Final Results - Year Ended 31 March 2000

Aortech International PLC 1 June 2000 AORTECH INTERNATIONAL plc Preliminary Results for the Year Ended 31 March 2000 AorTech International plc, the Scottish-based manufacturer of cardiovascular devices, announces its preliminary results for the year ended 31 March 2000. * Turnover increased 24% to £3.45 million (1999: £2.78 million) * Loss before development expenditure & goodwill amortisation £180,733 (1999: Loss £343,221) * Operating loss £1.83 million (1999 restated: £1.02 million)* * Loss per share 7.71p (1999 restated: Loss 5.05p) * FDA approval secured and initial marketing of TruCComs commenced * Significant progress with new synthetic Tri-leaflet heart valve * Elastomedic and intellectual property rights to Elast-EonT acquired *The Group's focus in the past two years has been increasingly concentrated on the development of new innovative technologies for the medical device market. As a result it is considered appropriate that this year's Profit and Loss Account should reflect this focus by writing off the development costs incurred. Gordon Wright, Chairman, commented: ' During the past year our Group has continued its progress in the development of innovative technologies, has maintained the growth in its established products, has announced the achievement of significant milestones and has secured strategically important acquisitions. Our established products, the Ultracor mechanical valve and the Elan and Aspire tissue valves, continue to be well accepted, with sales showing a 24% increase over 1999. 'Following the acquisition of the intellectual property and USA patents relating to the TruCCOMS system in July 1999, AorTech received FDA approval for the system in November, 1999. With the satisfactory conclusion of final clinical trials, the system is now recognised as representing a major breakthrough. 'Our new synthetic Tri-leaflet heart valve project has made significant progress with valves achieving critical durability levels of 400 million cycles in testing, corresponding to approximately ten years in patients. Initial evidence from first phase in vivo trials has produced encouraging results from explanted valves which show superior performance when compared with previous explants of non biostable polyurethane valves. The material utilised in the new Tri-leaflet heart valve is drawn from a range of Elast-Eon material developed in Australia during the last twelve years. 'Ownership of these materials, provides us with the opportunity to benefit from their use in a range of medical device implants. Twelve material evaluation agreements have already been concluded with major medical device companies with a view to fully exploiting this potential. We are confident that the significant advantages of Elast-Eon materials will result in their being the future materials of choice for utilisation in several long-term implantable devices. 'The potential of these new products has been reflected by a number of awards during the past year ...' Enquiries: 1 June 2000 AorTech International plc 01698 746699 Eddie McDaid, Managing Director Ian Cameron, Finance Director College Hill 020 7457 2020 Michael Padley Chairman's & Managing Director's Statement During the past year our Group has continued its progress in the development of innovative technologies, has maintained the growth in its established products, has announced the achievement of significant milestones and has secured strategically important acquisitions. It is pleasing to be able to record that these achievements have been reflected in a markedly improved shareholder value on the Stock Market. Since the Group's focus in the past two years has been increasingly concentrated on the development of new innovative technologies for the medical device market, it is considered appropriate that this year's Profit and Loss Account should reflect this focus by writing off the development costs incurred, not only in this year but also, by means of a prior year adjustment, in preceeding years. The Group's innovative technologies to which we refer are the new Continuous Cardiac Output Monitoring System (TruCCOMS), the new Tri- leaflet heart valve and the new Elast-Eon material. The potential impact of these products is continuing to be recognised not only within the medical device industry but also by investors and medical device analysts. This potential has been reflected by a number of awards during the past year including the AIM Award for the Best Technology Award of a U.K. company, the Scotland PLC Awards for Innovation and Best Performing Share and the Guild of Shareholders Award for Best Small Cap UK Company. TruCCOMS Technology Following the acquisition of the intellectual property and USA patents relating to TruCCOMS in July 1999, AorTech subsequently received FDA approval for the system in November 1999. With the satisfactory conclusion of final clinical trials, the system is now recognised as representing a major breakthrough in monitoring patients cardiac output both during and after surgery. The system consists of a disposable catheter linked to an analytical and display monitor and provides continuous display and immediate response to changes in cardiac output. The development work carried out during the last year to miniaturise the monitor has been completed with the new monitor and catheter now available for marketing and sale. Marketing of the product has already commenced in the USA. The establishment of our U.S. subsidiaries and opening of our office in Michigan is an important step in not only the marketing and sales of TruCCOMS but also in our future focus in the USA market. The senior management team has been strengthened with the recent appointment of Hans van den Berg as European Sales and Marketing Director of AorTech Critical Care. Hans has held senior positions in the area of critical care, including cardiac output, over the last twenty years. With his wealth of knowledge of the critical care market he will be a valuable addition to our team. Further senior appointments will be made over the next few months. The initial marketing objective in both the USA and Europe will be to collect further patient data for clinical publications in order to demonstrate the unique clinical benefits of the system, leading to increased production and full marketing and build up of sales in the in the latter half of the financial year, Other clinical applications are also possible from the TruCCOMS technology and a number of these are currently being investigated. New Tri-leaflet Heart Valve Our new synthetic Tri-leaflet heart valve project has made significant progress with valves achieving critical durability levels of 400 million cycles in testing, corresponding to approximately ten years in patients. Initial evidence from first phase in vivo trials has produced encouraging results from explanted valves which show superior performance when compared with previous explants of non biostable polyurethane valves. No other medical device company has, to our knowledge, made such progress in what is effectively the development of a 'next generation heart valve'. In addition, several papers were presented at the World Biomaterials Conference in Hawaii in May, 2000 on the excellent results achieved to- date. With the transfer of this project to our new facilities in Scotland senior appointments have been made to our team. We are particularly pleased to welcome Bill Haworth formerly Development Director of Avecor Inc. who has joined us as Development Manager, Dr. Bernard O'Connor formerly Research Manager of Glasgow University who has joined us as Design Engineer and Dr. Ian Griffiths formerly Polymer Science Team Leader with Victrex who will join us in July, as Polymer Scientist. Our plans envisage final in vivo trials during the latter part of this calendar year and the commencement of patient trials during the latter part of 2001. Our thanks go once again to the members of our consortium team from Glasgow, Leeds and Liverpool Universities, together with our colleagues in Australia, without whose efforts this project could not have progressed to these final development stages. Elastomedic and Elast-Eon Material The material utilised in the new Tri-leaflet heart valve is drawn from a range of Elast-Eon material developed in Australia during the last twelve years. Elast-Eon incorporates the properties of silicon together with those of polyurethane, resulting in an outstanding biostable material. We were, therefore, particularly pleased to announce in March 2000, not only the acquisition of Elastomedic but also the acquisition of the intellectual property and patents relating to the family of Elast-Eon materials which is now owned outright by the AorTech Group. Ownership of these materials, provides us with the opportunity to benefit from their use in a range of medical device implants and twelve material evaluation agreements have already been concluded with major medical device companies with a view to fully exploiting this potential. We are confident that the significant advantages of Elast-Eon materials will result in their being the future materials of choice for utilisation in several long-term implantable devices. We believe there is significant opportunity to capitalise on the outstanding qualities of these materials, particularly in view of the queries and concerns being raised by the European Regulatory Bodies and European Commission on other materials used in implantable devices. We expect that the strategy for the commercialisation of these materials will encompass not only licensing to other medical device companies but also their potential use in other medical device products to be manufactured, marketed and sold by AorTech. Established Products Our established products, the Ultracor mechanical valve and the Elan and Aspire tissue valves, continue to be well accepted, with sales showing a 24% increase over 1999. It is particularly pleasing to note that, with the tissue valve market expanding, the acquisition of our range of tissue valves in August 1999 has enabled us to benefit. We expect to continue this expansion during the course of next year. Executives and Staff Underlying and sustainable growth of AorTech can only be maintained with the professionalism, drive and commitment of all employees associated with the Group. The growth of AorTech during the past year, in particular, the development and commercialisation of our innovative technologies, is due in no small measure to the focus and commitment of all our employees. This growth means that recruitment at all levels will continue during the course of the current financial year. Future Prospects The commercialisation of TruCCOMS together with the development of our new heart valve has helped to increase our share price. With AorTech moving into the final phase of development of the new Tri-leaflet heart valve, the acquisition of Elastomedic and the potential of the new Elast-Eon material for other medical devices, we believe there is further significant growth and further value to be added. There will be announcements during the course of the current financial year on the progress of all these projects. We wish to thank our directors, employees and our collaborative partners in the UK, Europe, the USA and Australia for their significant contribution over the past year and also take this opportunity to thank the shareholders for their continued support. 1 June 2000 J G Wright E McDaid CHAIRMAN MANAGING DIRECTOR AORTECH INTERNATIONAL plc Consolidated Profit and Loss Account Note Year ended Year ended 31 March 31 March 2000 1999 restated £ £ Turnover 2 3,452,246 2,779,315 Cost of Sales (1,359,304) (1,239,431) Gross Profit 2,092,942 1,539,884 Selling and Administrative Expenses (2,202,298) (1,852,958) Amortisation of Intellectual Property (71,377) (30,147) Loss before Development Expenditure and Amortisation of Goodwill (180,733) (343,221) Development Expenditure (1,476,626) (640,344) Share of Development Expenditure of (85,128) (40,353) Associated Undertaking Amortisation of Goodwill (90,716) - Operating Loss (1,833,203) (1,023,918) Interest Receivable 113,911 83,385 Interest Payable (45,189) (60,748) Loss on Ordinary Activities before and (1,764,481) (1,001,281) after Taxation Basic Loss per Ordinary Share 3 (7.71p) (5.05p) Statement of Total Recognised Losses Loss for the financial year (1,764,481) (1,001,281) Currency Translation Differences (2,020) (17) Arising on Consolidation Total Recognised Losses Relating to the (1,766,501) (1,001,298) Year Prior Year Adjustment 4 (919,193) Total Losses Recognised Since Last (2,685,694) Annual Report AORTECH INTERNATIONAL plc Consolidated Balance Sheet 31 March 31 March 2000 1999 restated £ £ Fixed Assets Intangible Assets 23,540,817 422,951 Tangible Assets 1,252,521 1,040,170 Investment in Associated Undertaking - 581,934 24,793,338 2,045,055 Current Assets Stocks 1,957,466 1,651,874 Debtors 1,583,860 1,155,550 Cash at Bank 16,032,106 576,779 19,573,432 3,384,203 Creditors amounts falling due within (2,371,631) (896,581) one year Net Current Assets 17,201,801 2,487,622 Total Assets less Current Liabilities 41,995,139 4,532,677 Creditors Amounts falling due after (364,472) (355,964) more than one year Accruals and Deferred Income (78,329) (67,665) Net Assets 41,552,338 4,109,048 Capital and Reserves Called Up Share Capital 7,284,841 5,081,818 Share Premium Account 41,534,272 4,527,504 Other Reserve (2,003,143) (2,003,143) Profit and Loss Account (5,263,632) (3,497,131) Equity Shareholders' Funds 41,552,338 4,109,048 AORTECH INTERNATIONAL plc Consolidated Cash Flow Statement Year ended Year ended 31 March 31 March 2000 1999 restated £ £ Net cash outflow from operating (2,084,253) (1,456,797) activities Returns on investment and servicing of 58,522 20,763 finance Capital expenditure and financial (216,897) (376,281) investment Acquisitions and disposals (3,098,384) (622,287) Cash outflow before management of (5,341,012) (2,434,602) liquid resources and financing Management of liquid resources (14,879,507) (495,064) Financing 20,320,644 2,642,943 Increase/(Decrease) in Cash in Year 100,125 (286,723) Note 1 The financial information set out in this Announcement has been abridged from the Annual Report for the year ended 31 March 1999 and the unaudited accounts for the year ended 31 March 2000. The statutory accounts for the year ended 31 March 1999 were reported on by the Auditors, PriceWaterhouseCoopers, without qualification and have been delivered to the Registrar of Companies. Note 2 Segmental analysis by class of business and geographical area (a) Class of business The group operates in one class of business (b) geographical area The analysis by geographical area of the group's turnover is set out below: Year ended 31 March 2000 Year ended 31 March 1999 £ £ £ £ By By Origin By By destination destination Origin Geographical segment United Kingdom 746,611 2,794,200 997,817 2,289,097 Rest of Europe 2,657,063 658,046 1,746,693 490,218 Rest of World 48,572 - 34,805 - 3,452,246 3,452,246 2,779,315 2,779,315 Note 3 Loss per ordinary share The basic loss per ordinary share is calculated on the loss of the group of £1,764,481 (1999 restated - (£1,001,281) and 22,887,273 (1999 - 19,833,420) equity shares. The exercise of share options would not have been dilutive. Note 4 Prior Year Adjustment The Company has changed its accounting policy on development expenditure with effect from 1 April 1999. Previously, such development expenditure relating to specific projects intended for commercial exploitation was carried forward where the ultimate commercial viability had been assessed with reasonable certainty. Under the new accounting policy, all development expenditure is written off as incurred. The main reasons for the change in policy are to give greater focus to the Company's development of its innovative technologies and to align with more common industry practice. The effect of moving to this new policy is to increase the loss for the year to 31 March 2000 by £1,561,754 and for the year to 31 March 1999 by £680,697. The change of policy also reduced shareholders' funds by £919,193 as at 1 April 1999 and by £238,496 as at 1 April 1998. Copies of this statement will be available for a period of 14 days form the Company's registered office: Phoenix Crescent, Strathclyde Business Park, Bellshill, Scotland ML4 3NU

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