Contraception device maker
) reported earnings per share (EPS) of 7 cents during the third
quarter of fiscal 2012, compared to net loss of 9 cents per share
in the year-ago quarter. However, the reported EPS surpassed the
Zacks Consensus Estimate by 2 cents.
The improvement in the company's bottom line was primarily
driven by lower income tax provision during the quarter combined
with low interest and other expenses.
Revenues in the reported quarter were up 7.2% year over year
(up 10.2% at constant exchange rate or CER) to $35.5 million,
missing of the Zacks Consensus Estimate of $37 million. Sales
from the domestic market recorded growth of 12.8% to $29.1
million. However, international sales declined 12.3% to $6.4
million due to unfavorable currency movement and macroeconomic
headwinds in Europe.
Even amid several macroeconomic headwinds in the form of
persistent unemployment and limited consumer spending, the
improvement in the reported quarter primarily came on the back of
the exit of the company's direct peer
) Adiana from the permanent birth control market.
During the quarter, sales coming from this former competitor's
account, increased 38% year over year, while the organic growth
across all of the company's domestic business was 11%. Moreover,
Conceptus' gradual progress in improving commercial execution is
gradually accelerating its growth.
Conceptus derives a major share of its revenues from the
Essure permanent birth control system. The domestic sales for
Essure during the quarter were up 14.3% year over year.
Sales of the Essure system depends on the number of physicians
trained to perform the procedure. Conceptus is striving toward
making the system available worldwide by raising consumer and
physician awareness as well as training physicians to perform the
During the reported quarter, the company expanded its U.S.
physician penetration by enrolling 407 new physicians into
preceptorship, certifying approximately 286 physicians and
transitioning approximately 105 physicians to performing
procedures in the office setting. Till date, around 15,600
physicians are fully equipped to perform the Essure
Conceptus reported gross profit of $30.0 million, up 9.9% from
$27.3 million in the third quarter of 2011. Gross margin during
the quarter expanded 200 basis points (bps) to 84.6%.
Operating expenses declined 4.1% to $24.8 million, driven by
the company's lower domestic sales headcount and legal fees,
partially offset by costs associated with the DTC advertising
campaign, product development cost of the next-generation Essure
device and clinical trials for the Essure Transvaginal Ultrasound
confirmation study. As a result, operating margin during the
reported quarter expanded a huge 1020 bps to 14.7%.
Conceptus exited the quarter with cash, cash equivalents and
short-term investments of $65.9 million compared with $101.4
million at the end of fiscal 2011. In the third quarter, the
company's cash flow from operations was $8.7 million.
In February 2012, Conceptus redeemed its 2027 senior
convertible notes for $36.6 million. In December, 2011, $50.0
million of the original 2027 notes were refinanced and are now
due in 2031.
Conceptus reiterated its revenue guidance of $140-$144 for fiscal
The exit of Adiana from the permanent birth control market
should be highly beneficial for Conceptus. The Supreme Court's
decision on June 28, 2012 to uphold the Patient Protection and
Affordable Care Act of 2010 ("PPACA") (also known as Obamacare)
is another positive development, since it provides a huge impetus
to Conceptus' business.
The company is upbeat regarding the fact that under the PPACA,
the entire list of contraceptive methods approved by the U.S.
Food and Drug Administration ("FDA"), including the Essure
procedure, will be covered by all private insurance plans. We
believe that these recent tailwinds will largely benefit the
company's sales performance as it will increase access and
affordability of the Essure procedure worldwide.
However, we remain concerned about the limited growth
visibility arising from difficult macro-economic conditions
resulting in a weak hysteroscopic sterilization market.
Currently, Conceptus retains a short-term Zacks #3 Rank
CONCEPTUS INC (CPTS): Free Stock Analysis
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