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Lombard Medical Technologies Half Yearly Report

LONDON--(Marketwired - Aug 29, 2013) -

Press Information Lombard Medical Technologies PLC ("Lombard Medical" or the "Company") Interim results for the six months ended 30 June 2013 Aorfix™ Launch in the US Underway London, UK, 29 August 2013 - Lombard Medical Technologies PLC (  AIM :  LMT ), the specialist medical technology company focused on innovative vascular products, today announces its unaudited interim results for the six months ended 30 June 2013. Operational highlights - US FDA approval of AorfixTM for the endovascular repair of AAAs (Abdominal Aortic Aneurysms) o Only endovascular stent graft approved in US for use in cases with neck angulations up to 90 degrees o Unique 0-90 degree label indication enabling treatment of broadest range of AAA anatomies o Compelling case for use over competing products supported by extensive body of clinical evidence o One of only nine PMAs (pre-market approvals) granted by the FDA in H1 2013 - AorflexTM next generation delivery system approved by the FDA in June for commercial use in the US - Aorfix US commercial launch underway, formal launch event at VEITH Symposium, November 2013 o Initial commercial cases successfully completed o Direct sales team of 20 people recruited and product training completed o Physician training programme commenced - Approval for Aorfix in Japan on track, approval anticipated in H1 2014 Financial highlights - Total revenue increased 2%, in line with expectations, to GBP2.0m (H1 2012: GBP2.0m) - Aorfix commercial revenue increased 8% to GBP1.7m (H1 2012: GBP1.6m) o Revenue increased 6% in the four main EU markets (UK, Germany, Italy and Spain) to GBP1.1m (H1 2012: GBP1.0m) o Revenue in Germany increased by 47% offsetting the effect of continued EVAR centre consolidation in the UK o Revenue outside the main EU markets increased 9% to GBP0.6m (H1 2012: GBP0.5m) - Significant increase in demand for Aorfix in Germany and Spain offsetting decline in demand for Aorfix in UK which is expected to stabilise in H2 2013 o Combined demand for Aorfix over the four main EU markets steady with 194 patients treated (H1 2012: 195) - Operating loss increased by 11% to GBP4.8m (H1 2012: GBP4.4m) - Loss after taxation increased by 14% to GBP4.9m (H1 2012: GBP4.4m) - Financing o Aorfix US approval triggered receipt GBP13.5m (net of expenses) of the c.GBP14.1m Second Tranche of the two tranche April 2011 fundraising as well as the Company's ability to draw down $2.5m from the $5.0m loan facility granted by its exclusive Japanese distribution partner, Medico's Hirata Inc. o GBP20.9m (net of expenses) raised from a placing, subscription and offer of shares in June o GBP3.0m Convertible Loan Notes issued to Invesco in 2012 were converted into new Ordinary Shares - Strong cash position - GBP34.3m as at 30 June 2013 (30 June 2012: GBP5.2m) Post period events - Appointment of Raymond W. Cohen as Non-executive Chairman in July Commenting on the results, Simon Hubbert, Chief Executive of Lombard Medical, said:"During the period we received FDA approval to commercialise our AorfixTM stent graft device in the US, a milestone event which has transformed the future prospects of the Company. Importantly, approval included a significantly differentiated 0-90 degree label claim, making Aorfix the only device approved to treat both standard and difficult to treat cases of AAAs. Much progress has been achieved since approval in February, including the recruitment and subsequent training of our own direct sales force in June. Physician training programmes are also underway and we have successfully completed a number of commercial cases in centres across the US. We remain confident of capturing a significant share of the large AAA market." -Ends- For further information: Lombard Medical Technologies PLC Tel: +44(0)1235 750 800 Simon Hubbert, Chief Executive Officer Ian Ardill, Chief Financial Officer Canaccord Genuity Limited Tel: +44(0)20 7523 8000 Lucy Tilley / Tim Redfern / Henry Fitzgerald O'Connor / Dr Julian Feneley FTI Consulting Tel: +44(0)20 7831 3113 Simon Conway / Susan Stuart / Victoria Foster Mitchell Allen & Caron Tel: +1 (949) 474 4300 Matt Clawson About Abdominal Aortic Aneurysms AAAs are a balloon-like enlargement of the aorta which, if left untreated, may rupture and cause death. Approximately 4.5 million people are living with AAAs in the developed world and each year 600,000 new cases are diagnosed. In the U.S. aortic aneurysm disease is among the leading cause of death and it is estimated that 1.7 million people over the age of 55 have an AAA. The market for the repair of AAAs in the U.S. is valued at more than $600 million annually, and is forecast to grow to $1.6 billion worldwide by 2015 according to independent market research. About Lombard Medical Lombard Medical Technologies PLC (  AIM :  LMT ) is a medical device company focused on device solutions for the $1.3 billion per annum abdominal aortic aneurysm (AAA) repair market. The Company's lead product, AorfixTM, is an endovascular stent graft which has been specifically designed to solve the problems that exist in treating complex tortuous anatomy, which is often present in advanced AAA disease. Aorfix is the only stent graft approved for AAA neck angulations of up to 90 degrees and is currently being commercialized worldwide. Aorfix is the first AAA stent graft not of U.S. origin to gain FDA approval. The Company is headquartered in Oxfordshire, England with U.S. operations in Irvine, CA. Further background on the Company can be found at www.lombardmedical.com . Chief Executive's Review The first half of 2013 was one of the most significant periods in Lombard Medical's history, dominated by the news in February that the Company's AorfixTM device received FDA approval for commercial sale in the US. US approval of Aorfix, the Company's product for the treatment of AAAs, provides a strong platform for future growth in the world's largest EVAR market and will create significant shareholder value going forward. In addition to achieving US approval of Aorfix, Lombard Medical also received FDA approval for AorflexTM, the Company's next generation delivery system for the Aorfix stent graft which is already commercially available in Europe. The Company also completed the recruitment of its own direct sales force and is well advanced in the process of building its US business infrastructure, which includes relocating its US commercial headquarters to Irvine, California in Q3 2013. The US commercial launch of Aorfix is underway and a number of Aorfix procedures have been successfully completed post FDA approval. The Aorfix physician training programme is being rolled out across the US and has met with high levels of physician enrolment. A formal launch event of Aorfix with the new Aorflex delivery system, will take place at the 40th Annual Symposium on Vascular and Endovascular Issues (VEITH Symposium) in New York City in November 2013. Revenue Total revenue increased by 2%, in line with expectations, to GBP2.0m (H12012:GBP2.0m). Aorfix commercial revenue increased by 8% to GBP1.7m (H1 2012: GBP1.6m). Aorfix revenue in the main four EU markets (UK, Germany, Italy and Spain) grew by 6% to GBP1.1m (H1 2012: GBP1.0m). The particularly strong growth in revenue and demand seen in Germany and Spain during the period helped to counter the impact of UK EVAR centre consolidation. Combined demand for Aorfix over the four main EU markets held at the 2012 level with 194 patients treated (H1 2012: 195 patients). Demand and revenue differ due to the effect of distributor stocking/destocking in Italy and Spain. Aorfix commercial revenue outside of the main EU markets increased by 9% to GBP0.6m (H1 2012: GBP0.5m) driven largely by distributors in the EMEA region. Commercial revenues of non-Aorfix product from our Lombard Medical Scotland facility decreased by 18% to GBP0.3m (H1 2012: GBP0.4m). Aorfix regulatory approval in the US sets the stage for significant growth The FDA's decision in February to approve commercialisation of Aorfix in the US is a significant milestone for the Company and the key driver of future growth. The FDA's approval included a label indication for the treatment of patients with angulations at the neck (top) of the aneurysm of up to 90 degrees. This gives Aorfix the broadest label for such a device on the US market and makes it the only endovascular stent graft approved for use in high angle (>60 degrees) cases. Such a high angle indication can already be found on the European label for Aorfix. It is estimated that approximately 30% of all patients have some tortuosity either at the neck of the aneurysm or in the iliac arteries, and it is to this segment of patients that Aorfix is targeted with its uniquely flexible design. US EVAR market - a substantial and growing market The US EVAR market was estimated to be $625 million in 2012 and is expected to grow to $964 million in 2018, representing a CAGR of 7.5 per cent. The competitive landscape in the US is more favourable to that in the EU with fewer competitors approved in the 0 to 60 degree angle market and no competitor with approval to treat neck angles above 60 degrees. In the EU two such devices are approved but these are limited for use in patients with AAA neck angles of up to 75 degrees, specifically where the neck length is at least 15mm. All other approved devices in the EU are approved for use in cases with up to 60 degree angles, with the exception of one device which has no angle indication and is not approved in the US. The average selling price of EVAR devices in the US is materially higher than that of equivalent devices in the EU. In a closely regulated and litigious country such as the US, there is significant focus on 'on-label' use of products. Physicians are subject to regulatory pressure to avoid, where possible, 'off-label' use of devices. Aorfix is approved for use 'on-label' in patients across a broader indication of neck angles than its competitors with the consequence that Aorfix can be used by physicians in patients displaying highly tortuous anatomies where such patients would otherwise need to be treated 'off-label' using an AAA device. The broad indication of Aorfix will promote the treatment of AAAs using EVAR for some patients where FDA-approved 'on-label' products were not previously available; current treatment options are either open surgery or use of 'off-label' devices. Aorfix US commercial launch strategy on track The Company is launching Aorfix with the new Aorflex delivery system in the US and a number of commercial cases have already been successfully completed since approval earlier this year. A formal launch event of Aorfix with the Aorflex delivery system will take place at the VEITH Symposium in New York in November 2013. Preparations for the US commercial launch of Aorfix are on-track and the Company has recruited its own direct sales force and marketing infrastructure to launch Aorfix in the US. Initially Lombard Medical will be focussing on the c. 300 centres which perform more than 50% of the EVAR operations in the US. US commercial sales have commenced, with several procedures successfully performed to date. During the period, the Company hired Michael Gioffredi, President of Operations in the US, who has 30 years' experience in medical device companies, the majority of which has been in vascular sales and marketing roles. A sales team of 20 people with experience in EVAR, peripheral vascular sales or related fields is now in place. In June, this new team attended and successfully completed the in-depth training programme about the use of Aorfix and the EVAR procedure. The sales team is now focused on increasing US physician knowledge of Aorfix and organising their participation in physician training programmes, which commenced at various US venues in August. 11 physician training programmes were completed in August at specialist training centres and EVAR centres, with 9 physician training programmes planned in September. Marketing efforts for Aorfix will leverage the device's unique label in the underserved tortuosity segment which represents up to 30% of all EVARs. The Company calculates this segment of the market to be currently valued at c.$185m and expected to grow to c.$290m in 2018. Aorfix is the only approved device to treat such highly angulated cases but also works well in treating less challenging anatomies (0-60 degrees). RoW Aorfix update We continue to work with our exclusive Japanese distribution partner, Medico's Hirata Inc., to obtain Aorfix approval in Japan. Medico's Hirata is a leading supplier and developer of medical device products in Japan, with the sales infrastructure to maximise the potential of Aorfix in this important market. The Japanese market for EVAR products is estimated to be worth $100m and is one of the fastest growing in the world. Medico's Hirata remains in dialogue with the Japanese PMDA (Pharmaceuticals and Medical Devices Agency) to achieve regulatory approval for Aorfix, which we anticipate will be granted in H1 2014. Clinical data Lombard Medical has remained committed to the collection of data in its Retrospective Aorfix Data Retrieval Registry (RADAR). The RADAR registry now contains data from over 1,900 Aorfix cases and enables the Company to present on the largest clinical experience ever compiled on complex anatomy EVAR patients at conferences around the world. New Product Development Lombard Medical made progress with two new product development projects in line with our continuous commitment to providing innovative endovascular solutions which meet clinicians' needs and improve patient outcomes. The first project is focused on improving clinicians' experience during Aorfix stent graft delivery. The new delivery system, Aorflex, was launched in Europe in April 2012 and has received positive clinician feedback since launch. The submission for the US approval of the Aorflex delivery system was made to the FDA in April 2013 and in June 2013 Aorflex was approved for commercial use in the US. The Company's formal US commercial launch of Aorfix will include Aorflex as the stent graft's delivery system. The Company has also made progress towards expanding the size range of Aorfix, thereby addressing the needs of patients with AAAs with aortic neck diameters either too large or too small for the current product size range. Based on published clinical data, management estimates this to be up to 25 per cent. of the total AAA patient population. A wider range of sizes will be available for custom order (customised to a physician's requirements and not requiring a CE Mark) in Europe in the second half of 2013. A clinical study to support regulatory approval of the most widely used combinations of sizes in the expanded size range is anticipated to commence in 2014. The Company is also planning and developing further iterations of the Aorfix product and its delivery system, including a reduction in the device profile and the inclusion of a repositionable graft top-end to assist the physician in placing the graft accurately during the procedure. The Board After two years of service as Lombard Medical's Chairman and following the achievement of FDA approval for Aorfix in the United States, John Rush announced in April that he would step down as Non-executive Chairman of the Company, pending completion of a comprehensive search for his successor. I would like to thank John for his service as Chairman and I am pleased that John remains an active and committed member of the Board as a Non-executive Director. Post period end, in July, the Board appointed Raymond W. Cohen as Non-executive Chairman. Ray, a US national, has extensive international medical device experience having held several Chairman and CEO positions on the boards of both publicly listed and private life sciences companies in the US and Europe. Ray served as Chief Executive Officer of Vessix Vascular, Inc., a developer of a renal denervation system used to treat uncontrolled hypertension. During his tenure as CEO, the company was acquired by Boston Scientific Corporation in a structured transaction valued at up to $425 million. In May, Thomas Casdagli, Non-executive Director, resigned from the Board. Thomas was the Non-executive Director appointed by MVM in accordance with its right to appoint a Non-executive Director for so long as MVM held in excess of 5% of the issued share capital of the Company. With MVM's shareholding falling to 3.5% following the equity fundraising in June, Thomas stepped down from the Board. I would like to thank Thomas for his service as a Director since his appointment in 2011. Outlook US FDA approval of Aorfix combined with the funds raised in June to commercialise this product, have materially changed Lombard Medical's future prospects. The Company has launched Aorfix in the US and expects to hold a formal launch event at the VEITH Symposium in New York City in November 2013. With our uniquely labelled device and the resources to effectively commercialise Aorfix, we are confident of securing a meaningful share of the significant and growing US EVAR market and of growing revenues in Europe. With the help of our partner in Japan, one of the fastest growing markets in the world, we anticipate approval of Aorfix in H1 2014. Together these events will translate into the creation of significant value for shareholders going forward. Principal Risks and Uncertainties The Principal Risks and Uncertainties faced by the Company remain as reported on page 18 of the Annual Report for the year ended 31 December 2012, with the exception of the Financial Resources risk. The Company was successful in raising finance in addition to the second tranche of the May 2011 fundraising, mitigating this risk. Financial Review Total revenue for the period increased 2% to GBP2.0m (H1 2012: GBP2.0m). Commercial Aorfix revenue increased by 8% to GBP1.7m (H1 2012: GBP1.6m), with growth in Germany, Spain and Italy offset by a decline in the UK following the consolidation of centres performing EVAR over the past 18 months. Revenue from distributors outside the main EU markets returned to growth in the period. Other commercial revenues declined by 18% to GBP0.3m (H2 2011: GBP0.4m) due to the decrease in OEM revenues generated by the Company's Prestwick facility. The gross profit of GBP0.6m (H1 2012: GBP0.6m) represented a gross margin of 32% (H1 2012: 30%). The gross margin is in line with expectations and reflects low production volumes in the first half of the year ahead of the stock build for US launch commencing in July. An increase in gross margin is expected from the second half of the year, driven by the combination of increased volumes, a higher average selling price in the US and the on-going process improvement programme, which is currently in its data gathering phase. Selling, marketing and distribution expenses increased by 48% to GBP2.1m (H1 2012: GBP1.4m) due to increases in sales and marketing headcount and activity in the US following FDA approval, in readiness for the US launch. Research and development expenditure decreased by 16% to GBP2.1m (H1 2012: GBP2.5m) as clinical and regulatory expenditure reduced on the Aorfix clinical trial following FDA approval. Administrative expenses increased by 24% to GBP1.3m (H1 2012: GBP1.1m). This is primarily due to a share option charge of GBP0.1m in the current year following the changes made to the performance criteria in June, compared with a credit of GBP0.3m in the prior year. Finance costs of GBP0.3m (H1 2012: GBP0.1m) were incurred as a result of the accounting for the effective interest payable on the convertible loan notes. The tax credit of GBP0.2m (H1 2012: GBP0.1m) consisted of an estimate of GBP0.2m for the R&D tax credit arising in the period (H1 2012: GBP0.3m less an adjustment of GBP0.2m for an overestimate of the R&D tax credit in the prior year accounts). The loss and total comprehensive expense for the period increased by 14% to GBP5.0m (H1 2012: GBP4.4m). The net cash outflow from operating activities decreased by 21% to GBP4.0m (H1 2012: GBP5.1m) principally due to decreased working capital requirements of GBP0.7m (H1 2012: increase of GBP0.5m). Net cash used in investing activities increased to GBP0.5m (H1 2012: GBP0.1m) due to purchase of sales and marketing equipment to support the US launch. Net cash flows from financing activities were GBP36.0m (H1 2012: GBP2.8m), and consisted of the following: - The US approval of Aorfix in February triggered the receipt by the Company of the GBP13.5m (net of expenses) second tranche of the two tranche April 2011 fundraising. - Aorfix approval also triggered the Company's ability to draw down $2.5m from the $5.0m loan facility granted by its exclusive Japanese distribution partner, Medico's Hirata Inc. - In June, the Company raised an additional GBP20.9m (net of expenses) through a placing, subscription and offer of new shares. The fundraising received strong support from the Company's existing shareholders as well as a number of new top tier institutional investors. As previously announced, the Company expects to use the net proceeds of the June fundraising, together with its existing cash resources, approximately as follows: - Build the sales and marketing infrastructure to launch Aorfix in the US - Following US launch, continue to grow Aorfix market share in the US - Expand Aorfix production capacity - Develop next generation products, line extensions and delivery devices - Clinical trials - Grow the rest of world sales of Aorfix and launch in select new territories (including Japan in H1 2014) - General working capital purposes In June, the GBP3.0m Convertible Loan Notes issued to Invesco Asset Management Limited, the Company's largest shareholder, in 2012 were converted into new Ordinary Shares, effectively extinguishing the debt. The Company had cash of GBP34.3m as at 30 June 2013 (30 June 2012: GBP5.2m) which we anticipate will be sufficient to enable the Company to achieve its longer-term goals in the US market and to support Lombard Medical's strategy through to cash generation. Click on, or paste the following link into your web browser, to view the associated PDF document. http://www.rns-pdf.londonstockexchange.com/rns/6974M_1-2013-8-28.pdf This information is provided by RNS The company news service from the London Stock Exchange END