Final Results

Deltex Medical Group PLC 10 April 2002 10 April 2002 Deltex Medical Group plc Preliminary Results for the year ended 31 December 2001 DELTEX MEDICAL'S TURNOVER RISES 30% IN MAIDEN RESULTS ON AIM Deltex Medical Group plc ('Deltex Medical'/'Group'/'Company'), the AIM listed haemodynamic monitoring company, announces its results for the year ended 31 December 2001. Highlights • Sales increased by 30% to £1.3 million (2000: £1.0 million); 15% reduction in losses to £3.3 million (2000: loss before tax of £3.9 million after exceptional costs) in line with expectations • Strongest growth achieved in the UK and Asia • Deltex Medical to sell direct in the UK market from 1 July 2002 coinciding with the launch of the new multi-use operating theatre probe • Reimbursement approval published in Korea in April 2002 • Listing moved from Nasdaq Europe to AIM in November 2001 with £4.2 million net proceeds from an institutional placing • Strategic focus on markets with the highest potential returns; the US sales and marketing function has been realigned and resources refocused onto specialist areas such as international markets • Nigel Keen becomes executive chairman and acting chief executive; Kemp Coady steps down as chief executive to become a non-executive director • Continued evidence of the growing acceptance of both the medical and economic benefits of haemodynamic optimisation and of the solutions offered by Deltex Medical's technology • Over 600 CardioQTM monitors now installed in hospitals in more than 30 countries • New prototypes of the NeuroQTM and the SupraQTM in product development phase. Chairman, Nigel Keen, commented: '2001 and the first few months of 2002 have been an exciting time for the Group. We have made enormous progress in opening up new markets around the world, in developing the right sales and marketing approaches and strategies for these markets and in building a distribution network that matches the quality and potential of our technology. At the same time we are enhancing the strength and depth of the management team to ensure that Deltex Medical will complete its transition from a research and development led business to an effective international sales and marketing organisation. 'Health services and medical communities worldwide are striving to deliver best practice, whilst often operating under strict budget restraints. In these circumstances, we believe that health practitioners throughout the world will continue to regard the CardioQTM with growing enthusiasm owing to its independently proven ability to guide treatments that will optimise patient care, get patients out of hospital quicker and thereby significantly reduce costs.' Enquiries Deltex Medical Group plc Nigel Keen, Chairman and Chief Executive nigel.keen@deltexmedical.com 01243 774 837 Ewan Phillips, Finance Director ewan.phillips@deltexmedical.com 01243 774 837 Financial Dynamics Stephanie Highett stephanie.highett@fd.com 020 7831 3113 Sarah Mehanna sarah.mehanna@fd.com 020 7831 3113 Notes for editors Deltex primarily develops, assembles and markets a cardiac function monitor and therapy guidance device, the CardioQTM ('CardioQTM'/'Monitor'). The CardioQTM incorporates the Company's proprietary software and a narrow, easy-to-use, minimally invasive, disposable oesophageal probe, used for transmitting and receiving an ultra-sound ('Doppler') signal. By using this Doppler technology, the CardioQTM provides clinicians with an early warning on the haemodynamic condition of critically ill patients. This continuous, real-time monitoring facilitates the administration of fluids or drugs in a timely fashion and provides an provides an immediate assessment of their impact. There are already over 600 CardioQTMs currently in use in hospitals worldwide and distribution arrangements are in place in over 30 countries. In addition, there are currently more than 75 clinical publications on the use of the CardioQ TM which have repeatedly:- • validated the results of the Monitor against known standards for measuring cardiac output, demonstrating that the technology works • proved that the CardioQTM works over a variety of types of operation • shown that the Company's technology provides significant health and economic benefits by helping to reduce post-operative complications and length of hospital stays by an average of 30 to 40 per cent for a wide range of patients. The Company is also currently developing a number of new products:- • A multi-patient probe for use in specific circumstances in certain markets • The SupraQTM - a monitor based on the CardioQTM technology but using a completely non-invasive probe; the prototype is being prepared for clinical testing in the second half of 2002 • The NeuroQTM - a monitor designed to measure blood flow in the brain; the new prototype is in preparation for clinical trials in the second half of 2002 The multi-patient probe for use in operating theatres in the UK will be launched in July 2002. CHAIRMAN'S STATEMENT Group overview The human body provides oxygen to all its principal organs through the circulation of blood around the system. In critically ill patients or when individuals are involved in a traumatic event it is vital that the clinician is given information to ensure that this blood circulation is continuing properly (the 'haemodynamic condition'). If the oxygen supply is not maintained for any extended period the patient either takes longer to recover, does not recover completely or does not recover at all. Deltex Medical has developed and proven a cardiac function monitor, the CardioQ TM, which it manufactures and markets. The CardioQTM monitor uses Doppler Ultrasound technology to provide clinicians with an early warning on the haemodynamic condition of critically ill patients, the data being provided through a disposable probe which is inserted into the patient's oesophagus through the mouth or nose. This real time monitoring system facilitates the administration of fluids or drugs in a timely fashion and provides an immediate assessment of their impact. Clinical studies have repeatedly shown that Deltex Medical's technology provides significant health and economic benefits by helping to reduce post operative complications and length of hospital stays by an average of 30 to 40% for a wide range of patients. Deltex Medical's goal is to establish its technology as common practice in operating theatres, intensive care units and accident and emergency departments worldwide, thereby giving doctors information that will enable them to guide therapy which will help them make their patients better, quicker. Whilst the CardioQTM is today used principally on sedated patients, Deltex Medical is currently developing devices which will extend the use of the technology to patients that are not sedated. This will allow the clinician to assess the patient's haemodynamic status from the time that the patient arrives in the healthcare system, be that at the site of an accident or on admission to hospital, through to the discharge of the patient from the hospital. I can report progress in many directions during 2001. Momentum is growing in the acceptance of the Group's technology throughout medical communities in many different countries as awareness grows amongst clinicians of the benefit of optimising the haemodynamic condition of their patients. The year ended 31 December 2001 saw sales of monitors increase by over 80% to 164 units and revenue producing probes by over 30% to 17,865. Overall, sales amounted to £1.3 million, an increase of £0.3 million on 2000. Sales growth has been particularly strong in the UK and the Far East. The net loss for the year amounted to £3.3 million which is in line with expectations and compares with a loss after exceptionals of £3.9 million in the previous year. AIM Listing The Group moved its listing from Nasdaq Europe to AIM on 8 November 2001, raising £4.2 million net in an institutional placing at a price of 25p per share. This low price reflected the conditions in the financial markets since the Nasdaq Europe listing in April 2000. We were pleased to be able to complete this new capital raising despite the very difficult markets for new issues which have prevailed since the events of 11 September in New York. We anticipate that the capital that was raised is sufficient to allow the business to complete its next stage of development and thereby become self-financing. Changes in distribution strategy In order to respond to the growing demand for its products, the Group is increasing its focus on its sales and marketing activities. Currently the Group's products are taken to market by distributors in more than thirty different countries throughout the world and it is the Group's intention to maintain its network of distributor partners in markets outside the UK. In the UK, however, as announced today, we have agreed with Actamed, our UK distributor, that, after nearly four years of partnership, we will sell the Group's products direct from 1 July 2002. This will increase our ability to develop our sales and marketing programmes for roll-out through our distribution partners in other markets and coincides with the planned commercial launch of our new multi-use theatre probe. Although the Group has a substantial installed base of monitors in the USA the cost of introducing the technology to new users in the USA has been higher than in other countries where the Group's products are being sold. We have therefore realigned our sales and marketing organisation in the USA to focus more carefully on those market sectors which provide the best opportunities for increasing the use of our devices. We maintain a specialised field sales force of experienced clinical trainers in the USA and, in order to increase the margin on sales in the USA, we have brought back in-house the distribution of our products. This refocusing has allowed us to apply additional resource to those markets in the world where the take-up of our products is faster and where we can therefore earn greater margins on the products which we sell. We anticipate that, as awareness of the benefits of monitoring haemodynamic condition become more accepted in the USA as is happening in the rest of the world, we will be able to accelerate the introduction of our products in the USA. Opening new markets The Group has made significant progress in increasing the number of markets where patients can benefit from the use of our technology. During 2001, highlights included: being awarded both regulatory and reimbursement approval in Japan; appointing new distributors in countries such as Korea, Brazil, India and South Africa; gaining regulatory approval in Korea; obtaining the European CE mark for the new multi-use theatre probe and seeing a considerable increase in demand from our distributor partners to participate in our training programmes. In a separate announcement made today, 10 April 2002, Deltex Medical has confirmed that reimbursement approval has been published in Korea for use of its products in the treatment of cardiac and cardiothoracic patients. We regard Korea as a market with considerable potential and have received considerable interest to date from the medical community there. Clinical Studies The Group has a substantial body of clinical papers from pre-eminent doctors around the world supporting the use of Deltex Medical's technology. These papers variously demonstrate that the CardioQTM is safe, accurate, easy to use and that it helps patients to get better, quicker. The focus of the Group's support for clinical trials is moving towards local trials in local markets. Doctors in most countries tend to be most aware of, and therefore most influenced by, clinical studies undertaken and published in their own country and language. Important trials are being undertaken in Japan, Korea and Brazil as well as the ongoing stream of trials taking place in markets where Deltex Medical has been established longer, such as France, Belgium, Switzerland, the UK and the USA. The results of clinical trials consistently show that Deltex Medical's technology helps patients recover more quickly. As a result of new trials and new patient care protocols emanating from them, the number of situations where the Group's products can be used beneficially continues to expand. Research and Development One of the Group's strengths lies in its expertise in research and development both in-house and in terms of its relationships with academic consultants working in a variety of different hospitals and universities. Progress during the year has been made on a number of different projects: software upgrades on the CardioQTM, including new paediatric applications; probe redesign and the completion of the new multi-use theatre probe; the linguistic and software translations involved in the entry into new countries; and the submission of technical data for regulatory purposes in the expanding distribution networks. This has lead to regulatory approval being granted for the Group's products in a number of new countries notably, Japan and Korea. In addition, new prototypes of the SupraQTM have been prepared for clinical testing in the current year. The SupraQTM is an updated version of an earlier product which measures cardiac output using a completely non-invasive probe and which is therefore suitable for use on non-sedated patients. Work has continued with our partners on interfacing the CardioQTM to the high-end monitors in place beside the majority of critical care beds throughout the world. It is important to develop these interfaces to be ready for the time when acceptance of the CardioQTM and its benefits is such that the technology needs to be made available to all critical care patients. The NeuroQTM, the Group's product which is being developed for use in monitoring how well the blood is circulating in the brain, has also advanced during the year. New prototypes of the device have been produced for use in clinical trials in Addenbrookes Hospital in Cambridge and these trials are expected to take place during the current year. Board changes Following the refocusing of the Group's business towards those international markets where our products are being well received and with the increasing emphasis on our sales activity in the UK, Kemp Coady is to stand down as Chief Executive Officer to allow us to appoint a new CEO with more direct experience in those markets where our products are most readily accepted. In the interim, I will become Executive Chairman and Chief Executive. I am delighted that Kemp has agreed to stay on the Board as a non-executive director giving us continued access to his knowledge and experience and contacts in the medical device markets in the USA. In September 2001, David Moorhouse and Jeffrey Vender resigned as directors. They were valued colleagues for a number of years and we thank them for their contributions to the Group as it moved from an early stage start-up to a company listed on the London Stock Exchange. Ewan Phillips joined the Board as Finance Director in September; his appointment, the changes made in the US and the appointment of Tim Gresham as head of marketing are key steps in building the right management team for the next stage of Deltex Medical's growth. Prospects 2001 and the first few months of 2002 have been an exciting time for the Group. We have made enormous progress in opening up new markets around the world, in developing the right sales and marketing approaches and strategies for these markets and in building a distribution network that matches the quality and potential of our technology. At the same time, we are enhancing the strength and depth of the management team to ensure that Deltex Medical will complete its transition from a research and development led business to an effective international sales and marketing organisation. Health services and medical communities worldwide are striving to deliver best practice, whilst often operating under strict budget restraints. In these circumstances, we believe that health practitioners throughout the world will continue to regard the CardioQTM with growing enthusiasm owing to its independently proven ability to guide treatments that will optimise patient care, get patients out of hospital quicker and thereby significantly reduce costs. Significant advances in medical practice take a long time. The Board believes that, with a current installed base of over 600 CardioQTM monitors, Deltex Medical is now well established as one of the best positioned suppliers of minimally and non-invasive cardiac monitoring solutions which can take advantage of the growing acceptance of the benefits of optimising patients' haemodynamic condition. The Board is confident that Deltex Medical will deliver long term value to its shareholders. Nigel Keen Chairman 10 April 2002 Consolidated profit and loss account for the year ended 31 December 2001 2001 2000 £m £m Unaudited Audited Turnover 1.3 1.0 Cost of sales (0.7) (0.5) ---- ---- Gross profit 0.6 0.5 ---- ---- Net operating expenses - before exceptional costs (4.0) (3.8) - exceptional costs - (0.7) ---- ---- Net operating expenses - total (4.0) (4.5) ---- ---- Operating loss (3.4) (4.0) Interest receivable and similar income 0.1 0.2 Interest payable and similar charges - (0.1) ---- ---- Loss on ordinary activities before taxation (3.3) (3.9) Tax on loss on ordinary activities - - ---- ---- Loss for the financial year (3.3) (3.9) ========= ========= Loss per share - basic and diluted £(0.174) £(0.273) ========= ========= Consolidated balance sheet at 31 December 2001 2001 2000 £m £m Unaudited Audited as restated Fixed assets Tangible assets 0.4 0.5 ---- ---- Current assets Stocks 0.7 0.9 Debtors 0.4 0.3 Cash at bank and in hand 5.6 3.7 ---- ---- 6.7 4.9 Creditors: Amounts falling due within one year (1.2) (0.5) ---- ---- Net current assets 5.5 4.4 ---- ---- Net assets 5.9 4.9 ========= ========= Capital and reserves Called up share capital 3.7 15.6 Share premium account 8.6 6.5 Merger reserve 1.8 1.8 Profit and loss account (22.3) (19.0) Capital redemption reserve 14.1 - ---- ---- Equity shareholders' funds 5.9 4.9 ========= ========= Consolidated cash flow statement for the year ended 31 December 2001 2001 2000 £m £m Unaudited Audited ---- ---- Net cash outflow from operating activities (2.4) (4.2) ---- ---- Returns on investments and servicing of finance Interest received 0.1 0.2 Interest paid - - Interest element of finance lease payments - - ---- ---- Net cash inflow from returns on investments and servicing of finance 0.1 0.2 ---- ---- Capital expenditure Purchase of tangible fixed assets (0.3) (0.5) ---- ---- Net cash outflow for capital expenditure (0.3) (0.5) ---- ---- Net cash outflow before financing (2.6) (4.5) ---- ---- Financing Issue of ordinary share capital 5.3 9.6 Expenses in connection with share issue (1.1) (1.5) Capital element of finance lease payments - - ---- ---- Net cash inflow from financing 4.2 8.1 ---- ---- Increase in net cash in the year 1.6 3.6 ========= ========= Notes to the preliminary statement for the year ended 31 December 2001 1. Nature of the financial information The financial statements for Deltex Medical Group plc have yet to be signed for the year ended 31 December 2001. The financial information set out in the announcement does not constitute the Company's statutory accounts for the year ended 31 December 2001 or 31 December 2000. The financial information for the year ended 31 December 2000 is derived from the statutory accounts for that year which have been delivered to the Registrar of Companies. The auditors reported on those accounts; their report was unqualified and did not contain a statement under either Section 237 (2) or Section 237 (3) of the Companies Act 1985. The statutory accounts for the year ended 31 December 2001 will be finalised on the basis of the financial information presented by the directors in this preliminary announcement and will be delivered to the Registrar of Companies following the Company's Annual General meeting. The preliminary results have been prepared in accordance with applicable accounting standards. The particular accounting policies adopted are the same as those adopted in the financial statements for the year ended 31 December 2000. 2. Turnover 2001 2000 £m £m Unaudited Audited Analysis of turnover by destination United Kingdom 0.5 0.3 United States of America 0.3 0.4 Rest of Europe 0.3 0.3 Rest of the World 0.2 - ---- ---- 1.3 1.0 ========= ========= 3. Exceptional items The exceptional costs in 2000 arose because one of the Group's share option plans gave employees and former employees of an overseas subsidiary the right to buy shares at less than nominal value. The subsidiary is responsible for the cost of the shortfall between the option price and the nominal value of all the options involved. 4. Operating cash flow 2001 2000 £m £m Unaudited Audited Operating loss (3.4) (4.0) Depreciation of tangible fixed assets 0.4 0.2 Impairment adjustment - 0.1 Provision for costs associated with share options - 0.9 Exchange differences (0.1) (0.8) Loss on sale of fixed assets - - Decrease/(increase) in stocks 0.2 (0.5) Decrease/(increase) in debtors (0.1) - (Decrease)/increase in creditors 0.6 (0.1) ---- ---- Net cash outflow from operating activities (2.4) (4.2) ========= ========= 5. Prior year adjustment The acquisition by the Company of Deltex Medical Holdings Limited in 2000 has been accounted for using the principles of merger accounting. The prior year adjustment is to reclassify the share premium account balance in Deltex Medical Holdings Limited as a merger reserve rather than share premium account on consolidation. 6. Dividends The directors do not recommend payment of a dividend (2000: nil). 7. Distribution of announcement Copies of this announcement are being sent to all shareholders and will be available for collection free of charge from the Company's registered office at Terminus Road, Chichester, West Sussex PO19 8TX. This information is provided by RNS The company news service from the London Stock Exchange FR UKARRUKRSRUR

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