Novadaq Technologies Inc.

Novadaq Technologies Inc.

March 30, 2010 07:30 ET

Novadaq Reports Fiscal 2009 Full-Year and Fourth Quarter Financial Results

TORONTO, ONTARIO--(Marketwire - March 30, 2010) - Novadaq® Technologies Inc. (TSX:NDQ), a developer of real-time medical imaging systems for use in the operating room, today announced its financial results for the fiscal year and fourth quarter ended December 31, 2009. Unless otherwise indicated, all dollar amounts in this press release are expressed in United States (U.S.) dollars.

2009 Highlights

  • Increased recurring revenues for the SPY® Imaging System by 13% overall in 2009 and by 36% in Q4 2009 compared to Q4 2008 demonstrating increased usage in both cardiac and plastic reconstructive surgery.
  • Signed License, Development and Supply Agreements with Intuitive Surgical Inc., (NASDAQ:ISRG), for integrating SPY Imaging into the da Vinci® Robot and accomplished the first development milestone. Received a total of $3,000,000 in payments from Intuitive.
  • Received U.S. Food and Drug Administration 510(k) clearance for the first generation endoscopic SPY Imaging System (a SPY "scope") and commenced post-market clinical studies in gastrointestinal and urological surgery.
  • Published data from the U.S. Centers for Medicare and Medicaid independent study of more than 350 heart bypass surgery patients showed that the use of SPY resulted in cost savings of $2,000-$4,000 per patient.
  • Added five new peer-reviewed publications to the nearly 40 featuring SPY, including a chapter dedicated to SPY in the most highly regarded textbook of reconstructive breast surgery.
  • Reported clinical study results at the 2009 American Society of Plastic Surgery, showed that the use of SPY in breast reconstruction reduced complication rates from national averages of 15% to virtually zero.
  • Cash used in operating activities for twelve months ending December 31, 2009 was $6,259,000 compared to $12,011,000 for year-ended December 31, 2008.

Events Subsequent to Year-End

  • Strengthened the balance sheet through the completion of a $6.6 million (net of transaction costs) private placement offering.
  • Received an additional $1,000,000 payment from Intuitive for reaching the second development milestone associated with the integration of SPY Imaging into the da Vinci Robot.
  • Updated results from 350 patients enrolled in the SPY VICTORIA™ Cardiac Surgery Registry showed use of SPY in heart bypass surgery continues to result in reduced complications including, 50% lower rates of reoperation than those reported by the Society of Thoracic Surgeons.
  • Initiated human clinical studies with the use of SPY scope for the visualization of lymph nodes in urological, thoracic and gynecological surgery.

Three Months Ended December 31, 2009

Revenue decreased to $1,788,000 in Q4-2009 from $2,830,000 in Q4-2008. Revenue decreased for all products except recurring revenues associated with our consumable SPY Paqs, required for our core product, the SPY Imaging System, which increased by 36% over same time period. Q4-2009 revenue was impacted by reduction in capital sales. Q4-2009 sales exceeded Q3-2009 sales of $1,723,000.

Novadaq's Q4-2009 net loss of $5,308,000 or $0.22 per share, compared to $3,523,000, or $0.14 per share in Q4-2008. The Q4-2009 net loss included non-cash asset write-downs of $1,554,000 for the remaining book value of the OPTTX intangible asset, inventory and leaseholds. Q4-2009 net loss exceeded net loss for Q3-2009 of $3,852,000 primarily due to non-cash asset write-downs.

Q4-2009 cash used in operating activities of $2,411,000 versus Q4-2008 of $2,801,000 included reduced working capital requirements. Q4-2009 cash requirement was also less than the Q3-2009 of $3,117,000 due to reduced working capital requirements.

Twelve Months Ended December 31, 2009

Revenue of $8,225,000 decreased from $12,372,000 in 2008. A negative market impact resulted in reduction of capital sales and other products excepting the Company's consumable SPY Paqs, required for our core product, the SPY Imaging System, which grew 13% over same time period. Gross profit as a percentage of sales decreased to 44% in 2009 from 50% in 2008 due to the lack of high margin capital sales. Novadaq's 2009 net loss was $14,989,000, or $0.61 per share, compared to $16,799,000, or $0.68 per share, in 2008. The cost reduction program initiated in Q4-2008 was maintained in 2009. Cash used in operating activities for twelve months ending December 31, 2009 was $6,259,000 compared to $12,011,000 for year-ended December 31, 2008. The cost reduction program and reduction in working capital reduced our cash requirements.

As at December 31, 2009, Novadaq had cash, cash equivalents of $2,525,000. Since year-end December 2009, the Company collected $1,000,000 for reaching the second of three predefined development milestones and also successfully raised $7,121,000 from a private placement.

"Increases in recurring revenues year over year undoubtedly demonstrate that our market development efforts in cardiac and plastic reconstructive surgery are paying off," commented Dr. Arun Menawat, Novadaq's President and Chief Executive Officer. "Although the current economic environment in the U.S makes capital acquisition of new technologies that serve new markets difficult, we have always known that the true measure of our success and technology adoption is not reflected in capital sales, but is in recurring revenues."

Dr. Menawat continued, "Our sales team is charged with developing specific markets such that the clinical and economic value proposition for SPY becomes irrefutable. Combining the economic data published by CMS with existing positive clinical data in cardiac surgery accomplished our market development objectives and allowed us to transition our focus to rapidly growing a similar body of strong evidence in plastic reconstructive surgery. Repeated reports of significant reductions in complication rates in reconstructive surgery and the associated cost savings strengthens our position to secure additional alliances with plastic reconstructive and cardiac surgery focused companies. These anticipated alliances, and the on-going alliance with Intuitive Surgical, will ultimately allow us to achieve our revenue and business growth objectives." 

Conference Call

Novadaq is pleased to invite all interested parties to participate in a conference call today, March 30, at 10:00 AM Eastern Time during which these results will be discussed.

Those wishing to access the live conference call by telephone should dial 1-877-407-0778 (within Canada and the United States) or 1-201-689-8565 (international callers) several minutes prior to the beginning of the call. A telephonic replay of the conference call will be made available until 04/30/10 at midnight and can be accessed by dialing 1-877-660-6853 (within Canada and the United States) or 1-201-612-7415 (international callers) and entering the account number 286 and the conference identification number 347063 when prompted.

The call will also be webcast live and archived for 365 days on the company's website at under the "Events" tab in the Investors section. In addition, a replay of the call will be available for download to a portable audio player or computer, as an MP3 or podcast file, at the same location on Novadaq's website.

About Novadaq Technologies Inc.

Novadaq Technologies develops and markets real-time fluorescence imaging technology products for use in the operating room. The company's primary core technology platform, SPY Imaging, provides clinically relevant, anatomic and physiologic images during a variety of complex open and minimally invasive surgical (MIS) procedures. SPY empowers surgeons treating life threatening diseases to more effectively treat vascular blockages; assess tissue perfusion; identify cancerous tumors and delineate margins; and visualize relevant lymph nodes for removal. More than 30 peer-reviewed publications demonstrate that SPY imaging leads to fewer post-operative complications and reduced hospital costs. The endoscopic SPY system (a SPY scope) combines all of the capabilities of SPY imaging with state-of-the-art high definition (HD) white light visualization offered by conventional endoscopes. The company's key markets include plastic reconstructive, gastrointestinal, cardiac and general surgery. To realize the full potential of its technology platform, Novadaq explores technology alliances. Novadaq announced its first alliance with Intuitive Surgical Inc. in January 2009, to integrate SPY imaging into the 3-D HD imaging capabilities of the da Vinci® Surgical Robotic System. In addition, Novadaq is the exclusive United States distributor of PLC Medical's CO2 HEART LASER System. For more information, please visit the company's website at

Forward-Looking Statements

Certain statements included in this press release may be considered forward-looking. Such statements involve known and unknown risks, uncertainties and other factors that may cause actual results, performance or achievements to be materially different from those implied by such statements, and therefore these statements should not be read as guarantees of future performance or results. The closing of the private placement of the units described in this press release is subject to customary conditions precedent, including regulatory approval, and therefore there is a risk that the private placement of the units will not close. All forward-looking statements are based on Novadaq's current beliefs as well as assumptions made by and information currently available to Novadaq and relate to, among other things, results of future clinical tests of the SPY Imaging System and SPY scope, anticipated financial performance, business prospects, strategies, regulatory developments, market acceptance and future commitments.

Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of this press release. Due to risks and uncertainties, including the risks and uncertainties identified by Novadaq in its public securities filings actual events may differ materially from current expectations. Novadaq disclaims any intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

Novadaq Technologies Inc.        
[expressed in U.S. dollars]  
As at December 31        
  2009   2008  
  $   $  
Cash and cash equivalents 2,524,958   3,991,833  
Accounts receivable 1,398,593   3,242,490  
Current portion of prepaid expenses and other receivables 2,003,681   1,092,356  
Inventory 1,017,268   1,186,878  
Total current assets 6,944,500   9,513,557  
Long-term investments 150,000   200,000  
Property, plant and equipment, net 1,762,554   2,585,963  
Prepaid expenses and other receivables 189,148   203,094  
Deferred development costs 405,195   405,195  
Intangible assets, net 7,273,564   9,797,772  
  16,724,961   22,705,581  
Accounts payable and accrued liabilities 3,254,575   3,311,389  
Current portion of deferred warranty revenue 710,365   772,805  
Current portion of deferred license and development revenue 3,000,000    
Total current liabilities 6,964,940   4,084,194  
Long-term debt 3,527,700    
Long-term income tax payable 48,979      
Deferred revenue 238,158   308,850  
Total liabilities 10,779,777   4,393,044  
Shareholders' equity        
Share capital 81,188,324   81,178,719  
Contributed surplus 6,882,280   4,269,907  
Deficit (82,125,420 ) (67,136,089 )
Total shareholders' equity 5,945,184   18,312,537  
  16,724,961   22,705,581  
Novadaq Technologies Inc.                
[expressed in U.S. dollars]  
  2009   2008  
  3 months ended December 31   12 months ended December 31   3 months ended December 31   12 months ended December 31  
  $   $   $   $  
Product sales 1,476,433   6,810,442   2,389,218   10,707,679  
Service revenue 312,462   1,414,213   441,205   1,663,906  
Total revenue 1,788,895   8,224,655   2,830,423   12,371,585  
Cost of sales 1,053,234   4,609,652   1,481,538   6,162,663  
Gross profit 735,661   3,615,003   1,348,885   6,208,922  
OPERATING EXPENSES                
Sales and marketing 1,882,695   7,289,674   1,822,662   10,329,269  
Research and development 1,027,520   3,799,145   1,185,121   5,642,563  
General and administration 1,026,594   3,459,424   1,405,625   5,662,912  
Depreciation 96,342   398,493   94,298   361,057  
Amortization 271,694   1,196,434   308,247   1,232,988  
Write-down of inventory 158,571   424,950      
Write-down of intangible asset 1,327,774   1,327,774      
Loss on foreign exchange 17,537   124,626   46,936   61,366  
Total operating expenses 5,808,727   18,020,520   4,862,889   23,290,155  
Loss before the following (5,073,066 ) (14,405,517 ) (3,514,004 ) (17,081,233 )
Interest expense (174,791 ) (534,264 )    
Gain (Loss) on redemption of long-term investments     (25,000 ) 5,000  
Interest income 1,796   11,676   15,364   276,802  
Net loss for the year before income tax (5,246,061 ) (14,928,105 ) (3,523,640 ) (16,799,431 )
Income tax expense (61,226 ) (61,226 )    
Net loss for the year after taxes (5,307,287 ) (14,989,331 ) (3,523,640 ) (16,799,431 )
Deficit, beginning of year (76,818,133 ) (67,136,089 ) (63,612,447 ) (50,336,658 )
Deficit, end of year (82,125,420 ) (82,125,420 ) (67,136,089 ) (67,136,089 )
Basic and fully diluted loss per share (0.22 ) (0.61 ) (0.14 ) (0.68 )
Novadaq Technologies Inc.                
[expressed in U.S. dollars]  
  2009   2008  
  3 months ended December 31   12 months ended December 31   3 months ended December 31   12 months ended December 31  
  $   $   $   $  
Net loss for the year (5,307,287 ) (14,989,331 ) (3,523,640 ) (16,799,431 )
Add (deduct) items not involving cash                
Depreciation and amortization 468,181   2,235,715   612,676   2,400,185  
Inventory write-down 158,571   424,950      
Intangible asset write-down 1,327,774   1,327,774      
Leasehold improvement write-down 66,605   66,605      
Non-cash interest expense 153,478   153,478      
Imputed interest expense 83,629   280,208      
Gain on redemption of long-term investments     25,000   (5,000 )
Stock-based compensation 192,957   648,594   210,919   1,019,060  
  (2,856,092 ) (9,852,007 ) (2,675,045 ) (13,385,186 )
Net change in deferred revenue and deferred charges 1,974,528   1,974,528   (217,911 ) (217,911 )
Net change in non-cash working capital balances                
related to operations (1,529,513 ) 1,618,248   92,007   1,592,450  
Cash used in operating activities (2,411,077 ) (6,259,231 ) (2,800,949 ) (12,010,647 )
Issuance of convertible debentures, net of transaction costs   5,062,409      
Issuance of common shares, net   4,989     34,735  
Cash provided by financing activities   5,067,398     34,735  
Deferred development costs     (74,012 ) (74,012 )
Purchase of property, plant and equipment (122,221 ) (282,478 ) (1,284 ) (967,818 )
Redemption of long-term investments   50,000     300,000  
Purchase of TMR business       (2,089,284 )
Disposal of short-term investments, net     2,501,695   11,443,506  
Cash provided by (used in) investing activities (122,221 ) (232,478 ) 2,426,399   8,612,392  
Foreign exchange loss on cash held in foreign currency (4,472 ) (42,564 ) (78,390 ) (62,576 )
Net decrease in cash and cash equivalents (2,537,770 ) (1,466,875 ) (452,940 ) (3,426,096 )
Cash and cash equivalents, beginning of year 5,062,728   3,991,833   4,444,773   7,417,929  
Cash and cash equivalents, end of year 2,524,958   2,524,958   3,991,833   3,991,833  

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