TORONTO, March 17 /CNW/ - Novadaq(R) Technologies Inc. (TSX: NDQ), a
developer of medical imaging systems for the operating room, today announced
its financial results for the fourth quarter and year ended December 31, 2005.
In this press release, unless otherwise indicated, all dollar amounts are
expressed in US dollars.
"We entered the public markets on June 10, 2005, with a vision to
commercialize disease specific diagnostic and therapeutic image guided
procedures, with the potential to improve clinical outcomes and the cost of
healthcare," said Arun Menawat, President and CEO of Novadaq Technologies Inc.
"Since that time we have met major milestones. The fourth quarter of 2005 was
the first full quarter in which SPY, our cardiac surgery imaging product, was
marketed commercially in the United States, meeting our first key milestone.
We now have 30 systems installed in the United States. Clinical trials for the
treatment of wet AMD continued in Europe and North America, using our unique
imaging based device, the OPTTX System. Also, in February 2006 we signed an
exclusive license with the University of Rochester over a broad portfolio of
patents in the field of intra-operative fluorescence guided imaging of nerves,
and we have now begun development of a new device, LUNA(TM), for the
visualization of nerves and lymphatics to potentially reduce negative outcomes
including impotency, during critical operations such as radical
prostatectomy."
Selected Fiscal 2005 Financial Highlights and Operating Highlights
- Received FDA clearance for SPY Intra-operative Imaging System
- United States patent issued for SPY: Method and Apparatus For
Performing Intra-Operative Angiography
- Signed North American distribution agreement with the Sorin Group
for SPY
- Signed U.S. service agreement with Kodak for SPY
- Established U.S. subsidiary to extend infrastructure and ensure
support for SPY
- Hired U.S. based clinical educators to support sales to the cardiac
surgery market
- Executed on clinical advancement for OPTTX, completing the product
development of the first generation device
- Cdn. $25 million initial public offering on June 10, 2005 (TSX: NDQ)
- Strengthened intellectual property platform and filed 6 new patent
applications in several areas including nerve mapping
Financial Results
Year Ended December 31, 2005 Compared to Year Ended December 31, 2004
Revenue from all sources in 2005 was $623,439, representing a decrease of
$523,835 from revenue in 2004 of $1,147,274. The overall decrease includes a
reduction in capital sale revenue of $808,864 offset by an increase in
procedure based revenue of $285,029. Approximately 92% of procedure based
revenue was generated from Company owned imaging systems installed in the US,
with the remainder representing sales of consumable supplies to customers
outside the US who have purchased systems. The decrease in capital sale
revenue reflects the sale of 2 imaging systems in 2005 versus 10 in 2004. The
Company agreed to sell an additional 6 imaging systems in Japan in the fourth
quarter of 2005 and revenue will be recorded when the systems are shipped in
2006. In addition, a decision was made to change the revenue model in Japan to
a blended capital sale/procedure based model. This change involved a
significant reduction in the capital sale price offset by a planned increase
in the price of consumable supplies.
The launch of SPY in the US, our key market is still in the early stage.
December 31, 2005 represented the end of the first full quarter of commercial
activities conducted by Sorin, our sales partner in the US during which time
over half of the annual procedure based revenue for the year was recorded.
Gross profit as a percentage of sales decreased from 72.2% in 2004 to
55.9% in 2005 as a result of a shift in focus from capital device sales to
procedure based revenue. The gross profit percentage earned on capital sales
is higher than the percentage earned on procedural revenue as the procedural
gross profit is net of sales commissions, and the cost of consumable supplies.
Sales and marketing expenses increased to $1,248,551 in 2005 from
$247,892 in 2004. The increase in sales and marketing expenses was a result of
the commercial launch of the SPY System in the US in 2005, and included an
increase in employee costs (approximately $450,000); an increase in travel
costs (approximately $165,000) and an increase in costs incurred for trade
shows, surgical meetings, marketing materials and advertising (approximately
$318,000). Sales and Marketing expenses are expected to continue to increase
moderately during 2006 as the Company continues to build its team of clinical
educators and other internal resources.
Research and development expenses increased by $2,336,481 from $1,277,386
in 2004 to $3,613,867 in 2005. The overall increase reflects increases in
employee and related office and travel costs for additional engineering staff
to support the OPTTX design efforts and to support commercial manufacturing of
SPY, and additional clinical staff to plan and execute OPTTX trials (increase
of approximately $1,052,000). The increase also related to increased costs
incurred to design and build next generation OPTTX devices for use in clinical
trials (increase of approximately $685,000), an increase in patent costs
(approximately $340,000) and an increase in SPY product development costs
(approximately $79,000). Research and development costs are expected to
continue to increase during 2006 to support the patient registry and product
development initiatives for SPY and clinical trials for OPTTX and LUNA.
General and administration expenses increased by $1,166,173 to $2,894,494
in 2005 from $1,728,321 in 2004. This increase related to increases in
employee costs to support the commercial launch of SPY and public company
costs (increase of approximately $203,000), an increase in stock based
compensation of approximately $400,000 which substantially related to the
contractual vesting of options upon the completion of the Company's initial
public offering, insurance costs related to public company D&O and product
liability coverage (increase of approximately $173,000), investor relations
costs (increase of approximately $170,000) and professional fees (increase of
approximately $101,000).
Depreciation expense decreased by $32,562 from 2004 to 2005 as certain
SPY imaging devices that were being used in research and development in 2004
were converted to revenue producing assets during 2005. Amortization of these
devices was included in depreciation expense in 2004 and cost of sales in
2005. Amortization increased by $22,063 from 2004 to 2005 as a result of
license payments made in June 2005 which are capitalized and amortized.
Interest income increased by $460,759 from 2004 to 2005 as a result of
the increase in cash and short term investment balances following completion
of the Company's initial public offering on June 10, 2005.
Net loss increased by approximately $4,102,000 as a result of a reduction
in gross profit of approximately $480,000, an increase in sales and marketing
costs of approximately $1,000,000, an increase in research and development
expenses of approximately $2,336,000, an increase in general and
administrative expenses of approximately $1,166,000, offset partially by an
increase in foreign exchange gain of approximately $411,000 and increased
interest income of approximately $460,000.
As at December 31, 2005 the Company had cash, cash equivalents and short-
term investments of $22,774,263, an increase of $13,375,989 over December 31,
2004. The increase in these balances was primarily the result of the initial
public offering completed on June 10, 2005 for net proceeds of $17,850,019
offset by cash used in operations during 2005 YTD. Cash used in operating
activities increased from $2,157,185 in 2004 to $4,287,270 in 2005.
As at December 31, 2005 there were a total of 18,006,689 common shares
(21,367,578 on a fully diluted basis) and no preferred shares outstanding.
Quarter Ended December 31, 2005 Compared to Quarter Ended
September 30, 2005
The fourth quarter of 2005 was the first full quarter of sales activity
by Sorin and procedure based revenue more than doubled from the third quarter
of 2005. Capital sale revenue was down from the third quarter of 2005 as there
were no SPY systems shipped in the fourth quarter.
Gross profit as a percentage of sales decreased from 65% in the third
quarter of 2005 to 34% because of the reduction in capital sales. The gross
profit percentage earned on capital sales is higher than the percentage earned
on procedural revenue as the procedural gross profit is net of sales
commissions in the range of 30% to 40% based on pricing, and the cost of
consumable supplies.
Sales and marketing and general administrative expenses increased from
the third to the fourth quarter of 2005 to support the increase in SPY sales
activity in the US. The increase in R&D expense related primarily to increased
engineering salary and other costs to support OPTTX device development and
increased patent costs incurred to develop the Company's intellectual property
portfolio.
Conference call
Novadaq will host a conference call on Monday, March 20, 2006 at
4:30 p.m. E.T. to discuss the financial results for the fourth quarter and
full year ended December 31, 2005. To access the conference call by telephone,
dial 416-644-3427 or 1-800-814-4890. Please connect approximately ten minutes
prior to the beginning of the call to ensure participation. The conference
call will be archived for replay until March 27, 2006 at midnight. To access
the archived conference call, dial 416-640-1917 or 1-877-289-8525 and enter
the reservation number 21180888 followed by the number sign.
A live audio webcast of the conference call will be available at
www.novadaq.com. Please connect at least ten minutes prior to the conference
call to ensure adequate time for any software download that may be required to
join the webcast. The webcast will be archived at the above website for 90
days.
About Novadaq Technologies
Novadaq Technologies Inc. (TSX: NDQ) develops and commercializes medical
devices based on its proprietary imaging platform for the diagnosis and
treatment of human vascular, ophthalmic, and neurologic diseases and
conditions. Novadaq's SPY Intra-operative Imaging System, commercially
available worldwide, enables cardiac surgeons to visually assess coronary
vasculature and bypass graft functionality during the course of open-heart
bypass surgery. Novadaq's ophthalmic product, the OPTTX System, is aimed at
the diagnosis, evaluation and treatment of wet Age-related Macular
Degeneration (AMD) by using the same core imaging technology that is used in
the SPY System. The OPTTX System is currently being evaluated in clinical
trials. Novadaq's product for nerve visualization in prostate surgery, LUNA is
designed to enable surgeons to visualize nerve bundles during the course of
radical prostatectomy in order to reduce negative outcomes including
impotency. For more information, please visit the company's website at
www.novadaq.com.
This press release contains certain information that may constitute
forward-looking information within the meaning of securities laws. In some
cases, forward-looking information can be identified by the use of terms such
as "may", "will", "should", "expect", "plan", "anticipate", "believe",
"intend", "estimate", "predict", "potential", "continue" or other similar
expressions concerning matters that are not historical facts. Forward-looking
information may relate to management's future outlook and anticipated events
or results, and may include statements or information regarding the future
financial position, business strategy and strategic goals, research and
development activities, projected costs and capital expenditures, financial
results, research and clinical testing outcomes, taxes and plans and
objectives of or involving Novadaq. Particularly, information regarding future
sales and marketing activities and research and development activities, as
well as the Company's plans for each of the SPY System and the OPTTX System,
and the potential for development of an application for the Company's imaging
device in image guided conventional and minimally invasive nerve-sparing
radical prostatectomy (LUNA(TM)), is forward-looking information.
Forward-looking information is based on certain factors and assumptions
regarding, among other things, market acceptance and the rate of market
penetration of Novadaq's SPY System, the clinical results of the use of the
SPY System, the results from clinical tests of the OPTTX System, and potential
opportunities in the AMD treatment market and in image guided conventional and
minimally invasive urological applications including nerve-sparing radical
prostatectomy. While the Company considers these assumptions to be reasonable
based on information currently available to it, they may prove to be
incorrect. Forward looking-information is subject to certain factors,
including risks and uncertainties that could cause actual results to differ
materially from what we currently expect. These factors include risks relating
to the transition from research and development activities to commercial
activities, market acceptance and adoption of the SPY System, dependence on
key suppliers for components of the SPY System and the OPTTX System,
regulatory and clinical risks, risks relating to the protection of
intellectual property, risks inherent in the conduct of research and
development activities, including the risk of unfavorable or inconclusive
clinical trial outcomes, potential product liability, competition and the
risks posed by potential technological advances, and risks relating to
fluctuations in the exchange rate between the US dollar and the Canadian
dollar.
You should not place undue importance on forward-looking information and
should not rely upon this information as of any other date. While Novadaq may
elect to, Novadaq is under no obligation and does not undertake to update this
information at any particular time.
Summary financial statements attached:
For complete financial statements please go to www.sedar.com
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CONSOLIDATED BALANCE SHEETS
(expressed in U.S.$)
As at December 31
2005 2004
$ $
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ASSETS
Current
Cash and cash equivalents 750,726 434,380
Short-term investments 22,023,537 8,963,894
Accounts receivable 233,977 1,082,659
Investment tax credits receivable 41,341 54,468
Prepaid expenses and other receivables 553,534 58,644
Inventory 410,064 65,529
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Total current assets 24,013,179 10,659,574
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Property, plant and equipment, net 464,484 41,542
Deferred charges 11,259 19,015
Licenses, net 3,030,711 3,336,618
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27,519,633 14,056,749
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LIABILITIES AND SHAREHOLDERS' EQUITY
Current
Accounts payable and accrued liabilities 1,432,455 478,692
Current portion of deferred revenue 37,351 37,286
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Total current liabilities 1,469,806 515,978
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Deferred revenue 21,789 59,206
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Total liabilities 1,491,595 575,184
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Commitments and contingencies
Shareholders' equity
Share capital 46,255,988 27,966,017
Contributed surplus 3,411,851 2,280,891
Deficit (23,639,801) (16,765,343)
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Total shareholders' equity 26,028,038 13,481,565
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27,519,633 14,056,749
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CONSOLIDATED STATEMENTS OF LOSS AND DEFICIT
(expressed in U.S.$)
Year ended December 31
2005 2004
$ $
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Revenue 623,439 1,147,274
Cost of sales 275,237 318,543
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Gross profit 348,202 828,731
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Operating expenses
Sales and marketing 1,248,551 247,892
Research and development 3,613,867 1,277,386
General and administration 2,894,494 1,728,321
Depreciation 28,379 60,941
Amortization 430,907 408,844
Gain on foreign exchange (476,298) (65,307)
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7,739,900 3,658,077
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Loss before the following (7,391,698) (2,829,346)
Interest income 517,240 56,481
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Net loss for the year (6,874,458) (2,772,865)
Deficit, beginning of year (16,765,343) (13,992,478)
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Deficit, end of year (23,639,801) (16,765,343)
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Basic and fully diluted loss per Share (0.41) (0.16)
CONSOLIDATED STATEMENTS OF CASH FLOWS
(expressed in U.S.$)
Year ended December 31
2005 2004
$ $
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OPERATING ACTIVITIES
Net loss for the year (6,874,458) (2,772,865)
Add items not involving cash
Depreciation and amortization 524,389 482,021
Foreign exchange gain on cash held in
foreign currency (9,712) -
Stock option compensation 1,130,960 730,741
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(5,228,821) (1,560,103)
Net change in non-cash working capital
balances related to operations 941,551 (597,082)
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Cash used in operating activities (4,287,270) (2,157,185)
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FINANCING ACTIVITIES
Issuance of common shares 18,289,971 -
Issuance of Class A common shares 2,492,061
Repurchase of Class A common shares - (2,634,590)
Repurchase of Class B common shares - (63,898)
Issuance of Class C preference shares - 10,062,659
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Cash provided by financing activities 18,289,971 9,856,232
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INVESTING ACTIVITIES
Purchase of property, plant and equipment (511,424) (12,220)
Purchase of licenses (125,000) (175,000)
Investments in short-term investments, net (13,059,643) (7,225,237)
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Cash used in investing activities (13,696,067) (7,412,457)
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Foreign exchange gain on cash held in
foreign currency 9,712 -
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Net increase in cash and cash equivalents
during the year 316,346 286,590
Cash and cash equivalents, beginning of year 434,380 147,790
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Cash and cash equivalents, end of year 750,726 434,380
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%SEDAR: 00022069E
