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Spectranetics Corp. Reports Operating Results (10-Q)

November 06, 2009 | About:
10qk

10qk

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Spectranetics Corp. (SPNC) filed Quarterly Report for the period ended 2009-09-30.

Spectranetics Corp. is a medical device company engaged in the development manufacturing marketing and distribution of its technology for interventional cardiovascular therapy. The Company's CVX-300 excimer laser system is the only excimer laser system approved by the FDA for multiple cardiovascular procedures. The technology has been designed for use in multiple cardiovascular applications including coronary angioplasty and the removal of pacemaker and ICD leads. (press release) Spectranetics Corp. has a market cap of $185.4 million; its shares were traded at around $5.69 with and P/S ratio of 1.7.

Highlight of Business Operations:

Investing Activities. For the nine months ended September 30, 2009, cash provided by investing activities was $0.7 million, consisting of proceeds from the maturity of investment securities of $4.6 million and a decrease in restricted cash of $0.6 million, offset by capital expenditures of $2.8 million, a milestone payment to Kensey Nash Corporation (KNC) of $1.5 million, and two acquisitions of patents for a total of $0.2 million. The decrease in restricted cash was due to a payment made in the Rentrop case; see Note 12, “Commitments and Contingencies,” of the condensed consolidated financial statements included with this report for more information. The capital expenditures included manufacturing capacity expansion projects as well as additional capital items for research and development projects and additional computer equipment purchases.

As of September 30, 2009, the unrealized loss on our auction rate securities was approximately $2.1 million, recorded in 2008, reducing the par value of the securities of $17.1 million to their fair value of $15.0 million. No further reduction of fair value was deemed to have occurred in the first nine months of 2009. At December 31, 2008, we also performed a sensitivity analysis in the valuation of our auction rate securities using an estimated date to liquidation of plus or minus two years and a discount rate of plus or minus 50 basis points. The sensitivity analysis with these parameters calculated a valuation ranging from $14.6 million to $16.2 million.

Our exposure to foreign currency fluctuations is primarily related to sales of our products in Europe, which are denominated in the euro. Changes in the exchange rate between the euro and the U.S. dollar could adversely affect our revenue and net income. Exposure to foreign currency exchange rate risk may increase over time as our business evolves and our products continue to be introduced into international markets. Currently, we do not hedge against any foreign currencies and, as a result, could incur unanticipated gains or losses. For the three months ended September 30, 2009, approximately $0.3 million of decreased revenue and $0.1 million of decreased operating expenses were the result of exchange rate fluctuations of the U.S. dollar in relation to the euro as compared to the prior year period. Accordingly, the net impact of exchange rate fluctuations on consolidated net loss for the three months ended September 30, 2009 was an increase in net loss of $0.2 million as compared to the prior year.

Recently, President Obama and members of Congress have proposed significant reforms to the U.S. healthcare system. Both the U.S. Senate and House of Representatives have conducted hearings about healthcare reform. The Obama administration’s fiscal year 2010 budget included proposals to limit Medicare payments, reduce drug spending and increase taxes. In addition, members of Congress have proposed a number of approaches. In September 2009, Max Baucus, the Chairman of the U.S. Senate Finance Committee, released a draft of the committee’s healthcare reform bill, a bill which included an excise tax on all medical devices, requiring the medical device industry to contribute $4 billion to healthcare reform each year for a period of 10 years. The House of Representatives has also released a bill containing a $20 billion tax on medical devices. Various healthcare reform proposals also have emerged at the state level. We cannot predict what healthcare initiatives, if any, will be implemented at the federal or state level, or the effect any future legislation or regulation will have on us, or our results of operations. In addition, if the excise tax contained in proposed legislation is enacted into law, our operating results could be materially and adversely affected.

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