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Nephros Reports 2014 Fourth Quarter and Full Year Financial ResultsNephros, Inc. (OTCQB:NEPH), a commercial stage medical device company that develops and sells high performance liquid purification ultrafilters and an on-line mid-dilution hemodiafiltration system for use with a hemodialysis machine for the treatment of chronic renal failure patients, announced today financial results for the three months and full year ended December 31, 2014. "During 2014, Nephros continued to advance its HDF system toward commercialization and successfully obtained FDA clearance for our water filters to be used in hospital infection control," said Dr. Paul Mieyal, Acting CEO of Nephros. "The reception to our medical filters has been positive, and the first quarter of 2015 was our strongest quarter in the company's history as we realized organic product sales nearly two-and-a-half times greater than the first quarter of 2014." Outlook for 2015 For full-year 2015, we anticipate significantly increased product revenue vs. full-year 2014, driven primarily by increased sales of our hospital infection control filters. We intend to focus our efforts on expanding the market penetration of our water filtration products by enhancing our relationships with key distributors. We continue to pursue opportunities for expansion of dialysis water filter sales, but growth of this product line is anticipated to be incremental in 2015 vs. 2014. Financial Performance for the Year Ended December 31, 2014 Total revenues for the year ended December 31, 2014 were approximately $1,748,000 compared to approximately $1,740,000 for the year ended December 31, 2013. An increase of approximately $123,000 related to the Bellco license agreement was offset by a decrease in water filter sales of $115,000. Cost of goods sold was approximately $549,000 for the year ended December 31, 2014 compared to approximately $898,000 for the year ended December 31, 2013. The decrease is attributable to an inventory reserve expense related to the 2013 recall of our point of use and DSU ultrafilters. Research and development expenses were approximately $781,000 and $867,000, respectively, for the years ended December 31, 2014 and December 31, 2013. Depreciation and amortization expense was approximately $217,000 for the year ended December 31, 2014, compared to approximately $223,000 for the year ended December 31, 2013. Selling, general and administrative expenses were approximately $2,870,000 for the year ended December 31, 2014 compared to approximately $3,069,000 for the year ended December 31, 2013. As of December 31, 2014, Nephros had cash and cash equivalents of approximately $1.3 million. Hospital and Other Commercial Facilities water filtration - DSU-H and SSU-H Ultrafilters Last October, we announced that Nephros had received 510(k) clearance from the U.S. Food and Drug Administration (FDA) to market DSU-H and SSU-H Ultrafilters as medical devices for use in the hospital setting. With our existing distributors, Chem-Aqua, Garratt Callahan, H-O-H Water Technology and Total Quality Medical, we formally launched these products in January 2015. The DSU-H and SSU-H Ultrafilters are intended to be used to filter EPA quality drinking water. The filters retain bacteria, viruses and endotoxin. By providing ultrapure water for patient washing and drinking, the filters aid in infection control. The filters also produce water that is suitable for wound cleansing, cleaning of equipment used in medical procedures and washing of surgeon's hands. Dialysis water and bicarbonate concentrate - DSU-D and SSU-D ultrafilters During 2014, we signed a non-exclusive distributor agreement with Mar Cor Purification to distribute Nephros's dialysis ultrafilters to U.S. and Canadian dialysis clinics. We believe that more stringent standards for dialysis water, bundling of dialysis reimbursement payments, and the Affordable Care Act initiatives can provide positive momentum for increased adoption of Nephros ultrafiltration products. European Hemodiafiltration - MD220 Hemodiafilter In February 2014, we signed an amendment to our current license agreement with Bellco to extend and expand the existing license agreement. The amendment extends the agreement by five years through 2021 and expands Bellco's exclusivity to include additional countries in Europe, as well as non-exclusive rights to Korea, Mexico, Brazil, China and the Netherlands. In return, we received €450,000 during 2014. We also areed to reduce the fixed royalty payment in return for an increase in the minimum sales volumes required to retain exclusivity. The royalty period began on January 1, 2015 and extends through December 31, 2021. U.S. On-line Mid-dilution Hemodiafiltration - Nephros HDF System The OLpur H2H HDF Module and OLpur MD 220 Hemodiafilter is cleared by the FDA to market for use with a UF controlled hemodialysis machine that provides ultrapure dialysate in accordance with current ANSI/AAMI/ISO standards, for the treatment of patients with chronic renal failure in the United States. Our on-line mid-dilution HDF system is the only on-line mid-dilution HDF system of its kind to be cleared by the FDA to date. In May 2014, DaVita Healthcare Partners announced that it had commenced delivering and evaluating on-line mid-dilution hemodiafiltration treatments to select patients at DaVita's North Colorado Springs Clinic. In February 2015, we announced that, in the course of the evaluation, DaVita informed Nephros that it would require additional validation of the system. Nephros and DaVita agreed upon a protocol for the additional validation work which was completed in March. We have submitted the data report to DaVita, and have been informed that it is still under review. Upon satisfactory completion of the additional validation work, we anticipate that DaVita will continue its evaluation. In March 2015, we announced that the Renal Research Institute, a research division of Fresenius Medical Care, was conducting an evaluation of our hemodiafiltration system in its clinic. We also anticipate evaluating our on-line mid-dilution HDF system at other clinics throughout the U.S. and, although we have not begun to broadly market our on-line mid-dilution HDF system, we are actively seeking a commercialization partner in the U.S. Military and Outdoor Recreation Water - HydraGuard In response to a Special Notice Announcement from the U.S. Army, Nephros submitted its individual water purification device (IWPD) containing the Nephros proprietary ultrafilter technology for consideration as part of a standard issue personal hydration pack for soldiers in the field. In October 2014, the Army released a new request for information (RFI (News - Alert)). We submitted a response to the RFI in November and we anticipate a new RFP in the first half of 2015. In addition to the RFI, we continue to make the HydraGuard available to the U.S. military via our distributor agreements with W.S. Darley & Company, Source (News - Alert) One Distribution Inc. and Atlantic Diving Supply, Inc. About Nephros, Inc. Nephros is a commercial stage medical device company that develops and sells high performance liquid purification filters. Our filters, which we call ultrafilters, are primarily used in dialysis centers for the removal of biological contaminants from water, bicarbonate concentrate and/or blood. We were founded in 1997 by healthcare professionals affiliated with Columbia University Medical Center/New York-Presbyterian Hospital to develop and commercialize an alternative method to hemodialysis (HD). We have extended our filtration technologies to meet the demand for liquid purification in other areas, in particular water purification. Presently, we offer ultrafilters for sale to customers in five markets:
For more information about Nephros, please visit the company's website at www.nephros.com. Forward-Looking Statements Certain statements in this press release constitute "forward-looking statements." Such statements include statements regarding our expected 2015 product revenue, our ability to expand market penetration of our water filtration products, our ability to grow sales of our dialysis filtration products in 2015, our expectation of increased adoption of our ultrafiltration products, our expectation that DaVita will continue to evaluate our on-line mid-dilution hemodiafiltration system and the expected timeline for doing so, the efficacy and intended use of our technologies under development, the timelines for bringing such products to market and the availability of funding sources for continued development of such products and other statements that are not historical facts, including statements which may be accompanied by the words "intends," "may," "will," "plans," "expects," "anticipates," "projects," "predicts," "estimates," "aims," "believes," "hopes," "potential" or similar words. Forward-looking statements are not guarantees of future performance, are based on certain assumptions and are subject to various known and unknown risks and uncertainties, many of which are beyond our control. Actual results may differ materially from the expectations contained in the forward-looking statements. Factors that may cause such differences include, but are not limited to, the risks that: (i) we may not be able to continue as a going concern; (ii) we may not be able to obtain funding if and when needed or on terms favorable to us in order to continue operations and successfully implement our business plan; (iii) we face significant challenges in obtaining market acceptance of our products and sales growth in key geographic areas, which could adversely affect our potential sales and revenues; (iv) we face potential liability associated with the production, marketing and sale of our products including with respect to potential serious injuries, product-related deaths or product malfunctions, product recalls, product liability claims, class action lawsuits or other events that could cause us to incur expenses and may also limit our ability to generate revenues from such products; (v) to the extent our products or marketing materials are found to violate any provisions of the FDC Act or any other statutes or regulations then we could be subject to enforcement actions by the FDA or other governmental agencies; (vi) the voluntary recalls of point of use and DSU in-line ultrafilters used in hospital water treatment applications announced on October 30, 2013 and the related circumstances could subject us to claims or proceedings by consumers, the FDA or other regulatory authorities which may adversely impact our sales and revenues; (vii) we may encounter problems with our suppliers, manufacturers and distributors; (viii) we may encounter unanticipated internal control deficiencies or weaknesses or ineffective disclosure controls and procedures; and (ix) we may not be able to secure or enforce adequate legal protection, including patent protection, for our products. More detailed information about us and the risk factors that may affect the realization of forward-looking statements, including the forward-looking statements contained in this press release, is set forth in our filings with the SEC (News - Alert), including our Annual Report on Form 10-K for the fiscal year ended December 31, 2014, and our other periodic reports filed with the SEC. We urge investors and security holders to read those documents free of charge at the SEC's website at www.sec.gov. We do not undertake to publicly update or revise our forward-looking statements as a result of new information, future events or otherwise, except as required by law.
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