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IsoRay Trails Estimates in 1Q

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Medical isotope maker IsoRay Inc's (AMEX:ISR - News) first-quarter fiscal 2012 (ended September 30) loss per share of 4 cents was a penny higher than the Zacks Consensus Estimate and in line with the year-ago loss. Net loss (applicable to common shareholders) widened 26% year over year to $1.1 million as the Washington-based company witnessed a decline in its top line.

The company, which makes the Cesium-131 internal radiation therapy (brachytherapy) isotope, posted product sales of roughly $1.21 million, down 8.6% year over year, missing the Zacks Consensus Estimate of $2 million.

The decline in revenues is attributable to lower sales from prostate brachytherapy (down 11%), which more than offset higher revenues in other treatment areas (including lung, brain, colorectal and head and neck cancers). The company reported a decline in the purchase of prostate brachytherapy by some of its major customers.

Revenues from other treatments continues to grow with sales climbing 20% year over year in the first quarter, boosted by increased adoption of the company’s Cesium-131 brachytherapy seeds by physicians for treating cancers (in body sites other than prostate). IsoRay ended the first quarter with more than 100 such treatments across major cancer centers in the U.S. Non-prostate treatment sales accounted for 10% of total revenues in the quarter, an increase from 7% recorded a year-ago.

Gross margin plummeted to 5.5% from just 16.2% a year-ago due to the twin impact of lower revenues and higher cost of sales (up 3%). The company stated that a temporary rise in the cost of isotope led to the increase in cost of sales.

Operating expenses rose roughly 8% year over year to $1.17 million. IsoRay is spending heavily on developing new non-prostate therapies which is reflected by a 119% year-over-year increase in research and development expenses in the quarter.

IsoRay ended the quarter with roughly $1.6 million in cash and cash equivalents, up roughly 56% year over year, with no debt.  

IsoRay develops and markets isotope-based medical products and devices for the treatment of cancer and other malignant diseases. It competes with Theragenics (NYSE:TGX - News) and C.R. Bard (NYSE:BCR - News) among others.

The company secured, in September 2011, the U.S. approval for its GliaSite radiation therapy system, a balloon catheter used in treating brain cancer. In its first quarter commentary, IsoRay stated that it expects GliaSite to be approved shortly by the Washington State Department of Health, Radiation Division, a final step before it can start taking orders for the product.

IsoRay remains optimistic that expanded market traction of Cesium-131 coupled with ongoing clinical developments and new product launches would spur growth moving forward. The company feels that favorable study results will stimulate a recovery in its prostate therapy sales.

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