MAKO Surgical Reports Operating Results for the Third Quarter 2008

FORT LAUDERDALE, Fla. — MAKO Surgical Corp., a medical device company focused on marketing its Tactile Guidance System (TGS), an advanced robotic-arm solution, and its implants for a minimally invasive orthopedic knee procedure, known as MAKOplasty, announced its financial results for the quarter ended Sept. 30.

2008 Third Quarter Business Highlights

• MAKOplasty Procedure Volume — During the third quarter, 159 MAKOplasty procedures were performed, representing a 14 percent increase over the second quarter of 2008. Average monthly utilization was 4.5 MAKOplasty procedures per commercial site. As of September 30, 2008, 582 MAKOplasty procedures were performed since the first procedure in June 2006.
• TGS Sales — Three TGS units were installed and customer accepted at commercial sites during the third quarter. These new sites brought the total number of MAKO's commercial TGS sites to thirteen as of September 30, 2008.
• Product Milestones — During the quarter, MAKO launched the MAKO-branded unicompartmental implant system called RESTORIS. MAKO also continued to make progress towards achieving regulatory clearances for version 2.0 of the TGS and the MAKO bicompartmental knee system for the anticipated commercial launches of these products in the first half of 2009.
• Commercialization Growth — During the quarter, MAKO exhibited at two orthopedic specialty meetings and received notification that two manuscripts have been accepted for publication in peer-reviewed clinical journals.
• Equity Financing — Subsequent to the third quarter, MAKO secured equity financing of up to $60 million, with initial gross proceeds of $40 million and conditional access to an additional $20 million. Proceeds from the financing, which closed October 31, 2008, will be used to support the anticipated commercialization of version 2.0 of the TGS and the proprietary bi-compartmental implant system and disposable products, for continuing research and development of our future products and for the continuing expansion of operations and working capital to support growth."We are pleased with our operating results for the third quarter," said Maurice R. Ferre, MD, president and chief executive officer of MAKO. "The 159 MAKOplasty procedures performed by our customers and the addition of three new commercial sites represent a continuation of the strong adoption trends apparent in the first two quarters of the year. In addition, we are gratified that we have secured access to capital that we believe is adequate to allow for the execution of our business plan."

 
2008 Third Quarter Financial Review
Revenue was $800,000 in the third quarter of 2008 compared to $200,000 in the third quarter of 2007, primarily generated from MAKOplasty procedures. Additionally, deferred revenue increased to $8.9 million at Sept. 30, of which $2.4 million was generated during the third quarter, primarily as a result of the sale and customer acceptance of three TGS units during the quarter. Gross margin for the quarter was impacted by a $523,000 write-off of discontinued inventory in the third quarter, due to the launch of MAKO-branded Restoris implant system and the anticipated launch of version 2.0 of the TGS in the first half of 2009.

Operating expenses were $9.9 million in the third quarter of 2008 compared to $5.9 million in the third quarter of 2007. The increase in operating expenses is primarily attributable to an increase in sales and marketing activities for the continued expansion of the direct sales force and commercialization of the TGS and MAKOplasty implant products, as well as ongoing research and development relating to future products. Additionally, general and administrative costs increased as we continued to build infrastructure to support growth and incurred costs associated with operating as a public company. Operating expenses for the period included $780,000 associated with an accrual for employee bonus compensation programs covering substantially all of the employees of the Company. These programs are based on the achievement of certain operating milestones for 2008. Based on the progress the Company has made to date toward achieving these operating milestones, the Company recorded, in the third quarter, an accrual to cover the nine month period ended Sept. 30.

Net loss attributable to common stockholders for the three months ended Sept. 30 was $10.2 million, including non-cash, stock-based compensation expense of $600,000, based on average basic and diluted shares outstanding of 18.1 million. This net loss compares to a net loss attributable to common stockholders for the same period in 2007 of $6.7 million, including non-cash stock-based compensation expense of $600,000, or -$4.12 per basic and diluted share, based on average basic and diluted shares outstanding of 1.6 million.

Cash, cash equivalents and short-term investments were $30.9 million as of Sept. 30, compared to $12.7 million as of Dec. 31, 2007. Cash, cash equivalents and short-term investments, after giving effect for the net proceeds of the recent equity financing, would be approximately $70.4 million as of Sept. 30.

2008 Nine Month Financial Review
For the nine months ended Sept. 30, revenue was $2 million, primarily generated from MAKOplasty procedures. Additionally, deferred revenue increased to $8.9 million at Sept. 30, as a result of the sale and customer acceptance of eight TGS units during the nine month period. The net loss attributable to common stockholders for the nine month period was $26.8 million, resulting in a net loss per common share of -$1.76 in the period, compared to a net loss attributable to common stockholders of $15.9 million or -$10.07 per common share in the same period in 2007. Additionally, net loss attributable to common stockholders for each of the two nine month periods included non-cash charges for accretion and dividends on preferred stock that ceased upon the conversion of the preferred stock into common stock upon the closing of our IPO during the first quarter of 2008.

Source: MAKO Surgical Corp.