MAKO Surgical Corp. Reports Operating Results for the Second Quarter 2013

MAKO Surgical Corp. Reports Operating Results for the Second Quarter 2013

Second Quarter 2013 Highlights

Second quarter revenue totaled $28.2 million, a 19% increase over the same
period in 2012

Ten RIO® systems sold in the second quarter, of which eight were sold to
domestic customers

A total of fifteen RIO systems sold worldwide in the first six months of 2013,
increasing worldwide commercial installed base to 171 RIO systems and domestic
commercial installed base to 164 RIO systems

3,274 MAKOplasty® procedures performed in the second quarter, a 26% increase
over the same period in 2012

6,262 MAKOplasty procedures performed in the first six months of 2013, a 28%
increase over the same period in 2012

FORT LAUDERDALE, Fla., July 30, 2013 (GLOBE NEWSWIRE) -- MAKO Surgical Corp.
(Nasdaq:MAKO), a medical device company that markets its RIO® Robotic Arm
Interactive Orthopedic surgical platform, MAKOplasty® joint specific
applications and proprietary RESTORIS® implants that together enable
orthopedic surgeons to consistently, reproducibly and precisely treat patient
specific osteoarthritic disease, today announced its operating results for the
quarter ended June 30, 2013.

Recent Business Developments

RIO Systems – Ten RIO systems were sold during the second quarter, of which
eight were sold to domestic customers and two were sold through international
distributors in Italy and Turkey. The revenue associated with one RIO system
sold to and customer accepted by our Italian distributor will be deferred
until all revenue recognition criteria are satisfied. These ten RIO systems
bring MAKO's worldwide commercial installed base of RIO systems to 171 systems
and domestic commercial installed base to 164 systems as of June 30, 2013. At
the end of the quarter, MAKO had 164 MAKOplasty sites worldwide. Nine
MAKOplasty total hip arthroplasty, or THA, applications were sold during the
quarter, six of which were sold with new RIO systems sales and three of which
were sold as upgrades to existing customers with knee-only commercial systems.
As of June 30, 2013, 111 RIO systems, or 65% of the worldwide commercial
installed base, have the MAKOplasty THA application.

MAKOplasty Procedure Volume – During the second quarter, 3,274 MAKOplasty
procedures were performed, of which 3,125 were performed at domestic sites and
577 were THA procedures. The 3,274 MAKOplasty procedures performed represent a
10% increase over the procedures performed in the first quarter of 2013 and a
26% increase over the procedures performed in the second quarter of 2012. The
577 THA procedures performed represent a 24% increase over the THA procedures
performed in the first quarter of 2013 and a 106% increase over the THA
procedures performed in the second quarter of 2012. The average monthly
utilization per site for all MAKOplasty procedures was 7.0 procedures during
the second quarter of 2013, an increase from 6.6 procedures during the first
quarter of 2013. Through June 30, 2013, approximately 29,000 procedures had
been performed since the first procedure in June 2006.

Clinical Research and Marketing – At the 2013 Computer Assisted Orthopedic
Surgery meeting in June, three key presentations were made on MAKOplasty.
First, Dr. Bryn Jones presented additional early data from the randomized
controlled trial (RCT) performed at the Glasgow Royal Infirmary with the
University of Strathclyde. Dr. Jones presented three-month data for the entire
cohort of 139 patients highlighting accuracy, pain level, American Knee
Society scores and hospital cost savings. MAKOplasty unicompartmental knee
procedures results were favorable to the manually placed Biomet Oxford®
implants in nearly all measured categories. Second, Dr. Riyaz Jinnah's group
presented data on a retrospective registry review of 125 lateral
uni-compartmental knee arthroplasty, or UKA, patients, 88 of which were
MAKOplasty patients. At the patients' 24 month follow up appointment, the
MAKOplasty lateral UKA group had a statistically significant lower revision
rate, shorter average hospital stay and better alignment than the manual
lateral UKA group. Lastly, Dr. Benjamin Domb's group presented data comparing
acetabular cup position for a matched pair series of 50 MAKOplasty total hip
procedures versus 50 manual total hip procedures. The data showed that 92% of
the MAKOplasty cups were within the stricter Callanan, or Massachusetts
General Hospital, safe zone, compared to 62% of the conventional cups. All
results are statistically significant, and provide additional evidence of the
clinical and economic benefits of MAKOplasty over manual procedures.

"We are pleased that our programs implemented in the first quarter to drive
utilization and system sales are beginning to show positive business results,"
said Maurice R. Ferré, M.D., President and Chief Executive Officer of MAKO.
"Additionally, the recently released favorable data on both knee and hip
MAKOplasty provides continuing support for the clinical value proposition of
our procedures."

2013 Second Quarter Financial Review

Revenue was $28.2 million in the second quarter of 2013 compared to $23.7
million in the second quarter of 2012, representing a 19% increase. The
increase in revenue was primarily attributable to the recognition of revenue
of 3,274 MAKOplasty procedures performed, which represents a 26% increase over
the procedures performed in the second quarter of 2012, and an increase in
service revenue.

Gross profit for the second quarter of 2013 was $16.8 million compared to a
gross profit of $17.3 million in the same period in 2012. Gross margin for the
second quarter of 2013 was 59%, consisting of a 51% margin on procedure
revenue, a 62% margin on RIO system revenue and a 91% margin on service
revenue. Procedure gross margin for the second quarter of 2013 was negatively
impacted by an inventory valuation adjustment of $4.1 million for excess hip
implant inventory related to the RESTORIS Trinity Cup and RESTORIS Metafix
Femoral Stem implant system and the RESTORIS Z implant system. The valuation
adjustment was primarily due to the greater than anticipated adoption of our
RESTORIS PST Cup and Tapered Femoral Stem hip implant system, or RESTORIS PST
implant system, which MAKO commercially launched in October 2012, as a percent
of total THA procedures. In the second quarter of 2013, over 75% of the THA
procedure volume was performed with the RESTORIS PST implant system.

Operating expenses were $29.6 million in the second quarter of 2013 compared
to $25.8 million in the second quarter of 2012. The increase in operating
expenses was primarily due to the new medical device tax, which became
effective January 1, 2013, and a $2.0 million asset impairment charge for
excess hip implant instrumentation associated with the RESTORIS Trinity Cup
and RESTORIS Metafix Femoral Stem implant system and the RESTORIS Z implant
system.

Net loss for the three months ended June 30, 2013 was $19.7 million, or
$(0.42) per basic and diluted share, based on average basic and diluted shares
outstanding of 46.9 million. Included in net loss for the second quarter of
2013 was a non-cash and non-operating expense of $6.9 million associated with
the change in fair value of a derivative asset related to a credit facility
agreement. Upon expiration of the credit facility's draw period on May 15,
2013, the derivative asset had no value resulting in a $6.9 million charge to
non-operating expense in the second quarter of 2013. This compares to a net
loss for the same period in 2012 of $8.5 million, or $(0.20) per basic and
diluted share, based on average basic and diluted shares outstanding of 42.2
million.

Cash, cash equivalents and available-for-sale investments were $62.9 million
as of June 30, 2013 compared to $73.3 million as of December 31, 2012.

2013 Six-Month Financial Review

Revenue was $53.0 million for the six months ended June 30, 2013 compared to
$43.3 million for the six months ended June 30, 2012, representing a 22%
increase. Revenue for the six months ended June 30, 2013 primarily consisted
of $31.2 million in revenue from the sale of implants and disposables used in
the 6,262 MAKOplasty procedures performed in the six months ended June 30,
2012, $14.7 million in revenue from the sale of fourteen RIO systems, ten of
which included MAKOplasty THA applications, four MAKOplasty THA applications
sold to existing customers, recognition of two previously deferred
international commercial RIO system sales, and $7.1 million in revenue from
service. In addition to the fourteen recognized RIO system sales, the revenue
associated with the sale of one international commercial system including a
MAKOplasty THA application was deferred until all revenue recognition criteria
are satisfied.

The net loss for the six months ended June 30, 2013 was $29.3 million, or
$(0.63) per basic and diluted share, based on average basic and diluted shares
outstanding of 46.9 million. Included in net loss for the six months ended
June 30, 2013 was non-cash and non-operating expense of $7.6 million
associated with the change in fair value of a derivative asset related to a
credit facility agreement, a $4.4 million non-cash inventory valuation
adjustment for excess hip implant inventory and a $2.3 million non-cash asset
impairment charge associated with hip implant instrumentation. This compares
to a net loss for the same period in 2012 of $20.3 million, or $(0.48) per
basic and diluted share, based on average basic and diluted shares outstanding
of 41.9 million.

Outlook

MAKO's 2013 annual guidance of 45 to 48 RIO systems sold and 13,500 to 14,500
MAKOplasty procedures performed remains unchanged.

Conference Call

MAKO will host a conference call today at 4:30 pm ET to discuss its second
quarter 2013 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
17131905.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 its RIO®
Robotic-Arm Interactive Orthopedic system, joint specific applications for the
knee and hip, and proprietary RESTORIS® implants for orthopedic procedures
called MAKOplasty®. The RIO is a surgeon-interactive tactile surgical platform
that incorporates a robotic arm and patient-specific visualization technology,
which enables precise, consistently reproducible bone resection for the
accurate insertion and alignment of MAKO's RESTORIS implants. The MAKOplasty
solution incorporates technologies enabled by an intellectual property
portfolio including more than 300 U.S. and foreign, owned and licensed,
patents and patent applications. 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," "outlook," "guidance" 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 general economic conditions and credit
conditions, changes in the availability of capital and financing sources for
our company and our customers, unanticipated changes in the timing and
duration of the sales cycle for MAKO's products or the vetting process
undertaken by prospective customers, changes in competitive conditions and
prices in MAKO's markets, changes in the relationship between supply of and
demand for our products, fluctuations in costs and availability of raw
materials, finished goods (including from sole-source suppliers), and labor,
changes in other significant operating expenses, slowdowns, delays, or
inefficiencies in MAKO's product research and development cycles,
unanticipated issues relating to intended product launches, decreases in sales
of MAKO's principal product lines, decreases in utilization of MAKO's
principal product lines or in procedure volume or system utilizations,
increases in expenditures related to increased or changing governmental
regulation or taxation of MAKO's business, both nationally and
internationally, unanticipated issues in complying with domestic or foreign
regulatory requirements related to MAKO's current or future products,
including initiating and communicating product actions or product recalls and
meeting Medical Device Reporting requirements and other requirements of the
United States Food and Drug Administration, or securing regulatory clearance
or approvals for new products or upgrades or changes to MAKO's current
products, developments adversely affecting our actual and potential sales
activities outside the United States, increases in cost containment efforts by
group purchasing organizations, the impact of the United States healthcare
reform legislation enacted in March 2010 on hospital spending, reimbursement,
and the taxing of medical device companies, unanticipated changes in
reimbursement to our customers for our products, any unanticipated impact
arising out of the securities class action or any other litigation, inquiry,
or investigation brought against MAKO, any negative impact from the generation
or interpretation of clinical study results related to MAKOplasty, loss of key
management and other personnel or inability to attract such management and
other personnel, increases in costs of retaining a direct sales force and
building a distributor network, unanticipated issues related to, or
unanticipated changes in or difficulties associated with, the recruitment of
agents and distributors of our products, and unanticipated intellectual
property expenditures required to develop, market, and defend MAKO's products
or market position. 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, 2012 filed on February 28, 2013. 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.

Oxford® is a registered trademark of Biomet Orthopedics.

Condensed Statements of                             
Operations (unaudited)
(in thousands, except per   Three Months Ended June  Six Months Ended June 30,
share data)                 30,
                           2013         2012        2013          2012
                                                               
Revenue:                                                        
Procedures                  $ 16,378    $ 13,018   $31,214     $24,580
Systems                     8,231       8,183      14,730       14,054
Service                     3,616       2,474      7,090        4,680
Total revenue               28,225      23,675    53,034       43,314
Cost of revenue:                                                
Procedures                  7,949       3,118      11,616       5,775
Systems                     3,149       2,796      5,580        5,244
Service                     342         451        784          832
Total cost of revenue       11,440      6,365      17,980       11,851
Gross profit                16,785      17,310     35,054       31,463
Operating costs and                                             
expenses:
Selling, general and
administrative (exclusive   21,841      18,783     41,979       38,159
of depreciation and
amortization)
Research and development
(exclusive of depreciation  5,633       5,244      10,646       10,098
and amortization)
Depreciation and            2,103       1,771      4,149        3,457
amortization
Total operating costs and   29,577      25,798     56,774       51,714
expenses
Loss from operations        (12,792)    (8,488)    (21,720)     (20,251)
Other income (expense), net (6,936)     (33)       (7,613)      25
Loss before income taxes    (19,728)    (8,521)    (29,333)     (20,226)
Income tax expense          –          14         15           39
Net loss                    $ (19,728) $ (8,535) $ (29,348)   $(20,265)
Net loss per share - Basic  $ (0.42)    $ (0.20)  $ (0.63)    $(0.48)
and diluted
Weighted average common                                         
shares outstanding -
Basic and diluted           46,935      42,161     46,870       41,927

Depreciation expense for certain property and equipment was reclassified from
selling, general and administrative expense to depreciation and amortization
expense in the prior period's condensed statement of operations to conform to
the current period's presentation. This change in presentation only affects
the components of operating costs and expenses and does not affect total
operating costs and expenses, revenue, cost of revenue, net loss or cash
flows.

Condensed Balance Sheets (unaudited)                     
(in thousands)                                June 30,    December 31,
                                             2013        2012
                                                        
ASSETS                                                   
Current Assets:                                          
Cash and cash equivalents                     $ 19,579  $ 61,367
Short-term investments                        40,054     11,899
Accounts receivable                           21,131     22,389
Inventory                                     21,580     25,080
Deferred cost of revenue                      1,021      967
Financing commitment asset                    –          7,608
Prepaid and other current assets              2,678      1,972
Total current assets                          106,043    131,282
Long-term investments                         3,295      –
Cost method investment                        4,181      4,181
Property and equipment, net                   22,441     22,996
Intangible assets, net                        5,771      5,657
Other assets                                  2,788      2,786
Total assets                                  $ 144,519 $ 166,902
                                                        
LIABILITIES AND STOCKHOLDERS' EQUITY                     
Current Liabilities:                                     
Accounts payable                              $ 1,742    $ 2,267
Accrued compensation and employee benefits    4,861      4,298
Other accrued liabilities                     7,088      8,727
Deferred revenue                              9,953      9,973
Total current liabilities                     23,644     25,265
Deferred revenue, non-current                 769        800
Total liabilities                             24,413     26,065
Stockholders' Equity:                                    
Common stock                                  47         47
Additional paid-in capital                    371,033    362,364
Accumulated deficit                           (250,924)  (221,576)
Accumulated other comprehensive income (loss) (50)       2
Total stockholders' equity                    120,106    140,837
Total liabilities and stockholders' equity    $ 144,519  $ 166,902

                                                                
Condensed Statements of Cash Flows (unaudited)                   
(in thousands)                                       Six Months Ended June 30,
                                                    2013         2012
                                                                
Operating activities:                                            
Net loss                                             $ (29,348)  $ (20,265)
Adjustments to reconcile net loss to net cash used               
in operating activities:
Depreciation                                         3,552       2,832
Amortization of intangible assets                    884         839
Stock-based compensation                             5,879       6,122
Provision for inventory reserve                      4,443       95
Amortization of premium on investment securities     112         221
Loss on asset impairment                             2,290       511
Provision for doubtful accounts                      398         77
Issuance of stock under development agreement        389         454
Non-cash changes under credit facility               7,608       (62)
Changes in operating assets and liabilities:                     
Accounts receivable                                  860         1,692
Inventory                                            (2,877)     (11,432)
Deferred cost of revenue                             (54)        (458)
Prepaid and other current assets                     (706)       (2,714)
Other assets                                         (2)         (37)
Accounts payable                                     (525)       3,776
Accrued compensation and employee benefits           563         (4,747)
Other accrued liabilities                            (639)       (1,365)
Deferred revenue                                     (51)        2,378
Net cash used in operating activities                (7,224)     (22,083)
Investing activities:                                            
Purchase of investments                              (42,868)    (3,160)
Proceeds from sales and maturities of investments    11,254      22,298
Acquisition of property and equipment                (3,353)     (3,839)
Acquisition of intangible assets                     (998)       (65)
Net cash provided by (used in) investing activities  (35,965)    15,234
Financing activities:                                            
Payment under credit facility                        (1,000)     –
Proceeds from employee stock purchase plan           874         844
Exercise of common stock options and warrants for    1,642       2,176
cash
Payment of payroll taxes relating to vesting of      (115)       (172)
restricted stock
Net cash provided by financing activities            1,401       2,848
Net decrease in cash and cash equivalents            (41,788)    (4,001)
Cash and cash equivalents at beginning of period     61,367      13,438
Cash and cash equivalents at end of period           $ 19,579    $ 9,437

CONTACT: Investors:
         MAKO Surgical Corp.
         954-628-1706
         investorrelations@makosurgical.com
        
         or
        
         Westwicke Partners
         Mark Klausner
         443-213-0500
         makosurgical@westwicke.com
 
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