RNS Number:0365Q
LiDCO Group Plc
23 September 2003
LiDCO GROUP PLC
INTERIM RESULTS - SIX MONTHS ENDED 30 JUNE 2003
LiDCO, the UK-based, AIM-traded cardiovascular monitoring company, announces
continuing progress in its second year of commercialization of its products.
Highlights:
* Turnover increased by 70% to #1.7m (2002: #1.0m), and loss per share
cut by 30% to 2.59p (2002: 3.69p);
* Continued commercial validation of products evidenced by:
o Sensor sales up 82% in period to 4,315 (2002: 2,375);
o 100 PulseCO and 69 combined LiDCOplus monitors sold (2002: 101
PulseCO Systems and 56 LiDCO Systems);
* Successful launch of the combined LiDCOplus monitor (which replaces
both the LiDCO and PulseCO monitors) with improved ease of use and higher
margins;
* Registration by Nipro Corporation of the PulseCO System in Japan in
August 2003, with market launch expected in Q4 of 2003;
* Marketing authorizations for lithium chloride received for: Belgium,
Holland, Germany and Spain, enabling the first European sensor sales to
commence;
* Cash burn reduced by 48%; and
* Discussions concerning a US distribution partner are progressing
well. William Blair International Limited, the London subsidiary of
Chicago-based investment bank William Blair & Company, has been appointed by the
Company to facilitate and assist in these discussions.
Enquiries:
LiDCO Group Plc 020-7749 1500
Terry O'Brien (CEO) terry@lidco.com 020-7749 1502
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Richard Mills (FD) richard@lidco.com 020-7749 1509
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Bankside Consultants Limited
Charles Ponsonby (PR) charles.ponsonby@bankside.com 020-7444 4166
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Chris Munden (IR) chris.munden@bankside.com 020-7444 4150
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Notes for Editors
LiDCO is a leading developer of minimally invasive, computer-based hemodynamic
monitoring equipment and disposables used primarily for the management of
critical care and cardiovascular risk hospital patients. The Company's current
products are:
* the LiDCOplus and PulseCO monitors, computer-based platforms for
displaying a range of real-time continuous hemodynamic parameters including
cardiac output, oxygen delivery and fluid volume; and
* the LiDCO disposable for accurately determining cardiac output in a
minimally-invasive manner.
LiDCO was founded in 1991 by Doctors Terry O'Brien (the current CEO), David Band
(the current Scientific Director), Robert Linton and Jiri Kratochvil and by
King's College, London. LiDCO's head office is in Hoxton, London N1, whilst its
sales offices are located in the Granta Science Park, Cambridge and in Dallas,
Texas.
CHAIRMAN'S STATEMENT
Financial Overview
Turnover for the six months increased by 70% to #1.7m (2002: #1.0m). With
improved gross margins of 70% (2002: 63%) and administration expenses lower than
in the equivalent period last year following a cash savings programme, the
retained loss was reduced significantly to #1.8m (2002: #2.6m).
In June 2003, LiDCO made a substantial initial sale of monitors to its Japanese
distributor for #700,000. This resulted in sales to distributors being higher
than the comparative period in 2002 which had included initial sales to
distributors of #335,000.
In June 2003, LiDCO received #112,000 in cash from the Inland Revenue in respect
of Research & Development tax credits for 2000 and 2001. The Company expects to
make claims for tax credits for subsequent years also.
At 30 June 2003 net cash stood at #1.9m. The rate of cash burn in the six months
to 30 June 2003 has been almost halved compared with the equivalent period in
2002. During September 2003, #700,000 is scheduled to be paid to LiDCO by Nipro
Corporation, the Japanese distributor, in respect of the substantial sale made
in June. Certain debtor balances owed by European distributors will fall due in
the next six months, which will add further to future cash receipts. The level
of cash is kept under regular review by the Directors, who are satisfied that it
is sufficient for current needs.
Sales and Marketing
Direct Territories (UK and USA)
LiDCO continues to sell via its own in-house sales forces in both the UK and the
USA. The main customers are cardiac/major surgery and intensive care units.
Sales from direct territories at #633,000, on a like-for-like basis, were up 27%
on the same period in 2002. Sales of disposables into the increased installed
base of monitors were 78% higher at 3,645 units (2002: 2,050 units).
Interest in our technology over the last two years remains high, with
approximately 500 hospital departments in the UK and USA having requested an
evaluation of the technology. To date, 330 sales proposals have been requested
and 35% of these have closed successfully, as shown in the table below. Of the
sales proposals made (representing 531 LiDCOplus monitors) 54% are still in
progress and only 11% have decided not to proceed.
Cumulative sales proposals made in the direct territories from the commencement
of direct sales in July 2001 through to 31 August 2003 are as follows:
US UK Total
Proposals Units Proposals Units Proposals Units
In progress 122 432 56 99 178 531
Closed (won) 63 191 52 60 115 251
Closed (lost) 13 30 24 24 37 54
Total 198 653 132 183 330 836
To accelerate closure of these accounts in its direct territories, the Company
is now offering customers flexible options to acquire its technology. In
addition to straight capital purchase, it offers 'upcharge', where the customer
pays a premium on the disposable price that over time recoups the sales value of
the monitor. In instances where the customer wishes to use a mixture of both
invasive and minimally-invasive technologies to calibrate and determine cardiac
output, an option is now being offered called 'consignment' whereby the customer
pays a fee for each time it uses the monitor in addition to any disposable costs
incurred. This is a non-prescriptive sales approach, allowing customers to stage
their adoption of LiDCO's minimally-invasive sensor technology while still
benefiting from LiDCO's real time, beat-to-beat data analysis and innovative and
intuitive displays.
* USA
Analysis of the first 50 USA hospital accounts shows success in having the
technology purchased for three reasons. First, to replace completely the use of
the invasive pulmonary artery catheter, the main competing technology used by
hospitals (20% of accounts); second, the low cost and minimally invasive nature
allows hospitals to expand the numbers of patients monitored for cardiac output
and oxygen delivery (40%); and finally, use of the LiDCOplus monitor with a low
cost catheter markedly reduces the costs of continuous invasive hemodynamic
monitoring (40%). Thus, the technology can both access existing revenue budgets
for advanced hemodynamic monitoring and ultimately grow the market for
hemodynamic monitoring. Given such progress, LiDCO believes that there is a
considerable market opportunity for its technology in the USA.
As announced in March 2003, LiDCO is holding discussions with major corporate
distribution partners regarding the grant of a sales and marketing licence for
this territory. These discussions are continuing and are progressing well. The
Company has appointed investment bank William Blair International to assist with
these and other opportunities. While these discussions take place, LiDCO
continues to sell through a small direct sales force of seven people (reduced
from 11 people in 2002). Customer interest in the adoption of LiDCO technology
continues to be strong, as evidenced in the continued development of the sales
activity pipeline.
Given the slower than originally anticipated closure of accounts in the USA on a
capital basis, LiDCO has initiated two alternative sales models that could
facilitate the closure of the sales pipeline: upcharge (since March 2002) and
consignment (since June 2002). With upcharge, LiDCO initially, on a pilot basis,
targeted five hospitals, of which four accepted. This has encouraged LiDCO to
expand this programme significantly. On the consignment model, it is still too
early to quantify the likely uptake; however, the clear cost savings (up to $100
per patient) available to hospitals adopting this model have resulted in a high
degree of interest. To date, one account has been closed in September 2003, with
a further 15 hospitals expressing interest. The success of this model could
significantly increase the rate of adoption of the Company's technology in the
USA.
The reduction in US sales resource and continued slow capital cycle has resulted
in overall foreign exchange- adjusted revenues remaining static compared with
2002 at #390,000. However, sensor sales are up 53% at 2,065 units (2002: 1,350).
Pricing and margins are strong and consistent with expectations. Despite the
modest sales resource, the Company anticipates acceleration in recurring income
in the second half of 2003 as these new sales models make an impact. However,
the focus on the application and implementation of these sales models may impact
the number of monitors sold on a capital basis.
* UK
Hospitals continue to prefer to purchase through an upcharge sales model due to
the extreme shortage of capital funds. While this defers the capital receipts,
sensor usage has continued to be robust at 10 sensors per monitor per month. In
the half year, sensor sales were up 126% at 1,580 (2002: 700) and revenue up a
very encouraging 111% at #243,000 (2002: #115,000). The UK market is developing
well and the Company expects further growth in the second half of 2003.
* Europe
In January 2003 LiDCO was granted approval in principle to sell the lithium
chloride injectate, a key component of the disposable system, in six countries
through the EC Mutual Recognition drug approval process. Subsequently, sales
have been hampered by the late release of the final marketing approval letters
from the individual territories involved. LiDCO only recently received these
authorization letters from: Spain (May), Belgium (June), Germany (July) and
Holland (July) and is still waiting for Italy and Austria. Therefore, sales
revenue will only start well into the second half of the year. This was
unanticipated and very disappointing for both the Company and its distributor
partners. Consequently, although first half year sensor sales increased to 560
units (2002: 95), the reduced capital sales resulted in revenue at #106,000
being down over 50% on 2002 (#221,000). LiDCO will endeavour in the second half
of the year to pick up some of the ground lost through these unavoidable
regulatory delays.
* Far East
The main efforts have been to work with the Japanese partner, Nipro Corporation
("Nipro" Reuters code 8086.T), to register the PulseCO monitor. Following the
conclusion of clinical trials and the subsequent regulatory testing and
submission, LiDCO was informed by Nipro of the successful registration of the
PulseCO Monitor in Japan. In anticipation of launch, Nipro purchased in June a
substantial number of PulseCO monitors as a stocking order and LiDCO expects
launch of the PulseCO System in Japan in Q4 of 2003.
The Japanese market is the second biggest market in the world for hemodynamic
monitoring. Hospital reimbursement for invasive cardiac output monitoring of up
to #500 per patient use means that the PulseCO monitor can be sold in
conjunction with a pulmonary artery catheter to provide continuous cardiac
output and oxygen delivery parameters at a premium price. Given the above
progress, sales in the Far East increased significantly to #740,000 (2002:
#114,000). Following discussions with Nipro, it has been agreed that the rights
to finalize the lithium registration and exploit the LiDCO disposables in Japan
are to be returned to LiDCO. LiDCO will then conclude the registration of the
lithium chloride in 2004.
Regulatory Affairs
In January 2003 the LiDCOplus monitor was approved for sale in the USA by the
Food and Drugs Administration. This was closely followed by the approval through
the EC pharmaceutical Mutual Recognition System to market the lithium chloride
in certain territories (see EC section above). We have also had approval for
sale of the monitor and lithium chloride combination in the Czech Republic. A
further round of EC pharmaceutical Mutual Recognition approvals will be sought
in France, Sweden, Denmark and Ireland in the first quarter of 2004.
New Products and Applications
The LiDCOplus monitor provides a PC-based platform approach to monitoring that
is software-driven and as such capable of interpreting raw data from a variety
of sources. We believe that the customer requires such information to be
displayed simply at the bedside, so that life-threatening situations can be
detected quickly by all levels of staff and appropriate action taken
immediately. The LiDCOplus monitor platform, sensor technology and software are
being developed further to improve the results from non-invasive monitoring,
fluid management and to monitor the blood supply of the brain.
Non-Invasive Monitoring: Studies are in progress evaluating the use of
non-invasive blood pressure sensors to trigger the LiDCOplus fluid loading
software. The goal is that nurses should be able to use the LiDCOplus to monitor
non-invasively any patient requiring fluids, drugs or heart pacemaker therapy.
If successful, this approach could replace the need for an arterial access in a
much expanded group of cardiology, heart failure and surgery patients. The early
results are promising and suggest that LiDCO's software can analyse the lower
quality of signal from such sensors.
Fluid Management: Control of fluid administration to hospital patients is a
major problem - getting it wrong is dangerous to the patient, costs the hospital
money and delays patient recovery. The Company's main focus has been on proving
that the two most recently introduced LiDCOplus monitor fluid parameters (stroke
volume and arterial pulse pressure) are an improvement on traditional invasive
methods.
We are therefore pleased to announce the successful completion and publication
of an independent trial conducted by the surgery and trauma department of
Parkland Memorial Hospital (UT Southwestern Medical Center at Dallas). This
trial showed that the use of the LiDCOplus monitor was more effective in
facilitating fluid management in intensive care patients (ICU) than the existing
market-leading invasive pulmonary artery catheter. Further UK and USA trials are
currently in progress to develop a more nurse-friendly user screen which will
display these parameters in an easy-to-interpret manner. This improved software
will help nurses to perform in minutes a procedure which would otherwise take up
an expensive ICU bed for hours. The development and clinical trial of this
software should be complete by the end of 2003 and a FDA regulatory application
made shortly after.
Cerebral Oxygen Extraction: Research at the Company's laboratory at St Thomas'
Hospital, London into developing a non-invasive way of monitoring the brain to
ensure that it is adequately supplied with oxygen has resulted in a novel
software algorithm that is currently subject to a patent application. The
algorithm requires signals from two pre-existing non-invasive optically-based
sensors that are applied by sticking to the surface of the skin. We believe that
there is a substantial market opportunity for such a product in major, neuro and
heart surgery patients.
Prospects
Besides continuing to progress discussions with potential US distributors, the
second half of the year will see the Company focusing on the establishment of
the upcharge and consignment sales models in the US alongside the existing
capital sales model. UK sales have progressed well and we expect this trend to
continue. In Europe, having received the final marketing approvals for the
initial countries, we will now concentrate on converting the clinical interest
shown in these territories to commercial sales. We have begun to seek a
distributor in Germany, Europe's largest market. Meanwhile, having recently
achieved the registration of the PulseCO monitor in Japan, we will be working
with our partner to promote PulseCO, once it is launched in Japan. Careful cost
control will be maintained with further reductions in the cost base whilst
maintaining our direct sales force at current levels.
Theresa Wallis
Chairman
22 September 2003
INDEPENDENT REVIEW REPORT TO LiDCO GROUP PLC
Introduction
We have been instructed by the Company to review the financial information for
the six months ended 30 June 2003, which comprises the consolidated profit and
loss account, the consolidated balance sheet, the consolidated cash flow
statement and related notes 1 to 3. We have read the other information contained
in the interim report and considered whether it contains any apparent
misstatements or material inconsistencies with the financial information.
This report is made solely to the company, in accordance with Bulletin 1999/4
issued by the Auditing Practices Board. Our work has been undertaken so that we
might state to the company those matters we are required to state to them in an
independent review report and for no other purpose. To the fullest extent
permitted by law, we do not accept or assume responsibility to anyone other than
the company, for our review work, for this report, or for the conclusions we
have formed.
Directors' responsibilities
The interim report, including the financial information contained therein, is
the responsibility of, and has been approved by, the directors. The directors
are also responsible for ensuring that the accounting policies and presentation
applied to the interim figures are consistent with those applied in preparing
the preceding annual accounts except where any changes, and the reasons for
them, are disclosed.
Review work performed
We conducted our review in accordance with the guidance contained in Bulletin
1999/4 issued by the Auditing Practices Board for use in the United Kingdom. A
review consists principally of making enquiries of group management and applying
analytical procedures to the financial information and underlying financial data
and, based thereon, assessing whether the accounting policies and presentation
have been consistently applied unless otherwise disclosed. A review excludes
audit procedures such as tests of controls and verification of assets,
liabilities and transactions. It is substantially less in scope than an audit
performed in accordance with United Kingdom Auditing Standards and therefore
provides a lower level of assurance than an audit. Accordingly, we do not
express an audit opinion on the financial information.
Review conclusion
On the basis of our review, we are not aware of any material modifications that
should be made to the financial information as presented for the six months
ended 30 June 2003.
DELOITTE & TOUCHE LLP
London
Chartered Accountants
22 September 2003
CONSOLIDATED PROFIT AND LOSS ACCOUNT
For the six months ended 30 June 2003
Six months Six months Year ended
ended 30 June ended 30 June 31 December
2003 2002 2002
(unaudited) (unaudited) (audited)
#'000 #'000 #'000
TURNOVER 1,655 984 2,042
Cost of sales (501) (367) (779)
Gross profit 1,154 617 1,263
Administration expenses (3,162) (3,409) (7,038)
OPERATING LOSS (2,008) (2,792) (5,775)
Interest receivable and similar 47 168 279
income
LOSS ON ORDINARY ACTIVITIES BEFORE (1,961) (2,624) (5,496)
TAX
Tax on loss on ordinary 112 - -
activities
LOSS ON ORDINARY ACTIVITIES AFTER (1,849) (2,624) (5,496)
TAX
Loss per share (basic) (p) 2.59 3.69 7.72
Loss per share (diluted) (p) 2.58 3.61 7.27
CONSOLIDATED BALANCE SHEET
As at 30 June 2003
30 June 30 June 31 December
2003 2002 2002
(unaudited) (unaudited) (audited)
#'000 #'000 #'000
FIXED ASSETS
Tangible assets 1,233 708 1,234
Intangible assets 544 587 565
Investments 38 164 42
1,815 1,459 1,841
CURRENT ASSETS
Stocks 1,979 2,520 2,292
Debtors 1,812 1,098 1,367
Cash at bank and in hand 1,881 7,308 3,974
5,672 10,926 7,633
CREDITORS: amounts falling due within (677) (687) (741)
one year
NET CURRENT ASSETS 4,995 10,239 6,892
TOTAL ASSETS LESS CURRENT LIABILITIES 6,810 11,698 8,733
CREDITORS: amounts falling due after (233) (455) (333)
more than one year
NET ASSETS 6,577 11,243 8,400
CAPITAL AND RESERVES
Called up share capital 357 355 356
Share premium 12,430 12,402 12,430
Merger reserve 8,512 8,512 8,513
Profit and loss account (14,722) (10,026) (12,899)
EQUITY SHAREHOLDERS' FUNDS 6,577 11,243 8,400
CONSOLIDATED CASH FLOW STATEMENT
For the six months ended 30 June 2003
Six months Six months
ended ended Year ended
30 June 30 June 31 December
2003 2002 2002
(unaudited) (unaudited) (audited)
#'000 #'000 #'000
Operating loss (2,008) (2,792) (5,775)
Depreciation and amortisation 260 130 331
Decrease in the value of 4 94 223
investments
Decrease/(increase) in stocks 313 (547) (319)
(Increase)/decrease in (445) 98 (171)
debtors
(Decrease)/increase in (164) (577) (645)
creditors
Net cash outflow from operating (2,040) (3,594) (6,356)
activities
Returns on investment and 47 168 279
servicing of finance
Taxation 112 - -
Capital expenditure and (213) (675) (1,387)
financial investment
Cash outflow before financing (2,094) (4,101) (7,464)
Financing 1 44 73
Decrease in cash in the (2,093) (4,057) (7,391)
period
NOTES TO THE INTERIM STATEMENT
1. NATURE OF THE FINANCIAL INFORMATION
The financial information has been prepared in accordance with generally
accepted accounting principles in the UK. The accounting policies applied in
preparing the financial information are consistent with those adopted and
disclosed in the Group's statutory accounts for the year ended 31 December 2002.
These results are unaudited and the financial information does not constitute
statutory accounts as defined under section 240 of the Companies Act 1985. The
financial information for the year ended 31 December 2002 has been derived from
the Group's statutory accounts for that period, as filed with the Registrar of
Companies. The auditors' report on the statutory accounts for the year ended 31
December 2002 was unqualified and did not contain statements under section 237
(2) or (3) of the Companies Act 1985.
2. DIVIDENDS
It remains the Company's policy that no dividends will be paid until future
operations have provided appropriate levels of distributable profits.
3. DISTRIBUTION OF THE INTERIM STATEMENT
Copies of this statement will be available for collection free of charge from
the Company's registered office at 16 Orsman Road, London N1 5QJ. An electronic
version will be available on the Company's website, www.lidco.com.
This information is provided by RNS
The company news service from the London Stock Exchange
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