Interim results for the six months ended 30 June 2011 U.S. trial data submitted to FDA

Transcription

1 Press Information Interim results for the six months 2011 U.S. trial data submitted to FDA London, UK, 30 August 2011 Lombard Medical Technologies PLC ( Lombard Medical, LMT or the Company ), a medical device company focused on device solutions for the $1.1 billion per annum abdominal aortic aneurysm ( AAA ) repair market, today announces its unaudited interim results for the six months Operational highlights Aorfix sales up 51% in 4 main EU markets (UK, Germany, Italy, Spain) to 936,000 (H1 : 622,000) Total revenues increased 26% to 1.8 million (H1 : 1.4 million) U.S. clinical trial complete and final pre-market approval ( PMA ) submission made on 5 August 2011 Four of six Aorfix PMA modules now approved European sales organisation strengthened: o o o Highly experienced Director of Central Europe appointed Business Managers recruited for Italy and Spain Third German sales executive appointed Experienced U.S. medical device executive appointed Chief Operating Officer to: o o Oversee operations and product development Deliver manufacturing cost efficiencies Manufacture of stent grafts for commercial use commenced at Prestwick facility Aorfix development projects for a new generation delivery system and expanded size range progressing in line with Company expectations Financial highlights 27.2 million raised from two-tranche placing, subscription and offer: o First tranche of 13.0 million ( 12.2 million net of expenses) received May 2011 o Second tranche of 14.2 million ( 13.6 million net of expenses) to be received following FDA approval of Aorfix Commercial revenues increased 27% to 1.7 million (H1 : 1.3 million) Gross margin increased to 53% (H1 : 46%) Operating loss up 0.8 million to 5.0 million (H1 : 4.2 million) Loss after taxation for the period up 18% to 4.4 million (H1 : 3.7 million) Net cash of 12.1 million as at 2011 Commenting on the results, Simon Hubbert, Chief Executive of Lombard Medical, commented: Lombard Medical has made important progress towards bringing our lead product to market in the U.S. and to putting the Company on the path to long-term revenue growth and profitability. We secured funding which is enabling us to deliver our strategy for Aorfix, including building up a specialist sales team, ensuring sufficient manufacturing capacity and moving ahead with product innovation. We have seen the benefits of targeting major markets through our own dedicated sales force in Germany and the UK and will build on this momentum there and in other markets. The final submission to the FDA was made earlier this month and we look forward to bringing the substantial clinical benefits of Aorfix to patients with hard-to-treat aneurysms in the U.S. and around the world. 1

2 About Lombard Medical Lombard Medical Technologies PLC (AIM: LMT), is a medical device company focused on device solutions for the $1.1 billion dollar per annum abdominal aortic aneurysm (AAA) repair market. AAAs are a balloon-like enlargement of the aorta which, if left untreated, may rupture and cause death. Approximately 4.5 million people are living with AAAs in the developed world and each year 600,000 new cases are diagnosed. The market for endovascular stent grafts for this application is expected to grow to $1.6 billion by The Company s lead product, Aorfix, is an endovascular stent graft which has been specifically designed to solve the problems that exist in treating complex tortuous anatomy which is often present in advanced AAA disease. Aorfix is currently being commercialised in the EU and has been submitted to the FDA for approval in the U.S. The Company is headquartered in Oxfordshire, with operations in Ayrshire and Phoenix, USA. Further background on the Company can be found at For further information: Lombard Medical Technologies PLC Simon Hubbert, Chief Executive Officer Tim Hall, Finance Director Evolution Securities Limited Chris Clarke/Tim Redfern Financial Dynamics Jonathan Birt/Susan Quigley Tel: Tel : Tel :

3 Chief Executive s Review The successful two-tranche fundraising completed in May 2011 will fund the Company s current business plan. The first tranche of 13.0 million ( 12.2 million net of expenses) is expected to fund the Company through Q3 2012, by which time the Company expects to have received FDA approval of Aorfix which would then trigger receipt of the second tranche of 14.2 million ( 13.6 million net of expenses). Funds received from the second tranche will be used to launch Aorfix in the U.S. through Lombard Medical s own sales force and are expected to be sufficient to fund the Company through to profitability. As well as existing shareholders, the fundraising was backed by two specialist healthcare investment managers, Abingworth LLP and MVM Life Science Partners LLP. Timothy Haines and Thomas Casdagli, from Abingworth and MVM respectively, joined the Lombard Medical Board on 31 May 2011 and the Board is already benefiting from their knowledge and experience of the medical device industry. Revenue Lombard Medical currently focuses its sales and marketing resources on those four of the five main European markets in which Aorfix has reimbursement, being the UK, Germany, Italy and Spain. In these markets sales grew by 51% to 936,000 (H1 : 622,000). Excluding Italy, sales in the main European markets grew by 70% to 936,000 (H1 : 551,000). Sales in Germany were particularly strong growing by 251% and are expected to continue to grow strongly in the second half of the year as the Company has recently appointed Ralf Link, previously Vice President Sales & Marketing Central Europe for C. R. Bard, as Director of Central Europe and a third German Sales Executive. A fourth Sales Executive for Germany will be appointed in the second half of Sales in the UK recovered in the second quarter after a relatively weak first quarter and grew by 58% in the period driven primarily by increased sales in the three new sales territories set up during. Following disappointing sales growth in Italy, the Company terminated its contract with its Italian distributor and appointed a local Business Manager who will identify and support a number of small distributors to sell Aorfix in Italy. The issue of credit notes for stock returned on termination of the Italian distributor s contract eliminated sales to Italy in the period and reduced the overall reported growth in the main European markets. In Spain, Lombard Medical has recently appointed a consultant to support its local distributor and in France recruitment into a small trial required for local reimbursement is going well with over half the patients recruited. Commercial Aorfix revenues outside of the main European markets declined by 12% as sales were adversely affected by the continuing weak economic conditions in Greece and one-off factors at certain distributors. However, the Company expects commercial Aorfix revenues in these markets to return to growth in the second half of the year. Total commercial sales that include revenues generated by the Company s Prestwick facility increased 27% to 1.7 million. Growing Evidence of Clinical Need for Aorfix In April 2011, a paper was published in the Journal of the American Heart Association, Circulation, entitled Predictors of Abdominal Aortic Aneurysm Sac Enlargement after Endovascular Repair. This paper evaluated compliance with anatomic guidelines for endovascular aortic repair (EVAR) and the relationship between baseline anatomy and post-evar aneurysm sac enlargement. The paper concluded that in a significant proportion of cases stent grafts were being used outside of their instructions for use (IFU). This included the treatment of patients with aneurysm neck angulations of greater than 60 which occurred in 9.5% of the sample of 1,583 patients treated in The 5-year post-evar rate of AAA sac enlargement reported in the study was high at 41% and one of five independent predictors of sac enlargement noted in the paper was an aneurysm neck angulation of greater than 60. This paper clearly demonstrates that there is a significant opportunity for Aorfix in the U.S. to improve outcomes for patients with neck-angulations of greater than 60 and to improve IFU compliance rates. 3

4 Aorfix Regulatory Approval in the U.S. The Company recently submitted the last of six PMA (Pre-Market Approval) modular filings containing clinical data from its U.S. trial of Aorfix to the FDA. The first three modules on biological testing, non-clinical laboratory studies and sterilisation and packaging have been reviewed and approved by the FDA. The FDA had questions related to modules four (engineering, bench testing and shelf-life) and five (manufacturing) and comprehensive responses to these questions were submitted to the FDA in Q The FDA has since confirmed that module five has been approved. Further confirmatory bench testing is being undertaken to support some of the Company s responses on module four and the results of this testing will be made available to the FDA if required in Q Subject to approval of modules four and six, and a successful FDA audit of Lombard Medical s facilities, the Company continues to anticipate FDA approval of Aorfix sometime between the first and third quarters of This approval is expected to include a unique indication to treat patients with angulations at the neck (top) of the aneurysm of up to 90. Post FDA approval, Lombard Medical intends to launch Aorfix in the U.S. with its own sales force and has identified its initial sales territories from market research on all 1,500 U.S. hospitals performing endovascular aortic repair (EVAR). During the rest of 2011 the Company will continue to refine its launch plans and U.S. marketing strategy to make the most of the fact that, if approved as anticipated, Aorfix will be the only stent graft on the U.S. market licensed to treat patients with aneurysm neck angulations of greater than 60. It is estimated that approximately 30% of all patients have some tortuosity either at the neck of the aneurysm or in the iliac arteries and with the U.S. EVAR market currently worth in excess of $550 million this represents a significant opportunity for Aorfix with its unique flexible design. Aorfix Regulatory Approval in Japan and Canada The Company s Japanese distribution partner expects to submit for Shonin approval of Aorfix in Japan using the clinical and other data provided to the FDA in the second half of The U.S. clinical trial data will also be submitted to the Canadian regulatory authorities during this time. Regulatory approval of Aorfix in Canada is expected to be received towards the end of 2012 and Japanese approval is expected during the first half of Development Although some resources have been diverted from the development projects to answer FDA questions on PMA module four, the Company has made good progress with its two main development projects during Design validation testing is ongoing for a range of larger stent grafts with a diameter of up to 38mm that are required for markets such as Germany where a significant proportion of patients have aortas too large for the widest diameter Aorfix graft currently available. The new large grafts have been designed to fit in the current delivery system without increasing its profile. Manufacture of larger sizes for a small clinical trial required for CE Mark approval is due to start before the end of the year, with CE Mark approval expected in Following input from the Company s Clinical Advisory Board on a number of different prototypes the final concept has been selected for a new Aorfix delivery system that is smaller in profile, cheaper to manufacture and with better ergonomics than the current system. This new delivery system is being developed in partnership with an outside contractor with significant experience in the design and manufacture of similar products. Lombard Medical expects to be able to file for CE Mark approval of this improved delivery system around the end of Manufacturing Operations In Lombard Medical took the strategic decision to move the stent graft production currently performed at Didcot to its Prestwick facility in order to increase capacity at Didcot for assembly and loading of the delivery device. The Prestwick facility currently has eight people dedicated to stent graft production and this is due to rise to 18 by the end of 2011 as sales volumes increase and Prestwick takes over a greater proportion of the stent graft production. In August 2011 the Company appointed Brian Ranft as Chief Operating Officer responsible for production, quality and product development. Brian, who has been working as a consultant for Lombard Medical since June, was formerly Senior Vice President of Operations at Orthofix Inc. and has over 20-years of experience in major medical device companies. Brian s primary medium-term objectives are to ensure that manufacturing capacity grows sufficiently quickly to meet anticipated demand and to ensure that the various 4

5 development projects are delivered on time and are smoothly transferred into commercial production ahead of their regulatory approval and launch. Outlook The successful fundraising completed in May 2011 has secured the Company s financial future and allows management to focus on its core near-term strategic objectives: To obtain U.S. approval for Aorfix and prepare for its launch; To drive sales in the main European markets; To efficiently build manufacturing capacity ahead of forecast sales demand; and To progress the Company s two main Aorfix development projects. Together with a successful fundraising, Lombard Medical has made solid progress in all these areas during the first half of 2011 and the Directors remain confident that the Company will be able to achieve significant sales growth over the next five years by directly marketing Aorfix and its exceptional ability to treat patients with tortuous anatomy in a growing number of major markets. 5

6 Finance Director s Review Total revenues for the period increased 26% to 1.8 million (H1 : 1.4 million). Total revenues consisted of commercial revenues, which increased 27% to 1.7 million (H1 : 1.3 million), and U.S. clinical trial revenues, which increased 15% to 117,000 (H1 : 102,000). Worldwide commercial Aorfix revenues increased by 22% to 1.4 million (H1 : 1.2 million), with strong growth in the UK, Germany and Spain offsetting declines in Italy arising from termination of the agreement with the local distributor, Greece due to economic conditions and Russia due to contractual obligations. Other commercial revenues increased by 57% to 298,000 (H1 : 190,000) primarily due to a 59% increase in contract service revenues generated by the Company s Prestwick facility. The gross profit of 955,000 (H1 : 667,000) represented a gross margin of 53% (H1 : 46%) with the increased margin arising from a mixture of higher production volumes and higher average selling prices as the proportion of sales made direct to hospitals increased. Selling, marketing and distribution expenses remained stable at 1.1 million (H1 : 1.1 million) as increases in marketing expenses and sales force costs in the UK and Germany were offset by lower recruitment fees and the absence of a dedicated Director of Sales & Marketing in the period after the appointment of Simon Hubbert as Chief Executive Officer. Research and development expenditure increased by 29% to 3.2 million (H1 : 2.5 million) as expenditure on the two main Aorfix development projects increased and the company continued to invest in various activities required for FDA approval of Aorfix in the U.S. Administrative expenses increased 28% to 1.6 million (H1 : 1.3 million) as temporary increases in Board-related costs arising from the Board changes announced in the period and higher legal and professional fees were partially offset by a reduction in share option charges. Interest receivable decreased by 28,000 to 4,000 (H1 : 32,000) primarily due to lower average cash balances. The tax credit of 586,000 (H1 : 471,000) consisted of an estimate of 430,000 for the R&D tax credit arising in the period (H1 : 350,000), plus an adjustment of 170,000 (H1 : 121,000) for an underestimate of the R&D tax credit in the prior year accounts, less overseas tax paid of 14,000 (H1 : nil). The loss after taxation for continuing activities increased 18% to 4.4 million (H1 : 3.7 million) primarily as a result of the increase in operating expenses that was partly offset by the increased gross profit and tax credit. The net cash outflow from operating activities increased by 2.5 million to 5.8 million (H1 : 3.3 million) principally due to the higher operating loss of 5.0 million (H1 : 4.2 million), the R&D tax credit for the prior year not having been received (H1 : 0.9 million) and increased working capital requirements of 0.9 million (H1 : 0.1 million). Net cash used in investing activities of 99,000 consisted of capital expenditure of 103,000 (H1 : 19,000) less interest received of 4,000 (H1 : 32,000). Net cash flows from financing activities of 12.2 million (H1 : 12.1 million) arose from the net proceeds of the first tranche of the 27.2 million, two-tranche placing and subscription approved by shareholders in May In the first tranche 1,858 million shares were issued at a price of 0.7 pence each raising 13.0 million before expenses of 0.8 million. The Directors believe that the net cash balance held at 2011 of 12.1 million (H1 : 10.3 million) is sufficient to fund the Company through to FDA approval of Aorfix, at which point the second tranche of the recent fundraising becomes due. In light of this the Board of Lombard Medical regards it as appropriate that these interim financial statements are prepared on a going concern basis. 6

7 Consolidated Statement of Comprehensive Income for the six months 2011 (unaudited) 2011 Year 31 December Continuing operations Note Revenue 2 1,818 1,445 3,007 Cost of sales (863) (778) (1,624) Gross profit ,383 Selling, marketing and distribution expenses (1,072) (1,115) (2,429) Research and development expenses (3,226) (2,494) (5,201) Administrative expenses (1,632) (1,273) (2,495) Total operating expenses (5,930) (4,882) (10,125) Operating loss (4,975) (4,215) (8,742) Finance income interest receivable Finance costs Loss before taxation 2 (4,971) (4,183) (8,689) Taxation Loss after taxation from continuing operations (4,385) (3,712) (7,868) Discontinued operation Profit from discontinued operation Comprehensive loss for the period attributable to equity shareholders (4,385) (3,712) (7,854) Basic and diluted loss per share (pence) From continuing operations only 4 (0.18) (0.19) (0.38) From continuing and discontinued operation 4 (0.18) (0.19) (0.38) 7

8 Consolidated Balance Sheet as at 2011 (unaudited) December Note Assets Intangible assets 2,296 2,339 2,317 Property, plant and equipment Financial assets - available for sale Non-current assets 3,388 3,331 3,350 Inventories 2,104 1,490 1,694 Trade and other receivables 1, ,066 Taxation recoverable 1, Cash and cash equivalents 12,117 10,253 5,814 Current assets 16,969 12,960 9,274 Total assets 20,357 16,291 12,624 Liabilities Trade and other payables (2,489) (2,191) (2,604) Current liabilities (2,489) (2,191) (2,604) Total liabilities (2,489) (2,191) (2,604) Net assets 17,868 14,100 10,020 Equity Capital and reserves attributable to equity holders of the Company Called up share capital 5 28,189 26,331 26,331 Share premium account 5 47,432 37,101 37,101 Other reserves 5 11,118 11,118 11,118 Accumulated loss (68,871) (60,450) (64,530) Total equity 17,868 14,100 10,020 8

9 Consolidated Cash Flow Statement for the six months 2011 (unaudited) 2011 Year 31 December Note Net cash outflow from operating activities 6 (5,787) (3,259) (7,639) Cash flows from investing activities Interest received Purchase of property, plant and equipment (103) (19) (99) Net cash flows (used in)/from investing activities (99) 13 (46) Cash flows from financing activities Proceeds from issue of ordinary shares 13,004 13,334 13,334 Share issue expenses (815) (1,184) (1,184) Net cash flows from financing activities 12,189 12,150 12,150 Increase in cash and cash equivalents 6,303 8,904 4,465 Cash and cash equivalents at beginning of period 5,814 1,349 1,349 Cash and cash equivalents at end of period 12,117 10,253 5,814 9

10 Consolidated Statement of Changes in Equity for the six months 2011(unaudited) Share Capital Share Premium Other Reserves Accumulated Loss Total Equity 000 ' At 1 January 12,997 38,285 11,118 (56,912) 5,488 Loss after taxation attributable to equity shareholders (3,712) (3,712) Share-based compensation Issue of ordinary shares 13, ,334 Share issue expenses - (1,184) - - (1,184) At 26,331 37,101 11,118 (60,450) 14,100 Loss after taxation attributable to equity shareholders (4,142) (4,142) Share-based compensation At 31 December 26,331 37,101 11,118 (64,530) 10,020 Loss after taxation attributable to equity shareholders (4,385) (4,385) Share-based compensation Issue of ordinary shares 1,858 11, ,004 Share issue expenses - (815) - - (815) At ,189 47,432 11,118 (68,871) 17,868 10

11 Notes to the Financial Information 1 Basis of Preparation of Interim Financial Information The unaudited interim financial statements have been prepared in accordance with International Financial Reporting Standards and International Accounting Standards (collectively IFRS) as adopted by the EU including those applicable to accounting periods ending 31 December 2011 and the accounting policies set out in Lombard Medical Technologies PLC s Annual Report for the year 31 December. These interim financial statements have been prepared in accordance with International Accounting Standard 34 Interim Financial Reporting. They do not include all the statements required for full annual financial statements, and should be read in conjunction with the consolidated financial statements of the Group as at 31 December. The interim financial statements have been prepared on the going concern basis, which assumes that the Group will continue in operational existence for the foreseeable future. The financial information contained in this interim financial statement is unaudited and does not constitute statutory accounts as defined in section 434 of the Companies Act The financial information for the year 31 December has been extracted from the Group s published financial statements for that year. Those accounts that have been delivered to the Registrar of Companies were audited and the audit report was unqualified and did not contain a statement under section 498 of the Companies Act

12 2 Operating Segment Analysis 2011 Year 31 December Business Analysis Revenue: Continuing operations Cardiovascular devices and medical fabrics 1,818 1,445 3,007 Loss before taxation: Continuing operations Cardiovascular devices and medical fabrics (4,975) (4,215) (8,742) Operating loss (4,975) (4,215) (8,742) Net finance income/(expense) Loss before taxation from continuing operations (4,971) (4,183) (8,689) Revenue by destination: United Kingdom and Europe 1,476 1,098 2,398 United States of America Rest of World ,818 1,445 3,007 Following the sale of the Group s Polymer Coatings business in 2009 the Group has operated in just one segment being the Cardiovascular Devices and Medical Fabrics segment in accordance with reports used by the chief operating decision makers identified as the executive board members who take operating decisions. 3 Taxation on Loss on Ordinary Activities 2011 Year 31 December Utilisation of UK tax losses from research and development expenditure to reclaim payroll taxes: - for prior year for current year Overseas taxation (14)

13 4 Loss per Share Basic loss per share is calculated by dividing the loss attributable to ordinary shareholders by the weighted average number of ordinary shares. The diluted earnings per ordinary share are identical to those used for the basic earnings per ordinary share as the exercise of share options and warrants would have had the effect of reducing the loss per ordinary share and are therefore not dilutive. Reconciliations of the losses and weighted average number of shares used in the calculations are set out below: 2011 Year 31 December Continuing operations Loss for the period ( 000) (4,385) (3,712) (7,868) Weighted average number of ordinary shares ( 000) 2,480,065 1,937,242 2,061,448 Basic and diluted loss per share (pence) (0.18) (0.19) (0.38) Discontinued operation Profit for the period ( 000) Weighted average number of ordinary shares ( 000) 2,480,065 1,937,242 2,061,448 Basic and diluted profit per share (pence)

14 5 Equity On 6 May 2011 a general meeting of the Company approved: 1. The subdivision of each existing ordinary share of 1 pence each into one new ordinary share of 0.1 pence each and one new C deferred share of 0.9 pence each; and 2. The issue of 1,857,667,450 new ordinary shares of 0.1 pence each for a consideration of 13,004,000 before expenses of 815,000. i) Share capital December Number of shares Nominal Value Number of shares Nominal Value Number of shares Nominal Value 000s s s 000 Allotted, called up and fully paid Ordinary shares of 0.1p each 4,032,362 4, Ordinary shares of 1p each - - 2,174,695 21,747 2,174,695 21,747 A deferred shares of 0.862p each 373,857 3, ,857 3, ,857 3,223 B deferred shares of 1p each 136,186 1, ,186 1, ,186 1,361 C deferred shares of 0.9 p each 2,174,695 19, ,717,100 28,189 2,684,738 26,331 2,684,738 26,331 ii) Share Premium Account This consists of the proceeds from the issue of shares in excess of their par value less associated issue costs. iii) Other Reserves This arose on the conversion of convertible preference shares to ordinary shares and represents the difference between the fair value of the preference shares and the nominal value of the ordinary shares issued. Rights - Ordinary Shares Voting: in a show of hands every holder has one vote and in a poll each share has one vote. Dividends: each ordinary share has the right to receive dividends. Return on capital: each ordinary share has the right in a liquidation of the Company s assets. Rights Deferred Shares Voting: deferred shares do not entitle the holders to attend or vote at any general meeting of the Company. Dividends: deferred shares do not entitle the holder to receive any dividend or other distribution. Return on capital: on a winding up the holders of deferred shares are only entitled to the amount paid up on each deferred share after the holders of the ordinary shares have received the sum of 1 million for each ordinary share. 14

15 6 Reconciliation of Loss before Taxation to Net Cash Outflow from Operating Activities Continuing operations 2011 Year 31 December Loss before taxation (4,971) (4,183) (8,689) Depreciation and amortisation of licences Share-based compensation expense Net finance income (4) (32) (53) Increase in inventories (410) (43) (247) Increase in receivables (382) (153) (352) (Decrease)/increase in payables (115) Net cash used in continuing operations (5,773) (4,130) (8,524) Research and development tax credits received Overseas taxation (14) - - Net cash used in continuing operating activities (5,787) (3,259) (7,653) Discontinued operation Research and development tax credits received Net cash generated by discontinued operating activity Net cash used in all operating activities (5,787) (3,259) (7,639) 15