AOR.L Regulatory News (AOR)

31 Aug 2006 07:01

Aortech International PLC31 August 2006 31 August 2006 Final Results for the year ended 31 March 2006 AorTech International plc (AIM: AOR) ("AorTech" or the "Company"), the medicaldevice development and biomaterials intellectual property and licensing company,today announces its final results for the year ended 31 March 2006. Operational Highlights • First US FDA Pre-Market Approval ('PMA') for use of Elast-Eon(TM) in a long-term life sustaining application• Agreement signed with St Jude Medical for exclusive use of Elast-Eon(TM) as cardiac rhythm management lead insulator• Expansion and relocation of Australian facility: o increased scale and stability of pilot polymer synthesis manufacturing capability o reduced manufacturing costs• Appointment of Eddie McDaid and Gordon Wright as Non-Executive Directors Post period end: • First human use of Elast-Eon(TM) in cardiac lead insulators achieved in July• Appointment of Medical Advisory Board comprising two highly esteemed plastic surgeons and researchers Financial Highlights • Turnover up over 900% to £1.42m (2005: £0.14m), of which £1.1m resulted from agreement signed with St Jude Medical• Operating expenses reduced by 15% to £1.87m (2005: £2.19m)• Loss after tax reduced by 72% to £0.52m (2005: Loss £1.87m)• Net cash position of £2.72m (2005: £4.02m), reflecting investment in development projects Commenting on the results, Jon Pither, Chairman of AorTech, said: "The positive results of the year are a culmination of the efforts of the pastthree years. These efforts have enabled the Company to focus on realising thepotential of its Elast-Eon(TM) material and to deliver the first majorcommercialisation of Elast-Eon(TM) in a medical device product through our licence and supply agreement with St. Jude. Having achieved this first commercialisation agreement I am confident that this will be the first of several licence and supply agreements over the coming years. Our Company is now achieving a financial and cash flow stability that we have been seeking to create since 2003." -Ends- Enquiries: AorTech International plc Tel: 020 7357 9477 (on 31 August)Frank Maguire, CEO Hogarth Partnership Limited Tel: 020 7357 9477Melanie Toyne-Sewell / Sarah Richardson Notes to Editors: AorTech International plc is a public limited company formed under the laws ofScotland, UK and is traded on the Alternative Investment Market, a marketoperated by the London Stock Exchange plc, under the trading symbol AOR. Additional material concerning AorTech International is available on theCompany's website at www.aortech.com, or may be obtained by contacting theCompany's Public Relations firm, Hogarth Partnership Limited. AorTech International plc: Prestige Travel Suite, Barclays Bank House, 81-83Victoria Road, Surbiton, Surrey, KT6 4NS, UK Chairman's statement Financial year ended 31 March 2006 saw the first significant income for thebiomaterials-focused business strategy that has been under development since2003. Results Results to date are reflected in the summary financial performance of thebusiness: For the year ended 31 March 2006, the Company's turnover was £1,424,944,representing a more than 10-fold increase over the previous year's £136,958.Approximately £1.1million of the 2006 turnover resulted from the agreementsigned with St. Jude Medical. As the substance of the transaction is that of asale of rights to the use of Elast-Eon(TM) in specified fields of use, this hasbeen recognised as revenue in these financial statements. Operating expenses forthe year were £1,867,740, representing a reduction of almost 15% over theprevious year and being 26% less than the figure for 2004. The operatingexpenses included £634,292 of development expenditure (2005: £653,896) andamortisation of intangible fixed assets of £99,491 (2005: £94,589). The Lossafter Tax for the year was £523,348, which compares with the loss for 2005 of£1,867,390. The cash position as at 31 March 2006 was £2,715,804, which compares with£4,015,126 on the corresponding day in 2005. However, the cash position improvedsignificantly in April 2006 with the receipt of the US$2million (approximately£1.1million) initial payment from St. Jude Medical in respect of the agreementconcluded prior to the financial year end. Other tangible measures of progress came in the form of the first US FDAPre-Market Approval ('PMA') for the use of our Elast-Eon(TM) material in along-term, life sustaining application and the agreement reached with St. JudeMedical for exclusive use of Elast-Eon(TM) as insulation for its cardiac pacingproducts. Post year end, an extremely important event occurred in July 2006 whenElast-Eon(TM) achieved first human use as a cardiac rhythm management leadinsulator. Our general strategy is to build a profitable, cash positive, polymer licensingand supply business and to leverage that base with selected device developmentprojects with high potential returns, such as heart valve and breast implant,with which the directors expect to enhance shareholder value. Elast-Eon(TM) licensing and supply As FDA approval of our product became known in the marketplace and our contractwith St. Jude Medical was announced, there was a substantial increase in newcustomer enquiries. Almost any clinical use of our polymer requires a lengthy cycle of applicationdevelopment and testing followed by a regulatory approval phase. However, as aconsequence of PMA approvals and first human use, customer interest has risenand we anticipate an increasing number of clinical applications to be approvedduring the coming financial year. We would expect these to be focused mainly onorthopaedic and cardiac surgery applications, although there are additionalclient development programmes underway in cardiology and urology, among others. During the period, under the guidance of our Chief Scientific Officer, Dr. AjayPadsalgikar, we also continued to expand our technology offerings with thedevelopment of new softer grades of Elast-Eon(TM), an Elast-Eon(TM) gel and aninjectable form of Elast-Eon(TM). Patent applications have been made for all ofthese materials. Device Development The two most significant internal projects I wish to report on are the polymerheart valve and the breast implant. Polymer heart valve The global prosthetic heart valve market is in excess of $1 billion and growingat approximately 6% per annum. Various estimates suggest that the potentialmarket for percutaneous heart valves is equivalent in size to the surgical heartvalve market. Over the past several years, Bovine Spongiform Encephalopathy (BSE) has emergedas a risk factor in the use of tissue heart valves manufactured from animaltissue. A polymer heart valve removes this risk. There has been increased interest from both industry and investors incatheter-delivered (percutaneous) heart valve technology. A percutaneous heartvalve has the advantage of being delivered to the heart via a catheter insertedthrough an incision in the groin, thus avoiding conventional open-chest surgeryutilising cardio-pulmonary bypass. This approach provides a therapeutic optionfor patients not strong enough to undergo a conventional open-chest procedure.The AorTech polymer valve offers significant advantages in size and ease of useas compared with other, tissue-based percutaneous designs, making this therapyavailable for smaller patients. The strength of this increased industry interestin catheter-delivered heart valves can be demonstrated by the EdwardsLifesciences' acquisition in October 2004 of Percutaneous Valve TechnologyCompany (PVT), for a reported $125million up front payment. The AorTech polymer valve offers a significant advantage in manufactured costversus other commercially available heart valve products, making it ideallysuited for large emerging markets such as China and India. AorTech's Strategy: Prior to suspending our UK based heart valve developmentprogramme in the summer of 2003, two key objectives were attained. These were the filing of patents for the "high durability" polymer valve knownas M-95-C in both surgical and percutaneous forms and the demonstration of asoft failure mode for this valve. This "soft" failure mode is similar, and ourdata suggests even somewhat superior, to that of commercial tissue heart valveproducts in widespread distribution. The significance of a soft failure mode isthat, unlike a mechanical valve where failure almost always results in death, apatient with a failing polymer or tissue valve will exhibit symptoms of thefailing valve, providing an opportunity for an intervention to correct thissituation, thus preserving the life of the patient. As a result of these technology and market factors there has been a generallevel of renewed interest by outside parties in our AorTech polymer valve. Thisinterest level has been significant and has led to our decision to recommencethe AorTech polymer valve programme. We have recruited Dr. Jason Beith, theinventor of the recently patented M-95-C valve to lead our development projectteam. We are seeking an industry partner to assist in the development programme andbelieve that we have made progress towards identifying a partner who willprovide the necessary resources to continue the pre-clinical development andtesting on our polymer valve. This would enable the valve project to be takensuccessfully to clinical trials in future years with the ultimate objectivebeing the commercialisation of this heart valve in areas of surgical, minimallyinvasive and percutaneous manifestations. I look forward to reporting on theprogress towards a partnership for the development of the AorTech polymer valvewithin the next year. On 26 March 2006 our M-95-C patent was issued in the UK and we anticipate thatit will be issued in all major territories over the next 18-24 months. Breast Implant Worldwide, 800,000 women will receive breast implant products in the comingyear. More than 90% of these will be for purely cosmetic reasons. Although some form of re-approval by US FDA of a silicone gel-filled implant isanticipated in the near future, we believe that the case for the use of anElast-Eon(TM) gel filler in existing implants can be made on the basis of bothproduct and patient safety. Our product avoids the use of platinum or tin - orindeed any metal catalyst in the material - and offers a substantive reductionin low molecular weight compounds compared with the silicone material thatcharacterises existing silicone breast implant products. It is our opinion, therefore, that the anticipated US FDA approval of siliconegel products will be a positive development for AorTech as it will reintroduce atechnology factor into market competition for devices that have been inregulatory limbo for 14 years. We have been developing a minimally invasive gel implant technology that webelieve may be of significant interest to both the industry and the market. Thistechnology will permit a gel implant procedure, without damage to the shell, andsecure the benefits of the safer Elast-Eon(TM) gel. We are not aware of any other next generation breast implant technology like this. Our future development programme over the coming months is to pursue proof of concept for the minimally invasive breast implant and to select a partnership where the development programme can be taken to clinical trials and ultimately commercial use. Patents have been filed for this minimally invasive breast implant device. Operational Update In May 2006, our Australian operation moved into a new and expanded facilitylocated on a technology campus in Scoresby, Melbourne, approximately 3 milesfrom our prior location. As a result of this relocation we have been able to both scale up and stabiliseour pilot polymer synthesis manufacturing capability. Together with theimprovement in polymer quality levels, we are able to achieve a significantreduction in the polymer manufacturing cost. We anticipate that our new capacity levels are adequate for the foreseeablefuture. Substantive funding for the infrastructure elements of this move wereobtained from the Australian State of Victoria. This move is an endorsement ofthe success of AorTech's team in Victoria and the quality of local supportavailable to a high technology business. Board Changes In November 2005, we announced the appointment of Eddie McDaid and Gordon Wrightas Non-Executive Directors of the Company. Their knowledge of the Company andthe industry in which we operate is wide ranging, and their input has been muchwelcomed by their colleagues on the Board. Outlook Over the coming year we expect the early adopters of Elast-Eon(TM) technology inthe fields of cardiology, orthopaedics and urology to provide the momentum formoving this segment of the business forward. We have prepared our operations forthis new business and are confident of our product quality, capacity ofmanufacturing and new cost basis. During the same period, we expect to be announcing significant developments inthe use of Elast-Eon(TM) in orthopaedic applications and we anticipate theformation of a co-development partnership with an industry partner for our heartvalve technology. Current trading remains in line with the Board's expectations. In Conclusion The positive results for the year are a culmination of the efforts of the pastthree years, following the downsizing of the organisation and its activitiesduring 2002/2003. These efforts have enabled the Company to focus on realising the potential ofits Elast-Eon(TM) material and to deliver the first major commercialisation ofElast-Eon(TM) in a medical device product through our licence and supply agreement with St. Jude Medical. Having achieved this first commercialisation agreement I am confident that it will be the first of several licence and supply agreements over the coming years. Our Company is now achieving a financial and cash flow stability that we have been seeking to create since 2003. None of this progress or these achievements would have been possible without theexpertise, drive and commitment of our employees in Australia, whom I thank, onbehalf of myself and the Board, for their outstanding service. I have to alsothank my fellow Board members and in particular our Chief Executive, FrankMaguire, for his sterling work during the past twelve months in delivering thepositive results and indeed the major turnaround that the Company has achievedduring the year ended 31 March 2006. Finally, I take this opportunity to thank our shareholders for their continuedsupport over the years. I am confident that AorTech can build on itsachievements of the past twelve months and that the potential of our uniqueElast-Eon(TM) material will continue to add value to the company over ensuingyears. Jon PitherChairman Consolidated Profit And Loss Account for the year ended 31 March 2006 Notes 2006 2005 £ £ Turnover 2 1,424,944 136,958 Cost of Sales 3 (222,751) (31,339) ---------- ----------Gross profit 1,202,193 105,619 Net operating expenses 3 (1,867,740) (2,189,908)----------------------------------------- ------ ---------- ----------Net operating expenses include: Development expenditure (634,292) (653,896) Amortisation of intangible assets (99,491) (94,589 )----------------------------------------- ------ ---------- ----------Group operating loss 3 (665,547) (2,084,289) Interest receivable 142,199 216,899 ---------- ----------Loss on ordinary activities before taxation 2 (523,348) (1,867,390) Taxation 5 - - ---------- ----------Loss for the financial year (523,348) (1,867,390) ========== ========== Loss per ordinary share 6 Basic (13.74p) (49.01p)Diluted (13.74p) (49.01p) Consolidated Statement of Total Recognised Gains and Losses for the year ended31 March 2006 2006 2005 £ £ Loss for the financial year (523,348) (1,867,390) Currency translation differences arising onconsolidation (22,981) (45,215) ---------- ---------- Total losses recognised since last annual report (546,329) (1,912,605) ========== ========== Balance Sheets as at 31 March 2006 Group 2006 2005 £ £ Fixed assets Intangible assets 1,360,209 1,449,366Tangible assets 239,775 189,678Investment in subsidiary undertakings - - ----------- ----------- 1,599,983 1,639,044Current assets Stocks 139,637 68,852Debtors: amounts falling due within one year 1,304,424 278,948Debtors: amounts falling due after more than one year - -Cash at bank 2,715,804 4,015,126 ----------- ----------- 4,159,865 4,362,926 Creditors: amounts falling due within one year (508,371) (348,460) ----------- -----------Net current assets 3,651,494 4,014,466 Total assets less current liabilities 5,251,478 5,653,510 Creditors: amounts falling due after more than oneyear (144,297) - ----------- -----------Net assets 5,107,181 5,653,510 =========== =========== Capital and reserves Called up share capital 9,525,695 9,525,695Other reserve (2,003,143) (2,003,143)Profit and loss account (2,415,371) (1,869,042) ----------- -----------Equity shareholders' funds 5,107,181 5,653,510 =========== =========== Consolidated Cashflow Statement for the year ended 31 March 2006 notes 2006 2005 £ £ Net cash outflow from operating activities 7 (1,188,804) (2,119,791) Returns on investment and servicing offinanceInterest received 142,199 216,899 TaxationResearch and development tax credits refunded (98,899) - Capital expenditure and financial investmentPurchase of tangible fixed assets (119,759) (28,000) --------- ---------Net cash outflow from capital expenditure andfinancial investment (119,759) (28,000) Cash outflow before management of liquidresources and financing (1,265,263) (1,930,892) Management of liquid resourcesCash released from short term deposit 1,658,461 1,994,364 --------- ---------Increase in cash in the year 393,198 63,472 ========= ========= Notes to the Financial Statements for the year ended 31 March 2006 Note 1 This statement has been prepared using accounting policies and presentationconsistent with those applied in the preparation of the statutory accounts ofthe Group. The principal accounting policies represent the most appropriate inaccordance with FRS 18. The new standards that are appropriate to the Group(namely FRSs 21, 22, 25 and 28) had no material impact on the financialstatements. The summary accounts set out above do not constitute statutory accounts asdefined by Section 240 of the UK Companies Act 1985. The summarised balancesheet at 31 March 2006, the summarised consolidated profit and loss account andthe summarised consolidated cash flow statement for the year then ended havebeen extracted from the group's statutory accounts for the year to 31 March 2006upon which the auditors' opinion is unqualified. The statutory accounts for theyear ended 31 March 2006 were approved by the Directors on 30 August 2006, buthave not yet been delivered to the Registrar of Companies. Note 2: Segmental Analysis by Class of Business and Geographical Area (a) Class of business - The Group operates one class of business. (b) Geographical area - The analysis by geographical area of the Group'sturnover, loss before tax and net assets is set out below: (i) Turnover 2006 2005 Sales by Sales by Sales by Sales by destination origin destination origin £ £ £ £GeographicalsegmentUnited Kingdom 35,870 - 13,024 -Rest of World 1,389,074 1,424,944 123,934 136,958 --------- --------- -------- -------- 1,424,944 1,424,944 136,958 136,958 ========= ========= ======== ======== (ii) (Loss) /Profit beforetaxation 2006 2005 £ £GeographicalsegmentUnited Kingdom (689,206) (957,192)Rest of World 23,659 (1,127,097) -------- --------Loss before interest (665,547) (2,084,289) Net interestreceivable 142,199 216,899 -------- --------Loss on ordinaryactivities beforetaxation (523,348) (1,867,390) ======== ======== (iii) Net assets 2006 2005 £ £Geographical segmentUnited Kingdom 2,127,732 3,733,878Rest of World 2,979,449 1,919,632 --------- --------- 5,107,181 5,653,510 ========= ========= Note 3: Net operating expenses Net operating expenses of £1,867,740 (2005: £2,189,908) also include Selling andMarketing Costs of £243,739 (2005: £185,384) and Other Administrative Expensesof £890,218 (2005: £1,256,039). Note 4: Operating Loss 2006 2005 £ £The operating loss is stated after charging: Depreciation and amortisation charge for the year:Intangible owned assets 99,491 94,589Tangible owned fixed assets 72,406 70,948Operating lease rentals:Other 90,931 138,689 The above results for the year relate to continuing operations. Note 5: Taxation No tax arises on the loss for the year (2005: nil) Unrelieved tax losses remain available to offset against future taxable profitsof the same trade in the same country. These losses have not been recognised asdeferred tax assets within the financial statements as they do not meet theconditions required in accordance with FRS 19. Losses carried forward in the UKtotal £2,401,144 - tax effect is £720,343 (2005: £1,840,679 - tax effect is£552,204). Losses carried forward in Australia total £4,304,906 - tax effect£1,291,472 (2005: £4,404,615 - tax effect £1,321,384). Note 6: Loss per Ordinary Share The basic loss per ordinary share is calculated on the loss of the Group of£523,348 (2005: loss of £1,867,390) and on 3,810,278 (2005: 3,810,278) equityshares, being the weighted average number of shares deemed to be in issue. Theexercise of share options would not have been dilutive and accordingly the basicand diluted loss per share are the same. Note 7: Reconciliation of Operating Loss to Net Cash Flow from OperatingActivities 2006 2005 £ £ Group operating loss (665,547) (2,084,289)Amortisation of intangible assets 99,491 94,589Depreciation of tangible fixed assets 72,406 70,948Increase in stocks (70,785) (20,199)Increase in debtors (1,027,476) (91,100)Increase / (decrease) in creditors 403,107 (89,740) --------- ---------Net cash outflow from operating activities (1,188,804) (2,119,791) ========= ========= Note 8: Notice of Annual General Meeting The Annual General Meeting will be held at 12 noon on 28 September 2006 at theoffices of Biggart Baillie, Dalmore House, 310 St Vincent Street, Glasgow G25QR. Note 9: Posting and availability of accounts The annual report and accounts for the year ended 31 March 2006 will be sent bypost to all registered shareholders on 5 September 2006. Additional copies willbe available for a month thereafter from the Company's Surbiton office.Alternatively, the document may be viewed on, or downloaded from, the Company'swebsite: www.aortech.com. This information is provided by RNS The company news service from the London Stock Exchange