Urologix Inc. (ULGX) Signing of an Exclusive Worldwide License for the Prostiva RF Therapy System for BPH Conference Call September 6, 2011 10:30 AM ET Executives Stryker Warren, Jr. – CEO Greg Fluet – EVP and COO Brian Smrdel – CFO Analysts Ernest Andberg – Feltl and Company Presentation Operator
Stryker WarrenGood morning, and thank you for joining us to discuss our signing an exclusive worldwide license for the Prostiva RF Therapy System for BPH from Medtronic. Joining me on the call today are Greg Fluet, Urologix’s Executive Vice President and Chief Operating Officer and Brian Smrdel, Urologix’s Chief Financial Officer. We are pleased to discuss the signing today of an exclusive worldwide license agreement for the Prostiva RF Therapy System for BPH to share why we believe this transaction is transformative for Urologix, to highlight how the addition of Prostiva improves our market position and to illustrate what we consider are growth opportunities in the years to come. The agenda for the call is as follows. To begin, I will provide a high level overview of the Prostiva transaction and its financial implications. Then I will speak to the benign prostatic hyperplasia or BPH market, the treatment landscape today, and how our expanded product portfolio will serve this market going forward. Finally, I will discuss the key drivers of our growth strategy and then invite your questions. Prostiva RF Therapy is a transurethral needle ablation device that is 510(k) cleared for the treatment of BPH. Similar to the Urologix’s Cooled ThermoTherapy or CTT product, Prostiva is most commonly used in the urologist’s office. Moreover this transaction will significantly expand Urologix’s position as the leading provider in-office treatment solutions for symptomatic and obstructive urinary conditions due to BPH. The combination of Prostiva RF Therapy with Urologix’s Cooled ThermoTherapy affords Urologix the ability to offer urologists the broadest in-office solution set and more importantly, it will expand Urologix’s addressable patient population. As stated in the press release, the term of the worldwide exclusive license for Medtronic’s Prostiva is ten years with an option to acquire the technology. In exchange for the license, Urologix is paying Medtronic a license fee of $1 million, of which $500,000 was paid at closing, and $500,000 will be paid upon the one-year anniversary.
Urologix has also agreed to pay Medtronic a royalty fee on products sold with the maximum total payments for the license and royalty fees capped at $10 million, which is equivalent to the exercise price of the option to acquire the technology. Additional information relating to the transaction can be found in the Form 8-k that will be filed with the SEC.In terms of the financial impact of the transaction as we reported on August 23, Urologix’s revenue for fiscal year 2011 on a standalone basis was $12.6 million. Following this transaction, we except the combined businesses, Prostiva plus Urologix’s CTT to generate revenue in the range of $18 million to $20 million for fiscal year 2012. We expect this transaction to materially contribute to future bottom line results as well. The structure of this transaction will provide opportunities to leverage our existing infrastructure as we add substantial revenues with only a modest increase in expected expenses, primarily related to the addition of Prostiva sales force. Let me share our perspective on the BPH market in general and highlight the opportunities for Urologix to both serve and grow the BPH market in the years to come. Our primary focus has been and will continue to be the treatment of urinary obstruction in symptoms due to BPH, a major health problem in men. BPH is non-cancerous prostate growth often referred to as an enlarged prostate that can cause potentially severe lower urinary tract symptoms or LUTS and voiding dysfunction due to obstruction as the prostate grows in size. BPH is a progressive condition associated with age for which there is no cure. Importantly, BPH is not only a symptomatic disease but when left untreated obstructive BPH can lead to serious conditions including urinary retention, urinary tract infections, bladder stones, incontinence, bladder decompensation, and in extreme cases, chronic kidney disease. Read the rest of this transcript for free on seekingalpha.com