Apr 18, 2002
Guidant Reports First Quarter Record Sales and Earnings

13 Percent Earnings Growth Leads to Earnings Per Share of $0.47, as Adjusted; Second Quarter Financial Guidance Reflects Enhanced Growth

Indianapolis, IN - Guidant Corporation (NYSE and PCX: GDT), a global leader in technology for the treatment of cardiac and vascular disease, today reported record first quarter 2002 sales of $709.7 million. Guidant achieved sales growth of 6 percent versus the prior year, and 7 percent on a constant currency basis. Net income of $143.8 million and earnings per share of $0.47, reflecting growth of 13 percent and 14 percent respectively, were also first quarter records, as adjusted. Reported net income and earnings per share totaled $139.5 million and $0.45, respectively, and include a one-time charge for purchased research and development associated with a co-exclusive license from Novartis Pharma AG for the rights to utilize the drug everolimus for drug eluting stents.

Three Months Ended March 31, 2002

Guidant's worldwide total sales growth reflected advancements in all geographic regions led by an increase in international sales of 11 percent in constant currency when compared to the prior year. "Once again, our strong performance was attributable to products resulting from our internal development efforts," stated Ronald W. Dollens, Guidant president and CEO. "Continuing acceleration of the implantable defibrillator market, worldwide growth of coronary stents led by international stent sales and emerging therapies highlighted our performance. Net income as a percent of sales exceeded 20 percent notwithstanding our continued significant investment in research and development and sales and marketing," commented Dollens.

Quarter Highlights

Worldwide sales of implantable defibrillator systems increased 13 percent in the period to $193.4 million. International defibrillator sales of $37.8 million were up 14 percent over the prior year, while U.S. sales of $155.6 climbed 13 percent. International and U.S. implantable defibrillator unit volume grew 20 percent and 16 percent, respectively. "Growth was driven by greater use of implantable defibrillators along with the increasing international adoption of heart failure devices with defibrillation capability," said Dollens. U.S. pacemaker sales grew 6 percent to $92.0 million, in spite of several competitive launches during the period. Worldwide pacemaker sales were $141.7 million, an increase of 2 percent over the prior year, led by a 7 percent constant currency growth in Europe. "The recent U.S. approval and second quarter launch of the INSIGNIA(tm) family of pacemakers will continue Guidant's strong presence in the pacemaker market," Dollens commented.

In the quarter, Guidant provided clarification regarding the U.S. regulatory status of CONTAK CD®/ EASYTRAK® system for heart failure patients. As previously stated, Food and Drug Administration (FDA) review of the CONTAK CD/EASYTRAK system continues and is expected to be completed within the next few weeks. "Additionally, we anticipate FDA approval for expanded use of implantable defibrillators in patients identified by the landmark MADIT II trial," remarked Dollens. As recently presented at the American College of Cardiology meeting and published in The New England Journal of Medicine, the MADIT II trial demonstrated that patients who had a prior heart attack and compromised heart function and who received an implantable defibrillator experienced a 31 percent reduction in mortality compared to the use of drug therapy alone. The filing is under expedited review. "These results could lead to a doubling of the number of patients currently indicated for implantable defibrillators," continued Dollens.

Worldwide coronary stent sales reached $220.9 million for the quarter-an increase of 4 percent over the first quarter 2001. Coronary stent sales in the United States were slightly above the prior year at $157.9 million. "As a result of continuing strong acceptance of the MULTI-LINK PENTA(tm) and the MULTI-LINK PIXEL(tm) Coronary Stent Systems, Guidant held market share gains realized during the fourth quarter of 2001 for a market share of approximately 45 percent in the United States," Dollens observed. International coronary stent sales of $63.0 million grew 13 percent with 20 percent growth in constant currency. Worldwide, pricing remained stable compared to the fourth quarter of 2001.

"We also experienced substantial progress in our drug eluting stent program completing full enrollment of 1,043 patients in our U.S. DELIVER trial using the ACHIEVE(tm) paclitaxel eluting stent via our collaboration with Cook Incorporated. We anticipate completion of the follow-up phase of the trial this year with FDA filing immediately thereafter," commented Dollens. In Europe, Guidant is awaiting CE Mark approval for the ACHIEVE drug eluting coronary stent submitted in January of this year. "The first quarter was also highlighted by the announcement of a worldwide co-exclusive license agreement with Novartis Pharma AG granting Guidant rights to utilize the drug everolimus in the development of drug eluting stents. This agreement further strengthens our internal program and capabilities as we prepare for next-generation drug eluting stents," Dollens concluded.

Worldwide sales from the GALILEO(tm) Intravascular Radiotherapy System increased to $6.1 million during the quarter. During the quarter in the United States, Guidant increased the number of accounts utilizing the GALILEO system to more than 80; over 125 contracts for system placements have been signed.

Sales of endovascular products, including the ANCURE® ENDOGRAFT® System, were $32.2 million, up 10 percent. "Expansion of new product offerings and investment in sales force resources led to strong performance of peripheral products," said Dollens. Led by endoscopic vessel harvesting system growth, cardiac surgery product sales grew 19 percent over the prior year to $20.3 million in the quarter.

Gross profit of $537.6 million was a first quarter record representing 75.8 percent of sales and an improvement over the 74.7 percent gross profit percentage reported for the first quarter of 2001. The gross profit percentage for the first quarter was at the upper end of Guidant's historical range.

"Guidant continued to focus on the future through investment in sales force expansion and key clinical trials for drug eluting stents and heart failure, while also setting records in profitability," said Dollens. Operating expenses for the first quarter of 2002 were $322.4 million, as adjusted to exclude purchased research and development charges of $6.8 million. Net other expenses decreased primarily due to the elimination of $8.0 million pre-tax goodwill amortization as directed by Statement of Financial Accounting Standards (SFAS) 142.

The company's effective tax rate for the quarter was 26 percent, compared to 28 percent in the first quarter of 2001, each as adjusted. The tax rate decline reflected benefits from increased overseas manufacturing, strategic investments in research and development, and the elimination of primarily non-tax deductible goodwill amortization. Financial statements, including reported totals and adjustments, are described in the attachments.

Second Quarter Financial Guidance

"Sales and earnings guidance for the second quarter reflects sales growth in the range of 10 percent to 13 percent with earnings per share growth of 25 percent to 30 percent year over year, adjusted," commented Dollens.

Earnings Webcast Information

As previously announced, Guidant will conduct a live webcast today, Thursday, April 18, at 5 p.m. EDT. The live webcast of Guidant's conference call will be accessible through Guidant's website or at CCBN's individual investor center. The webcast will be archived on both websites for future on-demand replay. The webcast will also include presentation visuals.

The call will be hosted by Guidant's President and CEO Ronald W. Dollens and will feature a review of current financial results. Also participating on the call will be Guidant's Group Chairmen, Ginger L. Graham and A. Jay Graf, and Vice President, Finance and CFO Keith E. Brauer.

System requirements for the webcast include Internet Explorer 5.0 (or higher) or Netscape Navigator 4.0 (or higher). Users also should have the most recent version of Windows Media Player, which can be downloaded for free. Users may experience varying levels of performance based on their connection speed, system capabilities and presence of a corporate firewall. To ensure a connection, users should go to the program five to 15 minutes before its start.

Guidant Corporation pioneers lifesaving technology, giving an opportunity for a better life today to millions of cardiac and vascular patients worldwide. The company, driven by a strong entrepreneurial culture of more than 10,000 employees, develops, manufactures and markets a broad array of products and services that enable less invasive care for some of life's most threatening medical conditions.

View this release and financials in PDF format.

This release includes forward-looking statements concerning financial guidance, the timing of regulatory filings and approvals and expanded indications for Guidant's products. The statements are based on assumptions about many important factors, including the results of product trials, internal FDA processes and timelines, product and market development, competition, litigation, foreign exchange and the factors listed on exhibit 99 to Guidant's most recent 10-K. As such, they involve risks that could cause actual results to differ materially. The company does not undertake to update its forward-looking statements.