Thursday, 8 November 2012

Bacterin International posts positive income, revenue rises 18% as it pushes new marketing programs, bolstered sales

Medical device company Bacterin International Holdings(NYSE MKT: BONE) has reported that it swung to a positive operating income in the third quarter as revenue increased a whopping 18 per cent, and said that sales in the fourth quarter are expected to be even better. 
The maker of bone graft material and antimicrobial coatings for medical applications reported operating income of $213,000 for the three months that ended September 30, compared to an operating loss of $1.57 million, a year ago. 
Earnings before interest, taxes, depreciation and amortization (EBITDA) swung to a positive $820,000, up from a negative $316,000 in the same period of 2011. 
Revenue rose to $8.9 million from $7.5 million a year earlier as sales from its direct sales force and independent distributors grew.
The company said the latest period marks the first full quarter since exiting its back order status on a large production push to catch up with orders. Inventory increased 54 per cent to $14.5 million. 
"Bacterin had a very productive third quarter, reaching new milestones, and turning the corner from a slower first half that had been impacted by production issues that are now resolved," said CEO Guy Cook. 
"With the ramp in revenue, we are beginning to get a glimpse of the earnings potential of the company."  
Indeed, gross margin of 71 per cent was in line with the company's previous outlook of 70 to 75 per cent as operating expenses declined 22 per cent. 
During the latest quarter, the company launched new marketing programs focused on surgeon education and training, with sales personnel also building their pipelines without "manufacturing limitation", Bacterin said. 
The medical device company also announced a fourth national group purchasing organization (GPO) contract with Premier Healthcare Alliance - one of the nation's largest group purchasing organizations, serving over 2,600 hospitals and more than 84,000 other healthcare sites. 
Hospital accounts in the latest quarter increased to 900 facilities, compared to 768 a year ago. 
Looking ahead, Cook said: "We expect revenue in Q4 to be even better and to further support this sales expansion, we have already launched new marketing investments. 
"Bacterin has instituted a key opinion leader (KOL) program enabling top surgeons to travel to our Montana headquarters, witness the production of OsteoSponge and become greater advocates for our products. 
"We have also started more training sessions in the field to help surgeons gain a comprehensive understanding of the intended uses, capabilities and performance of OsteoSponge."
The OsteoSponge allograft consists of 100 percent demineralized human cancellous bone, with no additional carrier materials. The material is prepared using methods that preserve native growth factors, says Bacterin, thereby promoting cellular ingrowth, proliferation, and ultimately osteogenesis. The product has been used in over 100,000 procedures.
Bacterin's technology optimizes the growth factors in human allografts to promote bone, subchondral repair and dermal growth. Its products are used in a variety of applications including enhancing fusion in spine surgery, relief of back pain, bone growth in foot and ankle surgery, cranial healing following neurosurgery and subchondral repair in knee and other joint surgeries.
In addition to bone graft material, the company also makes bioactive coatings for various medical device applications, including antimicrobial coatings designed to inhibit biofilm formation and microbial contamination. 
In the latest quarter, Bacterin secured $25 million in financing with OrbiMed Advisors, adding to its general working capital.  
"With the recent financing secured from OrbiMed, in addition to being EBITDA positive, we now have greater capital and flexibility to accelerate the awareness of our products, with these types of campaigns, which we did not have before," Cook added. 
General and administrative expenses increased 13 per cent to $2.4 million, to support the higher revenue and increased operational space, while cost of sales also went up. 
At the end of the third quarter, the company had cash and equivalents of $15.8 million - way up from $7.8 million at the end of the second quarter. 
The medical device company also saw in the latest period that positive clinical results were published on the use of Bacterin's OsteoSponge product for the rengeneration of subchondral bone, in the peer-reviewed journal Foot & Ankle Specialist. 
The company said that the article reported six month post-operative outcomes on a series of seven patients using the OsteoSponge SC, for the regeneration of subchondral bone in complex lesions of the talus. This included pain and activity scales as well as radiographic findings. 
As of September, the OsteoSponge SC had been implanted in more than 250 patients, continuing to produce “excellent clinical outcomes". 
"New clean rooms will be ready to go by Q1 2013, an upgrade which supports throughput capacity of $120-$150 million. With capital and capacity needs met, we can now focus our attention more fully on restoring growth trends in sales and anticipated profitability, to industry best levels."
Cook said that for the full year, the company narrowed its revenue outlook to $35 to $37 million, from $35 to $40 million, as it believes the future and long term opportunity for Bacterin products remain "very strong". 

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