Biopsys Medical Inc – ‘10-Q’ for 9/30/96

As of:  Tuesday, 11/12/96   ·   For:  9/30/96   ·   Accession #:  912057-96-25361   ·   File #:  0-28016

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Quarterly Report   —   Form 10-Q
Filing Table of Contents

Document/Exhibit                   Description                      Pages   Size 

 1: 10-Q        Quarterly Report                                      12     47K 
 2: EX-11.1     Statement re: Computation of Earnings Per Share        1      5K 
 3: EX-27       Exhibit 27 FDS                                         2      8K 

10-Q   —   Quarterly Report
Document Table of Contents

10-Q
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     UNITED STATES
      SECURITIES AND EXCHANGE COMMISSION
      Washington, D.C. 20549

     FORM 10-Q

(Mark One)                                                                      
[ X ]       QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF                
THE SECURITIES EXCHANGE ACT OF 1934       

For the quarterly period ended      September 30, 1996                          
           -----------------------------

      OR
[   ]    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF                   
THE SECURITIES EXCHANGE ACT OF 1934         

For the transition period from _______________ to ____________________          

Commission File    0-28016                                                      
Number             Biopsys Medical, Inc.                                        
            --------------------------------------------------------
              (Exact name of registrant as specified in its charter)

Delaware                               33-0578012     
-----------------------------------       --------------------------------      
(State or other jurisdiction of                  (I.R.S. Employer               
incorporation or organization)                  Identification No.)             

3 Morgan, Irvine CA  92618
----------------------------------------------------------------------------    
(address of principal executive offices)  
  (Zip Code)

  714-460-7800
----------------------------------------------------------------------------    
(Registrant's telephone number, including area code)

----------------------------------------------------------------------------    
(Former name, former address and fiscal year, if changed since last report)     

Indicate by check mark whether the registrant (1) has filed all 
reports required to be filed by Section 13 or 15(d) of the Securities           
Exchange Act of 1934 during the preceding 12 months (or for such shorter        
period that the registrant was required to file such reports), and (2) has      
been subject to such filing requirements for the past 90 days.                  

Yes   X     No                                                                  
----      ----                                                        

As of October 25, 1996,  9,716,880 shares of Common Stock were issued and       
outstanding.                                                                    

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     BIOPSYS MEDICAL, INC.

      FORM 10-Q For the Quarter Ended September 30, 1996

     INDEX

                                                                [Download Table]

                                                                          Page
                                                                          ----
                                                                              
         Facing Sheet                                                       1 

         Index                                                              2 

Part I.  Financial Information                                                

Item 1.  a)   Balance sheets at September 30, 1996 and June 30, 1996        3 

         b)   Statements of operations for the three-month periods            
              ended September 30, 1996 and September 30, 1995               4 

         c)   Statements of cash flows for the three-month periods ended      
              September 30, 1996 and September 30, 1995                     5 

         d)   Notes to financial statements                                 6 

Item 2.  Management's Discussion and Analysis of Financial Condition and      
         Results of Operations                                              7 

Part II. Other Information                                                  10

         Signature                                                          11

         Index to Exhibits                                                  12


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PART 1: FINANCIAL INFORMATION 

ITEM 1.  FINANCIAL STATEMENTS                                                   

BIOPSYS MEDICAL, INC.   
BALANCE SHEETS    

ASSETS    

                                             September 30,          June 30,
                                              --------------------------------
                                                1996                1996
                                              -------------       ------------
                           (unaudited)
CURRENT ASSETS:                                                                 
    Cash and cash equivalents                  $ 8,906,000        $ 12,122,000
    Short-term investments                       6,419,000           9,405,000
    Accounts receivable, net                     1,473,000             985,000
    Inventories                                  2,160,000           1,581,000
    Prepaid expenses and other current assets      256,000             141,000
                                               -----------        ------------
          Total current assets                  19,214,000          24,234,000

LONG-TERM INVESTMENTS                            20,427,000          15,860,000 

PROPERTY AND EQUIPMENT, net                         850,000             776,000 

OTHER ASSETS                                         38,000              44,000 
                                               -----------        ------------

                                               $40,529,000        $ 40,914,000
                                               -----------        ------------
                                               -----------        ------------

LIABILITIES AND STOCKHOLDERS' EQUITY  

CURRENT LIABLITIES:                                                             
    Accounts payable                           $   778,000        $  1,270,000
    Accrued expenses                               694,000             561,000
                                               -----------        ------------
         Total current liabilities               1,472,000           1,831,000

COMMITMENTS                                           -                   -     

STOCKHOLDERS' EQUITY                                                            
Common Stock, $.001 par value; 50,000,000                             
shares authorized; 9,716,880 shares                               
      issued and outstanding                        10,000              10,000
    Additional paid-in capital                  45,083,000          45,092,000
     Accumulated deficit                         (6,753,000)         (6,615,000)
    Deferred stock option compensation             717,000             596,000
                                               -----------        ------------
         Net stockholders' equity               39,057,000          39,083,000
                                               -----------        ------------

                                               $40,529,000        $ 40,914,000
                                               -----------        ------------
                                               -----------        ------------

See accompanying notes to financial statements.   

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BIOPSYS MEDICAL, INC.         
STATEMENTS OF OPERATIONS          
(UNAUDITED)         

                                              Three Months Ended September 30,
                                              --------------------------------
                                                1996                1995
                                              -------------       ------------
Net Sales                                       $  2,401,000        $  224,000  

Cost of Sales                                      1,106,000           153,000  
                                             -------------       -----------
   Gross Profit                                  1,295,000            71,000

Operating Expenses:                                                             
   Research and development                        485,000           236,000
   Sales and marketing                             854,000           272,000
   General and administrative                      563,000           230,000
                                             -------------       -----------
        Total operating expenses                 1,902,000           738,000
                                             -------------       -----------

Interest income                                      469,000            64,000  
Interest expense                                        -              (13,000) 
                                             -------------       -----------
Net loss                                         $  (138,000)       $ (616,000) 
                                             -------------       -----------
                                             -------------       -----------

Net loss per share                               $     (0.01)       $    (0.08) 
                                             -------------       -----------
                                             -------------       -----------

Weighted average shares outstanding               10,274,000         7,593,000  

See accompanying notes to financial statements. 

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BIOPSYS MEDICAL, INC.         
STATEMENTS OF CASH FLOWS          
(UNAUDITED)         

                                              Three Months Ended September 30,
                                              --------------------------------
                                                1996                1995
                                              -------------       ------------
CASH FLOWS FROM OPERATING ACTIVITIES:                                           
    Net Loss                                   $   (138,000)      $  (616,000)
Adjustments to reconcile net loss to                                  
net cash used in operating activities:                            
   Depreciation and amortization                    53,000            24,000
 Deferred Compensation                           121,000               -
Changes in assets and liabilities:                                    
        Accounts receivable                        (488,000)          (84,000)
Prepaid expenses and other current                          
          assets                                  (115,000)           10,000
        Inventories                                (579,000)         (279,000)
       Accounts payable and accrued expenses      (359,000)          154,000
                                               -------------       -----------
          Net cash used in operating activities  (1,505,000)         (791,000)

CASH FLOWS FROM INVESTING ACTIVITIES:                                           
  Acquistion of property and equipment             (121,000)         (126,000)
Short-term investment maturities                2,986,000               - 
  Long-term investment purchases                 (4,567,000)         (999,000)
                                               -------------       -----------
          Net cash used in investing activities  (1,702,000)       (1,125,000)

CASH FLOWS FROM FINANCING ACTIVITIES:                                           
 Stock issuance expenses                          (9,000)              -
Net proceeds from issuance of Series C                                
     preferred stock                                   -           6,495,000
                                               -------------       -----------
Net cash provided (used) by                             
            financing activities                    (9,000)        6,495,000
                                               -------------       -----------

NET INCREASE (DECREASE) IN CASH AND CASH                                        
EQUIVALENTS                                     (3,216,000)        4,579,000

CASH AND CASH EQUIVALENTS, beginning of period    12,122,000            13,000  
                                               -------------       -----------

CASH AND CASH EQUIVALENTS, end of period          $ 8,906,000       $ 4,592,000 
                                               -------------       -----------
                                               -------------       -----------

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION                                
 Cash paid for income taxes                  $       -         $       -
                                               -------------       -----------
                                               -------------       -----------
 Cash paid for interest                      $       -         $       -
                                               -------------       -----------
                                               -------------       -----------

   See accompanying notes to financial statements.

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     BIOPSYS MEDICAL, INC.

     NOTES TO FINANCIAL STATEMENTS
     (UNAUDITED)

1.    BASIS OF PRESENTATION                                                     

The accompanying balance sheet as of September 30, 1996 and the     
statements of operations and cash flows for the three months ended September    
30, 1996 and 1995 have been prepared by Biopsys Medical, Inc.( the              
"Company"), without audit. In the opinion of management, all adjustments        
necessary to present fairly the financial position, results of operations,      
and cash flows at September  30, 1996, and for all periods presented, have      
been made.                                                                      

 Although the Company believes that the disclosures in these financial
statements are adequate to make the information presented not misleading,       
certain information and footnote disclosures required by Generally Accepted     
Accounting Principles for complete financial statements have been omitted       
pursuant to the rules and regulations of the Securities and Exchange            
Commission ("SEC"). This financial data should be reviewed in conjunction       
with the audited financial statements and notes thereto included in the         
Company's Form 10-K for the year ended June 30, 1996.  The results of           
operations for the three months ended September 30, 1996 may not necessarily    
be indicative of the operating results for the full 1997 fiscal year.           

2.    COMPUTATION OF NET LOSS PER SHARE                                         

Net loss per share has been computed by dividing the net loss by the
weighted average number of common and common equivalent shares outstanding      
during the period. Pursuant to Securities and Exchange Commission Staff         
Accounting Bulletin Topic 4D, stock options granted during the twelve months    
prior to the date of the initial filing of the Company's Form S-1               
Registration Statement have been included in the calculation of common          
equivalent shares using the treasury stock method, as if they were              
outstanding as of the beginning of each period presented.                       

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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND         
RESULTS OF OPERATIONS                         

  The following discussion of the financial condition and results of
operations of the Company should be   read in  conjunction  with  the           
unaudited Financial  Statements and  related  Notes  thereto  included in       
Part I - Item 1 of this Form 10-Q and with the Financial Statements and         
related Notes thereto included in its June 30, 1996 Annual Report on Form       
10-K.  This Report on Form 10-Q contains certain forward-looking statements     
within the meaning of Section 27A of the Securities Act of 1933 and Section     
21E of the Securities Exchange Act of 1934.  Actual events or results may       
differ materially from those projected in the forward-looking statements as a   
result of the factors described herein and in the documents incorporated        
herein by reference. Such forward-looking statements include, but are not       
limited to, statements concerning the risk of breast cancer; breast cancer      
screening; improvements in ultrasound; business strategy; development and       
introduction of new products; research and development; marketing, sales and    
distribution; manufacturing; competition; third-party reimbursement;            
government regulation; and operating and capital requirements.                  

OVERVIEW                                                                        

     Since its inception in July 1993, the Company has been engaged in the
design, development, clinical testing and, more recently, the manufacture and   
sale of the Mammotome Biopsy System. The Company received clearance of its      
510(k) premarket notification for the Mammotome Biopsy System from the FDA in   
April 1995, began limited sales to selected customers in May 1995 and           
commercially introduced the Mammotome Biopsy System in August 1995.  For the    
quarter ended September 30, 1996, net sales of the Mammotome Biopsy System      
totaled $2,401,000.  As of September 30, 1996, the Mammotome Biopsy System      
had been used in over 23,000 breast biopsy procedures at approximately 317      
sites in the United States.                                                     

   The Company has a limited history of operations and has experienced
significant operating losses since inception.  As of September 30, 1996 the     
Company had an accumulated deficit of approximately $6.8 million.  Results of   
operations may fluctuate significantly from quarter to quarter and will         
depend upon numerous factors, including the extent to which the Company's       
products continue to gain market acceptance, actions relating to regulatory     
and reimbursement matters, progress of clinical trials, introduction of         
alternative means for less-invasive breast biopsy by competitors of the         
Company, pricing of competitive products and the cost and effect of             
promotional discounts and marketing programs.  There can be no assurance that   
the Company will successfully commercialize the Mammotome Biopsy System or      
achieve significant revenues or profitability.  Furthermore, there can be no    
assurance that revenues and profitability, if achieved, will be sustained on    
a quarterly or annual basis, or at all.                                         

The Mammotome procedure requires the use of an imaging modality 
during the procedure.  Currently, the only imaging modality with which the      
Mammotome Biopsy System is compatible is a prone stereotactic x-ray imaging     
table.  Two companies, Fischer and Lorad, have sold substantially all of the    
approximately 1,000 prone stereotactic imaging tables installed in the United   
States.  The Company has established non-exclusive marketing arrangements       
with Fischer and Lorad under which Fischer and Lorad can purchase Mammotome     
drive units from the Company at a discount from list price and can then         
bundle Mammotome drive units with stereotactic imaging tables for sale to       
customers.  However, Mammotome probes and other disposable products related     
to the Mammotome Biopsy System are purchased by the customer directly from      
the Company, not from Fischer or Lorad. There can be no assurance that          
Fischer and Lorad will purchase or promote the Mammotome drive unit or that     
they will continue their marketing arrangements with the Company.  Lorad also   
has an arrangement with United States Surgical Corporation ("USSC"), a          
competitor of the Company, under which Lorad manufactures stereotactic tables   
for USSC on a private label basis.  In addition, Fischer and Lorad may have     
additional arrangements to market other competing breast biopsy systems.        
There can be no assurance that these or other imaging equipment manufacturers   
will not redesign the stereotactic tables so that they would not be             
compatible with the Mammotome Biopsy System.  The failure or loss of such       
marketing arrangements could have a material adverse affect on the Company's    
business, financial condition and results of operations.                        

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 The Company has limited experience in manufacturing the Mammotome
Biopsy System.  If the Company is unable to manufacture an adequate number of   
drive units or probes on a cost-effective and timely basis, it would have a     
material adverse effect on the Company's ability to realize significant         
product revenues for at least the next several quarters.  The Company           
currently contracts with third parties to manufacture certain components of     
the Mammotome Biopsy System. Final assembly, sterilization and packaging of     
the Mammotome Biopsy System is currently performed by the Company in-house      
and by contract manufacturers.  The Company has limited capacity to             
manufacture the Mammotome Biopsy System and will be required to increase its    
in-house capability to manufacture more of the system's components.  There      
can be no assurance that the Company will be able to attract, train and         
retain the required personnel or will be able to increase its manufacturing     
capability in a timely manner, or at all.  There can be no assurance that       
reliable, high-volume manufacturing can be established or maintained at         
commercially reasonable costs on a timely basis, or at all.  If the Company     
is unable to increase its in-house manufacturing capability, the Company may    
need to obtain alternative manufacturing facilities or establish additional     
contract manufacturing for its products.  Delays associated with, or the        
inability to establish, such additional capacity could have a material          
adverse affect on the Company's business, financial condition and results of    
operations.                                                                     

    The Company purchases components used in the Mammotome Biopsy System
from various suppliers.  A limited number of parts and components are           
currently available only from single sources. The Company is in the process     
of qualifying additional sources for these components.  There can be no         
assurance that the Company will be successful in qualifying any additional      
sources on a timely basis, or at all. Medical device companies frequently       
experience difficulties in obtaining required quantities of components          
necessary to manufacture their products.  For example, the industry has         
experienced shortages of the type of stainless steel used in the Mammotome      
probes, and there can be no assurance that such shortages will not occur in     
the future.  If the Company or any of its contract manufacturers encounter      
future manufacturing difficulties, including problems involving production      
yields, quality control and assurance, shortages of components or shortages     
of qualified personnel, it could have a material adverse effect on the          
Company's business, financial condition and results of operations.  In          
addition, prior to international commercialization, the Company will be         
required to attain and maintain compliance with GMP requirements and ISO 9001   
standards.  Failure to either attain or maintain compliance with the            
applicable regulatory requirements of various regulatory agencies would have    
a material adverse effect on the Company's business, financial condition and    
results of operations.                                                          

RESULTS OF OPERATIONS                                                           

QUARTER ENDED SEPTEMBER 30, 1996 AND 1995                                       

  Net sales for the quarter ended September 30, 1996 were $2,401,000
compared to $224,000 during the quarter ended September 30, 1995.  The          
Company commenced commercial shipments of its Mammotome Biopsy System in        
August 1995.  Net sales for the quarter ended September 30, 1996 reflect        
sales of 97 Mammotome drive units and approximately 11,000 disposable probes.   

  During the quarter ended September 30, 1996, cost of sales totaled
$1,106,000, or 46% of net sales compared to $153,000 or 68% of net sales in     
the prior year.  In addition to direct material and subassembly costs           
associated with products sold, cost of sales also reflect increases in          
manufacturing personnel and other overhead costs associated with the            
commencement of manufacturing and assembly operations, engineering and          
support functions, and materials procurement and handling functions.            

   Research and development expenses increased 106% to $485,000 during
the quarter September 30, 1996 from $236,000 during the quarter ended           
September 30, 1995.  This increase was primarily due to research and            
development expenses associated with the continued development of the           
11-gauge probe and the MicroMark Clip during the quarter ended September 30,    
1996.                                                                           

   Selling general and administrative expenses increased to $1,417,000
during the quarter ended September 30, 1996 from $503,000 during the quarter    
ended September 30, 1995.  This increase was primarily due to the hiring of     
sales personnel, increased marketing activities and increases in                
administrative personnel and related costs to support commercial sales of the   
Mammotome Biopsy System.                                                        

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Interest income increased to $469,000 during the quarter ended  
September 30, 1996 from $51,000, net during the quarter ended September 30,     
1995.  The increase was due to higher cash balances and short-term and          
long-term investments associated with completion of Company's initial public    
offering in May 1996.                                                           

LIQUIDITY AND CAPITAL RESOURCES                                                 

In May 1996, the Company completed an initial public offering of
2,587,500 shares of common stock (including the underwriters overallotment of   
337,500 shares) at $15.00 per share.  Net proceeds to the Company were          
approximately $35.3 million.  From inception through April 1996, the Company    
financed its operations primarily through the private placement of equity       
securities totaling $9.7 million.  These equity securities were converted to    
common stock in conjunction with the initial public offering. As of September   
30, 1996, cash, cash equivalents, short-term and long-term investments          
totaled $35.7 million. The Company's cash used in operating activities          
increased to $1.5 million for the quarter ended September 30, 1996 from $.8     
million for the quarter ended September 30, 1995, primarily resulting from      
increases in accounts receivable and inventories related to the commercial      
introduction of the Mammotome Biopsy System.                                    

 The Company's principal source of liquidity at September 30, 1996
consisted of cash, cash equivalents, short term and long term investments of    
$35.7 million.  The Company has adopted investment guidelines which restrict    
the types and quality of investments the Company is authorized to enter into.   
At September 30, 1996, the Company had invested approximately $.4 million in  
money market funds, approximately $16.1 million in commercial paper and         
corporate bonds rated a minimum of A1/P1, and approximately $19.2 million in    
U.S. government treasury notes or federal agencies.  At September 30, 1996,     
the Company had no long term debt.  The Company has never had and currently     
does not have commitments for credit facilities, such as revolving credit       
agreements or lines of credit, that could provide additional working capital.   

  The Company believes that the current cash balances and short-term
and long-term investments will be sufficient to meet the Company's operating    
and capital requirements through fiscal 1997.  The Company's future liquidity   
and capital requirements will depend on numerous factors, including the         
extent to which the Company's Mammotome Biopsy System gains market              
acceptance, the timing of regulatory actions regarding the Company's            
potential future products, the costs and timing of expansion of sales,          
marketing and manufacturing activities, obtaining and enforcing patents         
important to the Company's business, results of clinical trials and             
competition.  There can be no assurance that the Company will not be required   
to raise additional capital, or that such capital will be available on          
acceptable terms, or at all.                                                    

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      PART II. OTHER INFORMATION

ITEM 1.     LEGAL PROCEEDINGS                                                   

None.                                                   

ITEM 2.     CHANGES IN SECURITIES                                               

None.                                                   

ITEM 3      DEFAULTS IN SENIOR SECURITIES                                       

None                                                    

ITEM 4.     SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS                 

None                                                    

ITEM 5.     OTHER INFORMATION                                                   

None                                                    

ITEM 6.     EXHIBITS AND REPORTS ON FORM 8-K                                    

       (a)                                                        Page
11.1   Computation of net loss per share (see   
       note 2 to Financial Information in Part I
                  of this Form 10-Q)                                13

           27   Financial Data Schedule                             14

(b)      Reports on Form 8-K                            

None                                  

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      SIGNATURES

      Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this Report to be signed on its behalf by the    
undersigned, thereunto duly authorized.                                         

                   BIOPSYS MEDICAL, INC.

     By: /s/
                                      ----------------------------------
                   Steven J. Naber
                                  Vice President of Finance  and
                           Chief Financial Officer
                                  (Duly Authorized and Principal
                                     Financial and Accounting Officer)

Date:  November 11, 1996                                                        

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     BIOPSYS MEDICAL, INC.
     INDEX TO EXHIBITS

EXHIBIT                                                       SEQUENTIALLY      
NUMBER      DESCRIPTION                                       NUMBERED PAGE     
-------     -----------                                       -------------     

11.1        Statement Re: Computation of Net loss Per Share        13           

27          Financial data schedule                                14           

12  

Dates Referenced Herein   and   Documents Incorporated by Reference

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Filed on:		11/12/96
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		10/25/96		1
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		6/30/96		6		7			10-K
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