Last checked at 16 Sep 2008 07:00
Deltex Medical Group plc
Interim results for the six months ended 30 June 2008
16 September 2008 - Deltex Medical Group plc ("Deltex Medical" or "Company"), UK's leading haemodynamic monitoring company, today announces its results for the six-month period ended 30 June 2008.
Financial Highlights
Group sales up 28% (H1 2008 £2.5 million; H1 2007 £1.9 million)
Quarterly Group probe sales over £1.0 million for the first time in Q2
UK sales ahead by 23%
Cash at 30 June 2008 of £1.1 million with a further £0.6 million available to be drawn down under loan agreements
Inward investment packages of £2.0 million secured in South Carolina, USA and Germany
Operating Highlights
Next generation monitor, the CardioQ-ODM™, launched in UK and Europe
Probe manufacturing capacity expanded
Patent applications made for I2 probes for awake patients
Widening recognition of ODM's unique capabilities
CardioQ-ODM at the top of the UK NHS innovation agenda
Largest single order of CardioQ-ODM for UK intensive care application in five years
Positive government sponsored reports on CardioQ-ODM's clinical and economic effectiveness from UK and Spain adding to 2007 reports from USA
US field team expanded and US office established in Greenville, South Carolina
Direct sales operation in Germany established
First US physician reimbursement payments from private insurers
Nigel Keen, Chairman of Deltex Medical, said:
"The momentum in all our target markets behind the growth in sales in the first half of the year has continued into the second half. The new CardioQ-ODM monitor is now at the top of the NHS innovation agenda and a key product in the drive for the adoption of new medical technologies by the Department of Health. Meanwhile we continue to drive growth in our probe sales in the UK and North America. We remain confident of the outlook for the current year and view the future with confidence."
For further information, please contact:-
Deltex Medical Group plc 01243 774 837
Nigel Keen, Chairman njk@deltexmedical.com
Andy Hill, Chief Executive ahill@deltexmedical.com
Ewan Phillips, Finance Director eap@deltexmedical.com
Gavin Anderson & Company 0207 554 1400
Deborah Walter dwalter@gavinanderson.co.uk
Robert Speed rspeed@gavinanderson.co.uk
Stuart Macaulay smacaulay@gavinanderson.co.uk
Charles Stanley Securities
Nominated Advisors 020 7149 6000
Philip Davies philip.davies@csysecurities.com
Russell Cook russell.cook@csysecurities.com
Notes for Editors
Deltex Medical manufactures and markets the CardioQ-ODM™ monitor, which uses disposable ultra-sound probes inserted into the oesophagus to determine the amount of blood being pumped around the body - 'circulating blood volume'. Reduced circulating blood volume is known as hypovolaemia, which leads to insufficient oxygen being delivered to the organs. This causes medical complications including peripheral and major organ failure which can lead to death. Hypovolaemia, which is akin to severe dehydration, affects virtually every patient having surgery because of the combined effects of pre-operative starvation, the impact of the anaesthetic agents and trauma from the surgery itself. Using fluids and drugs, guided by the CardioQ-ODM, to optimise the amount of circulating blood significantly reduces post-operative complications allowing patients to make a faster, more complete recovery and return home earlier.
The CardioQ-ODM incorporates the Company's proprietary software and a small diameter, easy-to-use, minimally invasive, disposable oesophageal probe that is used for transmitting and receiving an ultra-sound signal. By using this technology, the CardioQ-ODM provides clinicians with the ability to haemodynamically optimise critically ill patients and those undergoing routine moderate to major surgery through the controlled administration of fluid and drugs. Haemodynamic optimisation has been scientifically proven to improve the speed and quality of patient recovery and reduce hospital stay.
There are already over 1,500 CardioQ-ODMs currently in use in hospitals worldwide and distribution arrangements are in place in over 30 countries. In addition, there are currently more than 100 clinical publications on the use of the CardioQ-ODM which have repeatedly:-
Validated the results of the Monitor against known standards for measuring cardiac output, demonstrating that the technology works
Proved that the CardioQ-ODM works in a wide range of surgical procedures
Demonstrated that the Company's technology provides significant health and economic benefits by helping to reduce post-operative complications and length of hospital stays by an average of 30 to 40 per cent for a wide range of patients.
The SupraQ™ is an entirely non-invasive device which uses an ultrasound probe held at the base of the patient's neck to track the flow of blood in the aorta; it presents the same data as the CardioQ-ODM in a similar format and is used for taking snapshots or monitoring over short periods.
Chairman's Statement
Group Summary
Deltex Medical's CardioQ-ODM™ oesophageal Doppler monitor (ODM) is changing the way doctors care for patients having major surgery or who are in intensive care. ODM is the first and only technology sensitive enough to detect accurately small changes in blood flows and, therefore, allow doctors to optimise a patient's circulating blood volume and avoid the complications caused by reduced oxygen delivery.
Scientific evidence of the highest quality from independently conducted, randomised controlled clinical trials, using CardioQ-ODM to guide fluid delivery during surgery, is being translated into routine clinical practice in leading hospitals around the world and as a consequence patients are recovering from their surgery faster and leaving hospital sooner and in better health than they otherwise would do.
The clinical and economic potential of ODM has been independently verified and endorsed by peer-reviewed clinical meta-analyses and government sponsored health technology assessments from each of the USA, UK and Spain.
Trading Results
Sales
| Sales | |||||||
| Unaudited | |||||||
| 2008 | 2008 | 2008 | 2008 | 2008 | 2008 | ||
| Probes | Monitors | Probes | Monitors | Other | Total | ||
| units | units | £'000 | £'000 | £'000 | £'000 | ||
| Direct Markets | |||||||
| UK CardioQ | 14,105 | 32 | 1,146 | 245 | 74 | 1,465 | |
| UK SupraQ | - | 2 | - | 26 | - | 26 | |
| UK Total | 14,105 | 34 | 1,146 | 271 | 74 | 1,491 | |
| USA | 3,115 | 8 | 228 | 42 | 2 | 272 | |
| Spain | 290 | - | 32 | - | - | 32 | |
| Germany | 370 | 4 | 38 | 45 | - | 83 | |
| Distributor Markets | |||||||
| Europe | 5,565 | 4 | 285 | 25 | 6 | 316 | |
| Far East & Latin America | 3,170 | 30 | 134 | 127 | 3 | 264 | |
| 26,615 | 80 | 1,863 | 510 | 85 | 2,458 |
| Sales | |||||||
| Unaudited | |||||||
| 2007 | 2007 | 2007 | 2007 | 2007 | 2007 | ||
| Probes | Monitors | Probes | Monitors | Other | Total | ||
| units | units | £'000 | £'000 | £'000 | £'000 | ||
| Direct Markets | |||||||
| UK CardioQ | 12,455 | 26 | 976 | 173 | 66 | 1,215 | |
| UK SupraQ | - | - | - | - | - | - | |
| UK Total | 12,455 | 26 | 976 | 173 | 66 | 1,215 | |
| USA | 3,405 | 8 | 239 | 39 | 1 | 279 | |
| Spain | 335 | 1 | 34 | 7 | - | 41 | |
| Germany | - | - | - | - | - | - | |
| Distributor Markets | |||||||
| Europe | 4,135 | 7 | 186 | 29 | 2 | 217 | |
| Far East & Latin America | 2,665 | 23 | 89 | 69 | 4 | 162 | |
|
|
|
|
|
|
| ||
| 22,995 | 65 | 1,524 | 317 | 73 | 1,914 |
In the six months to 30 June 2008 the Company's sales grew by £544,000 (28%) compared to the first half of 2007 (H1 2008 £2,458,000; H1 2007 £1,914,000). Sales of monitors for the period were up £193,000 (H1 2008 £510,000; H1 2007 £317,000) and sales of disposable probes were ahead by £339,000 (H1 2008 £1,863,000; H1 2007 £1,524,000). Nearly 80% of Group revenues came from the recurring revenue streams derived from probes and monitor maintenance. Quarterly Group probe sales exceeded £1,000,000 for the first time in the Company's history in the second quarter of the year.
UK sales were up 23% at £1,491,000 compared to £1,215,000 for the same period in 2007. Sales in the UK in the first half of the year were nearly £50,000 per month ahead of the prior year with probe sales averaging £191,000 per month. Monitor sales were close to £100,000 ahead of the prior year: they include two SupraQ monitors and four CardioQ-ODM monitors for use in the NHS National Technology Adoption Centre project at the Whittington Hospital in London. Since the end of the period, the Manchester Royal Infirmary has also bought four CardioQ-ODM monitors for use in the National Technology Adoption Centre project and a major London teaching hospital has bought a further four CardioQ-ODM monitors specifically for use in the intensive care unit of our largest single order specifically for the UK critical care market for five years.
US sales were little changed from the corresponding period in 2007 at £272,000 (2007 £279,000) reflecting significant one-off sales in 2007 where we set up a number of projects at hospital accounts, the results and benefits of which are expected to start to flow through in 2009. We have seen satisfactory gains in each of our focus regions of Southern California, the North-East and Mid-West where our business model has been delivering increasing breadth and depth of usage among key hospitals, particularly where doctors have been receiving payment (reimbursement) for the use of CardioQ-ODM. We are working with doctors to secure a satisfactory level of physician reimbursement from CMS in each of these regions and are well positioned to exploit the opportunities for substantial growth that CMS reimbursement is expected to offer.
Sales continued to grow strongly in those international markets where our sales are supported by distributors. Revenues in the first half of the year were up 46% in Europe and 63% in the Far East and Latin America (2008 £316,000 and £264,000; 2007 £217,000 and £162,000 respectively). Probe sales in the distributed markets were substantially ahead of the prior year in both Europe, up 74%, and the Far East and Latin American regions, up 51% compared to the prior period. In France, our longest established and largest distributor-led market, probe revenues were ahead by 54% compared to the prior period as a result of growing demand for ODM in operating theatres. The regular standing order for probes from our French distributor now stands at 430 per month compared to 385 going into the second half of 2007 and 200 per month at the same stage in 2006.
Gross margins continued to show improvement, increasing from 69.4% in the first half of 2007 to 69.8% in the first half of 2008 as a result of manufacturing economies of scale and efficiency gains more than offsetting a few increases in prices of the components we use. Production and development projects in progress to improve margins are already expected to deliver continued margin improvements throughout 2008, 2009 and beyond. The Company's cost base remains tightly controlled with modest increases focused on areas of known increase in demand for example to support clinically the NHS National Technology Adoption Centre project in the UK, to support a major multi-hospital audit project in Spain and to increase our coverage of our key target regions in the USA.
The operating loss for the period reduced by £55,000 to £1,124,000 compared to £1,179,000 in the first half of 2007 despite significant increases in accounting charges for non-cash clinical trial and share-based payment costs which totalled £285,000 compared to £191,000 in the corresponding period in 2007. Although penetration compared to the proven market potential is still low even in our most established territories, the UK and certain distributor-led countries, the growing maturity of our businesses in these markets mean that our operational gearing to support them is attractive. On average the International and UK businesses combined to generate an additional £80,000 each month in the first half of 2008 compared to the corresponding period in 2007. These increases have been achieved with relatively modest increases in our underlying cost base attributable to these markets, and thus the combined operating profit from the UK and International segments improved by over £60,000 per month compared to the first half of 2007.
Markets
UK
In the UK the use of the CardioQ-ODM to guide fluid delivery in the operating theatre is becoming established as standard practice in major surgery with particularly strong progress in major bowel surgery. Many colorectal surgeons now recognise that the addition of ODM to enhanced recovery or fast-track protocols for patients having major surgery has a greater impact on reducing complications and shortening lengths of hospital stay than any other single element of the protocol. On the back of our successes in colorectal surgery, we are starting to see increasing levels of interest from other surgical disciplines, in particular urology and orthopedics.
There is an increasing body of clinical data emerging suggesting that use of ODM also reduces the likelihood of patients having to be readmitted to hospital for unexpected complications after they have been sent home. Furthermore, as the amount of clinical data on routine use of ODM continues to grow, independent analysis of that data is starting to show that routine use of ODM clearly does save lives.
Through our work with surgeons, anaesthetists, hospital managers and NHS administrators we have managed to put ODM towards the top of the UK innovation agenda.
The Centre for Evidence-based Purchasing (CEP), which is part of the Policy and Innovation Directorate of the NHS Purchasing and Supply Agency, aims to evaluate new technologies and determine their merit based on objective analysis of published clinical data through a process of technology assessment. CEP applies similar technology appraisals to those used by NICE and in March 2007 commissioned a technology assessment of ODM from the Health Economic Research Unit at Aberdeen University that is currently scheduled for publication in December 2008.
CEP published its report and recommendations concerning ODM in April 2008 based on the draft findings of the Aberdeen group. In respect of the use of ODM during surgery, the Company's key target market for the CardioQ-ODM, the CEP report concluded:
"In patients undergoing high-risk surgery, addition of ODM-guided fluid administration to CVP monitoring plus conventional clinical assessment is likely to result in fewer deaths, fewer complications, and a shorter length of hospital stay. The costs of ODM are likely to be offset by reductions in both complications and length of hospital stay".
The economic analysis in the CEP report showed that the NHS should save at least £3.00 for every £1.00 it spends on CardioQ-ODM, based on 'worst case' assumptions. The saving rises to £67.00 for every £1.00 spent on the CardioQ-ODM if the lowest cost per patient is compared to the highest benefit in the report's economic models.
CEP concluded that ODM has "significant potential", the highest level of recommendation it has yet to give any technology and the Company notes that the US government's AHRQ report on ODM, which underpins many of CEP's findings, effectively concluded that no more clinical trials were needed in substantial parts of the Company's target markets.
In parallel with the CEP initiative, the Department of Health and NHS established the NHS National Technology Adoption Centre (NTAC) in 2007. This body aims to examine and recommend ways to overcome the practical issues that slow the implementation of proven new medical technologies at the operational level within the NHS. The mission of the NTAC is:
"…to work directly with the NHS at a clinical, managerial and procurement level to identify and overcome the barriers to adoption for innovative technologies which have already demonstrated clear benefits to patients and will improve system efficiency."
The NTAC project selection panel comprises a variety of NHS bodies including CEP, NICE, UKHTA (the UK Government's health technology assessment agency), the NHS National Innovation Centre and the NHS Institute for Innovation and Improvement. After an initial review of 24 technologies the CardioQ-ODM was one of four chosen in the first wave of NTAC projects, the only selected technology to be used for hospital in-patients.
The NTAC is supporting the project management and reporting of implementation projects at three NHS Trusts and will produce guidance on effective procurement and implementation of the CardioQ-ODM for other NHS Trusts to follow.
In March 2008, the first of these Trusts, the Whittington in London, purchased four additional monitors in order to expand significantly its CardioQ-ODM usage in operating theatres and thus became the first hospital in the UK to own sufficient monitors to be able to make CardioQ-ODM a standard of care for patients undergoing moderate or major surgery and those in critical care. Subsequently two other sites, in Derby and Manchester, have acquired the additional CardioQ-ODM monitors necessary for their pilot implementations. The hospitals are currently in the Deltex Medical led training phase. Unlike at the Whittington, which was already one of the Company's top 50 probe customers, there has been only limited past usage of the CardioQ-ODM in Derby and no established use at all at the Manchester Royal Infirmary where all previous doctors' business cases to adopt CardioQ-ODM had been rejected prior to NTAC involvement.
The Company is working to bring the CEP report to the attention of as many decision makers in the NHS as possible and working closely with doctors and hospital administrators at each of the NTAC sites to ensure that their implementation projects come to a successful conclusion.
USA
Our key strategic objective in the USA is to develop a scalable sales and implementation model that can be tailored to each of the key healthcare provider systems that operate in this market. Such a model is crucial to our achieving our medium and longer-term goals in the USA because the dynamics of the US healthcare market are conducive to prolonged periods of accelerated widescale market penetration. Throughout the first half of 2008 we have been able to test and further refine the model developed successfully during 2007 in two more hospitals in Southern California and, more recently, the two other areas of the country where our efforts are focused. In the second half of the year we are looking to recruit a small number of additional field staff to complete the skill set of our local teams and put in place the US based team leadership and infrastructure that will position us to roll out the model quickly and effectively going forward.
In parallel with the above, the Company is working to streamline and maximise the effectiveness of the support it provides to users of the CardioQ-ODM in initiating the claims process to get paid ('reimbursed') for the use of ODM. This new service went live earlier in September 2008 following the conclusion of a successful pilot phase in August.
Levels of reimbursement being paid regularly by private providers to some of our largest US customers are at satisfactory levels and towards the top of our range of expectations. While public providers, including the Centers for Medicare and Medicaid Services, have been making increasingly frequent payments to doctors using the CardioQ-ODM at reasonable levels, it is still too early for the level of these to be predictable in any given place.
However, reimbursement has become sufficiently routine that one of the larger groups of anaesthetists in the USA has recently guaranteed a minimum payment to all of its members each time they use the CardioQ-ODM for certain common procedures, in the knowledge that it will receive at least this level of funds from both public and private payers when claims are submitted.
International
Deltex Medical's international business falls into two categories - the direct international markets of Spain and Germany and the remaining, distributor-led markets.
In Spain, our primary focus in 2008 is the support of a surgeon-led, multi-centre audit of the impact of ODM in patients undergoing major bowel surgery. We understand that the audit is progressing well and is on target to report in November as planned.
We have recently been granted access to a draft health technology assessment of the use of ODM in bowel surgery being produced by the Spanish equivalent of NICE. The draft conclusions of this document are consistent with CEP's conclusions in the UK earlier in the year and we understand that the final report will give considerable weight to the audit findings.
If the conclusions of the final report are as we expect them to be, then its publication should provide a "green light" to any hospital wishing to implement use of ODM as a standard of care in colorectal surgery in Spain.
We are in the early stages of establishing our direct operation in Germany and continue to work closely with the largest teaching hospital in the country, the Charite hospital in Berlin. The doctors we are working with at the Charite hospital are responsible for setting best-practice guidelines for anaesthesia in Germany and are highly influential across mainland Europe, particularly in the area of enhanced recovery and fast-track surgery programmes.
Our distributor partners, following the lessons we have learned in the UK, are seeing increasing uptake of ODM in operating theatres where we have encouraged a focus on core surgical procedures - bowel, orthopaedic and urological - where surgeon awareness and advocacy is growing most quickly. Feedback from distributor representatives at our 2008 distributor sales meeting was overwhelmingly positive about the growth prospects for the CardioQ-ODM in their respective territories and there was a clear consensus that the surgeon support we are creating is proving key for anaesthetists who are seeking initial funding to establish routine use of the CardioQ-ODM in their practice.
Technology assessment
The weight of evidence supporting the routine use of the CardioQ-ODM is so overwhelming that a US Government-commissioned technology assessment published early in 2007 stated that its use in surgery leads to a "clinically significant reduction in major complications", "a clinically significant reduction in the total number of complications" and "to a reduction in hospital stay". The evidence supporting each of these conclusions was considered to be "strong". Strong in the setting of a formal technology assessment is defined as: "Evidence supporting the qualitative conclusion is convincing. It is highly unlikely that new evidence will lead to a change in this conclusion".
Based on this technology assessment, the US Government agency responsible for healthcare for the elderly and the poor, the Centers for Medicare and Medicaid Services (CMS), determined that use of the CardioQ-ODM was "reasonable and necessary" and that the proven benefits warranted doctors being paid ("reimbursed") for using it in Medicare and Medicaid patients. Already, private insurers are following the CMS lead and are reimbursing doctors that manage their patients using the CardioQ-ODM.
In the UK, two world-renowned London teaching hospitals have made use of the CardioQ-ODM routine practice (that is, a standard of care) within their enhanced surgical recovery programmes for patients having major bowel surgery. Similar care packages are being developed for other major surgical procedures performed at these hospitals. Many other hospitals, district general and large teaching institutions alike, are working towards implementation of surgical care packages that incorporate routine use of the CardioQ-ODM.
Doctors and healthcare administrators around the world are increasingly aware of the potential health and economic benefits of wide-scale adoption of the CardioQ-ODM in their hospitals. Our primary role is to faciliate implementation of the CardioQ-ODM as a standard of care through a programme of structured education, training and post-implementation support that enables doctors to help their patients recover more fully and more quickly from their surgery and hospital managers to provide a better quality of care more efficiently and more cost effectively.
The CardioQ-ODM helps patients by enabling doctors to reduce the complications that arise from a medical condition that is common to almost all patients having surgery and many others in intensive care or arriving in the accident and emergency department. This condition is known as hypovolaemia - a reduction in circulating blood volume - and in surgical patients arises as a direct consequence of the combined effects of pre-operative starvation, the anaesthetic agents used to put the patient to sleep and the blood and fluid losses associated with the surgical procedure itself. Hypovolaemia means that the body struggles to get sufficient blood to the tissues and vital organs which are consequently starved of essential oxygen. This can cause medical complications including peripheral and major organ failure, which if not dealt with quickly can lead to severe compromise or even death.
The body compensates for developing hypovolaemia through the sequential shut down of the circulatory system and diversion of blood to critical organs. This helps to maintain blood pressure at normal levels and preserve oxygen delivery to those organs at the expense of other systems. The CardioQ-ODM uses disposable ultrasound probes placed in the oesophagus to measure real-time blood flow which is an earlier and much more sensitive indicator of changes in circulating blood volume than blood pressure. This allows the doctor to detect and deal rapidly with the early stages of hypovolaemia before it becomes a clinical problem. In contrast, blood pressure-based monitoring systems, however sophisticated, are unable to detect hypvolaemia until it is so severe that the body's compensatory mechanism begins to fail, at which point the patient is in a critical condition.
There are signs of a widening recognition of the unique capabilities of ODM in comparison to other haemodynamic monitoring technologies. ODM is the only technology to measure blood flow directly and continuously. As announced previously, a US health technology assessment commissioned by CMS into pulmonary artery catheters (PAC) concluded that there was no clinical benefit in those patient groups where its use had been tested and that, in addition, some patients suffered adverse events as a result of PAC placement. As an earlier CMS commissioned health technology assessment has already identified strong evidence of improved outcomes using ODM on large numbers of patients, including many of those who receive a PAC, this report may lead to significant opportunities for the CardioQ-ODM to replace PAC in the USA and other markets where PAC usage is highest.
Furthermore, since the end of the six month period ended 30 June 2008, the British Journal of Anaesthesia has published results of the first randomised controlled clinical trial attempting to manage fluids during surgery using a Pulse Pressure Wave Analysis technique (using direct measurement and analysis of pressure to derive flow measurements). The study showed no benefit and the authors noted that all the trials to date showing improved outcome during surgery had used ODM, speculating that the technique used in their trial was "not sensitive enough to guide the administration of fluid."
Operations
Since the successful launch of the CardioQ-ODM in April, the key operational focus in 2008 has been on the manufacturing process for our range of disposable oesophageal probes. This project has two primary goals, firstly, to reduce unit production costs of the probes and secondly to simplify the manufacturing process and make key elements of the process amenable to mass production and automation.
In the first half of the year we standardised componetry between probe types, brought the manufacture of certain probe sub-assemblies in-house and simplified our product labelling.
In the second half of the year we will complete the transition to a new, standardised approach to packaging and complete commissioning of an extension to the existing cleanroom where the probes are built, tested and packaged. This extension is designed to improve workflows and provide significant additional manufacturing capacity.
In parallel with these developments we have strengthened our in-house quality team and will complete a thorough going review and upgrade of our entire quality system before the year-end.
These projects will leave us better able to scale up manufacturing capacity rapidly to meet significant increases in demand as they occur without having to expand beyond our existing manufacturing site in Chichester.
Research and Development
In April 2008 we released the CardioQ-ODM™, our next generation oesophageal Doppler monitor (ODM). The CardioQ-ODM offers a number of significant improvements over predecessor models including enhanced patient management and event recording, upgraded compatibility with hospital networking systems, better and easier patient data management and greater ease of use.
This new monitor has been successfully launched in the UK and our international markets with the exception of the USA, where submission for market clearance will be made to the Food and Drug Administration (FDA) in the second half of the year.
Our Research and Development team has also been working on a radical redesign of the probe and, if the concept can be proven, it should generate opportunities to further strengthen our intellectual position, reduce manufacturing costs and facilitate mass production. It builds on patented aspects of the I2 series of probes we launched last year and would make the probe even easier and quicker to focus than it is today.
Work on the next generation of our wholly non-invasive device, the SupraQ, continues to progress satisfactorily despite delays caused by the changing regulatory environment in the UK related to the clinical trials we wish to undertake ahead of releasing the device on to the market. In the wake of the success of the I2n probe range which was released in 2007, we increasingly see the SupraQ's awake patient applications as complementary to those of the oesophageal probe. We will continue to pursue this project as resources and priorities allow.
Clinical Research
A recent review of the international clinical trials database revealed that there are in the order of twenty full clinical trials in progress using the CardioQ-ODM. Deltex Medical's role in these trials is minimal and generally only related to ensuring that the investigators are well trained in the use of ODM and can get the best from the CardioQ-ODM before they embark on treating study patients. Occasionally we will provide advice on study design or guide potential investigators to an experienced user who can offer such advice impartially. It is our belief that our limited involvement in such trials helps to ensure that the clinical data they generate is both highly robust and genuinely independent.
Most of the trials currently underway recognise oesophageal Doppler monitoring as the proven, "gold standard" for fluid management. That is, they are not seeking to test whether or not the CardioQ-ODM works. Almost all of the trials should to a greater or lesser extent add to the wealth of existing and universally supportive clinical data for ODM and extend the range of clinical applications where ODM-guided stroke volume optimisation should be a standard of care.
The remaining trials are targeted at specific surgical areas, such as orthopaedic and urology surgery, and, assuming they show benefit, are expected to accelerate further adoption of the CardioQ-ODM as a standard of care in these specific categories of major surgery. Importantly, preliminary results from the urology study together with other emerging clinical data from this specialty are highly encouraging.
Outlook
Deltex Medical is better placed than at any time in the Company's history to change the way that patients requiring fluid management are cared for:
In the UK the Company's technology is at the top of the innovation agenda and a key part of the Department of Health and NHS drive to accelerate and improve access to new medical technologies
In the USA, recognising the value of the technology to patients and the health system alike, ODM has been granted an exceptionally broad national coverage determination by the publicly funded provider of healthcare, making it the first procedure to provide separate professional reimbursement for the anaesthetist in a generation of practitioners
In Europe and the rest of the world ODM is increasingly recognised as one of the most effective single steps that doctors can take to improve outcomes for patients and reduce the cost of healthcare delivery
The continued focus on helping healthcare professionals improve patient outcomes and the quality and efficiency of care delivery through innovative technological solutions should enable Deltex Medical to deliver consistent sales growth and sustainable long-term value to its shareholders.
The momentum in all our target markets behind the growth in sales in the first half of the year has continued into the second half. The new CardioQ-ODM monitor is now at the top of the NHS innovation agenda and a key product in the drive for the adoption of new medical technologies by the Department of Health. Meanwhile we continue to drive growth in our probe sales in the UK and North America. We remain confident of the outlook for the current year and view the future with confidence.
Nigel Keen
Chairman
16 September 2008
Consolidated Income Statement
for the six month period ended 30 June 2008
| Unaudited | Unaudited | Audited | ||
| Half year to | Half year to | Full year to | ||
| 30 June | 30 June | 31 December | ||
| 2008 | 2007 | 2007 | ||
| £'000 | £'000 | £'000 | ||
| Revenue | 2,458 | 1,914 | 4,168 | |
| Cost of sales | (742) | (585) | (1,250) | |
| ———— | ———— | ———— | ||
| Gross profit | 1,716 | 1,329 | 2,918 | |
| Administrative expenses | (1,349) | (1,113) | (2,334) | |
| Sales and distribution costs | (1,320) | (1,277) | (2,525) | |
| Research and development costs | (171) | (118) | (282) | |
| ———— | ———— | ———— | ||
| Net operating expenses | (2,840) | (2,508) | (5,141) | |
| ———— | ————- | ———— | ||
| Operating loss | (1,124) | (1,179) | (2,223) | |
| Financial income | 6 | 4 | 33 | |
| Financial expenditure | (12) | (10) | (21) | |
| ———— | ———— | ———— | ||
| Loss before taxation | (1,130) | (1,185) | (2,211) | |
| Tax on loss | 10 | 11 | 23 | |
| ———— | ————- | ———— | ||
| Loss for the financial period | (1,120) | (1,174) | (2,188) | |
| ========= | ========= | ========= | ||
| Loss per share - basic and diluted | (1.2p) | (1.4p) | (2.5p) | |
| ========= | ========= | ========= |
The above results all relate to continuing operations. The loss on ordinary activities before taxation and the loss for the period has been computed on the historical cost basis.
Consolidated statement of recognised income and expense
for the six month period ended 30 June 2008
| Unaudited | Unaudited | Audited | |
| Half year to | Half year to | Full year to | |
| 30 June | 30 June | 31 December | |
| 2008 | 2007 | 2007 | |
| £'000 | £'000 | £'000 | |
| Exchange differences taken to reserves | 12 | (11) | 8 |
| Loss for the period | (1,120) | (1,174) | (2,188) |
| ———— | ———— | ———— | |
| Total recognised expense for the year | (1,108) | (1,185) | (2,180) |
| ========= | ========= | ========= |
Consolidated Balance Sheet
at 30 June 2008
| Unaudited | Unaudited | Audited | ||
| 30 June | 30 June | 31 December | ||
| 2008 | 2007 | 2007 | ||
| £'000 | £'000 | £'000 | ||
| Assets | ||||
| Non - current assets | ||||
| Property, plant and equipment | 42 | 28 | 37 | |
| Trade and other receivables | 6 | 34 | 20 | |
| Intangible assets | 205 | 155 | 190 | |
| ———— | ———— | ———— | ||
| Total non-current assets | 253 | 217 | 247 | |
| Current assets | ||||
| Inventories | 528 | 448 | 441 | |
| Trade and other receivables | 1,738 | 1,366 | 1,570 | |
| Current income tax recoverable | 33 | 34 | 47 | |
| Cash and cash equivalents | 1,114 | 1,782 | 763 | |
| ———— | ———— | ———— | ||
| Total current assets | 3,413 | 3,630 | 2,821 | |
| ———— | ———— | ———— | ||
| Total assets | 3,666 | 3,847 | 3,068 | |
|
|
|
| ||
| Liabilities | ||||
| Current liabilities | ||||
| Borrowings | (206) | (280) | (407) | |
| Trade and other payables | (1,104) | (1,242) | (1,204) | |
| Provisions for other liabilities and charges | (161) | (180) | (77) | |
| ———— | ———— | ———— | ||
| Total liabilities | (1,471) | (1,702) | (1,688) | |
| ———— | ———— | ———— | ||
| Net assets | 2,195 | 2,145 | 1,380 | |
| ———— | ———— | ———— | ||
| Equity | ||||
| Share capital | 1,004 | 925 | 925 | |
| Share premium | 18,110 | 16,423 | 16,423 | |
| Capital redemption reserve | 17,476 | 17,476 | 17,476 | |
| Other reserves | 1,499 | 1,112 | 1,342 | |
| Translation reserve | 11 | (20) | (1) | |
| Retained earnings | (35,905) | (33,771) | (34,785) | |
| ———— | ———— | ———— | ||
| Total equity | 2,195 | 2,145 | 1,380 | |
| ———— | ———— | ———— |
————————
Consolidated Statement of Cash Flows
for the six month period ended 30 June 2008
| Unaudited | Unaudited | Audited | ||
| Half year to | Half year to | Full year to | ||
| 30 June 2008 | 30 June 2007 | 31 December 2007 | ||
| £'000 | £'000 | £'000 | ||
| ———— | ———— | ———— | ||
| Cash flows from operating activities | ||||
| Operating loss | (1,124) | (1,179) | (2,223) | |
| Depreciation of property, plant & equipment | 9 | 23 | 38 | |
| Amortisation of intangibles | 16 | 1 | 2 | |
| Loss on disposal of fixed asset | - | - | (1) | |
| ———— | ———— | ————- | ||
| Earnings before interest, tax, depreciation and amortisation | (1,099) | (1,155) | (2,184) | |
| Cost of equity settled share schemes | 157 | 98 | 328 | |
| ———— | ————- | ———— | ||
| Operating cash flows before movements in working capital | (942) | (1,057) | (1,856) | |
| Decrease in inventories | 12 | 17 | 41 | |
| Increase in debtors | (159) | (107) | (293) | |
| (Decrease)/increase in creditors | (119) | 78 | (50) | |
| Increase in provisions | 11 | 44 | 27 | |
| ———— | ———— | ———— | ||
| Cash used in operations | (1,197) | (1,025) | (2,131) | |
| Interest paid | (12) | (10) | (21) | |
| Income taxes received | 24 | 22 | 23 | |
| ———— | ———— | ————- | ||
| Net cash used in operating activities | (1,185) | (1,013) | (2,129) | |
| ———— | ———— | ————- | ||
| Cash flows from investing activities | ||||
| Purchase of property, plant & equipment | (14) | (4) | (29) | |
| Capitalised development expenditure | (31) | (65) | (101) | |
| Interest received | 11 | 4 | 28 | |
| ———— | ————- | ———— | ||
| Net cash used in investing activities | (34) | (65) | (102) | |
| ———— | ————- | ———— | ||
| Cash flows from financing activities | ||||
| Issue of ordinary share capital | 1,773 | 2,613 | 2,613 | |
| Expenses in connection with share issue | (7) | (151) | (151) | |
| Proceeds from increase/(decrease) in borrowings | (201) | (17) | 110 | |
| Repayment of obligations under finance leases | - | (1) | - | |
| ———— | ———— | ———— | ||
| Net cash generated from financing activities | 1,565 | 2,444 | 2,572 | |
| ———— | ———— | ————- | ||
| Net increase in cash and cash equivalents | 346 | 1,366 | 341 | |
| Cash and cash equivalents at beginning of the period | 763 | 418 | 418 | |
| Effect of exchange rate fluctuations on cash held | 5 | (2) | 4 | |
| ———— | ———— | ———— | ||
| Cash and cash equivalents at end of the period | 1,114 | 1,782 | 763 | |
| ========= | ========= | ========= |
Notes to the Interim Statement
for the six month period ended 30 June 2008
1. Basis of preparation
Deltex Medical Group plc (the Company) is a company incorporated in England and Wales. The condensed Group half year financial statements consolidate those of the Company and its subsidiaries (together referred to as the Group). They have been prepared in accordance with International Financial Reporting Standard (IFRS) IAS 34 Interim Financial Reporting. They do not include all of the information required for full annual financial statements, and should be read in conjunction with the consolidated financial statements of the Group for the year ended 31 December 2007.
The half year results are unaudited. The summary of results for the year ended 31 December 2007 is an extract from the published consolidated financial statements of the Group for that period which have been reported on by the Group's auditors and delivered to the Registrar of Companies. The audit report (i) was unqualified, (ii) did not include a reference to any matters to which the auditors drew attention by way of emphasis without qualifying their report, and (iii) did not contain a statement under section 237(2) or (3) of the Companies Act 1985.
The half year financial information has been prepared applying the accounting policies and presentation that were applied in the preparation of the Group's published consolidated financial statements for the year ended 31 December 2007. At 31 December 2007, additional costs which were not allocated in the 30 June 2007 interim statement, were allocated to each of the Company's business segments in order to provide an enhanced understanding of the performance of each business segment. The segment results for the six month period ended 30 June 2007 have been restated in order to remain consistent with the audited results for the year ended 31 December 2007.
2. Results by geography
Segment information is presented in the consolidated interim financial statements in respect of the Group's geographical segments, which are the primary basis of segment reporting. The geographical segment reporting reflects the Group's management structure.
Segment results include items directly attributable to a segment as well as those, which can be allocated on a reasonable basis.
The segment results for the six months ended 30 June 2008 are as follows:
| UK £'000 | USA £'000 | International £'000 | Unallocated £'000 | Total £'000 | ||
| Total segment revenue Inter segment revenue | 1,606 (115) | 272 - | 695 - | - - | 2,573 (115) | |
| Group revenue | 1,491 | 272 | 695 | - | 2,458 | |
| Segment/operating result | 310 | (160) | 38 | (1,312) | (1,124) | |
| Finance income | 6 | |||||
| Finance costs | (12) | |||||
| Loss before taxation | (1,130) | |||||
| Tax on loss | 10 | |||||
| Loss for the financial year | (1,120) |
The segment results for the six months ended 30 June 2007 are as follows:
| UK £'000 | USA £'000 | International £'000 | Unallocated £'000 | Total £'000 | ||
| Total segment revenue Inter segment revenue | 1,345 (130) | 279 - | 420 - | - - | 2,044 (130) | |
| Group revenue | 1,215 | 279 | 420 | - | 1,914 | |
| Segment/operating result as originally stated | 195 | (11) | (93) | (1,270) | (1,179) | |
| Additional allocated costs | (85) | (29) | (50) | 164 | - | |
| Segment operating result | 110 | (40) | (143) | (1,106) | (1,179) | |
| Finance income | 4 | |||||
| Finance costs | (10) | |||||
| Loss before taxation | (1,185) | |||||
| Tax on loss | 11 | |||||
| Loss for the financial year | (1,174) |
Additional costs have been allocated to the individual business segments in order to be consistent with the preparation of the segmental results in the 31 December 2007 audited financial statements.
The segment results for the year ended 31 December 2007 are as follows:
| UK £'000 | USA £'000 | International £'000 | Unallocated £'000 | Total £'000 | ||
| Total segment revenue Inter segment revenue | 2,892 (258) | 587 - | 947 - | - - | 4,426 (258) | |
| Group revenue | 2,634 | 587 | 947 | - | 4,168 | |
| Segment/operating result | 379 | (52) | (210) | (2,340) | (2,223) | |
| Finance income | 33 | |||||
| Finance costs | (21) | |||||
| Loss before taxation | (2,211) | |||||
| Tax on loss | 23 | |||||
| Loss for the financial year | (2,188) |
Unallocated costs include those costs that cannot be split between segments, including expenditure on research and development and clinical trials.
Inter-segment transfers or transactions are entered into under the normal commercial terms and conditions that would also be available to unrelated third parties.
3. Loss per share
The loss per share calculation for the six months to 30 June 2008 is based on the loss for the period of £1,120,000 and weighted number of shares in issue of 92,880,034. The loss per share calculation for the six month period ended 30 June 2007 is based on the loss for the period of £1,174,000 and weighted average number of shares in issue of 82,918,000.
The Group had no dilutive potential ordinary shares in either period, which would serve to increase the loss per ordinary share. Therefore, there is no difference between the loss per ordinary share and the diluted loss per ordinary share.
4. Statement of changes in shareholders' equity
| Group | Share capital | Share premium | Capital redemption | Other Reserve | Translation reserve | Profit and loss account |
| £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | |
| At 1 July 2007 | 925 | 16,423 | 17,476 | 1,112 | (20) | (33,771) |
| Shares issued during the year | - | - | - | - | - | - |
| Premium on shares issued during the year | - | - | - | - | - | - |
| Issue expenses | - | - | - | - | - | |
| Loss for the financial year | - | - | - | - | (1,014) | |
| Credit in respect of service cost settled by award of options | - | - | - | 230 | - | - |
| Exchange movements taken to reserves | - | - | - | - | 19 | - |
| ———— | ———— | ———— | ——— | ———— | ——— | |
| At 31 December 2007 | 925 | 16,423 | 17,476 | 1,342 | (1) | (34,785) |
| Share issued during the year | 79 | - | - | - | - | - |
| Premium on shares issued during the year | - | 1,694 | - | - | - | - |
| Issue expenses | - | (7) | - | - | - | - |
| Loss for the financial year | - | - | - | - | - | (1,120) |
| Credit in respect of service cost settled by award of options | - | - | - | 157 | - | - |
| Exchange movements taken to reserves | - | - | - | - | 12 | - |
| ———— | ———— | ———— | ——— | ———— | ——— | |
| At 30 June 2008 | 1,004 | 18,110 | 17,476 | 1,499 | 11 | (35,905) |
| ========= | ========= | ========= | ========= | ========= | ========= |
5. Called-up share capital
| 1 pence ordinary shares | |
| £'000 | |
| 100,359,629 1p ordinary shares (31 December 2007: 92,487,907) | 1,004 |
| ======= |
During the period, the Company issued 83,305 1p ordinary shares pursuant to the exercise of options. The Company also placed 6,836,392 1p ordinary shares with institutional and other investors. In addition a total of 952,025 1p ordinary shares were issued to certain of the Company's Directors and advisors who elected to take shares in lieu of cash payment for their services.
6. Distribution of announcement
Copies of this announcement are being sent to all shareholders and will be available for collection free of charge from the Company's registered office at Terminus Road, Chichester, West Sussex, PO19 8TX or for download from the Company's website; www.deltexmedical.com.