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CARDIOVASCULAR SYSTEMS, INC. Reports Operating Results (10-Q)

May 14, 2010 | About:
10qk

10qk

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CARDIOVASCULAR SYSTEMS, INC. (CSII) filed Quarterly Report for the period ended 2010-03-31.

Cardiovascular Systems, Inc. has a market cap of $75.4 million; its shares were traded at around $5.08 with and P/S ratio of 1.3. CSII is in the portfolios of Lee Ainslie of Maverick Capital, Stanley Druckenmiller of Duquesne Capital Management, LLC, George Soros of Soros Fund Management LLC.

Highlight of Business Operations:

Revenues. Revenues increased by $1.4 million, or 9.3%, from $15.1 million for the three months ended March 31, 2009 to $16.5 million for the three months ended March 31, 2010. This increase was attributable to a $792,000, or 5.8%, increase in sales of the Diamondback 360° and a $612,000, or 43.1%, increase in sales of supplemental and other products during the three months ended March 31, 2010 compared to the three months ended March 31, 2009. Supplemental products include our Viper product line and distribution partner products, some of which have been introduced over the last year. As of March 31, 2010, we had a 151-person direct sales organization. As of March 31, 2009, we had a 119-person direct sales organization. We expect our revenue to increase as we continue to increase the number of physicians using the devices, increase the usage per physician, continue to focus on physician education programs, and introduce new and improved products. Currently, all of our revenues are in the United States, however, we may potentially sell internationally in the future.

Research and Development Expenses. Research and development expenses decreased by $0.9 million, or 28.3%, from $3.4 million for the three months ended March 31, 2009 to $2.5 million for the three months ended March 31, 2010. Research and development expenses relate to specific projects to improve our product or expand into new markets, such as the development of a new control unit, shaft designs, crown designs, and PAD and coronary clinical trials. The reduction in these expenses related to the decreased numbers and sizes of PAD development projects in fiscal 2010, as well as the timing of those projects. Research and development expenses for the three months ended March 31, 2010 and 2009 includes $300,000 and $220,000, respectively, for stock-based compensation. As we continue to expand our product portfolio within the market for the treatment of peripheral arteries and leverage our core technology into the coronary market, we expect to incur research and development expenses for the remainder of the fiscal year at a slightly higher rate than that incurred for the three months ended March 31, 2010, although fluctuations could occur based on the number of projects and studies and the timing of expenditures.

Revenues. Revenues increased by $6.0 million, or 14.8%, from $40.8 million for the nine months ended March 31, 2009 to $46.8 million for the nine months ended March 31, 2010. This increase was attributable to a $4.2 million, or 11.4%, increase in sales of the Diamondback 360° and a $1.8 million, or 50.4% increase in sales of supplemental and other products during the nine months ended March 31, 2010 compared to the nine months ended March 31, 2009. Supplemental products include our Viper product line and distribution partner products, some of which have been introduced over the last year.

Cost of Goods Sold. Cost of goods sold decreased by $1.1 million, or 9.2%, from $12.0 million for the nine months ended March 31, 2009 to $10.9 million for the nine months ended March 31, 2010. This decrease in cost of goods sold resulted in an increase to gross margin of 6%, from 71% for the nine months ended March 31, 2009 to 77% for the nine months ended March 31, 2010. Cost of goods sold represents the cost of materials, labor and overhead for single-use catheters, guidewires, control units, and other ancillary products. The increase in gross margin from the nine months ended March 31, 2009 to March 31, 2010 is primarily due to manufacturing efficiencies, product cost reductions, and shipment of fewer lower margin control units. Cost of goods sold for the nine months ended March 31, 2010 and 2009 includes $434,000 and $367,000, respectively, for stock-based compensation.

Selling, General and Administrative Expenses. Selling, general and administrative expenses increased by $1.5 million, or, 3.3%, from $45.6 million for the nine months ended March 31, 2009 to $47.1 million for the nine months ended March 31, 2010. The primary reasons for the increase included increased sales and marketing expenses of $3.8 million, from building our sales team along with additional marketing programs, partially offset by reduced consulting and professional services primarily from a $1.7 million write-off of previously capitalized initial public offering costs in fiscal 2009. Selling, general and administrative expenses for the nine months ended March 31, 2010 and 2009 includes $5.2 million and $4.1 million, respectively, for stock-based compensation.

Research and Development Expenses. Research and development expenses decreased by $4.5 million, or 37.4%, from $11.9 million for the nine months ended March 31, 2009 to $7.4 million for the nine months ended March 31, 2010. The reduction in these expenses related to costs of a coronary clinical trial occurring during the nine months ended March 31, 2009, along with the decreased number and size of PAD development projects in fiscal 2010, as well as the timing of those projects. Research and development expenses for the nine months ended March 31, 2010 and 2009 includes $876,000 and $441,000, respectively, for stock-based compensation.

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