Theragenics Corp. (TGX, Financial) filed Quarterly Report for the period ended 2012-09-30.
Theragenics Corporation has a market cap of $46.5 million; its shares were traded at around $1.45 with a P/E ratio of 19.4 and P/S ratio of 0.6. Theragenics Corporation had an annual average earning growth of 2.1% over the past 5 years.
We have non-exclusive distribution agreements in place for the distribution of our TheraSeed® device. Under our third party distribution agreements, we are the exclusive palladium-103 seed supplier for the treatment of prostate cancer for each distributor, and each distributor has the non-exclusive right to sell TheraSeed® in the U.S. and Canada. Certain agreements also provide distributors with the right to distribute TheraSeed® for the treatment of solid localized tumors other than in the prostate and with rights to distribute to certain locations outside of North America. Such applications (non-prostate and outside of North America) have not been material and are not expected to become material in the near future. Our principal non-exclusive distribution agreement is with C.R. Bard (“Bard”). Our agreement with Bard provides for automatic one year extensions of the term, unless either party gives notice of its intent not to renew at least twelve months prior to the end of the current term. The current term expires December 31, 2013 and will be automatically extended for one additional year unless either party gives notice of its intent not to extend by December 31, 2012. Sales to Bard under the agreement with Bard represented approximately 23% and 25% of total brachytherapy seed segment revenue for the three and nine months ended September 30, 2012, respectively, and 26% and 28% of total brachytherapy seed segment revenue for the three and nine months ended September 30, 2011, respectively.
Core became an additional non-exclusive distributor of TheraSeed® in January 2010. In February 2011, we terminated our agreement with Core due to Core s failure to satisfy its financial obligation to us in accordance with the contractual terms of the agreement. Core had been attempting to become current with amounts due to us. However, litigation filed against Core by a third party in January 2011 created what we viewed as an unacceptable level of uncertainty surrounding Core s ability to satisfy their financial obligations to us for both current and ongoing sales. Subsequent to termination of the agreement, we continued to supply TheraSeed® to Core on a prepaid basis. In the latter half of 2011, certain customers who previously purchased TheraSeed® through Core began purchasing either from us on a direct basis or through one of our other TheraSeed® distributors. In February 2012, we acquired Core s prostate brachytherapy customer base. See above under “Acquisition of Core Oncology s Prostate Brachytherapy Customer Base”. Sales to Core in our brachytherapy segment totaled approximately 11% and 12% of total brachytherapy seed segment revenue for the three and nine months ended September 30, 2011, respectively.
In the third quarter of 2012, operating income in our surgical products segment was $243,000 compared to $780,000 in the third quarter of 2011. For the first nine months of 2012, operating income was $1.0 million compared to $1.1 million in the first nine months of 2011. Our gross profit margins on sales were 34% in the quarter ended September 30, 2012 compared to 37% in the quarter ended September 30, 2011. In the year to date period, our gross profit margin on sales was 34% for the nine months ended September 30, 2012 compared to 36% for the nine months ended September 30, 2011. Gross margins continue to be affected by our sales channel mix. We sell our surgical products primarily to OEM s and to a network of distributors. Sales to OEM s, which typically carry a lower gross profit margin than sales to dealers, have increased relative to total sales over the past several years from 84% in 2009 to 89% in 2012. We also experienced higher rework costs on some newer customer programs during 2012. Over time, we plan to increase margins by integrating manufacturing processes, improving efficiencies and introducing newer and higher margin products, such as the Galt VTI, Galt Microslide and Galt Centeze discussed above.
Operating income in our brachytherapy business was $906,000 in the third quarter of 2012 compared to $1.2 million in the third quarter of 2011. For the nine month period, operating income was $3.0 million in 2012 and $3.8 million in 2011. Sales of TheraSeed® decreased $1.1 and $2.3 million for the three and nine months ended September 30, 2012, respectively, from the comparable 2011 periods. Manufacturing expenses related to our TheraSeed® palladium-103 based device tend to be fixed in nature and, accordingly, these declines in revenue had a significant effect on operating income in the 2012 periods. Operating income in our brachytherapy seed business is expected to continue to be highly dependent on TheraSeed® sales levels due to the high fixed cost component of our manufacturing operations. Revenue from the acquired Core customers partially offset the decline in Theraseed® sales and contributed to operating income in 2012, though margins on iodine-125 based devices are lower than our TheraSeed® devices. Initially, we supplied the acquired customer base with iodine-125 based devices under a temporary supply agreement with Core as we transitioned the new customers. Effective July 1, 2012, we began to supply these acquired customers with our internally produced AgX100TM device, which lowered our cost of sales for these customers. The improved profitability from our internally produced AgX100 TM partially offset the decline in operating income resulting from our lower Theraseed® sales.
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Theragenics Corporation has a market cap of $46.5 million; its shares were traded at around $1.45 with a P/E ratio of 19.4 and P/S ratio of 0.6. Theragenics Corporation had an annual average earning growth of 2.1% over the past 5 years.
Highlight of Business Operations:
Our brachytherapy product sales decreased 5% for the quarter ended September 30, 2012 and were flat for the nine months ended September 30, 2012 from the comparable 2011 periods. Incremental revenues from the acquisition of the Core Oncology customer base totaled $1.0 million and $2.8 million for the three and nine months ended September 30, 2012, respectively. See “Acquisition of Core Oncology s Prostate Brachytherapy Customer Base” above. Excluding the incremental sales to the acquired customers, brachytherapy product revenue, primarily from our TheraSeed® product, declined 24% and 17% for the three and nine months ended September 30, 2012, respectively.We have non-exclusive distribution agreements in place for the distribution of our TheraSeed® device. Under our third party distribution agreements, we are the exclusive palladium-103 seed supplier for the treatment of prostate cancer for each distributor, and each distributor has the non-exclusive right to sell TheraSeed® in the U.S. and Canada. Certain agreements also provide distributors with the right to distribute TheraSeed® for the treatment of solid localized tumors other than in the prostate and with rights to distribute to certain locations outside of North America. Such applications (non-prostate and outside of North America) have not been material and are not expected to become material in the near future. Our principal non-exclusive distribution agreement is with C.R. Bard (“Bard”). Our agreement with Bard provides for automatic one year extensions of the term, unless either party gives notice of its intent not to renew at least twelve months prior to the end of the current term. The current term expires December 31, 2013 and will be automatically extended for one additional year unless either party gives notice of its intent not to extend by December 31, 2012. Sales to Bard under the agreement with Bard represented approximately 23% and 25% of total brachytherapy seed segment revenue for the three and nine months ended September 30, 2012, respectively, and 26% and 28% of total brachytherapy seed segment revenue for the three and nine months ended September 30, 2011, respectively.
Core became an additional non-exclusive distributor of TheraSeed® in January 2010. In February 2011, we terminated our agreement with Core due to Core s failure to satisfy its financial obligation to us in accordance with the contractual terms of the agreement. Core had been attempting to become current with amounts due to us. However, litigation filed against Core by a third party in January 2011 created what we viewed as an unacceptable level of uncertainty surrounding Core s ability to satisfy their financial obligations to us for both current and ongoing sales. Subsequent to termination of the agreement, we continued to supply TheraSeed® to Core on a prepaid basis. In the latter half of 2011, certain customers who previously purchased TheraSeed® through Core began purchasing either from us on a direct basis or through one of our other TheraSeed® distributors. In February 2012, we acquired Core s prostate brachytherapy customer base. See above under “Acquisition of Core Oncology s Prostate Brachytherapy Customer Base”. Sales to Core in our brachytherapy segment totaled approximately 11% and 12% of total brachytherapy seed segment revenue for the three and nine months ended September 30, 2011, respectively.
In the third quarter of 2012, operating income in our surgical products segment was $243,000 compared to $780,000 in the third quarter of 2011. For the first nine months of 2012, operating income was $1.0 million compared to $1.1 million in the first nine months of 2011. Our gross profit margins on sales were 34% in the quarter ended September 30, 2012 compared to 37% in the quarter ended September 30, 2011. In the year to date period, our gross profit margin on sales was 34% for the nine months ended September 30, 2012 compared to 36% for the nine months ended September 30, 2011. Gross margins continue to be affected by our sales channel mix. We sell our surgical products primarily to OEM s and to a network of distributors. Sales to OEM s, which typically carry a lower gross profit margin than sales to dealers, have increased relative to total sales over the past several years from 84% in 2009 to 89% in 2012. We also experienced higher rework costs on some newer customer programs during 2012. Over time, we plan to increase margins by integrating manufacturing processes, improving efficiencies and introducing newer and higher margin products, such as the Galt VTI, Galt Microslide and Galt Centeze discussed above.
Operating income in our brachytherapy business was $906,000 in the third quarter of 2012 compared to $1.2 million in the third quarter of 2011. For the nine month period, operating income was $3.0 million in 2012 and $3.8 million in 2011. Sales of TheraSeed® decreased $1.1 and $2.3 million for the three and nine months ended September 30, 2012, respectively, from the comparable 2011 periods. Manufacturing expenses related to our TheraSeed® palladium-103 based device tend to be fixed in nature and, accordingly, these declines in revenue had a significant effect on operating income in the 2012 periods. Operating income in our brachytherapy seed business is expected to continue to be highly dependent on TheraSeed® sales levels due to the high fixed cost component of our manufacturing operations. Revenue from the acquired Core customers partially offset the decline in Theraseed® sales and contributed to operating income in 2012, though margins on iodine-125 based devices are lower than our TheraSeed® devices. Initially, we supplied the acquired customer base with iodine-125 based devices under a temporary supply agreement with Core as we transitioned the new customers. Effective July 1, 2012, we began to supply these acquired customers with our internally produced AgX100TM device, which lowered our cost of sales for these customers. The improved profitability from our internally produced AgX100 TM partially offset the decline in operating income resulting from our lower Theraseed® sales.
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