Urologix, Inc. (ULGX)

F3Q2012 Results Earnings Call

April 26, 2012 5:00 PM ET


Stryker Warren, Jr. – Chief Executive Officer

Brian Smrdel – Chief Financial Officer

Greg Fluet – Executive Vice President and COO


Jeff Adams – Private Investor

Deepak Chaulagai – Dougherty & Company

Larry Haimovitch – HMTC



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Good day, ladies and gentlemen. And welcome to the Urologix Incorporated Fiscal Year 2012 Third Quarter Conference Call. My name is Bill, and I will be your coordinator for today. At this time, all participants are in listen-only mode. We will be facilitating a question-and-answer session towards the end of the conference. As a reminder, this conference is being recorded for replay purposes.

Certain information discussed during this conference call, including answers to your questions, may contain forward-looking statements that are made pursuant to the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995.

Actual results may differ materially from those stated or implied in any forward-looking statements due to risks and uncertainties. A detailed discussion of risks and uncertainties maybe found in Urologix’s recent report on Form 10-K for the year ended June 30, 2011, and other documents filed with the Securities and Exchange Commission. Urologix disclaims any obligation to update any forward-looking statements made during the course of this call.

At this time, I will turn over the call to Mr. Stryker Warren, Jr., Chief Executive Officer. Please proceed, sir.

Stryker Warren, Jr.

Thank you. Good afternoon to all those joining us today to discuss the company’s results for the third quarter of fiscal year 2012. With me are Brian Smrdel, the company’s Chief Financial Officer; and Greg Fluet, the company’s Executive Vice President and Chief Operating Officer.

Today's call we’ll begin with the summary of our third quarter performance, the second full quarter as the new Urologix. Brian will then review the financial results for the third fiscal quarter in detail. Finally, I will share an update on the progress we are making on our growth strategy, provide color surrounding our revised fiscal year 2012 guidance and review our near-term priorities, before opening up the call for questions.

The third quarter this fiscal year was generally positive with sequential topline growth in the second full quarter of operations as the new Urologix. For the third quarter is historically our most difficult of the fiscal year, we posted sequential growth in the period for the first time in five years, both of our product lines this quarter contributed to this growth and the results support are compelling long-term growth story.

Specifically, the combination of the Prostiva RF Therapy System with our Cooled ThermoTherapy technology has made Urologix the clear leader for the in-office treatment of BPH with an expanded population of men whom we can effectively treat.

We have two complimentary in-office technologies which combined have more than 50% market share. Both products have demonstrated durable clinical effectiveness for the treatment of BPH and we have a focus sales strategy to drive financial and operating performance fueled by market development initiatives and patient education programs.

This quarter we posted improving margins and positive operating cash flow and we continue to see encouraging results from our patient education initiatives each of which we will detail in a few moments.

Despite many highlights from the third quarter, we also faced challenges that pressured results in the period. It impacted our expectations for topline performance over the balance of this fiscal year.

As noted in our press release this afternoon, we have lowered our fiscal year 2012 revenue guidance to a range of $17 million to $17.5 million from the previous guidance range of $18 million to $20 million introduced at the time of the Prostiva transaction last fall.

The primary driver of our tempered guidance expectations for the balance of the fiscal year is slower than anticipated recovery and the recently acquired Prostiva business. We knew this was a business under pressure in recent years when we acquire the license last fall, and while we feel confident in the technology and the business has stabilized, the process of reinvigorating the Prostiva line has been challenging.

We also experienced dislocation in the sales force in one region which impacted our sales in the quarter. For the sales positions have been filled it will take time for those individual to reach full productivity. Importantly, while Prostiva revenue has been slower than originally anticipated, we fully expect our continued focus and support of this product line to achieve appreciable growth.

Before turning the call over to Brian for deeper dive into third quarter results, I want to step back briefly to discuss the [fardel] market opportunity for the company over next few years and reiterate a key message for the new Urologix story.

Our market is changing. We are uniquely positioned to capitalize on the opportunities to grow with our target market by increasing patient awareness of non-surgical alternative BPH drugs, by hiding urologist recognition of BPH patient interest in in-office BPH therapies, by improving patient outcomes and by enhancing the productivity of urology practices.

Urologix's product serves the BPH treatment market, a segment of the urology marketplace with favorable growth characteristics. The addressable patient population is both large and growing, comprised of aging men with lower urinary tract symptoms caused by a progressive condition which left untreated could cause serious health issues.

Urologist, the company's target customers and their patients are increasingly questioning the merits of chronic medication for BPH in light of the marginal benefit and growing evidence of risks associated with long-term drug management.

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