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Lombard Medical Technologies Half Yearly Report

Aug 29 2013 12:00AM



LONDON -- (Marketwired) -- 08/29/13 --

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 UnderwayLondon, UK, 29 August 2013 - Lombard Medical Technologies PLC(AIM: LMT), the specialist medical technology company focused oninnovative vascular products, today announces its unaudited interimresults 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 2014Financial 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 JulyCommenting on the results, Simon Hubbert, Chief Executive of LombardMedical, said:"During the period we received FDA approval to commercialiseourAorfixTM stent graft device in the US, a milestone event which hastransformed the future prospects of the Company. Importantly, approvalincluded a significantly differentiated 0-90 degree label claim, makingAorfix the only device approved to treat both standard and difficult totreat cases of AAAs. Much progress has been achieved since approval inFebruary, including the recruitment and subsequent training of our owndirect sales force in June. Physician training programmes are alsounderway and we have successfully completed a number of commercialcases in centres across the US. We remain confident of capturing asignificant share of the large AAA market." -Ends-For further information:Lombard Medical Technologies PLC Tel: +44(0)1235 750 800Simon Hubbert, Chief Executive OfficerIan Ardill, Chief Financial OfficerCanaccord Genuity Limited Tel: +44(0)20 7523 8000Lucy Tilley / Tim Redfern /Henry Fitzgerald O'Connor/ Dr Julian FeneleyFTI Consulting Tel: +44(0)20 7831 3113Simon Conway / Susan Stuart /Victoria Foster MitchellAllen & Caron Tel: +1 (949) 474 4300Matt ClawsonAbout Abdominal Aortic AneurysmsAAAs are a balloon-like enlargement of the aorta which, if leftuntreated, may rupture and cause death. Approximately 4.5 millionpeople are living with AAAs in the developed world and each year600,000 new cases are diagnosed. In the U.S. aortic aneurysm disease isamong the leading cause of death and it is estimated that 1.7 millionpeople over the age of 55 have an AAA. The market for the repair ofAAAs in the U.S. is valued at more than $600 million annually, and isforecast to grow to $1.6 billion worldwide by 2015 according toindependent market research.About Lombard MedicalLombard Medical Technologies PLC (AIM: LMT) is a medical device companyfocused on device solutions for the $1.3 billion per annum abdominalaortic aneurysm (AAA) repair market. The Company's lead product,AorfixTM, is an endovascular stent graft which has been specificallydesigned to solve the problems that exist in treating complex tortuousanatomy, which is often present in advanced AAA disease. Aorfix is theonly stent graft approved for AAA neck angulations of up to 90 degreesand is currently being commercialized worldwide. Aorfix is the firstAAA stent graft not of U.S. origin to gain FDA approval. The Company isheadquartered in Oxfordshire, England with U.S. operations in Irvine,CA.Further background on the Company can be found Executive's ReviewThe first half of 2013 was one of the most significant periods inLombard Medical's history, dominated by the news in February that theCompany's AorfixTM device received FDA approval for commercial sale inthe US. US approval of Aorfix, the Company's product for the treatmentof AAAs, provides a strong platform for future growth in the world'slargest EVAR market and will create significant shareholder value goingforward.In addition to achieving US approval of Aorfix, Lombard Medical alsoreceived FDA approval for AorflexTM, the Company's next generationdelivery system for the Aorfix stent graft which is alreadycommercially available in Europe. The Company also completed therecruitment of its own direct sales force and is well advanced in theprocess of building its US business infrastructure, which includesrelocating its US commercial headquarters to Irvine, California in Q32013.The US commercial launch of Aorfix is underway and a number of Aorfixprocedures have been successfully completed post FDA approval. TheAorfix physician training programme is being rolled out across the USand has met with high levels of physician enrolment. A formal launchevent of Aorfix with the new Aorflex delivery system, will take placeat the 40th Annual Symposium on Vascular and Endovascular Issues (VEITHSymposium) in New York City in November 2013.RevenueTotal 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 andSpain) grew by 6% to GBP1.1m (H1 2012: GBP1.0m). The particularlystrong growth in revenue and demand seen in Germany and Spain duringthe period helped to counter the impact of UK EVAR centreconsolidation. Combined demand for Aorfix over the four main EU marketsheld at the 2012 level with 194 patients treated (H1 2012: 195patients). Demand and revenue differ due to the effect of distributorstocking/destocking in Italy and Spain.Aorfix commercial revenue outside of the main EU markets increased by9% to GBP0.6m (H1 2012: GBP0.5m) driven largely by distributors in theEMEA region. Commercial revenues of non-Aorfix product from our LombardMedical Scotland facility decreased by 18% to GBP0.3m (H1 2012:GBP0.4m).Aorfix regulatory approval in the US sets the stage for significantgrowthThe FDA's decision in February to approve commercialisation of Aorfixin the US is a significant milestone for the Company and the key driverof future growth.The FDA's approval included a label indication for the treatment ofpatients with angulations at the neck (top) of the aneurysm of up to 90degrees. This gives Aorfix the broadest label for such a device on theUS market and makes it the only endovascular stent graft approved foruse in high angle (>60 degrees) cases. Such a high angle indicationcan already be found on the European label for Aorfix. It is estimatedthat approximately 30% of all patients have some tortuosity either atthe neck of the aneurysm or in the iliac arteries, and it is to thissegment of patients that Aorfix is targeted with its uniquely flexibledesign.US EVAR market - a substantial and growing marketThe US EVAR market was estimated to be $625 million in 2012 and isexpected to grow to $964 million in 2018, representing a CAGR of 7.5per cent.The competitive landscape in the US is more favourable to that in theEU with fewer competitors approved in the 0 to 60 degree angle marketand no competitor with approval to treat neck angles above 60 degrees.In the EU two such devices are approved but these are limited for usein patients with AAA neck angles of up to 75 degrees, specificallywhere the neck length is at least 15mm. All other approved devices inthe EU are approved for use in cases with up to 60 degree angles, withthe exception of one device which has no angle indication and is notapproved in the US. The average selling price of EVAR devices in theUS is materially higher than that of equivalent devices in the EU.In a closely regulated and litigious country such as the US, there issignificant focus on 'on-label' use of products. Physicians are subjectto regulatory pressure to avoid, where possible, 'off-label' use ofdevices. Aorfix is approved for use 'on-label' in patients across abroader indication of neck angles than its competitors with theconsequence that Aorfix can be used by physicians in patientsdisplaying highly tortuous anatomies where such patients wouldotherwise need to be treated 'off-label' using an AAA device. The broadindication of Aorfix will promote the treatment of AAAs using EVAR forsome patients where FDA-approved 'on-label' products were notpreviously available; current treatment options are either open surgeryor use of 'off-label' devices.Aorfix US commercial launch strategy on trackThe Company is launching Aorfix with the new Aorflex delivery system inthe US and a number of commercial cases have already been successfullycompleted since approval earlier this year. A formal launch event ofAorfix with the Aorflex delivery system will take place at the VEITHSymposium in New York in November 2013.Preparations for the US commercial launch of Aorfix are on-track andthe Company has recruited its own direct sales force and marketinginfrastructure to launch Aorfix in the US. Initially Lombard Medicalwill be focussing on the c. 300 centres which perform more than 50% ofthe EVAR operations in the US. US commercial sales have commenced, withseveral procedures successfully performed to date.During the period, the Company hired Michael Gioffredi, President ofOperations in the US, who has 30 years' experience in medical devicecompanies, the majority of which has been in vascular sales andmarketing 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 trainingprogramme about the use of Aorfix and the EVAR procedure.The sales team is now focused on increasing US physician knowledge ofAorfix and organising their participation in physician trainingprogrammes, which commenced at various US venues in August. 11physician training programmes were completed in August at specialisttraining centres and EVAR centres, with 9 physician training programmesplanned in September.Marketing efforts for Aorfix will leverage the device's unique label inthe underserved tortuosity segment which represents up to 30% of allEVARs. The Company calculates this segment of the market to becurrently valued at c.$185m and expected to grow to c.$290m in 2018.Aorfix is the only approved device to treat such highly angulated casesbut also works well in treating less challenging anatomies (0-60degrees).RoW Aorfix updateWe continue to work with our exclusive Japanese distribution partner,Medico's Hirata Inc., to obtain Aorfix approval in Japan. Medico'sHirata is a leading supplier and developer of medical device productsin Japan, with the sales infrastructure to maximise the potential ofAorfix in this important market. The Japanese market for EVAR productsis estimated to be worth $100m and is one of the fastest growing in theworld. Medico's Hirata remains in dialogue with the Japanese PMDA(Pharmaceuticals and Medical Devices Agency) to achieve regulatoryapproval for Aorfix, which we anticipate will be granted in H1 2014.Clinical dataLombard Medical has remained committed to the collection of data in itsRetrospective Aorfix Data Retrieval Registry (RADAR). The RADARregistry now contains data from over 1,900 Aorfix cases and enables theCompany to present on the largest clinical experience ever compiled oncomplex anatomy EVAR patients at conferences around the world.New Product DevelopmentLombard Medical made progress with two new product development projectsin line with our continuous commitment to providing innovativeendovascular solutions which meet clinicians' needs and improve patientoutcomes.The first project is focused on improving clinicians' experience duringAorfix stent graft delivery. The new delivery system, Aorflex, waslaunched in Europe in April 2012 and has received positive clinicianfeedback since launch. The submission for the US approval of theAorflex delivery system was made to the FDA in April 2013 and in June2013 Aorflex was approved for commercial use in the US. The Company'sformal US commercial launch of Aorfix will include Aorflex as the stentgraft's delivery system.The Company has also made progress towards expanding the size range ofAorfix, thereby addressing the needs of patients with AAAs with aorticneck diameters either too large or too small for the current productsize range. Based on published clinical data, management estimates thisto be up to 25 per cent. of the total AAA patient population. A widerrange of sizes will be available for custom order (customised to aphysician's requirements and not requiring a CE Mark) in Europe in thesecond half of 2013. A clinical study to support regulatory approval ofthe most widely used combinations of sizes in the expanded size rangeis anticipated to commence in 2014.The Company is also planning and developing further iterations of theAorfix product and its delivery system, including a reduction in thedevice profile and the inclusion of a repositionable graft top-end toassist the physician in placing the graft accurately during theprocedure.The BoardAfter two years of service as Lombard Medical's Chairman and followingthe achievement of FDA approval for Aorfix in the United States, JohnRush announced in April that he would step down as Non-executiveChairman of the Company, pending completion of a comprehensive searchfor his successor. I would like to thank John for his service asChairman and I am pleased that John remains an active and committedmember of the Board as a Non-executive Director.Post period end, in July, the Board appointed Raymond W. Cohen asNon-executive Chairman. Ray, a US national, has extensive internationalmedical device experience having held several Chairman and CEOpositions on the boards of both publicly listed and private lifesciences companies in the US and Europe. Ray served as Chief ExecutiveOfficer of Vessix Vascular, Inc., a developer of a renal denervationsystem used to treat uncontrolled hypertension. During his tenure asCEO, the company was acquired by Boston Scientific Corporation in astructured transaction valued at up to $425 million.In May, Thomas Casdagli, Non-executive Director, resigned from theBoard. Thomas was the Non-executive Director appointed by MVM inaccordance with its right to appoint a Non-executive Director for solong as MVM held in excess of 5% of the issued share capital of theCompany. With MVM's shareholding falling to 3.5% following the equityfundraising in June, Thomas stepped down from the Board. I would liketo thank Thomas for his service as a Director since his appointment in2011.OutlookUS FDA approval of Aorfix combined with the funds raised in June tocommercialise this product, have materially changed Lombard Medical'sfuture prospects. The Company has launched Aorfix in the US andexpects to hold a formal launch event at the VEITH Symposium in NewYork City in November 2013.With our uniquely labelled device and the resources to effectivelycommercialise Aorfix, we are confident of securing a meaningful shareof the significant and growing US EVAR market and of growing revenuesin Europe. With the help of our partner in Japan, one of the fastestgrowing markets in the world, we anticipate approval of Aorfix in H12014. Together these events will translate into the creation ofsignificant value for shareholders going forward.Principal Risks and UncertaintiesThe Principal Risks and Uncertainties faced by the Company remain asreported on page 18 of the Annual Report for the year ended 31 December2012, with the exception of the Financial Resources risk. The Companywas successful in raising finance in addition to the second tranche ofthe May 2011 fundraising, mitigating this risk.Financial ReviewTotal 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 UKfollowing the consolidation of centres performing EVAR over the past 18months. Revenue from distributors outside the main EU markets returnedto growth in the period. Other commercial revenues declined by 18% toGBP0.3m (H2 2011: GBP0.4m) due to the decrease in OEM revenues generated bythe Company's Prestwick facility.The gross profit of GBP0.6m (H1 2012: GBP0.6m) represented a grossmargin of 32% (H1 2012: 30%). The gross margin is in line withexpectations and reflects low production volumes in the first half ofthe year ahead of the stock build for US launch commencing in July. Anincrease in gross margin is expected from the second half of the year,driven by the combination of increased volumes, a higher averageselling 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% toGBP2.1m (H1 2012: GBP1.4m) due to increases in sales and marketingheadcount and activity in the US following FDA approval, in readinessfor the US launch.Research and development expenditure decreased by 16% to GBP2.1m (H12012: GBP2.5m) as clinical and regulatory expenditure reduced on theAorfix 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 currentyear 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 ofthe accounting for the effective interest payable on the convertibleloan notes.The tax credit of GBP0.2m (H1 2012: GBP0.1m) consisted of an estimateof 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&Dtax credit in the prior year accounts).The loss and total comprehensive expense for the period increased by14% to GBP5.0m (H1 2012: GBP4.4m).The net cash outflow from operating activities decreased by 21% toGBP4.0m (H1 2012: GBP5.1m) principally due to decreased working capitalrequirements 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 supportthe 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 ofthe 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 purposesIn June, the GBP3.0m Convertible Loan Notes issued to Invesco AssetManagement Limited, the Company's largest shareholder, in 2012 wereconverted 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 Companyto achieve its longer-term goals in the US market and to supportLombard Medical's strategy through to cash generation.Click on, or paste the following link into your web browser, to viewthe associated PDF document. This information is provided by RNS The company news service from the London Stock ExchangeEND

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