Conformis Reports 50 Percent Drop in Q2 Product Revenue

Conformis Inc.’s finances took quite a hit during the second quarter of 2020 (period ending June 30). 

Total revenue slipped 1 percent on a reported and constant currency basis to $19.5 million but total product sales fell 50 percent to $9.7 million. U.S. product proceeds plummeted 52 percent to $8.3 million compared with Q2 2019. Rest of World product revenue decreased 34 percent to $1.4 million on a reported basis and 33 percent on a constant currency basis.

Royalty revenue was $9.7 million, including $9.6 million from a previously disclosed settlement and license agreement with Zimmer Biomet. Gross margin reached 57 percent, an increase of 750 basis points year-over-year, including the impact from the Zimmer Biomet settlement and license agreement.

Total operating expenses decreased 14 percent year-over-year.

“We are excited to announce the launch of a new program aimed at developing a knee replacement offering targeted at hospital outpatient and ambulatory surgery centers (ASCs),” said Mark Augusti, president and CEO. “As we have stated previously, during the COVID-19 pandemic, we have maintained our focus on new product development and our commitment to revenue growth through portfolio expansion. Achieving hip growth of 12% during arguably one of the toughest commercial environments ever in orthopedics demonstrates the importance of new product vitality.”

Total revenue for the three-month period ended June 30 decreased $0.1 million to $19.5 million, or 1 percent year-over-year on a reported and constant currency basis. Total revenue in each of the second quarter of 2020 and 2019 includes royalty and licensing revenue of $9.7 million and $0.3 million, respectively, related to patent license agreements. The increase in royalty revenue in the second quarter of 2020 compared to the same quarter in the prior year is primarily due to the patent license settlement of $9.6 million due from Zimmer Biomet.

Conformis Hip System sales in the second quarter of 2020 were up 12 percent to $0.6 million, which were all in the United States. Total gross profit increased $1.4 million to $11 million, or 57 percent of revenue, in the second quarter of 2020, compared to $9.6 million, or 49 percent of revenue, in the second quarter of 2019. This 750 basis point increase in gross margin year-over-year was driven primarily by the $9.6 million Zimmer Biomet patent license settlement.

Total operating expenses decreased $2.2 million to $13.3 million, or 14 percent year-over-year, primarily due to lower variable expenses as a result of the decline in revenue.

Net loss was $2.1 million, or $0.03 per basic and diluted share, in the second quarter of 2020, compared to a net loss of $6.8 million, or $0.11 per basic and diluted share, in the same period last year. Net loss in the second quarter of 2020 included foreign currency exchange income of $0.7 million, compared to foreign currency exchange income of $0.4 million in the same period last year.  Net loss per basic and diluted share calculations assume weighted average basic and diluted shares outstanding of 68.2 million for the second quarter of 2020, compared to 63.3 million for the same period last year.

Cash and cash equivalents totaled $18.2 million as of June 30, compared to $26.4 million as of Dec. 31, 2019.