News Column

Sunshine Heart Announces Second Quarter and Six Months 2014 Financial Results and Corporate Update

August 12, 2014

EDEN PRAIRIE, Minn., Aug. 12, 2014 (GLOBE NEWSWIRE) -- Sunshine Heart, Inc. (Nasdaq:SSH) today announced its financial results and provided a corporate update for the second quarter and six months ended June 30, 2014.

"I'm pleased with progress achieved during the past quarter with the COUNTER HF™ and OPTIONS HF studies along with development of the fully implantable C-Pulse® system. Our efforts over the past two quarters to increase the exposure of the C-Pulse COUNTER HF Trial among the targeted patient population and cardiology community are starting to make a meaningful impact on recruitment. We have already seen a doubling of the number of patients scheduled to visit with their doctor in the third quarter versus the second quarter and moving forward, we expect to see this reflected by an increase in enrollment," commented Dave Rosa, Chief Executive Officer of Sunshine Heart.

Second Quarter Corporate Highlights:

• Fifteen sites activated in the C-Pulse COUNTER HF U.S. investigational pivotal study, up from thirteen at the end of the first quarter 2014, and two additional activated sites are awaiting clinical contract amendments.• Eighteen additional U.S. sites committed to participate bringing number total to thirty-five.• Seven additional patients enrolled in U.S. with three new centers enlisting their first patient.• Potential patients now identified at every participating U.S. site.• Two centers in the UK for OPTIONS HF EU post-market study are now able to enroll with one having performed a successful implant.• Two additional patients in Europe were implanted with C-Pulse bringing total implants in OPTIONS HF to twelve.• Exit site infection rate to-date for OPTIONS HF study is 8.3%, per investigator-reported results, significantly below our feasibility study rate of 40%.• Completed 90 day animal trial for next generation fully-implantable C-Pulse system.• Two posters were presented by Dr. Cheng and by Dr Hotz at the International Society for Heart and Lung Transplantation (ISHLT) 34th Annual Meeting, April 10-13 in San Diego, CA.• Two posters were presented by Dr. Hotz and Dr. Cecere at the Annual Meeting of the Heart Failure Association (HFA) of the European Society of Cardiology (ESC), May 17-20 in Athens, Greece.• Key additions to leadership team with appointments of Kimberly Oleson as Senior Vice President, Clinical Affairs and Brian Brown, Senior Vice President of Technology and Operations.• Confirmation from the peer-reviewed journal Journal of the American College of Cardiology Heart Failure that the U.S. feasibility study manuscript will be published online in September and in print in October.

Second Quarter Financial Highlights:

• SG&A expense totaled $2.2 million in the second quarter and $4.6 million year-to-date 2014 vs. $2.2 million and $4.1 million, respectively, in comparable periods of 2013.• R&D expense totaled $4.4 million in the second quarter and $8.5 million year-to-date 2014 vs. $3.2 million and $5.6 million, respectively, in comparable periods of 2013.• R&D tax credit refund of $0.3 million for the second quarter and year-to-date 2014 vs. a refund of $1.1 million in comparable periods of 2013.• Loss per share of $(0.38) and $(0.75) in the second quarter and six months ended June 30, 2014, respectively, vs. loss per share of $(0.35) and $(0.81) in comparable periods of 2013.• Cash used in operations was $11.9 million for the six months ended June 30, 2014 vs. $7.6 million in comparable period of 2013.• Cash and cash equivalents on hand at June 30, 2014 was $42.1 million vs. $54.1 million at year-end 2013.

FINANCIALS

The Company did not have reimbursement revenue in the second quarter of 2014 based upon the enrollment activity under its U.S. COUNTER HF study during the quarter. The Company's results for the six months ended June 30, 2014 include reimbursement revenue of $59,000 for an implant of the C-Pulse System under its U.S. COUNTER HF study. Although the Company's C-Pulse System is not approved for commercial sale in the U.S., the FDA has assigned the C-Pulse System to a Category B designation, making it eligible for reimbursement at certain U.S. sites during clinical studies. As such, the Company is able to invoice hospitals and clinics that are eligible for reimbursement by Medicare, Medicaid or private insurance companies. Product costs incurred for the Company's clinical studies are deemed to be development costs and, accordingly, are expensed to research and development as incurred. Upon commercialization, product costs will be capitalized in inventory and recorded to cost of sales as the inventory is sold.

Operating expenses in the second quarter of 2014 totaled $6.7 million, compared to $5.3 million in the second quarter of 2013. Operating expenses for the six months ended June 30, 2014 totaled $13.1 million, compared to $9.7 million in 2013. Equity compensation expense totaled $0.8 million and $1.5 million for the three and six month periods ended June 30, 2014, respectively, as compared to $0.6 million and $1.1 million, respectively, for the comparable periods of 2013.

Excluding equity compensation expense, non-GAAP operating expenses totaled $5.9 million and $11.6 million for the second quarter and six months ended June 30, 2014, respectively, as compared to $4.7 million and $8.6 million for the comparable periods of 2013. The increase over the prior year periods was primarily attributable to increased clinical research and infrastructure expenses related to the U.S. pivotal and EU post-market studies and increased development expense associated with our fully-implantable device.

Included in the full year results are income tax benefits from the receipt of R&D tax credit refunds in Australia totaling $0.3 million in in the second quarter and six months ended June 30, 2014 and $1.1 million in the comparable periods of 2013.

Net loss in the second quarter and six months ended June 30, 2014 was $6.4 million, or $0.38 per share; and $12.7 million, or $0.75 per share, respectively. This compares to losses of $4.2 million, or $0.35 per share; and $8.6 million, or $0.81 per share in the comparable periods in 2013. Excluding equity compensation expense, second quarter and six month periods ended June 30, 2014 net non-GAAP losses totaled $5.6 million, or $0.33 per share; and $11.2 million, or $0.67 per share, respectively. This compares to $3.6 million, or $0.30 per share; and $7.5 million, or $0.71 per share, in the comparable periods of 2013.

Cash used in operating activities totaled $11.9 million for the six months ended June 30, 2014 compared to $7.6 million for 2013, with the increase driven primarily by higher clinical and research expenses. The Company had $42.1 million in cash and cash equivalents at June 30, 2014, compared to $54.1 million at December 31, 2013.

In addition to financial results for the second quarter and six months ended June 30, 2014, Sunshine Heart also announced several corporate updates with regard to the ongoing clinical studies for C-Pulse and progress of internal product development.

CORPORATE UPDATE

During the quarter, Sunshine Heart achieved significant progress with C-Pulse's COUNTER HF pivotal study as twenty-four patients were identified and scheduled to visit their respective physician to discuss the C-Pulse therapy. Fifteen were seen by doctors and seven were enrolled in the study representing just about a 50% conversion rate which is higher than the 33% rate previously projected. Of the seven patients who were recruited from the centers, three centers enrolled their first patient. At the conclusion of the second quarter, the Company had thirty-five sites committed to participate with fifteen locations capable of enrolling patients. Sunshine Heart is also pleased to report that every participating center has now identified at least one patient who fits the profile of the study.

Sunshine Heart is pleased to report progress on the OPTIONS HF European post-market study where it completed two additional implants during the quarter with one being the first at the Royal Brompton & Harefield Hospital in the United Kingdom. This brings a total of twelve implants performed to date in OPTIONS HF with two U.K based centers activated during the quarter. In addition, although early in the trial with limited numbers, the observed rate of exit site infection in the OPTIONS HF study improved significantly over our feasibility study results and is well below historical rates for LVAD devices. To date, based on investigator-reported results, the observed rate of exit site infection is 8.3% (1/12 subjects), well below our prior U.S. pilot study experience of 40% (8/20).

Results of the ninety day chronic animal trial for the next generation, fully implantable C-Pulse system were analyzed during the quarter. Necropsy was performed and the histopathology findings were in line with what we were expecting at this stage, and very similar to those found in early chronic animal studies using the current C-Pulse system. Hemodynamic measurements at implant and at conclusion of the study both confirmed the desired diastolic pressure augmentation and pre-systolic aortic pressure reduction generated by the device. The lung tissue against which the pump was placed had an expected fibrovascular pump capsule that was flexible and did not appear to be inhibiting the function of the pump. Histopathology of the major organs found all organs to be normal and the Company is evaluating the ability to accelerate development of C-Pulse and will continue to explore further miniaturization of the existing system.

The leadership was team was also bolstered during the quarter with the appointments of Kimberly Oleson as Senior Vice President, Clinical Affairs and Brian Brown to the post of Senior Vice President, Technology and Operations. Ms. Oleson was previously Vice President of Global Clinical Operations at Medtronic, Inc., where she was responsible for building Medtronic's first centralized clinical operations organization. Mr. Brown joined Sunshine Heart after a twenty-four year career at Boston Scientific, where he most recently was VP of R&D, leading a number of business units that were the primary growth drivers for their cardiovascular division.

"We are well positioned to execute the studies and will continue to add key members to management as the Company prepares for its next stage of growth, "concluded Mr. Rosa.

QUARTERLY CONFERENCE CALL

The Company will host a conference call and webcast at 9:00 a.m. Eastern time today to discuss its financial results and provide an update on its ongoing clinical studies. Dr. William Cohn of the Texas Heart Institute will be available to answer questions after the Company's prepared remarks. Dr. Cohn will be available to answer questions pertaining to the results of the Company's 90 day chronic animal trial for the fully implantable C-Pulse system.



To access the live webcast, please visit the Investors page of the Sunshine Heart website at http://ir.sunshineheart.com. Alternatively, you may access the live conference call by dialing (877) 303-9826 (U.S.) or (224) 357-2194 (international) and using conference ID 78823880. An audio archive of the webcast will be available following the call at http://ir.sunshineheart.com.

SUNSHINE HEART, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Operations and Comprehensive Loss
(Unaudited)
(In thousands, except per share amounts)
 
 Three months ended

June 30,
Six months ended

June 30,
 2014201320142013
Net sales $ -- $ --$ 59 $ --
         
Operating expenses        
Selling, general and administrative 2,243 2,150 4,604 4,126
Research and development 4,413 3,150 8,476 5,576
Total operating expenses 6,656 5,300 13,080 9,702
Loss from operations (6,656) (5,300) (13,021) (9,702)
Other income, net 11 3 44 6
Loss before income taxes (6,645) (5,297) (12,977) (9,696)
Income tax benefit (265) (1,077) (265) (1,077)
Net loss$ (6,380)$ (4,220)$ (12,712)$ (8,619)
         
Basic and diluted loss per share$ (0.38)$ (0.35)$ (0.75)$ (0.81)
     
Weighted average shares outstanding – basic and diluted 16,882 11,911 16,870 10,644
         
Other comprehensive income:        
Foreign currency translation adjustments (3) 83 (22) 75
Total comprehensive loss$ (6,383)$  (4,137)$ (12,734)$ (8,544)
 
 
Condensed Consolidated Balance Sheets
(Dollars in thousands, except share amounts)
 
 



June 30,


2014


December 31,

2013
  (unaudited)
Current assets    
Cash and cash equivalents$ 42,125$ 54,136
Accounts receivable -- 59
Other current assets 675 448
Total current assets 42,800 54,643
Property, plant and equipment, net 572 587
TOTAL ASSETS$ 43,372$ 55,230
     
Current liabilities    
Accounts payable$ 2,092$ 2,188
Accrued salaries, wages, and other compensation 757 1,315
Total current liabilities 2,849 3,503
Total liabilities 2,849 3,503
     
Commitments and contingencies -- --
     
Stockholders' equity    
Series A junior participating preferred stock as of June 30, 2014 and December 31, 2013, par value $0.0001 per share; authorized 30,000 shares    
Preferred stock as of June 30, 2014 and December 31, 2013, par value $0.0001 per share; authorized 39,970,000 shares -- --
Common stock as of June 30, 2014 and December 31, 2013, par value $0.0001 per share; authorized 100,000,000 shares: issued and outstanding 16,891,317 and 16,825,284 shares, respectively 2 2
Additional paid-in capital 153,060 151,530
Accumulated other comprehensive income:   
Foreign currency translation adjustment 1,185 1,207
Accumulated deficit (113,724) (101,012)
Total stockholders' equity 40,523 51,727
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY$ 43,372$ 55,230
 
 
Condensed Consolidated Statements of Cash Flows
(Unaudited)
(in thousands)
 
 Six months ended

June 30,
 20142013
Net loss$ (12,712)$ (8,619)
Adjustments to reconcile net loss to cash flows used in operating activities:   
Depreciation 128 83
Stock-based compensation expense, net 1,321 838
Amortization of warrants for service agreements ?  240
Changes in operating assets and liabilities    
Accounts receivable 59 ?
Other current assets (319) (371)
Accounts payable and accrued expenses (399) 258
Net cash used in operations(11,922)(7,571)
Cash flows used in investing activities:  
Purchases of property and equipment (113) (17)
Net cash used in investing activities(113)(17)
Cash flows provided by financing activities:  
Net proceeds from the sale of common stock 16 14,910
Net cash provided by financing activities1614,910
Effect of exchange rate changes in cash 8 (20)
Net decrease in cash and cash equivalents (12,011) 7,302
Cash and cash equivalents - beginning of period 54,136 14,224
CASH AND CASH EQUIVALENTS - END OF PERIOD$ 42,125$ 21,526
     
Supplement schedule of non-cash activities    
Stock options and restricted stock units classified as liabilities, net$ (286) $ --


USE OF NON-GAAP MEASURES

Management uses non-GAAP measures to establish operational goals and cash flows, and believes that non-GAAP measures may assist investors in analyzing the underlying trends in the Company's business over time. Investors should consider these non-GAAP measures in addition to, not as a substitute for or as superior to, financial reporting measures prepared in accordance with GAAP. In this press release, the Company has reported non-GAAP measures of operating expenses, net loss and loss per share excluding equity compensation expense, which exclude equity expenses related to stock options, service warrants, restricted stock units and common stock awards, and reconcile to GAAP operating expense, GAAP net loss and GAAP loss per share as follows:

SUNSHINE HEART, INC. AND SUBSIDIARIES
Reconciliation of non-GAAP amounts to GAAP
(Unaudited)
(In thousands, except per share amounts)
 
 Three months ended

June 30,
Six months ended

June 30,
 2014201320142013
GAAP operating expenses$ 6,656$ 5,300$ 13,080$ 9,702
Equity compensation expense (753) (591) (1,488) (1,078)
Non-GAAP operating expenses$ 5,903$ 4,709$ 11,592$ 8,624
         
GAAP net loss$ (6,380)$ (4,220)$ (12,712)$ (8,619)
Equity compensation expense 753 591 1,488 1,078
Non-GAAP net loss (5,627) (3,629) (11,224) (7,541)
         
GAAP basic and diluted loss per share$ (0.38)$ (0.35)$ (0.75)$ (0.81)
Non-GAAP basic and diluted loss per share$ (0.33)$ (0.30)$ (0.67)$ (0.71)
         
Weighted average shares outstanding – basic and diluted 16,882 11,911 16,870 10,644


About the C-Pulse Heart Assist System



The C-Pulse Heart Assist System, or C-Pulse System, an investigational device in the United States, Canada and countries that do not recognize the CE mark approval, utilizes the scientific principles of intra-aortic balloon counterpulsation applied in an extra-aortic approach to assist the left ventricle by reducing the workload required to pump blood throughout the body, while increasing blood flow to the coronary arteries. Combined, these potential benefits may help sustain the patient's current condition or, in some cases, reverse the heart failure process, thereby potentially preventing the need for later-stage heart failure devices, such as left ventricular assist devices (LVADs), artificial hearts or transplants. It may also provide relief from the symptoms of Class III and ambulatory Class IV heart failure and improve quality of life and cardiac function. Based on the results from our feasibility study, we also believe that some patients treated with our C-Pulse System will be able to stop using the device due to sustained improvement in their condition as a result of the therapy.



Caution: Investigational device, limited by Federal (or United States) Law to Investigational use.



About Sunshine® Heart

Sunshine Heart, Inc. (Nasdaq:SSH) is an early-stage medical device company focused on developing, manufacturing and commercializing the C-Pulse System for treatment of Class III and ambulatory Class IV heart failure.  Sunshine Heart has completed an approved U.S. Food and Drug Administration (FDA) feasibility clinical study of the C-Pulse System and presented the results in November 2011.  In March 2012, the FDA notified the Company that it could move forward with an investigational device exemption (IDE) application.  Sunshine Heart received unconditional approval from the FDA in November 2012 to initiate its pivotal study.  In July 2012, Sunshine Heart received CE Mark approval for its C-Pulse System in Europe.  Sunshine Heart is a Delaware corporation headquartered in Minneapolis with wholly owned subsidiaries in Australia and Ireland. The Company has been listed on the NASDAQ Capital Market since February 2012.  

Forward-Looking Statements



Certain statements in this release are forward-looking statements that are based on management's beliefs, assumptions, expectations, and information currently available to management.  All statements that address future operating performance, events or developments that we expect or anticipate will occur in the future are forward-looking statements, including, without limitation, our expectations with respect to future clinical study activities and results including patient enrollment in studies. These forward-looking statements are subject to numerous risks and uncertainties, including, without limitation, the possibility that our clinical studies do not meet their enrollment goals, meet their endpoints or otherwise fail, that regulatory authorities do not accept our application or approve the marketing of the C-Pulse System, the possibility that we may be unable to raise the funds necessary for the development and commercialization of our products, that we may not be able to commercialize our products successfully in the EU and the other risk factors described under the caption "Risk Factors" and elsewhere in our filings with the SEC.  You should not place undue reliance on forward-looking statements because they speak only as of the date when made and may turn out to be inaccurate. We do not assume any obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. We may not actually achieve the plans, projections or expectations disclosed in forward-looking statements, and actual results, developments or events could differ materially from those disclosed in the forward-looking statements.

CONTACT: Investor: Candice KnollBlueprint Life Science Group T: +1-415-375-3340 Ext. 105 Jeff Mathiesen Chief Financial Officer Sunshine Heart, Inc. T: +1-952-345-4200 Media: David SchullRusso Partners T: +1-212-845-4271 Andreas Marathis Russo Partners T: +1-212-845-4235



Sunshine Heart logo

Source: Sunshine Heart, Inc.


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