Deltex Medical Regulatory News (DEMG)

Deltex Medical Group plc

("Deltex Medical" or "the Company")

Chairman's Statement to Annual General Meeting

7 May 2014 - At the Annual General Meeting of Deltex Medical being held today the Company's Chairman, Nigel Keen will make the following statement:

Overview

We are pleased with the continued progress of the Company, in the UK, the US and other international markets. The UK has performed as anticipated in the first half of the year, with strong growth expected in H2. The USA has seen encouraging results from our growing base of dedicated trainer accounts and the success of the Premier collaboration is increasing the clinical awareness amongst American doctors of the importance of fluid management to drive better outcomes after surgery. Our international distributors have reported an increase in end-user sales and we expect to see increased probe sales to them over the course of the year.

UK

UK surgical probe utilisation is in line with our expectations. We are seeing continuing satisfactory growth in probe consumption in the majority of our larger accounts including our dedicated trainer accounts. In the last 16 months we have increased the number of dedicated trainer accounts from two to 13. We expect to add further hospitals to this programme in the coming months.

This year has seen wide-scale de-stocking in the NHS in the build-up to its March year end meaning that growth in revenues from UK surgical probes is lagging growth in consumption. Assuming such de-stocking unwinds on a basis consistent with prior years, we would expect to see the majority of this year's growth in UK surgical probe revenues to come through in the second half.

Earlier this year NHS England changed its approach to driving the wide-scale adoption of Intra-operative Fluid Management ('IOFM'). The NHS has ended its 2013 plan to make compliance with high impact innovations a pre-qualification criterion for CQUIN payments and moved towards embedding adoption of IOFM into the NHS standard contract. It will take time for the new approach to roll-out across the NHS but we believe it will help to underpin continuing growth momentum towards the end of this year and into 2015.

USA

Our US strategy is to penetrate a small number of hospitals broadly and deeply in order to build a solid platform for national roll-out as the tide of clinical understanding rises. In January we announced that we had established our fifth US dedicated trainer account, up from two a year ago. We are making good progress towards becoming a standard of care in each of our dedicated trainer accounts and, in three of the five, are starting to build a pipeline for expansion into other hospitals in the same hospital group.

We expect to add more dedicated trainer accounts during the course of the year both from local spread in those regions where we have a presence and from early stages of market pull. In the year to date we have seen an encouraging step-up in enquiries from major hospitals, mostly prestigious academic medical centres, who are looking to adopt IOFM and have identified ODM as the only evidence-based approach to doing this. We are supporting clinical evaluations in those hospitals looking to adopt ODM at scale and expect successful evaluations to translate into opportunities to establish further dedicated trainer accounts.

The USA is the world's largest market for medical technologies. Clinical awareness amongst American doctors of the importance of fluid management to drive better outcomes after surgery has been behind that in Europe but has been growing more rapidly in the last two years. The US market development project we are undertaking, primarily through collaboration with Premier Inc, is contributing to this better understanding. Analysis of Premier's database of US hospital outcomes is showing substantial variation in fluid management practice during and after surgery and this is associated with variation in outcomes.

International

Our distributors have reported increases in end user sales of our products in the majority of our more important target markets including France, Scandinavia, Germany, Austria and Peru. These increases are expected to flow through to increased probe sales over the course of the year.

Our joint venture in Canada has made a satisfactory start to the year and we are pursuing a small number of post-evaluation tender opportunities which would give the business a significant step-up, albeit from a small base.

Summary

Deltex Medical has built market leading positions in the most developed markets for intra-operative fluid management and is building strong platforms for growth in other evolving markets. Our gross margins are high, particularly on sales of disposable surgical probes, our principal revenue stream, and our costs remain under tight control. We are generating substantial cash returns from our sales operation in the UK, our most developed market and are also generating a reasonable level of cash from our International distributor network. We are investing these resources in building a platform for future growth in the USA and are encouraged at the pace of market development there. Probe sales in the year to date have been impacted by some short term effects of NHS de-stocking however we continue to make progress in underlying probe consumption in our focus accounts in the UK and abroad. The Board looks forward to continued progress throughout the remainder of 2014 and beyond.

For further information, please contact:-

Notes for Editors

Deltex Medical manufactures and markets CardioQ-ODMÔ Oesophageal Doppler Monitoring ('ODM') systems. 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 technology 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 intermediate risk 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 supports its use.

Subsequent to the NICE guidance, the NHS in England announced its selection of ODM as a high impact innovation to be rolled out across the system fully, at pace and scale with significant financial penalties starting in the NHS 2013/14 financial year ending 31 March 2014.

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 2012 launch of the CardioQ-ODM+, Deltex Medical has added the Pulse Pressure Waveform Analysis ('PPWA') approach to monitoring cardiac output to ODM functionality. Doing this has improved Deltex Medical's offer for monitoring applications as well as providing doctors and nurses with a choice of clinical strategies appropriate to individual patients in different clinical settings.

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 3,000 CardioQ-ODM systems in use in hospitals worldwide. Distribution arrangements are in place in over 30 countries.