Edap Tms SA (EDAP) 2011 Q1 法說會逐字稿

Greetings, and welcome to the EDAP first quarter 2011 earnings call. At this time all participants are in a listen-only mode. A brief question and answer session will follow the formal presentation. (Operator Instructions) As a reminder, this conference is being recorded.

It is now my pleasure to introduce your host, Miss Carol Ruth of The Ruth Group. Thank you, Miss Ruth, you may begin.

Thank you, operator. With us today for management are Philippe Chauveau, Chairman of the Board, Marc Oczachowski, Chief Executive Officer, and Eric Soyer, Chief Financial Officer.

Before we begin I'd like to remind everyone that management's remarks today may contain forward-looking statements. These include statements regarding the Company's growth and expansion plans. Such statements are based on management's current expectations, and are subject to a number of uncertainties and risks that could cause actual results to differ from those described in these forward-looking statements. Factors that may cause such a difference include, but are not limited to, those described in the Company's filings with the Securities and Exchange Commission.

Now I'd like to turn the call over to Mr. Philippe Chauveau. Philippe.

Good morning, everyone, and thanks for joining us on our first quarter investor call.

We continue to be pleased with the market acceptance of our new and innovative lithotripsy devices, and the sales momentum and pipeline. The high market acceptance of these devices was underscored by the interest demonstrated at the major urology meetings we attended recently.

I will let Marc outline these market share advances in his remarks, as well as update you on just published 10-year and 15-year data on Ablatherm-HIFU.

Finally, cash management remains on track. Marc, over to you.

Thank you, Philippe, and thank you everyone for joining us on our first quarter 2011 earnings call. During today's call I will discuss our first quarter results and recent developments across our Lithotripsy and HIFU businesses.

We are most pleased with the activity across our Lithotripsy business, as Philippe mentioned, and are pleased with the gains in market share we are experiencing on a global basis with our new, fully renewed product line.

We have started 2011 with first quarter Lithotripsy revenue up 29%. During the quarter we sold seven machines, as compared to six machines in Q1, 2010. The product mix was focused on our new compact machines, particularly the Sonolith i-move with our innovative stereo vision and ultrasound localization system.

This continued growth in our Lithotripsy revenue is a validation of our strategic decision made a few years ago in renewing our range of lithotripters, with the goal and objective of continuing our innovation program.

In four years we have grown our ESWL revenues by more than 30%. This is good news in such a market where sales are primarily based on replacement of equipment, but still very dynamic and extremely receptive and sensitive to innovation.

We believe these products have great potential for growth by gaining market share from the competition. Taking market share is what we are doing with our new range of products, and will continue in the months to come as we continue to actively work on our approval processes for the Sonolith i-move in the two largest markets in the world, USA and Japan.

We are also very pleased with the strong interest from the international urological community at the three major recently attended international annual medical congresses, including European Association of Urology in March, the Japanese Urological Association in April, and at the American Urological Association annual meeting in May.

At the AUA last week in Washington DC, four scientific presentations were made that support Ablatherm-HIFU's efficacy for the treatment of localized prostate cancer as an effective, less traumatic, radiation-free treatment option for prostate cancer.

I want to highlight the positive 10-year data from an international registry base multicenter study that was presented at the AUA. The study showed that 83% of patients had no biopsy evidence of the disease following treatment with Ablatherm-HIFU.

This paper was developed from our Ablatherm-HIFU at registry, and demonstrates long-term positive results on a large number of patients, over 2,500. This is a great milestone in the recognition of Ablatherm-HIFU as a standard primary treatment for localized prostate cancer.

A 15-year clinical review of Ablatherm-HIFU data was published in current urology reports, supports the potential for this minimally invasive treatment to be used as a primary local therapy for men with any stage of prostate cancer.

The paper was co-authored by renowned urology experts and HIFU pioneers, Professor Christian Chaussy, and Dr. Stefan Thueroff from Germany.

The paper describes the functional and quality-of-life benefits HIFU offers, as well as its ability to effectively treat prostate cancer at different stages and levels. This publication also outlines the significant change in the prostate cancer patient profile during the last 10 years. It underscores the main reason for the switch from radical treatment approach to better adapted focal treatment strategy.

Finally, this publication shows how Ablatherm-HIFU, and its specific benefits and advantages, are extremely well positioned to answer most of the current and future needs of both patients and urologists, from whom multimodality, repeatability, flexibility and reproducibility have become key in prostate cancer management.

We are, thus, in agreement that HIFU has tremendous value as a primary treatment for prostate cancer, and the less invasive nature of the procedure is especially advantageous to address increasing therapeutic timeframe of today's prostate cancer patients.

Finally, and to conclude with the Washington DC American Urological Association annual meeting highlights, we received a large number of visits from American urologists to our EDAP TMS booth. While many enquired about the status of the ENLIGHT trial, most of the requests and concerns were to make sure they will be trained and ready by then on the Ablatherm-HIFU device.

This is great news indeed, as it shows that the HIFU momentum is being built now in the urological community, and that many US urologists are looking forward to positioning themselves to be fully prepared when the technology is approved in the US.

Turning to other applications for HIFU beyond prostate cancer, the HIFU-triggered drug delivery program is continuing to move forward. In April the Consortium Research Corporation program was awarded a EUR1.1 million grant from the European Union's Eurostars program. We are contributing our extensive HIFU expertise to this collaboration that has a potential to improve drug delivery in cancer patients.

In mid April we participated in the annual International Society of Therapeutic Ultrasound, ISTU, meeting that was held in New York City. This [scientific] gathering attracted more than 300 scientists whose work is dedicated to developing therapeutic ultrasound for the treatment of a large variety of pathologies.

We presented two abstracts on prostate cancer, reporting on salvage treatment and long-term HIFU in nearly 1,100 patients. Other HIFU applications for the treatment of uterine, breast, liver tumors, along with palliative options for pancreatic and [bones] tumors were discussed among the scientific community.

Particular attention was demonstrated in drug delivery as it shows a significant potential for addressing a large variety of pathologies, including tumors.

The use of drug encapsulated or drug directly delivered into the patient, activated by ultrasound, was addressed in many presentations. With a long-term experience in the treatment of prostate cancer patients using HIFU, EDAP is a clear leader in bringing HIFU technology through various preclinical and clinical phases.

From a global perspective, we are enthusiastic with the first quarter of 2011 that shows a growth of 12% in our revenues, as compared with Q1 last year. We have also demonstrated success in focusing on reducing operating expenses to reflect the global economy, and increased efficiencies.

As reported in today's release, our total operating expenses declined 14.6% year over year. We are focused on prudently managing our cash resources as we ended the first quarter of 2011 with $8.6 million.

I will now turn the call over to Eric, who will review our first quarter 2011 financials in greater detail. Eric.

Thank you, Marc, and good morning, everyone. I will now take a few minutes to review our first quarter 2011 financial results. The results reflected strong Lithotripsy device sales.

Total revenue for the first quarter 2011 increased by 12.1% to EUR4.9 million or $6.8 million, as compared to EUR4.3 million, or $5.9 million, for the first quarter last year.

Total revenue for the HIFU division was EUR1.3 million, or $1.8 million, for the first quarter [2010], compared to EUR1.6 million, or $2.2 million, for the same period last year.

Results for the first quarter 2011 reflected the sale of zero Ablatherm-HIFU device, as compared to the sale in the first quarter of 2010 of one previously owned Ablatherm-HIFU machine. The HIFU division revenues continue to be impacted by the changing market dynamics in Europe.

For the three months ended March 31, 2011, total revenue for the Lithotripsy division increased by 28.9% to EUR3.5 million, or $4.9 million, compared to EUR2.7 million, or $3.7 million, during the year ago period.

During the first quarter 2011, the Company recorded sales of seven lithotripsy machines, including two Sonolith i-sys devices and four Sonolith i-move devices, up from a total of six devices sold in the first quarter of 2010.

Gross profit for the first quarter 2011 increased by 15.2% to EUR2 million, or $2.7 million, compared to EUR1.7 million, or $2.3 million, for the year ago period. Gross profit margin was 40.7% in the first quarter 2011, compared to 39.6% in the year ago period. The improvement in the gross profit margin was mostly attributed to higher sales volumes.

Total operating expenses decreased by 14.6% to EUR2.6 million, or $3.7 million, for the first quarter 2011, compared to EUR3.1 million, or $4.2 million, for the same period of 2010.

Operating loss was reduced to EUR670,000, or $932,000, for the first quarter 2011, compared to EUR1.4 million, or $1.9 million, in the first quarter of 2010.

Net income for the first quarter 2011 was EUR213,000, or $295,000, or EUR0.02 per diluted share, as compared to a net loss of EUR2.6 million, or $3.5 million, or EUR0.24 per diluted share, in the first quarter of 2010.

The first quarter of 2011 net income included interest income of EUR1.4 million, or $1.9 million. That was comprised of a positive EUR1.6 million adjustment for the convertible debts and outstanding warrants to fair value, along with the usual interest and other lease arrangement expenses.

At March 31, 2011, cash and cash equivalents, including short-term treasury investments, were EUR6 million, or $8.6 million.

Thank you for your attention, and I will now turn the call back to the operator who will open the line for questions.

Thank you, sir. Ladies and gentlemen, at this time we will be conducting a question and answer session. (Operator Instructions) Bruce Jackson, Morgan Joseph.

My question is about the Lithotripsy business. I was wondering if you think that the growth rate is sustainable, and if you plan to see acceleration through the rest of the year in the unit placements.

We started again very well the year as we increased 29% as compared with last year, and we expect to continue again growing our Lithotripsy business during the year.

Now to tell you if we're going to get some acceleration, I think visibility in the environment is a little bit limited to do such a statement.

Okay. And then, with the HIFU units, when do you think the market might become more receptive to placing new HIFU units?

As we said several times, number of machines placed or sold are really depending on -- could be seasonal; from one quarter to the other it could be very different. So we did not get any machines sold in Q1, but we may have -- as a matter of fact, we have one machine in backlog for Q2. So that really depends from one quarter to the other.

Now in terms of the HIFU strategy, we are continuing to closely work with the urology community, the patient community, to communicate and work on our long-term publication, and large [quota] of patients, so that we can get it scientific recognition that will definitely help growing the HIFU position.

Okay, that's it from me.

Thank you, Bruce.

(Operator Instructions) Peter Cardillo, Avalon Partner Securities.

A question regarding the FDA. Could you give us an update, are you in constant talk with them, and what's the feeling out there? Can we be hearing shortly from them, or whatever the case may be?

Well, actually are in constant discussion with the FDA. Now to give a timeframe, or an estimated time of market clearance or decision from the FDA, is always very difficult. And even more [in these days] where we've seen in other companies that filed that the timing is a bit longer than it used to be, even on 510(k) projects.

So it's very difficult, but what we can say is that we are actively and continuously discussing with the FDA.

Okay, thank you.

You're welcome.

(Operator Instructions) Thank you, but we have no further questions at this time. I'd like to turn the floor back to Mr. Philippe Chauveau for any closing remarks.

Let me close this conference call by thanking everyone for participating in today's conference call. And I'd like to say now, talk to you soon, and goodbye.

Ladies and gentlemen, this concludes today's conference. You may disconnect your lines at this time, and thank you for your participation.