IsoTis Reports Q2 2007 Results and Recommends Stockholders Approve Merger with Integra LifeSciences
IRVINE, CA, USA, - August 7, 2007 – IsoTis, Inc (NASDAQ: ISOT), an orthobiologics company, today reported its results for the second quarter and six months ended June 30, 2007. Product revenues were $10.4 million for the second quarter of 2007, representing a 4% decrease over product revenues of $10.8 million for the second quarter of 2006. For the first six months of 2007, product revenues were $20.3 million, representing a 1% decrease over product revenues of $20.5 million for the same period in 2006. Total revenue, including income from the transfer of IsoTis' intellectual property rights for PolyActive to OctoPlus (Euronext: OCTO) and the extension of the company's private label agreement with AlloSource, was $14.6 million for the second quarter of 2007 and $24.5 million for the first six months of 2007.
Revenue Analysis
IsoTis' two chief distribution channels are its U.S. network of independent agents and its network of international distributors, while the remaining portion of its revenues are derived from private label agreements and deferred revenue proceeds. In the second quarter of 2007, revenues from the U.S. network decreased 3% to $6.1 million compared to $6.3 million in the second quarter of 2006, while in the first six months of 2007 revenues from the U.S. network grew 1% to $12.6 million, compared to $12.4 million in the first six months of 2006. In the second quarter of 2007, international revenues grew 20% to $3.0 million compared to $2.5 million in the second quarter of 2006, while in the first six months of 2007 international revenues grew 3% to $5.1 million, compared to $5.0 million in the first six months of 2006.
Results Comparison & Cash Position
Income from operations for the second quarter of 2007 was $0.3 million, compared to a loss from operations of $2.1 million for the second quarter of 2006. In the first six months of 2007, the loss from operations was $5.3 million, compared to $4.6 million in the first six months of 2006.
Due to the impact of other revenue recorded in the second quarter of 2007 in connection with the transfer of our intellectual property rights for PolyActive and the extension of our private label agreement with AlloSource, the net result for the second quarter of 2007 was a profit of $37,000, while for the first half of 2007 we recorded a net loss of $5.0 million.
At June 30, 2007, IsoTis had cash and cash equivalents and restricted cash of $14.4 million.
Recommendation to Accept Terms of Merger with Integra Lifesciences
Earlier today, IsoTis announced a definitive agreement to combine with Integra LifeSciences Holdings Corporation (NASDAQ: IART) (“Integra”) in a cash transaction. The Company believes that this strategic combination, unanimously approved by the Board of Directors of IsoTis, will create a global leader in regenerative medicine. The transaction is expected to be completed in the fourth calendar quarter of 2007.
Under the terms of the merger agreement, IsoTis stockholders will receive $7.25 in cash for each share of IsoTis common stock they own. The total consideration of the transaction is approximately $51 million, plus debt assumed at closing.
As disclosed earlier this year, IsoTis embarked on a process to raise capital to fund the Company's operations with the filing on January 29, 2007 of a registration statement on Form S-1 for a proposed public offering. That registration statement was later withdrawn as a result of a delay in the approval of its 510(k) application with the FDA regarding its Accell products. Still requiring capital, the Company elected to pursue financing in the private markets. The Company successfully secured a $20 million Credit Facility with Merrill Lynch Capital and Silicon Valley Bank on May 30, 2007, which credit facility contains the condition that the Company must raise net proceeds of $18.6 million in new equity capital by August 31, 2007 or repay Merrill Lynch $7.5 million by September 1, 2007. IsoTis has been unable to negotiate such financing on terms that the Board of Directors deems acceptable for the stockholders.
Without additional financing, the Company will not be able to finance its operations beyond October 2007. Consequently, the Company and its advisors pursued potential strategic partners, resulting in today's announcement. The transaction is subject to approval by holders of more than 50% of the outstanding shares of IsoTis' common stock at a special meeting of stockholders to be held later this year, as well as other closing conditions and approvals. The transaction is expected to close in the fourth calendar quarter of 2007. The Board of Directors unanimously approved the agreement and plan of merger with Integra, and unanimously recommends that IsoTis' stockholders vote in favor of approval and adoption of the agreement.
Pieter Wolters, President and CEO of IsoTis said, “With the challenges of the last quarters, we are happy to have kept the sales of our Accell products at or around the same levels compared with the same periods of last year. As communicated earlier, the U.S. FDA has reinitiated the review of our Accell 510(k) submission, and we are optimistic that a decision will be reached in the next few weeks.
“Our employees and partners have been successful in building IsoTis to a leading orthobiologics company to date. We're proud of the innovative product and technology platforms we have created, as well as our established distribution channels in the US and overseas. We have been unable to secure the necessary financial resources to support continued growth within the limited period of time and cash available after the regulatory approval delay. The time required to reach cash flow breakeven as a standalone company would require substantial additional capital that has proven to be unavailable on acceptable terms.“
“We have followed Integra's success in building an industry leader over the years. During our recent discussions with Integra's team leading to today's announcement, we were impressed by the capabilities and integrity of their leadership. We are confident that under the new ownership and with Integra's resources backing us, our products, technology platforms and employees will once again flourish and continue the growth path that we started in 2004.”
“We believe this transaction represents a fair value to our stockholders. For our other stakeholders, the transaction enables both IsoTis and Integra to reach their shared goal of improving patient outcomes in an innovative, cost-effective manner. We are very excited about the benefits this combination of industry leaders will provide to employees, physicians and their patients, and to our business partners. Therefore the Board of Directors unanimously recommends that IsoTis' stockholders vote in favor of approval and adoption of the agreement."
Conference Call
IsoTis has scheduled a conference call to discuss these results today August 7, 2007 at 4 p.m. EST (1 p.m. PST, 10 p.m. CET). US Dial In: toll free 1-866-966-5335; UK Dial In 44-20-3023-4442; Continental Europe Dial In: 41-22-592-7103; no password required. Digital playback is available from August 7 at 8:00 p.m. for 24 hours. US Dial In: 1-866-583-1035; European Dial In 41-22-580-3314; playback ID: 573240#. To listen to the conference call live via the internet, vis