Interim Results
Aortech International PLC
15 December 2000
AORTECH INTERNATIONAL PLC
Interim Results for the Six Months Ended 30 September 2000
AorTech International plc, the Scottish-based manufacturer of cardio-vascular
devices, announces its Interim Results for the six months ended 30 September
2000.
Highlights
* Turnover continues to increase; £1.76 million in H1
* Loss for the period £3.2 million, due primarily to increased development
expenditure
* Cash at bank £12.7 million
* TruCOMMS - CE mark secured; reference centres in Europe & USA selected
* Elast-EonTM - further evaluation agreements signed
* External trileaflet research transferred to Belshill
* Technology centre opened at Group Headquarters
* Scientific and Medical Advisory Groups established
Gordon Wright, Chairman, commented:
'In our June statement we reviewed the significant advances achieved in the
development of AorTech's technologies and innovative products. This excellent
progress has continued and has been reflected with the Company receiving
further prestigious awards.
'We are pleased to confirm that the unique features of the TruCCOMS system, in
particular its immediate response to changes in cardiac output, have resulted
in significant interest from both distributors and physicians.
'There has been continued excellent progress on our new synthetic trileaflet
heart valve project. The analysis of explanted valves from the six-month
in-vivo trials resulted in a paper being presented at the European Association
for Artificial Organs Congress. The conclusion from this paper was that
biostable polyurethanes demonstrated improved blood compatibility, leaving
leaflets flexible and valve function unimpaired.
' We are confident that, building on the opportunities that the new
technologies open up for new products and new markets, the prospects for the
AorTech Group are excellent.'
15 December 2000
ENQUIRIES:
AorTech International plc Tel: 01698 746699
Eddie McDaid, Managing Director
Bell Lawrie White & Co. Tel: 0141 221 7733
Clive Thomson / Elizabeth Kennedy
College Hill Tel: 020 7457 2020
Michael Padley / Nicholas Nelson
Chairman's & Managing Director's Statement
In our June statement in the Annual Report for the year ended 31 March 2000,
we reviewed the significant advances achieved in the development of AorTech's
technologies and innovative products. This excellent progress has continued
and has been reflected with the company receiving further prestigious awards
during the period.
Milestones and achievements during the period include:
* The award in July, 2000 of the European regulatory CE mark for our
Continuous Cardiac Output monitoring system (TruCCOMS) which enables
AorTech to commence marketing in Europe. This follows the earlier award of
FDA approval, enabling marketing to commence in the USA;
* Presentation of clinical results of the TruCCOMS system at the British
Association of Cardiothoracic Anaesthesia Conference;
* Significant expansion of our clean room facility in Scotland in
preparation for the increased production of TruCCOMS in the next few
years;
* Presentation of the excellent results from the six-month in-vivo trials
of our new synthetic tri-leaflet heart valve in a paper at the European
Association of Artificial Organs Congress in Switzerland in September,
2000;
* Continued progress on the accelerated durability testing of the
Elast-EonTM material to be used for the trileaflet heart valve, now
exceeding 500 million cycles, equivalent to approximately 13 years as a
human implant;
* Establishment of our Scientific Advisory Group and Medical Advisory
Group;
* Introduction of the new Elan stentless tissue valve, extending the range
of our tissue valves in response to their increasing use by surgeons.
Results for the Half Year to 30 September 2000
Development expenditure incurred during the six months was approximately £
1,900,000 compared to development expenditure of approximately £612,000
incurred for the same period last year. The increase in this expenditure
reflects the focus of AorTech in developing its new innovative products.
Sales of AorTech's established products, (mechanical and tissue heart valves,
Mitral Repair System, together with contract work) continue to increase and
contribute towards the costs of the development of these new innovative
technologies. The revenues from these products were £1,757,000 and provided
gross margins of 56% for the period.
In line with previous years we anticipate revenues of established products in
the second half of this financial year being stronger than in the first half.
With the introduction of our new Elan stentless tissue valve the company
expects further increases in the sale of our established products in the
ensuing financial year.
Through the acquisition of the Tissuemed valve business in August, 1999
AorTech demonstrated its foresight in recognising the future trends in the
growth of the tissue valve segment of the heart valve replacement market and
this has been fully justified with global market trends confirming the move
from mechanical to tissue heart valve replacement.
The strength of the pound relative to other European currencies has
necessitated price reductions to several of our European distributors in order
to compete in these countries. However, we are pleased to confirm that by
addressing manufacturing costs of our tissue valves we have achieved a
reduction in these costs through increased efficiency and, as a result, we
anticipate a further increase in gross profit margin from our established
products during the course of the next financial year.
The group loss before taxation for the six months to 30 September, 2000 was £
2,728,919 which, although a significant increase over the loss of £762,199
during the preceding comparative period, should be seen in the context of our
new accounting policy introduced during the year ended 31 March, 2000 whereby
all development expenditure was expensed as incurred. As mentioned previously
development expenditure incurred during the six month period was £1,900,861
(1999: £612,528) and the amortisation of goodwill and intellectual property
was £629,555 (1999 £21,870) both of which have been charged before arriving at
our net loss.
TruCCOMS
With European regulatory approval now obtained for our TruCCOMS system and
with FDA approval last year, it is AorTech's intention to market this new
innovative product (through clinical studies) in selected reference centres in
Europe and the USA. We are pleased to confirm that the unique features of the
TruCCOMS system, in particular its immediate response to changes in cardiac
output, have resulted in significant interest from both distributors and
physicians. To exploit the technology fully and to achieve significant market
penetration of sales of the system it is our strategy to produce clinical
papers from patient studies in a number of centres to confirm both its unique
features and patient benefits. We believe this will enable AorTech to achieve
substantial sales of TruCCOMS such that it will be the major contributor to
the Group's revenue in the short to medium term. The Company expects sales of
TruCCOMS to commence in the first quarter of 2001.
Trileaflet Heart Valve
There has been continued excellent progress on our new synthetic trileaflet
heart valve project. The analysis of explanted valves from the six-month
in-vivo trials resulted in a paper being presented at the European Association
for Artificial Organs Congress in Switzerland in September this year. The
conclusion from this paper was that biostable polyurethanes demonstrated
improved blood compatibility, leaving leaflets flexible and valve function
unimpaired. Biostable polyurethanes may thus improve prospects for prolonged
function of synthetic heart valve prostheses.
The durability testing of the valve is continuing satisfactorily and the
Elast-EonTM material chosen for our new heart valve is demonstrating its
unique biostability relative to all other known polyurethanes.
Plans are being put in place for all regulatory in-vivo work to be carried out
in the USA during the first half of 2001, in order to meet both European and
FDA regulatory requirements.
The objectives of the new trileaflet heart valve are to overcome the present
problems of replacement of diseased and damaged heart valves by mechanical or
tissue valves which, in the case of mechanical valves, require the patient to
take daily anticoagulation treatment and, in the case of tissue valves, lack
long-term durability.
Elastomedic and Elast-EonTM Materials
We are confident that the acquisition of Elastomedic, together with the
acquisition of the Intellectual Property and patents relating to the Elast-Eon
TM material, will represent in future years a major strategic event for the
AorTech Group. There have been over the last six months further material
evaluation agreements concluded with a number of major medical device
companies, to assess the potential for the utilisation of Elast-EonTM within
other medical implantable devices. The Group's objective is to secure in the
next two to three years supply and licence agreements with medical device
companies which will represent a future revenue source for AorTech.
It is the Group's intention to utilise, Elast-EonTM in other products that
will be developed by AorTech. In recognising the future potential of Elast-Eon
TM for the AorTech Group, we have already implemented plans for the expansion
of our facilities in Melbourne, Australia in order to increase the processing,
scale up and production of the Elast-EonTM material.
New Facilities
In June we opened our new 6,000 sq. ft. technology centre at our headquarters
in Bellshill, Scotland and the transfer of the Intellectual Property and
Technology of the new trileaflet valve from universities to our facilities, we
have committed further funding towards capital equipment and cleanroom
expansion as we move into the final phase in the development of the trileaflet
valve.
A new office and warehouse in Michigan, USA are now open, and we are
evaluating several options for the expansion of our operations in the USA.
Scientific Advisory Group
We are pleased to confirm that, in November this year, we established our
Scientific Advisory Group. The aim of this Group is to assist the Company in
the resolution of important scientific and technological issues and the
identification of opportunities for further developments, based upon AorTech's
new technologies and core competences. The initial members of this Group are
among the world's leading authorities in their various fields and include: -
Dr. Thien How, Senior Lecturer in Clinical Engineering at the University of
Liverpool, who specialises in the analysis of blood flow in the cardiovascular
system.
Professor Gordon Meijs who is a leading Polymer Scientist and one of the
world's foremost polyurethane chemists. Professor Meijs heads the work on
biomaterials at the renowned division of Molecular Science at CSIRO in
Melbourne, Australia.
Professor Stuart Cooper, currently Vice President and Chief Academic Officer
of the prestigious Illinois Institute of Technology in Chicago, and is
recognised as one of the world's leading authorities on polyurethane
technology and the medical application of polymeric biomaterials.
Professor Ajit Yoganathan, who is Regent Professor of Biomedical Engineering
at the Georgia Institute of Technology in Atlanta, USA. Professor Yoganathan
is one of the world's leading authorities on the fluid mechanics of heart
valves and has helped to establish Georgia Institute as an internationally
renowned centre for cardiovascular engineering and tissue engineering.
Professor Yoganathan is an advisor to the FDA on heart valve performance.
Medical Advisory Group
We are also pleased to report the setting up of our Medical Advisory Group,
whose members are physicians of international repute, with the aim of
assisting and providing medical advice to the Group on various clinical issues
in relation to our products and technologies. The initial members of this
Medical Group are: -
Professor David Wheatley, who is a Fellow of the Royal College of Surgeons in
Edinburgh and was appointed British Heart Foundation Professor of Cardiac
Surgery at the University of Glasgow and Honorary Consultant Cardiac Surgeon
to Greater Glasgow Health Board in 1979. Professor Wheatley is Past President
of the European Association of Cardiothoracic Surgeons and President of the
Society of Cardiothoracic Surgeons of Great Britain and Ireland. Professor
Wheatley's research is particularly related to techniques and materials in
cardiac surgery, especially in relationship to the evaluation and design of
artificial heart valves.
Professor Reiner Korfer who is a world-renowned surgeon and is Medical
Director of Herz-zentrum Nordrhein-Westfalen which is one of the largest
cardiac centres in the world. He is Head of Department of Thoracic and
Cardiovascular Surgery at the University of Bochum, Bad Oeynhausen, Germany.
Professor Korfer's expertise is in the area of heart transplantation and
cardiac assist devices and he is on the scientific panel for many
international publications.
Professor Alessandro Frigiola, currently Surgeon in Chief of the First
Division of Cardiac Surgery at the E.Malan Centre of San Donato Hospital, the
largest cardiac centre in Italy.
Professor Hans Huysmans, Professor of Cardiac Surgery at the University
Hospital of Leiden, The Netherlands, is an internationally renowned surgeon
known particularly for his work in biological heart valves over the last two
decades. Professor Huysmans sits on the scientific committees of many leading
journals and international committees.
Mr. Samer Nashef is a Consultant Cardiothoracic Surgeon at Papworth Hospital,
Cambridge, a world-recognised centre for cardiac transplantation and cardiac
surgery. Mr. Nashef has pioneered work in the area of continuous cardiac
output monitoring and has been instrumental in the areas of cardiac surgical
audit, both in the UK and abroad.
Future Prospects
AorTech has now secured strong foundations in three major areas which will
sustain the future long-term growth of the Group. These areas are:
* Heart Valves - a new synthetic trileaflet heart valve which we expect
will represent one of the most significant developments in heart valve
replacement over the last 20 years.
* Biomaterials - a new generation of biostable materials - Elast-EonTM;
* Critical Care - a new generation for continuous cardiac output -
TruCCOMS
We are confident that building on the foundations laid, as these technologies
open up new products and new markets, that the prospects for the AorTech Group
are excellent. We are therefore reviewing continuously the various methods by
which we are able to increase both the growth of AorTech and the opportunities
appropriate to our technologies.
High quality personnel at all levels are being recruited within the Group, in
particular at the Senior Management level and Divisional Director level. It is
the quality of our people that will determine the future growth of the AorTech
Group and with the outstanding contribution from our personnel, we are
confident that AorTech will deliver our high expectations.
We are proud to be involved with such an outstanding group of individuals and
to have the opportunity to lead AorTech to the forefront of innovative cardiac
medical devices.
We take this opportunity to thank all of our teams, both within and outwith
the AorTech Group for their outstanding contributions and also to thank our
shareholders for their continued significant support.
J.G. WRIGHT E. McDAID
Chairman Managing Director
15 December 2000
CONSOLIDATED PROFIT AND LOSS ACCOUNT (UNAUDITED)
restated
six months six months
ended ended year ended
30 September 30 September 31 March
2000 1999 2000
Note £ £ £
Turnover 2 1,756,511 1,619,266 3,452,246
Cost of sales (781,224) (644,848) (1,359,304)
Gross Profit 975,287 974,418 2,092,942
Selling and marketing costs (451,890) (410,399) (744,627)
Administrative expenses (3,695,399) (1,271,108) (3,096,390)
Administrative expenses
include:
Development expenditure (1,900,858) (612,528) (1,476,626)
Amortisation of intangible (629,555) (21,870) (162,093)
fixed assets
Group operating loss (3,172,002) (707,089) (1,748,075)
Share of operating loss of - (39,226) (85,128)
associate
Operating loss including associate (3,172,002) (746,315) (1,833,203)
Interest receivable 457,691 11,068 113,911
Interest payable (14,607) (26,952) (45,189)
Loss on ordinary activities
before and after taxation 2 (2,728,918) (762,199) (1,764,481)
Loss per ordinary share 3 (9.15p) (3.62p) (7.71p)
Statement of total recognised losses
Loss for the period (2,728,918) (762,199) (1,764,481)
Currency translation differences
arising on consolidation (1,745) (506) (2,020)
Total recognised losses (2,730,663) (762,705) (1,766,501)
Prior year adjustment 5 (919,193)
(2,685,694)
CONSOLIDATED BALANCE SHEET (UNAUDITED)
restated
30 September 30 September 31 March
2000 2000 1999
£ £ £
Fixed assets
Intangible assets 22,998,520 2,411,324 23,540,817
Tangible assets 1,746,886 1,014,959 1,252,521
Investment in associated undertaking - 681,900 -
24,745,406 4,108,183 24,793,338
Current assets
Stocks 2,181,324 1,854,695 1,957,466
Debtors 1,896,271 1,298,400 1,583,860
Cash at bank 12,740,544 2,066,324 16,032,106
16,818,139 5,219,419 19,573,432
Creditors: amounts falling due within one (1,723,267) (2,054,949) (2,371,631)
year
Net current assets 15,094,872 3,164,470 17,201,801
Total assets less current liabilities 39,840,278 7,272,653 41,995,139
Creditors: amounts falling due after more (134,375) (420,875) (364,472)
than one year
Accruals and deferred income (46,316) (156,177) (78,329)
Net assets 39,659,587 6,695,601 41,552,338
Capital and reserves
Called up share capital 7,534,841 6,015,845 7,284,841
Share premium account 42,122,184 6,942,735 41,534,272
Other reserve (2,003,143) (2,003,143) (2,003,143)
Profit and loss account (7,994,295) (4,259,836) (5,263,632)
Shareholders' funds 39,659,587 6,695,601 41,552,338
CONSOLIDATED CASH FLOW STATEMENT (UNAUDITED)
restated
six months six months year
ended ended ended
30 September 30 September 31 March
2000 1999 2000
£ £ £
Net cash outflow from operating activities (2,178,131) (1,033,966) (2,084,253)
(see below)
Returns on investment and servicing of 146,749 (20,896) 58,522
finance
Capital expenditure and financial (1,076,208) (683,184)(3,315,281)
investment
Cash outflow before management
of liquid resources and financing (3,107,590) (1,738,046) (5,341,012)
Management of liquid resources 3,169,655 (1,341,478) (14,879,507)
Financing (180,728) 3,227,591 20,320,644
(Decrease)/Increase in cash in the period (118,663) 148,067 100,125
Reconciliation of operating loss to net cash outflow from operating activities
restated
six months six months
ended ended year ended
30 September 30 September 31 March
2000 1999 2000
£ £ £
Continuing activities
Operating loss (3,172,002) (746,315) (1,833,203)
Amortisation of intangible fixed assets 629,555 21,870 162,093
Depreciation of tangible fixed assets 307,000 86,010 250,819
Gain on sale of tangible fixed assets (415) (14,311) (14,395)
Share of loss of associated undertaking - - 85,128
Release from deferred grants (32,013) (25,000) (98,977)
Increase in stocks (223,858) (202,821) (205,592)
Increase in trade debtors (24,950) (19,770) (298,402)
(Increase)/decrease in prepayments (32,851) 46,561 (38,500)
Decrease/(increase) in other debtors 44,738 (165,517) (65,117)
Increase/(decrease) in trade creditors 361,889 (67,298) (329,261)
Increase in other taxes and social 22,995 4,451 18,136
security
(Decrease)/increase in accruals and (58,219) 48,174 283,018
other creditors
Net cash outflow from operating (2,178,131) (1,033,966) (2,084,253)
activities
NOTES TO THE FINANCIAL STATEMENTS (UNAUDITED)
1. Basis of preparation
These unaudited interim financial statements have been prepared on the
basis of the accounting policies set out in the group's annual report for
the year ended 31 March 2000.
The financial information contained in these interim financial statements
does not constitute statutory accounts within the meaning of Section 240
of the Companies Act 1985. The financial information for the year ended 31
March 2000 is an extract from the latest published financial statements
that have been delivered to the Registrar of Companies and on which the
auditors' report was unqualified.
2. Segmental analysis by class of business and geographical area
(a) Class of business The group operates in one class of business
(b) Geographical area The analysis by geographical area of the group's
turnover, loss before tax and net assets is set out below:
six months ended six months ended year ended
30 September 2000 30 September 1999 31 March 2000
sales by sales by sales by sales by sales by sales by
destination origin destination origin destination origin
£ £ £ £ £ £
(i)
Turnover
Geographical
segment
United 388,968 1,404,585 284,587 1,380,665 746,611 2,794,200
Kingdom
Rest of 1,341,136 346,096 1,313,918 238,601 2,657,063 658,046
Europe
Rest of 26,407 5,830 20,761 - 48,572 -
World
1,756,511 1,756,511 1,619,266 1,619,266 3,452,246 3,452,246
restated
six months ended six months ended six months ended
30 September 30 September 31 March
2000 1999 2000
(ii) Loss before tax £ £ £
Geographical segment
United Kingdom (2,629,076) (748,750) (1,711,022)
Rest of Europe 217 2,435 5,230
Rest of World (543,143) - (127,411)
Loss before interest (3,172,002) (746,315) (1,833,203)
Net interest receivable 443,084 (15,884) 68,722
(2,728,918) (762,199) (1,764,481)
(iii) Net assets
Geographical segment
United Kingdom 37,480,484 6,489,986 40,908,269
Rest of Europe 286,981 205,615 324,319
Rest of World 1,892,122 - 319,750
39,659,587 6,695,601 41,552,338
NOTES TO THE FINANCIAL STATEMENTS (UNAUDITED) continued
3. Loss per ordinary share
The loss per ordinary share is calculated on the loss of the Group of £
2,728,918 for the six months to 30 September 2000 (six months ended 30
September 1999, £762,199, year ended 31 March 2000: £1,764,481) and on th
following number of shares:
a. 29,838,813 equity shares being the weighted average number of shares in
issue during the six months ended 30 September 2000.
b. 21,076,041 equity shares being the weighted average number of shares in
issue during the six months ended 30 September 1999.
c. 22,887,273 equity shares being the weighted average number of shares in
issue during the year ended 31 March 2000.
1. Analysis of net funds
1 April cash non-cash 30 September
2000 flow changes 2000
£ £ £ £
Net cash
Cash at bank and in hand 16,032,106 (3,288,318) (3,244) 12,740,544
Deposits treated as liquid (15,374,571) 3,169,655 - (12,204,916)
resources
657,535 (118,663) (3,244) 535,628
Liquid resources
Deposits included in cash 15,374,571 (3,169,655) - 12,204,916
Debt
Debt due within one year (279,878) 151,640 (71,611) (199,849)
Debt due after more than
one year (209,472) - 75,097 (134,375)
(489,350) 151,640 3,486 (334,224)
Net funds 15,542,756 (3,136,678) 242 12,406,320
2. Prior year adjustment
During the year ended 31 March 2000, the Group changed its accounting policy
with regard to development costs. Comparative figures for the six months ended
30 September 1999 have been adjusted to reflect this change, the effect being
to increase the loss for that period by £651,754 and to reduce shareholders'
funds at 30 September 1999 by £1,570,947.
Copies of the Report & Accounts will posted to shareholders in due course.
This statement will be available for a period of 14 days from the Company's
registered office: Phoenix Crescent, Strathclyde Business Park, Bellshill,
Scotland ML4 3NU.
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