After implementing a restructuring plan, Urologix Inc. has recorded a decrease in revenue.
The Minneapolis-based company develops, manufactures and markets minimally invasive medical products used to treat benign prostatic hyperplasia, or enlarged prostate disease.
On May 6, Urologix announced that its revenues of $3.4 million were down by 18 percent compared to the same quarter the previous year, citing a lower volume of units that were sold.
Net sales were also down. For the three months ended Dec. 31, Urologix generated $3.8 million, compared to $4.4 million for the same period the previous year. The company raised substantial doubt about the ability to continue as a going concern because of the history of recurring losses and negative cash flows, according to a Feb. 12 filing with the U.S. Securities and Exchange Commission.
Despite a recently completed restructuring process on April 10, Urologix warns that it may not have enough cash on hand to sustain operations for the next 12 months.
As part of the restructuring, which was aimed at cutting cash use, Urologix altered its sales approach and sales team, refocusing towards high-potential strategic accounts. "We expected there would be a learning curve as our team adjusted to this new deployment model," says Greg Fluet, Urologix CEO in a statement, regarding the revenue decrease. The changes are meant to help it get into the new health care delivery models, such as accountable-care organizations (ACOs) and large hospital networks, to demonstrate the effectiveness of its product.
“The development of a new organizational structure reflects two important goals for Urologix," Fluet adds. "The first is to create a sustainable core business that should position the company to become operationally cash flow positive. The second is to evolve Urologix’s strategy to align our business with broader shifts in the urology market, which is evolving towards both consolidation of urology practices and hospital employment of urology care providers."
To increase revenue, Urologix plans to focus on sales of its Cooled ThermoTherapy and Prostiva products.
The company is also managing expenses related to its acquisition of the Prostiva product line, used to treat prostate problems, from Medtronic Inc.
(NYSE: MDT). In March, after Urologix was late on a payment to Medtronic, the company agreed that it would not draw funds under its line of credit with Silicon Valley Bank while money owed to Medtronic was past due, without permission.
The company's ability to continue as a going concern depends upon not defaulting on the Medtronic note, it says in the SEC filing.
Urologix entered into a licensing agreement with Medtronic for the Prostiva product, which included a $500,000 payment on Sept. 6, 2011, and another $500,000 payment due on Sept. 6, 2012. In June 2013, the company entered into a restructuring agreement with Medtronic related to $7.5 million that it owed the company, and ended up paying just $2 million, plus the $500,000 due in 2012. Also as part of the restructuring, Urologix entered into a $5.3 million note agreement with Medtronic to continue paying for Prostiva, but did not pay the $650,000 due, as of Dec. 31, or a $65,000 maintenance fee due in October, on time, according to the February SEC filing.
The company listed $10.8 million in assets and $12.7 million in liabilities on its latest quarterly filing.
For last week's edition of Turnaround Tuesday, see "Stanadyne Sells Unit to Pay Debt."
For more struggling companies, see Mergers & Acquisitions Distressed Company Watch List.