During the first quarter of 2009 and 2008, 90% and 91% of revenues, respectively, were derived from consumables sales, 10% and 9% of revenues, respectively, were derived from medical equipment sales. Medical equipment sales include sales of ADVANCE™ devices and related modules, NC-statdevices and related modules, and service agreement revenues. Consumables sales include sales of nerve specific electrodes, EMG needles, and other accessories.
Gross margins as a percentage of total revenues for the first quarter of 2009 were 72%, against 73% for the first quarter of 2008. In the first quarter of 2009, the gross margins as a percentage of total revenues decreased primarily due to greater discounting. The increased discounting, which resulted in lower average selling prices is, in part, related to ADVANCE transition pricing for certain existing customers who are specialist physicians with peripheral nerve expertise.
Cash and cash equivalents and short-term investments totaled $15.9 million as of March 31, 2009 against $19.8 million as of December 31, 2008. During the quarter, the Company settled and paid $3.7 million to the US Department of Justice and used $0.4 million of cash to acquire certain assets from Cyberkinetics Neurotechnology Systems, Inc.
Shai N. Gozani, NeuroMetrix’s president & chief executive officer commented, “Our revenues in the first quarter of 2009 were down approximately 22% from the same period in 2008 and down 5% sequentially from the fourth quarter of 2008. We believe that the decrease in our revenues is due to the overall reduction in health care capital purchasing, the continued uncertainty surrounding reimbursement for the NC-stat System, and the 40% reduction in our direct sales force in the second quarter of 2008. During the first quarter of 2009, our active customer count, which is a twelve-month look back at accounts utilizing our neurodiagnostic instruments, decreased by approximately 180 to 5,000 physician practices and clinics as of the end of the first quarter of 2009 from the fourth quarter of 2008. However, the average consumables usage per active customer increased during the first quarter of 2009 as did the total consumables usage from the prior quarter.”
Gozani added, “We are now actively marketing the ADVANCE System into the neurology, physical medicine and rehabilitation (PM&R), neurosurgery, orthopedic and hand surgery, and pain medicine markets through our direct sales organization. As of the end of the first quarter of 2009, 7% of our active customers were using ADVANCE. We are encouraged by market reaction and have gained important insight into certain product enhancements that we believe could accelerate adoption. We have also made progress toward refining our sales focus by reorganizing our field sales into three market channels: neurology, neurointerventional, and physician office. The neurology market includes neurologists and physical medicine and rehabilitation (PM&R) physicians.”
Gozani further stated, “We recently announced the acquisition of certain technological and intellectual property assets from Cyberkinetics Neurotechnology Systems, Inc. This acquisition includes all of Cyberkinetics’ rights and regulatory filings for the Andara™ Oscillating Field Stimulator (OFS™) technology for treatment of acute spinal cord injury, an investigational device designed to stimulate spinal cord repair and restore sensation; the rights to develop and commercialize a therapeutic product for peripheral nerve injury based on the Andara OFS neurostimulation technology; development and commercialization rights to certain derivatives of the pharmacological agent 4-aminopyridine that may be useful in the treatment of central and peripheral nervous system injury and disease; and certain other intellectual property and technology.
