Nanosphere Announces Record Revenues and Placements, and Key Leadership Changes

Nanosphere Announces Record Revenues and Placements, and Key Leadership Changes 
NORTHBROOK, IL -- (Marketwire) -- 02/13/13 --  Nanosphere, Inc.
(NASDAQ: NSPH) 
Business Results and Guidance: 


 
--  Customer placements in 4Q12 increased to 56, up 87% over 4Q11. Annual
    placements of 166, up 163% over 2011.
--  2012 revenues were $5.1 million, a 100% increase over 2011.
--  FDA 510(k) clearances granted for C. difficile and 2C19 tests during
    4Q12.
--  Gram negative blood stream infection and enteric panels set for
    submission to the FDA in mid-2013.
--  2013 guidance set at $13 million to $15 million in revenue and 200 to
    250 customer placements.

  
Leadership Changes and Commitment of Major Shareholder: 


 
--  Michael K. McGarrity promoted to President and Chief Executive
    Officer.
--  Sheli Z. Rosenberg, Michael J. Ward and Michael K. McGarrity appointed
    to board, and board resignations of Mark E. Slezak, Roy N. Davis,
    William T. White III and William P. Moffitt were accepted.
--  Lurie Investments entered into a twelve-month Voluntary Lock-Up
    Agreement for its 14.7 million common shares.

  
The company, a leader in the development and commercialization of
advanced molecular diagnostics systems, today reported financial
results for the fourth quarter and full year ended December 31, 2012.
In addition, the Company announced the appointment of current Vice
President of Sales and Marketing and Chief Commercial Officer Michael
K. McGarrity to succeed William P. Moffitt as President and Chief
Executive Officer. Nanosphere also announced the appointment of Sheli
Z. Rosenberg, Michael J. Ward and Michael K. McGarrity to the board
of directors and accepted the resignations of Mark E. Slezak, Roy N.
Davis, William T. White III and William P. Moffitt. Lurie
Investments, together with its affiliates, is the largest holder of
Nanosphere shares and has voluntarily entered into a twelve-month
lock-up agreement with the Company. 
Nanosphere achieved record placements and revenues for the full year
and fourth quarter of 2012. 56 new customer placements were made in
the fourth quarter, bringing the cumulative customer base to 272.
Revenues for the fourth quarter and full year 2012 were $1.6 million
and $5.1 mil
lion respectively, compared to $0.8 million and $2.5
million in the fourth quarter and full year 2011. Growth in
placements and revenues in 2012 was driven predominantly by
U.S.-based microbiology laboratories adopting Nanosphere's platform
and growing menu of infectious disease tests. Revenue growth in the
fourth quarter was driven primarily by sales to U.S. microbiology
customers of systems and consumables used in testing for gram
positive blood stream and respiratory infections. 
During the fourth quarter of 2012, the Company received FDA clearance
for its C. difficile and 2C19 genetic variance tests. The Company
also announced that the Verigene System has been categorized as
Clinical Laboratory Improvement Amendments (CLIA) moderate
complexity. This categorization of the gram positive blood stream
infection test underscores the Verigene System's ease-of-use and
supports the market's demand for decentralized molecular testing. 
Executive Management Change 
Nanosphere's board of directors has appointed Michael K. McGarrity to
succeed William P. Moffitt as President and Chief Executive Officer.
Mr. McGarrity, who was previously Vice President of Sales and
Marketing and Chief Commercial Officer, has more than 24 years of
sales and marketing experience in the medical device industry. He
joined Nanosphere after 13 years with Stryker Corporation, where he
served in leadership roles in marketing and strategic development. 
"I am proud to be leading Nanosphere as we enter a new phase of our
growth focused on customer-facing commercialization," Mr. McGarrity
said.  "I believe that the best ideas come from collaboration with
our customers. We will continue to tap this resource through our
commercial and marketing organization for confirmation that we are on
the right path of applying our proprietary capabilities in clinically
actionable ways. We are committed to market-driven execution and
quality. This commitment is backed by the most talented and dedicated
employees in the industry, and we look forward to creating value for
our shareholders."  
Board Member Changes; Commitment of Lurie Investments 
The Company also announced the appointments of Sheli Z. Rosenberg,
Michael J. Ward and Michael K. McGarrity to its board of directors,
filling positions formerly held by Mark E. Slezak, Roy N. Davis,
William T. White III and William P. Moffitt, all of whom resigned as
directors. Ms. Rosenberg was appointed Chair of the board of
directors and previously served on the Nanosphere board from 2002 to
2012. Ms. Rosenberg is Of Counsel at Skadden, Arps, Slate, Meagher &
Flom LLP and is the former president, chief executive officer and
vice chairman of Equity Group Investments. Mr. Ward is currently a
Director at Lurie Investments responsible for managing investment
activities. Prior to joining Lurie Investments in 2009, he gained
over 15 years of investment banking experience at Credit Suisse,
Prudential Securities, Dresdner Kleinwort Wasserstein, BMO and
Leerink Swann. As an investment banker, Mr. Ward was primarily
focused on M&A and financing transactions for life sciences
companies. 
Also, Lurie Investments together with its affiliates has executed a
twelve-month voluntary lock-up agreement with Nanosphere, indicating
its intent to hold its position and realize the value it believes
exists within the Company. Lurie Investments and its affiliates hold
approximately 14.7 million shares of common stock, representing
approximately 26% ownership of the Company. 
"On behalf of the Board, I want to thank Bill Moffitt for his years
of valuable service in helping to make Nanosphere a leader in
advanced molecular diagnostics," said Ms. Rosenberg. "We are
confident in Mike McGarrity's ability to lead as Nanosphere enters
the commercialization stage. We are pleased with the early signs of
growth and excited about the opportunity to create significant
shareholder value as we make additional progress toward the broad
adoption of Nanosphere's technology as the industry-leading platform
in advanced molecular diagnostics. We also appreciate the commitment
of Lurie Investments to the success of Nanosphere," she continued.  
Operational Results 
Fourth quarter customer placements of 56 represents continued
acceleration of new customer growth in the U.S. Nanosphere
management, during the last quarterly conference call, provided
guidance around the low end of the previously disclosed range of 60
to 80 placements for the fourth quarter of 2012. Disappointing demand
in Europe resulted in total placements that were lower than expected
for the quarter.  
Costs and operating expenses were $38.0 million in 2012, remaining
flat relative to 2011. Costs of sales increased from $1.8 million in
2011 to $3.5 million in 2012, driven by increased volume. Selling,
general and administrative expenses in 2012 increased to $16.9
million from $16.2 million as field sales and customer support teams
were expanded. Research and development expenses decreased from $20.0
million in 2011 to $17.6 million in 2012 as a result of a shift in
resources from development to manufacturing and customer support as
commercialization accelerated. 
Net loss for 2012 was $32.9 million, compared with $35.4 million in
2011. Net loss for the fourth 
quarter of 2012 decreased to $7.6
million compared with $8.6 million for the same period in 2011 and
$8.7 million in the third quarter of 2012. 
Cash flow for the fourth quarter of 2012 was negative $8.8 million
including $1.5 million of investments in inventory to support system
placements. Full year 2012 cash flow from operations was negative
$31.7 million, of which $4.8 million was driven by increases in
inventory. Cash at December 31, 2012 was $33.1 million. 
Nanosphere is evaluating debt facilities to help manage its working
capital needs and is currently in discussions with debt providers. 
Business Guidance 
For the fiscal year ending December 31, 2013, the Company expects to
generate between $13 million and $15 million in product revenue and
between 200 and 250 customer placements. 
Nanosphere had previously provided guidance in the range of 80 to 100
placements for the first quarter of 2013. Slower than anticipated
growth in international markets and the timing of projected
regulatory approvals of the Company's gram negative blood stream
infection and its enteric pathogens panels make 45-55 placements more
likely in the first quarter.  
Conference Call Details 
Wednesday, February 13, 2013 at 5:00 P.M., Eastern Time
 Domestic:
888-713-4211
 International: 617-213-4864 
 Passcode: 32069247 
Webcast: www.nanosphere.us.  
Replay: Through February 20, 2013 on the Company's website or by
dialing:
 Domestic: 888-286-8010
 International: 617-801-6888 
Passcode 63405442 
About Nanosphere, Inc.  
Nanosphere develops, manufactures and markets an advanced molecular
diagnostics platform, the Verigene(R) System, for direct genomic and
ultra-sensitive protein detection. This easy to use and cost
effective platform enables simple, low cost and highly sensitive
genomic and protein testing on a single platform. Nanosphere is based
in Northbrook, IL. Additional information is available at
http://www.nanosphere.us. 
Except for historical information, the matters discussed in this
press release are "forward-looking statements" and are subject to
risks and uncertainties. Actual results could differ materially from
these forward-looking statements. Factors that could cause or
contribute to such differences include, but are not limited to, the
following: (i) Nanosphere's ability to develop commercially viable
products; (ii) Nanosphere's ability to achieve profitability; (iii)
Nanosphere's ability to produce and market its products; (iv)
Nanosphere's ability to obtain regulatory approval of its products;
(v) Nanosphere's ability to protect its intellectual property; (vi)
competition and alternative technologies; and (vii) Nanosphere's
ability to obtain additional financing to support its operations.
Additional risks are discussed in the Company's current filings with
the Securities and Exchange Commission. Although the Company believes
the expectations reflected in such forward-looking statements are
based on reasonable assumptions, it can give no assurance that its
expectations will be attained. The forward-looking statements are
made as of the date of this press release, and we undertake no
obligation to publicly update or revise any forward-looking
statement, whether as a result of new information, future events or
otherwise. 


 
                                                                            
                              Nanosphere, Inc.                              
                          Statements of Operations                          
          (dollars and shares in thousands except per share data)           
                                                                            
                                                Years Ended December 31,    
                                            ------------------------------- 
                                               2012       2011       2010   
                                            ---------  ---------  --------- 
                                                                            
REVENUE:                                                                    
                                                                            
  Product sales                             $   5,034  $   2,433  $   1,416 
  Grant and contract revenue                       44        100        610 
                                            ---------  ---------  --------- 
    Total revenue                               5,078      2,533      2,026 
COSTS AND EXPENSES:                                                         
  Cost of sales                                 3,541      1,820      2,597 
  Research and development                     17,552     20,013     18,821 
  Sales, general, and administrative           16,890     16,154     22,007 
                                            ---------  ---------  --------- 
    Total costs and expenses                   37,983     37,987     43,425 
                                            ---------  ---------  --------- 
    Loss from operations                      (35,905)   (35,454)   (41,399)
OTHER INCOME (EXPENSE):                                                     
  Foreign exchange gain (loss)                     (8)       (13)         4 
  U.S. Treasury grant                              --         --        978 
  Interest expense                                (13)        --       (274)
  Interest income                                  54         48         79 
                                            ---------  ---------  --------- 
    Total other income (expense)                   33         35        787 
                                            ---------  ---------  --------- 
NET LOSS                                    $ (32,872) $ (35,419) $ (40,612)
                                            =========  =========  ========= 
Net loss per common share - basic and                                       
 diluted                                    $    (.67) $    (.94) $   (1.46)
Weighted average number of common shares                                    
 outstanding - basic and diluted               49,193     37,800     27,755 
                                                                            
                                                                            
                    
                                                        
                              Nanosphere, Inc.                              
                               Balance Sheets                               
                           (dollars in thousands)                           
                                                                            
                                                        As of December 31,  
                                                     -----------------------
                                                         2012        2011   
                                                     ----------- -----------
Cash and cash equivalents                            $    33,139 $    39,273
Inventories                                                7,326       2,325
Other current assets                                       1,311       1,109
                                                     ----------- -----------
Total current assets                                      41,776      42,707
Net property and equipment                                 2,872       4,522
Intangible assets - net of accumulated amortization        2,733       3,033
Other assets                                                  76          75
                                                     ----------- -----------
Total assets                                         $    47,457
 $    50,337
                                                     =========== ===========
                                                                            
Total liabilities                                          5,225       4,728
Total stockholders' equity                                42,232      45,609
                                                     ----------- -----------
Total liabilities and stockholders' equity           $    47,457 $    50,337
                                                     =========== ===========

  
Contact:
Nanosphere, Inc.
Roger Moody
847-400-9021
Chief Financial Officer
rmoody@nanosphere.us 
or 
LifeSci Advisors
Michael Rice
646-597-6979
Founding Partner
mrice@lifesciadvisors.com  
Nanosphere, Inc.
4088 Commercial Avenue
Northbrook, IL 60062 
 
 
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