Interim Results
September 29 2003 - 2:02AM
UK Regulatory
RNS Number:2664Q
Deltex Medical Group PLC
29 September 2003
29 September 2003
Deltex Medical Group plc
Interim Results
Deltex Medical Group plc ('Deltex Medical'/'Group'/'Company'), the AIM listed
haemodynamic monitoring company announces its results for the six month period
ended 30 June 2003.
Highlights
* Sales increased by 38% to #1.1m (2002: #0.8m)
* Losses for the period of #1.7m (2002: #1.4m), reflecting increased
investment in key UK and European markets
* Sales in UK and Europe more than doubled to #0.8m (2002: #0.3m)
* Over 1,500 new operating theatre probes sold in the UK
* 42 patients per day in the UK using a CardioQ - up 90% on previous year
(30 June 2002: 22 patients a day)
* Strong penetration of operating theatre markets in UK and France with
similar strategies evolving in other European territories
* US FDA 510K approval granted for updated CardioQ system and FDA on-site
inspection successfully completed
* Cash burn rate reducing, with cash at the period end of #1.8m, in line
with expectations and which should, on current plans, be sufficient to see
the Company to profitability
* Professor Bennett, leading expert in haemodynamic optimisation and
intensive care medicine, appointed as consultant
* Current trading in line with expectations.
Chairman, Nigel Keen commented:
"The launch, at the end of 2002, of a new range of disposable probes (the DP
series) specifically designed to provide a monitoring solution for patients
undergoing surgery, has significantly increased the market opportunity for the
Company. In clinical trials, use of our technology in the operating theatre has
been demonstrated to reduce hospital stay by up to 42% by significantly reducing
complications. Helping patients to get better, quicker through the use of our
technology offers the National Health Service in the UK and other healthcare
providers around the world the opportunity to improve access to healthcare
through efficiency gains and reduced costs.
"Throughout our key European markets in France, Italy and Spain momentum is
growing as - in conjunction with our distributor partners - we roll out the
market development strategies derived from our UK experience. We have had
particular success in securing penetration into operating theatres in France and
anticipate seeing this success repeated in other key markets including Spain and
Italy.
"We are confident that Deltex Medical is well positioned to support doctors in
delivering the clinical benefits of haemodynamic optimisation to their patients
and as a result we will deliver long-term value to our shareholders."
Enquiries
Deltex Medical Group plc
Nigel Keen, Chairman
nigel.keen@deltexmedical.com
01243 774 837
Andy Hill, Chief Executive
andy.hill@deltexmedical.com
01243 774 837
Ewan Phillips, Finance Director
ewan.phillips@deltexmedical.com
01243 774 837
Financial Dynamics
Stephanie Highett/Francetta Carr
stephanie.highett@fd.com
020 7831 3113
Charles Stanley & Company Ltd
Philip Davies
philip.davies@charles-stanley.co.uk
020 7953 2000
Russell Cook
russell.cook@charles-stanley.co.uk
020 7953 2000
Notes for Editors
Deltex Medical primarily develops, assembles and markets a cardiac function
monitor and therapy guidance device, the CardioQ('CardioQ'/'Monitor'). The
CardioQ incorporates the Company's proprietary software and a small diameter,
easy-to-use, minimally invasive, disposable oesophageal probe that is used for
transmitting and receiving an ultrasound ('Doppler') signal. By using this
Doppler technology, the CardioQ provides clinicians with the ability to
haemodynamically optimise critically ill patients and those undergoing routine
moderate to major surgery through the controlled administration of fluid and
drugs. Haemodynamic optimisation has been scientifically proven to improve the
speed and quality of patient recovery and reduce hospital stay.
There are nearly 1,000 CardioQs 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 which
have repeatedly:-
* validated the results of the Monitor against known standards for measuring
cardiac output, demonstrating that the technology works
* proved that the CardioQ works in a wide range of surgical procedures
* demonstrated 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:-
* the SupraQ - a monitor based on the CardioQ technology but using a
completely non-invasive probe; the prototype is being prepared for clinical
testing
* the NeuroQ - a monitor designed to measure blood flow in the brain; the
new prototype is in preparation for clinical trials.
Chairman's Statement
The human body provides oxygen to all its 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 ("
haemodynamic optimisation"). If the oxygen supply is not maintained for any
extended period ("haemodynamic compromise" or "hypovolaemia") the patient either
takes longer to recover, does not recover completely or does not recover at all.
Hypovolaemia is one of the most common causes of complications and extended
hospital stay that affects patients undergoing surgery or who are in need of
intensive care.
Similarly, patients who undergo routine surgery, although seemingly fit, are at
risk of complications and extended hospital stay due to hypovolaemia. This is
because all surgical patients are denied fluid and food for a period prior to
their operation ("nil by mouth"); during the operation they are treated with
anaesthetic agents that affect the body's ability to compensate for the
dehydration caused by the nil by mouth regime; and are further compromised
through blood loss and evaporation from the wound during the surgical procedure.
Deltex Medical's CardioQ cardiac function monitor and the range of disposable
probes used with it enable doctors to detect and deal with hypovolaemia. The
CardioQ uses Doppler ultrasound technology to provide the clinician with the
data required to intervene to manage the patient's fluid status to achieve and
then maintain haemodynamic optimisation. This data is provided through a probe
which is inserted into the patient's oesophagus through the mouth or nose. The
Company's technology is increasingly being adopted as a 'standard of care' and
as a result of use of the CardioQ, more and more patients around the world are
able to leave hospital earlier and healthier.
Overall sales for the group in the six months to 30 June 2003 increased by 38%
to #1.1 million compared to #0.8 million for the same period in 2002. Losses for
the period amounted to #1.7 million, an increase of #0.3 million on the loss
recorded for the same period last year. This increase arose from the additional
investment required to bring in-house the UK sales and clinical trainer teams
from 1 July 2002 and to strengthen our European sales force in the second half
of 2002. This investment has enabled us to more than double sales across the UK
and Europe compared to the same period in 2002.
The rate of cash burn increased in the second and third quarters of 2002 as we
made this investment but started to fall in the final quarter of 2002. It
continued to fall in the first half of 2003, with operating activities absorbing
#1.4 million of cash in the half year, #0.3 million less than the #1.7 million
absorbed in both the comparative period and the second half of 2002. As at 30
June 2003, cash in hand was #1.8 million, in line with expectations. The
Company's current plans show that this should be sufficient to see the Company
to profitability.
In the UK, which is our principal market, approximately 42 patients every day
were being monitored by the Company's products at the end of June 2003, compared
with 22 a year earlier. Over the same period the installed base of CardioQ
monitors in the UK had increased by over 80% to 248. In December 2002 we
launched a range of dedicated operating theatre probes in the UK. Since then
approximately half of the CardioQ monitors installed have been in operating
theatres and we have sold over 1,500 of the new operating theatre probes. Our
intensive care business has continued to grow steadily and this, combined with
the early penetration of the operating theatre market, shows that the Company's
technology is becoming increasingly accepted in the UK. Hospitals are frequently
setting up monthly orders for their probe requirements which demonstrates that
use of the Company's technology is becoming part of the day-to-day routine of
clinical practice. Additionally, the shift away from ad-hoc purchasing creates
smoother, more predictable trading patterns which is helping to improve our
operational efficiency.
The emphasis on operating theatres and the move to monthly orders have also been
a major contributing factor to the success seen in the European territories. In
France, the next most developed market after the UK, we have worked extensively
with our distributor to implement this strategy which has been successful in the
UK. This has led to an increase in the CardioQ installed base and an associated
increase in probes sales. We are in the process of rolling out similar
strategies in other European markets.
Sales in the US remain stable at #0.2 million. This follows the shift to a
focused strategy that concentrates on broader adoption within the existing user
base whilst clinical acceptance is being developed and reimbursement for users
by healthcare providers is being sought. In the other countries in the world in
which we are active, sales in the first half of 2002 represented the build up of
initial stocks in the territories. Since then, our distributors have been
working to develop their markets with the resultant depletion of these stocks.
These activities are beginning to bear fruit, an example being that the first
half of 2003 saw approval for reimbursement to users being granted in Korea and
probe orders have now been received from the distributor.
In the first quarter of the year Deltex Medical raised #1.3 million before
costs, by way of the placing of 18,858,499 new ordinary shares. This, has
enabled us to increase penetration in our key markets, accelerate the
development of products that can be used in conscious patients and ensure
appropriate resources are in place to exploit the potential that exists for the
use of our products globally.
Major Developments
The launch, at the end of 2002, of a new range of disposable probes (the DP
series) specifically designed to provide a monitoring solution for patients
undergoing surgery, has significantly increased the market opportunity for the
Company. Use of our technology in the operating theatre has been demonstrated in
clinical trials to reduce hospital stay by up to 42% by significantly reducing
complications. Helping patients to get better, quicker through the use of our
technology offers the National Health Service in the UK and other healthcare
providers around the world the opportunity to improve access to healthcare
through efficiency gains and reduced costs.
Our UK sales, marketing and clinical training teams enable the Company to work
closely with doctors and nurses. This has allowed us to develop strategies and
materials that support doctors in the difficult and frequently frustrating
process of obtaining the necessary funds to purchase innovative products such as
the CardioQ. These strategies are also being tailored and rolled out across our
international network of distributors.
The medical device industry is highly regulated. Regulatory bodies across the
world aim to ensure that medical products meet rigorous standards for safety and
performance. Medical device manufacturers therefore require quality assurance
and regulatory affairs teams of a high calibre who can ensure that the Company
and its products comply with the many and varied regulatory requirements that
are specific to individual markets or regions. Primarily Deltex Medical has to
meet the requirements of European CE marking and the US Food and Drugs
Administration (FDA). Forthcoming changes in the regulatory system for CE
marking have meant that we have invested significantly in upgrading our quality
systems to ensure continued compliance once the changes come into effect at the
end of this year. Additionally, the US FDA recently inspected the Company for
compliance. The outcome was positive and the inspector highly complimentary of
the Company, its systems and the team involved.
In March 2002 we filed an upgraded application to the US FDA to bring our prior
approval up to current best practice in the light of these recent changes in
regulatory procedures. The US FDA recently confirmed that our upgraded
application has been approved. Unusually, the approval was granted on the
application's first pass through the system and this confirms the quality of the
CardioQ system on a global level.
We are delighted to be able to announce that Professor David Bennett has joined
Deltex Medical as a consultant. Professor Bennett is a world-renowned expert in
haemodynamic optimisation and widely regarded as a key instigator of intensive
care medicine in the UK. David brings with him a wealth of experience and
insight that will prove invaluable in helping us to develop focused solutions
that meet the needs of our customers and their patients.
Kemp Coady, who has been a non-executive director of the Company since he ceased
to be Chief Executive in April 2002, has stepped down from the board with
immediate effect. We thank him for his contribution and wish him well in his
future career.
Research and Development
Recently our Research and Development team completed the first phase of a
project to develop the 'electronic heart' of our future monitor systems,
bringing with it many benefits in terms of ease of use, performance and
ergonomics. The device has now been successfully bench tested and the first
clinical evaluations are scheduled to be completed before the year-end. In
addition, we are making progress in developing both a softer probe that is more
comfortable for use on conscious patients and the wholly non-invasive monitoring
system, SupraQ Both of these products have entered their clinical evaluation
phase. The pDP, a single use paediatric probe for use with our proprietary
paediatric nomogram, is currently being evaluated for both operating theatre and
intensive care use in five of the six major children's hospitals in England.
Prospects
The evidence gathered through feedback from doctors in the United Kingdom shows
that haemodynamic optimisation can act as the catalyst for a very significant
improvement in the management of patients on their journey through the hospital,
whether undergoing surgery or in need of intensive care. Clinicians in a number
of hospitals have developed proposals for the wide-scale use of our products in
their practice - typically these proposals would involve even our most
established users consuming more than ten times the volume of probes than they
use at present. However, resources in the National Health Service are
constrained and we therefore have to help convert this high level of demand for
our products by providing support to clinicians to help them obtain funding for
these programmes.
In conjunction with leading doctors in the UK we are actively developing high
level programmes to make the benefits of improved care available to a wider
number of patients in the UK operating theatres. The aim of these programmes is
to unlock central NHS funds for doctors who currently want to, but are denied
access to such systems . The speed at which we can pursue these opportunities
and the rate of acceleration over and above current growth that we can achieve
will depend upon the resources available to us.
Throughout our key European markets in France, Italy and Spain momentum is
growing as - in conjunction with our distributor partners - we roll out the
market development strategies derived from our UK experience. We have had
particular success in securing penetration into operating theatres in France and
anticipate seeing this success repeated in other key markets including Spain and
Italy.
We are confident that Deltex Medical is well positioned to support doctors in
delivering the clinical benefits of haemodynamic optimisation to their patients
and as a result we will deliver long-term value to our shareholders.
Nigel Keen
Chairman
29 September 2003
Consolidated profit and loss account
for the six month period ended 30 June 2003
Unaudited Unaudited Audited
Half year to Half year to Full year to
30 June 30 June 31 December
2003 2002 2002
#m #m #m
Turnover 1.1 0.8 1.8
Cost of sales (0.5) (0.5) (0.9)
---- ---- ----
Gross profit 0.6 0.3 0.9
---- ---- ----
Net operating expenses (2.3) (1.8) (4.1)
---- ---- ----
Operating loss (1.7) (1.5) (3.2)
Interest receivable and similar income - 0.1 0.1
---- ---- ----
Loss on ordinary activities before taxation (1.7) (1.4) (3.1)
Tax on loss on ordinary activities - - 0.2
---- ---- ----
Loss for the financial period (1.7) (1.4) (2.9)
===== ========= =========
Loss per share - basic and diluted (3.8p) (3.7p) (7.8p)
===== ========= =========
The above results all relate to continuing operations. The loss on ordinary
activities before taxation and the loss for the period has been computed on the
historical cost basis.
Statement of group total recognised gains and losses
for the six month period ended 30 June 2003
Unaudited Unaudited Audited
Half year to Half year to Full year to
30 June 30 June 31 December
2003 2002 2002
#m #m #m
---- ---- ----
Loss for the period (1.7) (1.4) (2.9)
Currency translation differences in foreign currency net
investment 0.1 (0.1) (0.1)
---- ---- ----
(1.6) (1.5) (3.0)
===== ===== ====
Consolidated balance sheet
at 30 June 2003
Unaudited Unaudited Audited
30 June 30 June 31 December
2003 2002 2002
#m #m #m
Fixed assets
Tangible assets 0.2 0.3 0.3
---- ---- ----
Current assets
Stocks 0.7 0.5 0.7
Debtors 0.9 0.5 0.9
Cash at bank and in hand 1.8 3.8 2.0
---- ---- ----
3.4 4.8 3.6
Creditors:
Amounts falling due within one year (1.1) (0.7) (1.0)
---- ---- ----
Net current assets 2.3 4.1 2.6
---- ---- ----
Net assets 2.5 4.4 2.9
==== ==== ====
Capital and reserves
Called up share capital 0.6 3.7 3.7
Share premium account 9.6 8.6 8.6
Merger reserve 1.8 1.8 1.8
Profit and loss account (26.9) (23.8) (25.3)
Capital redemption reserve 17.4 14.1 14.1
---- ---- ----
Equity shareholders' funds 2.5 4.4 2.9
==== ==== ====
Consolidated cash flow statement
for the six month period ended 30 June 2003
Unaudited Unaudited Audited
Half year to Half year to Full year to
30 June 30 June 31 December
2003 2002 2002
#m #m #m
---- ---- ----
Net cash outflow from operating activities (1.4) (1.7) (3.4)
---- ---- ----
Returns on investments and servicing of finance
Interest received - 0.1 0.1
---- ---- ----
Net cash inflow from returns on investments and
servicing of finance - 0.1 0.1
---- ---- ----
Taxation - - 0.1
---- ---- ----
Capital expenditure
Purchase of tangible fixed assets - (0.1) (0.2)
---- ---- ----
Net cash outflow for capital expenditure - (1.7) (0.2)
---- ---- ----
Net cash outflow before financing (1.4) (1.7) (3.4)
---- ---- ----
Financing
Issue of ordinary share capital 1.3 - -
Expenses in connection with share issue (0.1) - -
---- ---- ----
Net cash inflow from financing 1.2 - -
---- ---- ----
Decrease in net cash during the period (0.2) (1.7) (3.4)
===== ===== ====
Notes to the interim statement
for the six month period ended 30 June 2003
1. Basis of preparation
The financial information for the six months ended 30 June 2003 is not audited
but has been prepared in accordance with generally accepted accounting
principles in the UK. The accounting policies adopted are those which will be
applied in the financial statements for the year ended 31 December 2003. These
are consistent with those set out in the audited financial statements for the
year ended 31 December 2002. The financial information does not constitute
statutory accounts as defined in Section 240 of the Companies Act 1985.
2. Turnover
The Group's activities consist solely of the manufacture and marketing of
medical devices. By origin, all sales are United Kingdom sales.
Unaudited Unaudited Audited
Half year to Half year to Full year to
30 June 30 June 31 December
2003 2002 2002
#m #m #m
Analysis of turnover by destination
United Kingdom 0.6 0.2 0.7
United States of America 0.2 0.2 0.4
Rest of Europe 0.2 0.1 0.4
Rest of the World 0.1 0.3 0.3
---- ---- ----
1.1 0.8 1.8
==== ==== ====
3. Loss per share
The loss per share calculation for the six months to 30 June 2003 is based on
the loss for the period of #1.7 million and weighted number of shares in issue
of 43.5 million. The loss per share calculation for the year to 31 December 2002
is based on the loss for the financial year of #2.9 million and weighted average
number of shares in issue of 36.9 million. The loss per share calculation for
the six month period ended 30 June 2002 was based upon the loss for the period
of #1.4 million and weighted average number of shares in issue of 36.9 million.
The Group had no dilutive potential ordinary shares in either period, which
would serve to increase the loss per ordinary share. Therefore there is no
difference between the loss per ordinary share and the diluted loss per ordinary
share.
4. Reconciliation of movements in shareholders' funds
Unaudited Unaudited Audited
Half year to Half year to Full year to
30 June 30 June 31 December
2003 2002 2000
#m #m #m
Opening shareholders' funds 2.9 5.9 5.9
Increase in share capital during the period 0.2 - -
Premium on shares issued, net of costs 1.0 - -
Loss for the financial period (1.7) (1.4) (2.9)
Exchange difference taken to reserves 0.1 (0.1) (0.1)
--- --- ---
Closing shareholders' funds 2.5 4.4 2.9
==== === ===
5. Called-up share capital
10 pence Deferred 1 pence
ordinary shares 9 pence shares ordinary shares
#m #m #m
At 1 January 2003 3.7 - -
24 April 2003 conversion of each 10
pence ordinary share into one 9 pence
deferred share and one 1 pence ordinary
share (3.7) 3.3 0.4
25 April 2003 issue of 11,642,567 1
pence ordinary shares - - 0.1
12 May 2003 issue of 7,215,929 1 pence
ordinary shares - - 0.1
Cancellation of all deferred shares - (3.3) -
--- --- ---
At 30 June 2003 - - 0.6
======= ======= =======
6. Reconciliation of operating loss to net cash outflow from
operating activities
Unaudited Unaudited Audited
Half year to Half year to Full year to
30 June 30 June 31 December
2003 2002 2002
#m #m #m
Operating loss (1.7) (1.5) (3.2)
Depreciation on tangible fixed assets 0.1 0.1 0.3
Decrease in stocks - 0.2 -
Increase in debtors - (0.1) (0.4)
Increase/(Decrease) in creditors 0.2 (0.4) (0.1)
--- --- ---
Net cash outflow from operating activities (1.4) (1.7) (3.4)
======= ======= =======
7. Reconciliation of movement in net cash
1 January Cash flow Exchange 30 June
2003 2003
movement
#m #m #m #m
Net cash
Cash at bank and in hand 2.0 (0.2) - 1.8
--- --- --- ---
2.0 (0.2) - 1.8
======= ======= ======= =======
8. 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
END
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