Synovis says Q3 revenues hurt by slowdown in CMS market, posts revenues of $13.1 million

By Jennifer Lanning Drey

Eugene, Ore., Aug. 23 - Synovis Life Technologies, Inc. said a slowdown in the cardiac rhythm management (CRM) market had a significant impact on third-quarter revenues within the company's interventional business unit.

The decrease was somewhat offset by increased revenue in the surgical business unit, which reached a record $7.3 million in the quarter, due to unit growth and higher average selling prices, said Brett Reynolds, Synovis' chief financial officer, during a company conference call held Wednesday.

For the third quarter, Synovis reported consolidated net revenues of $13.1 million, versus $15.6 million in the same period of 2005, according to a company news release.

Interventional business revenue declined $5.7 million in the third quarter from $9.0 million in the third quarter of 2005, according to the release.

"As a major supplier to the CRM market, [the interventional business unit] experiences the slowdown in an amplified way," said Richard Kramp, president of Synovis, during Wednesday's conference call.

The company believes the decrease in sales is attributable to reduced revenues from top CRM customers, driven by a reported disruption in the market. The company has also been affected by the phase out of an existing product, for which Synovis makes components, he said.

However, Kramp indicated the company remains hopeful the market slowdown is temporary.

"There seems to be little doubt that the CRM market will return to an attractive growth rate in the future, although there has not been a consensus on when this will happen," he said.

"The effectiveness of the treatment modality has been well documented in clinical papers and the market is said to be relatively under-penetrated, so there is definitely room for growth," Kramp also said.

Synovis is working on development-stage opportunities with new and existing customers that the company believes will add to CRM and non-CRM business growth over the next four to six quarters, according to Kramp.

"We believe these efforts along with the anticipated return to vitality in the CRM market will put the interventional business back on a growth curve," he said.

Synovis' net loss for the third quarter was $526,000, or $0.04 per share, compared with net income of $355,000, or $0.03 per diluted share, in the third quarter of 2005, according to the news release.

Acquisition funding

Synovis chief executive officer Karen Gilles Larson also said during Wednesday's call that the company has hired an investment banking firm to help seek acquisition targets.

At July 31, Synovis reported cash, cash equivalents and short-term investments of $45.5 million, which Gilles Larson said the company intends to use to carry out future acquisitions.

"It is not our desire to sit on our cash and simply earn interest. We believe that currently the use of our cash for an acquisition will provide the most sustainable value for our shareholders, and it is to this end that we retain our cash position and the advantage this gives us in pursuing a broader range of acquisitions, both in number of acquisition and in size of acquisition," Gilles Larson said.

Synovis is engaged in searching for acquisition targets but has not yet completed any deals, she said.

Synovis, based in St. Paul, Minn., is a medical device company engaged in developing, manufacturing and bringing to market medical devices for the surgical and interventional treatment of disease.

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