Placing to raise ?2.5 million

RNS Number : 8907V

Deltex Medical Group PLC

18 January 2013

 



Deltex Medical Group plc

Placing of 13,157,895 New Ordinary Shares at 19 pence to raise  £2.5 million

18 January 2013- Deltex Medical Group plc ("Deltex Medical" or the "Company"), the global leader in oesophageal Doppler monitoring ("ODM"), announces that Arden Partners plc has, on behalf of the Company, placed 13,157,895 new ordinary shares of 1p each ("New Ordinary Shares") at a price of 19p ("Placing Price"), to raise approximately £2.4 million after expenses (the "Placing").

Use of Proceeds

The proceeds of the Placing will be used to fund the second phase collaboration project with Premier Inc. ("Premier") which was referred to in the announcement made by the Company on 8 January 2013. The programme will result in the implementation of CardioQ-ODM in up to five US hospitals and will involve the payment of fees to Premier. This will give Deltex access to Premier`s patient outcome and hospital cost data, Premier's clinical change management and quality improvement expertise as well as a scalable implementation programme for other hospitals to follow and, ultimately, Premier's extensive networks of hospitals and health policy makers. Additional costs will be incurred by Deltex Medical in providing training staff and customer support consistent with its established account development models in the USA.

The Company estimates the total additional costs of implementing CardioQ-ODM into three Premier alliance hospitals to be approximately £1.3 million which will be spread over two years. These comprise approximately £1.0 million in fees to Premier and a small expansion in the Company's clinical training capacity. The additional proceeds not committed to the Premier project and these three hospitals will provide the Company with additional working capital and allow it to expand the number of hospitals participating in the implementation project to five whilst expanding its US sales and training team to support this.

About Premier

Premier is a performance improvement alliance of more than 2,700 US hospitals and 90,000 other sites using the power of collaboration and technology to lead the transformation to coordinated, high-quality, cost-effective care. Owned by hospitals, health systems and other providers, Premier operates a leading healthcare purchasing network in the USA with more than $4 billion in annual savings. Premier also maintains the US's largest clinical, financial outcomes database with information on 1 in 4 patient discharges in the USA.

Within Premier's alliance of 2,700 hospitals, a group of hospitals, called the QUEST group, was established in 2008 to spearhead major programmes. The QUEST group currently has a membership of approximately 350 hospitals. Premier calculates that the original 150 QUEST members have cumulatively saved approximately $7 billion since inception through participating in and implementing quality improvement programmes supported by clinical and economic evidence generated from the Premier databases.

Benefits of collaboration with Premier

Deltex Medical is undertaking this collaboration with Premier with the objectives of:

·      accelerating the creation of a significant market for its products in the USA both through increasing the number of deeply penetrated hospitals and through generating high quality evidence of clinical and economic benefit specific to US health systems;

·      increasing the rate of sales growth that the Company would otherwise expect to achieve in the USA during the next two years; and

·      establishing by the end of the collaboration period (expected to occur in late 2014 or early 2015) a substantial pipeline of QUEST and wider Premier alliance hospitals committed to adopting CardioQ-ODM following the implementation models developed with Premier.

The clinical acceptance of the importance of intra-operative fluid management in determining patients' outcomes after surgery in the USA is generally some way behind that in the UK and Europe where intraoperative fluid management is increasingly recognised as a beneficial element in surgical care. Despite this, where there is a reasonable degree of clinical acceptance in individual hospitals, the Company has been successful in penetrating these US hospitals more effectively than anywhere else in the world. The Company estimates that its two largest US accounts are currently using the CardioQ-ODM on approximately 50% and 20% respectively of patients whose profiles fall within the UK National Institute for Health & Clinical Excellence ("NICE") guidance on CardioQ-ODM. These two accounts are, in aggregate, currently generating over $65,000 in probe sales each month. After deducting the costs of a full time clinical trainer in each hospital, they are, jointly, contributing net margins of over 60%, which on an annualised basis would make a contribution of circa $500,000. The Company's strategy in the USA is to increase the number of deeply penetrated accounts and the Directors believe that the collaboration with Premier will help it achieve this aim more quickly with the potential to generate substantial returns on its investment.

Placing details

Arden Partners plc has placed 13,157,895 New Ordinary Shares on behalf of the Company with institutional and other investors. The Placing is conditional, inter alia, upon Admission and will raise approximately £2.4 million, after expenses.

Application will be made for the New Ordinary Shares issued pursuant to the Placing to be admitted to trading on AIM and it is anticipated that Admission will become effective and that dealings will commence on 23 January 2013.

The New Ordinary Shares will, when issued, rank equally in all respects with the existing ordinary shares and will represent approximately 8% per cent. of the enlarged issued share capital of the Company immediately following Admission.

Following the Placing the Company will have 164,190,150 ordinary shares in issue. This figure may be used by shareholders as the denominator for the calculations by which they will determine if they are required to notify their interest in, or a change to their interest in Deltex Medical Group plc, under the Disclosure and Transparency Rules.

Directors` participation in the Placing

As part of the arrangements for the Placing, three Non-executive Directors will subscribe for New Ordinary Shares at the Placing Price. Nigel Keen, Julian Cazalet and Sir Duncan Nichol will subscribe for 789,000, 263,000 and 131,500 New Ordinary Shares respectively with an aggregate value of approximately £225,000 or 9 per cent. of the Placing. Following completion of the Placing, Nigel Keen, Julian Cazalet and Sir Duncan Nichol will hold the following holdings and percentages of the enlarged issued share capital in the Company: 6,687,547 ordinary shares (4.1 per cent.), 3,880,882 ordinary shares (2.4 per cent.) and 853,916 ordinary shares (0.5 per cent.) respectively.

Announcement of 2012 Results

The Company expects to announce its results for the financial year ended 31 December 2012 in the week commencing Monday 25 March 2013.

Deltex Medical's chairman, Nigel Keen, commented:

"This research collaboration is an exciting development for the Company following on from the Duke University Medical Centre study where the CardioQ-ODM formed a core part of the enhanced recovery programme (ERP). We believe that Premier's alliance of 2,700 U.S hospitals could be the launch pad for a substantial increase in penetration of the US market by CardioQ-ODM". 

For further information, please contact:-

Deltex Medical Group plc                                    01243 774 837

Nigel Keen, Chairman                                         [e-mail]

Ewan Phillips, Chief Executive                             [e-mail]

Paul Mitchell, Finance Director                            [e-mail]

Nominated Adviser & Broker

Arden Partners plc                                              020 7614 5900

Chris Hardie                                                       [e-mail]

Jamie Cameron                                                  [e-mail]

Kreab Gavin Anderson                                        020 7074 1800

Robert Speed                                                     [e-mail]

This announcement is for information purposes only and does not constitute an offer to sell or an invitation to subscribe for or a solicitation of an offer to buy or subscribe for any securities in any jurisdiction including in which such an offer or solicitation is unlawful and is not for distribution in or into, without limitation, the United States, Canada, Australia or Japan (the "Excluded Territories"), or to US persons (within the meaning of Regulation S of the United States Securities Act 1933 (as amended) (the "Securities Act").

The New Ordinary Shares have not been and will not be registered under the Securities Act or under the applicable securities laws of any state in the United States or any other Excluded Territory and, unless an exemption under such act or laws is available, may not be offered for sale or subscription or sold or subscribed directly or indirectly within the Excluded Territories or for the account or benefit of any national, resident or citizen of the Excluded Territories. No public offering of securities will be made in the United States. The distribution of this announcement in other jurisdictions may be restricted by law and therefore persons into whose possession this announcement comes should inform themselves about and observe any such restrictions. Any failure to comply with these restrictions may constitute a violation of the securities laws of such jurisdictions.

Arden Partners plc, which is authorised and regulated in the United Kingdom by the Financial Services Authority, is acting exclusively for Deltex Medical and for no one else in connection with the Placing and will not be responsible to anyone other than Deltex Medical for providing the protections afforded to clients of Arden Partners plc nor for providing advice in relation to the Placing or any other matters referred to in this announcement.

This announcement contains certain statements that are or may be "forward-looking statements". These statements typically contain words such as "intends", "expects", "anticipates", "estimates" and words of similar import. All the statements other than statements of historical facts included in this announcement, including, without limitation, those regarding Deltex Medical's financial position, business strategy, plans and objectives of management for future operations (including development plans and objectives relating to Deltex Medical's products and services) are forward-looking statements. By their nature, forward-looking statements involve risk and uncertainty because they relate to events and depend on circumstances that will occur in the future and therefore undue reliance should not be placed on such forward-looking statements. There are a number of factors that could cause the actual results, performance or achievements of Deltex Medical or those markets and economies to be materially different from future results, performance or achievements expressed or implied by such forward-looking statements. Such forward-looking statements are based on numerous assumptions regarding Deltex Medical's present and future business strategies and the environment in which Deltex Medical will operate in the future and such assumptions may or may not prove to be correct. Forward-looking statements speak only as at the date they are made. Neither Deltex Medical, nor Arden Partners plc nor any other person undertakes any obligation (other than, in the case of Deltex Medical, pursuant to the AIM Rules for Companies) to update publicly any of the information contained in this announcement, including any forward-looking statements, in the light of new information, change in circumstances or future events.

Notes for Editors

Deltex Medical manufactures and markets the CardioQ-ODMÔ system. Oesophageal Doppler monitoring using the CardioQ-ODM is the only therapy to measure blood flow in the central circulation in real time. Minimally invasive, easy to set up and quick to focus, the device generates a low-frequency ultrasound signal, which is highly sensitive to changes in flow and measures them immediately. Randomised, controlled trials using Doppler have demonstrated that early fluid management intervention will reduce post-operative complications, reduce intensive care admissions, and reduce the length of hospital stay.

The CardioQ-ODM has two distinct established clinical applications: firstly, to guide fluid management during surgery and secondly, to monitor cardiac output in critical care settings.

Surgical market

In March 2011 the National Institute for Health & Clinical Excellence ('NICE') recommended that CardioQ-ODM be considered for use in patients undergoing major and high risk surgery and in high risk patients undergoing major surgery. NICE estimated the applicable number of such patients in the NHS in England alone to be over 800,000 each year. CardioQ-ODM has been shown to be effective in both elective and emergency surgery and with both general and regional anaesthetics. This recommendation was specific to CardioQ-ODM and was based on the robust evidence base that it enjoys.

The NICE evaluation and recommendation confirms that the potential global market for CardioQ-ODM in surgery includes tens of millions of patients, even if confined to developed health economies: the most conservative estimate of the potential value of the market opportunity Deltex Medical has created is in excess of £1 billion per annum. The Company's core focus is on building market leading positions in this surgical market, both geographically and by type of surgery.

Critical care market

In critical care settings, well-equipped hospitals will often have more than one cardiac output monitoring technology available. In this environment, ODM's strengths are that it is quick to set up, easy to use, safe, low cost and the ideal technology for a patient in crisis requiring rapid or frequent intervention. The potential market for cardiac output monitoring in critical care is a fraction of the size of that for intra-operative fluid management.

Through the recent launch of the CardioQ-ODM+, Deltex Medical has incorporated pulse pressure variation, the best validated parameter from the Pulse Pressure Waveform Analysis ('PPWA') approach to monitoring cardiac output. Note that, in surgery, adding PPWA parameters does not expand per se the market potential of ODM, the Company's clinical and market research indicates that it may help accelerate some clinicians' acceptance of the value of ODM measured flow variables.

Company goal

Our goal is to make oesophageal Doppler monitoring (ODM) a standard of care for patients in both these markets. We believe that, in most modern health systems, it is essential to have a robust evidence base of both clinical benefit and cost effectiveness in order to achieve system-wide adoption of a new medical technology. Deltex Medical is one of the very first medical technology companies to have completed the investment necessary to build such an evidence base: as a result, use of ODM during surgery has the proven potential to deliver both clinical and economic benefits that are material at each of patient, hospital and system level.

The Company is currently in the implementation phase of achieving this goal in a number of territories worldwide and there are already over 2,500 CardioQ-ODMs currently in use in hospitals worldwide and distribution arrangements are in place in over 30 countries.

 

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