Spectranetics Corp (SPNC)

Q2 2010 Earnings Call

July 28, 2010 11:00 am ET

Executives

Emile Geisenheimer - Chairman, President and CEO

Guy Childs - CFO

Jason Hein - SVP for Sales & Marketing

Don Markley - Lippert/Heilshorn & Associates

Analysts

Jason Mills - Canaccord Genuity

Suraj Kalia - Rodman & Renshaw

Amit Bhalla - Citi

Joshua Zable - Natixis

Thomas Kouchoukos - Stifel Nicolaus & Company

Josh Jennings - Jefferies & Company

Bud Leedom - Global Hunter Securities

Presentation

Operator

Welcome to the Spectranetics second quarter results conference call. At this time, all participants are in a listen-only mode. Following management's prepared remarks, we'll hold a question-and-answer session. (Operator Instructions) As a reminder, this conference is being recorded today Wednesday July 28, 2010.

I would now like to turn the conference over to Mr. Don Markley. Sir, please go ahead.

Don Markley

Thank you. This is Don Markley with Lippert/Heilshorn & Associates. Thank you for participating in today's call. Joining me from Spectranetics are Chairman, President and Chief Executive Officer, Emile Geisenheimer; Chief Financial Officer, Guy Childs; and Senior Vice President for Sales and Marketing, Jason Hein.

Earlier today, Spectranetics released financial results for the three and six months ended June 30, 2010. If you have not received this news release or if you'd like to be added to the company's distribution list, please call Lippert/Heilshorn in Los Angeles at 310-691-7100 and ask for Noreen.

Before we begin, I'd like remind you that management will make statements during this call that includes forward-looking statements within the meaning of Federal Securities Laws. These statements involve material risks and uncertainties that could cause actual results or events to be materially different from those anticipated.

For a list and description of those risks and uncertainties, please see the company's filings with the Security and Exchange Commission. Spectranetics disclaims any intention or obligation to update or revise any financial projections or forward-looking statements, whether as a result of new information, future events or otherwise. Furthermore, this conference call contains time sensitive information and is accurate only as of the date of the live broadcast July 28, 2010.

I'll now turn the call over to Emile Geisenheimer. Emile.

Emile Geisenheimer

Thank you, Don and good morning to everyone. Thanks for joining the call. I'd like to begin this morning call with a review of some of the highlights of Spectranetics second quarter accomplishments, before I turn the call over to Guy, who will cover the financial results.

Spectranetics reached a number of important milestones during the second quarter. Our highlights include, total revenue for the quarter reached $30 million driven by Lead Management revenue growth of 14% and peripheral atherectomy revenue growth of 8%.

We achieved profitability during the quarter of pretax profit of $124,000 compared to $2.3 million loss in the second quarter last year. Turbo-Tandem launch was a continued success in quarter and helped drive our peripheral atherectomy growth and remain [decisive] to conduct a randomized clinical trial for in-stent restenosis in the United States and expect to apply for an investigational device exemption from the Food and Drugs Administration.

We are also committed to a small randomized clinical trial in Europe comparing blood eluting balloons alone to laser atherectomy followed by drug-coated balloons and in in-stent restenosis. Importantly we received reimbursement approval in Japan for a laser assisted Lead Extraction device the SLS II.

The first product that we have received both regulatory approval and reimbursement approval in Japan and we look forward to commercializing this product through our distribution partner DVx. In the initial phase in its launch, we will focus on 10 training centers in Japan. Lead Management revenue totaled over $10 million in the second quarter and grew 14% compared with last year.

The Heart Rhythm Society meeting was recently held in Denver and proved to be a very big success exceeding our expectations. We showcased our computerized lead extraction simulator for the first time and went through extensive traffic to our booth. The results of our LExICON study in the new Heart Rhythm Society Lead Management guidelines continued to be subject of high interest at the conference.

I am pleased to report that the Turbo-Tandem launch is continuing its success. We've now opened over 200 Turbo-Tandem accounts in the United States. This is less than half of our current laser atherectomy accounts, so there is room for growth. You'd recall that our goal has not been to maximize immediate revenue growth but rather to carefully introduce Turbo-Tandem in a way that will maximize the likelihood of the device becoming your ongoing tool choice in each account.

We are carefully monitoring reorder rate and I am pleased to note that a very large percentage of accounts that have had the device for over 60 days have reordered. Equally important are the many case reports we're receiving from our physician customers who praises Turbo-Tandem's ease of use, case speed and most importantly their positive impression of the acute clinical results that they are achieving.

Revenue in the United States reached $26 million this second quarter, increasing 6% over the very strong second quarter last year. Our international sales declined from last year's second quarter by 11% and totaled $4 million.

The decline is due primarily to the $700,000 decrease in laser sales compared with last year's second quarter and we have often pointed out the timing of laser sales is difficult to control or predict. Additionally, changes in foreign currency exchange rate compared with last year had an adverse impact of approximately $115 million of second quarter revenue.

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