SOURCE: Given Imaging

February 27, 2007 17:39 ET

Given Imaging Reports Fourth Quarter and Full Year 2006 Results

Record Fourth Quarter Revenues of $27.5 Million, Non-GAAP EPS $0.09; 2006 Revenues Grow to $95 Million, 2006 Non-GAAP EPS $0.13; Record Fourth Quarter PillCam SB Capsule Sales of 48,700, 22% Increase Over 2005

YOQNEAM, ISRAEL -- (MARKET WIRE) -- February 27, 2007 -- Given Imaging Ltd. (NASDAQ: GIVN) today announced unaudited financial results for the fourth quarter and twelve months ended December 31, 2006.

Worldwide sales increased to $27.5 million in the fourth quarter of 2006, compared to $24.4 million in the fourth quarter of 2005. Gross margin in the fourth quarter of 2006 was 73.8%, compared to 75.4% in the fourth quarter of 2005.

On a GAAP basis, the Company reported net income of $1.5 million, or $0.05 per share on a fully-diluted basis in the fourth quarter of 2006, compared to net profit of $3.5 million, or $0.12 per share on a fully diluted basis in the fourth quarter of 2005. The 2006 GAAP results for the fourth quarter include $1.1 million in compensation expenses as a result of the Company's adoption of FAS 123R at the start of the year. On a non-GAAP basis, the Company reported net income of $2.5 million, or $0.09 per share on a fully diluted basis in the fourth quarter of 2006.

In 2006, net cash provided by operating activity totaled $7.9 million. Cash, cash equivalents and marketable securities at December 31, 2006 totaled $96.5 million.

"Given Imaging's fourth quarter results demonstrate clear success across many aspects of our business, most notably the strong growth in PillCam revenues since our sales force shifted its focus beginning in the third quarter of 2006 to concentrate on selling capsules," said Homi Shamir, president and CEO of Given Imaging. "Looking ahead, 2007 should be an exciting year as we focus on expanding the contribution of PillCam revenues from Europe and Asia/Pacific where we hope to receive approval to market PillCam SB in Japan in the second quarter of this year," Mr. Shamir added. "We now have four PillCam capsules that will contribute to revenues in 2007; PillCam SB, PillCam ESO, Agile Patency as well as the latest addition to our PillCam family of capsule endoscopes, PillCam COLON, which received the CE Mark in Europe last October. We plan to gradually deliver PillCam COLON to our customers beginning in the second half of 2007. To remain at the forefront of innovation and expand our technological lead, we plan to launch advanced versions of our PillCam SB and PillCam ESO capsules and potentially PillCam COLON in the U.S. later this year subject to receiving marketing clearance from the U.S. Food and Drug Administration."

The Company also reported that it is analyzing treatment of intercompany transactions resulting in accumulated net operating losses of its U.S. subsidiary. These losses, accumulated since 2001, resulted in a Deferred Tax Asset of $2.0 million on its unaudited balance sheet as of December 31, 2006 and unrecognized tax assets of $2.6 million as of that date. The outcome of this analysis may require a reduction of the Company's Deferred Tax Asset as well as an increase in Taxes on Income on its Statement of Operations and any related tax liability. The Company believes that any adjustments related to this analysis will be limited to these captions and Net Income in the 2006 financial statements. The Company expects that this analysis will be completed on or before it files its Annual Report on Form 20-F for the year ended December 31, 2006, which the Company plans to file during the second quarter of 2007.

Fourth Quarter 2006 Revenue Analysis

U.S. sales in the fourth quarter of 2006 increased by 6.4% to $20 million compared to $18.8 million sales in the same period in 2005. International sales in the fourth quarter of 2006 increased 33.9% to $7.5 million compared to $5.6 million sales in the same period in 2005.

Total PillCam SB sales in the fourth quarter of 2006 were approximately 48,700, an increase of 22.1% compared to the same period last year. PillCam SB sales in the U.S. increased 24.6%, while PillCam SB sales outside of the U.S. increased 13.2% compared to the fourth quarter of 2005. PillCam sales accounted for 84% of total revenues. In the same period in 2005, PillCam sales represented 79% of total sales.

Reorders of PillCam SB grew to 42,900, up 13.5% from the fourth quarter of 2005.

Supplemental fourth quarter data can be found at www.givenimaging.com in the Investor section.

Fourth Quarter and Recent Highlights

Reimbursement

--  The American Medical Association (AMA) and the Center for Medicare and
    Medicaid Services (CMS) assigned a Permanent Level 1 CPT Code for PillCam
    ESO which became effective on January 1, 2007.
    
--  United Healthcare revised its small bowel capsule endoscopy coverage
    to include suspected and known celiac disease.  United Healthcare serves
    more than 18 million customers.
    
--  Trailblazer Health Enterprises, a Part B Medicare carrier serving more
    than 3.6 million individuals in Delaware, the District of Columbia,
    Maryland, Texas and Virginia issued a new policy covering capsule endoscopy
    of the small bowel for a variety of indications including celiac and
    Crohn's disease.  The policy also states that esophageal capsule endoscopy
    may be used to evaluate esophageal varices in patients with portal
    hypertension as an alternative to upper GI endoscopy.
    
Corporate Development

In January 2007, Given Imaging announced that it will lead a European consortium for developing an integrated imaging-biosensing screening system for cancer of the gastrointestinal tract.

2007 World Economic Forum

Given Imaging was honored at the 2007 World Economic Forum in Davos, Switzerland as a Technology Pioneer.

Twelve Month Financial Results

For the year ended December 31, 2006, sales were $95 million compared to $86.8 million in 2005. Gross profit for 2006 was 74.6% which was the same as gross profit for 2005. On a GAAP basis, net loss for 2006 was $1.5 million or $0.05 per share, compared to net income of $6.3 million, or $0.21 per share, on a fully diluted basis in 2005. The 2006 Statements of Operations include the impact of $5.2 million in expenses due to the adoption of FAS 123R. The Company reported non-GAAP net income of $3.7 million, or $0.13 per share, on a diluted basis in 2006.

2007 Guidance

The company expects full year 2007 revenues of between $114 million to $119 million. The company expects full year 2007 GAAP, fully diluted earnings per share of between $0.21 - $0.31 per share. Non-GAAP, fully diluted earnings per share in 2007 is expected to be in a range of $0.34 to $0.44. Both GAAP and non-GAAP expected net income do not include expenses related to the Company's patent litigation with Olympus.

Fourth Quarter Webcast Information

Given Imaging will host a conference call tomorrow, February 28, 2007, at 9:00 a.m. Eastern time to discuss fourth quarter and full year 2006 results. To participate in the teleconference, please dial (866) 293-8970 fifteen minutes before the conference begins. International callers should dial (913) 312-1230. The call will also be webcast live at www.givenimaging.com. A replay of the call will be available for thirty days on the company's website, or until March 7, 2007 by dialing 888-203-1112. International callers should dial 719-457-0820. The replay participant code is 8791440.

About Given Imaging Ltd.

Given Imaging is redefining gastrointestinal diagnosis by developing, producing and marketing innovative, patient-friendly products for detecting gastrointestinal disorders. The company's technology platform is the PillCam™ Platform, featuring the PillCam video capsule, a disposable, miniature video camera contained in a capsule, which is ingested by the patient, a sensor array, data recorder and RAPID® software. Given Imaging has three commercially available capsules: the PillCam SB video capsule to visualize the entire small intestine which is currently marketed in the United States and in more than 50 other countries; the PillCam ESO video capsule to visualize the esophagus; and the Agile™ patency capsule to determine the free passage of the PillCam capsule in the GI tract. The PillCam COLON video capsule to visualize the colon has been cleared for marketing in the European Union and multi-center clinical trials are underway in Europe and the U.S. A capsule to visualize the stomach is under development. Nearly 500,000 patients worldwide have benefited from the PillCam capsule endoscopy procedure. Given Imaging's headquarters, manufacturing and R&D facilities are located in Yoqneam, Israel; it has direct sales and marketing operations in the United States, Germany and France, and local offices in Japan, Spain and Australia. For more information, visit http://www.givenimaging.com.

This press release contains forward-looking statements within the meaning of the "safe harbor" provisions of the U.S. Private Securities Litigation Reform Act of 1995. These forward-looking statements include, but are not limited to, projections about our business and our future revenues, expenses and profitability. Forward-looking statements may be, but are not necessarily, identified by the use of forward-looking terminology such as "may," "anticipates," "estimates," "expects," "intends," "plans," "believes," and words and terms of similar substance. Forward-looking statements involve known and unknown risks, uncertainties and other factors which may cause the actual events, results, performance, circumstances or achievements of the Company to be materially different from any future events, results, performance, circumstances or achievements expressed or implied by such forward-looking statements. Factors that could cause actual events, results, performance, circumstances or achievements to differ from such forward-looking statements include, but are not limited to, the following: (1) satisfactory results of clinical trials with PillCam Colon (2) changes in regulatory environment, (3) our success in implementing our sales, marketing and manufacturing plans, (4) protection and validity of patents and other intellectual property rights, (5) the impact of currency exchange rates, (6) the effect of competition by other companies, (7) the outcome of future litigation, including patent litigation with Olympus Corporation, (8) the reimbursement policies for our product from healthcare payors, (9) quarterly variations in operating results, (10) the impact of the newly adopted SFAS 123R for expensing option-based payments, (11) the possibility of armed conflict or civil or military unrest in Israel, and (12) other risks and factors disclosed in our filings with the U.S. Securities and Exchange Commission, including, but not limited to, risks and factors identified under such headings as "Risk Factors," "Cautionary Language Regarding Forward-Looking Statements" and "Operating Results and Financial Review and Prospects" in the Company's Annual Report on Form 20-F for the year ended December 31, 2005. You are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of this press release. Except for the Company's ongoing obligations to disclose material information under the applicable securities laws, it undertakes no obligation to release publicly any revisions to any forward-looking statements, to report events or to report the occurrence of unanticipated events.


                  Given Imaging Ltd. and its subsidiaries

                        Consolidated Balance Sheets
                   (In thousands except per share data)

                                                    December 31
                                           ------------------------------
                                                 2005            2006
                                                Audited        Unaudited
Assets

Current assets
Cash and cash equivalents                  $       65,356  $       44,510
Short-term investments                                288          17,245
Accounts receivable:
 Trade, net                                        18,325          18,887
 Other                                              6,264           1,463
Inventories                                        16,172          18,168
Advances to suppliers                                 332              82
Deferred taxes                                      1,219           1,374
Prepaid expenses                                    1,020           1,340
                                           --------------  --------------

Total current assets                              108,976         103,069


Assets held for employees’ severance
 payments                                           1,690           1,984

Marketable securities                              21,664          34,769


Fixed assets, at cost, less accumulated
 depreciation                                      13,862          14,811


Other assets, net                                   2,918           3,544
                                           --------------  --------------

Total Assets                               $      149,110  $      158,177
                                           ==============  ==============




                   Given Imaging Ltd. and its subsidiaries

                        Consolidated Balance Sheets
                     (In thousands except share data)


                                                     December 31
                                           ------------------------------
                                                 2005            2006
                                                Audited        Unaudited
Liabilities and shareholders' equity


Current liabilities

Current installments of obligation under
 capital lease                             $          11   $          13
Accounts payable:
  Trade                                            5,529           5,550
  Other                                           13,886          14,620
Deferred income                                    3,333           3,871
                                           -------------   -------------

Total current liabilities                         22,759          24,054
                                           -------------   -------------

Long-term liabilities
Deferred income                                   22,172          20,411
Obligation under capital lease                        34              20
Liability in respect of employees’
 severance payments                                2,040           2,407
                                           -------------   -------------

Total long-term liabilities                       24,246          22,838
                                           -------------   -------------

Total liabilities                                 47,005          46,892
                                           -------------   -------------

Commitments and contingencies

Minority interest                                     61           3,499

Shareholders’ equity
Share capital:
Ordinary Shares, NIS 0.05 par value each
 (90,000,000 shares authorized as of
 December 31, 2005 and 2006, 27,950,281
 and 28,641,291 shares issued and fully
 paid as of December 31, 2005 and 2006,
 respectively)                                       327             335
Additional paid-in capital                       148,955         156,197
Capital reserve                                    2,166           2,166
Accumulated deficit                              (49,404)        (50,912)
                                           -------------   -------------
Total shareholders' equity                       102,044         107,786
                                           -------------   -------------

Total liabilities and shareholders' equity $     149,110   $     158,177
                                           =============   =============




                  Consolidated Statements of Operations
              (In thousands except share and per share data)



                              Year ended            Three month period
                              December 31,           Ended December 31,
                        ------------------------  ------------------------
                           2005         2006         2005         2006
                          Audited     Unaudited    Unaudited    Unaudited
                        -----------  -----------  -----------  -----------
Revenues                $    86,776  $    95,029  $    24,400  $    27,472
Cost of revenues             22,070       24,154        6,000        7,185
                        -----------  -----------  -----------  -----------

Gross profit                 64,706       70,875       18,400       20,287
                        -----------  -----------  -----------  -----------

Operating expenses
Research and
 development, gross          (8,833)     (12,678)      (2,754)      (3,304)
Royalty bearing
 government grants            1,244        1,867          372          580
                        -----------  -----------  -----------  -----------
Research and
 development, net            (7,589)     (10,811)      (2,382)      (2,724)

Sales and marketing         (43,281)     (50,732)     (11,054)     (13,609)
General and
 administrative              (9,657)     (16,027)      (2,644)      (3,773)
                        -----------  -----------  -----------  -----------

Total operating
 expenses                   (60,527)     (77,570)     (16,080)     (20,106)
                        -----------  -----------  -----------  -----------

Operating profit (loss)       4,179       (6,695)       2,320          181

Financial income, net           762        3,980          607        1,022
                        -----------  -----------  -----------  -----------

Profit (loss) before
 taxes on income and
 minority share               4,941       (2,715)       2,927        1,203

Taxes on income                 286         (127)         281          (99)
                        -----------  -----------  -----------  -----------

Profit (loss) before
 minority share               5,227       (2,842)       3,208        1,104

Minority share in
 losses of subsidiary         1,116        1,334          313          357
                        -----------  -----------  -----------  -----------

Net profit (loss)       $     6,343  $    (1,508) $     3,521  $     1,461
                        ===========  ===========  ===========  ===========

Profit (loss) per share
Basic profit (loss) per
 Ordinary Share         $      0.23  $     (0.05) $      0.13  $      0.05
                        ===========  ===========  ===========  ===========

Diluted profit (loss)
 per Ordinary Share     $      0.21  $     (0.05) $      0.12  $      0.05
                        ===========  ===========  ===========  ===========

Weighted average number
 of Ordinary Shares used
 to compute basic profit
 (loss) per Ordinary
 Share                   27,781,223   28,053,849   27,920,441   28,073,231
                        ===========  ===========  ===========  ===========

Weighted average number
 of Ordinary Shares used
 to compute diluted profit
 (loss) per Ordinary
 Share                   29,695,164   28,053,849   29,950,208   29,833,686
                        ===========  ===========  ===========  ===========

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