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Lower Net Loss for Urologix

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Urologix (ULGX) reported net loss of $1.225 million or a loss of 8 cents per share in the fourth quarter of 2012, a nominal improvement from a net loss of $1.33 million or a loss of 9 cents per share in the year-ago quarter. Reported loss, however, lagged the Zacks Consensus Estimate of a loss of 6 cents per share. The reported quarter also included $205,000 of non-cash imputed interest expense on deferred acquisition payments.

For the full year 2012, net loss of 32 cents per share came as a disappointment compared with the previous year’s loss of 26 cents per share and the Zacks Consensus Estimate of loss of 28 cents per share.

Revenues increased 54.2% year over year to $4.5 million during the quarter driven by incremental contribution from the Prostiva radio frequency (“RF”) therapy product revenue. However, revenues dropped 5% on a sequential basis due to lower procedure kit sales volume in the company’s direct channel. Revenues during 2012 increased 35.4% to $17 million.

Gross profit during the quarter was $2.3 million representing gross margin of 50.6%, up from the adjusted (after considering accounting adjustment) margin of 48.4% in the year-ago quarter. Margin during the reported quarter was adversely affected by 110 basis points from non-cash (accounting) items related to the purchase of the Prostiva RF therapy system. Moreover, operating expenses are on the rise as selling and marketing (up 61.5% year over year to $2.1 million) and general and administrative expenses (up 21.8% to $0.8 million) recorded significant increases, while research and development expenses dropped 1% to $0.57 million. We believe that higher expenses were primarily associated with the induction of the Prostiva RF therapy system to the company’s portfolio.

Urologix exited the fiscal with cash and cash equivalents of $1.9 million, lower than $3.1 million at the end of the previous fiscal. The company expects to report revenues of $17.5−$19 million during fiscal 2013.

The Minneapolis based company develops, manufactures and markets non-surgical catheter-based therapies for the treatment of Benign Prostatic Hyperplasia (“BPH”), a disease that affects more than 23 million men worldwide. Under a license agreement signed in September 2011, Medtronic (MDT) and its subsidiary VidaMed granted Urologix an exclusive, worldwide license to the Prostiva RF therapy System for the treatment of BPH.

The stock carries a Zacks #3 Rank (Hold) in the short term.

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