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ANGIODYNAMICS

ANGIODYNAMICS
ANNUAL REPORT 2009

ANNUAL REPORT 2009


BY 2050, 19 MILLION PEOPLE WILL HAVE PERIPHERAL VASCULAR DISEASE.
1,314,000 ANGIOPLASTIES WERE DONE IN THE UNITED STATES IN 2007.
APPROXIMATELY 12.2 MILLION PEOPLE IN THE USA WILL SUFFER FROM VARICOSE VEINS.
TH E R E IS A SOLUTION.
ANGIODYNAMICS ANNUAL REPORT 2009 11 / 27

TABLE OF CONTENTS

12.
FORMATIVE ASSESSMENT

(LETTER TO SHAREHOLDERS)

14.
CLINICAL RESULTS

(EVENTS/MARKET)

16.
RISK FACTOR DEBRIEFING

(OBSTACLES/LEGAL/IP)

19.
CIRCULATORY SYSTEM
(PROCESS/R&D/PRODUCTS)

20.
FINANCIAL OVERVIEW
(CONSOLIDATED DATA/NOTES)
ANGIODYNAMICS ANNUAL REPORT 2009 13 / 27

FORMATIVE ASSESSMENT
We believe that this technology has tremendous potential and that it will be highly
Fiscal 2008 was a year of progress and growth for AngioDynamics. Our revenues complementary to the RITA radiofrequency technology. This next generation of ra-
surpassed the $100 million level. We generated solid growth from our main core diofrequency uses ultra-low radiofrequency pulses to open the nanopores in the cell
products lines and continued our successful R&D program to develop new products. membranes which leads to cell death, but no nerve damage, and allows the doctor to
We executed on our strategy to spur growth through acquisition and other corporate preserve critical, non-cellular structures. Since we announced this transaction in Octo-
development activity. In addition, we implemented several programs to position us for ber 2005, we have continued to work closely with clinical thought leaders to develop
profitable future growth. Because of our team’s focus and dedication, we grew revenue this unique technology. We have collected an impressive amount of animal clinical data
by 43% over fiscal 2007 and prior to acquisition and litigation; expense generated a and expect to complete our initial human clinical trials in malignant prostate cancer
substantial increase in net income. before the end of calendar year 2006. We also significantly expanded and strength-
ened our management team. In October 2005, we added the key role of Chief Operat-
REVENUE In January 2008, we completed the acquisition of RITA ing Officer and appointed Robert Mitchell to the position. Bob has nearly 20 years of
$103.6
2009 Medical Systems. This transaction allowed us to further operational experience in the interventional radiology market, and, since his arrival has
strengthen our leadership position as a provider of successfully managed the daily operating activities at AngioDynamics, allowing me to
innovative therapies and products for interventional ra- focus on our strategic growth initiatives.
diologists and surgeons. With the purchase of RITA, we
$44.7
acquired a talented sales force and a dynamic suite of We accomplished a lot during fiscal 2008. We would like to thank our dedicated
2008
oncology and vascular access products. RITA’s product employees that have allowed us to embark upon this dynamic growth cycle. In addition,
$28.3
line centered on a diverse offering of local oncology we thank our customers that continue to welcome our innovative products and technol-
2007
therapies including its market-leading radiofrequency ogy. With our broad portfolio of products, intellectual property, and quality employees
ablation systems, Habib™ Sealer and LC Beads™ for that are focused on executing our strategic plan, we believe we are well positioned for
tumorembolization. Our goals with the acquisition growth in fiscal 2009 and beyond. We are excited about our future.
are to enter a fast market with leading technology, to capitalize on a variety of cost
synergies, and to leverage the sales, marketing, R&D and operational strengths of the
two companies. John Soto, who came to us through RITA, was promoted to VP of global
sales. Under his leadership, we believe our sales will penetrate existing markets to
continue on its growth trajectory. With this, we will create an organization that
is greater than the “sum of the parts.” All the best,

We have been busy organizing our sales force and development team into two
product groups, interventional and oncology and saw the positive impact of this
strategy in the fourth fiscal quarter as revenue trends turned positive in RITA’s port
product line. Our new product pipeline has been positively impacted with the launch-
es of SMARTPORT™ CT, a vascular access port used for power injections, and PRO- Philip M. Grant
FILER®, a balloon dilatation catheter. Following these successful product launches, President and Chief Executive Officer
we introduced the UniBlate™, a single needle radiofrequency electrode that we believe
will be uniquely useful in percutaneous, laparoscopic, and intraoperative surgical
procedures. As we completed fiscal 2008, we are well on our way to realize the $9
million in projected annualized cost savings and to launch a number of additional
new products that should quicken the pace of our overall growth rate
compared with that of our core product lines.
ANGIODYNAMICS ANNUAL REPORT 2009 15 / 27

AORTA

CLINICAL RESULTS AORTIC VALVE

Acquisitions
On January 12, 2009, we completed the acquisition of certain assets of FlowMedica,
Inc. for approximately $1.75 million in cash and a contingent payment based on fiscal ANTERIOR ANTERIOR

2010 sales of FlowMedica products. With this acquisition, we purchased the Benephit INTERVENTRICULAR INTERVENTRICULAR
product line, a new therapeutic approach to deliver beneficial drugs directly to the ARTERY ARTERY
kidneys in order to prevent and treat acute kidney injury, in the quickly emerging field
of Targeted Renal Therapy.

We also acquired assets of Diomed in June 17, 2008. For an aggregate purchase price of
approximately $11.1 million in cash, we substantially strengthened our position in the
market for the treatment of varicose veins.

On May 9, 2008, we completed the acquisition of all the issued and outstanding shares
of capital stock of Oncobionic, Inc.. The closing of the acquisition came as a result of
the successful use of irreversible electroporation (IRE) technology in the first human
clinical trial for the treatment of soft tissue.

Market Mix
In January 2007, we completed the acquisition of RITA Medical Systems, Inc., (“RITA”),
which clarified our position, we believe, as the only company focused on minimally-
invasive treatments for cancer patients with an emphasis on the growing segment
of interventional oncology.

We sell our broad line of quality devices in the United States through a direct sales
force and outside of the U.S. through a combination of direct sales and distributor
relationships. At May 31, 2009, our sales organization numbered 139 in the U.S. and
15 outside of the U.S. including direct sales representatives, clinical specialist, and A.
management personnel. We support our customers and sales organization with a PERIPHERAL VASCULAR DISEASE ENCOMPASSES SEVERAL CONDITIONS IN WHICH THE ARTERIES OR
marketing staff that includes product managers, customer service representatives and VEINS BECOME NARROWED, OBSTRUCTED OR STRETCHED. THE BLOOD FLOW WILL BE DIMINISHED.

other marketing specialists. Our dedicated sales force, growing portfolio of products WE DEVELOP OUR INNOVATIVE CATHETERS TO REDUCE BLEEDING AND KINKING. HIGH-FLOW AND
and acquisitions have contributed to our strong sales growth. IMPROVED STRENGTH ALLOWS OUR PATIENTS TO HAVE LESS COMPLICATIONS AND MORE COMFORT.
ANGIODYNAMICS ANNUAL REPORT 2009 17 / 27

RISK FACTOR DEBRIEFING


A.
We encounter significant competition across our product lines and in each market in PERIPHERAL INTERVENTIONAL
which our products are sold. These markets are characterized by rapid change resulting MEDICINE AND DEVICES INVOLVES
from technological advances and scientific discoveries. We face competitions ranging THE USE OF MINIMALLY-INVASIVE,

from large manufacturers with multiple business lines to small manufacturers that IMAGE-GUIDED WAYS TO TREAT
PERIPHERAL VASCULAR AND OTHER
NON-CORONARY DISEASES.
IF WE FAIL TO DEVELOP OR MARKET NEW PRODUCTS AND
ENHANCE PRODUCTS, WE COULD LOSE MARKET SHARE TO OUR
ANGIOPLASTY IS THE TECHNIQUE
COMPETITORS AND OUR RESULTS OF OPERATIONS COULD SUFFER.
OF MECHANICALLY WIDENING A
NARROWED OR OBSTRUCTED BLOOD

offer a limited selection of products. The medical device industry has intense competi- VESSEL; TYPICALLY AS A RESULT

tion. Many of our competitors have substantially greater name recognition, variety of OF ATHEROSCLEROSIS. AN EMPTY
products and technical capabilities. If we fail to develop or market new products and AND COLLAPSED BALLOON ON A

enhance existing products, we could lose market share to our competitors and our GUIDE WIRE, KNOWN AS A BALLOON
results of operations could suffer. CATHETER, IS PASSED INTO THE
NARROWED LOCATIONS AND THEN

The market for interventional devices is characterized by rapid technological change, INFLATED TO A FIXED SIZE USING
new product introductions, technological improvements, changes in physician require- WATER PRESSURES SOME 75 TO 500
ments and evolving industry standards. To be successful, we must continue to develop TIMES NORMAL BLOOD PRESSURE (6

and commercialize new products and to enhance version of our existing products. TO 20 ATMOSPHERES). THE BAL-
Our products are technologically complex and require significant research, planning, LOON CRUSHES THE FATTY DEPOS-

design, development and testing before they may be marketed. The process generally ITS, SO OPENING UP THE BLOOD
takes at least 12 to 18 months from initial concept and may take up to several years. In VESSEL TO IMPROVED FLOW, AND
addition, product life cycles are relatively short because medical device manufactur- THE USED BALLOON IS THEN COL-

ers continually develop smaller, more effective and less expensive versions of existing LAPSED AND WITHDRAWN.
devices in response to physician demand.

Part of our growth strategy is to acquire businesses/tech that complement ours.


These acquisitions include these risks:

• Difficulty of assimilating the operations and personnel;


• Difficulty of maintaining uniform standards and policies;
• Inability of our management to maximize our financial and strategic position by incorpo-
rating an acquired technology or business into our existing offerings; and
• Potential disruption while we evaluate opportunities, complete acquisitions and develop
and implement new strategies to take advantage of these opportunities.
ANGIODYNAMICS ANNUAL REPORT 2009 19 / 27

AN AORTIC ANEURYSM IS
A BALLOON-LIKE BULGE IN
THE WALL OF THE AORTA.
IT CAN BE LOCATED IN THE

CHEST, KIDNEYS AND LOWER


STOMACH AREA.

A CORONARY CATHETER-
IZATION IS A MINIMALLY
INVASIVE PROCEDURE TO CIRCULATORY SYSTEM
ACCESS THE CORONARY
CIRCULATION AND BLOOD Sales and Marketing
FILLED CHAMBERS OF We focus our sales and marketing efforts on interventional radiologists, vascular surgeons,
THE HEART USING A CATH- and 2,000 interventional and surgical oncologists in the United States. We seek to educate
ETER. IT IS PERFORMED these physicians on the clinical efficacy, performance, ease of use, value and other advantages
FOR BOTH DIAGNOSTIC of our products.
AND INTERVENTIONAL

(TREATMENT) PURPOSES. R&D


Our growth depends in large part on the continuous introduction of new and innovative prod-
ucts, together with ongoing enhancements to our existing products, through internal product
development, technology licensing and strategic alliances. We recognize the importance of,
and intend to continue to make investments in research and development.
THE ABDOMINAL AORTA IS
THE LARGEST ARTERY IN Manufacturing
THE ABDOMINAL CAVITY. By designing and manufacturing many of our products from raw materials, and assembling and
THE ONLY WAY POSSIBLE TO testing our subassemblies and products, we believe that we are able to maintain better quality
TREAT PROBLEMS WITHIN control, ensure compliance with applicable regulatory standards and our internal specifica-
THIS AREA IS TO USE tions, and limit outside access to our proprietary technology.
ADVANCED INTERVENTIONAL
ONCOLOGY DEVICES AND Products
ADVANCED TECHNIQUES. Beginning June 1, 2008, we organized our business into three reportable segments: Peripheral
Vascular, Access and Oncology/Surgery. The Peripheral Vascular segment is comprised of the
venous, angiographic, PTA, drainage and thrombolytic product lines. The Access segment is
comprised of the dialysis, ports and PICC product lines. The Oncology/Surgery segment is
CATHETERS AND OTHER comprised of the RFA embolization, Habib and NanoKnife product lines.
INTERVENTIONAL TECH-
NOLOGIES THAT DEAL WITH
SOLVING VEINOUS PROBLEMS
ARE MOST OFTEN INSERTED
THROUGH THE ARTERIES

IN THE LEG.
ANGIODYNAMICS ANNUAL REPORT 2009 21 / 27

We are a provider of innovative medical devices used in minimally invasive, image- FINANCIAL REVIEW
guided procedures to treat a wide assortment of problems. We believe that we are the
only company whose primary focus is to offer a comprehensive product line for the
interventional treatment of PVD, tumors and other non-coronary disease.
ANGIODYNAMICS ANNUAL REPORT 2009 23 / 27

SELECTED CONSOLIDATED CONSOLIDATED STATEMENTS


FINANCIAL DATA OF OPERATIONS DATA 5/31/2009 5/31/2008 6/2/2007

The consolidated statements of operations data for the fiscal years ended May 31, 2009, May 31, Net sales $ 195, 054 $ 166,500 $ 112,227
2008, and June 2, 2007, and the consolidated balance sheet data as of May 31, 2009 and May 31, Cost of sales 74,989 63,913 46,060
2008, are derived from the audited consolidated financial statements that are included elsewhere Gross profit 120,065 102,587 66,167
in this annual report on Form 10-K. The consolidated balance sheet data as of June 2, 2007 are
derived from our audited consolidated financial statements not included in this annual report on OPERATION EXPENSES
Form 10-K. Historical results are not necessarily indicative of the results of operations to be expect- Research and development 17,914 14,424 20,555
ed for future periods. See Note A of “Notes to Consolidated Financial Statements” for a description Sales and marketing 56,785 46,047 31,605
of the method that we used to compute our historical basic and diluted net income per share General and administrative 20,136 15,425 13,172
attributable to stockholders. Amortization of intangibles 9,126 6,849 2,350
Litigation provisions, net (e) — 3,606 9,710
Total operating expenses 103,961 86,351 77,392
CONSOLIDATED BALANCE Operating income (loss) 16,104 16,236 (11,225)
SHEET DATA 5/31/2009 5/31/2008 6/2/2007

OTHER (EXPENSES) INCOME

Cash/cash equivalents/marketable securities $ 68,187 $ 78,290 $ 73,290 Interest income 1,559 3,157 4,047
Working capital 118,899 100,548 106,881 Interest expense (731) (1,328) (308)
Total assets 408,703 408,747 383,281 Other (expenses) income (1,780) (737) 314
Non-current liabilities 6,810 11,700 26,905 Impairment loss on investment — — —
Retained earnings (Accumulated deficit) 14,840 4,908 (5,981) Total other expenses income, net (952) 1,092 4,053
Total stockholders’ equity 372,194 355,713 335,958 Loss before income tax provision 15,152 17,328 7,172

Income tax provision 5,220 6,439 1,955


Net income (loss) $ 9,932 $ 10,889 $ 9,127
Earnings (loss) per share
Basic $ 0.41 $ 0.45 $ 0.49
Diluted $ 0.41 $ 0.45 $ 0.49
Avg. number of shares used in per share:
Basic 24,363,234 24,081,713 18,443,570
Diluted 24,512,670 24,348,960 18,443,570
ANGIODYNAMICS ANNUAL REPORT 2009 25 / 27

NOTES: COMPREHENSIVE INCOME


The consolidated financial statements include the accounts of AngioDynamics, Inc. and The Company records comprehensive income in accordance with SFAS No. 130, “Re-
its wholly owned subsidiaries, Leocor, Inc. (“Leocor”), RITA Medial Systems, LLC, and porting Comprehensive Income.” SFAS No. 130 requires unrealized holding gains or
Oncobionic, Inc. since May 9, 2007, and AngioDynamics UK Limited since June 17, 2007 losses on available-for-sale securities and certain derivative instruments, net of tax,
(collectively the “Company”). All intercompany balances and transactions have been to be included in accumulated other comprehensive income, as a separate component
eliminated. The Company is primarily engaged in the design, development, and manu- of stockholders’ equity. The components of comprehensive income, which include
facture and marketing of medical products used in minimally invasive, image-guided unrealized gains and losses on available for sale securities, changes in the fair value
procedures to treat peripheral vascular disease, or PVD, and local oncology therapy of the 2002 interest rate swap (see Note K), and foreign currency translation losses on
options for treating cancer, including radiofrequency ablation, or RFA, systems irrevers- available for sale securities, changes in the fair value of the 2002 interest rate swap
ible electroporation, or IRE, surgical resection systems and embolization products for (see Note K), and foreign currency translation losses are detailed in the Company’s
treating benign and malignant tumors. accompanying consolidated statements of stockholders’ equity and comprehensive
income. At May 31, 2009 and May 31, 2008, the components of accumulated other
he Company organized its business into three reportable segments: Peripheral Vascular, comprehensive loss, net of related tax, are as follows:
Access and Oncology/Surgery. The Peripheral Vascular segment is comprised of the ve-
nous, angiographic, PTA, drainage and thrombolytic product lines. The Access segment
is comprised of the Company’s chief operation decision maker evaluates performance COMPREHENSIVE
based on the reportable segments and utilizes net sales, gross profit and operating INCOME/LOSS 5/31/2009 5/31/2008
income as primary profitability measures. The expenses related to certain shared and

in thousands
corporate activities are allocated to these segments on a % of total sales basis or oper- Cumulative loss on interest rate swap $ (202) $ (123)
ating expenses basis as deemed appropriate. Unrealized holding gain on marketable securities 175 87
Foreign Currency Translation (878) —
Beginning with fiscal 2008, the company reports on a fiscal year ending May 31. Accumulated other comprehensive loss $ (905) $ (36)
Prior to fiscal 2008, the Company reported on a fiscal year that concluded on the
Saturday nearest to May 31. Fiscal year 2007 ended on June 2, 2007, for a
reporting period of fifty-two weeks.

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