Interim results for the six months ended 30 June 2012

Transcription

1 Press Information Lombard Medical Technologies PLC ( Lombard Medical or the Company ) Interim results for the six months ended 30 June 2012 London, UK, 30 August 2012 Lombard Medical Technologies PLC (AIM:LMT), the specialist medical technology company focussed on innovative vascular products, today announces its unaudited interim results for the six months ended 30 June Operational highlights Demand for Aorfix increased 23% in the four main EU markets (UK, Germany, Italy and Spain) with 195 patients treated (H1 : 158 patients) Total revenues increased 9% to 2.0m (H1 : 1.8m) Aorfix sales increased 11% in the four main EU markets to 1.0m (H1 : 0.9m) o 53% growth in Germany reflecting expansion of direct sales team US regulatory approval submission on track; response to FDA including additional data analyses submitted in July 2012 High angle clinical data from US PYTHAGORAS trial presented in June 2012 o Strong data despite extremely challenging patient group with high neck angles Launch of Aorflex TM delivery system in April o Encouraging clinician feedback from initial procedures Key hire appointment of Ian Ardill to the Board as Chief Financial Officer in January 2012 o Significant financial, medical device, business development and international experience Financial highlights Total commercial revenues increased 15% to 2.0m (H1 : 1.7m) 3.0m raised from issue of convertible loan notes to Invesco in March 2012 Operating loss reduced by 0.6m to 4.4m (H1 : 5.0m) Loss after taxation for the period steady at 4.4m (H1 : 4.4m) Cash of 5.2m as at 30 June 2012 (30 June : 12.1m) Commenting on the results, Simon Hubbert, Chief Executive of Lombard Medical, commented: During the period we made significant progress against a number of objectives set out at the start of the year and reported double digit commercial revenue growth despite weakness in the Eurozone and challenging market conditions. In Europe we launched our Aorflex TM delivery system which has been well received by clinicians and reported sales growth of +50% in Germany. Our submission for Aorfix TM is with the regulators and we continue to anticipate US approval later this year. About Lombard Medical Lombard Medical Technologies PLC (AIM: LMT), is a medical device company focused on device solutions for the $1.2 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 US. 1

2 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 Tel: Simon Hubbert, Chief Executive Officer Ian Ardill, Chief Financial Officer Canaccord Genuity Limited Jamie Adams / Mark Dickenson / Lucy Tilley FTI Consulting Simon Conway / Susan Stuart / Victoria Foster Mitchell Tel: Tel:

3 Chief Executive s Review In the first half of 2012 the Company continued to make significant progress against our strategic objectives to secure US FDA approval of Aorfix, increase product adoption in Europe and advancement of next generation Aorfix products. Demand for Aorfix increased 23% with 195 patients treated in the four main EU markets (UK, Germany, Italy and Spain) compared to 158 in the same period last year. US approval, if received this year as anticipated, will trigger receipt of the second tranche of 14.2 million ( 13.6 million net of expenses) from the fundraising completed in May. The Company also launched its new Aorflex delivery system and is on track to introduce an expanded size range for Aorfix in Europe in Q Revenue Total company revenue grew 9% to 2.0m (H1 : 1.8m). Total revenues consist of commercial revenues, which increased 15% to 2.0m (H1 : 1.7m), and US clinical trial revenues, which decreased 81% to 0.0m (H1 : 0.1m), following the cessation of trial enrolment in. Revenue in the main four EU markets (UK, Germany, Italy and Spain) grew 11% to 1.0m (H1 : 0.9m). This revenue growth does not fully represent the increase in case numbers as distributors in Spain and Italy reduced their inventory holding in response to government austerity measures. We are confident that we have seen the majority of this inventory effect and we therefore expect to see higher sales in the EU in H Sales in Germany were strong with growth of 53% reflecting the impact of the expanded direct sales team put in place in whilst sales in the UK grew by 6%. UK growth was hampered by a later than expected launch in April of the new Aorflex delivery system and by a reduction in the number of UK centres performing Endovascular Aortic Repair in line with Government policy of creating specialist centres. The new Aorflex delivery system is now fully available in Europe and has received encouraging clinician feedback. Continued adoption of this enhanced delivery device is expected to positively impact Aorfix sales in the second half. In France we continue to work with the regulatory authorities to achieve reimbursement approval for Aorfix. Commercial Aorfix revenues outside of the main European markets increased by 11% driven largely by strong growth in Latin America whilst commercial sales from our Lombard Medical Scotland facility increased 33%. Aorfix Regulatory Approval in the US The US is the largest market in the world for the endovascular repair of abdominal aortic aneurysms ( EVAR ) and is estimated to be currently worth over $600m. FDA approval to sell Aorfix in the US is therefore a key value driver for the Company. The Company is seeking the US approval for Aorfix to include a label indication for the treatment of patients with angulations at the neck (top) of the aneurysm of up to 90 degrees. If achieved, this would give Aorfix the broadest label for such a device on the US market and the only endovascular stent graft licensed for use in high angle (>60 degrees) cases. Such a high angle indication can already be found on the European label for Aorfix. 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 it is to this segment of patients that Aorfix is targeted with its uniquely flexible design. In January 2012 the final clinical module for US approval was accepted for review by the FDA. The FDA also gave approval for 50 additional patients to be treated with Aorfix under a continued access programme allowing clinical trial sites to continue using Aorfix while the PMA (Premarket approval) is being reviewed. As announced in May 2012 the FDA requested further analysis of the existing data set which was submitted in July The FDA has since carried out audits of our US facility in Arizona and 3 clinical trial sites in H with no major findings. Aorfix Clinical Results in the US In June the company announced the high angle clinical data results from the US PYTHAGORAS trial. The unique data set, presented at the Society of Vascular Surgery (SVS) Annual Meeting on 7-9 June in the USA by Dr Mark Fillinger of Dartmouth Hitchcock Medical Centre, featured results from the world's first multicentre, controlled EVAR (Endovascular Aortic Repair) clinical trial studying patients with angles greater than 60 degrees. 205 patients were recruited in the trial and the data resulted from 143 patients with highly- 3

4 angulated aortic necks (angles between 60 and 110 degrees). Treatment of this patient group is not indicated in any stent grafts currently available in the USA. Data on the 62 patients in the roll-in group (angles under 60 degrees) had been presented in November. The data showed that Aorfix performed well in extreme, more difficult to treat, aortic neck angulations. Outcomes such as freedom from major adverse events (MAEs, as defined by the SVS) at 30 days and 365 days, were significantly lower than in patients undergoing open surgical repair (81.1% vs. 56.4% p< and 75.5% vs. 54.5% p< respectively). Although not tested in the trial, Dr Fillinger noted that the outcomes were similar to EVAR trials of other stent grafts in much less severe anatomy. RoW Aorfix Update In Japan we continue to work with our experienced distribution partner, which is in dialogue with the Japanese PMDA ( Pharmaceuticals and Medical Devices Agency ) to achieve regulatory approval for Aorfix TM, which we anticipate will be granted around 12 months after US approval. New Product Development Lombard Medical has made progress across two new product development projects in line with our continuous commitment to providing innovative endovascular solutions which meet clinicians needs and improve patient outcomes. The first project is focused on improving clinicians experience during Aorfix stent graft delivery. The new delivery system, Aorflex, launched in April, introduces a number of enhanced features with clear clinical benefits. Initial clinician feedback has been extremely encouraging with greater adoption expected in the second half of Regulatory approval in the US will be sought following receipt of FDA approval for the current Aorfix TM device and delivery system. The Company has also made significant progress towards expanding the size range of Aorfix, which will address patients with AAA who have aortic neck diameters either too large or too small for the current product size range. This is estimated to be up to 25% of the total AAA patient population. Custom built devices in larger and smaller sizes will be available from Q Additional Financing In March the Company secured an additional 3 million financing through the issue of convertible loan notes to Invesco, the Company's largest shareholder, providing additional resources to continue moving ahead with Aorfix and driving sales in Europe beyond Q Board Appointment Lombard Medical appointed Ian Ardill to the Board as Chief Financial Officer in January Ian has significant financial, business development and international experience and was previously Finance Director for over six years at Biocompatibles International plc, a listed medical technology company. Outlook The Company achieved double digit commercial revenue growth across key markets in Europe and RoW territories despite operating against a backdrop of challenging market conditions in Europe. The second half of the year will be an important period for the Company during which we anticipate further revenue growth, US FDA approval of Aorfix and receipt of the second tranche of funds ( 14.2 million before expenses). These funds will be used to launch Aorfix TM in the US; expand production capacity to meet anticipated demand and pursue key development projects. Principal Risks and Uncertainties The Principal Risks and Uncertainties faced by the Company remain as reported on page 18 of the Annual Report for the year ended 31 December. 4

5 Financial Review Total revenues for the period increased 9% to 2.0m (H1 : 1.8m). Total revenues consisted of commercial revenues, which increased 15% to 2.0m (H1 : 1.7m), and US clinical trial revenues, which decreased 81% to 0.0m (H1 : 0.1m), following the cessation of trial enrolment in. Worldwide commercial Aorfix revenues increased by 11% to 1.6m (H1 : 1.4m), with growth in the UK and Germany offset by declines in Spain and Italy resulting from the reduction of distributor inventory levels in those countries. There was net growth in the Rest of World, distributor markets. Other commercial revenues increased by 33% to 0.4m (H1 : 0.3m) due to the increase in OEM revenues generated by the Company s Prestwick facility. The gross profit of 0.6m (H1 : 1.0m) represented a gross margin of 30% (H1 : 53%). The margin was affected by a number of issues in the period: lower production volumes following a stock build in and a temporary decline in production yields; initial unanticipated costs from the transfer of the Aorflex TM delivery system into production; and the impact of high overhead levels carried forward in stock from. Selling, marketing and distribution expenses increased by 31% to 1.4m (H1 : 1.1m) due to increases in sales and marketing headcount and provisions made against some older debtor balances. Research and development expenditure decreased by 23% to 2.5m (H1 : 3.2m) as clinical and regulatory expenditure reduced on the Aorfix TM clinical trial and Aorfix development project expenditure was restricted in order to conserve cash. Administrative expenses decreased by 34% to 1.1m (H1 : 1.6m). A share option credit of 0.3m (H1 : charge of 0.0m) was accounted for, reflecting the directors anticipation of US approval for Aorfix TM in the fourth quarter of 2012; the share option performance criteria require approval by the end of the third quarter of The remainder of the decrease in administrative expenses was due to the H1 costs of the Board reorganisation. Finance costs of 0.1m (H1 : nil) were incurred as a result of the accounting for the effective interest payable on the convertible loan notes. The tax credit of 0.1m (H1 : 0.6) consisted of an estimate of 0.3m for the R&D tax credit arising in the period (H1 : 0.4m), plus an adjustment of 0.2m for an overestimate of the R&D tax credit in the prior year accounts (H1 : 0.2m for an underestimate). The loss and total comprehensive expense for the period remained at 4.4m (H1 : 4.4m). The net cash outflow from operating activities decreased by 12% to 5.1m (H1 : 5.8m) principally due to the lower loss before tax of 4.5m (H1 : 5.0m) and decreased working capital requirements of 0.5m (H1 : 0.9m). Net cash used in investing activities remained at 0.1m (H1 : 0.1m). Net cash flows from financing activities were 2.8m (H1 : 12.2m); the net proceeds of the issue of the convertible loan notes. In H1, the Company received 13.0m before expenses of 0.8m from the first tranche of the 27.2m, two-tranche placing and subscription approved by shareholders in May. The Directors continue to manage the Company s cash position closely in view of the impact of the timing of FDA approval on its on-going cash requirements. They believe that the current cash balance and anticipated cash flows in the remainder of the year will be sufficient to fund the Company beyond approval of Aorfix, anticipated in the fourth quarter of 2012, and into the second quarter of Fourth quarter approval of Aorfix will release the second tranche of funds, ( 14.2m before expenses), from the May fundraising. The Directors hold regular discussions with the Company s major shareholders on the management of the cash position in the event of a delay in FDA approval and have also considered additional, potential sources of funding that support the going concern basis in the event of a delay in FDA approval beyond the end of In light of these considerations, the Board regards it as appropriate that these interim financial statements are prepared on a going concern basis. 5

6 Consolidated Statement of Comprehensive Income for the six months ended 30 June 2012 (unaudited) 6 months ended 30 June months ended 30 June Year ended 31 December Note Revenue 2 1,974 1,818 4,012 Cost of sales (1,384) (863) (2,035) Gross profit ,977 Selling, marketing and distribution expenses (1,405) (1,072) (2,895) Research and development expenses (2,490) (3,226) (6,571) Administrative expenses (1,072) (1,632) (3,107) Total operating expenses (4,967) (5,930) (12,573) Impairment provision - investment - - (850) Operating loss (4,377) (4,975) (11,446) Finance income interest receivable Finance costs (137) - - Loss before taxation 2 (4,496) (4,971) (11,387) Taxation ,282 Loss and comprehensive expense for the period (4,351) (4,385) (10,105) Basic and diluted loss per ordinary share (pence) From continuing operations 4 (21.58) (0.18) (0.31) 6

7 Consolidated Balance Sheet as at 30 June 2012 (unaudited) 30 June June 31 December Note Assets Intangible assets 2,255 2,296 2,275 Property, plant and equipment Financial assets - available for sale Non-current assets 2,936 3,388 2,883 Inventories 2,629 2,104 2,312 Trade and other receivables 1,265 1,448 1,465 Taxation recoverable 1,295 1,300 1,150 Cash and cash equivalents 5,188 12,117 7,545 Current assets 10,377 16,969 12,472 Total assets 13,313 20,357 15,355 Liabilities Borrowings 5 (183) - - Trade and other payables (2,559) (2,489) (2,972) Current liabilities (2,742) (2,489) (2,972) Borrowings 5 (2,478) - - Non-current liabilities (2,478) - - Total liabilities (5,220) (2,489) (2,972) Net assets 8,093 17,868 12,383 Equity Capital and reserves attributable to equity holders of the Company Called up share capital 6 28,189 28,189 28,189 Share premium account 6 47,451 47,432 47,451 Other reserves 6 11,437 11,118 11,118 Accumulated loss (78,984) (68,871) (74,375) Total equity 8,093 17,868 12,383 7

8 Consolidated Cash Flow Statement for the six months ended 30 June 2012 (unaudited) 6 months ended 30 June months ended 30 June Year ended 31 December Note Net cash outflow from operating activities 7 (5,077) (5,787) (10,010) Cash flows from investing activities Interest received Purchase of property, plant and equipment (141) (103) (526) Net cash flows used in investing activities (123) (99) (467) Cash flows from financing activities Proceeds from issue of ordinary shares - 13,004 13,004 Share issue expenses - (815) (796) Proceeds from issue of convertible loan note 3, Convertible loan notes issue expenses (157) - - Net cash flows from financing activities 2,843 12,189 12,208 (Decrease)/increase in cash and cash equivalents (2,357) 6,303 1,731 Cash and cash equivalents at beginning of period 7,545 5,814 5,814 Cash and cash equivalents at end of period 5,188 12,117 7,545 8

9 Consolidated Statement of Changes in Equity for the six months ended 30 June 2012 (unaudited) Share Capital Share Premium Other Reserves Accumulated Loss Total Equity '000 At 1 January 26,331 37,101 11,118 (64,530) 10,020 Loss and total comprehensive expense for the period (4,385) (4,385) Share-based compensation Issue of ordinary shares 1,858 11, ,004 Share issue expenses - (815) - - (815) At 30 June 28,189 47,432 11,118 (68,871) 17,868 Loss and total comprehensive expense for the period (5,720) (5,720) Share-based compensation Share issue expenses At 31 December 28,189 47,451 11,118 (74,375) 12,383 Loss and total comprehensive expense for the period (4,351) (4,351) Share-based compensation (258) (258) Equity component of convertible loan notes (net of issue costs) At 30 June ,189 47,451 11,437 (78,984) 8,093 9

10 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 2012 and the accounting policies set out in Lombard Medical Technologies PLC s Annual Report for the year ended 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 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 ended 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 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 Group is developing its technologies for the marketplace and seeking regulatory approval in the United States for Aorfix and as such absorbs cash until sufficient funds from products sold are generated. The group agreed 27.2m of funding in May, 13.0m of which was received in with the remaining 14.2m due on FDA approval of its Aorfix TM product. The group has submitted all the required modules to the FDA and anticipates approval to be granted by the end of In these circumstances the directors are confident that the 14.2m would support the going concern basis of preparation of these financial statements. The Directors have also given specific consideration to the impact if FDA approval is delayed beyond the end of 2012 and have prepared detailed cash flow forecasts on this basis. The plans supporting these forecasts extend the sufficiency of the group s current available funding into the second quarter of Additionally, the Directors have identified specific assets the sale of which may be possible and also hold regular discussions with major shareholders on how to manage the position in the event of a delay. Although these sources of funding are not certain, they have the potential to provide a further extension in the cash runway to support the going concern basis of preparation of these financial statements. Based on the above, the Directors consider the going concern assumption to be appropriate and therefore the going concern basis has been adopted in the preparation of these financial statements. 10

11 2 Operating Segment Analysis The Group operates 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. Revenue by destination: 6 months 6 months ended ended 30 June 30 June 2012 Year ended 31 December United Kingdom and Europe 1,672 1,476 3,294 United States of America Rest of World ,974 1,818 4,012 3 Taxation on Loss on Ordinary Activities UK research and development claim: 6 months 6 months ended ended 30 June 30 June 2012 Year ended 31 December - for the current year ,150 - for the prior year (215) ,321 Overseas taxation charge - (14) (39) ,282 11

12 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: 6 months 6 months ended ended 30 June 30 June 2012 Year ended 31 December Loss for the period () (4,351) (4,385) (10,105) Weighted average number of ordinary shares ( 000) 20,162 2,480,065 3,263,848 Basic and diluted loss per share (pence) (21.58) (0.18) (0.31) 5 Borrowings Convertible loan notes with a face value of 3m were issued to Invesco, the Company's largest shareholder, on 30 March The loan notes pay interest of 8% per annum, compounded annually and are repayable at the Company s discretion at any time until 1 July The loan notes are repayable or convertible at the holder s discretion at any time between 1 July 2013 and 1 September 2013 or on certain other events as noted in the shareholder circular dated 9 March In the case of conversion, the conversion share price is 140 pence per share. At 30 June 2012, the amount outstanding comprised: Face value of convertible loan notes issued on 30 March ,000 Equity component (337) Issue costs relating to the liability element (139) Liability component on initial recognition at 30 March ,524 Interest expense 137 Interest paid - 2,661 Included in current liabilities 183 The outstanding liability on the convertible loan notes was valued at a discount rate of 18%, considered a market rate for an equivalent non-convertible loan and the excess liability has been treated as an equity component and credited to other reserves. 12

13 6 Equity On 27 March 2012 a general meeting of the Company approved a share consolidation of one new ordinary share of 20 pence for every 200 existing ordinary shares of 0.1 pence. The Record Date for the consolidation was 27 March 2012 i) Share capital 30 June June 31 December Number of shares Nominal Value Number of shares Nominal Value Number of shares Nominal Value 000s 000s 000s Allotted, called up and fully paid Ordinary shares of 20p each 20,162 4, Ordinary shares of 1p each - - 4,032,362 4,032 4,032,362 4,032 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 19,573 2,174,695 19,573 2,174,695 19,573 28,189 28,189 28,189 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. 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; and the accounting for the equity component, net of issue costs, of the convertible loan notes issued in

14 7 Reconciliation of Loss before Taxation to Net Cash Outflow from Operating Activities 6 months 6 months ended ended 30 June 30 June 2012 Year ended 31 December Loss before taxation (4,496) (4,971) (11,387) Depreciation and amortisation of licences Share-based compensation expense (258) Impairment provision - investment Net finance income 119 (4) (59) Increase in inventories (317) (410) (618) Decrease/(increase) in receivables 200 (382) (399) (Decrease)/increase in payables (413) (115) 368 Net cash used in continuing operations (5,077) (5,773) (10,842) Research and development tax credits received Overseas taxation - (14) - Net cash used in operating activities (5,077) (5,787) (10,010) 14