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Sunshine Heart Announces Third Quarter and Nine Months 2014 Financial Results and Provides Corporate Update

EDEN PRAIRIE, Minn., Oct. 30, 2014 (GLOBE NEWSWIRE) -- Sunshine Heart, Inc. (Nasdaq:SSH) today announced its financial results and provided a corporate update for the third quarter and nine months ended September 30, 2014.

"I am particularly pleased with progress achieved this past quarter across corporate and clinical fronts highlighted by COUNTER HF™ reaching double digit enrollment. This milestone marks the continuation of doubling enrollment quarter over quarter for this study throughout the year, and all of us at the Company are excited regarding this momentum," commented Dave Rosa, Chief Executive Officer of Sunshine Heart.

Third Quarter Corporate Highlights:

  • Nineteen sites activated in the C-Pulse® COUNTER HFU.S. investigative pivotal study, up from sixteen at the end of the second quarter 2014.
  • Fourteen additional patients enrolled in the U.S., with three new centers enrolling their first patient.
  • Publication of feasibility study results in JACC HF and histology results of C-Pulse's effect on the aorta published in ASAIO.
  • Activated four additional centers in Europe for the OPTIONS HF post-market study; five new centers have identified patients.
  • Completed European notified body regulatory audit with zero major non-conformities.
  • Oral and poster presentations at the TCT and Heart Failure Society of America conferences.

Third Quarter Financial Highlights:

  • SG&A expense totaled $2.4 million in the third quarter and $7.0 million year-to-date 2014 vs. $2.5 million and $6.6 million, respectively, in comparable periods of 2013.
  • R&D expense totaled $3.8 million in the third quarter and $12.3 million year-to-date 2014 vs. $3.7 million and $9.3 million, respectively, in comparable periods of 2013.
  • Loss per share of $(0.36) and $(1.12) in the third quarter and nine months ended September 30, 2014, respectively, vs. loss per share of $(0.47) and $(1.29) in comparable periods of 2013.
  • Cash used in operations was $17.4 million for the nine months ended September 30, 2014 vs. $11.8 million in the comparable period of 2013.
  • Cash and cash equivalents on hand at September 30, 2014 was $36.6 million vs. $54.1 million at year-end 2013.

FINANCIALS

The Company's results for the three and nine months ended September 30, 2014 include reimbursement revenue of $59,000 and $118,000, respectively, compared to $59,000 in each of the comparable periods of the prior year, for implants of the C-Pulse System under the U.S. COUNTER HF study. Although the Company's 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 clinical studies. As such, the Company is able to invoice hospitals and clinics that are eligible for reimbursement by Medicare, Medicaid or private insurance companies. The Company currently estimates approximately 30% of devices implanted in its COUNTER HF study will be reimbursed. Product costs incurred for the Company's clinical studies 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 2014 totaled $6.2 million, compared to $6.2 million in the third quarter of 2013. Operating expenses for the nine months ended September 30, 2014 totaled $19.2 million, compared to $15.9 million in the comparable period of 2013. Equity compensation expense totaled $0.7 million and $2.2 million for the three and nine month periods ended September 30, 2014, respectively, as compared to $1.1 million and $2.1 million, respectively, for the comparable periods of 2013.

Excluding equity compensation expense, non-GAAP operating expenses totaled $5.5 million and $17.1 million for the third quarter and nine months ended September 30, 2014, respectively, as compared to $5.2 million and $13.8 million for the comparable periods of 2013. The increase over the prior year periods was primarily attributable to increased clinical research and infrastructure expenses related to the U.S. pivotal and EU post-market studies and increased development expense associated with our fully-implantable device.

We received an income tax benefit of $136,000 for the state of Minnesota R&D tax credit during the third quarter of 2013. Included in the full year results are income tax benefits from the receipt of R&D tax credit refunds in Australia totaling $0.3 million in the nine months ended September 30, 2014 and $1.1 million in the comparable period of 2013.

Net loss in the third quarter and nine months ended September 30, 2014 was $6.1 million, or $0.36 per share; and $18.8 million, or $1.12 per share, respectively. This compares to losses of $6.0 million, or $0.47 per share; and $14.7 million, or $1.29 per share, in the comparable periods of 2013. Excluding equity compensation expense, third quarter and nine month periods ended September 30, 2014 net non-GAAP losses totaled $5.4 million, or $0.32 per share; and $16.7 million, or $0.99 per share, respectively. This compares to net non-GAAP losses of $5.0 million, or $0.39 per share; and $12.5 million, or $1.11 per share, in the comparable periods of 2013.

Cash used in operating activities totaled $17.4 million for the nine months ended September 30, 2014 compared to $11.8 million for the comparable period of 2013, with the increase driven primarily by higher clinical and research expenses. The Company had $36.6 million in cash and cash equivalents at September 30, 2014, compared to $54.1 million at December 31, 2013.

In addition to financial results for the third quarter and nine months ended September 30, 2014, Sunshine Heart also announced several corporate updates related to ongoing clinical studies for the C-Pulse System and the progress of internal product development.

CORPORATE UPDATE

As projected in the second quarter conference call, the Company achieved significant progress with C-Pulse's COUNTER HF™ pivotal study as fourteen patients were enrolled in the study, doubling the enrollment from the second quarter. To date, twelve of nineteen centers have enrolled patients. The Company remains enthusiastic about the pace of site enrollment and is pleased that all participating centers have identified patients. Furthermore, one of the study's principal investigators is working to assist centers that have identified patients but have been unsuccessful in consenting them, while others have high rates of patient consent.

Four additional centers in Europe have been activated, bringing the total number of clinical sites to thirteen. While management and country personnel changes temporarily delayed the recruitment process, the Company is optimistic regarding future progress. Five centers have identified patients, with one patient already scheduled for implant in the fourth quarter of 2014. The Company was also pleased to report the successful completion of the audit of its facility by the Company's European notified body (regulatory agency), with no major non-conformities.

Meaningful progress was achieved during the quarter with the development of C-Pulse II, a fully implantable device that has the same non-blood contacting, non-obligatory and MIS implantation characteristics as the current C-Pulse System, alleviating the need for the percutaneous drive line. The Company expects to provide a more detailed development schedule for the C-Pulse II by the end of 2014.

"The next generation C-Pulse utilizes cutting-edge electromagnetic technology to give heart failure patients all the benefits of C-Pulse, but in a fully implantable system. No other cardiac device has achieved this technological advancement in treating this patient population, in over 25 years. As we head into the final quarter of 2014, I'd like to extend my appreciation to the C-Pulse study and development teams for their dedication to advancing both the COUNTER HF™ and OPTIONS HF studies, and the continued advancement of C-Pulse II." concluded Mr. Rosa.

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 studies.

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 24120657. An audio archive of the webcast will be available following the call at http://ir.sunshineheart.com.

SUNSHINE HEART, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Operations and Comprehensive Loss
(Unaudited)
(In thousands, except per share amounts)
Three months ended Nine months ended
September 30, September 30,
2014 2013 2014 2013
Net sales $ 59 $ 59 $ 118 $ 59
Operating expenses
Selling, general and administrative 2,361 2,486 6,965 6,612
Research and development 3,808 3,747 12,284 9,323
Total operating expenses 6,169 6,233 19,249 15,935
Loss from operations (6,110) (6,174) (19,131) (15,876)
Other income (expense), net (22) 3 22 9
Loss before income taxes (6,132) (6,171) (19,109) (15,867)
Income tax benefit -- (136) (265) (1,213)
Net loss $ (6,132) $ (6,035) $ (18,844) $ (14,654)
Basic and diluted loss per share $ (0.36) $ (0.47) $ (1.12) $ (1.29)
Weighted average shares outstanding – basic and diluted 16,903 12,732 16,881 11,354
Other comprehensive income:
Foreign currency translation adjustments 17 (165) (5) (90)
Total comprehensive loss $ (6,115) $ (6,200) $ (18,849) $ (14,744)
Condensed Consolidated Balance Sheets
(In thousands, except share and per share amounts)
September 30,
2014
December 31,
2013
(unaudited)
Current assets
Cash and cash equivalents $ 36,575 $ 54,136
Accounts receivable 59 59
Other current assets 563 448
Total current assets 37,197 54,643
Property, plant and equipment, net 594 587
TOTAL ASSETS $ 37,791 $ 55,230
Current liabilities
Accounts payable $ 1,812 $ 2,188
Accrued salaries, wages, and other compensation 917 1,315
Total current liabilities 2,729 3,503
Total liabilities 2,729 3,503
Commitments and contingencies -- --
Stockholders' equity
Series A junior participating preferred stock as of September 30, 2014 and December 31, 2013, par value $0.0001 per share; authorized 30,000 shares -- --
Preferred stock as of September 30, 2014 and December 31, 2013, par value $0.0001 per share; authorized 39,970,000 shares -- --
Common stock as of September 30, 2014 and December 31, 2013, par value $0.0001 per share; authorized 100,000,000 shares: issued and outstanding 16,919,847 and 16,825,284 shares, respectively 2 2
Additional paid‑in capital 153,714 151,530
Accumulated other comprehensive income:
Foreign currency translation adjustment 1,202 1,207
Accumulated deficit (119,856) (101,012)
Total stockholders' equity 35,062 51,727
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 37,791 $ 55,230
Condensed Consolidated Statements of Cash Flows
(Unaudited)
(In thousands)
Nine months ended
September 30,
2014 2013
Net loss $ (18,844) $ (14,654)
Adjustments to reconcile net loss to cash flows used in operating activities:
Depreciation 198 130
Stock-based compensation expense, net 1,924 1,821
Amortization of warrants for service agreements ˗ 240
Changes in assets and liabilities
Accounts receivable ˗ (59)
Other current assets (207) (179)
Accounts payable and accrued expenses (429) 946
Net cash used in operations (17,358) (11,755)
Cash flows used in investing activities:
Purchases of property and equipment (205) (82)
Net cash used in investing activities (205) (82)
Cash flows provided by financing activities:
Net proceeds from the sale of common stock 16 57,591
Net cash provided by financing activities 16 57,591
Effect of exchange rate changes in cash (14) (171)
Net decrease in cash and cash equivalents (17,561) 45,583
Cash and cash equivalents - beginning of period 54,136 14,224
CASH AND CASH EQUIVALENTS - END OF PERIOD $ 36,575 $ 59,807
Supplement schedule of non-cash activities
Stock options and restricted stock units classified as liabilities, net $ (337) $ --

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 equity compensation expense, which exclude equity expenses related to stock options, service warrants, restricted stock units and common stock awards, and reconcile to GAAP operating expense, GAAP net loss and GAAP loss per share as follows:

SUNSHINE HEART, INC. AND SUBSIDIARIES
Reconciliation of non-GAAP amounts to GAAP
(Unaudited)
(In thousands, except per share amounts)
Three months ended
September 30,
Nine months ended
September 30,
2014 2013 2014 2013
GAAP operating expenses $ 6,169 $ 6,233 $ 19,249 $ 15,935
Equity compensation expense (700) (1,078) (2,188) (2,105)
Non-GAAP operating expenses $ 5,469 $ 5,155 $ 17,061 $ 13,830
GAAP net loss $ (6,132) $ (6,035) $ (18,844) $ (14,654)
Equity compensation expense 700 1,078 2,188 2,105
Non-GAAP net loss (5,432) (4,957) (16,656) (12,549)
GAAP basic and diluted loss per share $ (0.36) $ (0.47) $ (1.12) $ (1.29)
Non-GAAP basic and diluted loss per share $ (0.32) $ (0.39) $ (0.99) $ (1.11)
Weighted average shares outstanding – basic and diluted 16,903 12,732 16,881 11,354

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 counter-pulsation 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 study, 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 conditions 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 study 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 study. 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 wholly owned subsidiaries in Australia and Ireland. 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, our expectations with respect to future clinical study activities and results including patient enrollment in studies. These forward-looking statements are subject to numerous risks and uncertainties, including, without limitation, the possibility that our clinical studies 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 U.S. Securities and Exchange Commission. 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: For further information, please contact: Investor: Candice Knoll Blueprint Life Science Group T: +1-415-375-3340 Ext. 105 Jeff Mathiesen Chief Financial Officer Sunshine Heart, Inc. T: +1-952-345-4200 Media: David Schull Russo Partners T: +1-212-845-4271 Christopher R. Hippolyte Russo Partners T: +1-646-942-5634

Source:Sunshine Heart, Inc.