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MAKO Surgical Corp. Reports Operating Results for the Second Quarter 2011



MAKO Surgical Corp. Reports Operating Results for the Second Quarter 2011

Second Quarter and Six-Month 2011 Highlights

Second quarter revenue totaled $18.6 million, an 81% increase over the same
period in 2010

Twelve RIO® systems sold in the second quarter, including ten domestic
commercial sales and two international commercial sales, increasing worldwide
commercial installed base to 86 RIO systems

A total of nineteen RIO systems sold worldwide in the first six months of
2011, a 73% increase over the same period in 2010

1,557 MAKOplasty® procedures performed in the second quarter, a 96% increase
over the same period in 2010

2,861 MAKOplasty® procedures performed in first six months of 2011, an 88%
increase over the same period in 2010

Intellectual property portfolio enhanced by the allowance in the second
quarter of a key patent and the recent securing of an exclusive license

FORT LAUDERDALE, Fla., Aug. 8, 2011 (GLOBE NEWSWIRE) -- MAKO Surgical Corp.
(Nasdaq:MAKO), a medical device company that markets both its RIO® Robotic Arm
Interactive Orthopedic surgical platform and proprietary RESTORIS® implants
for minimally invasive orthopedic knee procedures known as knee MAKOplasty®,
today announced its operating results for the quarter ended June 30, 2011.

Recent Business Developments

RIO Systems – Twelve RIO systems were installed and customer accepted at
commercial sites during the second quarter, bringing MAKO's worldwide
commercial installed base of RIO systems to 86 systems as of June 30, 2011, of
which 84 are domestic. Four of the second quarter RIO system sales were part
of the first quarter binding commitment for eleven new MAKOplasty sites
received from Health Management Associates, Inc. (NYSE:HMA), an operator of
acute care hospitals primarily in the southeast and southwest areas of
non-urban America. A total of six RIO system sales have been fulfilled under
the HMA order, with the remaining five RIO systems expected to be installed
and customer accepted over the remainder of 2011.

MAKOplasty Procedure Volume – During the second quarter, 1,557 MAKOplasty
procedures were performed, of which 1,519 were performed at domestic sites.
The 1,557 MAKOplasty procedures performed represent a 19% increase over the
procedures performed in the first quarter of 2011 and a 96% increase over the
procedures performed in the second quarter of 2010. In the six months ended
June 30, 2011, a total of 2,861 MAKOplasty procedures were performed. Through
June 30, 2011, a total of 8,730 procedures had been performed since the first
procedure in June 2006.

Intellectual Property Portfolio – Since its inception, as MAKO has progressed
in the development of its innovative products, it has licensed third party
intellectual property that both enables and protects MAKOplasty, and has filed
original patent applications capturing the novelty of these technologies. MAKO
was recently notified by the United States Patent and Trademark Office of the
allowance of one such MAKOplasty patent application, entitled "Haptic Guidance
System and Method." MAKO believes the allowed claims of this patent broadly
protect fundamental necessary elements of what would be required to
commercialize a viable robotic solution for orthopedic surgery. Additionally,
recognizing the criticality of haptic technology, in May 2009 MAKO obtained a
non-exclusive worldwide license, in the field of orthopedics, to the entire
patent portfolio of Immersion Corporation, a leading innovator in haptic
technologies claiming more than 1,000 U.S. and foreign patents and patent
applications. Recently, MAKO and Immersion expanded this license to provide
MAKO with exclusive rights to the same portfolio in the same field.

Clinical Research and Marketing – Efforts to build a strong base of clinical
evidence for knee MAKOplasty continue with over 65 clinical studies currently
in process. During the second quarter, 46 abstracts were submitted for
peer-review to five different conferences.

Hip Application Development – The surgeon preference evaluation of the hip
MAKOplasty application is progressing according to MAKO's plan and MAKO
continues to expect a commercial launch by the end of 2011.

"We are pleased with our strong operating results in the second quarter of
2011 and our team's consistent execution of our plan," said Maurice R. Ferre,
M.D., President and Chief Executive Officer of MAKO. "Further, we believe that
the expansion of our intellectual property portfolio through the allowance of
one of our MAKOplasty patents and securing the exclusive rights to the
Immersion patent portfolio provide MAKO with the opportunity to achieve a
unique and valuable market position in the field of robotically assisted
orthopedic surgery."

2011 Second Quarter Financial Review

Revenue was $18.6 million in the second quarter of 2011 compared to $10.3
million in the second quarter of 2010, representing an 81% increase. Revenue
in the second quarter of 2011 primarily consisted of $7.7 million in revenue
from the sale of implants and disposables used in the 1,557 MAKOplasty
procedures performed in the quarter, $9.5 million in revenue from the sale of
twelve RIO systems and $1.4 million in revenue from service.

Total gross profit for the second quarter of 2011 was $13.1 million compared
to a gross profit of $6.6 million in the same period in 2010. Total gross
margin for the second quarter of 2011 was 71%, comprised of a 78% margin on
procedure revenue, a 63% margin on RIO system revenue and a 81% margin on
service revenue.

Operating expenses were $23.1 million in the second quarter of 2011 compared
to $15.2 million in the second quarter of 2010. The increase in operating
expenses was primarily attributable to the following: an increase in sales and
marketing activities for the continued expansion of the direct sales force and
commercialization of the RIO system and RESTORIS implant systems; an increase
in research and development activities associated with continuous improvement
of the RIO system and the development of potential future products, including
the hip application and associated implant systems; and an increase in general
and administrative costs as MAKO continued to build infrastructure to support
growth.

Net loss for the three months ended June 30, 2011 was $9.9 million, including
non-cash stock-based compensation expense of $2.6 million, or $(0.24) per
basic and diluted share, based on average basic and diluted shares outstanding
of 40.6 million. This compares to a net loss for the same period in 2010 of
$8.5 million, including non-cash stock-based compensation expense of $1.6
million, or $(0.26) per basic and diluted share, based on average basic and
diluted shares outstanding of 33.4 million.

Cash, cash equivalents and investments were $76.8 million as of June 30, 2011
compared to $96.8 million as of December 31, 2010.

2011 Six-Month Financial Review

For the six months ended June 30, 2011, revenue was $31.6 million, primarily
generated from the sale of nineteen RIO systems and 2,861 domestic MAKOplasty
procedures performed during the period, compared to $17.5 million for the six
months ended June 30, 2010.

The net loss for the six months ended June 30, 2011 was $20.9 million,
including non-cash stock-based compensation expense of $4.9 million, or
$(0.52) per basic and diluted share, based on average basic and diluted shares
outstanding of 40.4 million. This compares to a net loss for the six months
ended June 30, 2010 of $19.9 million, including non-cash stock-based
compensation expense of $2.9 million, or $(0.60) per basic and diluted share,
based on average basic and diluted shares outstanding of 33.3 million.

Conference Call

MAKO will host a conference call today at 4:30 pm ET to discuss its second
quarter 2011 results. To listen to the conference call, please dial
877-843-0414 for domestic callers and 914-495-8580 for international callers
approximately ten minutes prior to the start time. The participant code is
84118019. To access the live audio broadcast or the subsequent archived
recording, visit the Investor Relations section of MAKO's website at
www.makosurgical.com.

About MAKO Surgical Corp.

MAKO Surgical Corp. is a medical device company that markets both its RIO^®
Robotic-Arm Interactive Orthopedic system and its proprietary RESTORIS^®
implants for minimally invasive orthopedic knee procedures. The MAKO RIO is a
surgeon-interactive tactile surgical platform that incorporates a robotic arm
and patient-specific visualization technology and prepares the knee joint for
the insertion and alignment of MAKO's resurfacing RESTORIS implants through a
minimal incision. The FDA-cleared and CE Marked RIO system allows surgeons to
provide a precise, consistently reproducible tissue-sparing, bone resurfacing
procedure called MAKOplasty^® to a large, yet underserved patient population
suffering from early to mid-stage osteoarthritic knee disease. The MAKOplasty
solution is comprised of imaging, navigation, surgical procedures, haptics,
robotics, software, instrument and implant technologies and is enabled by an
intellectual property portfolio of more than 300 U.S. and foreign, owned and
licensed, patents and patent applications, as well as copyrights, trademarks,
trade secrets and employee know-how. Additional information can be found at
www.makosurgical.com.

Forward-Looking Statements

This press release contains forward-looking statements regarding, among other
things, statements related to expectations, goals, plans, objectives and
future events. MAKO intends such forward-looking statements to be covered by
the safe harbor provisions for forward-looking statements contained in Section
21E of the Securities Exchange Act of 1934 and the Private Securities Reform
Act of 1995. In some cases, forward-looking statements can be identified by
the following words: "may," "will," "could," "would," "should," "expect,"
"intend," "plan," "anticipate," "believe," "estimate," "predict," "project,"
"potential," "continue," "ongoing" or the negative of these terms or other
comparable terminology, although not all forward-looking statements contain
these words. These statements are based on the current estimates and
assumptions of our management as of the date of this press release and are
subject to risks, uncertainties, changes in circumstances, assumptions and
other factors that may cause actual results to differ materially from those
indicated by forward-looking statements, many of which are beyond MAKO's
ability to control or predict. Such factors, among others, may have a material
adverse effect on MAKO's business, financial condition and results of
operations and may include the potentially significant impact of a continued
economic downturn or delayed economic recovery on the ability of MAKO's
customers to secure adequate funding, including access to credit, for the
purchase of MAKO's products or cause MAKO's customers to delay a purchasing
decision, changes in competitive conditions and prices in MAKO's markets,
unanticipated issues relating to intended product launches, decreases in sales
of MAKO's principal product lines, increases in expenditures related to
increased or changing governmental regulation or taxation of MAKO's business,
unanticipated issues in complying with regulatory requirements related to
MAKO's current products or securing regulatory clearance or approvals for new
products or upgrades or changes to MAKO's current products, the impact of the
recently enacted United States healthcare reform legislation on hospital
spending, reimbursement, and the taxing of medical device companies, loss of
key management and other personnel or inability to attract such management and
other personnel and unanticipated intellectual property expenditures required
to develop, market, and defend MAKO's products. These and other risks are
described in greater detail under Item 1A, "Risk Factors," in MAKO's periodic
filings with the Securities and Exchange Commission, including MAKO's annual
report on Form 10-K for the year ended December 31, 2010 filed on March 10,
2011. Given these uncertainties, undue reliance should not be placed on these
forward-looking statements. MAKO does not undertake any obligation to release
any revisions to these forward-looking statements publicly to reflect events
or circumstances after the date of this press release or to reflect the
occurrence of unanticipated events.

"MAKOplasty®," "RESTORIS®," "RIO®," as well as the "MAKO" logo, whether
standing alone or in connection with the words "MAKO Surgical Corp." are
trademarks of MAKO Surgical Corp.

                                                        
                                                        
Condensed Statements of
Operations (unaudited)         Three Months Ended      Six Months Ended
(in thousands, except per      June 30,                June 30,
share data)
                               2011        2010        2011         2010
                                                                     
Revenue:                                                             
Procedures                     $ 7,676     $ 4,240     $ 14,143     $ 7,868
Systems – RIO                  9,474       5,672       14,838       9,062
Service                        1,429       339         2,624        570
Total revenue                  18,579      10,251      31,605       17,500
Cost of revenue:                                                     
Procedures                     1,716       1,111       3,514        3,066
Systems – RIO                  3,488       2,383       5,526        4,123
Service                        274         177         533          478
Total cost of revenue          5,478       3,671       9,573        7,667
Gross profit                   13,101      6,580       22,032       9,833
Operating costs and                                                  
expenses:
Selling, general and           17,137      10,717      31,946       21,535
administrative
Research and development       5,015       3,701       9,209        6,984
Depreciation and               977         749         1,952        1,371
amortization
Total operating costs and      23,129      15,167      43,107       29,890
expenses
Loss from operations           (10,028)    (8,587)     (21,075)     (20,057)
Interest and other income      120         64          212          172
Loss before income taxes       (9,908)     (8,523)     (20,863)     (19,885)
Income tax expense             1           1           41           47
Net loss                       $ (9,909)   $ (8,524)   $ (20,904)   $ (19,932)
Net loss per share - Basic     $ (0.24)    $ (0.26)    $ (0.52)     $ (0.60)
and diluted
Weighted average common
shares outstanding - Basic     40,605      33,419      40,358       33,300
and diluted

                                                           
                                                           
Condensed Balance Sheets (unaudited)         June 30,     December 31,
(in thousands)                               2011         2010 
                                                           
Current Assets:                                            
Cash and cash equivalents                    $ 7,371      $ 27,108
Short-term investments                       52,346       46,401
Accounts receivable                          12,018       11,560
Inventory                                    14,657       10,504
Deferred cost of revenue                     97           ―
Prepaids and other assets                    2,238        1,283
Total current assets                         88,727       96,856
Long-term investments                        17,051       23,283
Property and equipment, net                  11,139       9,212
Intangible assets, net                       6,890        7,530
Other assets                                 165          198
Total assets                                 $ 123,972    $ 137,079
                                                           
Current Liabilities:                                       
Accounts payable                             $ 2,181      $ 1,518
Accrued compensation and employee benefits   3,456        5,546
Other accrued liabilities                    6,013        5,064
Deferred revenue                             3,596        3,071
Total current liabilities                    15,246       15,199
Deferred revenue – long term                 75           109
Total liabilities                            15,321       15,308
Stockholders' equity:                                      
Common stock                                 41           40
Additional paid-in capital                   282,470      274,712
Accumulated deficit                          (173,786)    (152,882)
Accumulated other comprehensive loss         (74)         (99)
Total stockholders' equity                   108,651      121,771
Total liabilities and stockholders' equity    $ 123,972   $ 137,079

                                                        
                                                        
Condensed Statements of Cash Flows (unaudited)         Six Months Ended
(in thousands, except share data)                      June 30,
                                                       2011         2010
Operating activities:                                                
Net loss                                               $ (20,904)   $ (19,932)
Adjustments to reconcile net loss to net cash used                   
in operating activities:
Depreciation                                           2,081        1,092
Amortization of intangible assets                      640          476
Stock-based compensation                               4,946        2,930
Inventory write-down                                   28           1,107
Amortization of premium on investment securities       195          299
Loss on asset impairment                               148          986
Provision for doubtful accounts                        154          ―
Issuance of restricted stock under development         1,080        ―
agreement
Changes in operating assets and liabilities:                         
Accounts receivable                                    (612)        (2,561)
Inventory                                              (5,583)      (4,410)
Deferred cost of revenue                               (97)         ―
Prepaid and other assets                               (955)        (599)
Other assets                                           33           (6)
Accounts payable                                       663          508
Accrued compensation and employee benefits             (2,090)      (1,128)
Other accrued liabilities                              949          1,881
Deferred revenue                                       491          (118)
Net cash used in operating activities                  (18,833)     (19,475)
Investing activities:                                                
Purchase of investments                                (22,703)     (8,522)
Proceeds from sales and maturities of investments      22,820       22,830
Acquisition of property and equipment                  (2,754)      (1,997)
Acquisition of intangible assets                       ―            (113)
Net cash (used in) provided by investing activities    (2,637)      12,198
Financing activities:                                                
Proceeds from employee stock purchase plan             469          322
Exercise of common stock options and warrants for      1,930        317
cash
Payment of payroll taxes relating to vesting of        (666)        (236)
restricted stock
Net cash provided by financing activities              1,733        403
Net decrease in cash and cash equivalents              (19,737)     (6,874)
Cash and cash equivalents at beginning of period       27,108       17,159
Cash and cash equivalents at end of period             $ 7,371      $ 10,285

CONTACT: Investors:
         MAKO Surgical Corp.
         954-628-0753
         investorrelations@makosurgical.com
        
         or
        
         Westwicke Partners
         Mark Klausner
         443-213-0500
         makosurgical@westwicke.com
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