Sphere Medical Holding Regulatory News (SPHR)

Dr Wolfgang Rencken, Chief Executive Officer and Matthew Hall, Chief Financial Officer will host a presentation for analysts at 10.30am today at Consilium Strategic Communications' offices, 41 Lothbury, London, EC2R 7HG. There will be a conference call for remote users with a replay available afterwards. To request details for this call please contact spheremedical@consilium-comms.com or call +44 (0)20 3709 5700.

15 September 2014

Sphere Medical Holding plc

Interim Results for the Six Months ended 30 June 2014

Cambridge, UK, 15 September 2014: Sphere Medical Holding plc (AIM: SPHR.L) ("Sphere" or "Sphere Medical" or the "Company"), a leading provider of innovative monitoring and diagnostic devices for the critical care setting, today announces its unaudited interim results for the six months ended 30 June 2014.

Highlights

· Proxima 3 system granted CE marking under the EU Medical Devices Directive

· Dr Wolfgang Rencken appointed as Chief Executive Officer - proven track record in developing and commercialising medical devices and driving significant product revenue growth

· Progress on the development of Proxima 4 under the Collaboration Agreement with Ortho-Clinical Diagnostics continues to plan

· Loss before taxation £3.0 million (2013: £2.9 million)

· Cash and cash equivalents of £6.3 million (2013: £2.6 million) at 30 June 2014 and a further £523,000 of Research and Development tax credit received after period end

Post-period end highlights

· Launch of Proxima 3 to take place at the Association of Anaesthetists of Great Britain & Ireland Annual Congress on 17/18 September 2014

· Hospital evaluation leads received during presentation of Proxima 3 at the British Association of Critical Care Nurses conference in Cardiff earlier this month

· Appointed an experienced VP Sales direct from Abbott Point of Care to lead the commercialisation of Proxima in the UK and Europe

· The Proxima 3 Post Market Clinical Follow-up Study at the Queen Elizabeth Hospital, Birmingham continues to plan

· Appointed Professor Jean-Louis Vincent to the Medical Advisory Board, a world authority on intensive care medicines

Commenting on these interim results, Dr Wolfgang Rencken, Chief Executive Officer of Sphere Medical, said:

"Since my appointment as CEO in February 2014 the Company has taken great strides towards becoming a commercially successful medical device group. Obtaining the CE marking for the Proxima system represented a significant milestone for the Company. It also paved the way for the commencement of the Proxima 3 Post Market Clinical Follow-up Study at the Queen Elizabeth Hospital, Birmingham. Throughout the period we have also progressed to plan the development of the next generation of Proxima alongside Ortho Clinical Diagnostics."

"Lastly, and importantly, we began to put in place the infrastructure for the commercial launch of Proxima which is due to take place later this month. Encouragingly, we have already received initial hospital evaluation leads from Proxima 3's first industry presentation at a recent intensive care conference. This is an exciting time for the Company and I look forward to the future with ever-growing confidence."

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Notes for Editors

Sphere Medical (AIM: SPHR.L), is a medical device company developing a range of innovative monitoring and diagnostic devices designed to significantly improve patient care.

Sphere Medical's vision is to become a leading solution provider to the critical care market offering innovative, near real time, point of care diagnostic and monitoring products to enable closer control of therapeutic response and improve patient outcomes and reduce the overall cost of care.

Sphere Medical's strategy is focused on developing the Proxima platform for measuring blood gases, electrolytes and metabolites and partnering on the development of the Pelorus platform for measuring drug levels in blood.

The Company plans to sell its products directly to the critical care market, which includes the ICU and OR, with dedicated field sales forces in the UK, Germany and Benelux, and work with partners for worldwide distribution.

Sphere Medical's products deliver near real time analysis of blood gases, electrolytes and drug levels with laboratory accuracy, at the patient's bedside. Sphere Medical's products can be used in a wide range of medical applications, enabling faster clinical decision making and improved patient outcomes, whilst reducing costs for healthcare payers.

Sphere Medical entered into a collaboration agreement with Ortho-Clinical Diagnostics, Inc. in 2013 for the development of Proxima and enhancement of Sphere's operational and production capabilities.

Sphere Medical has a number of partnerships with industry leading medical device companies and has received a strategic investment from Ortho Clinical Diagnostics (now part of Carlyle Group). Other significant investors include Life Sciences Partners (LSP Life Sciences Fund).

For further information, please visit www.spheremedical.com

CHIEF EXECUTIVE'S REPORT

INTRODUCTION

The period since I joined as Chief Executive Officer in February 2014 has seen a significant transformation and acceleration of pace in the Company. We have focussed our efforts on preparing the Company for the commercialisation of Proxima, including hiring an experienced VP Sales, gathering evidence of market validation and progressing the development of the next generation of Proxima. I am delighted with the progress we are making and believe we are well on the way towards becoming a commercially successful company.

READINESS FOR COMMERCIALISATION

Our initial focus was on obtaining the required CE marks for the Proxima 3 system and understanding the target clinical markets which we plan to address. We then defined the sales process and the geographic markets of maximum sales potential. We have been successful in hiring a VP Sales with a successful track record and direct relevant commercial experience in intensive hospital care point of care products. This work has enabled us to set the date for the commercial launch of Proxima 3 in the UK.

CE Mark Approval

Proxima is a disposable patient dedicated arterial blood gas analyser which supports rapid and frequent measurements at critical times and delivers blood gas analysis results at the patient's bedside. In June 2014 the Company received each of the four individual CE marks which comprise the Proxima system, namely: Sensor - Class IIa medical device; Vials - Class I sterile medical device; Flush - Class III infused medical device; and Monitor - Class IIa medical device.

Target Markets

Proxima will be marketed to clinical segments where patient management requires frequent measurements. These areas include:

• Severe sepsis and septic shock

• Acute respiratory distress syndrome (ARDS)

• Major trauma

• Neuro trauma

Sales Process

Proxima will be sold in the UK directly by the Company's own field sales team. Due to our clear focus on the primary therapeutic areas where Proxima can make most impact, we have been able to identify the 83 hospitals across the UK which will offer greatest potential usage of Proxima and consequently where we will concentrate our sales efforts.

During 2015 we plan to expand our direct commercial sales operations into the European market by launching Proxima in Germany and Benelux.

Each prospective customer will be offered a short evaluation of Proxima, lasting a few weeks. Thereafter a razor/razor blade sales model will be adopted, where the monitor can either be purchased separately from the disposables or the monitor can be financed via a premium pricing on the disposables.

Appointment of VP Sales

In late August 2014 we appointed a VP Sales who will spearhead Proxima's commercial activities. Our new VP Sales has joined direct from Abbott and was responsible for sales and marketing across EMEA of Abbott's Point of Care product portfolio, including the i-STAT system, a point of care blood gas analyser.

Commercial Launch

Proxima 3 is to be launched at the Association of Anaesthetists of Great Britain & Ireland Annual Congress (AAGBI) on 17/18 September 2014. Following the launch and in parallel to selling Proxima, we will be engaging with key opinion leaders and clinicians to conduct case studies and publish results in our target market segments.

MARKET VALIDATION

While preparing the Company for commercial launch, emphasis was also placed on obtaining early market validation of Proxima and its potential within a US$900 million worldwide point of care blood gas and electrolyte testing market.

Proxima 3 Post Market Clinical Follow-up Study

The Proxima 3 Post Market Clinical Follow-up Study has commenced at the Queen Elizabeth Hospital, Birmingham. Subject to the continuation of current patient recruitment rates, we expect the preliminary results to be available, as planned, in October 2014. It is an open and non-randomised study that will be used to assess the performance of the Proxima system on a wide range of patients treated in the Intensive Care Unit, High Dependency Unit or Operating Room with a variety of conditions. The primary endpoint of the study is to compare blood gas readings from Proxima with those obtained from a standard commercially available blood gas analyser in a clinical environment.

Each patient fitted with the Proxima system will be assessed up to three days (72 hours). A minimum of 20 and maximum of 40 patients and a minimum 100 valid method comparison measurements will be required for this study.

Medical Advisory Board

A significant endorsement of Proxima's potential was obtained when Professor Jean-Louis Vincent was appointed to the Medical Advisory Board (MAB) in August 2014. Professor Vincent is Professor of Intensive Care at the Université Libre de Bruxelles and the Head of the Department of Intensive Care, Erasme University Hospital (University of Brussels). Professor Vincent is a world authority on intensive care medicines, is President of the World Federation of Societies of Intensive and Critical Care Medicine and a member of the editorial board of approximately 30 international journals on intensive and critical care.

Initial Market Interest

Earlier this month, the Company attended the British Association of Critical Care Nurses conference in Cardiff at which it exhibited Proxima 3. The response to Proxima was very encouraging and has led to several requests for a more detailed evaluation follow up, once Proxima has been officially released for sale.

FUTURE PRODUCT DEVELOPMENT

As part of the Collaboration Agreement with Ortho-Clinical Diagnostics (OCD), work has been progressing to plan on the development of Proxima 4. Furthermore, studies with Pelorus were supported to assess its commercial potential. Our intellectual property portfolio is being continuously updated to include the latest product developments and so strengthen the Company's competitive position.

Proxima 4

Proxima 4 will incorporate enhancements which will expand the analytes on the sensor panel and facilitate integration with Hospital Information System, Laboratory Information System and Patient Data Services connectivity. These enhancements, which are proceeding to plan, are expected to lead to stronger sales penetration as well as significantly expand the geographical reach of Proxima.

Proxima 4 is being developed alongside OCD under the Collaboration Agreement which was signed in June 2013. This agreement covers all aspects of Proxima 4, including market assessment, product development and the enhancement of Sphere's operational and production capabilities.

The successful completion of the Proxima 4 development programme will allow OCD the opportunity to exercise its option under the Collaboration Agreement to negotiate a proposed global commercialisation deal for Proxima 4 which we would expect to take place in H2 2015.

Pelorus and Cardiopulmonary Bypass Monitor

We continue to support clinical studies aimed at evaluating the use of Pelorus 1500 propofol analyser to monitor intravenous propofol levels, including the study at Great Ormond Street Hospital for Children and the University Medical Centre Groningen in the Netherlands. These clinical studies are expected to result in the development of the next generation of infusion protocols and control systems which would be a significant opportunity to improve patient care and consequently represents a large commercial opportunity for Sphere Medical.

Sphere Medical is also developing an in-line continuous blood monitoring system for cardiopulmonary bypass procedures with our partner, Sorin Group Italia S.r.l., a global medical devices company and a leader in the treatment of cardiovascular diseases. The development of the sensor is taking place concurrently with the Proxima 4 sensor development.

Intellectual Property

Our intellectual property portfolio is a key asset and we continue to invest in the maintenance and development of our IP estate. We currently have 28 patents covering chip design, manufacture of miniaturised sensor arrays, sensor design, monitoring and analytical systems and calibration.

FINANCIAL REVIEW

In the six months ended 30 June 2014 revenue was £8,000 (H1 2013: £31,000).

Operating expenses were £3.1 million (H1 2013: £3.0 million). Included in operating expenses are product development and product realisation costs of £1.5 million (H1 2013: £2.0 million) associated with the development of the Proxima disposable patient-attached arterial blood gas analyser. Administrative expenses were £1.1 million (H1 2013: £0.8 million) and include the one-off costs associated with the change of CEO.

Finance income (net) was £nil (H1 2013: £0.1 million) representing interest earned on term deposits.

During the period no research and development tax credit refund was received (H1 2012: £nil) although a refund of £523,000 was received after 30 June 2014.

The loss for the period was £3.0 million (H1 2013: £2.9 million). The basic and fully diluted loss per share for the period was 5.0 pence (H1 2013: 7.8p).

As at 30 June 2014 cash and cash equivalents was £6.3 million (30 June 2013: £2.6 million).

THE SPHERE MEDICAL TEAM

Sphere Medical continues to benefit from the hard work and expertise of its employees who, with the Board, are fully committed to transforming Sphere Medical into a successful commercial medical device company.

We would like to take this opportunity to thank all our employees and management for their continued commitment and shareholders for their on-going support of Sphere Medical.

SUMMARY AND OUTLOOK

With a new and commercially focused management team in place and strong key opinion leader support, we remain committed to delivering on our strategy of commercialising Proxima and continuing the further development of the Proxima system. To that end, Proxima 3 will be launched in the UK later this month and we have hired an experienced VP Sales directly from Abbott Point of Care to lead our sales activities. We are encouraged by the initial response to Proxima 3 at the recent British Association of Critical Care Nurses conference where several requests for hospital evaluations were received. During 2015 we intend to expand our commercial sales operations into Europe by launching Proxima 3 in Germany and Benelux.

In parallel with our commercial activities, we continue the development of Proxima 4 which we expect to complete within the timeframe of the Collaboration Agreement. Proxima 4 is expected to form the basis for the negotiation of a worldwide commercial distribution agreement. We believe our commercial and product development activities currently underway point to a strong commercial future for the Proxima platform and Sphere Medical as a whole.

Consolidated Statement of Comprehensive Income

For the 6 months ended 30 June 2014

All amounts derive from continuing operations.

The accompanying notes form an integral part of this Consolidated Statement of Comprehensive Income. Total comprehensive income equates to the loss for the period reported above.

Consolidated Statement of Financial Position

At 30 June 2014

The accompanying notes form an integral part of this Consolidated Statement of Financial Position.

Consolidated Statement of Cash Flow

For the 6 months to 30 June 2014

The accompanying notes form an integral part of this Consolidated Statement of Cash Flow.

Consolidated Statement of Changes in Equity

For the 6 months to 30 June 2014

The accompanying notes form an integral part of this Consolidated Statement of Changes in Equity.

Notes to the interim financial statements

1. Nature of financial information

These half year financial statements, which were approved by the Board on 11 September 2014, are unaudited and do not constitute statutory accounts as defined in section 434 of the Companies Act 2006.

The financial statements have been prepared under the historical cost convention and in accordance with the recognition and measurement principles of International Financial Reporting Standards ("IFRS") as adopted by the European Union. These interim financial statements do not contain all 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 2013.

Statutory accounts for the Group and the Company for the year ended 31 December 2013, which contain an unqualified audit report from Grant Thornton UK LLP, have been delivered to the Registrar of Companies and did not contain statements under section 498(2) or section 498(3) of the Companies Act 2006. The comparative financial information for that period has been extracted from such accounts.

The comparative information for the six months ended 30 June 2013 has been extracted from the unaudited management accounts and is correspondingly shown as unaudited.

2. Significant accounting estimates and judgements

Share options and warrants

Share options are granted over a discretionary period and vest in tranches over a three-year period. The fair value of options is determined using the Black-Scholes valuation model, which requires a number of estimates and assumptions. The significant inputs into the model are the share price at the date of grant, the exercise price, the expected option life, the expected volatility and the risk-free interest rate.

Deferred tax asset

The Board uses its judgement in the assessment of the extent, if any, to which to recognise the deferred tax asset, based on the forecast trading performance and the expected use of trading losses.

Research and development expenditure

The Board uses its judgement in the assessment of the extent, if any, to which expenditure is identified as development expenditure rather than research expenditure. Development expenditure has not been capitalised as regulatory and other uncertainties relating to the current stage of the Group's development projects mean that all the criteria for capitalisation of development expenditure as required by International Financial Reporting Standards have not been met.

3. Principal accounting policies

The accounting policies for the six months ended 30 June 2014 are unchanged from those set out in the financial statements for the year ended 31 December 2013.

The financial statements consolidate the financial statements of Sphere Medical Holding plc and its subsidiary undertaking Sphere Medical Limited.

4. Loss per share

Fully diluted loss per share is calculated after showing the effect of outstanding options in issue. As the effect of the options would be to reduce the loss per share, the diluted loss per share is the same as the undiluted loss per share.

Calculation of loss per share is based on the following loss and numbers of shares:

5. Share capital

Share issue

196,630 ordinary shares of £0.01 each were issued and allotted in the period pursuant to the exercise of share options under the Enterprise Management Incentives Scheme by a former employee.

6. Reconciliation of operating loss to operating cash flows

Further Copies

Copies of this announcement and, on finalisation, the interim report will be available, free of charge, for a period of one month from the Company's Nominated Adviser and Broker, Peel Hunt LLP, Moor House, 120 London Wall, London EC2Y 5ET, Tel: 020 7418 8900 or from Sphere Medical Holding plc, Harston Mill, Harston Cambridgeshire CB22 7GG, Tel: 01223 875222. Copies of the interim report will be made available to shareholders in due course and is available on the Company's website, www.spheremedical.com from today, 15 September 2014