HEARTWARE INTERNATIONAL INC FRAMINGHAM, Mass., Feb. 26, 2015 /PRNewswire/ -- HeartWare International, Inc. (NASDAQ: HTWR), a leading innovator of less invasive, miniaturized circulatory support technologies that are revolutionizing the treatment of advanced heart failure, today announced revenue of $73.2 million for the fourth quarter ended December 31, 2014, a 38% increase compared to $53.1 million in revenue for the same period of 2013. For the fiscal year 2014, the company generated revenue of $278.4 million, a 34% increase compared to revenue of $207.9 million in 2013.
During the fourth quarter, 737 HeartWare(®) Ventricular Assist Systems were sold globally, compared to 524 units in the fourth quarter of 2013. U.S. revenue, generated through the sale of 382 units during the fourth quarter of 2014, was $41.5 million, a 60% increase from $25.9 million in the fourth quarter of 2013. Revenue from international markets, derived through the sale of 355 units, was $31.7 million, an increase of 17% from $27.1 million in the fourth quarter of 2013. Currency fluctuations offset total revenue performance in the fourth quarter by approximately $1.9 million, or 3.7 percentage points, compared to the fourth quarter of 2013.
"With record unit sales in the fourth quarter contributing to more than 2,750 units sold globally during 2014, as well as the addition of more than 50 hospital centers around the world, we continue to be encouraged by the growing adoption of the HeartWare System," said Doug Godshall, President and Chief Executive Officer. "During the year, we completed enrollment in our Japan bridge-to-transplant study, ramped enrollment in the supplemental cohort of our U.S. Destination Therapy study, advanced our technology pipeline, made significant upgrades to our quality systems, improved our gross margin, and concluded the year by initiating the submission process for our CE Marking Trial Application for our next-generation MVAD(®) System."
"Looking ahead, 2015 promises to be a busy year as we initiate our MVAD(®) System CE Marking trial, file our MVAD trial protocol in the U.S., complete enrollment in our destination therapy trial, present initial clinical data evaluating the HeartWare System as a destination therapy, and advance our HVAD(®) LATERAL study evaluating the thoracotomy implant technique," Godshall added.
Gross margin percentage improved to 68.1% in the fourth quarter of 2014, as compared to 63.6% in the fourth quarter of 2013. The improvement compared to the same period in 2013 primarily reflects efficiencies associated with increased manufacturing throughput. For the year ended December 31, 2014, gross margin improved four points over the same period in 2013.
Total operating expenses for the fourth quarter of 2014 were $45.8 million, as compared to $53.3 million in the fourth quarter of 2013. Total operating expenses for the fourth quarter of 2014 include a $9.1 million reduction in the estimated fair value of future contingent consideration payments for CircuLite as a result of the Company's decision to replace CircuLite's Synergy micro pump with a version of HeartWare's MVAD for future development and commercialization. Also related to this decision, HeartWare recognized an impairment charge of $2.7 million with respect to in-process R&D acquired from CircuLite in connection with the 2013 acquisition. Total operating expenses for 2014 were $186.3 million, a four percent increase from the same period in 2013.
Research and development expense was $33.5 million for the fourth quarter of 2014, which compared to $30.3 million in the same period in 2013. The $3.2 million net increase was comprised of a $1.2 million increase in project spending, a $3.0 million increase as a result of FDA warning letter remediation costs, and a decrease of $1.0 million in non-recurring impairment charges compared to the fourth quarter of 2013.
Selling, general and administrative expenses were $21.4 million in the fourth quarter of 2014, compared to $23.0 million in the fourth quarter of 2013 which included approximately $2.9 million of CircuLite acquisition and severance expenses. Net of these prior-year expenses, selling, general and administrative expenses increased as a result of revenue growth.
Net loss for the fourth quarter of 2014 was $0.9 million, or $0.05 per basic and diluted share, compared to a net loss of $22.0 million, or a loss of $1.33 per basic and diluted share, in the fourth quarter of 2013. Net loss for the fourth quarter of 2014 includes the benefit of the $9.1 million contingent consideration fair value adjustment and the $2.7 million in-process R&D charge which are discussed above. For the fiscal year ended December 31, 2014, the company recorded a net loss of $19.4 million, or a loss of $1.14 per basic and diluted share, compared to a $59.3 million net loss, or a loss of $3.69 per basic and diluted share, in fiscal year 2013.
Non-GAAP net loss for the fourth quarter of 2014 was $6.9 million, or $0.41 per basic and diluted share, compared to a loss of $15.2 million, or $0.92 per basic and diluted share in the fourth quarter of 2013. Non-GAAP net loss for 2014 was $34.6 million, or $2.03 per basic and diluted share, compared to a loss of $51.9 million, or $3.23 per basic and diluted share, in 2013. See "Use of Non-GAAP Financial Measures" and "Reconciliation of GAAP to Non-GAAP Net Loss per Common Share."
At December 31, 2014, HeartWare had $179.7 million of cash, cash equivalents and investments, a $1.8 million reduction from the end of the third quarter 2014.
Conference Call and Webcast Information
HeartWare will host a conference call on Thursday, February 26, 2015 at 8:00 a.m., U.S. Eastern Time to discuss its financial results, highlights from the fourth quarter and the company's business outlook. The call may be accessed by dialing 1-877-407-0789 five minutes prior to the scheduled start time and referencing "HeartWare." Callers outside the U.S. should dial +1-201-689-8562.
A live webcast of the call will also be available in the Investor section of the company's website (http://ir.heartware.com/). A replay of the conference call will be available through the above weblink immediately following completion of the call.
About HeartWare International
HeartWare International develops and manufactures miniaturized implantable heart pumps, or ventricular assist devices, to treat patients suffering from advanced heart failure. The HeartWare(®) Ventricular Assist System features the HVAD(®) pump, a small full-support circulatory assist device designed to be implanted next to the heart, avoiding the abdominal surgery generally required to implant competing devices. The HeartWare System is approved in the United States for the intended use as a bridge to cardiac transplantation in patients who are at risk of death from refractory end-stage left ventricular heart failure, has received CE Marking in the European Union and has been used to treat patients in 41 countries. The device is also currently the subject of a U.S. clinical trial for destination therapy. For additional information, please visit the Company's website at www.heartware.com.
HeartWare International, Inc. is a member of the Russell 2000(®) and its securities are publicly traded on The NASDAQ Stock Market.
HEARTWARE, HVAD, MVAD, PAL, SYNERGY, CIRCULITE and HeartWare logos are registered trademarks of HeartWare, Inc.
Use of Non-GAAP Financial Measures
HeartWare management supplements its GAAP financial reporting with certain non-GAAP financial measures for financial and operational decision making. For example, we use "non-GAAP adjusted net loss" and "non-GAAP adjusted net loss per common share" to refer to GAAP loss per share excluding certain adjustments such as amortization of intangible assets, impairment charges, purchase accounting and acquisition related transaction costs, and restructuring and severance costs. These are non-GAAP financial measures under Section 101 of Regulation G under the Securities Exchange Act of 1934, as amended. Management believes that providing this additional information enhances investors' understanding of the financial performance of the Company's operations and increases comparability of its current financial statements to prior periods. Non-GAAP measures should not be considered as a substitute for measures in accordance with financial performance in accordance with GAAP, and they should be reviewed in comparison with their most directly comparable GAAP financial results. Reconciliations of HeartWare's GAAP to non-GAAP financial measures are provided at the end of this release under "Reconciliation of GAAP to Non-GAAP Net Loss per Common Share."
Forward-Looking Statements
This announcement contains forward-looking statements that are based on management's beliefs, assumptions and expectations and on information currently available to management. All statements that address operating performance, events or developments that we expect or anticipate will occur in the future are forward-looking statements, including without limitation our expectations with respect to the commercialization of the HeartWare(®) Ventricular Assist System, progress and outcomes of clinical trials, regulatory and quality compliance, research and development activities and our ability to take advantage of acquired and pipeline technology. Management believes that these forward-looking statements are reasonable as and when made. However, you should not place undue reliance on forward-looking statements because they speak only as of the date when made. HeartWare does not assume any obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as may be required by federal securities laws and the rules and regulations of the Securities and Exchange Commission. HeartWare may not actually achieve the plans, projections or expectations disclosed in forward-looking statements, and actual results, developments or events could differ materially from those disclosed in the forward-looking statements. Forward-looking statements are subject to a number of risks and uncertainties, including without limitation those described in Part I, Item 1A. "Risk Factors" in HeartWare's Annual Report on Form 10-K filed with the Securities and Exchange Commission. HeartWare may update risk factors from time to time in Part II, Item 1A "Risk Factors" in Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, or other filings with the Securities and Exchange Commission.
For further information:
Christopher Taylor
HeartWare International, Inc.
Email: ctaylor@heartware.com
Phone: +1 508 739 0864
- Tables to Follow-
HEARTWARE INTERNATIONAL, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share data)
(unaudited)
Three Months Ended Year Ended
December 31, December 31,
------------ ------------
2014 2013 2014 2013
---- ---- ---- ----
Revenue, net $73,209 $53,054 $278,420 $207,929
Cost of revenue 23,349 19,293 92,195 76,468
------ ------ ------ ------
Gross profit 49,860 33,761 186,225 131,461
Operating expenses:
Selling, general and administrative 21,412 22,976 87,177 76,524
Research and development 33,451 30,281 122,432 102,483
Change in fair value of contingent consideration (9,080) - (23,260) -
------ --- ------- ---
Total operating expenses 45,783 53,257 186,349 179,007
Income (loss) from operations 4,077 (19,496) (124) (47,546)
Other expense, net (5,096) (1,926) (18,682) (11,298)
------ ------ ------- -------
Loss before taxes (1,019) (21,422) (18,806) (58,844)
Income tax (benefit) expense (103) 626 560 467
---- --- --- ---
Net loss $(916) $(22,048) $(19,366) $(59,311)
===== ======== ======== ========
Net loss per common share -
basic and diluted $(0.05) $(1.33) $(1.14) $(3.69)
====== ====== ====== ======
Weighted average shares outstanding -
basic and diluted 17,037 16,574 16,992 16,066
====== ====== ====== ======
HEARTWARE INTERNATIONAL, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)
(unaudited)
December 31, December 31,
2014 2013
---- ----
ASSETS
Current assets:
Cash and cash equivalents $102,946 $162,880
Short-term investments 75,535 37,596
Accounts receivable, net 38,041 28,052
Inventories 54,046 40,876
Prepaid expenses and other current
assets 5,975 11,205
----- ------
Total current assets 276,543 280,609
Property, plant and equipment, net 19,036 18,562
Other assets, net 128,234 130,656
------- -------
Total assets $423,813 $429,827
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $13,322 $17,914
Other accrued liabilities 36,589 35,276
------ ------
Total current liabilities 49,911 53,190
Convertible senior notes, net 114,803 107,125
Other long-term liabilities 50,565 70,905
Stockholders' equity 208,534 198,607
------- -------
Total liabilities and stockholders'
equity $423,813 $429,827
======== ========
Reconciliation of GAAP to Non-GAAP Net Loss per Common Share (unaudited) (see explanation of adjustments below) (in thousands, except per share data)
Three Months Ended Year Ended
December 31, December 31,
------------ ------------
2014 2013 2014 2013
---- ---- ----
GAAP net loss $(916) $(22,048) $(19,366) $(59,311)
GAAP net loss per
common share - basic
and diluted $(0.05) $(1.33) $(1.14) $(3.69)
Adjustments:
Amortization and
impairment of
purchased intangible
assets and goodwill (a)
-Selling, general and
administrative 84 28 337 28
-Research and
development 2,998 3,806 3,719 3,868
Acquisition-related
transaction costs (b) - 2,349 - 2,849
Contingent
consideration
adjustments (c) (9,080) - (23,260) -
Restructuring costs (d)
-Selling, general and
administrative (22) 649 2,962 649
-Research and
development - - 1,032 -
--- --- ----- ---
Total adjustments (6,020) 6,832 (15,210) 7,394
Non-GAAP adjusted
net loss $(6,936) $(15,216) $(34,576) $(51,917)
======= ======== ======== ========
Non-GAAP adjusted
net loss per common
share - basic and
diluted $(0.41) $(0.92) $(2.03) $(3.23)
Shares used in
computing non-GAAP
adjusted net loss
per common share -
basic and diluted 17,037 16,574 16,992 16,066
====== ====== ====== ======
(a) Represents amortization of
purchased intangible assets
related to CircuLite and
WorldHeart.
(b) Represents transaction costs
associated with the acquisition of
CircuLite in December 2013.
(c) Represents the change in fair value
of contingent consideration
associated with the acquisition of
CircuLite in December 2013.
(d) Represents certain restructuring
costs, as follows (in thousands):
Three Months Ended Year Ended
December 31, December 31,
------------ ------------
2014 2013 2014 2013
---- ---- ----
Lease exit charge for
HeartWare's $(13) - $359 -
former Massachusetts
corporate offices
Charges related to
CircuLite
acquisition:
Lease exit charge for
former N.J. 16 - 1,730 -
corporate offices
Contract termination
costs - - 688 -
Employee severance (25) 649 588 649
Abandoned fixed assets - - 629 -
--- --- --- ---
Total (9) 649 3,635 649
Total restructuring
costs $(22) $649 $3,994 $649
==== ==== ====== ====
The terms "non-GAAP adjusted net loss" and "non-GAAP adjusted net loss per common share" refer to GAAP net loss and GAAP net loss per common share excluding certain adjustments such as amortization of purchased intangible assets, impairment charges, purchase accounting and acquisition-related transaction costs, and restructuring and severance costs as follows:
1. We exclude amortization of purchased intangible assets and periodic
impairment charges related to long-lived assets from this measure because
such charges do not represent what our management believes are the costs
of developing, producing, supporting and selling our products and the
costs to support our internal operating structure.
2. We exclude purchase accounting adjustments and acquisition-related costs
from this measure because they occur as a result of specific events and
are not reflective of our internal investments and the ongoing costs to
support our operating structure. Purchase accounting adjustments include
contingent consideration fair value adjustments.
3. We exclude restructuring and severance costs from this measure because
they tend to occur as a result of specific events such as acquisitions,
divestitures, repositioning our business or other unusual events that
could make comparisons of long-range trends difficult and are not
reflective of our internal investments and the costs to support our
operating structure.
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SOURCE HeartWare International, Inc.
