Record Sales Growth of 175% From Growing Adoption of CTS' OPCAB(TM) System

    CUPERTINO, Calif., Oct. 20 /PRNewswire/ -- CardioThoracic Systems, Inc.
(CTS) (Nasdaq: CTSI), a leading developer of minimally invasive cardiac
surgery devices, today reported results for the third quarter and nine months
ended October 2, 1998.
    For the third quarter of 1998, CTS reported revenues of $4.4 million, up
175 percent from revenues of $1.6 million in the third quarter of 1997.  The
net loss for the quarter was $4.9  million, or $0.35 per share on 14.0 million
weighted average shares outstanding, compared to a net loss of $5.9 million,
or $0.44 per share on 13.5 million weighted average shares outstanding, for
the third quarter of 1997.
    For the first nine months of 1998, CTS reported net revenues of
$11.1 million, compared with net revenues of $6.6 million for the same period
of 1997.  Net loss for the first nine months of 1998 was $16.5 million, or
$1.19 per share on 13.9 million weighted average shares outstanding, compared
to a net loss of $15.4 million, or $1.15 per share on 13.5 million weighted
average shares outstanding, for the first nine months of 1997.
    As of October 2, 1998, CTS had cash, cash equivalents and available-for-
sale securities of $44.2 million.
    "The growing adoption of off-pump bypass surgery and the use of CTS'
OPCAB(TM) (Off-Pump Coronary Artery Bypass) System is the key driver behind
our record revenues in the third quarter," said Richard Ferrari, CTS president
and chief executive officer.  "CTS' continued focus on education and training
with surgical teams has clearly paid off as more and more physicians are
becoming comfortable with treating a larger number of their patients off-pump.
The flexibility and ease of use of the OPCAB System is allowing surgeons to
perform multiple bypass surgery on a broader base of patients.  We expect this
trend to continue with minimally invasive off-pump bypass becoming even more
widespread."

    Strategic Alliances Expand CTS Product Portfolio
    During the quarter, CTS entered into two agreements which will allow the
company to offer its customers additional tools for minimally invasive cardiac
surgery.  Through its strategic alliance with Transonic Systems, Inc., CTS
will be able to provide surgeons with a specialized flow measurement system
and disposable probe for beating heart and endoscopic bypass surgery.  This
device measures blood flow through the coronary arteries, enabling surgeons to
validate the patency of the anastomosis.  This product is expected to be
available in the U.S. in the first quarter of 1999.
    Additionally, CTS has acquired the exclusive U.S. distribution rights for
a line of cardiac surgery sutures from Peters Laboratories, the leading
developer of cardiac sutures in France.  These sutures have demonstrated
superior performance in mitral valve repair procedures and other cardiac
surgeries such as valve implantation and robotic suturing of the coronary
anastomosis.  CTS will begin distributing the line of sutures in the U.S. in
November 1998.  Ferrari commented, "Our recent agreements clearly demonstrate
that we are executing on our strategy of providing surgeons with a suite of
products needed to perform the best quality minimally invasive cardiac
surgeries.  We have invested in creating a top notch sales force in the U.S.
and we are leveraging this investment by offering surgeons additional
important products."

    CTS Stabilization Technology Receives R&D 100 Award
    Also during the quarter, CTS was awarded the R&D 100 Award by R&D Magazine
for the company's Beating Heart Coronary Artery Bypass Graft System with
Mechanical Stabilization.  This prestigious award recognizes the 100 most
technologically significant new products of 1997.  During its 35 year history,
the R&D 100 Award has acknowledged such advances as the flashcube, the digital
wristwatch, antilock brakes, the automated teller machine and the fax machine.
"We are honored to be included with the most significant research and
development projects of the year.  This award underscores the important
technological advance that CTS' proprietary systems have brought to the field
of cardiac surgery," said Ferrari.
    CardioThoracic Systems, Inc., Cupertino, Calif., is a leading developer of
proprietary technologies for minimally invasive cardiac surgery.  CTS
commercialized its first products in the U.S. in 1997, and has successfully
developed technologies and products for use in minimally invasive multi-vessel
beating heart bypass surgery.  CTS continues its efforts in the minimally
invasive cardiac surgery market with the introduction of its conduit
harvesting technology.  CTS is also developing technologies in other areas,
including stopped heart valve repair and replacement procedures and coronary
bypass procedures.  The company's stock is traded on the Nasdaq Stock Market
under the symbol CTSI.
    This news release contains forward-looking information that involves risks
and uncertainties, including uncertainties associated with the capabilities of
the CTS instrumentation, the market acceptance of CTS products, clinical
adoption of the OPCAB System and other CTS products and the procedures for
which such products are used, the effects of the company's agreements with
Transonic Systems and Peters Laboratories, the timing of shipments of the
company's new products, the timing of releases of the company's products under
development, and the success of the company's development efforts.  Actual
results may differ significantly from the results discussed in the
forward-looking statements as a result of those and other factors, including
factors set forth in the company's annual report on Form 10-K filed with the
Securities and Exchange Commission on March 31, 1998 and the company's
quarterly report on Form 10-Q filed with the Securities and Exchange
Commission on August 13, 1998.  Copies of the Annual Report on Form 10-K and
the company's quarterly report on Form 10-Q are available by calling the
company's investor relations department at 408-342-1700.

                           CARDIOTHORACIC SYSTEMS, INC.
                 CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
                                   (unaudited)
                                  (in thousands)

                             Three Months Ended           Six Months Ended
                          October 2,   September 26,  October 2,   September 26,
                              1998          1997         1998          1997

    Net sales               $4,365        $1,629      $11,144        $6,577
    Cost of sales            1,897         1,115        5,199         4,331
    Gross profit             2,468           514        5,945         2,246
    Operating expenses:
     Research and
      development            2,712         2,832        8,064         7,279
     Sales, marketing,
      general,
      and administrative     5,249         4,499       16,246        13,305

      Total operating
       expenses              7,961         7,331       24,310        20,584

    Loss from operations    (5,493)       (6,817)     (18,365)      (18,338)

    Interest income, net       585           920        1,877         2,922
    Net loss               $(4,908)      $(5,897)    $(16,488)     $(15,416)
    Net loss per common share
     and per common share
     - assuming dilution    $(0.35)       $(0.44)      $(1.19)       $(1.15)

    Shares used in computing
     net loss per common share
     and per common share
     - assuming dilution    14,018        13,528       13,892        13,456

                       CONSOLIDATED CONDENSEDBALANCE SHEETS
                                  (in thousands)

                                    October 2, 1998    January 2, 1998
    (unaudited)
    Cash, cash equivalents and
    available-for-sale securities      $44,227            $60,834
    Total current assets                37,446             60,490
    Property and equipment, net          3,507              3,613
    Total assets                        53,277             69,276
    Total current liabilities            6,221              5,619
    Total stockholders' equity         $45,516            $60,134

Link to this page: