Baxano Surgical Discusses Q2 Results

Baxano Surgical Inc., recently formed from Trans1 Inc.’s acquisition of Baxano Inc., has emerged from the second quarter of fiscal 2013 with good news. This is the quarter, which ended June 30, is the quarter in which the acquisition was completed.

“This quarter, we created the new Baxano Surgical and now have a suite of spinal devices targeting the minimally invasive spine market, the most significant growth opportunity in spine,” said Ken Reali, President and CEO of Baxano Surgical. “Through the recent transition and integration we have been able to stabilize the business and are enthusiastic about now returning our full focus to driving future revenue growth.”

Revenues were $3.9 million for the quarter, representing a 12.1 percent increase from revenues of $3.5 million in Q2 2012. Domestic revenues were $3.7 million in Q2 2013, compared to $3.2 million the same quarter last year, and international revenues stayed the same at $0.2 million. Revenue contributed by the Baxano Inc. products—acquired on May 31—was $0.8 million.

Net loss was $8.5 million in Q2 2013 compared to a net loss of $6.3 million the same quarter last year; and net loss per common share was $0.26 compared to $0.23.

Contributing to the company’s loss this quarter were expenses related to a $6 million settlement paid to the U.S. government for false claims to Medicare and other federal health programs to get bigger payments.

“At the end of the quarter, we executed the final agreement with the U.S. Department of Justice, related to the subpoena issue in October 2011,” said Reali on the matter during an earnings conference call. “As previously announced, we agreed with the staff of the Department of Justice to settle this matter for $6 million, and include this amount in the fourth quarter of 2012. The $6 million settlement plus accrued interest of 2 percent will be paid in nine quarterly installments which began in July 2013 … This has been a long process for us, and we are pleased to put this behind us and return our full focus to running the business.”

Baxano Surgical’s Veo product, a lateral access and interbody spine fusion system, performed well this quarter. Domestic Veo revenue was $664,000, up 49 percent from Q2 2012. Veo procedures have become more frequent, company Chief Financial Officer Joe Slattery reported, due to “continued interest in the differentiated system that allows direct visualization of the psoas muscle.”

Domestic iO-Flex revenues was $2.6 million in the quarter, a 15 percent increase from the prior year period, but a 9 percent decline from the first quarter this year. 679 procedures were performed in the quarter, down 8 percent than 741 in the prior quarter. iO-Flex is a system designed to treat lumbar spinal stenosis. Slattery blamed its lackluster performance on the growing pains of an integrated sales force.

“We partly anticipate that revenues in the third quarter of 2013 will be in the range of $5.6 million to $6.2 million, reflecting the seasonality of the summer months,” Slattery said during the earnings call. “Based on the results in the first half of the year, and our current outlook for the balance of the year, we have reduced our annual guidance to a range of $23.5 million to $25.5 million, and expect to exit the year poised for meaningful growth.”

Baxano Surgical makes products to treat degenerative conditions of the spine affecting the lumbar region.