×

Sunshine Heart Announces Third Quarter 2013 Financial Results and Corporate Update

EDEN PRAIRIE, Minn., Nov. 11, 2013 (GLOBE NEWSWIRE) -- Sunshine Heart, Inc. (Nasdaq:SSH) today announced financial results and provided a corporate update for the third quarter ended September 30, 2013.

Third Quarter Corporate Highlights:

  • Company successfully completed $46 million public offering in September, 2013, sufficient to fund U.S. pivotal trial and EU post-market trial through completion.
  • Three new sites activated in COUNTER HF, the U.S. pivotal randomized clinical trial in the quarter, with eight total sites activated and 26 sites either activated or committed to participate. Two patients were randomized in the study. As a reminder, the primary endpoint of the study is defined as freedom from worsening heart failure related hospitalization, LVAD implant, heart transplant, and death
  • Eight total sites implant-ready in Europe and seven patient implants completed in OPTIONS HF, the EU post market study. No neurologic events, bleeding events, clotting events, infections, deaths or re-hospitalizations due to worsening heart failure were observed. Clinically significant improvements in 6 minute walk distance at 6 weeks were observed.
  • Multiple C-Pulse product enhancements, including driver enhancement, have been approved by the FDA with several additional improvements underway.
  • Acute animal study successfully completed utilizing new fully-implantable system with chronic study on target to commence before year-end.

Third Quarter Financial Highlights:

  • First C-Pulse® revenue reported from COUNTER HF, the U.S pivotal randomized trial
  • Loss per share of $0.47, or $0.39 per share excluding non-cash compensation expense
  • Cash used in operations of $4.2 million
  • Cash on hand at September 30, 2013 of $59.8 million

FINANCIALS:

We reported reimbursement revenue for the first time for the implant of our C-Pulse System under our U.S. COUNTER HF trial totaling $59,000. Although our C-Pulse system is not approved for commercial sale in the U.S., the FDA has assigned the C-Pulse system to a Category B designation, making it eligible for reimbursement at certain U.S. sites during our clinical trials. As such, we are able to invoice hospitals and clinics that are eligible for reimbursement by Medicare, Medicaid or private insurance companies. Product costs incurred for our clinical trials are deemed to be development costs and, accordingly, are expensed to research and development as incurred. Upon commercialization, product costs will be capitalized in inventory and recorded to cost of sales as the inventory is sold.

Operating expenses in the third quarter of 2013 totaled $6.2 million, compared to $3.3 million in the third quarter of 2012. Operating expenses in the first nine months of 2013 totaled $15.9 million, compared to $10.8 million in the first nine months of 2012. Non-cash compensation costs totaled $1.0 million and $2.1 million for the three and nine months ended September 30, 2013, respectively, as compared to $0.4 million and $1.1 million, respectively, for the comparable periods of 2012.

Excluding non-cash compensation costs, operating expenses totaled $5.2 million and $13.8 million for the third quarter and nine months ended September 2013, respectively; as compared to $2.9 million and $9.7 million in the comparable periods of 2012. The increase over the prior year periods was attributable to increased clinical research and infrastructure expenses related to the U.S. pivotal trial and EU post-market study.

We received an income tax benefit of $136,000 for the state on Minnesota R&D tax credit during the third quarter of 2013. Included in the nine month period results are income tax benefits from the receipt of R&D tax credit refunds in Australia totaled $1.1 million in 2013 and $0.7 million in the comparable period of 2012.

Net loss in the third quarter and nine months ended September 30, 2013 was $6.0 million, or $0.47 per share; and $14.7 million, or $1.29 per share, respectively. This compares to losses of $3.3 million, or $0.42 per share; and $10.0 million, or $1.49 per share in the comparable periods in 2012. Excluding non-cash compensation costs, third quarter and nine months net losses totaled $5.0 million, or $0.39 per share; and $12.5 million, or $1.10 per share, respectively. This compares to $2.9 million, or $0.37 per share; and $8.9 million, or $1.33 per share, in the comparable periods of 2012.

Cash used in operating activities totaled $11.8 million in the first nine months of 2013 compared to $9.7 million in the comparable period of the prior year, with the increase driven primarily by the higher clinical and research expenses. In September of 2013, we completed a public offering, generating net cash proceeds of $42.7 million. Year-to-date, we have received net proceeds of $57.6 million through the sale of common shares. The Company ended the third quarter with $59.8 million in cash, compared to $14.2 million at December 31, 2012.

In addition to financial results for the third quarter and first nine months of 2013, Sunshine Heart also announced several corporate updates with regard to the ongoing clinical trials for C-Pulse and progress of internal product development.

CORPORATE UPDATE:

In the third quarter of 2013, Sunshine Heart made significant site progress within its C-Pulse COUNTER HF U.S. pivotal trial. Within the period, three new sites were activated and a total of eight sites have been activated to-date. Sunshine Heart reports a total of 26 centers either activated or committed to joining the trial, up from 17 centers in the second quarter of 2013. The Company is currently waiting to hear from an additional four centers with regard to intention to participate in the COUNTER HF trial. Sunshine Heart expects to have between 11-19 sites activated and approximately 35 sites activated or committed to participate in the trial by year-end. In addition, the Company commenced patient enrollment in the quarter, enrolling two patients in the trial.

U.S. sites continue to average six months from enrollment to activation. Last quarter, the Company announced new initiatives to expedite site presentations and subsequent site activations. This included the hiring of a consultant to supplement in-house patient recruiting, as well as the addition of three new enrollment-related internal positions, including a Chief Medical Officer and VP Clinical Research and a Patient Recruitment Director. As a direct result of this, encouraging progress was made in the third quarter with regard to site commitments.

With regard to reimbursement for C-Pulse, the Company continues to receive feedback from sites with qualifying LVAD programs that they have received regional CMS reimbursement approval for the C-Pulse procedure under established LVAD codes. The Company also submitted an NUB application for reimbursement in Germany in October and expects to receive feedback in February of 2014 as previously indicated.

The Company reported last quarter that it was developing a formal weaning protocol following the successful weaning of two patients from its pilot feasibility study due to improved results. The protocol has now been fully reviewed by clinical advisors and is finalized to include heart failure class and ejection fraction targets, improvement across other objective functions, and reduction in counter-pulsation therapy, ultimately leading to permanent disconnection. The Company expects this full weaning process to require approximately 12 months from time of implant. The decision to wean and the appropriate timing is ultimately the decision of the physician and not the Company. There is no single parameter that indicates recovery, but rather a body of data available to the individual doctor. Encouragingly, none of the patients weaned thus far have been reconnected due to worsening heart failure and have remained off certain pre-operative drugs that were needed for their heart failure condition. At the 2013 Transcatheter Cardiovascular Therapeutics (TCT) conference on October 29, Dr. Andrew Kao presented details of his experience weaning two patients with a third in the later stages of the process. If successful with the third patient, Sunshine Heart will have weaned a total of five patients from the C-Pulse therapy. As previously indicated, Sunshine Heart does not plan to allow patients to be weaned in its ongoing trials as doing so could impact the primary endpoint of the respective trials.

Site activation and patient enrollments also continue to advance in the C-Pulse OPTIONS HF post-market study in the EU with seven total patients implanted to-date, up from four patients at the end of the second quarter of 2013. The Company has eight sites now activated and able to implant, including five in Germany and three in Italy. UK centers continue to progress through the approval process and the Company continues to expect UK site activation by the end of the year.

In addition to trial progress, Sunshine Heart continues to advance its internal R&D. The Company received approval in the U.S. for a driver enhancement program intended to improve physician ease of use, reduce nuisance alarms, and improve signal clarity. Sunshine Heart expects to implement the new program as quickly as possible across U.S. sites. The same program has been submitted for approval in the EU and the Company expects to receive approval in early 2014. With regard to the fully-implantable C-Pulse system, an acute animal trial has been successfully completed, displaying the ability to implant the device and provide comparable support to the existing C-Pulse system in worldwide clinical trials. As previously stated, the Company also plans to evaluate the fully-implantable system in a chronic trial, which will commence in the fourth quarter.

QUARTERLY CONFERENCE CALL

The Company will host a conference call and webcast at 9:00 a.m. Eastern time today to discuss its financial results and provide an update on its ongoing clinical trials.

To access the live webcast, please visit the Investors page of the Sunshine Heart website at http://ir.sunshineheart.com. Alternatively, you may access the live conference call by dialing (877) 303-9826 (U.S.) or (224) 357-2194 (international) and using conference ID 93959593. An audio archive of the webcast will be available following the call at http://ir.sunshineheart.com.

SUNSHINE HEART, INC.
Condensed Consolidated Statements of Operations and Comprehensive Loss
(Unaudited)
(In thousands, except per share amounts)
Three months ended
September 30,
Nine months ended
September 30,
2013 2012 2013 2012
Net sales $ 59 $ -- $ 59 $ --
Operating expenses
Selling, general and administrative 2,486 1,495 6,612 5,004
Research and development 3,747 1,802 9,323 5,755
Total operating expenses 6,233 3,297 15,935 10,759
Loss from operations (6,174) (3,297) (15,876) (10,759)
Interest income 3 1 9 30
Loss before income taxes (6,171) (3,296) (15,867) (10,729)
Income tax benefit (136) -- (1,213) (730)
Net loss $ (6,035) $ (3,296) $ (14,654) $ (9,999)
Basic and diluted loss per share $ (0.47) $ (0.42) $ (1.29) $ (1.49)
Weighted average shares outstanding – basic and diluted 12,732 7,789 11,354 6,727
Comprehensive loss $ (6,200) $ (3,308) $ (14,744) $ (9,948)
Condensed Consolidated Balance Sheets
(Dollars in thousands, except share amounts)
September 30,
2013
December 31,
2012
(unaudited)
Current assets
Cash and cash equivalents $ 59,807 $ 14,224
Accounts receivable 59 --
Other current assets 511 333
Total current assets 60,377 14,557
Property, plant and equipment, net 431 479
TOTAL ASSETS $ 60,808 $ 15,036
Current liabilities
Accounts payable $ 2,042 $ 1,156
Accrued salaries, wages, and other compensation 910 931
Total current liabilities 2,952 2,087
Total liabilities 2,952 2,087
Commitments and contingencies -- --
Stockholders' equity
Series A junior participating preferred stock as of September 30, 2013 and December 31, 2012, par value $0.0001 per share; authorized 30,000 shares -- --
Preferred stock as of September 30, 2013 and December 31, 2012, par value $0.0001 per share; authorized 39,970,000 shares -- --
Common stock as of September 30, 2013 and December 31, 2012, par value $0.0001 per share; authorized 100,000,000 shares: issued and outstanding 16,805,411 and 9,282,724 shares, respectively 2 1
Additional paid‑in capital 150,667 91,017
Accumulated other comprehensive income:
Foreign currency translation adjustment 1,095 1,185
Accumulated deficit (93,908) (79,254)
Total stockholders' equity 57,856 12,949
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 60,808 $ 15,036
Condensed Consolidated Statements of Cash Flows
(Unaudited)
(in thousands)
For the nine months ended
September 30,
2013 2012
Net loss $ (14,654) $ (9,999)
Adjustments to reconcile net loss to cash flows used in operating activities:
Depreciation 130 98
Loss on disposal of plant and equipment -- 63
Stock-based compensation expense, net 1,821 907
Amortization of warrants for service agreements 240 160
Changes in assets and liabilities
Accounts receivable (59) --
Other current assets (179) (321)
Accounts payable and accrued expenses 946 (574)
Net cash used in operations (11,755) (9,666)
Cash flows used in investing activities:
Purchases of property and equipment (82) (132)
Net cash used in investing activities (82) (132)
Cash flows provided by financing activities:
Net proceeds from the sale of common stock 57,591 20,620
Net cash provided by financing activities 57,591 20,620
Effect of exchange rate changes on cash (171) 61
Net increase in cash and cash equivalents 45,583 10,883
Cash and cash equivalents - beginning of period 14,224 6,563
CASH AND CASH EQUIVALENTS - END OF PERIOD $ 59,807 $ 17,446

USE OF NON-GAAP MEASURES

Management uses non-GAAP measures to establish operational goals and cash flows, and believes that non-GAAP measures may assist investors in analyzing the underlying trends in the Company's business over time. Investors should consider these non-GAAP measures in addition to, not as a substitute for or as superior to, financial reporting measures prepared in accordance with GAAP. In this press release, the Company has reported non-GAAP measures of operating expenses, net loss and loss per share excluding non-cash compensation costs, which exclude non-cash expenses related to stock options, service warrants and equity incentive arrangements, and reconcile to GAAP operating expense, GAAP net loss and GAAP loss per share as follows:

SUNSHINE HEART, INC.
Reconciliation of non-GAAP amounts to GAAP
(Unaudited)
(In thousands, except per share amounts)
Three months ended
September 30,
Nine months ended
September 30,
2013 2012 2013 2012
GAAP operating expenses $ 6,233 $ 3,297 $ 15,935 $ 10,759
Non-cash compensation costs (1,008) (446) (2,137) (1,067)
Non-GAAP operating expenses $ 5,225 $ 2,851 $ 13,798 $ 9,692
GAAP net loss $ (6,035) $ (3,296) $ (14,654) $ (9,999)
Non-cash compensation costs 1,008 446 2,137 1,067
Non-GAAP net loss (5,027) (2,850) (12,517) (8,932)
GAAP Basic and diluted loss per share $ (0.47) $ (0.42) $ (1.29) $ (1.49)
GAAP Basic and diluted loss per share $ (0.39) $ (0.37) $ (1.10) $ (1.33)
Weighted average shares outstanding – basic and diluted 12,732 7,789 11,354 6,727

About the C-Pulse® Heart Assist System

The C-Pulse Heart Assist System, or C-Pulse System, an investigational device in the United States, Canada and countries that do not recognize the CE mark approval, utilizes the scientific principles of intra-aortic balloon counterpulsation applied in an extra-aortic approach to assist the left ventricle by reducing the workload required to pump blood throughout the body, while increasing blood flow to the coronary arteries. Combined, these potential benefits may help sustain the patient's current condition or, in some cases, reverse the heart failure process, thereby potentially preventing the need for later-stage heart failure devices, such as left ventricular assist devices (LVADs), artificial hearts or transplants. It may also provide relief from the symptoms of Class III and ambulatory Class IV heart failure and improve quality of life and cardiac function. Based on the results from our feasibility trial, we also believe that some patients treated with our C-Pulse System will be able to stop using the device due to sustained improvement in their condition as a result of the therapy.

Caution: Investigational device, limited by Federal (or United States) Law to Investigational use.

About Sunshine® Heart

Sunshine Heart, Inc. (Nasdaq:SSH) is an early-stage medical device company focused on developing, manufacturing and commercializing the C-Pulse System for treatment of Class III and ambulatory Class IV heart failure. Sunshine Heart has completed an approved U.S. Food and Drug Administration (FDA) feasibility clinical trial of the C-Pulse System and presented the results in November 2011. In March 2012, the FDA notified the Company that it could move forward with an investigational device exemption (IDE) application. Sunshine Heart received unconditional approval from the FDA in November 2012 to initiate its pivotal trial. In July 2012, Sunshine Heart received CE Mark approval for its C-Pulse System in Europe. Sunshine Heart is a Delaware corporation headquartered in Minneapolis with a wholly owned subsidiary in Australia. The Company has been listed on the NASDAQ Capital Market since February 2012.

Forward-Looking Statements

Certain statements in this release are forward-looking statements that are based on management's beliefs, assumptions, expectations, and information currently available to management. All statements that address future operating performance, events or developments that we expect or anticipate will occur in the future are forward-looking statements, including, without limitation, future clinical trial activities and results including patient enrollment in trials. These forward-looking statements are subject to numerous risks and uncertainties, including, without limitation, the possibility that our clinical trials do not meet their enrollment goals, meet their endpoints or otherwise fail, that regulatory authorities do not accept our application or approve the marketing of the C-Pulse System, the possibility that we may be unable to raise the funds necessary for the development and commercialization of our products, that we may not be able to commercialize our products successfully in the EU and the other risk factors described under the caption "Risk Factors" and elsewhere in our filings with the SEC. You should not place undue reliance on forward-looking statements because they speak only as of the date when made and may turn out to be inaccurate. We do not assume any obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. We may not actually achieve the plans, projections or expectations disclosed in forward-looking statements, and actual results, developments or events could differ materially from those disclosed in the forward-looking statements.

CONTACT: Media: Laura Forman Blueprint Life Science Group T: +1-415-375-3340 Investor: Jeff Mathiesen Chief Financial Officer Sunshine Heart, Inc. T: +1-952-345-4200

Source:Sunshine Heart, Inc.