Orthovita Inc. (VITA) filed Quarterly Report for the period ended 2009-09-30.
ORTHOVITA INC. is a biomaterials company with proprietary techniques for the development of novel products for use in orthopaedics. Their focus is on developing products for use in surgical procedures in spine and osteoporotic fractures. Orthovita Inc. has a market cap of $298.43 million; its shares were traded at around $3.91 with and P/S ratio of 3.88.
Highlight of Business Operations:
Net cash provided by investing activities was $4,303,772 for the nine months ended September 30, 2009 compared to $2,980,710 for the nine months ended September 30, 2008. The increase in cash provided by investing activities for the nine months ended September 30, 2009, primarily reflects the net proceeds from the sale and maturity of short-term investments of $9,353,531, which was partially offset by expenditures of $4,539,754 for certain capital projects, including the purchase of equipment and leasehold improvements to manufacture Vitagel and $515,000 for a license right intangible. During the nine months ended September 30, 2008, we received net proceeds of $12,750,743 from the sale and maturity of short-term investments, which were partially offset by $3,418,033 in expenditures for equipment and leasehold improvements and $6,552,000 paid to acquire a collagen-processing business.
Notes Payable. On July 30, 2007, we entered into a $45,000,000 senior secured note purchase facility, to which we refer as our “debt facility” or “facility”, with LB I Group Inc., an affiliate of Lehman Brothers Inc. Notes issued under the facility are due July 30, 2012. We issued $25,000,000 principal amount of notes under the facility on July 30, 2007 and used most of the proceeds to repurchase a revenue interest obligation. On July 31, 2008, we issued an additional $10,000,000 principal amount of notes under the facility. We applied the proceeds of this note toward payment of (i) the $6,552,000 purchase price for the collagen raw material, equipment and technology license that we acquired during the third quarter of 2008 under a supply and license agreement and (ii) costs to expand our manufacturing capacity for Vitagel and ancillary products such as Aliquot, Imbibe and CellPaker.
Gross Profit. Gross profit for the three and nine months ended September 30, 2009 was $15,145,252 and $46,650,146, respectively, compared to $13,880,884 and $37,217,765, respectively, for the same periods in 2008. As a percentage of sales, gross profit was 68% for the three and nine months ended September 30, 2009, compared to 68% and 66% for the same periods in 2008. The increase in the gross margin for the nine months ended September 30, 2009, compared to the same period in 2008, primarily reflects more favorable product mix. Our gross margins may fluctuate from quarter to quarter based on the mix of products sold from period to period.
General and administrative expenses for the three and nine months ended September 30, 2009 were $3,443,940 and $9,148,039, respectively, a 29% and 12% increase compared to $2,671,559 and $8,202,293, respectively, for the same periods in 2008. The increase in expenses during the third quarter and first nine months of 2009 was primarily due to severance costs associated with the departure of a senior executive officer, combined with higher consulting costs. General and administrative expenses were 15% and 13% of product sales for the three and nine months ended September 30, 2009, respectively, as compared to 13% and 15% for the same periods in 2008.
Net other expense. Net other expense for the three and nine months ended September 30, 2009 was $722,514, and $2,098,708, respectively. Our net other expense for the three and nine months ended September 30, 2008 was $475,422 and $972,584. Net other expense for the three months ended September 30, 2009 was higher than the corresponding period in 2008 primarily due to lower interest income due to lower interest rates and lower cash, cash equivalents and short-term investment balances in 2009. Net other expense for the nine months ended September 30, 2009 was higher than the corresponding period in 2008 due to higher interest expense relating to outstanding notes payable as the principal amount was outstanding for a longer period of time during the nine months ended September 30, 2009 as compared to the prior period in 2008, combined with lower interest rates and lower cash, cash equivalents and short-term investments.
As of September 30, 2009 and December 31, 2008, our total exposure to foreign currency risk in U.S. dollar terms was $1,941,000 and $2,525,000, or 2% and 3% of our total assets, respectively. The potential impact of a hypothetical 10% decline in foreign exchange rates would result in a total decline in the fair value of our assets of approximately $194,000 at September 30, 2009 and $253,000 at December 31, 2008.
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