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Stereotaxis Inc. Reports Operating Results (10-Q)

November 05, 2010 | About:
10qk

10qk

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Stereotaxis Inc. (STXS) filed Quarterly Report for the period ended 2010-09-30.

Stereotaxis Inc. has a market cap of $205 million; its shares were traded at around $4.05 with and P/S ratio of 4.1. STXS is in the portfolios of Steven Cohen of SAC Capital Advisors.

Highlight of Business Operations:

Revenue. Revenue increased from $13.3 million for the three months ended September 30, 2009 to $13.9 million for the three months ended September 30, 2010, an increase of approximately 4%. Revenue from the sale of systems decreased from $8.7 million to $8.2 million, a decrease of approximately 6%. We recognized revenue on five NIOBE systems and a total of $2.6 million for ODYSSEY systems during the 2010 period, versus six NIOBE systems and a total of $1.4 million for ODYSSEY systems during the 2009 period. Revenue from sales of disposable interventional devices, service and accessories increased to $5.7 million for the three months ended September 30, 2010 from $4.6 million for the three months ended September 30, 2009, an increase of approximately 24%. The increase was attributable to the increased base of installed systems, the resulting increase in disposable sales and service contracts, as well as increased volume and favorable pricing on a next generation proprietary disposable.

Cost of Revenue. Cost of revenue decreased from $4.3 million for the three months ended September 30, 2009 to $3.9 million for the three months ended September 30, 2010, a decrease of approximately 10%. As a percentage of our total revenue, overall gross margin improved to 72% for the three months ended September 30, 2010 compared to 68% during the same three month period of the prior year due to a shift from system revenue to recurring revenue. Cost of revenue for systems sold decreased from $3.5 million for the three months ended September 30, 2009 to $3.1 million for the three months ended September 30, 2010, a decrease of approximately 11%. This decrease was the result of the decrease in the number of NIOBE systems sold in the most recent quarter as well as lower average cost per unit, partially offset by higher ODYSSEY cost of revenue attributable to product mix. Cost of revenue for disposables, service and accessories remained consistent at $0.8 million between the 2010 and 2009 periods, resulting in an increase in gross margin to 87% from 82% between these periods.

Revenue. Revenue increased from $37.1 million for the nine months ended September 30, 2009 to $39.5 million for the nine months ended September 30, 2010, an increase of approximately 7%. Revenue from the sale of systems decreased from $23.7 million to $22.8 million, a decrease of approximately 4%, primarily due to a decrease in the number of NIOBE systems sold, slightly offset by an increase in ODYSSEY sales. We recognized revenue on 16 NIOBE systems and a total of $6.0 million for ODYSSEY systems during the 2010 period, versus 19 NIOBE systems and a total of $2.7 million for ODYSSEY systems during the 2009 period. Revenue from sales of disposable interventional devices, service and accessories increased to $16.7 million for the nine months ended September 30, 2010 from $13.4 million for the nine months ended September 30, 2009, an increase of approximately 25%. The increase was attributable to the increased base of installed systems, the resulting disposable sales and service contracts, as well as favorable pricing on a next generation proprietary disposable.

Cost of Revenue. Cost of revenue decreased from $12.4 million for the nine months ended September 30, 2009 to $11.7 million for the nine months ended September 30, 2010, a decrease of approximately 6%. As a percentage of our total revenue, overall gross margin improved to 70% for the nine months ended September 30, 2010 compared to 67% during the same nine month period of the prior year, due to a shift from system revenue to recurring revenue. Cost of revenue for systems sold increased from $9.3 million for the nine months ended September 30, 2009 to $9.5 million for the nine months ended September 30, 2010, an increase of approximately 3%, primarily due to a change in product mix for ODYSSEY systems sold in 2010. Cost of revenue for disposables, service and accessories decreased to $2.2 million during the 2010 period from $3.2 million during the 2009 period, resulting in an increase in gross margin to 87% from 76% between these periods. This decrease in cost of revenue was primarily due to higher costs associated with software upgrades in 2009 compared to 2010.

Sales and Marketing Expenses. Sales and marketing expenses increased to $22.4 million from $21.4 million for the nine months ended September 30, 2010 and 2009, respectively, an increase of approximately 5%. Current year expenses include $3.1 million related to additional headcount supporting capital penetration and clinical adoption efforts, which were offset by $0.9 million related to asset impairment charges in 2009, $0.4 million due to decreased depreciation in 2010, and $0.5 million of reduced share-based compensation as a result of increased forfeiture rates.

In July 2008, the Company and Biosense Webster entered into an amendment to their existing agreements relating to the development and sale of catheters. Pursuant to the amendment, Biosense Webster agreed to pay the Company $10.0 million as an advance on royalty amounts that were owed at the time the amendment was executed or would be owed in the future by Biosense Webster to the Company pursuant to the royalty provisions of one of the existing agreements. The Company and Biosense Webster also agreed that an aggregate of up to $8.0 million of certain agreed upon research and development expenses that were owed at the time the amendment was executed or may be owed in the future by the Company to Biosense Webster pursuant to the existing agreement would be deferred and will be due, together with any unrecouped portion of the $10.0 million royalty advance, on the Final Payment Date (as defined below). Interest on the outstanding and unrecouped amounts of the royalty advance and deferred research and development expenses will accrue at an interest rate of the prime rate plus 0.75%. Outstanding royalty advances and deferred research and development expenses and accrued interest thereon will be recouped by Biosense Webster by deductions from royalty amounts otherwise owed to the Company from Biosense Webster pursuant to the existing agreement. The Company has the right to prepay any amounts due pursuant to the Amendment at any time without penalty. As of September 30, 2010, approximately $18.0 million had been advanced by Biosense Webster to the Company pursuant to the amendment. As of September 30, 2010, $8.8 million of royalty payments owed by Biosense had been used to reduce the advances together with accrued interest thereon and the remaining approximately $9.6 million of amounts owed to Biosense Webster has been classified as debt in the accompanying balance sheet including $4.0 million as short-term debt and $5.6 million as long-term debt. The Company recorded research and development expenses of $0.1 million and $0.4 million and royalties within disposables, service and accessories revenue of $1.0 million and $2.9 million for the three and nine months ended September 30, 2010, related to this agreement.

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