Interim Results
Aortech International PLC
13 December 2001
AORTECH INTERNATIONAL PLC
Interim Results for the six months to 30 September 2001
Aortech International plc, the Scottish-based manufacturer of cardio-vascular
devices, announces its Interim Results for the six months ended 30 September
2001.
Highlights
O Turnover increased 13% to £1.98 million (2000H1: £1.76m; Year £4.05m)
O Loss for the period £5.02 million - in line with expectations
O truCCOMS - initial sales contribution; Becton Dickinson appointed
European distributor; US launch October 2001; clinical studies underway
O Elast-Eon - manufacturing scale up achieved; further licence agreements
expected before financial year end
O Tri-leaflet Heart Valve - regulatory testing commenced October,
clinical trials scheduled for late 2002
O Cash reserves £25 million
Gordon Wright, Chairman, commented:
'The volume of sales of our mechanical and tissue valves increased during the
period and we are continuing to see increased demand for our range of tissue
valves.
'Initial sales orders of truCCOMS have been secured from a number of centres
in Europe. The truCCOMS System was officially introduced in the USA in
October. To date, the USA sales team have obtained several prestigious
accounts.
'The encouraging acceptance and adoption of truCCOMS gives us confidence that
sales will increase progressively during the course of the current financial
year and that, in the future, the system will become a major revenue
contributor to AorTech.
'The development work and testing results on our new tri-leaflet heart valve
completed to date has provided us with the data to indicate that our valve
should provide doctors and patients with a superior innovative artificial
heart valve.
'The Board look to the future with confidence and believe that AorTech has a
number of fundamental strengths which will enable the company to deliver long
term value to its shareholders.'
13th December 2001
ENQUIRIES:
AorTech International plc Tel: 01698 746 699
Eddie McDaid, Chief Executive
College Hill Tel: 020 7457 2020
Michael Padley
Clare Warren
Chairman's and Chief Executive's Joint Statement
Results
We are pleased to report that revenues for the six-month period to 30
September 2001 of £1,978,183 showed an increase of 13% over the similar period
last year. The turnover comprised sales of our mechanical and tissue valves
and related products, our contract manufacturing and, in the last two months
of the period, there was an initial contribution from sales of our truCCOMS
cardiac output monitor.
The loss for the period of £5,024,081 is in line with our forecasts and is
after charging development costs of £2,850,076 and amortisation of intangible
fixed assets of £615,222.
The reduction in our gross profit margin from 55% to 45% was in part due to
pricing pressures experienced in some countries, particularly in respect of
mechanical heart valves and in part to the anticipated low gross margins of
initial sales of our truCCOMS products.
Mechanical and tissue valves
Although the volume of sales of our mechanical and tissue valves increased
during the period, this was not reflected in much improved revenues due to the
pricing pressures referred to above.
We are however continuing to see increased demand for our range of tissue
heart valves and, as a result, we are re-locating our plant in Swillington,
near Leeds, to new premises nearby to facilitate an increase in the production
and supply to meet this demand. This increase reflects an overall move in
favour of tissue valves in world markets at the expense of mechanical valves.
truCCOMS
Marketing and Sales
The initiation of marketing and sales of truCCOMS in June was later than
anticipated pending the finalisation of the arrangements for Becton Dickinson
(BD) to be appointed our exclusive European Distributor for the system. The
negotiations with BD took several months and, during that time, it would have
been inappropriate to appoint distributors in various European countries.
Furthermore, BD's sales teams needed to familiarise themselves with the
truCOMMS product, their training being completed at the end of August 2001.
We are now pleased to report that since June 2001, when BD started, the
truCOMMS product has been accepted in a number of hospitals. Bad Oyenhausen,
one of the World's leading cardiac hospitals adopted truCCOMS for their open
heart surgery procedure. We have placed truCCOMS monitors in approximately 70
hospitals in Europe and there has been positive feedback from the initial
users of the truCCOMS system.
Initial sales orders of truCCOMS have been secured from a number of centres in
Europe specifically in Germany, UK, Italy, France and the Netherlands. These
sales have been focused in the specific area of 'open heart surgery'
particularly in the area of 'off-pump' surgery. The immediate response of
truCCOMS to changes in patients' cardiac output enables surgeons and
anaesthetists to monitor the success of their open heart procedures as they
are being performed and, in particular, during 'off-pump' surgery i.e. where
surgeons operate on the beating heart. As a result they are able to determine
any changes in patients' cardiac output and to take, where appropriate, prompt
corrective action.
In July 2001 we announced the appointment of Dennis Hurlebaus as Vice
President of Sales in the USA. Dennis has vast experience of sales in the
Critical Care and monitoring business, and since his appointment has recruited
10 sales representatives, all with previous Critical Care experience. In
addition to our own personnel, he has employed the services of 35 independent
medical manufacturing representatives.
Training of the sales organisation was completed in August and the truCCOMS
System was officially introduced in the USA at the American Society of
Anesthesiologists meeting in October. The level of acceptance of the truCCOMS
System at this meeting and the leads generated have enabled the USA sales team
to obtain several prestigious accounts.
We anticipate, as has been the case in Europe, acceptance and adoption of the
product by surgeons and anaesthetists in operating rooms, in particular in '
open heart' procedures and 'off-pump' procedures.
Clinical Studies
As part of the sales and marketing programme, clinical studies are being
carried out at various centres worldwide comparing the performance of truCCOMS
to other invasive and less invasive systems and also assessing the performance
of truCCOMS in a number of clinical situations. These studies, displaying the
clinical advantages of truCCOMS, will be published and made available
throughout the year.
The encouraging acceptance and adoption of truCCOMS gives us confidence that
sales will increase progressively during the course of the current financial
year and that, in the future, the system will become a major revenue
contributor to AorTech.
New Tri-leaflet Heart Valve
We announced the commencement of the regulatory phase testing of our new
tri-leaflet heart valve in early October 2001. This represents a significant
milestone in the development of the next generation heart valve which we are
confident will eliminate the disadvantages inherent in all current artificial
heart valves, namely that mechanical valves require daily anti-coagulation
therapy and bio-prosthetic (tissue) valves which lack durability and can have
a calcification propensity.
The development work and testing results on our new tri-leaflet heart valve
completed to date has provided us with the data to indicate that our valve
should indeed eliminate these disadvantages and provide doctors and patients
with a superior innovative artificial heart valve.
The assessment of data from our valves by the Medical Advisory Board, which
includes leading cardiac surgeons from around the World, has been extremely
positive.
The regulatory testing phase for the valve represents the final phase of
testing to meet the requirements of both the European regulators and the FDA
in the USA prior to commencing clinical trials with the heart valve in
patients. It is anticipated that these clinical trials in patients will
commence during the latter part of 2002 in Europe and in early 2003 in the
USA.
Elast-Eon Material
The Tri-leaflet valve
The acquisition of Elastomedic, now AorTech BioMaterials, was made in the
first instance to secure the rights to the material which forms the basis of
the leaflets for the tri-leaflet heart valve. The primary focus of our
AorTech BioMaterial Group in Australia has been to ensure the quality and
manufacturing standards of commercial quantities of the materials for the
heart valve and the repeatable manufacturing of that material. This has now
been achieved.
Wider Uses for Elast-Eon
A number of material evaluation agreements have been entered into with medical
device companies who are assessing the benefits of utilising Elast-Eon
material in a range of products. These evaluation agreements and research and
development agreements are ongoing with a supply and licence agreement
completed with Jomed at the end of the last financial year for using our
material in stents which are implanted in patients' arteries after angioplasty
procedures. Continued progress is being made with the evaluation agreements
and we anticipate further supply and licence agreements to be completed by the
end of this financial year.
Future Prospects of the AorTech Group
We believe that AorTech has a number of fundamental strengths which will
enable the company to deliver long term value to its shareholders. These
strengths are based on our technologies and our people, in particular in the
areas of:
Heart valves
Our innovative synthetic tri-leaflet heart valve has now reached the
regulatory phase prior to implants and clinical trials in patients next year.
This product addresses a market value of approximately $850 million and would
represent the major innovation in heart valve replacement during the last 25
years.
BioMaterials
Elast-Eon represents a unique biostable material, which will be capable of use
in a number of implantable medical products and represents a long-term future
value for the company.
Critical Care - truCCOMS
Our real time continuous cardiac output monitoring system, represents the
first real time continuous cardiac output monitoring system in the World and
will not only address the present $210 million market but will expand that
market.
Cash in Hand
At 30 September 2001, the Group had cash reserves of £25 million which will
enable us to drive forward and realise potential from our world leading
technologies.
Personnel
We have outstandingly talented employees throughout the organisation and have
recruited and will continue to recruit, where necessary, to strengthen the
team to ensure delivery of value from our World leading technologies.
We wish to thank our Directors and our Employees throughout the World for
their continued commitment and significant effort in taking the company to its
present stage and look forward to continued growth from our technological
base.
CONSOLIDATED PROFIT AND LOSS ACCOUNT
Unaudited Unaudited Audited
six months six months year ended
ended ended
30 September 30 September 31 March 2001
2001 2000
Note £ £ £
Turnover 2 1,978,183 1,756,511 4,050,585
Cost of sales (1,090,066) (781,224) (2,004,486)
Gross Profit 888,117 975,287 2,046,099
Selling and (1,140,708) (451,890) (1,065,257)
marketing costs
Administrative (5,296,096) (3,695,399) (7,953,999)
expenses
Administrative
expenses include:
Development (2,850,076) (1,900,858) (4,626,361)
expenditure
Amortisation of (615,222) (629,555) (1,227,586)
intangible fixed
assets
Loss on ordinary (5,548,687) (3,172,002) (6,973,157)
activities before
interest
Interest receivable 524,606 457,691 785,838
Interest payable - (14,607) (25,755)
Loss on ordinary
activities
before and after 2 (5,024,081) (2,728,918) (6,213,074)
taxation
Loss per ordinary 3 (13.89p) (9.15p) (20.71p)
share
statement of total
recognised losses
Loss for the period (5,024,081) (2,728,918) (6,213,074)
Currency
translation
differences
arising on (126,571) (1,745) (211,990)
consolidation
Total recognised (5,150,652) (2,730,663) (6,425,064)
losses
CONSOLIDATED BALANCE SHEET
Unaudited Unaudited Audited
30 September 2001 30 September 2000 31 March 2001
£ £ £
Fixed assets
Intangible assets 21,540,048 22,998,520 22,137,882
Tangible assets 3,398,653 1,746,886 2,535,126
24,938,701 24,745,406 24,673,008
Current assets
Stocks 3,200,495 2,181,324 2,165,530
Debtors 2,885,544 1,896,271 3,369,254
Cash at bank 24,953,169 12,740,544 8,325,970
31,039,208 16,818,139 13,860,754
Creditors: amounts (1,792,044) (1,723,267) (2,377,592)
falling due within
one year
Net current assets 29,247,164 15,094,872 11,483,162
Total assets less 54,185,865 39,840,278 36,156,170
current liabilities
Creditors: amounts - (134,375) -
falling due after
more than one year
Accruals and (92,922) (46,316) (139,734)
deferred income
Net assets 54,092,943 39,659,587 36,016,436
Capital and reserves
Called up share 9,525,696 7,534,841 7,547,341
capital
Share premium 63,409,738 42,122,184 42,160,934
account
Other reserve (2,003,143) (2,003,143) (2,003,143)
Profit and loss (16,839,348) (7,994,295) (11,688,696)
account
54,092,943 39,659,587 36,016,436
CONSOLIDATED CASH FLOW STATEMENT
Unaudited Unaudited Audited
six months ended six months Year ended
ended
30 September 2001 30 September 31 March 2001
2000
£ £ £
Net cash outflow from (5,922,119) (2,178,131) (5,096,432)
operating activities
(see below)
Returns on investment 456,182 146,749 812,130
and servicing of finance
Capital expenditure and (1,238,852) (1,076,208) (1,917,169)
financial investment
Cash outflow before (6,704,789) (3,107,590) (6,201,471)
management of liquid
resources and financing
Management of liquid (17,180,815) 3,169,655 7,831,938
resources
Financing 23,339,114 (180,728) (1,461,733)
(Decrease)/Increase in (546,490) (118,663) 168,734
cash in the period
Continuing activities
Operating loss (5,548,687) (3,172,002) (6,973,157)
Amortisation of 615,222 629,555 1,227,586
intangible fixed assets
Depreciation of 236,654 307,000 419,385
tangible fixed assets
Gain on sale of - (415) (415)
tangible fixed assets
Release from deferred (46,162) (32,013) (117,345)
grants
Increase in stocks (1,034,965) (223,858) (208,064)
Increase in trade (70,550) (24,950) (568,087)
debtors
Increase in prepayments (106,480) (32,851) (171,628)
(Increase)/decrease in (200,565) 44,738 (74,676)
other debtors
Increase in trade 95,193 361,889 1,277,342
creditors
Increase in other taxes 152,339 22,995 44,927
and social security
(Decrease)/increase in (14,118) (58,219) 47,700
accruals and other creditors
Net cash outflow from (5,922,119) (2,178,131) (5,096,432)
operating activities
NOTES TO THE INTERIM FINANCIAL STATEMENTS (UNAUDITED)
1. Basis of preparation
These unaudited interim financial statements have been prepared on the basis
of the accounting policies set out in the Group's annual report for the year
ended 31 March 2001.
The financial information contained in these interim financial statements
does not constitute statutory accounts within the meaning of Section 240 of
the Companies Act 1985. The financial information for the year ended 31 March
2001 is an extract from the latest published financial statements that have
been delivered to the Registrar of Companies and on which the auditors'
report was unqualified.
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, loss before and after tax and net assets
is set out below:
(i) Unaudited Unaudited Audited
turnover
six months ended six months ended year ended
30 September 2001 30 September 2000 31 March 2001
sales by sales by sales by sales by sales by sales by
destination origin destination origin destination origin
£ £ £ £ £ £
Geographical
segment
United 606,062 1,414,280 388,968 1,404,585 888,922 3,228,054
Kingdom
Rest of 1,288,033 494,427 1,341,136 346,096 2,870,108 726,399
Europe
Rest of 84,088 69,476 26,407 5,830 291,555 96,132
World
1,978,183 1,978,183 1,756,511 1,756,511 4,050,585 4,050,585
(ii) loss before tax Unaudited Unaudited Audited
six months ended six months ended year ended
30 September 30 September 31 March
2001 2000 2001
£ £ £
Geographical segment
United Kingdom (4,278,108) (2,629,076) (5,765,333)
Rest of Europe (37,856) 217 23,361
Rest of World (1,232,723) (543,143) (1,231,185)
Loss before interest (5,548,687) (3,172,002) (6,973,157)
Net interest 524,606 443,084 760,083
(payable)/receivable
Loss before and after tax (5,024,081) (2,728,918) (6,213,074)
(ii) net assets Unaudited Unaudited Audited
30 September 30 September 31 March
2001 2000 2001
£ £ £
Geographical segment
United Kingdom 51,051,626 37,480,484 33,731,815
Rest of Europe 363,835 286,981 331,319
Rest of World 2,677,482 1,892,122 1,953,302
54,092,943 39,659,587 36,016,436
3. Loss per ordinary share
The basic loss per ordinary share is calculated on the loss of the Group of
£5,024,081 for the six months ended 30 September 2001 (six months ended 30
September 2000: £2,728,918, year ended 31 March 2001: £6,213,074) and on the
following number of shares:
(a) 36,176,714 equity shares being the weighted average number of shares in
issue during the six months ended 30 September 2001.
(b) 29,838,813 equity shares being the weighted average number of shares in
issue during the six months ended 30 September 2000.
(c) 29,999,033 equity shares being the weighted average number of shares in
issue during the year ended 31 March 2001.
No material dilution of loss per ordinary share would arise if all share
options were exercised.
4. Analysis of net funds
1 April cash non-cash 30 September
2001 flow changes 2001
£ £ £ £
Net Cash:
Cash at bank and in 8,325,970 16,634,325 (7,126) 24,953,169
hand
Deposits treated as (7,542,633) (17,180,815) - (24,723,448)
liquid resources
783,337 (546,490) (7,126) 229,721
Liquid resources:
Deposits included in 7,542,633 17,180,815 - 24,723,448
cash
Debt:
Debt due within one (12,434) 12,143 291 -
year
Net funds 8,313,536 16,646,468 (6,835) 24,953,169
Copies of this statement will be available for a period of 14 days from the
Company's registered office:
Phoenix Crescent, Strathclyde Business Park, Bellshill, Scotland, ML4 3NJ.
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