RNS Number:8481M
Zi Medical PLC
27 June 2003
ZI MEDICAL PLC ("ZI MEDICAL" OR "THE COMPANY")
PRELIMINARY RESULTS
FOR THE 12 MONTHS ENDED 31 DECEMBER 2002
(Specialist developer of innovative medical device technologies with an emphasis
on drug infusion therapy)
KEY POINTS
*Distribution and collaboration agreements have recently been signed with
Baxter, the major global healthcare company.
*The loss for the period was #609,000 - broadly in line with budget.
*As ZiMed Ltd. was acquired via a reverse takeover in April 2002, the
results include approximately five months trading of BioLife Ventures plc.
*Further developments of RedEye - the company's gravity infusion
monitoring device - include a GSM communications module suitable for the
home care market and a catheter monitoring system
*The company is developing a range of syringe drivers using a new patented
method of detecting back-pressure, a problem commonly suffered by existing
products. The market for these devices is significant.
*Zi Medical has developed and patented some key devices for use within the
consumables used with syringe drivers, volumetric pumps and RedEye which it
hopes to market within the coming year. The consumables represent a greater
source of revenue for manufacturers than the associated hardware.
*The board is seeking further partnering arrangements with large, well
established medical device businesses to accelerate sales, rather than
retaining its in-house sales capability.
Executive chairman, Michael Fort comments
"We are very excited about the potential of, not only our current product
pipeline, but also the planned developments over the next two to three years. A
National Audit Office report in 2000 identified that almost a third of all
serious adverse events (SAEs) in hospitals relate to the giving of fluids in one
form or another. ... We will continue to concentrate on exploiting areas in
patient safety in fluid infusions as we believe that this market is one that
will lead to optimum shareholder returns in the medium term. "
Press Enquires:
Michael Fort, Executive Chairman, Tel: 07976 849470
Zi Medical PLC
Zoe Biddick, Biddicks Tel: 020 7448 1000
Chairman's Statement
I am pleased to report the inaugural trading results of the group for the period
ended 31st December 2002. I am also particularly pleased to be able to comment
further on the recent signing of the distribution and collaboration agreements
with Baxter Healthcare S.A., a member of the Baxter Healthcare Inc. Group.
The results include approximately five months trading as Biolife Ventures plc
prior to the reverse takeover of Zimed Limited and the placing and open offer
detailed in the document to shareholders dated 18th April 2002.
The loss for the financial period of #609,000 was broadly in line with our
expectations at the time of the acquisition. Sales of Red-Eye, the group's
patient monitoring system, by the internal sales force, were lower than expected
for reasons detailed below in the Operational Review, but tight management of
costs across all areas of the business kept the profit and loss account in line
with budget.
The group has made great strides in its product pipeline development. Further
enhancements have been made to the Red-Eye portfolio particularly in the
development of the GSM communications module that will be ready for launch later
in 2003 in order to exploit opportunities within the homecare market.
The development of a family of syringe driver products is particularly
encouraging as we believe the size of the global market for such products will
provide the group with strong growth opportunities in the medium term. We
believe that the group's unique and patented mechanism for backpressure
detection presents a strong marketing edge against current product offerings.
This problem increases the risk of using existing syringe drivers and its
resolution is perceived as a very positive development in the field. Great
emphasis will be placed over the next twelve months on ensuring this particular
area of our technology is exploited to the full. Additional further products in
the intravenous (IV) safety portfolio are planned for development this year.
The group's cash position has remained tight throughout the year. Our initial
fund raising of #562,000 just over a year ago was supplemented by a further
#180,000 in March this year. The financial market's appetite for an early stage
technology business such as ours has not been keen to say the least, when
combined with the general stock market malaise, raising funds has proved very
difficult. However, the progress made to date with limited funds has been a
great achievement, especially when this has been underscored with the recent
technology transfer deal with Baxter Healthcare. In order to fully exploit the
exciting opportunities for our products and to put the group on a sound
financial footing for the foreseeable future it will be necessary for the group
to raise additional funds before the end of the current financial year.
The deal with Baxter Healthcare, signed on 20th June 2003 was the culmination of
months of discussion and should be seen as high-level validation of the group's
technology and its ability to develop products for the worldhealthcare markets.
Baxter's position as a global leader in the medical devices business, with
representation in all major countries of the world, will ensure that Red-Eye
will be exploited to its full potential. Further, the technology collaboration
deal will allow our group to access Baxter resources during product development
and will further enhance our group's ability to develop first class products in
the areas of IV safety and ensure that they are commercialised on a very broad
geographical front. Whilst the details of the contracts must remain confidential
for commercial reasons, I can report that the royalty structure and contract
minimum quantities will provide the business with an income stream for the
foreseeable future.
That George Gallagher and his team have been able, in such a relatively short
period of time, not only to develop these new technologies but also to close
deals with multi national businesses is a testament to their abilities, both
technical and commercial. The group remains in discussions with a number of
other major healthcare businesses and we hope to be able to announce further
developments later in the year.
Subject to our ability to raise the necessary funds in the short term, I remain
very confident in the group's prospects for the medium to long term. We are very
excited about the potential of, not only our current product pipeline, but also
the planned developments over the next two to three years. We will continue to
concentrate on exploiting areas in patient safety in fluid infusions, as we
believe that this market is one that will lead to optimum shareholder returns in
the medium term.
Michael J Fort
Executive Chairman
Operational Review
Following the acquisition of Zimed Limited and the subsequent fund raising, it
had been the group's intention to complete the vertical integration of the
business as a medical devices solutions provider with the Red-Eye patient
monitoring system as the group's initial product offering.
To this end, the group recruited a small sales force in October 2002 to promote
the product direct to end-users, principally NHS hospitals. While the feedback
from what was effectively the first exhaustive field trial of RedEye proved
extremely useful, it also confirmed the difficulties facing a small company
trying to break into a mature market. It quickly became apparent that the cash
resources at the group's disposal were less than adequate to make the required
impact in the UK hospital market. It was therefore decided that the sales force
would be dismantled and that all efforts would be directed to the core
competencies of product development. At the same time, business development
activity was increased at a corporate level in order to seek out partnering
arrangements with large, well-established medical device businesses, with the
profile to exploit markets much more effectively.
The group's strengths lie in its abilities to develop innovative medical device
technologies based on current delivery methods, particularly in the areas of
patient safety in drug infusion therapy. A National Audit Office Report from
2000 identified that almost a third of all serious adverse events (SAEs) in
hospitals related to the giving of fluids in one form or another. The group,
having identified a need in this device area, set out to build a portfolio of
products, specialising in exploiting the need that clearly existed, namely:
Red-Eye
Further work has been undertaken on developing the Red-Eye family of products
that now include a catheter monitoring system, a GSM network model that is
particularly applicable to markets where homecare is a specific requirement,
together with various peripheral adaptations. It is believed, from market
intelligence gathered from the direct sales experience mentioned above together
with research undertaken at the time of the acquisition that the potential
market for Red-Eye in the UK alone is in the region of #15m per annum for the
basic product at market values. Your Board believes that the recent announcement
of the Baxter Healthcare contract to distribute Red-Eye is the optimum way to
exploit this market and other markets in Western Europe and the rest of the
world. The fact that one of the world's leading medical devices businesses has
chosen to exploit our product is proof of concept of the market niche for the
product.
Syringe Driver Family
The syringe driver market globally is very large - market estimates vary from
$500m to almost $1bn. However, product development is, at best, sporadic with
the main players relying on existing products, which have dominated the market
for a least a decade. The group has developed a family of syringe drivers with a
new patented method of detecting back-pressure in such devices - a problem with
existing syringes that is a cause of a high number of serious adverse events
(SAEs) each year. Zi-Medical's unique, modern product design puts the end-user
first. This is particularly important with ambulatory drivers where the patient
wears the product for days at a time. In therapeutic areas such as thalassemia,
where there is a high concentration of younger users, it is critical for the
product to appeal to the patient in order that they continue to use it.
The group's development pipeline includes an ambulatory driver with a very small
footprint - ideal for the thalassemia market; a standard sized ambulatory driver
for the general infusion of products where there is a need for patient mobility;
a low cost bedside driver to exploit the emerging countries markets, and a
standard bedside driver. It is believed that exploitation of this area of
product development offers the group the shortest route to profitability.
Other Product Developments
Whilst developing the two key product areas described above, other opportunities
have presented themselves to the group. The consumables, used both in syringe
drivers, volumetric pumps and Red-Eye are a bigger source of revenue for the
manufacturers than the hardware itself. To this end the group has developed and
patented some key devices contained within the consumables that it hopes to
market within the coming year.
Similarly, with the emphasis on patient safety, further early stage
opportunities are being investigated. In all cases, it is planned that each new
area for product development should be able to be commercially exploited within
eighteen months of work commencing on its development.
Financing
All the plans mentioned above are clearly dependent upon the group's ability to
continue to fund them. Whilst the cash position has been tight since inception,
the termination of the internal sales force will save the business almost
#250,000 per annum - money that is better invested in exploitation of the
group's intellectual property portfolio.
Each new product that is launched costs approximately #250,000 to develop to a
stage that is presentable to potential partners and customers. From that point
onwards a specific product development plan can be formed whereby the customer
co-funds the development of the product to launch. It is critical however, that
at this early stage of the group's development it is not starved of the funds
that it needs to take it's existing product offerings to customer presentation
stage. To this end a further round of fund raising later in this financial year
is necessary. It is fundamental that the cash invested thus far can evolve into
a serious product portfolio that will take the group into profit in the medium
term.
Board Composition
Immediately following the year-end, Rhys Owen, the group's part-time managing
director resigned to pursue other business interests. Steve Stocks, appointed to
supervise the sales force resigned in May following the board's decision to end
internal sales and concentrate instead on partnering agreements. We wish them
both well and thank them for their contributions during their relatively short
tenures. The current executive board comprises Michael Fort, Chairman and George
Gallagher, Managing Director. We recognise the need to strengthen this area
further and to add to the non-executive capacity with the appointment of at
least one further member to the board in the short term.
Consolidated profit and loss account
for the year ended 31 December 2002
Year ended Year ended Year ended 9 month period
ended
31 December 31 December 31 December 31 December
2002 2002 2002 2001
Existing Acquisitions Continuing Continuing
operations operations operations
#000 #000 #000 #000
Turnover - 43 43 -
Cost of - (19) (19) -
sales
=============== =============== =============== ===============
Gross profit - 24 24 -
Administrative (116) (519) (635) (63)
expenses
--------------- --------------- --------------- ---------------
Group (116) (495) (611) (63)
operating
loss
Interest 13 7
receivable and
similar
income
Interest (11) -
payable and
similar
charges
--------------- ---------------
Loss on (609) (56)
ordinary
activities
before
taxation
Tax on loss on - -
ordinary
activities
--------------- ---------------
Retained loss (609) (56)
for the
financial
period
=============== ===============
Loss per
ordinary
share
Basic and 2.02p 0.48p
diluted
=============== ===============
The Group has no recognised gains or losses for the year (2001:period) other
than those stated above and therefore no separate statement of total recognised
gains and losses has been presented. The results above also represent the
historical cost loss.
Consolidated balance sheet
at 31 December 2002
2002 2001
#000 #000 #000 #000
Fixed
assets
Intangible 1,871 -
assets
Tangible 32 -
assets
-------------- -------------- ---
1,903 -
Current
assets
Stocks 40 -
Debtors 51 4
Cash at bank 104 502
and in hand
-------------- --------------
195 506
Creditors:
amounts
falling due
within
one year (222) (13)
-------------- --------------
Net current (27) 493
(liabilities)
/assets
-------------- --------------
Total assets 1,876 493
less current
liabilities
Creditors:
amounts
falling due
after
more than one (34) -
year
-------------- --------------
Net assets 1,842 493
============== ==============
Capital and
reserves
Called up 792 270
share
capital
Share premium 705 279
account
Merger 1,010 -
reserve
Profit and (665) (56)
loss
account
-------------- --------------
Equity 1,842 493
shareholders'
funds
============== ==============
Consolidated cash flow statement
for the year ended 31 December 2002
Year ended Period ended
31 December 31 December
2002 2001
#000 #000
Net cash outflow from operating (623) (54)
activities
Return on investments and 2 7
servicing of finance
Capital expenditure and (28) -
financial investment
Acquisitions and disposals (320) -
-------------------- -------------------
Cash outflow before financing (969) (47)
Financing 532 549
-------------------- -------------------
Decrease/(increase) in cash in (437) 502
the period
==================== ===================
Reconciliation of net cash flow to movement in net funds
for the year ended 31 December 2002
Year ended Period ended
31 December 31 December
2002 2001
#000 #000
(Decrease)/increase in cash in (437) 502
the period
-------------------- -------------------
Movement in net funds in the (437) 502
period
Net funds at the start of the 502 -
period
-------------------- -------------------
Net funds at the end of the 65 502
period
==================== ===================
Notes
(forming part of the financial statements)
1. *Basis of preparation
The Group suffered a loss on ordinary activities for the year of #609,000
(2001: loss of #56,000) although at the current level of investment in
development activities, the directors are confident that the Group will turn
to profitability in the medium term. The directors estimate that the Group's
funding requirements, in order to continue to exploit the current commercial
opportunities over the next 12 months are in the region of #0.5m to #0.75m,
against which a current bank overdraft facility of #30,000 exists.
The directors are of the opinion that the recent signing of the distribution
and collaboration agreements with Baxter Healthcare S.A. leave the Group
well placed to approach new private investors in the short term for
additional funding later in 2003 which they believe will generate sufficient
working capital facilities to satisfy the forecast funding requirements.
Until such time, the directors have identified a number of options to
continue within its facilities.
Although there can be no certainty that sufficient equity funding will be
available, the directors believe it to be appropriate to prepare the
financial statements on a going concern basis since they are confident that
the Group will be able to secure additional funding for the next 12 months
to enable it to continue to meet its debts as they fall due.
The financial statements do not include any adjustments that would result
from the going concern basis of preparation being inappropriate.
2. Loss per share
The calculation of loss per share is based on basic and diluted losses
of #609,000 (9 months ended 31 December 2001: #56,000 loss) and basic
and diluted ordinary shares of 30,113,376 (2001: 11,642,827) being the
weighted average number of shares in issue during the year (2001:
period).
3. Acquisitions and disposals
On 14 May 2002 the Company acquired the entire share capital of Zimed
Limited comprising net liabilities of #291,000 for a total cost of
#1,600,000. The issued share capital of Zimed Limited is #1,000 which is
fully paid up.
The net liabilities acquired are set out below:
Book and fair
value at 14 May
2002
#000
Fixed assets 66
Current assets 62
---------------
Total assets 128
Creditors (419)
---------------
Net liabilities (291)
Goodwill 1,891
---------------
Total cost of acquisition (including fees of #250,000) 1,600
===============
Satisfied by:
Issue of 18,000,000 initial consideration ordinary 1,350
shares at 7.5p per share
Issue of 353,336 ordinary shares at 7.5p per share in 27
lieu of fees
Cash 223
=== ---------------
1,600
=== ===============
In addition to the initial consideration, a maximum deferred
consideration of #420,000 is payable via the issue of a further
5,600,000 2p ordinary shares at 7.5 per share.
The conditions attached to the deferred consideration are in two
elements as follows:
(i) If the turnover for the Group for the 12 month period ended
30 April 2003 exceeded #175,000 then a maximum of 2,800,000 2p
ordinary shares would have been issued at 7.5 per share
(#210,000). Since the actual turnover for the 12 month period
ended 30 April 2003 did not exceed #175,000 this element of the
deferred consideration has expired.
ii. If the turnover for the Group for the 12 month period ending
30 April 2004 reaches #2,000,000, then a maximum additional
consideration of 2,800,000 2p ordinary shares will be issued at
7.5p per share (#210,000). The payment of this element of the
deferred consideration is dependent on the turnover for the 12
month period ending 30 April 2004 exceeding #1,000,0000 with
consideration being payable on a pro rata basis for turnover
between #1,000,000 and #2,000,000.
The profit and loss account of Zimed Limited for the period 1 January
2002 to 14 May 2002 included turnover of #9,000 and a loss after
taxation of #92,000. The loss on ordinary activities for the 9 month
period ended 31 December 2001 was #118,000.
4. Reconciliation of movements in shareholders' funds
Group
Year ended 31
December
2002
#000
Loss for the year (609)
New share capital subscribed 1,958
------------------
1,349
Opening shareholders' funds 493
------------------
Closing shareholders' funds 1,842
==================
5. Reconciliation of operating loss to operating cash flows
Year ended 31 Period ended 31
December 2002 December 2001
#000 #000
Operating loss (611) (63)
Depreciation 20 -
Amortisation 62 -
Decrease in stock 6 -
Increase in debtors (31) (4)
(Decrease)/increase in (69) 13
creditors
------------------ ----------------
Net cash outflow from operating (623) (54)
activities
================== ================
6. *Analysis of cash flows for headings netted in the cash flow statement
Year ended Period ended
31 December 31 December
2002 2001
#000 #000
Returns on investments and servicing of
finance
Interest received 13 7
Interest paid (11) -
--------------- ----------------
Net cash inflow from returns on
investment and servicing of finance
2 7
=============== ================
Capital expenditure and financial
investment
Payments to acquire tangible fixed (28) -
assets
--------------- ----------------
Net cash outflow from capital
expenditure and financial investment
(28) -
=============== ================
Acquisitions and disposals
Payments to acquire subsidiary (223) -
undertaking
Net overdraft acquired with (97) -
subsidiary
--------------- ----------------
Net cash outflow from acquisitions and (320) -
disposals
=============== ================
Financing
Issue of share capital 581 549
Capital element of finance leases (2) -
Repayment of bank loans (47) -
--------------- ----------------
Net cash inflow from financing 532 549
=============== ================
7. Reconciliation of net cash flow to movement in net funds
#000
Decrease in cash during the year (437)
Cash outflow in respect of repayment of loans and 49
finance leases
----------------
Change in net funds resulting from cashflows (388)
Loans and finance leases acquired with subsidiary (92)
----------------
Change in net funds (480)
Net funds at 1 January 2002 502
----------------
Net funds at 31 December 2002 22
================
8. Analysis of changes in net funds
At 1 Cash Acquisitions At 31 December
(excluding cash 2002
and overdrafts)
January flows
2002
#000 #000 #000 #000
Cash at 502 (398) - 104
bank and in
hand
Overdraft - (39) - (39)
--------------- ------------- --------------- ---------------
502 (437) - 65
Debt due - 17 (28) (11)
within 1
year
Debt due - 30 (60) (30)
greater
than 1
year
Finance - 2 (4) (2)
leases
--------------- ------------- --------------- ---------------
502 (388) (92) 22
=============== ============= =============== ===============
9. This report is being sent out to shareholders and copies will be made
available at the Company's registered office, Unit 4, St Asaph Business
Park, St Asaph, Denbighshire LL17 0LJ.
ENDS
This information is provided by RNS
The company news service from the London Stock Exchange
END
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