RNS Number:1982J
LiDCO Group Plc
26 March 2003
LiDCO GROUP PLC
PRELIMINARY RESULTS
LiDCO Group Plc ("LiDCO" or "the company"), the UK-based AIM-traded
cardiovascular monitoring company, announces its results for the year to
31 December 2002.
HIGHLIGHTS
* Turnover increased by 81% to #2.04m (2001: #1.13m);
* Strong clinical acceptance of the technology demonstrated by sensor usage
trebling compared with 2001;
* Commercial validation of the business model evidenced by 300 PulseCO
and LiDCO Systems sold during 2002 (2001: 128 units);
* Lithium chloride injectate approved in principle for use in Europe in
January 2003, enabling commercialisation of the LiDCOplus system across
Europe in 2003;
* LiDCOplus system approved by US Food and Drug Administration in January
2003; and
* Discussions have commenced with potential US distribution partners to
maximise access to the US market.
Enquiries:
LiDCO Group Plc 020-7749 1500
Terry O'Brien (CEO) terry@lidco.com
Theresa Wallis (Chairman) theresa.wallis@lidco.com
Bankside Consultants Limited
Charles Ponsonby (PR) charles.ponsonby@bankside.com 020-7444 4166
Chris Munden (IR) chris.munden@bankside.com 020-7444 4150
Notes for Editors
LiDCO researches, develops and sells innovative medical devices, primarily for
critical care and cardiovascular risk hospital patients who require real-time
minimally invasive cardiovascular monitoring. The Group currently has two
principal products, both of which are patent protected, the LiDCOplus monitor (a
cardiovascular monitor displaying on a PC hardware platform the real-time
parameters of: fluid volume status, cardiac output and oxygen delivery) and the
LiDCO System (sensor and disposables) which is used for the calibration of the
monitor. The Group's principal customers are hospitals.
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 London N1, whilst its sales offices are located in the
Granta Science Park, Cambridge and in Dallas, Texas.
CHAIRMAN'S STATEMENT
This is my first Statement since being appointed non-executive Chairman in
December of 2002. In fact, it is only the Company's second set of annual results
since its admission to the London Stock Exchange's Alternative Investment Market
in July 2001.
LiDCO raised funds from the public market in order to commence the
commercialisation of its minimally invasive sensor and PC based monitoring
technology. I was therefore excited to join the Company at the end of its first
full year of sales activity in both the USA and the UK. In reviewing its 2002
performance I am aware that this was a challenging period for the Company.
The challenge was to establish a new technology in a market sector that requires
change but where standards are necessarily of the highest order. This meant that
in parallel to the sales effort the Company had to transition its operations
successfully to a fully commercial basis with the capacity to become the
supplier of choice for the minimally invasive monitoring of risk surgery and
intensive care patients. Specific achievements to this end included clinically
validating the technology, increasing revenues while maintaining pricing and
gross margins, establishing and assessing the marketing strategy for the USA and
the UK, automating and significantly increasing sensor manufacturing capacity
and positioning the Company to expand sales in 2003 through registration of the
Company's in vivo diagnostic (lithium chloride) in additional major European
markets.
In light of these achievements I am pleased to report that during 2002 the
foundations for the commercial phase of the business were clearly established.
As we enter our second full year of sales we are confident that we have both the
product and the organisational infrastructure to access the substantial market
opportunity outlined in our flotation prospectus. The challenges for 2003 are to
roll out sales in Europe and grow and accelerate closures of our sales pipeline
in the USA.
Towards the end of the year, the Board decided that the best way of maximising
access to the US, our largest market, would be through a distribution agreement
with a partner and that, given the progress made by the Company during 2002,
this could be achieved on commercially attractive terms. To this end the Company
has begun early discussions with potential US distribution partners.
FINANCIAL REVIEW
Turnover increased to #2,042,000. Whilst this was lower than original market
expectations, it was 81% above the previous year (2001: #1,130,000), generating
a gross profit of #1,263,000 (2001: #832,000) and representing a gross margin of
62% (2001: 74%), in line with the Company's expectations.
As 2002 was the first full year of sales, administration expenses rose to
reflect higher sales and marketing costs. Administration expenses were in line
with expectations at #7,038,000 (2001: #3,999,000). The pre and post tax loss
was #5,496,000 (2001: #2,803,000) and the basic loss per share is calculated at
7.72p (2001: 5.70p).
At the year end, net assets amounted to #8.0m, including net current assets of
#6.9m. The year end net cash balance was #4.0m (2001: #11.4m). The Group's
programme of investment in working capital and production facilities is now
complete, so that the cash burn in 2003 is expected to fall significantly.
TRADING REVIEW
Overall
Unit sales of monitors doubled whilst those of single use sensors trebled. 74%
of turnover related to monitors and 19% to sensors, with 7% relating to licence
fee income. 83% of the monitors (2001: 98%) were sold on a capital sale basis.
The average monthly usage rate of sensors per monitor was 6 which is very
encouraging.
Monitor sales consisted of 211 PulseCO units and 89 LiDCO units. In 2003, all
sales are expected to be of the improved LiDCOplus unit, which combines the
software of the two previous monitors into a single, easy-to-use unit based on
the PulseCO monitor.
US AND UK SALES ACTIVITY PIPELINE
2001 2002 2003 Cumulative
(2m to 28 February)
Meetings/demonstrations 149 224 21 394
Field trials requested 149 224 21 394
Field trials commenced 82 184 16 282
Field trials completed 48 143 27 218
Sales proposals* 47 176 53 276
Sales closures 23 54 8 85
* Sales proposals in 2002 exceeded field trials completed as some hospitals have
re-ordered monitors
During 2002 the European sales pipeline grew significantly with 224 product
demonstrations made, all of which resulted in a request for a field trial. 184
field trials were initiated and 143 were completed. Of the 176 sales proposals
made 54 resulted in sales closures in the year, 8 sales proposals did not
proceed due to lack of hospital budget funding and 114 sales proposals are still
in progress.
USA
During 2002 sales to US customers were made through our direct sales force of 12
people. Turnover increased to #1,009,000 (2001: #632,000), with 92% monitors
sold on a capital basis.
By the end of 2002, 40 hospitals had purchased the technology. Included in
these customers are a number of influential regional referral centers including:
MD Anderson (Houston), Beaumont (Detroit), Crawford Long (Atlanta), University
of Chicago and Northwestern Memorial (Chicago). In order to expand their use of
our minimally invasive monitoring six US customers have already reordered
monitors during 2002. Of particular note is Sarasota Hospital (Tampa, Florida)
which has fully equipped its cardiovascular theatres and intensive care
department through the purchase of 19 monitors.
Overall clinical acceptance of the technology has been excellent as evidenced by
the high percentage of requests for sales proposals resulting from hospitals'
clinical evaluation of the products. While progress to the clinical sign off
stage has been rapid, closure of sales has proved to be significantly slower
than expected, due mainly to cost containment by the hospital administration and
consequent lengthening of the capital cycle, an industry-wide phenomenon. This
has been the predominant reason why sales have not met analysts' expectations in
2002. It is, however, encouraging that follow-on purchases of monitors have
experienced a shorter capital cycle time at 7 months. Despite this tough
commercial environment, prices for both the monitor and sensor products have
been very robust and according to the Company's expectations.
The US is the most important market and represents approximately 60% of our
potential worldwide sales. Experience of our first full year of direct sales in
this market shows that the desire to change to our minimally invasive monitoring
technology is substantially as expected. However, the most challenging aspects
regarding access to this market are the hospital capital cycle and the physical
size of the opportunity, with around 14,000 potential customers within 3,500
hospitals. In the last quarter of 2002, following a review of US sales
strategy, the Company decided that the high level of interest in the product and
the margins being achieved in early sales meant that seeking a major US
corporate sales partner had now become a commercially attractive route to
accessing the market and announced its intention to start seeking a suitable
partner.
UK
As with the USA we have just concluded our first full year of direct sales
co-ordinated from our Granta Park (Cambridge) office. Given the severe shortage
of funds available for capital expenditure in the UK NHS the sales strategy was
to mostly provide monitors without charge and sell the sensors and associated
disposables mainly by means of a compensatory up charge. Turnover increased to
#300,000 (2001: #113,000) - with 35% of monitors placed on a capital basis. Use
of disposables has been very encouraging at 11 per monitor. By the end of 2002,
25 hospitals had adopted our technology. Our sales force numbering six people is
considered by the Company to be appropriate to penetrate this market fully.
Continental Europe
In anticipation of final approvals of lithium chloride, distributors were
appointed in Holland, Italy, Spain, Belgium and the Czech Republic. Sales
therefore predominantly reflected stocking orders and subsequent clinical trials
in major reference centres. Turnover increased to #441,000 (2001: #114,000).
Discussions are currently underway to establish a distributor for Germany and
Austria.
Far East and Japan
Sales in the Far East and Japan totalled #292,000 (2001: #271,000). Approval of
the PulseCO system for sale in Japan is expected towards the end of 2003. Sales
throughout the Far East and Japan are made through distributors appointed by the
Company.
CLINICAL VALIDATION
The Company continues to support an active program of clinical validation of the
accuracy of its products in cardiac / major surgery, intensive care, trauma and
heart failure markets (see the company website:www.lidco.com for full
publication details.) 2002 was another successful year with studies concluding
positively at: Duke University (N.Carolina) - intensive care, University of
Chicago (Illinois) - surgical study, Hammamatsu University (Japan) - efficacy in
pathological lung oedema, Southampton University Hospital - heart failure and
'off-pump' cardiac surgery.
PRODUCT APPLICATIONS
The Company actively assists customers to conduct trials of novel
applications of its technology. Applications currently undergoing trials or
further development include peri-operative optimisation, congestive heart
failure and paediatrics, all large or expanding markets.
REGULATORY AFFAIRS
In 2003, regulatory approval for the LiDCO System lithium chloride in vivo
diagnostic has been received in principle in the following EU territories:
Austria, Belgium, Germany, Italy, the Netherlands and Spain. This brings the
number of territories in which the Company has approval to sell its products to
12. In addition, approval applications are in progress for: Iran, Korea and
Taiwan and further applications will be made during 2003.
NEW PRODUCTS
On 9 January 2003, approval was received from the FDA (Food and Drug
Administration of the USA) for the sale of the LiDCOplus Hemodynamic Monitor in
the USA. The LiDCOplus Monitor combines the measurement and monitoring features
of the Company's existing products: the LiDCO (lithium dilution cardiac output
measurement) and PulseCO Systems (real time cardiovascular monitor), thus saving
premium space around the patient's bed and significantly enhancing ease of use.
RESEARCH AND DEVELOPMENT
The Company is actively developing additional features and applications for its
products. There are currently two principal areas of development:
Monitoring of Patient Fluid Status
This is one of the key unfulfilled measurements required in critical care
patients. The commercial implication of improving the performance of the
LiDCOplus in this arena is that we could greatly increase the numbers of
patients for whom the technology is suitable. The Company's ambition is to have
a LiDCOplus at the bedside for all acute care patients with arterial monitoring
who require fluid management. The customer requires a more visual way of
detecting occult low blood volume status and the amount of fluid required to
restore the patient. We are currently recording 'fluid loading' episodes in
patients undergoing optimisation for high risk surgery. This data will be used
to model the user interface and assess clinician and nursing response to the
novel interfaces.
Capillary Venous Pressure Measurement
This is a software algorithm which uses the arterial pressure waveform to
indicate the average pressure at the venous end of the tissue capillary. This
would have potential application in fluid volume management (see above). The
patent for this measurement has been filed and is progressing to the worldwide
PCT application stage. The accuracy to which the measurement can be made and the
utility of the measurement is under investigation.
MANUFACTURING
In 2002, a major expansion of the Company's London manufacturing facility was
completed at a cost of #0.8m, including a second clean room, high volume semi
automated sensor production and enhanced monitor production capacity.
BOARD CHANGES
Two resignations from the Board occurred in 2002: in November Pascal Levensohn,
a non-executive Director since 1998, and in December 2002 Bill Alexander, a
Director from 1995 to 2001 and Executive Chairman since the Company's admission
to AIM. Pascal and Bill, both of whom are resident in the USA, supported the
Company through its private funding rounds and subsequent flotation.
As Bill's successor I was appointed non-executive Chairman on 20 December 2002
and would like to thank Bill and Pascal for their years of service to the
Company.
PROSPECTS
The foundations to support continued growth were put in place during 2002. 2003
will see an increasing focus by the Company on sales in its expanded group of
territories. Sales in the US are expected to continue to be subject to a slow
capital cycle. In order to access the full market potential of the product in
the US and accelerate the closure of pipeline accounts the Company is in early
discussions with potential US distribution partners. Given the progress made
during 2002 and the fact that the Company has succeeded in establishing a high
level of interest in a high margin product that is supported by a low cost
manufacturing base we believe that it is in a strong position to attract a
suitable distribution partner. We hope to be able to announce on these matters
further during the year. Investment will continue in the core technology to
develop further enhancements to our sensor technology, physiological waveform
monitoring software and user interfaces. We remain confident of our prospects.
Theresa Wallis
Chairman
25 March 2003
CONSOLIDATED PROFIT AND LOSS ACCOUNT
For the year ended 31 December 2002
2002 2002 2001 2001
Note #'000 #'000 #'000 #'000
TURNOVER 2,042 1,130
Cost of sales (779) (298)
Gross profit 1,263 832
Administration expenses - other 2 (7,038) (3,897)
Administration expenses - exceptional items 3 - (102)
(7,038) (3,999)
OPERATING LOSS (5,775) (3,167)
Interest receivable and similar income 279 364
LOSS ON ORDINARY ACTIVITIES BEFORE TAX (5,496) (2,803)
Tax on loss on ordinary activities - -
LOSS ON ORDINARY ACTIVITIES AFTER TAX (5,496) (2,803)
Loss per share (basic) (p) 7.72 5.70
Loss per share (diluted) (p) 7.27 5.54
All amounts derive from continuing operations.
There are no recognised gains or losses for the current or preceding years other
than as stated above.
CONSOLIDATED BALANCE SHEET
As at 31 December 2002
2002 2001
#'000 #'000
FIXED ASSETS
Intangible fixed assets 565 567
Tangible fixed assets 1,234 183
Investments 42 258
1,841 1,008
CURRENT ASSETS
Stocks 2,292 1,973
Debtors 1,367 1,196
Cash at bank and in hand 3,974 11,365
7,633 14,534
CREDITORS: amounts falling due within one
year (741) (1,194)
NET CURRENT ASSETS 6,892 13,340
TOTAL ASSETS LESS CURRENT LIABILITIES 8,733 14,348
CREDITORS: amounts falling due after more
than one year (333) (525)
NET ASSETS 8,400 13,823
CAPITAL AND RESERVES
Called up share capital 356 354
Share premium 12,430 12,359
Merger reserve 8,513 8,513
Profit and loss account (12,899) (7,403)
EQUITY SHAREHOLDERS' FUNDS 8,400 13,823
Signed on behalf of the Board of Directors
Richard Mills
Director
25 March 2003
CONSOLIDATED CASH FLOW STATEMENT
For the year ended 31 December 2002
2002 2001
#'000 #'000
Net cash outflow from operating activities (6,356) (4,935)
Returns on investment and servicing of finance 279 364
Capital expenditure and financial investment (1,387) (925)
Cash outflow before financing (7,464) (5,496)
Financing 73 12,493
(Decrease)/increase in cash in the year (7,391) 6,997
Reconciliation of net cash flow to movement in net funds
2002 2001
#'000 #'000
Movement in cash in the period (7,391) 6,997
Net funds at 1 January 11,365 4,368
Net funds at 31 December 3,974 11,365
RECONCILIATION OF MOVEMENT IN CONSOLIDATED SHAREHOLDERS' FUNDS
For the year ended 31 December 2002
2002 2001
#'000 #'000
Loss for the financial year (5,496) (2,803)
Issue of shares 73 12,492
Net (reduction)/addition to shareholders' funds (5,423) 9,689
Opening shareholders' funds 13,823 4,134
Closing shareholders' funds 8,400 13,823
NOTES TO THE PRELIMINARY RESULTS
For the year ended 31 December 2002
1. NATURE OF THE FINANCIAL INFORMATION
The financial information set out in the announcement does not constitute the
Group's statutory accounts for the years ended 31 December 2002 or 2001. The
financial information for the year ended 31 December 2001 is derived from the
statutory accounts for that year which have been delivered to the Registrar of
Companies. The auditors reported on those accounts; their report was
unqualified and did not contain a statement under s237(2) or (3) Companies Act
1985. The statutory accounts for the year ended 31 December 2002 will be
finalised on the basis of the financial information presented by the directors
in this preliminary announcement and will be delivered to the Registrar of
Companies following the company's annual general meeting.
The preliminary results have been prepared in accordance with applicable
accounting standards. The particular accounting policies adopted are the same
as those adopted in the financial statements for the year ended 31 December
2001.
2. ADMINISTRATION EXPENSES
Administrative expenses include a loss of #223,000 (2001 - #108,000) on shares
held by the Group's Employee Share Ownership Trust. The shares were acquired by
the Trust on the flotation of the Group at #1.40. The market value of the shares
at 31 December 2002 was 14p per share (2001 - 98.5p per share).
3. EXCEPTIONAL ITEMS
Professional fees of #nil (2001 - #102,000) in respect of work performed by
advisers on the restructuring of the Group prior to the flotation have been
expensed. Direct costs of the flotation were debited against the share premium
account.
4. DIVIDENDS
It remains the Group's policy that no dividends will be paid until future
operations have provided appropriate levels of distributable profits.
5. DISTRIBUTION
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.
This information is provided by RNS
The company news service from the London Stock Exchange
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