[VASCULAR LOGO]
Exhibit 99.1
NEWS RELEASE
For Release: Wednesday, July 23, 2008, Contact: Howard Root, CEO
3:05 pm Central Time James Hennen, CFO
Vascular Solutions, Inc.
(763) 656-4300
VASCULAR SOLUTIONS ANNOUNCES RECORD SECOND QUARTER RESULTS;
NET REVENUE INCREASES 15% TO $15.2 MILLION
MINNEAPOLIS, Minnesota -- Vascular Solutions, Inc. (Nasdaq: VASC) today
reported financial results for the second quarter ended June 30, 2008.
Highlights of the second quarter and other recent events include:
o Achieved record net revenue of $15.2 million in the second quarter, up
15% from the second quarter of 2007 and above the top end of guidance
for the quarter.
o Achieved adjusted net income of $867,000, or $0.05 per diluted share,
an increase of 25% from adjusted net income of $691,000 in the second
quarter of 2007.
o Settled all existing patent litigation concerning the Vari-Lase(R)
vein products by entering into separate settlement agreements with
VNUS Medical Technologies and the bankruptcy estate of Diomed.
o Won a $4.5 million jury verdict from Marine Polymer Technologies in
April, which was subsequently entered into judgment and increased by
the court to $5.1 million to include interest through the date of
judgment, subject to appeal.
o Achieved positive cash flow of $995,000, not including the one-time
payments for the settlement of patent litigation.
o Launched four new products, consisting of the MICRO ELITE(TM) snare,
Gandras(TM) catheter, Axis(TM) guidewire and Jiffy(TM) guidewire in
the second quarter.
Commenting on the results, Vascular Solutions Chief Executive Officer
Howard Root said: "The second quarter represented the completion of an important
transformation for Vascular Solutions. With the conclusion of all three pieces
of litigation through settlement or victory at trial, our high legal expenses
and uncertainties should now disappear, leaving our strong revenue growth and
financial management to become apparent in bottom-line results and
profitability. Since 2004 we have consistently grown our net revenue and built
an organization that has proven it can develop, manufacture, launch and support
multiple clinically-based vascular devices, only to have those results masked by
the costs and uncertainties of litigation. I look forward to the opportunity to
demonstrate the soundness of our business without the distraction of litigation,
starting now."
Net revenue from hemostat products (primarily consisting of the D-Stat
Dry(TM), D-Stat(R) Flowable, Thrombi-Gel(R), Thrombi-Pad(TM) and D-Stat
Radial(TM) products) was $6.0 million during the second quarter, a decline of
11% from the second quarter of 2007. "In the second quarter of 2007 our partner
King Pharmaceuticals placed a $725,000 stocking order for their initial launch
of the Thrombi-Gel and Thrombi-Pad products, which is the reason for the
reduction in revenue as expected from the prior year. Sequentially, our hemostat
product revenue increased by 2% in the second quarter, as our sales force
implemented new programs to enhance our effectiveness in growing sales of our
D-Stat Dry(TM) in the competitive hemostatic patch market, which we expect to
continue to show excellent sequential results," commented Mr. Root.
Net sales of extraction catheters (primarily consisting of the Pronto(R) V3
extraction catheter) were $3.7 million in the second quarter, an increase of 40%
over the second quarter of 2007. "The benefit of thrombus aspiration in STEMI
cases has been demonstrated in multiple clinical studies presented and published
over the last year, which has driven the growth of the thrombus aspiration
market. With our full range of Pronto V3, Pronto LP, Pronto 035 and Pronto-Short
catheters, we are continuing to lead the thrombus aspiration market in options
for the physician. We believe that the thrombus aspiration market will continue
to increase substantially and that Pronto sales will continue to grow faster
than the market, with the important Japanese market cleared and ready for launch
of the Pronto V3 in the third quarter," Mr. Root stated.
Net sales of vein products (primarily consisting of the Vari-Lase
endovenous laser console and kits) were $2.4 million in the second quarter, an
increase of 16% over the second quarter of 2007. "The turmoil in the varicose
vein market resulting from litigation is now behind us, while several of our
competitors in the laser area are still involved or are now just getting
involved in the patent litigation quagmire. Entering the third quarter we are
well positioned for continued growth in the endovenous laser market through our
stable and clinically-advanced nationwide direct sales force providing
first-in-class products and customer support," commented Mr. Root.
Net sales of access products (primarily consisting of micro-introducer kits
and specialty guidewires), were $1.4 million in the second quarter, an increase
of 146% over the second quarter of 2007. "We have added substantially to our
product offerings in the access product category in the second quarter. Most
notably, we launched the MICRO ELITE snare as the exclusive U.S. distributor for
Radius Medical Technologies, with results in the second quarter that almost
matched our expectations for the entire year. We have now added to our
relationship with Radius by launching their EXPRO ELITE(TM) snare, which we
project will further boost our access products sales growth in the second half
of 2008," Mr. Root added.
Net sales of specialty catheters (primarily consisting of the Langston(R)
dual lumen catheters and Twin-Pass(R) dual access catheters), were $1.1 million
in the second quarter of 2008, an increase of 31% over the second quarter of
2007. "Our U.S. direct sales force and international distributors have both
continued to drive growth with all of our specialty catheters, and the April
launch of our new Gandras(TM) catheter for pelvic artery catheterizations and
the expanded sales of our Gopher(TM) catheter have added to our impressive
second quarter sales number. Our next specialty catheter which is expected to
launch in the fourth quarter has the potential to add $5 million in annualized
sales to this category," Mr. Root added.
Gross margin across all product lines was 64.0% in the second quarter of
2008, down from 66.4% in the second quarter of 2007 principally due to product
selling mix and the on-going royalty payable to VNUS Medical Technologies on
U.S. sales of Vari-Lase laser consoles and kits. Based on projected selling mix
across products, gross margin on product sales for the third quarter of 2008 is
expected to increase to between 64% and 66%.
Net loss for the second quarter was $468,000, or $0.03 per share, compared
to net income of $695,000, or $0.04 per share, in the second quarter of 2007.
Included in the net loss for the second quarter of 2008 was $3.1 million in
litigation expense resulting from past royalties payable to VNUS Medical related
to Vari-Lase products sold in the U.S. through March 31, 2008, offset by a
$1.659 million litigation gain resulting from the settlement agreement with the
bankruptcy estate of Diomed. During the second quarter of 2008 the company
expensed $356,000 of stock-based compensation expense. As adjusted (excluding
the Diomed and VNUS settlements and stock-based compensation expense, and
assuming a fully-taxed rate of 38%) net income was $867,000 or $0.05 per fully
diluted share in the second quarter of 2008, increasing from adjusted net income
of $691,000 or $0.04 per fully diluted share in the second quarter of 2007. In
addition to the amounts payable in settlement, during the second quarter of 2008
the company incurred approximately $176,000 in legal expenses within general and
administrative expenses related to trial preparation and settlement negotiations
with VNUS Medical and post-trial motions in the Marine Polymer litigation.
Regarding future guidance, net revenue for the third quarter is expected to
increase to between $15.3 million and $15.6 million. Corresponding adjusted net
income in the third quarter is expected to be between $0.06 and $0.08 per fully
diluted share. For the entire 2008, the company is reaffirming its guidance for
net revenue and adjusted net income per share to be between $60 million and $62
million and $0.21 and $0.29, respectively. "We believe that the progress we've
already made in 2008 in eliminating the distraction of litigation and continuing
to launch new products positions us very well for our continued sales growth and
profitability," concluded Mr. Root.
CONFERENCE CALL & WEBCAST INFORMATION
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Vascular Solutions will host a live webcast starting at 3:30 p.m., Central
Time today to discuss the information contained in this press release. The live
web cast may be accessed on the investor relations portion of the company's web
site at www.vascularsolutions.com. An audio replay of the call will be available
until Wednesday, July 30, 2008 by dialing 1-888-203-1112 and entering conference
ID# 6415791. A recording of the call will also be archived on the company's web
site, www.vascularsolutions.com until Wednesday, July 30, 2008. During the
conference call the company may answer one or more questions concerning business
and financial developments and trends, the company's view on earnings forecasts
and new product development and financial matters affecting the company, some of
the responses to which may contain information that has not been previously
disclosed.
VASCULAR SOLUTIONS, INC.
CONDENSED STATEMENTS OF OPERATIONS
(In thousands, except per share data) Three Months Ended Six Months Ended
June 30, June 30,
-------------------- --------------------
2008 2007 2008 2007
-------- -------- -------- --------
(unaudited) (unaudited)
Revenue:
Product revenue $ 14,871 $ 13,069 $ 28,609 $ 25,088
License and collaboration revenue 367 159 744 294
-------- -------- -------- --------
Total revenue 15,238 13,228 29,353 25,382
Product costs and operating expenses:
Cost of goods sold 5,360 4,389 9,941 8,318
Collaboration expenses 187 -- 368 --
Research and development 1,553 1,346 3,019 2,839
Clinical and regulatory 759 751 1,610 1,511
Sales and marketing 5,174 4,851 10,387 9,613
General and administrative 1,192 1,198 2,734 2,146
Litigation 1,457 15 1,484 5,690
Thrombin qualification -- 18 -- 129
-------- -------- -------- --------
Operating income (loss) (444) 660 (190) (4,864)
Interest expense (18) (41) (42) (85)
Interest income 48 107 140 198
Foreign exchange loss (1) -- (1) --
-------- -------- -------- --------
Income (loss) before tax $ (415) $ 726 $ (93) $ (4,751)
Income taxes (53) (31) (140) (88)
-------- -------- -------- --------
Net income (loss) $ (468) $ 695 $ (233) $ (4,839)
======== ======== ======== ========
Net income (loss) per share - basic $ (0.03) $ 0.05 $ (0.02) $ (0.32)
-------- -------- -------- --------
Weighted average shares used in
calculating - basic 15,502 15,181 15,471 15,138
-------- -------- -------- --------
Net income (loss) per share - diluted $ (0.03) $ 0.04 $ (0.02) $ (0.32)
-------- -------- -------- --------
Weighted average shares used in
calculating - diluted 15,502 15,862 15,471 15,138
-------- -------- -------- --------
VASCULAR SOLUTIONS, INC.
CONDENSED BALANCE SHEETS
June 30, December 31,
2008 2007
----------- ------------
(unaudited) (note)
ASSETS
Current assets:
Cash and cash equivalents $ 5,405 $ 5,286
Restricted cash -- 5,473
------- -------
Accounts receivable, net 7,342 7,363
Inventories 9,378 8,307
Prepaid expenses 749 810
------- -------
Total current assets 22,874 27,239
Property and equipment, net 3,578 3,846
Intangible assets, net 193 193
------- -------
Total assets $26,645 $31,278
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LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Total current liabilities $ 7,515 $12,709
Total long-term liabilities 5,328 5,744
Shareholders' equity:
Total shareholders' equity 13,802 12,825
------- -------
Total liabilities and shareholders' equity $26,645 $31,278
======= =======
Note: Derived from the audited financial statements at that date.
USE OF NON-GAAP MEASURES
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Management uses non-GAAP measures to establish operational goals, and
believes that non-GAAP measures may assist investors in analyzing the underlying
trends in the company's business over time. Investors should consider these
non-GAAP measures in addition to, not as a substitute for or as superior to,
financial reporting measures prepared in accordance with GAAP. In this press
release, the company has reported a non-GAAP measure called adjusted net income
which excludes certain expenses relating to litigation and stock-based
compensation, but includes assumed taxes on net income using a 38% tax rate for
2008 and a 39% tax rate for 2007.
Three Months Ended Six Months Ended
(In thousands) June 30, June 30,
------------------------ -------------------------
2008 2007 2008 2007
----------- ----------- ----------- -----------
(unaudited) (unaudited) (unaudited) (unaudited)
GAAP net income (loss) $ (468) $ 695 $ (233) $(4,839)
Litigation expense 1,457 15 1,484 5,690
Stock based compensation 356 373 879 659
Thrombin qualification expense -- 18 -- 129
Adjusted income taxes expense (478) (410) (723) (585)
------- ------- ------- -------
Non-GAAP adjusted net income $ 867 $ 691 $ 1,407 $ 1,054
======= ======= ======= =======
On March 28, 2007, the jury in a litigation initiated by Diomed Holdings,
Inc. concerning the company's Vari-Lase business returned a verdict that
Vascular Solutions contributed to and induced infringement of a patent held by
Diomed and awarded monetary damages in the amount of $4.1 million with respect
to Vascular Solutions' activities. Through the quarter ended March 31, 2008 the
company had expensed $5.826 million as an estimate of litigation expenses in
this matter, representing the amount of the jury's verdict together with
management's estimate of Vascular Solutions' attorneys' fees, court costs,
additional damages with respect to Vari-Lase sales in the U.S. through April 11,
2007 and pre-judgment interest. The Company entered into a settlement with
Diomed in April 2008 dismissing all claims and appeals by each side for a
one-time payment to Diomed of $3.586 million, resulting in a litigation gain of
$1.659 million in the second quarter of 2008. Due to the one-time nature of the
litigation expense and gain, management believes it is useful to exclude the
litigation expense and gain from adjusted net income.
On June 4, 2008, the Company entered into a settlement agreement with VNUS
Medical Technologies resulting in a payment of $3.116 million to VNUS as an
agreed royalty concerning Vari-Lase products shipped in the U.S. through the end
of the first quarter of 2008. On-going royalties related to Vari-Lase products
shipped in the U.S. starting in the second quarter are included as cost of goods
sold. The amount paid for prior quarters was recognized as litigation expense in
the second quarter of 2008. Due to the one-time nature of the litigation
expense, management believes it is useful to exclude the litigation expense from
adjusted net income.
Beginning January 1, 2006 the company has recognized stock-based
compensation expense, which has been excluded from adjusted net income to
provide comparable financial information to prior periods. The company incurred
stock-based compensation expense of $356,000 and $879,000 for the three months
and six months ended June 30, 2008, respectively.
Management uses the adjusted net income measure in its internal analysis
and review of operational performance. Management includes the litigation
expense in its cash projections. Management believes that this adjusted net
income measure provides investors with useful information in comparing the
company's performance over different periods, particularly when comparing this
period to periods in which the company did not incur any expenses relating to
these expenses. By using this non-GAAP measure management believes that
investors get a better picture of the performance of the company's underlying
business. Management encourages investors to review the company's net income
prepared in accordance with GAAP to understand the company's performance taking
into account all relevant factors, including those that may only occur from time
to time but have a material impact on the company's financial results.
ABOUT VASCULAR SOLUTIONS
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Vascular Solutions, Inc. is a medical device company that focuses on
developing unique solutions for unmet clinical opportunities within vascular
procedures. The company's five product categories consist of hemostat (blood
clotting) products, extraction (clot removal) catheters, vein products,
specialty catheters and access products. Over 90% of the company's revenues are
from products that were initially launched within the last five years.
The information in this press release contains forward-looking statements
that involve risks and uncertainties. Our actual results could differ materially
from those anticipated in these forward-looking statements. Important factors
that may cause such differences include those discussed in our Annual Report on
Form 10-K for the year ended December 31, 2007 and other recent filings with the
Securities and Exchange Commission. The risks and uncertainties include, without
limitation, risks associated with the need for adoption of our new products,
limited working capital, lack of sustained profitability, exposure to
intellectual property claims, exposure to possible product liability claims, the
development of new products by others, doing business in international markets,
limited manufacturing experience, the availability of third party reimbursement,
and actions by the FDA.
For further information, connect to www.vascularsolutions.com.
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