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MINRAD International, Inc. Announces 2007 Financial Results
Date:3/31/2008

ORCHARD PARK, N.Y., March 31 /PRNewswire-FirstCall/ -- MINRAD International, Inc. (Amex: BUF) today announced its financial results for the year and quarter ended December 31, 2007.

(in thousands,

except per share data) Year Ended Variance

December 31, December 31, $ %

2007 2006

Revenue $12,952 $16,341 $(3,389) (21)%

Cost of goods sold 13,518 10,754 2,764 26%

Gross profit (loss) (566) 5,587 (6,153) (110)%

Gross margin (4)% 34%

Operating Expenses

Sales & marketing 8,407 5,074 3,333 66%

Research & development 5,404 2,916 2,488 85%

Finance & administrative 4,375 4,636 (261) (6)%

Total Operating

Expenses 18,186 12,626 5,560 44%

Net loss available to

common shareholders $(18,798) $(7,272) $(11,526) 159%

Earnings per share

(basic and diluted) $(0.39) $( 0.20) $(0.19)

Revenue:

(in thousands) Year Ended Variance

December 31, December 31, $ %

2007 2006

Revenue

Sevoflurane $8,378 $10,538 $(2,160) (21)%

Other inhalants 4,107 5,712 (1,605) (28)%

Total Anesthesia &

Analgesia 12,485 16,250 (3,765) (23)%

Image Guidance 467 (10,552) (499)

Inventory reserve 2,510 -

Prepaid expenses and other 442 (751)

Increase (decrease) in liabilities:

Accounts payable 6,660 (2,450)

Accrued expenses (258) 856

Deferred income 1,000 -

Net cash used by operating activities (10,450) (15,021)

Cash flows from investing activities:

Purchases of investments - (12,424)

Sales of investments 7,249 5,217

Purchases of property and equipment (11,960) (5,496)

Acquisition of other assets (230) (309)

Net cash used by investing activities (4,941) (13,012)

Cash flows from financing activities:

Borrowings under demand notes payable 6,000 400

Repayments under demand notes payable - (3,120)

Borrowings under long-term debt 2,015 -

Principal payments on long-term debt (83) -

Proceeds from warrants exercised 2,066 475

Proceeds from sale of common stock, net of costs - 34,512

Preferred cash dividends - (656)

Proceeds from options exercised 967 417

Net cash provided by financing activities 10,965 32,028

Net (decrease) increase in cash and cash

equivalents (4,426) 3,995

Cash and cash equivalents - beginning of year 4,664 669

Cash and cash equivalents - end of year $238 $4,664

MINRAD INTERNATIONAL, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY

(in thousands, except number of shares)

Series A Addi-

Convertible tional Accum-

Preferred Stock Common Stock Paid-in ulated

Shares Amount Shares Amount Capital Deficit Total

Balance at

December

31, 2005 11,200 $3 29,058,431 $290 $40,262 $(36,209) $4,346

Sale of

common

stock,

net of

costs - - 11,500,000 115 34,397 - 34,512

Conversion

of

preferred

stock and

accrued

dividends

to common

stock

(11,200) (3) 5,677,666 57 129 - 183

Preferred

stock

dividends - - - - - (669) (669)

Stock

warrants

exercised - - 564,213 6 469 - 475

Stock

options

exercised - - 247,930 2 415 - 417

Stock

based

compen-

sation - - - - 841 - 841

Net loss - - - - - (6,603) (6,603)

Balance at

December

31, 2006 - $ - 47,048,240 $470 $76,513 $(43,481) $33,502

Stock

warrants

exercised - - 1,121,047 12 2,260 - 2,272

Stock

options

exercised - - 519,515 5 962 - 967

Stock based

compen-

sation - - - - 1,134 - 1,134

Net loss - - - - - (18,798) (18,798)

Balance at

December

31, 2007 - $ - 48,688,802 $487 $80,869 $(62,279) $19,077

91

376 414%

Total Revenue $ 12,952 $ 16,341 $(3,389) (21)%

Revenue was $12,952 for 2007, a decrease of $3,389 or 21% compared to $16,341 in 2006. This decrease is primarily attributable to a decline in domestic sales due to disruptions in our manufacturing operations which limited production output and sales in 2007 which resulted from the addition and start-up of a new independent sevoflurane manufacturing line in December, 2007. International sales were relatively flat between the two periods.

Our anesthesia and analgesia product line generated 96% and 99% of revenue for 2007 and 2006, respectively. Sevoflurane sales in 2007 were $8,378, a decrease of $2,160 compared to 2006. Isoflurane sales in 2007 were $3,211, a decrease of $1,068 when compared to 2006.

Sales to Original Equipment Manufacturers, or OEMs, which are included in United States sales, increased by $188, or 15%, from $1,257 for 2006 compared to $1,445 for 2007 due to the availability of sevoflurane as a product choice in addition to isoflurane and enflurane. Sales to our primary North American distributor decreased by $3,899 from $5,367 in 2006 to $1,468 for 2007.

(in thousands) Year Ended Variance

December 31, December 31, $ %

2007 2006

Revenue

United States $3,358 $7,061 $(3,703) (52)%

Europe 745 1,661 (916) (55)%

Western Hemisphere

(excluding U.S.) 6,851 6,125 726 12%

Pacific Rim 1,998 1,494 504 34%

Total Revenue $ 12,952 $ 16,341 $(3,389) (21)%

Gross Profit:

Gross profit or loss was $(566), a decrease of $6,153, or 110% compared to $5,587 in 2006. The reduction in gross profit was driven by a decrease in revenue and an increase in cost of goods sold, both of which are attributable to the disruption in operations which limited production output and sales resulting from the addition and start-up of a new independent sevoflurane manufacturing line in 2007. A reduction in gross profit also resulted from a charge to cost of goods sold of $2,510 to establish a reserve for work-in-process inventory to cover supplier related issues that have unfavorably affected product yield. It is the Company's intent to resolve these issues in an expedited manner and recover some of the costs incurred associated with the yield losses. Gross margin was (4.4)% in 2007 compared to 34.2% in 2006.

Operating Expenses:

Sales and marketing expenses for 2007 were $8,407 or 65% of revenue compared to $5,074, or 31% of revenue in 2006. The $3,333 increase was primarily driven by the expansion of our sales organization both domestically and internationally to accommodate anticipated expanded sales growth.

Research and development expenses for 2007 were $5,404, or 42% of revenue compared to $2,916 or 18% of revenue in 2006. The increase was primarily due to an expansion of our research and development efforts related to our anesthesia & analgesia, real-time image guidance, and conscious sedation product lines.

Finance and administration expenses for 2007 were $4,375 or 34% of revenue compared to $4,636 or 28% of revenue in 2006. Increases in deprecation and office rental expenses in 2007 were offset by decreases in employment expenses in 2007.

Net Loss:

For 2007, the Company experienced a loss of $(18,798), or $(0.39) per common share. This compares with a loss of $(7,272), or $(0.20) per common share the Company experienced in 2006. The increased operating loss for the year is primarily due to decreases in gross margin and revenue combined with increases in our overall operating expenses between the two periods.

Subsequent Events:

We estimate revenue for the first quarter of 2008, ending on March 31st, 2008, will be in the range of $11.5 to $12.0 million.

Fourth Quarter 2007 Results:

(in thousands, except

per share data) Quarter Ended Variance

December 31, December 31, $ %

2007 2006

Revenue $3,032 $5,892 $(2,860) (49)%

Cost of goods sold 4,710 4,633 77 2%

Gross profit (loss) (1,678) 1,259 (2,937) (233)%

Gross margin (55)% 21%

Operating Expenses

Sales & marketing 2,391 1,891 500 27%

Research & development 1,367 1,060 307 29%

Finance &

administrative 1,240 1,328 (88) (7)%

Total Operating

Expenses 4,998 4,279 719 17%

Net loss available

to common to common

shareholders $(6,764) $(3,011) $(3,753) 124%

Earnings per share

(basic and diluted) $(0.14) $( 0.08) $(0.06)

(in thousands) Quarter Ended Variance

December 31, December 31, $ %

2007 2006

Revenue

Sevoflurane $2,198 $4,261 $(2,063) (48)%

Other inhalants 679 1,606 (927) (58)%

Total Anesthesia &

Analgesia 2,877 5,867 (2,990) (51)%

Image Guidance 155 25 130 520%

Total Revenue $3,032 $5,892 $(2,860) (49)%

(in thousands) Quarter Ended Variance

December 31, December 31, $ %

2007 2006

Revenue

United States $451 $952 $(501) (53)%

Europe 134 423 (289) (68)%

Western Hemisphere

(excluding U.S.) 1,631 4,089 (2,458) (60)%

Pacific Rim 816 428 388 91%

Total Revenue $3,032 $5,892 $(2,860) (49)%

Contact: Charles R. Trego, Jr., Chief Financial Officer

ctrego@minrad.com

(716) 855-1068

http://www.minrad.com

About the Company

MINRAD International, Inc. is an interventional pain management company with real-time image guidance, anesthesia and analgesia, conscious sedation product lines. The real-time image guidance products facilitate minimally invasive surgery especially for pain management and have broad applications in orthopedics, neurosurgery, and interventional radiology. These devices enable medical professionals to improve the accuracy of interventional procedures and reduce radiation exposure. MINRAD International also manufactures and markets generic inhalation anesthetics for use in connection with human and veterinary surgical procedures. The company is developing a drug/drug delivery system for conscious sedation, which, similar to nitrous oxide in dental surgery, provides a patient with pain relief without loss of consciousness. Additional information can be found at the company's website, http://www.minrad.com.

The information contained in this news release, other than historical information, consists of forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements may involve risks and uncertainties that could cause actual results to differ materially from those described in such statements. Factors that may cause actual results to differ materially from those expressed or implied by its forward-looking statements include, but are not limited to, Minrad International's limited operating history and business development associated with being a growth stage company; its dependence on key personnel; its need to attract and retain technical and managerial personnel; its ability to execute its business strategy; the intense competition it faces; its ability to protect its intellectual property and proprietary technologies; its exposure to product liability claims resulting from the use of its products; general economic and capital market conditions; financial conditions of its customers and their perception of its financial condition relative to that of its competitors; as well as those risks described under the heading "Risk Factors" of Minrad International's Form 10-KSB, filed with the Securities and Exchange Commission on March 29, 2007. Although Minrad International, Inc. believes that the expectations reflected in such forward-looking statements are reasonable, it can give no assurance that such expectations will prove to have been correct.

MINRAD INTERNATIONAL, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(in thousands)

December December

31, 31,

2007 2006

ASSETS

Current assets:

Cash and cash equivalents $ 238 $ 4,664

Investments - 7,249

Accounts receivable 3,310 10,473

License agreement receivable 1,000 -

Inventories, net 12,402 4,360

Prepaid expenses and other 1,121 1,563

Total current assets 18,071 28,309

Property and equipment:

Machinery and equipment 15,169 2,420

Computer equipment and software 1,471 571

Furniture and fixtures 815 662

Leasehold improvements 385 385

Construction in progress 7,692 4,177

25,532 8,215

Less accumulated depreciation 2,247 1,234

Net property and equipment 23,285 6,981

Other assets, net 639 439

$ 41,995 $ 35,729

LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:

Demand notes payable $ 6,000 $ -

Accounts payable 12,983 965

Accrued expenses 1,004 1,262

Current portion of long term debt 206 -

Current portion of deferred income 103 -

Total current liabilities 20,296 2,227

Long-term liabilities

Long-term debt 1,725 -

Long-term deferred income 897 -

Total long-term liabilities 2,622 -

Commitments and contingencies - -

Stockholders' equity:

Series A convertible preferred stock - -

Common stock 487 470

Additional paid in capital 80,869 76,513

Accumulated deficit (62,279) (43,481)

Total stockholders' equity 19,077 33,502

$ 41,995 $ 35,729

MINRAD INTERNATIONAL, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except per share amounts)

Years Ended

December December

31, 31,

2007 2006

Revenue $12,952 $16,341

Cost of goods sold 13,518 10,754

Gross profit (566) 5,587

Operating expenses:

Sales and marketing 8,407 5,074

Research and development 5,404 2,916

Finance and administrative 4,375 4,636

Total operating expenses 18,186 12,626

Operating loss (18,752) (7,039)

Non-operating income (expenses):

Interest expense (2) (155)

Interest income 162 642

Warrant inducement (206) -

Loss on disposal of property and equipment - (51)

Total non-operating income (expenses) (46) 436

Net loss (18,798) (6,603)

Less preferred stock dividends:

Cash dividends - (486)

Non cash dividends - (183)

Net loss available for common stockholders $(18,798) $(7,272)

Net loss per share, basic and diluted $(0.39) $(0.20)

Weighted average common shares outstanding,

basic and diluted 47,676,454 36,639,348

MINRAD INTERNATIONAL, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

Years Ended

December 31, December 31,

2007 2006

Cash flows from operating activities:

Net loss $(18,798) $(6,603)

Adjustments to reconcile net loss to

net cash used by operating activities:

Depreciation and amortization 1,043 590

Stock based compensation 1,134 841

Loss on disposal of property and equipment - 51

Amortization of bond discount - (43)

Warrant inducement 206 -

(Increase) decrease in assets:

Accounts receivable 7,163 (7,013)

License agreement receivable (1,000) -

Inventories
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SOURCE MINRAD International, Inc.
Copyright©2008 PR Newswire.
All rights reserved

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