Deltex Medical Regulatory News (DEMG)

Deltex Medical Group plc

("Deltex Medical" or "the Company")

Deltex Medical Canada established as joint venture with distributor

12 December 2013 - Deltex Medical Group plc, the global leader in oesophageal Doppler monitoring ("ODM"), today announces that it has established Deltex Medical Canada as a joint venture with its current distributor, Provincial Medical Supplies ('PMS'). This is the first joint venture that Deltex Medical has established with one of its international distributors. It is designed to facilitate faster growth; pooling the margin on sales previously split between Deltex Medical and PMS will bring forward the time at which it will be economic to establish the clinical support programmes that drive deep, broad and sustainable adoption of CardioQ-ODM.

Deltex Medical owns 51% of the capital of Deltex Medical Canada and has the right to appoint three of its five directors. Prior to setting up the joint venture Deltex Medical acquired from PMS the business including customer list, CardioQ-ODM installed base and inventory for £185,000. The Company intends to use these assets to support the future growth of the joint venture. Sales, marketing and logistics costs will initially continue to be borne by Deltex Medical and PMS, being recouped from Deltex Medical Canada as cash is received from sales.

The Company has the right to acquire the remaining 49% of Deltex Medical Canada for a price based on one year's sales revenue of the joint venture (preceding twelve months basis, subsequently adjusted for any sales in excess of 25% growth in the following twelve months). Deltex Medical has granted the principals of PMS options over 500,000 ordinary shares in Deltex Medical and any gain on these options will be offset against future payments to acquire the remaining 49% of Deltex Medical Canada.

Ewan Phillips, Chief Executive of Deltex Medical, commented:

"PMS and Deltex Medical have created a number of opportunities for regional health systems in Canada to adopt CardioQ-ODM, with the most advanced of these already subject to public procurement processes. The joint venture is expected to generate higher third party sales in 2014 and beyond than would have been achieved under the previous arrangements and a more immediate return on Deltex Medical investments in building our Canadian business."

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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 2,800 CardioQ-ODM systems in use in hospitals worldwide. Distribution arrangements are in place in over 30 countries.