PLC Systems Reports Third Quarter Financial Results

PLC Systems Inc. (OTCBB: PLCSF), a medical device company focused on innovative technologies for the cardiac and vascular markets, today reported financial results for the three and nine months ended September 30, 2012. These results include only the company's RenalGuard ® operations as PLC completed the sale of its transmyocardial revascularization (TMR) business to Novadaq Corp. during the first quarter of 2011. Results from the TMR business are reflected as discontinued operations in the financial results for the nine months ended September 30, 2011. Highlights of the third quarter of 2012 and recent weeks include:
  • Revenues were $212,000, up 685% over the third quarter of 2011
  • Continued patient enrollment for RenalGuard U.S. pivotal trial at 9 trial sites
  • Made progress in Latin America (excluding Brazil where regulatory approval to market has already been obtained) on securing regulatory approvals for RenalGuard marketing on a country-by-country basis
  • Continued to broaden awareness of Contrast-Induced Nephropathy (CIN) with presence at key medical conferences including Latin American Society of Interventional Cardiology 2012 (SOLACI) and Transcatheter Cardiovascular Therapeutics (TCT) 2012
  • Investigators presented their published research on the ability of RenalGuard potentially to reduce the toxic effects of contrast media on the kidneys
  • Secured $1.0 million in financing with another $1.0 million still available based upon achievement of milestones

Management Commentary

“Our efforts to expand awareness of the dangers of CIN are gaining momentum with increasing numbers of key opinion leaders taking to the podium and robust traffic at PLC and distributor booths on exhibition floors,” said Mark R. Tauscher, president and chief executive officer of PLC Systems. “During the quarter, we had a presence at SOLACI where Girlow USA, our distributor in Latin America for all countries except Brazil, exhibited RenalGuard in its booth, demonstrating its ease of use and the supporting clinical studies. In October we had a booth at the all-important TCT meeting, where approximately 60% of the attendees were from countries where RenalGuard is available through distributors. In addition, there was a separate panel discussion at TCT on the prevention of contrast-induced kidney damage with a focus on matched hydration, such as that provided by RenalGuard. The principal investigator of the MYTHOS trial, Dr. Antonio Bartorelli, and the principal investigator of the REMEDIAL II trial, Dr. Carlo Briguori, presented data during the panel discussion.”

Mr. Tauscher continued, “We have made good progress getting our distributors up and running. In the second quarter our Brazilian distributor placed a large stocking order and has now been marketing RenalGuard. We are pleased with the efforts by Girlow USA to handle the regulatory approvals in the rest of Latin American, which must be done on a country-by-country basis. We expect our first approval before the end of the year.

“We are pleased to have secured $1.0 million in financing early in the third quarter, with an additional $1.0 million to come upon achieving certain milestones. The use of proceeds is largely to continue to enroll patients in our pivotal trial,” Mr. Tauscher concluded.

PLC Systems has established a number of goals for 2013, including:
  • Initiating additional sites for the U.S. clinical trial and making significant progress in patient enrollment, with sample size re-estimation planned after 163
  • Achieving further market penetration of RenalGuard in geographies where it is currently available for sale
  • Engaging additional distributors in key territories worldwide
  • Undertaking additional investigator-sponsored clinical trials of RenalGuard in new territories aimed at additional indications
  • Receiving additional patents to bolster the company's intellectual property portfolio
  • Obtaining a positive response from Japan's Department of Health to an investigator-submitted clinical trial proposal, followed by the launch of a full clinical trial in that critical market
  • Raising additional funds to support these initiatives

Financial Results

PLC Systems reported revenues for the third quarter of 2012 of $212,000, up 685% over third quarter 2011 revenues of $27,000, due to a higher volume of RenalGuard consoles sold to distributors. During the third quarter of 2012, PLC recognized revenues of $43,000 for single-use RenalGuard disposable sets and $169,000 for RenalGuard consoles shipped internationally, compared with $7,000 in sales of RenalGuard single-use disposable sets and $20,000 in consoles shipped in the third quarter of 2011.

Gross profit was $128,000 or 60.4% of revenues during the third quarter of 2012, compared with $10,000 or 37.0% of revenues a year ago. The increase was attributable to higher sales.

Selling, general and administrative expenses were $674,000, up 14% over $591,000 in the prior-year’s third quarter, largely due to an increase in stock-based compensation expense.

The Company recorded research and development expenses of $549,000 during the third quarter of 2012, an increase of 76% as compared to $312,000 in the third quarter of 2011. The increase is due to costs associated with enrolling patients into the RenalGuard U.S. pivotal trial, which began in January 2012. The Company expects research and development expenses to increase significantly as enrollment continues.

The net loss from continuing operations for the third quarter of 2012 was $3,165,000 or a loss of $0.10 per share, compared with a net loss from continuing operations of $401,000 or a loss of $0.01 per share in the third quarter of 2011. Of this net loss, $1,874,000 or 59% of the net loss was attributable to the change in fair value of the investor warrants and convertible notes issued during 2011 and during 2012.

For the nine months ending September 30, 2012, PLC reported revenues of $595,000, compared with $482,000 in the same period of 2011 which includes approximately $120,000 of OEM related revenues. The net loss from continuing operations for the first nine months of 2012 was $11,388,000 or $0.37 per share, compared with a net loss from continuing operations of $5,469,000 or $0.18 per share in the same period last year. Of this net loss, $7,735,000 or 68% of the net loss was attributable to the change in fair value of the investor warrants and convertible notes issued during 2011 and during 2012. Cash and cash equivalents were $723,000 at September 30, 2012, compared with $2,585,000 on December 31, 2011. The Company expects that it will need to raise additional capital during 2012, based on current and anticipated revenue projections from foreign sales of RenalGuard, and the anticipated costs of the U.S. clinical trial.

About PLC Systems Inc.

PLC Medical Systems, Inc., the operating subsidiary of PLC Systems Inc., is a medical device company focused on innovative technologies for the cardiac and vascular markets. PLC's lead product, RenalGuard®, significantly reduces the onset of CIN in at-risk patients undergoing certain cardiac and vascular imaging procedures. CIN is a form of acute kidney injury resulting from toxic contrast agents that occurs in 10% to 20% of at-risk patients. RenalGuard is CE-marked and is being sold in Europe and certain countries around the world via a network of distributors. Two investigator-sponsored studies in Europe have demonstrated RenalGuard's effectiveness at preventing CIN. The CIN-RG RenalGuard pivotal study is underway in the U.S. to support a planned Premarket Approval filing with the U.S. Food and Drug Administration.

Additional company information can be found at www.plcmed.com.

This press release contains "forward-looking" statements. For this purpose, any statements contained in this press release that relate to prospective events or developments are deemed to be forward-looking statements. Words such as "believes," "anticipates," "plans," "expects," "will" and similar expressions are intended to identify forward-looking statements. Our statements of our objectives are also forward-looking statements. While we may elect to update forward-looking statements in the future, we specifically disclaim any obligation to do so, even if our estimates change, and you should not rely on these forward-looking statements as representing our views as of any date subsequent to the date of this press release. Actual results could differ materially from those indicated by such forward-looking statements as a result of a variety of important factors, including that we may not receive necessary regulatory approvals to market our RenalGuard product or that such approvals may be withdrawn, the U.S. clinical trial for RenalGuard may not be completed in a timely fashion, if at all, or, if this clinical trial is completed, it may not produce clinically significant or meaningful results, the RenalGuard product may not be commercially accepted, operational changes, the need for additional financing, competitive developments may affect the market for our products, regulatory approval requirements may affect the market for our products, and additional risk factors described in the "Forward Looking Statements" section of our Annual Report on Form 10-K for the year ended December 31, 2011, a copy of which is on file with the SEC.

PLC Systems, PLC Medical Systems, PLC, RenalGuard and RenalGuard System are trademarks of PLC Systems Inc.
 

PLC SYSTEMS INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
 
  Three Months Ended

September 30,
  Nine Months Ended

September 30,
       
  2012       2011     2012       2011  
 
Revenues $ 212 $ 27 $ 595 $ 482
Cost of revenues   84     17     308     355  
Gross profit   128     10     287     127  
Operating expenses:
Selling, general and administrative 674 591 1,899 1,850
Research and development   549     312     1,618     759  
Total operating expenses   1,223     903     3,517     2,609  
Gain on the sale of assets (40 )
Loss from continuing operations   (1,095 )   (893 )   (3,230 )   (2,442 )
Other income (expense):
Interest expense (137 ) (116 ) (369 ) (277 )
Foreign currency transaction gains 17 2
Financing costs associated with convertible notes (80 )

(80

)

(530

)
Change in fair value of warrant liabilities (1,117 ) 232 (3,517 ) (872 )
Change in fair value of convertible notes (757 ) 376 (4,218 ) (1,840 )
Other income   4         24      
Total other (expense) income   (2,070 )   492     (8,158 )   (3,519 )
Net loss from continuing operations before income taxes (3,165 ) (401 ) (11,388 ) (5,961 )
Benefit for income taxes from continuing
operations               492  
Net loss from continuing operations, net of income taxes (3,165 ) (401 ) (11,388 ) (5,469 )
Discontinued operations:
Income from discontinued operations, net
of income taxes 53
Gain on sale of discontinued operations,
net of provision for income taxes               687  
Net income from discontinued operations, net
of income taxes               740  
Net loss $ (3,165 ) $ (401 ) $ (11,388 ) $ (4,729 )
Net loss per weighted average share, basic and diluted:
From loss on continuing operations
attributable to common stockholders $ (0.10 ) $ (0.01 ) $ (0.37 ) $ (0.18 )
From income on discontinued operations 0.00
From gain on sale of discontinued operations                 0.02  
Net loss attributable to common stockholders
per weighted average share, basic $ (0.10 ) $ (0.01 ) $ (0.37 ) $ (0.16 )
Weighted average shares outstanding:
Basic 30,397 30,351 30,912 30,351
 

CONDENSED BALANCE SHEETS
 
  September 30,   December 31,
  2012     2011  
Cash and cash equivalents $ 723 $ 2,585
Total current assets 1,707 3,509
Total assets 1,790 3,549
Total current liabilities 974 710
Shareholders’ deficit (15,060 ) (4,088 )

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