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TranS1 Inc. Reports Operating Results (10-Q)

November 10, 2010 | About:
10qk

10qk

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TranS1 Inc. (TSON) filed Quarterly Report for the period ended 2010-09-30.

Trans1 Inc. has a market cap of $46.6 million; its shares were traded at around $2.25 with and P/S ratio of 1.6. TSON is in the portfolios of Steven Cohen of SAC Capital Advisors, Jim Simons of Renaissance Technologies LLC.

Highlight of Business Operations:

Revenue Revenue decreased from $6.9 million in the three months ended September 30, 2009 to $6.3 million in the three months ended September 30, 2010. The $0.6 million decrease in revenue from 2009 to 2010 was related to lower case volume as a result of concerns and uncertainty in the marketplace surrounding physician reimbursement for our AxiaLIF procedure. Domestically, sales of our AxiaLIF single level products decreased from $4.1 million in the three months ended September 30, 2009 to $3.2 million in the three months ended September 30, 2010, and sales of our AxiaLIF 2L products increased from $1.8 million in the three months ended September 30, 2009 to $1.9 million in the three months

ended September 30, 2010. New products accounted for revenue of $0.3 million in the three months ended September 30, 2010. In the three months ended September 30, 2010, average revenue per AxiaLIF case continued to increase, helped by a price increase effective April 1, 2010, the release of our AxiaLIF 2L+ product, and penetration into existing cases by our new products. In the three months ended September 30, 2009 and 2010, we recorded 606 and 490 domestic AxiaLIF cases, respectively, including 138 AxiaLIF 2L cases in the three months ended September 30, 2009, and 136 AxiaLIF 2L and 2L+ cases in the three months ended September 30, 2010. Additionally, during the three months ended September 30, 2009 and 2010, we generated $0.6 million and $0.5 million, respectively, in revenues from sales of our facet and Vectre screw systems. Revenue generated outside the United States was $0.4 million in both the three months ended September 30, 2009 and 2010. There was $35,000 in initial stocking shipments to new distributors outside the United States in the three months ended September 30, 2009, compared to no initial stocking shipments to new distributors in the three months ended September 30, 2010. In the three months ended September 30, 2009 and 2010, 94% and 93%, respectively, of our revenues were generated in the United States.

Sales and Marketing Sales and marketing expenses decreased from $8.1 million in the three months ended September 30, 2009 to $5.9 million in the three months ended September 30, 2010. The decrease in expenses from 2009 to 2010 of $2.2 million was primarily due to lower personnel-related costs of $1.2 million, including lower commissions of $0.3 million, as we reduced our U.S. sales force to focus our resources, decreased travel and entertainment expenses of $0.6 million, and decreased surgeon training expenses of $0.5 million.

Revenue Revenue decreased from $23.5 million in the nine months ended September 30, 2009 to $20.3 million in the nine months ended September 30, 2010. The $3.2 million decrease in revenue from 2009 to 2010 was related to lower case volume as a result of concerns and uncertainty in the marketplace surrounding physician reimbursement for our AxiaLIF procedure. Domestically, sales of our AxiaLIF single level products decreased from $13.1 million in the nine months ended September 30, 2009 to $10.2 million in the nine months ended September 30, 2010 and sales of our AxiaLIF 2L products decreased from $6.2 million in the nine months ended September 30, 2009 to $6.0 million in the nine months ended September 30, 2010. New products accounted for revenue of $0.8 million in the nine months ended September 30, 2010. In the nine months ended September 30, 2010, average revenue per AxiaLIF case continued to increase, helped by a price increase effective April 1, 2010, the full market release of our AxiaLIF 2L+ product, and penetration into existing cases by our new products. In the nine months ended September 30, 2009 and 2010, we recorded 2,028 and 1,568 domestic AxiaLIF cases, respectively, including 481 AxiaLIF 2L cases in 2009 and 425 AxiaLIF 2L and 2L+ cases in 2010. Additionally, during the nine months ended September 30, 2009 and 2010, we generated $2.4 million and $1.6 million, respectively, in revenues from sales of our facet and Vectre screw systems. Revenue generated outside the United States increased from $1.4 million in the nine months ended September 30, 2009 to $1.7 million in the nine months ended September 30, 2010. In February 2009, we began to sell directly to hospitals in Germany through our own sales force, which previously had been done through a distributor. In the nine months ended September 30, 2009 and 2010, there were $122,000 and $51,000, respectively, in initial stocking shipments to new distributors outside the United States. In the nine months ended September 30, 2009 and 2010, 94% and 92%, respectively, of our revenues were generated in the United States.

Research and Development Research and development expenses decreased from $5.0 million in the nine months ended September 30, 2009 to $3.3 million in the nine months ended September 30, 2010. The $1.7 million decrease in expenses from 2009 to 2010 was primarily related to a $1.0 million expense in 2009 to acquire the rights to develop a technology for future use, a $0.2 million expense in 2009 for the exclusivity rights to negotiate for a potential product acquisition, and a decrease in project spending of $0.8 million in 2010.

Sales and Marketing Sales and marketing expenses decreased from $26.2 million in the nine months ended September 30, 2009 to $20.1 million in the nine months ended September 30, 2010. The decrease in expenses from 2009 to 2010 of $6.1 million was primarily due to lower commissions of $1.5 million, related to the lower revenue, decreased personnel-related costs of $1.5 million as we reduced our U.S. sales force to focus our resources, decreased travel and entertainment expenses of $1.6 million,

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