Full Press Release Details
MRI Interventions Reports First Quarter
Results, New Strategic Initiatives to Further Growth
IRVINE, CA, May 15, 2018 - MRI Interventions,
Inc. (OTCQB: MRIC) (the "Company") today announced financial results for its first fiscal quarter ended March 31, 2018.
First Quarter 2018 Highlights
Joe Burnett, President and Chief Executive
Officer of MRI Interventions, Inc. said, "The first quarter of 2018 was an opportunity to "hit the reset button"
and prepare our company and organization to execute on our five-year growth strategy. As part of that reset, we identified four
pillars of growth: functional neurosurgery, biologics and drug delivery, expansion into therapy devices and global scale. Exiting
the first quarter, we believe we have the plans, and, more importantly, the people, in place to exact ownership and accountability
in making this vision our reality."
Mr. Burnett continued, "We reorganized
our functional neurosurgery commercial organization to better leverage the capacity of our talented sales and clinical teams to
expand our market development capabilities. I have taken over commercial leadership with the sales and marketing team now reporting
directly to me. Our new sales forecasting and reporting processes are designed to add increased transparency and accountability
"Although we achieved year-over-year
growth in ClearPoint cases, we did not meet our internal targets. Importantly, however, through our new reporting and tracking
protocols, we know exactly where those misses came from and are working to correct them on an account by account basis. Additionally,
eight weeks ago, the FDA issued field action and warning letters to two of the largest players in the laser ablation space, and
we have since seen eight cases canceled or postponed that we believe occurred as a result of those warnings. There were also two
ClearPoint systems sales at facilities whose interest in ClearPoint focuses on laser ablation that were delayed, we believe, for
the same reason. This said, we view these delayed sales as postponements, rather than losses, as the patients are still in need
of therapy and hospitals are still in need of access to this important laser ablation technology.
"In biologics and drug delivery, we initiated
evaluations of ClearPoint and our drug delivery cannulas with three additional potential partners for inclusion in future preclinical
and clinical work. We have continued progress toward obtaining CE Mark for our SmartFlow cannula and have identified
internal resources who will actively focus on the growth of this exciting part of our business.
"With regard to our expansion into therapy,
we continue to progress, in collaboration with the Mayo Clinic, in the development of what we believe is the first-of-its-kind
neuro-aspiration device, and we are planning to submit a 510(k) with the FDA in the third quarter of 2018, with first-human-use
of the product following in December of this year.
"As for achieving global scale, we have
had discussions with prospective customers in three countries outside the U.S. and will continue those discussions into the second
half of 2018. We have achieved scale on our operational expenses as seen with a 10% reduction is sales and marketing spend year
over year, and a 100 basis point increase in gross margin despite the lower revenue.
"In summary, we view first quarter as
our opportunity to reorganize our people, processes and priorities around the exciting vision that we have ahead of us, and we
will continue to update our investors on progress toward that vision throughout the year."
Financial Results - Three Months
Ended March 31, 2018
Functional neurology revenue, which consists
of disposable product commercial sales related to cases utilizing the ClearPoint system, decreased 11% to $1.1 million for the
three months ended March 31, 2018, from $1.3 million for the same period in 2017. The decrease was due primarily to a larger number
of cases consuming two kits per case as opposed to one kit per case during the first quarter of 2017, relative to the same period
in 2018 and end of quarter ordering patterns at some larger accounts in 2016 and 2017.
Biologics and drug delivery systems revenue,
which consists primarily of disposable product sales related to customer-sponsored clinical trials, decreased 43% to $211,000 for
the three months ended March 31, 2018, from $373,000 for the same period in 2017. Revenues from this product line may vary from
quarter to quarter based primarily on biotechnology customers' scheduling of clinical trials. The decrease from the first
quarter of 2017 to the same period in 2018 was due to the purchasing pattern of two biotechnology customers who purchased an aggregate
of $305,000 of product during the first quarter of 2017, as compared to an aggregate of $74,000 during the same period in 2018.
The company has made adjustments to its biologics and drug delivery business intended to enable delivery against open purchase
orders across multiple quarters in order to alleviate a portion of the volatility in this business line. Trial partners have previously
tended toward ordering large quantities which were inventories and used over multiple quarters.
Capital equipment revenue, consisting of sales,
rentals and service of ClearPoint reusable hardware and software, decreased 23% to $263,000 for the three months ended March 31,
2018, from $344,000 for the same period in 2017. Revenues from this product line historically have varied from quarter to quarter.
This decrease was due primarily to a decrease from the first quarter of 2017 to the same period in 2018 in the number of ClearPoint
systems sold and postponement of two capital deals related to joint acquisition with laser ablation systems.
Gross margin for the three months ended March
31, 2018 improved to 64% from 63% in the same period in 2017, due primarily to a favorable mix of revenue in the first quarter
of 2017, relative to the same period in 2016.
Research and development costs were $546,000
for three months ended March 31, 2018, compared to $558,000 for the same period in 2017, a decrease of $11,000, or 2%. The decrease
was due primarily to decreases in software development costs and pre-commercial license fees, being partially offset by increases
in share-based compensation expenses and regulatory legal fees.
Sales and marketing expenses were $962,000
for the three months ended March 31, 2018, compared to $1.1 million for the same period in 2017, a decrease of $104,000, or 10%.
This decrease was primarily due to a decrease in sales personnel costs due to: consolidation in the second quarter of 2017 of the
Company's sales and marketing leadership; and a decrease in incentive compensation in the first quarter of 2018, relative
to the same period in 2017, based on lower sales volume. This decrease was partially offset by an increase in clinical personnel
costs due to: an increase in clinical personnel headcount in the first quarter of 2018, relative to the same period in 2017; and
relocation costs incurred in the first quarter of 2018 to position clinical personnel in closer proximity to high-volume customer
General and administrative expenses were $953,000
for the three months ended March 31, 2018, compared to $984,000 for the same period in 2017, a decrease of $31,000, or 3%. This
decrease was due primarily to decreases in professional and investor relations fees due to financing activity in which the Company
was engaged during the first quarter of 2017 that did not recur during the same period in 2018
During the three months ended March 31, 2018
and 2017, the Company recorded a gain of $34,000 and a loss of $93,000, respectively, resulting from changes in the fair value
of derivative liabilities. Derivative liabilities at March 31, 2018 arose from an amendment the Company entered into with Brainlab,
with respect to a note payable to Brainlab AG ("Brainlab") and related warrants, the provisions of which created: a
conversion feature allowing for $500,000 the principal balance of the note to be converted in a Qualified Public Offering, as defined
in the amendment, at a public offering price that may be less than market value per share of the Company's common stock;
and down round strike price protection with respect to the warrants.
Derivative liabilities at March 31, 2017 arose
from the amendment to the note payable to Brainlab described above, and from warrants, issued in 2013, that contained net-cash
settlement and down-round provisions and that expired in January 2018.
Net interest expense for the three months ended
March 31, 2018 was $247,000, compared with $213,000 for the same period in 2017. The increase was due to increased amortization
of the discount and deferred issuance costs associated with certain of our notes payable.
Teleconference Information
Investors and analysts are invited to listen
to a live broadcast review of the Company's 2018 first quarter financial results today at 4:15 p.m. Eastern time (1:15 p.m. Pacific
time) that may be accessed by visiting the Company's website at www.mriinterventions.com and selecting "Investors"
/ "News" / "IR Calendar." The conference call may also be accessed at https://78449.themediaframe.com/dataconf/productusers/mric/mediaframe/24549/indexl.html.
Investors and analysts who would like to participate in the conference call may do so via telephone at (877) 407-9034, or at (201)
493-6737 if calling from outside the U.S. or Canada.
For those who cannot access the live broadcast,
a replay will be available shortly after the completion of the call until May 29, 2018 by calling (877) 660-6853, or (201) 612-7415
if calling from outside the U.S. or Canada, and then entering conference I.D. number 413671. An online archive of the broadcast