UK Market Launch Begins Following Reimbursement Approval; Per
Procedure Model Continues Rapid Growth Worldwide LYON, France, Oct.
26 /PRNewswire-FirstCall/ -- EDAP TMS S.A. (NASDAQ:EDAP), today
reported financial results for the 2005 third quarter ended
September 30, 2005. For the third quarter of 2005, the company
reported total revenues of EUR 4.5 million compared to EUR 5.5
million in the same quarter of 2004. Year to date revenue includes
the sale of 24 lithotripsy and six Ablatherm-HIFU units. Revenues
for the nine months ended September 30, 2005 were EUR 14.6 million
compared to EUR 16.5 million in 2004. Hugues de Bantel, CEO of EDAP
TMS, commented: "The third quarter of 2005 certainly does not
reflect the current business situation as of October 1. The third
quarter is below our expectations due to our total mix in
lithotripsy. Necessary actions have been taken during the course of
the quarter and will enable us to resolve this issue before
year-end. More importantly, we have already secured a backlog of
two Ablatherm units since October 1, confirming our anticipation of
a strong fourth quarter with two months still ahead. The shift from
dependency on the purchase of equipment toward a business model
providing Ablatherm-HIFU procedures on a mobile basis is clearly
under way and will ensure predictable and recurring revenues in the
future as we are accumulating a significant site base. We believe
we are positioned for a fourth quarter demonstrating both our
capability to continue increasing per procedure treatment interest
and sell Ablatherm units to larger sites, including in new markets,
which we are entering at present." The company's gross margin as a
percentage of total revenue increased from 38 percent in 2004 to 41
percent to date due to continued focus on efficiency, consistent
average selling prices and increasing service contributions. The
company's operating expenses increased by 1 percent compared to
2004, with a clear focus on the HIFU division sales and marketing,
in line with the company's continued expansion of physician and
patient education activities. The company's net loss for the third
quarter 2005 was EUR 572,000 compared to EUR 259,000 in the third
quarter 2004. Net loss for the first nine months was EUR 1,111,000
compared to EUR 778,000 in 2004. The net loss level is largely
attributable to the delay in booking expected sales to the later
part of the year, and the shift to an expansion of mobile business
and its ensuing near-term alteration of the revenue model and
working capital. As of September 30, 2005, the company had EUR 7.5
million in cash. During the third quarter, EDAP invested a portion
of available cash in capitalized assets for increased new cost per
procedure installations worldwide. The working capital will be
returned through the sale of Ablatherm HIFU units and procedures in
both new and existing markets. EDAP: SUCCESSFUL UK LAUNCH
GENERATING ADDITIVE ORDERS THROUGH YEAR END For the first nine
months of 2005, the HIFU division experienced a 30% growth in the
mobile per-procedure business. Maintenance and service contract
sales continued to increase due to the end of the warranty period
for Ablatherm units already installed, fueling a 47% percent
increase year to date. With two additional Ablatherm units sold
during the quarter, revenues for the third quarter were EUR 1.4
million, amounting to EUR 5.0 million for the nine months ended
September 30, 2005. Gross margins improved to 49 percent of sales
at EUR 2.5 million as compared to 45 percent at EUR 2.3 million in
the prior year period. Year-to-date margin improvement was driven
by efficiencies within the manufacturing process, positive
contribution from services and ongoing attention to average selling
price. For the nine months of 2005, sales and marketing expenses
increased in the EDAP division in line with the company's planned
expansion of education programs. R&D expenses also increased,
as planned, in order to further strengthen the company's
technological mastery and strong IP portfolio. EDAP - HIFU
Division: Year Revenues Gross Margin Operating Income (Loss)
(Euros' millions) (Euros '000) Q3 2004 1.5 47 % 1 Q3 2005 1.4 51 %
(146) YTD 2004 5.0 45 % 164 YTD 2005 5.0 49 % (333) Total
Ablatherm-HIFU treatments are now more than 8,400 to date, which is
the most extensive body of experience on HIFU for localized
prostate cancer in the world. Additionally, the company now reports
more than 80 sites using Ablatherm-HIFU on a fixed or mobile basis,
as compared to 55 sites at September 30, 2004, a 45 percent
increase over the prior year. Over the last four months, the
Company reached significant milestones by establishing
Ablatherm-HIFU in leading centers, worldwide. In the United
Kingdom, where more than 30,000 new prostate cancer cases are
diagnosed every year, the Company's marketing efforts are bearing
fruits. In addition, NICE positive guidance obtained earlier in the
year recommending the use of HIFU for localized prostate cancer,
together with the recent approval of HIFU treatment by BUPA, the
UK's largest private medical insurer, to fund such therapy for its
members, led to the sale of two units in the UK in October. This
brings to four the number of sites now using Ablatherm-HIFU in the
UK. After a thorough review of available HIFU technologies for
prostate cancer, Guy's Hospital, in London, decided to purchase the
Ablatherm because of its unique clinical outcomes and safety
features. Guy's is a part of one of the largest UK Hospital Trusts.
Additionally, this hospital represents one of the country's most
well known teaching hospitals under a partnership with King's
College London and one of the largest urology centers in the United
Kingdom. Additionally, "Mobile-HIFU," a private UK company,
purchased an Ablatherm unit to offer the treatment on a mobile
cost-per-procedure basis. Treatments will begin in October in
various hospitals and clinics around the UK. This fully complies
with the company's strategy to expand the use of HIFU by offering
the technology to a wider number of patients. In October, the
company also entered the Australian market, by placing an
Ablatherm-HIFU at the highly regarded St Vincent's Clinic in
Sydney. Pr. Stricker, Head of the Urology department, and in charge
of the St Vincent's Prostate Cancer Centre has already treated
eight patients. Pr. Stricker's team has been fully trained on the
use of Ablatherm-HIFU and is now ready to offer the treatment to
Australian men with prostate cancer who are not candidates for
surgery, failed prior radiotherapy or choose the treatment for its
capacity to preserve the patient's quality of life. The
Ablatherm-HIFU Clinic opened in Toronto, Canada, in April 2005 by
an affiliate of Maple Leaf HIFU Company continued to attract new
patients during the third quarter. Patients have been treated with
excellent outcomes at the Toronto clinic since it opened building a
strong base of credibility based on local treatments for Canadian
men. Whereas most of the patients treated at the Toronto clinic
have been Canadian citizens, an increasing percentage of patients
have come from the United States, and it is believed that this
trend will continue. In Germany, the third largest market in the
world for medical devices, the mobile per-procedure business
increased 78 percent compared to the same period last year. As of
today, the company reports 25 Ablatherm user sites in Germany, 19
of which are served with the mobile model, a 108 percent increase
compared to last year with only 12 sites served. The Company
recently expanded its mobile services toward Austria and
Switzerland based on its strength in user experience and clinical
credibility. The mobile Italian HIFU market continues to grow with
a more than fourfold increase in the HIFU activity compared with
the first nine months last year. The number of sites doubled to 12
compared to the same period last year. The Italian market is
growing from a smaller base but confirms the acceleration of demand
for both fixed and mobile sites as well as treatments provided. The
Italian progress is similar to what the company has experienced in
Germany following reimbursement approval further confirming the
validity of the model. The company plans to begin its first
treatments in the United States through trials sponsored by its
partner HealthTronics by the end of 2005. HealthTronics has
identified the centers to conduct trial treatments and EDAP is
providing Ablatherm units according to its existing agreement.
Hugues de Bantel commented: "We are particularly pleased with the
ground work performed so far, which allowed us to enter new markets
successfully including the UK market with two machines already sold
in October and Australia with the installation of our first
Ablatherm-HIFU in that country. In both cases, as with prior market
entries, we are engaging key opinion leaders who are widely
respected within their respective urological communities. Progress
in our mobile business in key markets confirms the validity of our
strategic move toward offering payment on treatment performed
models as a primary method of propagating Ablatherm treatment in
new and existing markets. We are particularly pleased with the
quality of the centers which recently joined the list of Ablatherm
users. They continue to advance the credibility of Ablatherm-HIFU
as the most advanced and refined HIFU treatment worldwide for
localized prostate cancer." TMS: STEADY SALES IN LITHOTRIPTERS The
UDS Division continued steady sales with 24 lithotripters sold in
the first nine months of 2005. The company's mix of new unit sales
year to date was weighted toward the mid-range product family.
Revenues for the third quarter were EUR 4.0 million, amounting to
EUR 11.7 million for the nine month ended September 30, 2005. Gross
margins held steady at 30 percent for the division. The company
continued to maintain strict controls on internal expenses, which
decreased by 15 percent within the UDS division year to date.
Consequently, the company's operating profit for the quarter
increased 27 percent compared to last year. TMS finished the third
quarter with a strong backlog of 6 lithotripters anticipating a
solid fourth quarter. TMS - UDS Division: Year Revenues Gross
Margin % Operating Income (Loss) (Euros' millions) (Euros '000) Q2
2004 4.6 34 % 61 Q2 2005 4.0 30 % 120 YTD 2004 13.2 31 % 164 YTD
2005 11.7 30 % 209 Hugues de Bantel commented: "Year-to-date we had
a slower cycle in one of our key markets. These cycles occur
periodically within submarkets of our Lithotripsy base, especially
following strong uptrends in unit sales which remove a certain
amount of maintenance demand on older units. We saw more sales of
our mid-range product as compared to prior periods which has
affected the total revenues. We are now seeing a return in sales
activity to more normalized levels and mix in the later part of the
year as we had expected. TMS remains committed to Lithotripsy as we
have a broad and established base providing strong support for the
total company. Lithotripsy is a mature market, but TMS competes
effectively and has an established leadership position. We continue
to operate this division successfully with a focus on operating
income strength regardless of the short-term up and down
fluctuations within regional lithotripsy markets as demonstrated by
the increase in operating income during a period of lower total
revenues." CORPORATE OUTLOOK "EDAP continues to make significant
strides forward in advancing and accelerating our corporate model,"
said de Bantel. "The second and third quarters represented a shift
in our business that will further build our capability and global
reach. We continue to launch Ablatherm treatment successfully into
new markets and have high expectations from the activity we have
undertaken so far this year. We have invested some of our capital
position during this period of transition, and we expect to see
positive effects on revenues while continuing our solid margins and
corporate efficiency improvement. Our new market launches in the
third quarter and October demonstrate the outcomes of that
short-term investment. Our experience with continued growth and
success in key countries also confirms the potential returns with
the assistance of a strong mobile model and reimbursement approvals
from key health plans. We look forward to reporting continued
success and growth going forward." Commenting on the position of
the company, de Bantel stated, "While our revenues have been down
year to date, our model is clearly demonstrating its strength. The
revenue fall-off has largely been in the lithotripsy market due to
cycle and mix issues which are already correcting. However, we have
been able to improve our absolute operating income even on these
lower sales. The same is true in the HIFU division where we have
sold one fewer Ablatherm unit year to date than in the prior year.
Mobile procedure growth and increasing contributions from our
installed base have made up the difference. Finally, we are already
positioned very well to report a solid final quarter in HIFU due to
new market launches." "EDAP continues to operate with the future in
mind," de Bantel continued. "To that end, our primary focus is
utilizing our capital position to grow our available base of users
and potential patients through investment in expanding our market
reach and educational efforts directed to both patients and
physicians. The per procedure model clearly is successfully
expanding our treatable population by making Ablatherm-HIFU
available on a broader basis and growing treatment demand once
centers are established. In short, we are very excited about our
future growth opportunities." CONFERENCE ACTIVITY EDAP is
participating in the 5th International Symposium on Therapeutic
Ultrasound October 27 - 29, 2005, at Harvard Medical School,
Boston. EDAP is one of the key sponsors of the ISTU meeting and
will have scientific and clinical presentations made during the
event related to its clinical results at seven years, the longest
presented HIFU follow-up. EDAP will be actively participating in
the French Association of Urology (AFU) meeting to be held in
Paris, from November 16-19, 2005 (Booth #B7). During that congress,
the French HIFU Club will meet to discuss clinical results obtained
with the new Ablatherm-HIFU integrated imaging system and a
presentation will be made on selected criteria related to the HIFU
treatment of patients who failed radiotherapy. The company will
report on the proceedings following the event. Additionally, the
company plans to resume its market outreach efforts with investor
meetings the week of November 7 in Germany and the UK. The company
will also make visits in the United States during December. Details
or appointments for these events can be arranged through the
company's investor relations representation, Halliburton investor
Relations, at +1 972-458-8000. Conference Call and Webcast The
company will host a conference call to discuss the results and
answer questions from investors on Thursday, October 27, 2005, at
noon Eastern Time, 6:00 p.m. Paris Time. Representing the Company
on the call will be Philippe Chauveau, Chairman of the Board,
Hugues de Bantel, Chief Executive Officer, and Thierry Turbant,
Chief Financial Officer. Interested investors may join the call
live by dialing (888) 214-7592 from the United States or +1 (415)
537-1828 from international locations and requesting the EDAP TMS
Third Quarter Conference Call. Investors may also listen to the
live call online at http://www.edap-tms.com/ . Investors unable to
join the call can access a playback of the conference call. To
access the replay, please dial (800) 633-8284 or +1 (402) 977-9140
and using access code 21265876 beginning two hours after the end of
the call until November 3, 2005, or visit the company's Web site at
http://www.edap-tms.com/ . About EDAP TMS S.A. EDAP TMS S.A.
develops and markets the Ablatherm, the most advanced and
clinically proven choice for High Intensity Focused Ultrasound
(HIFU) treatment of localized prostate cancer. HIFU treatment is
shown to be a minimally invasive and effective treatment option
with a low occurrence of side effects. The company is also
developing this technology for the treatment of certain other types
of tumors. EDAP TMS S.A. also produces and commercializes medical
equipment for treatment of urinary tract stones using
Extra-corporeal Shockwave Lithotripsy (ESWL). For more information
on the Company, contact the Investor Relations Dept by phone at +33
(0)4 78 26 40 46 or see the Company's Web site at:
http://www.edap-tms.com/ . This press release contains, in addition
to historical information, forward-looking statements that involve
risks and uncertainties. These include statements regarding the
Company's growth and expansion plans. Such statements are based on
management's current expectations and are subject to a number of
uncertainties and risks that could cause actual results to differ
materially from those described in the forward-looking statements.
Factors that may cause such a difference include, but are not
limited to, those described in the Company's filings with the
Securities and Exchange Commission. (Tables follow) EDAP TMS S.A.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
(Amounts in thousands of Euro's and U.S. Dollars, except per share
data) Three Months Ended: Three Months Ended: Sept. 30, Sept. 30,
Sept. 30, Sept. 30, 2005 2004 2005 2004 Euros Euros $US $US Net
sales of medical equipment 2,062 3,211 2,510 3,920 Net sales of
spare parts, supplies and Services 2,464 2,320 2,999 2,833 NET
SALES 4,526 5,531 5,509 6,753 Other revenues --- (13) --- (15)
TOTAL REVENUES 4,526 5,518 5,509 6,738 Cost of sales (2,681)
(3,256) (3,263) (3,976) GROSS PROFIT 1,845 2,262 2,246 2,762
Research & development expenses (255) (360) (510) (439) S, G
& A expenses (2,084) (2,094) (2,337) (2,557) Total operating
expenses (2,339) (2,454) (2,847) (2,996) OPERATING PROFIT (LOSS)
(494) (192) (601) (234) Interest (expense) income, net 8 60 9 73
Currency exchange gains (loss), net (79) (120) (96) (147) Other
income (loss), net 20 --- 24 --- INCOME (LOSS) BEFORE TAXES (545)
(252) (664) (308) AND MINORITY INTEREST Income tax (expense) credit
(28) (7) (33) (9) NET INCOME (LOSS) (573) (259) (697) (317) Earning
per share - Basic (0.07) (0.03) (0.09) (0.04) Average number of
shares used in computation of EPS 7,781,731 7,781,731 7,781,731
7,781,731 Earning per share - Diluted (0.07) (0.03) (0.09) (0.04)
Average number of shares used in computation of EPS 8,344,368
8,038,156 8,344,368 8,038,156 NOTE: Translated for convenience of
the reader to U.S. dollars at the 2005 average three months noon
buying rate of 1 Euro = 1.2172 USD, and 2004 average three months
noon buying rate of 1 Euro = 1,2211 USD. EDAP TMS S.A. CONDENSED
CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED) (Amounts in
thousands of Euro's and U.S. Dollars, except per share data) Nine
Months Ended: Nine Months Ended: Sept. 30, Sept. 30, Sept. 30,
Sept. 30, 2005 2004 2005 2004 Euros Euros $US $US Net sales of
medical equipment 6,997 8,839 8,795 10,822 Net sales of spare
parts, supplies and Services 7,553 7,453 9,493 9,124 NET SALES
14,550 16,292 18,288 19,946 Other revenues 53 219 67 269 TOTAL
REVENUES 14,603 16,511 18,355 20,215 Cost of sales (8,688) (10,158)
(10,920) (12,437) GROSS PROFIT 5,915 6,353 7,435 7,778 Research
& development expenses (788) (613) (1,696) (1,392) S, G & A
expenses (6,497) (6,360) (7,460) (7,146) Non recurring operating
expenses --- (208) --- (254) Total operating expenses (7,285)
(7,181) (9,156) (8,792) OPERATING PROFIT (LOSS) (1,370) (828)
(1,721) (1,014) Interest (expense) income, net 35 29 44 36 Currency
exchange gains (loss), net 229 72 287 87 Other income (loss), net
22 4 28 5 INCOME (LOSS) BEFORE TAXES (1,084) (723) (1,362) (886)
AND MINORITY INTEREST Income tax (expense) credit (27) (55) (34)
(67) NET INCOME (LOSS) (1,111) (778) (1,396) (953) Earning per
share - Basic (0.14) (0.10) (0.18) (0.12) Average number of shares
used in computation of EPS 7,781,731 7,781,731 7,781,731 7,781,731
Earning per share - Diluted (0.14) (0.10) (0.18) (0.12) Average
number of shares used in computation of EPS 8,344,368 8,047,393
8,344,368 8,047,393 NOTE: Translated for convenience of the reader
to U.S. dollars at the 2005 average nine months noon buying rate of
1 Euro = 1.2569 USD, and 2004 average nine months noon buying rate
of 1 Euro = 1.2243 USD. EDAP TMS S.A. CONSOLIDATED BALANCE SHEETS
HIGHLIGHTS (UNAUDITED) (Amounts in thousands of Euro's and U.S.
Dollars) Sept. 30, June 30, Sept. 30, June 30, 2005 2005 2005 2005
Euros Euros $US $US Cash, cash equivalents and short term
investments 7,463 8,222 8,999 9,947 Total current assets 22,014
23,254 26,545 28,133 Total current liabilities 9,786 10,089 11,800
12,205 Shareholders' Equity 16,953 17,543 20,442 21,224 NOTE:
Translated for convenience of the reader to U.S. dollars at the
noon buying rate of 1 Euro = 1.2058 USD, on September 30, 2005 and
at the noon buying rate of 1 Euro = 1.2098 USD, on June 30, 2005.
EDAP TMS S.A. CONDENSED STATEMENTS OF OPERATIONS BY DIVISION NINE
MONTHS ENDED SEPTEMBER 30, 2005 (Amounts in thousands of Euro's)
EDAP S.A. TMS S.A. EDAP TMS Consolida- Total HIFU UDS HQ tion After
Division Division Impact Consolidation Net sales of 2,586 5,676 ---
(1,265) 6,997 medical devices Net sales of spare parts, supplies
& services 2,376 5,963 --- (786) 7,553 Other revenues 71 47 ---
53 (65) TOTAL REVENUES 5,033 11,686 --- (2,116) 14,603 GROSS PROFIT
2,460 50% 3,540 30% --- (86) 5,914 41% Research & Development
(794) (555) --- --- (1,349) Total SG&A plus depreciation
(1,999) (2,776) (1,160) --- (5,935) Non recurring op. expenses ---
--- --- --- --- OPERATING PROFIT (LOSS) (333) 209 (1,160) (86)
(1,370) CONTACT: EDAP TMS S.A. Hugues de Bantel - Philippe Chauveau
Blandine Confort +33 4 78 26 40 46 Halliburton Investor Relations
Matt Kreps - Geralyn DeBusk 972 458 8000 DATASOURCE: EDAP TMS S.A.
CONTACT: Hugues de Bantel or Philippe Chauveau or Blandine Confort,
all of EDAP TMS S.A., +33-4-78-26-40-46; or Matt Kreps or Geralyn
DeBusk, both of Halliburton Investor Relations, +1-972-458-8000,
for EDAP TMS S.A. Web site: http://www.edap-tms.com/
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