TIDMAOR
RNS Number : 2268V
AorTech International PLC
20 July 2018
AorTech International plc
("AorTech", the "Company" or the "Group")
Final results for the year ended 31 March 2018
AorTech International plc (AIM: AOR), the biomaterials and
medical device IP company, today announces its audited final
results for the year ended 31 March 2018.
Highlights:
-- Satisfactory settlement of litigation proceedings: resulting
in net receipts of $339k after costs.
-- Loss for the year down 81%: loss from continuing operations reduced to $44k (2017 $237k).
-- Year end cash balance: increased significantly to $591k (2017: $114k).
-- Successful, oversubscribed fundraising post-year end: GBP2.6m
raised before expenses enabling the execution of a new business
plan by a new team and partners.
For further information contact:
AorTech International plc Tel: +44 (0)7730 718296
Bill Brown, Executive Chairman
Stockdale Scurities Limited Tel: +44 (0)20 7601 6100
Tom Griffiths / David Coaten
A copy of this announcement will be available shortly at
www.aortech.net/investor-relations/regulatory-news-alerts.
About AorTech:
AorTech has developed biostable, implantable polymers, including
Elast-Eon(TM) and ECSil(TM) the world's leading long-term
implantable co-polymers, now manufactured on their behalf by
Biomerics LLC in Utah, USA. With several million implants and seven
years of successful clinical use, AorTech polymers are being
developed and used in cardiology and urological applications,
including pacing leads, cardiac cannulae, stents and neuro
stimulation devices. Devices manufactured from AorTech polymers
have numerous US FDA PMA approvals, 510k's, CE Marks, Australian
TGA and Japanese Ministry of Health approvals.
Elast-Eon(TM) and ECSil(TM)'s biostability is comparable to
silicone while exhibiting excellent mechanical, blood contacting
and flex-fatigue properties. These polymers can be processed using
conventional thermoplastic extrusion and moulding techniques. A
range of materials in a variety of application-specific
formulations for use in medical devices and components are
available.
In addition to the licensing of biostable polymers, AorTech is
now developing medical devices utilising the key properties of its
world class polymers.
CHAIRMAN'S STATEMENT
The Company on which I report today has changed beyond all
recognition from the AorTech I reported on last year. A year ago,
AorTech was embroiled in litigation with its former Chief Executive
and, as such, the focus of the Company was on historic events.
Resolving the litigation has allowed AorTech to switch focus to its
very exciting future and the execution of a new business plan by a
new team and partners. I discuss below the operating results for
the year ended 31 March 2018, but given the transformation of the
Company, the recent changes are of much more significance to its
future success.
Strategy Review
In the Company's interim results announced last December, it was
stated that a strategy was being considered as to how to
commercialise AorTech's platform technology. This strategy is now
in place following the recent oversubscribed fundraising.
In reviewing AorTech's portfolio of intellectual property
('IP'), it became very clear to the Board that the family of
biostable polymers was exceptional in long-term performance and is
well suited for use in blood contacting devices and particularly in
the cardiovascular system. AorTech has licensed device
manufacturers to use Elast-Eon(TM) in this area and to date over 5
million devices have been implanted which depend upon the use of
Elast-Eon(TM) for their success. The challenge for AorTech is to
achieve greater value from the benefits Elast-Eon(TM) brings to
medical devices.
The strategy adopted is therefore to continue to pursue
licensing and supply business through our manufacturing partner
Biomerics LLC, to advance development of AorTech's IP portfolio by
moving further up the value chain and to develop medical devices of
our own design.
AorTech is now transitioning to become a medical device business
with a portfolio of devices in the cardiovascular field.
Initial Product Focus
AorTech has identified two growth platforms and three key device
products that can be developed utilising the key properties of the
Elast-Eon(TM) polymer and build upon the GBP60 million of historic
research and development expenditure. The platforms are Polymeric
Heart Valves and Medical Textiles within which initial products
will be cardiac patches and vascular grafts. Each product is
described below:
Polymeric Heart Valves
AorTech has the opportunity to transform the global treatment of
heart disease by delivering a synthetic heart valve that will be
durable, so reducing the need for future replacement and should not
require lifelong drug treatment. As well as these clear clinical
advantages, the manufacturing costs of a synthetic valve will be
considerably less than those of current valve technology making
this a potentially disruptive advance in heart valve surgery.
AorTech's historic investment and progress to date dramatically
reduces both the time and cost of preparing a novel valve for human
trial.
When it initially developed a synthetic valve, AorTech was ahead
of the market, but the global heart valve market (valued at some
US$5 billion) is now in need of new technology, enhancing the
opportunities available to AorTech.
Medical Textiles
AorTech has identified two device categories that currently rely
on abattoir-sourced animal by-products. These are pericardial
patches and large bore vascular grafts. Replacing animal tissue
with a world leading bio-stable polymer will reduce manufacturing
costs, eliminate animal by-product sourcing risk and improve
product sterilisation options and performance. The initial products
to be developed are targeted to be ready for human use within two
years due to the acceptance of Elast-Eon(TM) in long-term
implants.
Patches
The currently available technology comprises either animal
tissue or textile (PTFE) material. Each material is compromised by
either suffering from calcification or subject to tissue ingrowth
leading to adhesion. AorTech will develop an Elast-Eon(TM) based
product that should avoid these problems and address a market that
is suffering a lack of supply of animal sourced products.
Vascular Grafts
The currently available technology comprises tightly woven PTFE
grafts or softer polyester grafts sealed with animal-sourced
material, limiting sterilisation options. AorTech will develop new
graft technology replicating current graft performance, but
utilising Elast-Eon(TM) as a sealing agent. The graft will be made
available as a direct surgical implant and as a component to other
medical device companies, particularly for incorporation into
valved conduits for tissue based valves that require wet
sterilisation.
Business Model
The medical device industry is highly regulated and requires a
significant amount of infrastructure to operate to the various
standards required. Setting up a development facility with a view
to manufacturing devices would require not only substantial
investment in people but a lengthy time commitment in obtaining
certification and establishing systems.
AorTech had previously made a strategic decision to exit polymer
manufacture and the relationship with Biomerics enabled a more
attractive manufacturing model to be put in place. Having found
this business model to operate well, AorTech has sought to develop
its business by working in partnership with well-established
businesses that not only have the necessary infrastructure in place
but can develop our new products more economically and faster than
the Company could by setting up itself. The business model is,
therefore, to keep corporate infrastructure costs to a minimum by
outsourcing to experts, thus minimising risk and maximising return
on investment.
Partnership Arrangements
Building upon the model adopted with Biomerics for polymer
manufacture and supply, AorTech has established relationships with
three Scottish-based businesses to provide the technology, people
and regulatory environment to develop the new devices business. For
the synthetic heart valve, we are partnering with Vascular Flow
Technologies Limited ("VFT") based in Dundee. VFT is Europe's
leading expert in medical imaging guided Computational Fluid
Dynamics and Finite Element Analysis. Together, VFT and AorTech
will optimise the heart valve design, manufacturing process and
undertake the regulatory testing required to ready the valve for
human trials. For the textiles-based products, AorTech is
partnering with RUA Medical ("RUA") operating from two
FDA-registered facilities in Ayrshire. RUA are experts in textile
based implantable devices and have a strong track record of
developing, commercialising and manufacturing devices. RUA will
assist in bringing both the patches and grafts to market.
Regulatory assistance and oversight is of critical importance and
the workplan for three initial products would be a challenge for
in-house resources. We will therefore be drawing upon support from
Edwin Lindsay's team of 12 consultants at Compliance Solutions
(Life Sciences) Limited for this key activity.
Board Changes
The new strategy and product development plans require a greater
level of expertise at Board level in order to create the platform
for commercial success. I am therefore delighted to welcome three
recent appointments to the Board in John Ely, Geoff Berg and David
Richmond. John Ely is a veteran of the heart valve industry with 7
approved cardiac surgery implant devices under his belt and for a
period of seven years ran a team at the FDA that was responsible
for approval of cardiovascular devices. Geoff Berg was a leading
heart surgeon and having carried out over 3,000 valve implantations
has the ultimate end-user experience of all the devices that
AorTech is developing. David Richmond has over 14 years' expertise
in medical textiles devices and founded RUA Medical; he brings
substantial experience in manufacturing methods, commercialisation
and product development.
John McKenna has recently moved from a non-executive role to
become an executive Director. John has been at the forefront of
marketing and bringing new cardiovascular products to market and is
widely recognised for his contribution to the industry. As well as
his in-depth device knowledge, one of John's key responsibilities
will be in establishing distribution channels for AorTech's new
devices and leveraging relationships particularly with the key
opinion leading surgeons.
As we transition to a device company, the contacts Gordon Wright
has with very senior executives at the global device companies will
be invaluable. Gordon was instrumental in working alongside the
founders of both St Jude Medical and ATS (now Medtronic) both to
manufacture their heart valves and to launch them in Europe.
I have now become full time Executive Chairman of AorTech and am
very proud of the quality of the team. I very much look forward to
developing the Company with their help and guidance.
Corporate Actions
In order to finance the new strategic plans for the Company,
AorTech recently undertook a fundraising exercise with the
assistance of our new stockbrokers, Stockdale Securities Limited.
Your Board was delighted with the level of support from both new
and existing shareholders and GBP2.1 million was raised by way of a
placing and subscription together with a further GBP500,000 in a
heavily oversubscribed open offer. In total, therefore, GBP2.6
million was raised before the expenses of the issue, providing the
necessary funds for the Company's next two years' development
plans.
Litigation Settlement
During the year, we were pleased to settle the Company's
long-running dispute with its former Chief Executive and related
parties. AorTech fortunately had the proceeds from an insurance
policy to finance 90 per cent of the costs incurred up to a policy
limit of GBP2 million. Due to litigation tactics, the case was very
long-running and AorTech was close to the expiry of the cover
available, which could have resulted in AorTech being unable to
continue to prosecute the case, and the risks to our IP associated
with that. Having to play the hand we had been dealt, I am pleased
that we were able to announce that "the parties have amicably
resolved their dispute and the terms of settlement have been
incorporated into a confidential settlement agreement." The
confidentiality terms limit our ability to fully disclose the terms
of the settlement. However, we are satisfied with the outcome and
our ongoing IP position. Under Exceptional items in the
Consolidated income statement, a net receipt of $339,000 has been
disclosed. This relates to the dispute settlement, but is after
making reimbursements to our insurer; settling additional fees with
our attorneys and other advisers, and making payments incurred on a
contingency basis to current and past Board members for
considerable time commitments during the course of the litigation
process.
Results and Shareholder Reporting
Revenues from polymer licence and royalty activities were lower
at $538,000 (2017: $614,000), due to the $76,000 reduction in
accrued revenues on the polymer supply contract where we recognised
$76,000 less than the licensee paid to AorTech. Administrative
expenses of $629,000 were incurred during the year. However within
this amount were exchange rate charges as a result of translating
Intangible Assets with a Sterling holding cost into the reporting
currency of US$. Adjusting for these differences, the Company was
broadly break even before amortisation of Intangible Assets. An
exceptional profit of $339,000 was reported as a result of the
settlement of the long-running litigation. Cash at the year end
increased from $114,000 to $591,000 demonstrating cash generation
even allowing for the proceeds from litigation. The Board is not
recommending the payment of a dividend.
These accounts have been prepared in US$ which is a historical
throwback to the time when almost all revenue and expenditure was
dollar-denominated. With the new business model and development of
devices in the UK, it would only confuse the reader and management
to continue to report in US$ so in the future AorTech will revert
to reporting its annual results in Sterling.
Other future changes to Corporate Reporting relate to the
Corporate Governance regime. AorTech did not subscribe to any
particular governance code, but now that the business has been
restructured and the Board enhanced, the adoption of a recognised
code is now a positive tool in developing strong relationships with
our shareholder base. Therefore in line with AIM Notice 50, I am
happy to report that from 28 September 2018, the Board proposes to
adopt the recommendations set out in the QCA Corporate Governance
Code for small and mid-sized quoted companies published by the
Quoted Companies Alliance in full and will comply or explain in
detail any departure from that code and the reasons for doing
so.
Outlook
The past year has been transformational. Historic disputes
having been resolved has enabled a new strategy and business model
to be adopted and a succesful fundraising completed. A
re-invigorated Board is now in place and world class business
partners working to develop exciting new medical devices. The
current year will be one of investment in product development and
closely managing each project to ensure the best return on that
investment.
Bill Brown
Executive Chairman
19 July 2018
Consolidated income statement
Year ended 31 March 2018 Year ended 31 March 2017
Pre-exceptional Pre-exceptional
items Exceptional items Exceptional
items Total items Total
US$000 US$000 US$000 US$000 US$000 US$000
Revenue 538 - 538 614 - 614
Other income - 339 339 - - -
Administrative expenses (629) - (629) (571) 12 (559)
Other expenses -
amortisation of
intangible
assets (292) - (292) (292) - (292)
--------------
Operating loss (383) 339 (44) (249) 12 (237)
Finance (expense) - - - - - -
/ income
---------------- -------------- --------- ---------------- -------------- ---------
Loss from continuing
operations attributable
to owners of the
parent company (383) 339 (44) (249) 12 (237)
Loss attributable
to owners of the
parent company (383) 339 (44) (249) 12 (237)
Loss per share
Basic and diluted
(US cents per share) (0.79) (4.27)
Consolidated statement of comprehensive income
Year
ended
31 Year ended
March 31 March
2018 2017
US$000 US$000
Loss for the year (44) (237)
Other comprehensive income:
I Items that will not be reclassified subsequently
to profit and loss
Exchange differences 1,863 (2,329)
Items that will be reclassified subsequently
to profit and loss
Exchange differences (1,716) 2,125
-------- -----------
Other comprehensive income for the year,
net of tax 147 (204)
-------- -----------
Total comprehensive income for the year,
attributable
to owners of the parent company 103 (441)
Consolidated balance sheet
31 March 31 March
2018 2017
US$000 US$000
Assets
Non current assets
Intangible assets 737 914
Total non current assets 737 914
---------------- ---------------------
Current assets
Trade and other receivables 188 392
Cash and cash equivalents 591 114
Total current assets 779 506
---------------- ---------------------
Total assets 1,516 1,420
---------------- ---------------------
Liabilities
Current liabilities
Trade and other payables (95) (102)
Total current liabilities (95) (102)
---------------- ---------------------
Total liabilities (95) (102)
Net assets 1,421 1,318
================ =====================
Equity
Issued capital 16,979 15,189
Share premium 3,502 3,133
Other reserve (2,807) (2,511)
Foreign exchange reserve 7,036 8,752
Profit and loss account (23,289) (23,245)
Total equity attributable to equity
holders of the parent 1,421 1,318
================ =====================
Consolidated cash flow statement
Year ended Year ended
31 March 31 March
2018 2017
US$000 US$000
Cash flows from operating activities
Group loss after tax (44) (237)
Adjustments for:
Amortisation of intangible assets 292 292
Finance expense / (income) - -
Effect of exchange rate during the year 54 (43)
(Increase) / decrease in trade and other
receivables 204 (149)
Increase / (decrease) in trade and other
payables (7) (63)
------------ --------------------------
Net cash flow from continuing operations 499 (200)
Net cash flow from operating activities 499 (200)
Cash flows from investing activities
Purchase of intangible assets (22) -
------------ --------------------------
Net cash flow from continuing operations (22) -
Net cash flow from investing activities (22) -
------------ --------------------------
Net cash flow from financing activities - -
------------ --------------------------
Net increase / (decrease) in cash and cash
equivalents 477 (200)
Cash and cash equivalents at beginning
of year 114 314
Cash and cash equivalents at end of year 591 114
============ ==========================
Consolidated statement of changes in equity
Profit
Issued Foreign and
Share Share Other exchange loss Total
capital premium reserve reserve account equity
US$000 US$000 US$000 US$000 US$000 US$000
Balance at 31 March 2016 17,426 3,595 (2,881) 6,627 (23,008) 1,759
Transactions with owners - - - - - -
Loss for the year - - - - (237) (237)
Other comprehensive income
Exchange difference on
translating
foreign operations (2,237) (462) 370 2,125 - (204)
Total comprehensive income
for the year (2,237) (462) 370 2,125 (237) (441)
--------- ------ -------- ----------------- --------------- --------
Balance at 31 March 2017 15,189 3,133 (2,511) 8,752 (23,245) 1,318
========= ====== ======== ================= =============== ========
Transactions
with owners - - - - - -
Loss for the
year - - - - (44) (44)
Other
comprehensive
income
Exchange
difference on
translating
foreign
operations 1,790 369 (296) (1,716) - 147
Total
comprehensive
income
for the year 1,790 369 (296) (1,716) (44) 103
------------ --------------- ------------- --------------- ------------ -------------
Balance at 31
March 2018 16,979 3,502 (2,807) 7,036 (23,289) 1,421
============ =============== ============= =============== ============ =============
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
1. Basis of preparation
The consolidated financial statements are for the year ended 31
March 2018. They have been prepared in compliance with
International Financial Reporting Standards (IFRS) and IFRS
Interpretations Committee (IFRIC) interpretations as adopted by the
European Union as at 31 March 2018.
The consolidated financial statements have been prepared under
the historical cost convention.
The accounting policies remain unchanged from the previous
year.
2. Going concern
After considering the year end cash position and taking into
account the recent GBP2.6 million fund raising, making appropriate
enquiries and reviewing budgets and profit and cash flow forecasts
to 31 December 2019 which incorporate planned investment in new
product development, the Directors have formed a judgement at the
time of approving the financial statements that there is a
reasonable expectation that the Group has sufficient resources to
continue in operational existence for the foreseeable future. For
this reason the Directors consider that the adoption of the going
concern basis in preparing the consolidated financial statements is
appropriate.
3. Preliminary announcement
The summary accounts set out above do not constitute statutory
accounts as defined by section 434 of the UK Companies Act 2006.
The summarised consolidated balance sheet at 31 March 2018, the
summarised consolidated income statement, the summarised
consolidated statement of comprehensive income, the summarised
consolidated statement of changes in equity and the summarised
consolidated cash flow statement for the year then ended have been
extracted from the Group's statutory financial statements for the
year ended 31 March 2018 upon which the auditor's opinion is
unqualified and did not contain a statement under either sections
498(2) or 498(3) of the Companies Act 2006. The audit report for
the year ended 31 March 2017 did not contain statements under
section 498(2) or section 498(3) of the Companies Act 2006. The
statutory financial statements for the year ended 31 March 2017
have been delivered to the Registrar of Companies. The 31 March
2018 accounts were approved by the Directors on 18 July 2018, but
have not yet been delivered to the Registrar of Companies.
4. Earnings per share
The basic loss per ordinary share of 0.79 US cents (2017: loss
of 4.27 US cents) is calculated on the loss of the Group of
US$44,000 (2017: loss of US$237,000) and on 5,557,695 (2017:
5,557,695) equity shares, being the weighted average number of
shares in issue during the year.
The diluted loss per share does not differ from the basic loss
per share as the exercise of share options would have the effect of
reducing the loss per share and is therefore not dilutive under the
terms of IAS 33.
5. Current operations
On 1 October 2013, the Group signed an agreement with Biomerics
LLC for the manufacture and distribution of our patented materials,
including to our existing licensees. In the opinion of the
Directors, the Biomerics transaction transformed the Group into a
pure intellectual property company. During the current year ending
31 March 2019 however, a fundraising was successfully completed for
the purpose of also enabling AorTech to transition to become a
medical device business with a portfolio of devices in the
cardiovascular field.
Notice of Annual General Meeting
Notice of the twenty-first Annual General Meeting of AorTech
International Plc will be posted with the Annual
Report and Accounts and will be held at the offices of Kergan
Stewart LLP, 163 Bath Street, Glasgow G2 4SQ
on Thursday, 23 August 2018 at 11:00am.
Posting and availability of accounts
The annual report and accounts for the year ended 31 March 2018
will be sent by post or electronically to all registered
shareholders on 31 July 2018. Additional copies will be available
for a month thereafter from the Company's head office at Level Two,
Springfield House, 23 Oatlands Drive, Weybridge, Surrey, KT13 9LZ.
Alternatively, the document may be viewed on, or downloaded from,
the Company's website: www.aortech.net.
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END
FR RLMFTMBIBBLP
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