<PAGE>
Filed pursuant to
Rule 424(b)(3)
Registration Statement
No.: 33-97722
Prospectus Supplement No. 3, dated February 10, 1997
(To the Prospectus dated September 30, 1996,
as Supplemented on October 31 and November 14, 1996)
NEUROMEDICAL SYSTEMS, INC.
Common Stock
Par Value $.0001 Per Share
On February 10, 1997, the Company reported the attached results for its
fourth quarter and 1996 financial results for the period ending December 31,
1996.
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<PAGE>
NEUROMEDICAL SYSTEMS, INC.
FOURTH QUARTER AND 1996 FINANCIAL RESULTS
On February 10, 1997 Neuromedical Systems, Inc. ("NSI" or the
"Company") announced results for its fourth quarter and year ending December 31,
1996.
Revenues for the fourth quarter were $1,775,000, an increase of 150%
from $710,000 for the fourth quarter of 1995. Of such revenues, $1,727,000
represented per slide charges for the screening of Pap smears, and the balance
of such revenues represented rental payments on PAPNET(R) Review Stations. The
revenue increase over 1995 was due primarily to a significant increase in both
unit volume and unit pricing in the United States market.
The Company reported a net loss for the fourth quarter of $10,345,000,
or $.35 share, compared to a net loss of $14,220,000, or $.72 per share (on a
pro forma basis), for the fourth quarter of 1995. The fourth quarter 1995
results included two non-cash charges, totaling $7,752,000 or $.39 per share,
resulting from the settlement of claims under the Company's territorial license
agreements and the vesting of 568,058 employee performance stock options upon
the completion of the Company's initial public offering in December 1995.
Revenues for 1996 were $4,729,000 compared to $2,475,000 for 1995, a
91% increase over the prior year. This increase was due primarily to higher
selling prices in 1996 compared to 1995 and to significantly higher unit volume
in the United States.
The net loss for the year was $34,158,000, or $1.17 per share,
compared to a net loss of $29,428,000, or $1.67 per share (on a pro forma
basis), for 1995. The increased
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net loss during 1996, compared to 1995, was due primarily to an increase in
marketing and sales expenses associated with the launch of the PAPNET(R) Testing
System in the United States, including the cost of the direct-to-consumer
advertising campaign, following clearance by the FDA in November 1995. In
addition, the Company's cost of sales, research and development and general and
administrative expenses also increased during 1996, although at a slower rate
than sales and marketing expenses. These increases were due primarily to the
expansion of the administrative and technical infrastructure of the Company to
support commercial activities in both the United States and overseas and its new
status as a public company. These increases in expenses during 1996, compared to
1995, were partially offset by the absence in 1996 of the two non-cash charges
that occurred in the fourth quarter of 1995.
In October 1996, the Company received FDA approval to claim that
PAPNET(R) testing is statistically significantly more sensitive to the detection
of false negatives than repeated manual microscopic examination of the same
number of smears.
The Company also announced during the fourth quarter that a study
published in the international medical journal ACTA CYTOLOGICA found that
PAPNET(R) testing for cervical cancer detection decreases the incidence of
cervical cancer at a cost which is within the range of tests and other
procedures commonly reimbursed by managed care organizations.
In October, the Company moved into its new 26,500 square foot Scanning
Center to accommodate anticipated increased demand for PAPNET(R) testing in the
United States. Also during the fourth quarter, the Company announced the
PAPNET(R) Access
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Program, a joint effort with major academic medical centers to provide PAPNET(R)
testing to under-served and indigent women nationwide.
The Company increased its worldwide marketing and sales organization
to a total of 61 persons by December 31, 1996 and added to its international
management during the quarter with the appointment of Dr. Henk Snyman as
President of NSI Europe. Prior to joining NSI, Dr. Snyman was General Manager of
Serono Benelux, a subsidiary of Ares-Serono, a multinational pharmaceutical
company.
During the fourth quarter, the Company increased the number of U.S.
laboratories offering PAPNET(R) testing to 201. PAPNET(R) testing is now
available nationwide through a network of local, regional and national
laboratories throughout the United States.
NSI also continued to expand its international laboratory
distribution. PAPNET(R) testing is now available in 23 countries worldwide. By
the end of the fourth quarter, PAPNET(R) testing was available through 47
laboratories in Europe and South Africa and 10 laboratories in Australia. In
Asia, the Company continued to expand its business in Hong Kong, Taiwan and
mainland China. During the quarter, the Company received slide processing
revenue from 42 laboratories and hospitals in these per countries.
Neuromedical Systems, Inc. is a healthcare technology company focused
on diagnostic screening applications to aid in the early detection of certain
cancers. NSI's first product, the PAPNET(R) Testing System, is uniquely able to
pinpoint and display small numbers of potentially abnormal cells that are
systematically missed on manual screening. PAPNET(R) testing increases the
cytologist's ability to focus on abnormal cells
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and to detect false negative Pap smears. The Company believes that widespread
adoption of the PAPNET(R) Testing System would dramatically reduce the morbidity
and mortality associated with such false negative smears.
Safe Harbor Statement
---------------------
Except for the historical information contained herein, the matters
discussed in this news release are forward-looking statements that involve risks
and uncertainties. The forward-looking statements in this release are made
pursuant to the safe harbor provisions of the Private Securities Litigation
Reform Act of 1995. Actual results may differ materially due to a variety of
factors, including without limitation, uncertain demand and acceptance of new
and existing products (including the PAPNET(R) Testing System), the Company's
continuing negative operating cash flow, reliance on a single product,
competition, dependence on key personnel, the impact on the Company of
territorial license agreements, dependence on patents and proprietary
technology, government regulation, limited marketing and sales history, the
impact of third-party reimbursement decisions, the risk of litigation and other
risks detailed in the Company's Securities and Exchange Commission filings,
including its Annual Report on Form 10-K for the year ended 1995.
###
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NEUROMEDICAL SYSTEMS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31,
------------------ ---------------
1996 1995
------------------ ---------------
<S> <C> <C>
ASSETS
Cash and marketable securities $ 83,391,000 $ 114,143,000
Other current assets 3,185,000 1,601,000
Property, plant and equipment, net 16,388,000 11,216,000
Other assets 1,240,000 388,000
------------------ ---------------
Total Assets $ 104,204,000 $ 127,348,000
================== ===============
LIABILITIES AND
STOCKHOLDERS' EQUITY
Current liabilities $ 9,510,000 $ 6,631,000
Other liabilities 11,166,000 6,050,000
Stockholders' equity 83,528,000 114,667,000
------------------ ---------------
Total Liabilities and
Stockholders' Equity $ 104,204,000 $ 127,348,000
================== ===============
</TABLE>
NEUROMEDICAL SYSTEMS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
THREE MONTHS ENDED
DECEMBER 31,
--------------------------------------
1996 1995
-------------- -----------------
<S> <C> <C>
REVENUES $ 1,775,000 $ 710,000
-------------- -----------------
COSTS AND EXPENSES
Costs of sales 2,469,000 1,843,000
Research and development 1,761,000 1,061,000
Marketing and sales 6,693,000 2,542,000
General and administrative 1,860,000 1,860,000
Stock issued pursuant to settlement agreement 0 1,652,000
Vesting of performance shares at initial public offering 0 6,100,000
-------------- -----------------
Total Costs and Expenses 12,783,000 15,058,000
-------------- -----------------
Other income (expense), net 663,000 128,000
-------------- -----------------
NET LOSS $ (10,345,000) $ (14,220,000)
============== =================
NET LOSS PER SHARE (1) $ (0.35) $ (0.72)
============== =================
WEIGHTED AVERAGE
SHARES OUTSTANDING 29,748,000 19,863,000
============== =================
<CAPTION>
TWELVE MONTHS ENDED
DECEMBER 31,
--------------------------------------
1996 1995
-------------- -----------------
<S> <C> <C>
REVENUES $ 4,729,000 $ 2,475,000
-------------- -----------------
COSTS AND EXPENSES
Costs of sales 8 ,178,000 6,478,000
Research and development 6,785,000 5,172,000
Marketing and sales 20,328,000 6,268,000
General and administrative 6,975,000 6,017,000
Stock issued pursuant to settlement agreement 0 1,652,000
Vesting of performance shares at initial public offering 0 6,100,000
-------------- -----------------
Total Costs and Expenses 42,266,000 31,687,000
-------------- -----------------
Other income (expense), net 3,379,000 (216,000)
-------------- -----------------
NET LOSS $ (34,158,000) $ (29,428,000)
=============== =================
NET LOSS PER SHARE (1) $ (1.17) $ (1.67)
=============== =================
WEIGHTED AVERAGE
SHARES OUTSTANDING $ 29,277,000 17,644,000
=============== =================
</TABLE>
(1) 1995 on a pro forma basis
