SINGAPORE -- Biosensors International Group, Ltd. announces financial results for its fourth fiscal quarter ("Q4 FY15") and fiscal full year ended 31 March 2015 ("FY15").
Highlights and Recent Developments:
• Q4 FY15: ◦Total revenue of US$75.9 million decreased 7% from the fourth quarter of Fiscal Year 2014 ("Q4 FY14") due to licensing revenue reduction and substantial unfavorable foreign exchange impact. Product revenue and licensing revenue declined by 1% and 49% year-on-year ("y-o-y") respectively. On a quarter-on-quarter ("q-o-q") basis, product revenue and licensing and royalty revenue were down 2% and 6% respectively.
• The Company continued to improve its cost structure. Operating income decreased 9% y-o-y but increased 5% q-o-q. Excluding licensing and royalty revenue, y-o-y operating income grew 49%. The improvement was largely due to sales and marketing ("S&M") and general and administrative ("G&A") expense reductions.
• Reported net loss of US$247.0 million, due to expense from exceptional items which primarily includes a one-time non-cash goodwill impairment for subsidiary JW Medical Systems ("JWMS").
• FY15: ◦Total revenue was US$308.4 million, compared to US$323.8 million for fiscal year ended 31 March 2014 ("FY14"), primarily due to lower licensing and royalty revenue as well as unfavorable foreign exchange rates.
• Reported net loss of US$224.8 million due to expense from exceptional items that were mentioned above.
• The Cardiac Diagnostic division continued to grow significantly. Sales reached US$6.7 million in Q4 FY15 and totaled US$20.0 million for FY15.
• The BioFreedom™ U.S. IDE Feasibility Trial completed patient enrollment during Q4 FY15.
"FY15 was a challenging year for Biosensors as lower licensing revenue and unfavorable foreign exchange rates impacted our reported sales. On a constant currency basis, however, our Q4 FY15 product revenue was encouraging and we also continued to see better operating income growth trends net of licensing revenue," commented by Biosensors' CEO Mr. Jose Calle. "Looking at the revenue, the cardiac diagnostic division and our distribution business in Japan were the best performers during Q4 FY15. We were also particularly pleased with the improvement in our operating income net of licensing and royalty revenue, which reflects the progress we have made in optimizing our cost structure."
Performance Summary for Q4 FY15
For Q4 FY15, Biosensors reported total revenue of US$75.9 million, down 7% y-o-y and 2% q-o-q. Product revenue of US$70.5 million was comparable to US$71.0 million in the same period last year, with the revenue growth of Cardiac Diagnostic and Critical Care Products ("CCP") being offset by a 5% y-o-y decrease in the revenue from Interventional Cardiology Products ("IVP").
Licensing and royalty revenue for Q4 FY15 was US$5.4 million, compared with US$5.8 million in the third quarter of fiscal year 2015 ("Q3 FY15") and US$10.6 million in Q4 FY14.
Gross margin on total product sales was 71% for the quarter compared with 73% in Q4 FY14 due mainly to IVP product ASP erosion, changes in product mix and currency impact.
Total operating expense as a percentage of total revenue for the quarter was 51%, compared to 54% in Q4 FY14.
The quarter's S&M expense was US$22.3 million; G&A expense was US$9.5 million; and research and development ("R&D") expense, which included costs for new product development and testing, clinical trials, patents registration and regulatory approval, was US$7.0 million. S&M and G&A expenses were lower both in their absolute dollar amounts and as a percentage of product revenue y-o-y. R&D expense was higher as the Company continued to invest in important clinical trials.
Operating profit for Q4 FY15 was US$16.5 million, a 9% decrease from US$18.0 million in Q4 FY14 and a 5% increase from Q3 FY15. Excluding licensing revenue, product operating income in Q4 FY15 was US$11.0 million, up 49% y-o-y and 12% q-o-q.
Net profit before exceptional items for Q4 FY15 was US$10.7 million, or both basic and diluted earnings per share ("EPS") of 0.64 US cents. This compares to a net profit before exceptional items of US$10.8 million, or basic EPS of 0.64 US cents and diluted EPS of 0.63 US cents for Q4 FY14.
Including exceptional items, Q4 FY15 reported a net loss of US$247.0 million, or basic loss per share of 14.76 US cents and diluted loss per share of 14.72 US cents. This compares with a reported net profit of US$6.1 million, or both basic and diluted EPS of 0.36 US cents, for Q4 FY14. The reported net loss for Q4 FY15 was the result of several exceptional items recorded in Q4 FY15, which includes a US$256.1 million one-time non-cash goodwill write-off mainly related to the China business. This goodwill was written off as China's annual DES revenue growth rates – which were in high double-digit percentages when Biosensors bought the remaining 50% equity in JWMS – has since declined over the last few years. While management remains optimistic on the underlying demand in China's healthcare industry, the impairment reflects the lower growth rate that the China operation has recorded in recent quarters.
Other exceptional items in Q4 FY15 include restructuring costs as well as one-time professional fees. Management believed that the restructuring was necessary to further enhance the Company's operational efficiency.
Performance Summary for FY15
For FY15, Biosensors reported total revenue of US$308.4 million, compared with US$323.8 million for FY14 largely as a result of lower licensing and royalty revenue and negative foreign exchange impact. Product revenue of US$281.5 million was comparable to the previous year of US$280.0 million, after growth in Cardiac Diagnostic and CCP revenues was partially offset by lower IVP revenue.
Licensing and royalty revenue for FY15 was US$26.9 million, compared with US$43.8 million for the previous year.
Gross margin on total product sales was 70% for FY15 compared with 74% for the same period last year as a result of changes in product mix, price erosion and currency impact.
Total operating expense as a percentage of product revenue for FY15 was 59%, compared to 64% in the previous year. In detail, S&M expense in FY15 was US$98.0 million; G&A expense was US$39.2 million; and R&D expense, which included costs for new product development and testing, clinical trials, patents registration and regulatory approval, was US$29.8 million.
Net profit before exceptional items for FY15 was US$34.9 million, or basic EPS of 2.07 US cents and diluted EPS of 2.06 US cents. This compares to a net profit before exceptional items of US$45.5 million, or basic EPS of 2.67 US cents and diluted EPS of 2.64 US cents, for FY14.
Including exceptional items, due to the US$256.1 million one-time non-cash goodwill write-off mainly related to the China business, FY15 saw a net loss of US$224.8 million, or basic loss per share of 13.29 US cents and diluted loss per share of 13.25 US cents, compared with a net profit of US$40.6 million, or basic EPS of 2.38 US cents and diluted EPS of 2.35 US cents, for FY14. The reported net loss for FY15 was primarily due to the goodwill impairment of the Company's subsidiary JWMS as discussed above.
Outlook for FY16
For the fiscal year ending 31 March 2016 ("FY16"), the Company expects market competition and pricing pressure to stay as headwinds. In addition, licensing income from partner, Terumo, could continue to decrease. The currency environment is also expected to remain challenging as the Company has concentrated risk with a majority of its revenue coming from non-US dollar denominated regions. Despite these issues, management aims to continue to work towards revenue growth over FY15. This is expected to be largely driven by revenue growth from BioFreedom™ and Cardiac Diagnostic segment as well as further expansion in Japan and emerging markets.
Commenting on the outlook for the Company, Mr. Calle said: "Looking ahead, while we anticipate both our operating and currency environments to remain challenging, we are confident that we can grow our revenue in FY16. On the expense side of things, we have achieved meaningful results from our cost reduction initiatives in the past two quarters. It remains one of our top priorities to further enhance our efficiency and drive operating income growth."
"Over the longer term, we will continue to strengthen our competitive position and further penetrate cardiovascular markets worldwide. We are also actively sourcing for promising new product lines or businesses that can help us grow further. We remain confident of executing our long-term growth strategies to become a more prominent, more diversified, and bigger global medical device company."
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