14 Apr 2020 10:27
14 April 2020
AorTech International plc
("AorTech" or the "Company")
Further Update re COVID-19
Late last week, RUA Medical Devices Limited ("RUA"), the Company's wholly-owned subsidiary, received communications from its largest customer that, due to US Government (both federal and state) mandates to suspend all elective surgery in hospitals and surgical centres throughout the United States, it was temporarily unable to provide forecasts and orders for the medical devices manufactured for it by RUA. The boards of both RUA and AorTech have therefore implemented their contingency plans to minimise the impact of this temporary disruption and have now placed a number of both production and administrative staff at RUA on furlough.
Sufficient production staff have been retained at RUA to allow the current order book to be fulfilled within agreed timelines, but full production will not resume until new orders are received, which is unlikely to be until the temporary suspension of elective surgery has been lifted in the US.
Financial Resources
The steps taken to furlough a number of employees coupled with strict control of overheads will add to the contingency measure previously taken to defer part of the consideration paid for the acquisition of RUA. These actions provide the boards of both RUA and AorTech with comfort that the Group can ride out the COVID-19 disruption and continue its Research and Development efforts. The Group is well funded and has cash resources to weather a short-term disruption in demand from its major customer. Nevertheless, to further preserve cash and "share the pain" with the furloughed employees, the Board has agreed to a reduction of 20 per cent. in both fees and salaries during this period of lock down.
Research and Development
The team responsible for the development of the Company's patches and grafts projects has been retained and its focus remains on bringing these products to market in line with the Company's current timelines. Recent developments on these projects have been very encouraging with both a step change in the design of the textile substrates and a major development in the Elast-Eon™ coating technology which through utilising a fully automated process allowed Elast-Eon™ to be deposited on the exterior of the graft without interfering with the internal lumen. Regulatory testing of the new graft is still anticipated in the second half of this year and the animal trials, in particular, are designed to demonstrate the grafts' performance targets of providing good surgical feel and natural healing without having to rely upon animal sourced material for initial sealant. The Board believes that eliminating animal derived products will become increasingly important to patients, clinicians and regulators in next generation devices.
Similarly, good progress continues on the Heart Valve project despite some COVID-19 related delays. The tooling for the heart valve frames is almost complete and the tooling for the leaflets is nearing completion. We have taken delivery of the key raw materials for valve manufacture and anticipate manufacturing trials to commence during May 2020.
It is still too early to quantify fully the impact of COVID-19 on the Group's business. However, to re-iterate earlier statements, the Board is taking prudent steps to mitigate risk and manage its cashflow. The Board is confident that the enlarged Group is well equipped to enable both AorTech and RUA to withstand this near-term uncertainty and anticipate the interruption to the order cycle to be temporary and will start to return to nearer to normal levels once restrictions on elective surgery in the US are lifted.
For further information contact:
AorTech International plc Tel: +44 (0)7730 718296
Bill Brown, Chairman
Shore Capital Tel: +44 (0)20 7408 4080
Tom Griffiths/David Coaten
About AorTech
AorTech has developed biostable, implantable polymers, including Elast-Eon™ and ECSil™, now manufactured on its behalf by Biomerics LLC in Utah, USA. Elast-Eon™ and ECSil™'s biostability is comparable to silicone while exhibiting excellent mechanical, blood contacting and flex-fatigue properties. These polymers can be processed using conventional thermoplastic extrusion and moulding techniques. With over 6 million implants and over 10 years of successful clinical use, AorTech polymers are proven in long term life enabling applications.
In addition to continuing to exploit AorTech's Intellectual Property related to the world class biomaterial - Elast-Eon™, AorTech is now incorporating this material into a number of medical devices of our own design. Elast-Eon™ has first class long term blood contacting properties and, as a result, all of the initial products being developed are for the cardio vascular field. Each device is being designed to have improved clinical outcomes over current device technology, eliminating the use of animal sourced material whilst allowing procedures to remain the same, therefore avoiding having to retrain surgeons in new ways of operating.