VNUS Medical Technologies, Inc. (VNUS) has reported net revenues of $101.2 million for the full year of 2008, up 43%, compared with the net revenues of $70.9 million in the previous year-end. It also reported a net income of $13.5 million, or $0.81 per diluted share, for the full year of 2008, compared with the net loss of $5.5 million, or $0.36 per diluted share, in the previous year-end.
Net revenues for the fourth quarter increased 32%, to $27.2 million against $20.6 million, for the fourth quarter of 2007 and up 18% when compared to the third quarter of 2008 at $23.1 million. Net revenues for the fourth quarter of 2008 included net product revenues and royalty revenues. Net product revenues are derived from the sale of disposable endovenous catheters and devices, RF generators and accessory products. Royalty revenues are derived from other companies paying royalties for a license to certain VNUS patents previously subject to an infringement lawsuit.
Net product revenues for the fourth quarter of 2008 up $5.4 million to $26.0 million compared to $20.6 million for the fourth quarter of 2007. Fourth quarter net product revenues up 19%, against net product revenues in the third quarter of 2008 of $21.9 million. The increase in net product revenues from the fourth quarter of 2007 was due to continuing higher sales of disposable ClosureFAST catheters and ClosureRFS devices, and higher overall international sales. Disposable catheters and device unit sales up in the fourth quarter of 2008 by 36% compared to the fourth quarter of 2007 and up 26% sequentially.
Fourth-quarter net income was $3.5 million, against a net income of $0.9 million for the fourth quarter of 2007 and a net income of $1.6 million for the third quarter of 2008. Gross margins in the fourth quarter improved to 68.9% compared to 65.8% in the fourth quarter of 2007, and compared to 69.6% sequentially. Patent litigation expenses included in the fourth quarter were $561,000, compared to $647,000 in the comparable quarter in 2007 and $331,000 in the third quarter in 2008. Fully diluted earnings for the fourth quarter of 2008 was $0.21 per share, against $0.05 per share for the fourth quarter of 2007 and $0.10 per share for the third quarter of 2008.
Excluding $8.7 million of non-recurring royalty revenues, net revenues in 2008 up 30% compared to 2007. Net product revenues in 2008 grew 25% compared to 2007 and annual unit sales in unit catheters and devices up 37% compared to 2007. The 2008 net income was $13.5 million or $0.81 per share compared to 2007 net loss of $5.5 million or $0.36 per share. Excluding $8.7 million of non-recurring royalty revenues in 2008, net income per share was $0.33 compared to net loss of $0.36 per share in 2007.
Adjusted EBITDA for the fourth quarter of 2008 was earnings of $5.6 million, as compared to EBITDA of $776,000 in the comparable quarter of 2007, and $3.6 million in the third quarter of 2008. For periods with net income, earnings per share, if fully taxed at 38%, would be $0.14 for the fourth quarter of 2008 compared to earnings per share, if fully taxed at the same rate, of $0.07 in the third quarter of 2008. The company expects to be in a Fully Taxed EPS position on a GAAP basis during 2010. Accordingly, the company has decided to provide supplemental disclosure of Fully Taxed EPS as a long term measure of growth in earnings on a comparable constant per share basis absent the utilization of net operating loss carryforwards and one-time events, such as the payment of royalties in the second quarter of 2008 related to periods prior to 2008.
VNUS’ balance sheet at December 31, 2008 included cash, cash equivalents and investments of $85.0 million, about $6.9 million more than the third quarter of 2008 due primarily to improved operating results, including growing revenues and improving customer collections.
“Our fourth quarter results substantially exceeded our expectations in every aspect of our business,” said VNUS president and chief executive officer Brian E. Farley. “Product revenue growth of 26% in the quarter with exceptional growth in international sales demonstrates that the market for our products continues to grow well and our products are accepted as a preferred treatment for venous reflux. We are also very pleased that our business generated a 13.7% operating margin in the current quarter compared to 8.3% in the third quarter of 2008. During 2008 we estimate that in the 40 countries where our products are sold, VNUS catheters and devices were used in about 10% of the 1.3 million venous reflux procedures performed annually. Taken together, our excellent product acceptance and a large available worldwide market to penetrate, cause us to remain confident of the long term potential to scale our business to further improve profitability. In recognition of this sizeable business opportunity we are continuing our sales and marketing expansion as previously described and as reflected in our 2009 guidance.”
VNUS also announced its business guidance for the first-quarter and full-year 2009.
VNUS projects international product revenues to grow at rates higher than overall company rates and expects international revenues to comprise about 13-15% of total product revenues during the year. Fluctuations in foreign currency exchange rates may impact the rate of reported US dollar growth of international revenues. VNUS expects that about 75% of international revenues in 2009 will be denominated in a foreign currency.
Included in the full year 2009 guidance are operating expense increases over 2008 to sales and marketing between 15% to 18%, research and development between 3% to 5% and general and administrative expenses between 6% to 8%.
VNUS presently estimates an overall increase in 2009 quarterly and full fiscal year operating expenses primarily due to up sales and marketing expenses associated with up sales activities, up field sales headcount and additional marketing related expenditures to support new long term business initiatives in domestic and international markets. VNUS estimates that first quarter and full-year 2009 operating expenses will include patent litigation expenses which will range $0.4 – $0.6 million and $1.8 – $2.3 million, respectively.