Deltex Medical Regulatory News (DEMG)

Deltex Medical Group plc

("Deltex Medical" or "the Company")

Pre-close update on the six months ended 30 June 2013

Strong growth in surgical probe sales

9 July 2013 - Deltex Medical Group plc (AIM: DEMG), the global leader in oesophageal Doppler monitoring ("ODM"), which measures blood flow in real time enabling fluid level optimisation to enhance recovery after surgery and in intensive care, today announces an update on trading in the six months ended 30 June 2013.

Highlights

·; Group sales at £2.9 million against £3.2 million last time reflecting increases in high margin probe sales offset by a decrease in low margin monitor sales

·; Strong growth in surgical probe revenues

o UK up 14% on prior year: over 30% growth in second quarter since start of NHS implementation drive

o US up 17% on prior year: pipeline expanded, Premier collaboration started

o International marginally ahead: France up over 20%

·; Rate of decline in UK ICU probe sales reduced

·; Monitor sales reduced by £0.5 million as a result of timing differences of research barter sales

·; UK surgical installed monitor base increased to 681, up 66. Strong start for CardioQ-ODM+

UK

Our UK surgical probe business grew 14% across the first half. Sales in the first quarter of the current year were flat year on year as the growth in Q1 2012 had increased by over 60% compared with the prior year. However growth in the second quarter (the first since the start of the NHS implementation drive) was in excess of 30% when compared with the previous year.

Levels of activity arising from the need for hospitals to comply with the NHS implementation drive launched in April vary significantly between NHS Trusts. As a result we are focusing our efforts on those accounts most advanced in their plans to adopt ODM widely. We have added two major UK NHS Trusts into our dedicated trainer programme during the period and both have subsequently more than doubled their probe utilisation and we have a number of proposals under discussion to extend this programme to other hospitals in the second half.

UK ICU probe sales stabilised, with a reduced rate of decline of 4%.

USA

US probe revenues grew 17%, mostly in existing accounts, with the strongest growth coming from accounts with dedicated training in place. During the period we deployed a third dedicated trainer to further drive this growth. We have also deployed clinical trainers to support comprehensive clinical and economic evaluations in a small number of strategically important hospitals. We are awaiting decisions regarding implementation which would have a positive impact on the latter part of 2013 and 2014.

The first phase of our collaboration with Premier Inc, is substantially complete. This is a retrospective database analysis looking at variability in outcome in certain types of major surgery. We are working with Premier to select hospitals for the implementation phase of the project. The first patients are likely to be treated in the first quarter of 2014 after ethics approvals for the project have been completed.

International

Almost all of our International business is conducted through distributors and on annual programmes. Our distributors in most of our larger markets are reporting increased end-user sales of probes. We are focusing the majority of our efforts on these larger markets. We have increased substantially our support for our distributor in France to coincide with new clinical guidelines, which are strongly supportive of ODM. France is our largest export market and probe sales, which are made against monthly orders, grew by over 20%.

Monitors

In the period, we expanded the UK surgical installed base of monitors by 66 monitors to 681. This included sales of monitors for a cash consideration and placements of monitors without charge.

Recorded monitor sales in the period were, as expected, circa £0.5m lower than in the first half of 2012, primarily because in the first half of 2012 £0.4m initial sales of the CardioQ-ODM+ were made in Europe under (non-cash) research barter arrangements .

In the USA the launch of the CardioQ-ODM+ is subject to US FDA approval, which is anticipated in the next few months.

Capital budgets remain severely restricted in almost all health economies and, as the business moves towards regular cash generation from probe revenues alone, we are looking at strategies aimed at expanding the installed base in both direct sales and distributed markets.

Nigel Keen, Deltex Medical's Chairman, commented:

"We entered 2013 with traction established in many of our major target markets and have maintained this momentum in the year to date. Major developments in the first half include: the start of the UK's implementation drive for intra-operative fluid management; the granting of an ODM specific physician payment code and the start of the Premier collaboration in the USA; and the publication of clinical guidelines for fluid management in France. As the benefits of each of these programmes start to come through in the second half of the year, we expect to deliver accelerated growth over and above current levels."

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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.