Conceptus reported revenues of $36.8 million, marginally missing the Zacks Consensus Estimate of $37 million. However, revenues were up 11.5% from the year-ago quarter’s $33 million.
Conceptus derives a major share of its revenues from Essure, which is a permanent birth control system, approved for sale in many countries, including the U.S. Domestic sales of the Essure system increased 7.4% year over year to $28.0 million and international sales increased 26.5% to $8.9 million in the reported quarter. International sales growth was negatively impacted by a stronger U.S. dollar.
Sales of the Essure system depends on the number of physicians trained to perform the procedure. Conceptus is working to make the system available worldwide by raising consumer and physician awareness as well as imparting training to the physicians for performing the procedure. During the quarter, the company trained about 400 physicians, certified 330 physicians and transitioned 160 physicians to perform procedures in an office environment.
The company reported gross profit of $29.6 million, up 12.12% compared to the year-ago quarter although gross margin remained unchanged at 80%. However, sequentially, gross margin declined by 100 basis points (bps) from the first quarter of 2010 and 200 bps from the fourth quarter of 2009 driven by a higher proportion of lower-margin international sales and stronger domestic currency.
Operating expenses increased 11% driven by a 13% increase in selling, general and administrative expenses, partially offset by a 9.6% decline in research and development expenses. Increased spending on field sales, consumer marketing and legal fees were responsible for higher operating expenses.
Conceptus exited the quarter with cash and cash equivalents of $21.5 million, down from $61.6 million at the end of December 2009. During the quarter, the company repaid $11.5 million of its outstanding short term loan of $25.7 million to UBS Financial Services. Subsequently, the remaining amount of $14.2 million was paid entirely.
Guidance
Conceptus provided guidance for the third quarter and reiterated fiscal 2010 guidance. Revenues during the third quarter are expected in the range of $33–$34 million with EPS of 3–6 cents. Adjusted EPS is expected to be 15–18 cents, higher than the Zacks Consensus Estimate of 14 cents.
For the full year, Conceptus maintained its earlier guidance of revenues ($143–$145 million), EPS (21–26 cents) and adjusted EPS (70–75 cents).
Earlier, in July 2010, Conceptus revised its estimates downward for the second quarter and fiscal 2010. The tightening of the guidance followed a reduction in physician office visits due to various domestic factors such as increase in unemployment and unfavorable currency impact.
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