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Annual sales to the North American market decreased 5% to $287.6 million, compared to $301.4 million for the prior year. Sales to the North American hospital market decreased 20% to $93.3 million, compared to $117.1 million last year. Excluding U.S. Military sales, North American hospital sales decreased 25% from $90.9 million to $68.6 million. U.S. Military sales were $24.7 million, compared to $26.2 million in the prior year period. Sales to the North American pre-hospital market increased 6% to $171.2 million, compared to $161.7 million in the prior year. International revenues increased by 1% to $97.6 million, compared to $96.6 million last year. LifeVest revenues increased 66% to $43.9 million compared to $26.5 million last year. Total AutoPulse sales decreased 6% to $16.7 million for the year, compared to $17.8 million in the prior year.

Fourth-quarter revenues for fiscal year 2009 increased 2% to $107.9 million, compared to $105.6 million in the fourth quarter of last year. Revenue results reflected a negative foreign exchange impact of approximately $1.4 million compared to the fourth quarter of fiscal 2008. The fourth quarter results include approximately $5 million of revenue derived from our newly acquired Temperature Management business. Net income decreased 62% to $3.4 million, compared to $8.9 million in the prior-year period, and diluted earnings per share decreased 61% to $0.16 per share, compared to $0.41 in the fourth quarter of last year.

Fourth-quarter sales to the North American market decreased 2% to $79.1 million, compared to $81.1 million in the fourth quarter of 2008. Sales to the North American hospital market decreased 3% to $28.9 million, compared to $29.7 million in the fourth quarter of last year. Excluding the U.S. Military, sales to the North American hospital market decreased 16% to $20.0 million, compared to $23.8 million in the prior-year quarter. Sales to the U.S. Military increased to $8.9 million, compared to $5.9 million in the prior year. Sales to the North American pre-hospital market decreased 2% to $44.5 million, compared to $45.6 million for the same period last year. International sales increased by 17% to $28.8 million, compared to $24.5 million in the fourth quarter last year. Total LifeVest revenues increased 59% to $12.9 million as compared to $8.1 million in the prior-year quarter. Total AutoPulse shipments to all markets decreased by 41% to $4.1 million, compared to $7.0 million in the fourth quarter of the prior year.

Gross margin for the fourth quarter was 50%, compared to 55% in the fourth quarter of fiscal 2008. The decrease was attributable to many factors including, but not limited to, reduced factory absorption due to the impact of lower production volumes of core defibrillators, foreign exchange and the mix of foreign sales, the inclusion of the newly acquired Temperature Management business which is in the early stages of ramp up, and higher than normal North American sales incentives and promotions necessary to motivate capital equipment purchases in a climate of economic uncertainty. These factors were partially offset by the favorable impact resulting from an increased mix of sales from the LifeVest product.

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Total product revenue was $65.7 million for the third quarter of 2009, a 53 percent increase compared to $42.9 million for the third quarter of 2008. Total product revenue for the first nine months of 2009 was $162.7 million compared to $118.2 million for the first nine months of 2008. XIFAXAN revenue for the third quarter of 2009 was $42.7 million compared to $21.4 million for the third quarter of 2008, and $93.0 million for the first nine months of 2009 compared to $56.1 million for the first nine months of 2008. Our bowel cleansing products MOVIPREP and OSMOPREP generated combined revenue of $16.4 million for the third quarter of 2009, compared to $14.8 million for the third quarter of 2008. Total combined product revenue for these two products was $47.6 million for the first nine months of 2009 and $44.4 million for the first nine months of 2008.

Total cost of products sold was $13.2 million for the third quarter and $34.5 million for the first nine months of 2009. Gross margin on total product revenue was 79.9% for the third quarter of 2009 compared to 81.9% for the third quarter of 2008 and 78.8% for the first nine months of 2009, compared to 81.3% for the first nine months of 2008. The lower gross margins for 2009 relative to the comparable periods for 2008 were due to a change in the product revenue mix. We continue to expect gross margins for the year ending December 31, 2009 to be 79% to 80%. Research and development expenses were $26.1 million for the third quarter of 2009 and $69.6 million for the first nine months of 2009, compared to $14.4 million and $57.3 million, respectively for the prior year periods. Research and development expenses for the third quarter of 2009 include a $5 million up-front payment related to the acquisition of the exclusive U.S. right to Lupin’s proprietary bioadhesive technology for use with rifaximin. Selling, general and administrative expenses were $29.6 million for the third quarter of 2009 and $83.6 million for the first nine months of 2009, compared to $23.4 million for the third quarter of 2008 and $67.6 million for the first nine months of 2008. The Company reported a net loss of $7.3 million, or $0.15 per share, fully diluted, for the third quarter of 2009.

Cash and cash equivalents were $69.1 million on September 30, 2009.

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BioSante incurred a net loss of approximately $6.4 million or ($0.21) per share for the quarter ended September 30, 2009, compared to a net loss of $6.6 million or ($0.24) per share for the same period in 2008. This decrease in net loss was due to BioSante’s decision in April 2009 to delay screening of new subjects for its ongoing LibiGel (testosterone gel) Phase III safety study, partially offset by the recognition of acquisition related costs of approximately $1.5 million related to the Company’s merger with Cell Genesys Inc., which closed October 14, 2009. Screening of new subjects for the safety study has been reinitiated.

The Company’s cash and cash equivalents as of September 30, 2009 were approximately $13.2 million, as compared to cash, cash equivalents and short-term investments of approximately $14.8 million on December 31, 2008. As of the completion of the merger with Cell Genesys on October 14, 2009, BioSante gained $23.2 million in cash, cash equivalents and short-term investments, after deducting anticipated estimated merger-related and other expenses, and assumed $22.0 million in principal amount of 3.125% convertible senior notes issued by Cell Genesys. In addition to the $23.2 million in cash, the Company obtained, as a result of the merger, a portfolio of cancer immunotherapies (known as GVAX Immunotherapies) and other technologies. Acquisition of these assets significantly expands the Company’s product portfolio. Several GVAX Immunotherapies now are in human clinical trials at the Johns Hopkins Sidney Kimmel Comprehensive Cancer Center, at minimal cost to the Company.

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Highlights and Recent Developments

* Increased patient volume in the third quarter by 46.8% over the third quarter of 2008

* Monitored over 260,000 patients nationally since the Company’s inception

* Increased revenue to $33.3 million in the third quarter, up 6.8% over the third quarter of 2008

* Signed 42 new payor contracts year-to-date, covering approximately 7 million lives and bringing the total number of covered lives to nearly 200 million

* Recognized as a Deloitte Fast 50 Company in Philadelphia and Fast 500 Company Nationally

* Awarded 15th U.S. Patent which covers Biological Signal Management (12 additional U.S. patents are pending; 12 international patents have been issued and 29 are pending)

* Rebilled 100% of older net receivables; experienced positive trends in the collection of current receivables

* $43 million in cash and no debt as of September 30, 2009

Financial Results

Revenues for the third quarter of 2009 increased to $33.3 million compared to $31.2 million in the third quarter of 2008, an increase of $2.1 million, or 6.8%. For the third quarter, the Company’s payor mix was 38% Medicare and 62% commercial. While the increased patient volume drove additional revenue, it was offset by the September 1, 2009 decrease in Medicare reimbursement as well as the declining commercial reimbursement trends as disclosed in the Company’s June 30, 2009 press release. Gross profit increased to $21.5 million in the third quarter of 2009, or 64.5% of revenues, compared to $21.2 million in the third quarter of 2008, or 67.9% of revenues.

On a GAAP basis, operating loss was $5.9 million in the third quarter of 2009 compared to operating income of $1.4 million in the third quarter of 2008. Excluding $1.3 million of expense primarily related to restructuring, adjusted operating loss was $4.6 million in the third quarter of 2009. This compares to adjusted operating income of $4.3 million in the third quarter of 2008, which excludes $2.9 million of expense related to the integration of PDSHeart and other restructuring efforts in the prior year period.

On a GAAP basis, net loss for the third quarter of 2009 was $5.4 million, or a loss of $0.23 per diluted share, compared to net income of $1.0 million, or $0.04 per diluted share, for the third quarter of 2008. Adjusted net loss for the third quarter of 2009 was $2.4 million, or a loss of $0.10 per diluted share, excluding expenses primarily related to restructuring. This compares to adjusted net income of $2.6 million, or $0.11 per diluted share, for the third quarter of 2008, which excludes the impact of integration, restructuring and other nonrecurring charges.

Revenues for the nine months ended September 30, 2009 increased to $107.3 million compared to $86.0 million in the comparable period in the prior year. For the nine months of 2009, gross profit increased to $71.7 million, or 66.8% of revenues, compared to $56.7 million, or 65.9% of revenues, in the comparable period in the prior year.

On a GAAP basis, operating loss for the first nine months of the year was $5.1 million compared to operating income of $3.3 million in the comparable period in the prior year. Excluding $4.5 million of expense related to restructuring and costs incurred in connection with the since-terminated merger agreement to acquire Biotel Inc., adjusted operating loss was $0.7 million in the first nine months of 2009. This compares to adjusted operating income of $8.1 million in the first nine months of 2008, which excludes $4.8 million of integration, restructuring and other nonrecurring charges.

Net loss for the first nine months of 2009 was $4.6 million, or a loss of $0.19 per diluted share, compared to net income of $2.3 million, or $0.10 per diluted share, for the first nine months of 2008. Adjusted net loss for the first nine months of 2009 was $0.1 million excluding expenses related to restructuring and costs incurred in connection with the since-terminated merger agreement to acquire Biotel Inc. This compares to adjusted net income of $5.0 million, or $0.23 per diluted share, for the first nine months of 2008, which excludes the impact of integration, restructuring and other nonrecurring charges.

On a GAAP basis, net loss available to common shareholders, which is derived by reducing net income by the accrued dividends and accretion on mandatorily redeemable convertible preferred stock was a loss of $4.6 million, or a loss of $0.19 per diluted share, for the nine month period ended September 30, 2009, compared to a net loss of $0.3 million, or a loss of $0.02 per diluted share, for the same period last year. The mandatorily redeemable convertible preferred stock, which was issued in part to finance the March 2007 PDSHeart acquisition, was converted to common stock in connection with CardioNet’s March 2008 initial public offering.

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Net sales were $24.9 million in the third quarter of 2009, a decline of 4% from $26.0 million a year ago. Gross margin was 78.9% in the third quarter of 2009, compared with 80.3% a year ago. This was due primarily to a newly initiated rebate program tied to the use of NuDerm or Condition & Enhance systems in conjunction with cosmetic procedures, which impacted gross margins by 1%, and which has been fully accrued for.

Operating expense declined to $14.7 million, compared with $16.1 million a year ago, and operating income was $4.9 million, or 20% of sales, compared with $4.8 million, or 18% of sales, a year ago.

Business Highlights of the Third Quarter and Subsequent Weeks:

* Added 427 new accounts during the quarter compared to 389 in the second quarter 2009, as a result of the Company’s continued investment in promotional activities. This brings the number of active accounts to 6,130 as of September 30, which is up 9% from a year ago.
* Introduced a second new product for 2009 in select accounts, Refissa Tretinoin Emollient Cream, 0.05% in mid-September. Refissa is FDA-approved for specific use to diminish fine facial wrinkles and fade irregular pigmentation due to sun damage and smooth tactile roughness. The Company plans to position Refissa to be used to further enhance the effectiveness of NuDerm, Condition & Enhance and Obagi-C Rx Systems.
* Launched ELASTIderm successfully in Japan thru Rohto Pharmaceuticals, Obagi’s retail consumer partner, contributing to an increase in approximately $200,000 in licensing fees from the same period in 2008.
* Generated $5.0 million of cash from operations for the third quarter of 2009 bringing the Company’s cash and short-term investment balance to $31.2 million at September 30. No shares were repurchased through the Company’s stock buyback program during the quarter.

Introducing Fourth Quarter 2009 Financial Guidance

Based on current market conditions, continued economic uncertainty and the Company’s historical seasonality pattern, the Company expects revenue for the fourth quarter of 2009 to be between $25.0 and $27.0 million and earnings to be $0.16 – $0.18 per fully diluted share on 22.0 million fully diluted shares outstanding.

Strengthened Balance Sheet and Cash Flow

As of September 30, 2009, the Company was debt free with cash and cash equivalents, including short term investments, totaling $31.2 million, up from $19.9 million at December 31, 2008. Additionally, the Company generated $5.0 million in cash flow from operations during the third quarter of 2009 and $13.9 million since December 31, 2008.

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For the three months ended September 27, 2009 and September 28, 2008, approximately $57.9 million (73.4%) and $95.3 million (70.1%) of the Company’s revenues, respectively, were derived from per diem staffing (inclusive of short-term contracts and allied health business staffed through local per diem branches); $10.1 million (12.8% of revenues) and $23.0 million (16.9% of revenues), respectively, were derived from travel nurse staffing; and $10.9 million (13.8% of revenues) and $17.5 million (13.0% of revenues), respectively, were derived from allied health staffing.

Gross profit for the third quarter of 2009 was $21.9 million, a decrease of 36.2% from the gross profit of $34.3 million for the third quarter of 2008. Gross margin (gross profit compared to service revenues) for the third quarter of 2009 was 27.7% as compared with 25.3% for the third quarter of 2008. The 240 basis point gross margin improvement over the comparable prior year period was primarily attributable to a continued focus on gross margin expansion and a recent favorable trend in the actuarial valuations of the Company’s self-insurance accrued liabilities. Selling, general and administrative expenses were $16.5 million, or 20.8% of revenues, in the third quarter of 2009 as compared with $27.5 million, or 20.2% of revenues, for the comparable prior year period. The $11.0 million, or 40.1%, decrease from the comparable prior year period is due to the various cost containment initiatives implemented over the past 12 months.

Revenues for the nine months ended September 27, 2009, were $265.2 million, a decrease of 37.5% from revenues of $424.1 million for the comparable prior year period. Net loss for the nine months ended September 27, 2009, was $20.0 million, or $0.66 per diluted share, as compared with a net loss of $49.4 million, or $1.63 per diluted share for the comparable prior year period. Adjusted net loss was $2.0 million, or $0.07 per diluted share, for the nine months ended September 27, 2009, as compared with adjusted net income of $3.3 million, or $0.11 per diluted share, for the comparable prior year period. The Company’s AEBITDA for the nine months ended September 27, 2009 was $14.0 million (5.3% of revenue) as compared with $19.0 million (4.5% of revenue) for the comparable prior year period. Cash flow generated from operations was $13.3 million for the nine months ended September 27, 2009, as compared with $17.9 million for the comparable prior year period.

For the nine months ended September 27, 2009 and September 28, 2008, approximately $189.1 million (71.3%) and $297.2 million (70.1%) of the Company’s revenues, respectively, were derived from per diem staffing (inclusive of short-term contracts and allied health business staffed through local per diem branches); $41.8 million (15.8% of revenues) and $74.1 million (17.5% of revenues), respectively, were derived from travel nurse staffing; and $34.3 million (12.9% of revenues) and $52.8 million (12.4% of revenues), respectively, were derived from allied health staffing.

Gross profit was $69.9 million for the nine months ended September 27, 2009, a decrease of 33.5% from the gross profit of $105.0 million for the comparable prior year period. Gross margin for the nine months ended September 27, 2009, was 26.3%, an increase from the gross margin of 24.8% for the comparable prior year period. The 150 basis point year-over-year improvement was primarily attributable to a continued focus on gross margin expansion and a recent favorable trend in the actuarial valuation of the Company’s self-insurance accrued liabilities. Selling, general and administrative expenses were $56.2 million, or 21.2% of revenues, for the nine months ended September 27, 2009, as compared with $86.2 million, or 20.3% of revenues, for the comparable prior year period. The $30.0 million, or 34.8%, decrease from the prior year is due to the various cost containment initiatives implemented over the past 12 months.

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CSI’s revenue in the first quarter of fiscal 2010 rose to $15.2 million, a 30-percent increase over revenue of $11.6 million in the first quarter of last fiscal year. The net loss improved 55 percent to $(6.2) million, or $(0.43) per basic and diluted share, in the first quarter of fiscal 2010, from $(13.7) million, or $(2.75) per basic and diluted share, in the year-ago period. The number of weighted average common shares outstanding increased to 14.5 million from 5.0 million in the first quarter of fiscal 2009, primarily due to new shares issued in conjunction with the February 2009 reverse merger with Replidyne, Inc., including the conversion of all preferred stock of the company to common stock. Adjusted EBITDA, calculated as loss from operations, less depreciation and amortization and stock-based compensation expense, improved by 70 percent to a loss of $(3.6) million versus a loss of $(11.8) million in the year-ago period. Cash and cash equivalents remained strong at $30.8 million and included $3.0 million of net funding received in conjunction with signing an agreement to establish a second production facility in Pearland, Texas.

The number of hospitals using the Diamondback 360 PAD System rose to 611 by the end of the fiscal 2010 first quarter, a nearly 90-percent increase over a year ago and 55 more than the end of the fourth quarter of fiscal 2009. Sales of disposable device units totaled 4,541 units in the first quarter of fiscal 2010 versus 3,636 units in the first quarter of last fiscal year, a 25-percent increase. Revenue generated from customer reorders continued to grow, increasing to 92 percent of total revenue for the fiscal 2010 first quarter from 72 percent in last year’s first quarter.

The fiscal first-quarter 2010 gross margin increased to 77 percent from 67 percent in the same period last year, driven by higher disposable volumes, manufacturing efficiencies, product cost reductions and shipment of fewer controller units. Operating expenses decreased 18 percent, due to effective expense management, the year-earlier write-off of $1.7 million in IPO costs, and completion and timing of development projects and clinical studies.

Providing Comprehensive Clinical Data and Tools to Treat PAD

CSI is committed to providing physicians with clinical data and endovascular tools to treat PAD. Toward that end, this quarter the company continued to expand its product portfolio through an exclusive distribution agreement with Asahi Intecc Co., Ltd., to market its peripheral guide wire line in the United States. Asahi peripheral guide wires are especially suited for addressing long, complex lesions in the leg and complement the plaque removal capabilities of the Diamondback 360°.

CSI also continued to make progress providing clinical data. At the Transcatheter Cardiovascular Therapeutics (TCT) conference in September, Dr. Barry Weinstock, an interventional cardiologist at Orlando Regional Medical Center, reported data from a retrospective study evaluating the long-term results of 64 patients from the pivotal OASIS trial. Outcomes were analyzed out to a mean of 29 months and included maintaining a 100-percent limb salvage rate, an 86-percent freedom from target lesion revascularization (TLR) and significantly improved ankle-brachial index (ABI) scores by an average of 0.29 over the baseline.

Also at TCT, Dr. Ragu Patlola, of Regional Acadiana in Lafayette, Louisiana, presented an abstract on a 150-patient, randomized, single-center study comparing treatment using the Diamondback 360˚ with angioplasty in infrapopliteal arteries. The three-month follow-up results were favorable for the Diamondback 360˚, showing much lower rates for adjunctive stenting (5 percent vs. 45 percent) and restenosis (15 percent vs. 62.5 percent).

CSI is advancing several clinical studies. COMPLIANCE 360° and CALCIUM 360˚ are prospective, randomized, multi-center studies that will evaluate the clinical benefit of modifying plaque and lesion compliance in leg arteries with the Diamondback 360° (supplemented by low-pressure balloon inflation, if desired, in CALCIUM 360˚) to high-pressure balloon inflation. Both studies call for enrolling 50 patients at five U.S. medical centers. CSI also continues working with the FDA on an IDE application for ORBIT II, a pivotal trial in the United States to evaluate the safety and effectiveness of the Diamondback 360° in treating severely calcified coronary lesions.

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Highlights of the third quarter of 2009 and other recent developments include:

* Closed its initial public offering on October 26, 2009, raising net proceeds to AGA Medical of $88.2 million, with its stock beginning trading on the NASDAQ Global Select Market under the symbol “AGAM”;
* Received CE Mark in July 2008 for the AMPLATZER Vascular Plug 4, which can be delivered through standard diagnostic catheters with the advantage of no additional cost or time required to exchange from a diagnostic catheter to a therapeutic delivery catheter, meaningfully expanding the addressable market for the Vascular Plug family;
* Expanded the limited commercial launch of the AMPLATZER Cardiac Plug, which had received CE Mark in December 2008 for left atrial appendage occlusion, beyond Europe including completing the first cases in South America, Israel and Hong Kong and receiving device approval and reimbursement authorization in Australia;
* Continued enrollment in its pivotal RESPECT study designed to study whether patent foramen ovale (PFO) closure is superior to medical management in preventing recurrent stroke, with 632 patients enrolled in the study with 1,160 patient follow-up years as of October 30, 2009;
* Received approval to change the protocol in its PREMIUM study (designed to measure whether PFO closure can result in a meaningful reduction in the number and severity of migraine headaches in certain patients with a PFO), which broadens the inclusion criteria and reduces the number of patients to be enrolled in the trial from 470 to 230 patients.

Financial Results for Third Quarter 2009 vs. Third Quarter 2008

Net sales for the third quarter of 2009 were $50.2 million, a 14.9% increase over $43.6 million for the third quarter of 2008. On a constant currency basis, net sales grew 17.2% year over year.

Gross margins for the third quarter of 2009 were 86.8% compared to 84.7% in the prior year period. The increase in gross margin was due to higher average selling prices (ASPs) from the distributor to direct conversions completed earlier this year and manufacturing efficiencies. Gross margins were also sequentially up from the first and second quarters of 2009, which were 80.2% and 83.6%, respectively. In the first two quarters of 2009, gross margins were unfavorably impacted as the company amortized the excess cost of inventory repurchased from seven distributors in territories that AGA Medical converted to direct distribution at the beginning of 2009.

Total operating expenses for the third quarter of 2009 were $38.6 million compared to $27.3 million in the third quarter of 2008. The expense increase is primarily attributable to increased selling, general and administrative expenses of approximately $5.0 million representing AGA Medical’s investment in infrastructure to support the distributor conversions primarily in Europe and U.S. sales channels, increased legal fees of $3.3 million as compared to the same period in the prior year that are primarily associated with patent litigation expenses related to the Medtronic trial that occurred in the third quarter, and higher amortization of $1.1 million primarily due to the accelerated repurchase of the company’s distribution rights in Italy from its former distributor.

The company reported net income (loss) applicable to common stockholders of ($2.4) million, or ($0.11) per fully diluted and basic share, for the three months ended September 30, 2009, compared to $1.8 million, or $0.04 per fully diluted share and $0.05 per basic share for the prior year period. The net income (loss) includes the dividends for Series A and Series B preferred and Class A common stock accrued in the period. Net income before dividends was $2.2 million, or $0.05 per fully diluted share and $0.06 per basic share, for the third quarter 2009, versus $5.9 million, or $0.14 per fully diluted share and $0.15 per basic share in the third quarter 2008. The accrued dividends on these securities and the securities associated with these dividends were converted into common stock in connection with the initial public offering. See “Statement regarding Non-GAAP Financial Measures.”

EBITDA (net income (loss) before interest income, interest expense, provision (benefit) for income tax, and depreciation and amortization) was $12.5 million in the third quarter 2009 versus $14.7 million in the prior year period. EBITDA margin was 24.9% for the third quarter 2009, compared to 33.6% for the third quarter 2008. See “Statement regarding Non-GAAP Financial Measures.”

Cash and cash equivalents were $13.9 million as of September 30, 2009, representing a $5.1 million increase from cash and cash equivalents of $8.8 million as of June 30, 2009.

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