Conceptus Inc. Reports Operating Results (10-Q)

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Nov 08, 2010
Conceptus Inc. (CPTS, Financial) filed Quarterly Report for the period ended 2010-09-30.

Conceptus Inc. has a market cap of $464.53 million; its shares were traded at around $14.95 with a P/E ratio of 67.95 and P/S ratio of 3.54. CPTS is in the portfolios of PRIMECAP Management, Steven Cohen of SAC Capital Advisors.

Highlight of Business Operations:

Effective January 1, 2010, the Centers for Medicare and Medicaid Service (CMS), the Medicare Physician Fee Schedule national average payment for hysteroscopic sterilization (CPT code) is $423 when performed in a hospital (facility) and $1,822 (non-facility) when performed in a physicians office. In addition, in the CMS Final Rule for the 2010 Outpatient Prospective Payment System, or OPPS, which assigns hospital outpatient reimbursement amounts, CPT 58565 maps to APC 202 which is assigned a Medicare National Average of $3,033, which under Medicare includes the cost of the implant. In 2010, the Medicare national average payment for hysteroscopic sterilization in the Ambulatory Surgery Center (ASC) is $1,672, which includes the cost of the implant. We believe these values are favorable for the Essure procedure and will help establish increased utilization of the device amongst doctors.

Net sales were $33.9 million for the three months ended September 30, 2010 as compared to $34.2 million for the three months ended September 30, 2009, representing a decrease of approximately $0.3 million or 1%. Net sales were $104.1 million for the nine months ended September 30, 2010 as compared to $94.4 million for the nine months ended September 30, 2009, representing an increase of approximately $9.7 million or 10%. The decrease in net sales for the three months ended September 30, 2010 reflects continuing macroeconomic pressures that have contributed to reductions in patient visits to OB/GYN physician offices, as well as ongoing competitive product trialing. The increase in net sales for the nine months ended September 30, 2010 is the result of continued commercialization and marketing of the Essure system worldwide and reflects the increasing numbers of physicians entering and completing training in the use of the procedure. The increase also reflects the continuation of our programs aimed at raising consumer and physician awareness of the Essure procedure.

Cost of goods sold for the three months ended September 30, 2010 was $6.6 million as compared to $5.0 million for the three months ended September 30, 2009, which represents an increase of $1.6 million, or 30%. Cost of goods sold for the nine months ended September 30, 2010 was $20.2 million as compared to $17.5 million for the nine months ended September 30, 2009, which represents an increase of $2.7 million, or 16%. Gross margin for the three months ended September 30, 2010 was 81% which represents a decrease from a gross margin of 85% for the three months ended September 30, 2009. For the nine months ended September 30, 2010, gross margin was 81%, which represents a decrease from a gross margin of 82% for the nine months ended September 30, 2009.

Selling, general and administrative spending for the nine months ended September 30, 2010 were $75.3 million as compared to $65.4 million for the nine months ended September 30, 2009, which represents an increase of $9.9 million, or 15%. The increase was the result of (i) payroll, stock compensation, training and recruiting related expenses of approximately $2.8 million, primarily due to the expansion of the U.S. field sales force, (ii) an increase of approximately $5.3 million due to increased personnel and legal fees, (iii) an increase of approximately $0.6 million in travel related expenses and (iv) an increase of approximately $1.2 million in advertising expenditures primarily for our consumer-awareness campaign. As a percentage of net sales, selling, general and administrative expenses for the nine months ended September 30, 2010 and 2009 represented 72% and 69%, respectively.

Total interest and other income (expense) net for each of the three months ended September 30, 2010 and 2009 was a net expense of $1.6 million. Total interest and other income (expense) net for the nine months ended September 30, 2010 and 2009 was a net expense of $4.6 million and $4.7 million, respectively, which represents an increase of $0.1 million or 3% primarily due to foreign exchange losses in the nine months ended September 30, 2009.

For the three and nine months ended September 30, 2010, we recorded approximately $0.2 million and $0.5 million of income tax expense, respectively. For the three and nine months ended September 30, 2009, we recorded approximately $0.2 million and $0.4 million of income tax expense, respectively.

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