EX-99 2 ex99-1.htm PRESS RELEASE

Exhibit 99.1

{ENDOLOGIX, INC. LOGO}

DATE:     April 25, 2005

PRESS RELEASE

CONTACT:      Robert J. Krist, Chief Financial Officer, 949-595-7200
                      www.endologix.com

ENDOLOGIX REPORTS 2005 FIRST QUARTER RESULTS

Irvine, Calif. – April 25, 2005 – Endologix, Inc. (Nasdaq: ELGX), developer and manufacturer of the Powerlink® System endoluminal stent graft (ELG) for the minimally invasive treatment for abdominal aortic aneurysms (AAA), today announced financial results for the quarter ended March 31, 2005.

“The early phase of our focused U.S. Powerlink System launch has generated strong physician interest with more than 70% of the first quarter domestic revenue generated by new physician users,” said Endologix President and Chief Executive Officer Paul McCormick. “All domestic revenue in the first quarter represented product usage. Since temporary consignment is the typical business practice at this stage, we believe that domestic product revenue will approximate product usage for the foreseeable future.”

Among recent highlights, the Company reported that it continued to build its sales and marketing team, including the February appointment of industry veteran Herbert Mertens as vice president of sales and marketing. Seven additional sales representatives, six opening new territories and one replacing a promoted regional manager, were hired during the first quarter. All have significant vascular implant experience, although no direct AAA ELG experience. One additional regional manager with a background in AAA stent grafts joined the Company during April, bringing the domestic sales organization to 13 sales territories, with four regional managers and one clinical training manager.

“Preparations for our transition to full commercialization are on track,” added Mr. McCormick. “Our low ratio of sales representatives to regional managers should accelerate the ELG learning curve for our newer representatives and our expectation is that these recent hires will begin to significantly impact our revenues in the next six to eight months.”

Product revenue increased to $1,354,000 from $343,000. Domestic product revenue increased to $621,000 in the just completed quarter from $83,000 in the first quarter of 2004. International product revenue increased to $733,000 from $260,000 over the same period.

Total revenue for the first quarter of 2005 was $1.4 million, compared with total revenue of $820,000 for the same period of 2004. Royalty revenue from licensed technology decreased as expected in the first quarter of 2005 to $60,000 from $477,000. Royalty revenue is expected to remain at approximately this level during 2005.


Product gross profit of $711,000 was 52.5% in the first quarter of 2005. This compares with $100,000 and 29.2% in the 2004 first quarter. This margin improvement was due to both higher average selling prices for direct U.S. commercial sales, and lower manufacturing costs per unit, driven by higher volumes of production. We anticipate that both factors will cause product gross margin percentage to continue to increase during 2005.

Total operating expenses increased to $4.2 million in the first quarter of 2005, versus $2.6 million in the first quarter of 2004. Research, development and clinical expense was $1.4 million in both periods. Quarter over quarter, sales and marketing expense increased by $987,000, and general and administrative expense increased by $663,000.

The sales and marketing increase reflects the initial build out and training cost of the domestic sales force from two field based employees in the first quarter of 2004 to the 18 positions described above. Also since March of 2004, an additional five Irvine based positions have been added in marketing and customer service functions.

The increase in G&A expense was almost entirely related to the cost of completing our first report on internal control over financial reporting in accordance with the Sarbanes-Oxley legislation, which was approximately $630,000 during this past quarter, and which totaled approximately $1.2 million over the past 15 months. Comparable costs in the first quarter of 2004 were $79,000. We expect that the ongoing expense related to Sarbanes-Oxley compliance will decline significantly through the remaining quarters of 2005.

Net loss for the first quarter of 2005 was $3.3 million, or $0.10 per share, compared with net a loss of $2.0 million, or $0.07 per share, for the first quarter of 2004. This increased loss was due to the build out and training of the domestic sale force, and the Sarbanes-Oxley costs discussed above, partially offset by the increase in total gross profit and higher interest income.

Total available cash and marketable securities at March 31, 2005 was $17.6 million, reflecting a reduction of $4.3 million from the $21.9 million reported at December 31, 2004.

About Endologix

Endologix, Inc. develops and manufactures minimally invasive treatments for vascular diseases. Endologix’s Powerlink System is an endoluminal stent graft for treating abdominal aortic aneurysms (AAA). AAA is a weakening of the wall of the aorta, the largest artery in the body, resulting in a balloon-like enlargement. Once AAA develops, it continues to enlarge and, if left untreated, becomes increasingly susceptible to rupture. The overall patient mortality rate for ruptured AAA is approximately 75%, making it the thirteenth leading cause of death in the U.S. In October 2004, Endologix received approval to market the Powerlink System in the U.S. Additional information can be found on Endologix’s Web site at www.endologix.com.

Except for historical information contained herein, this news release contains forward-looking statements, the accuracy of which are necessarily subject to risks and uncertainties, including risks related to the clinical success and physician and payor acceptance of a new medical device product, and the risks related to intellectual property rights surrounding new technology, all of which are difficult or impossible to predict accurately and many of which are beyond the control of Endologix, all as more fully described in the risk factors and other matters set forth in the company’s Annual Report on Form 10-K for the year ended December 31, 2004, and the company’s other filings with the Securities and Exchange Commission.

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ENDOLOGIX, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except per share amounts)
(Unaudited)

Three Months Ended
March 31,
     2005
   2004
 
Revenue:  
   Product   $ 1,354   $ 343  
   License    60    477  


Total revenue    1,414    820  
   Cost of product revenue    643    243  


Gross profit    771    577  


Operating expenses:  
   Research, development and clinical    1,359    1,444  
   Marketing and sales    1,378    391  
   General and administrative    1,439    776  


Total operating expenses    4,176    2,611  


Loss from operations    (3,405 )  (2,034 )


Other income (expense):  
   Interest income    109    54  
   Other expense    --    7  


       Total other income    109    61  


Net loss    ($ 3,296 )  ($ 1,973 )


Basic and diluted net loss per share    ($ 0.10 )  ($ 0.07 )


Shares used in computing basic and diluted net loss per share    31,896    29,273  


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ENDOLOGIX, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except per share amounts)
(Unaudited)

March 31, Dec. 31,
2005
2004
ASSETS            
Current assets:  
     Cash and cash equivalents   $ 4,303   $ 4,831  
     Marketable securities available-for-sale    11,754    16,335  
     Accounts receivable, net    549    347  
     Other receivables    201    233  
     Inventories    4,965    3,984  
     Other current assets    517    510  


         Total current assets    22,289    26,240  
Property and equipment, net    936    689  
Marketable securities available-for-sale    1,507    750  
Goodwill    3,602    3,602  
Other intangibles, net of accumulated amortization of $3,981 and $3,629,  
     respectively    12,777    13,129  
Other assets    103    102  


       Total Assets   $ 41,214   $ 44,512  


LIABILITIES AND STOCKHOLDERS' EQUITY   
Current liabilities:  
Accounts payable and accrued expenses   $ 2,781   $ 2,763  


       Current liabilities    2,781    2,763  
Accrued compensation    47    198  


       Total liabilities    2,828    2,961  


Stockholders' equity:  
Convertible preferred stock, $.001 par value; 5,000 shares authorized, no  
     shares issued and outstanding    --    --  
Common stock, $.001 par value; 50,000 shares authorized, 32,405 and 32,362  
     shares issued and outstanding at March 31, 2005 and December 31, 2004,  
     respectively    32    32  
Additional paid-in capital    125,853    125,704  
Accumulated deficit    (86,898 )  (83,602 )
Treasury stock, at cost, 495 shares at March 31, 2005 and December 31, 2004  
     (661 )  (661 )
Accumulated other comprehensive income    60    78  


       Total stockholders' equity    38,386    41,551  


       Total Liabilities and Stockholders' Equity   $ 41,214   $ 44,512  


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