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| Share Name | Share Symbol | Market | Type | Share ISIN | Share Description |
|---|---|---|---|---|---|
| Sphere Medical | LSE:SPHR | London | Ordinary Share | GB00B551W951 | ORD 1P |
| Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
|---|---|---|---|---|---|---|---|---|---|---|
| 0.00 | 0.00% | 0.40 | 0.35 | 0.45 | 0.00 | 01:00:00 |
| Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
|---|---|---|---|---|---|
| 0 | 0 | N/A | 0 |
From May 2019 to May 2024
TIDMSPHR
RNS Number : 9941X
Sphere Medical Holding plc
28 February 2017
28 February 2017
Sphere Medical Holding plc
("Sphere Medical" or "Sphere" or the "Company")
Results for the year ended 31 December 2016
Sphere Medical Holding plc (AIM: SPHR.L), an innovative point-of-care monitoring and diagnostic devices company, announces its results for the year ended 31 December 2016.
Business highlights for 2016 and post year-end
-- Successful commercial launch of Proxima 4 in mid-December 2016 in Europe with encouraging early market reaction
-- First sales of Proxima 4 achieved -- Over 20 hospitals have requested evaluations of Proxima 4 -- 4 hospitals have monitored patients with Proxima 4 -- First paediatric patients monitored -- Key Proxima 4 milestones met: -- CE mark certification completed -- Distribution partners appointed in Italy and Spain
-- >20% reduction in time to results demonstrated by University Hospital Southampton clinical study
-- Improved connectivity between Proxima and hospital data management systems -- New production facilities established and operational in Wales
Financial summary
-- Reduced loss after taxation GBP4.5 million (2015: GBP5.5 million) -- Reduced loss per share 3.2 pence (2015: 4.8 pence) -- Operating expenses contained below budget -- Total operating expenses reduced to GBP5.1 million (2015: GBP6.1 million) -- Product development costs capitalised GBP2.1 million (2015: GBP0.9 million) -- Revenue doubled to GBP30,000 (2015: GBP15,000) -- R&D tax credit received GBP0.6 million (2015: GBP0.6 million) -- Cash and short-term investments at year end of GBP3.2 million (2015: GBP10.0 million) -- Additional GBP3.0 million loan facility secured post year end -- GBP1.5 million cash drawn in January 2017 -- GBP1.5 million conditionally available to draw until March 2018
Commenting on today's announcement, Dr Wolfgang Rencken, Chief Executive Officer of Sphere Medical, said: "We are pleased to have launched Proxima 4 and are very encouraged by the early market reaction to it. As we build a growing customer base, who routinely use Proxima, more patients will be able to benefit from being managed with the system. We continue to advance distributor negotiations to expand Proxima 4's commercial launch with the aim to make it available to a wider patient population across Europe."
For further information, please contact:
Hot Features
Premium
Sphere Medical Holding Tel: +44 (0)1223 875
plc 222
Dr Wolfgang Rencken, Chief
Executive Officer
Richard Wright, Chief
Financial Officer
Panmure Gordon Tel: +44 (0) 20 7886
2500
Freddy Crossley (Corporate
Finance)
Duncan Monteith (Corporate
Finance)
Tom Salvesen (Corporate
Broking)
Consilium Strategic Tel: +44 (0) 20 3709
Communications 5700
Mary-Jane Elliott spheremedical@consilium-comms.com
Ivar Milligan
Hendrik Thys
Notes for Editors
About Sphere Medical (AIM: SPHR.L)
Sphere Medical is an innovative point-of-care medical device company. Its Proxima platform measures blood gases, electrolytes and metabolites at the patient's bedside and aims to improve patient care and reduce health system costs. The device is currently sold directly to the critical care market via Sphere Medical's sales force in the UK, Germany, The Netherlands and Belgium and via distributors in Italy and Spain.
For further information, please visit www.spheremedical.com
Strategic Report
INTRODUCTION
A number of significant milestones were achieved with Proxima 4 in 2016. We received CE mark certification in September and, in December, launched Proxima 4 in Europe, enabling us to commence marketing the product directly in the UK, Germany, Belgium and The Netherlands, and in Italy and Spain via our distribution partners. In 2017, we are now focussing our efforts on marketing Proxima 4, generating sales and building a regular customer base. Market reaction to Proxima 4 has been encouraging, building on the interest established with Proxima 3. As well as the key addition of glucose to the analyte panel, other changes such as a quicker set up and expansion of the patient pool to include children, have been very well received. Importantly, these changes increase the addressable market 4x to around GBP130m in Europe. Four hospitals have monitored patients using Proxima 4 and sales have already been made in the UK and to our newly appointed Italian distributor.
COMMERCIALISATION STRATEGY
Sphere Medical's strategy is focussed on leveraging the Proxima platform. Proxima 3 was the first generation approved for human use and has been in the market for two years. This has enabled us to gain market intelligence, which was successfully incorporated into Proxima 4. Proxima is the only commercially available patient-attached microanalyser device worldwide with the ability to monitor 13 key parameters. This product update incorporates a number of improvements that were based on feedback from clinicians on Proxima 3 and is now applicable to around 40% of critical care patients.
Looking further ahead, we plan to increase the applicable market for the Proxima platform by adding additional analytes, improving usability and expanding its use to neonatal patients. We also plan to launch Proxima in other major markets, such as the USA and Japan, in the next few years.
SALES PROGRESS
One of the main aims of launching Proxima 3 was to secure feedback on the product and to learn about the sales process and any potential barriers to adoption. Through 2016 hospitals continued to evaluate Proxima 3. Over 80 patient connections were made in the year, more than in the previous year. The feedback received has been very helpful in shaping the development of Proxima 4 so that we can convert more hospitals into regular users of the system.
By adding glucose to the analyte panel in Proxima 4 the addressable market is expanded fourfold from around 10% to around 40% of critical care patients. It is expected that this will increase adoption. In addition there are a number of other improvements to the system, including simpler and faster set-up and improved connectivity with hospital data systems.
In the first few weeks since Proxima 4 launched we have experienced increasing traction. Over 20 hospitals have requested evaluations of Proxima 4, including some paediatric centres which were unable to use Proxima 3 due to restrictions on adult-only use. We believe sales traction will continue to accelerate through 2017.
We have established a direct sales presence in the UK, Germany, The Netherlands and Belgium. Having a direct sales presence has been valuable in enabling us to receive feedback direct from customers.
An important component of building the revenue from Proxima is increasing its geographic presence. The most economical way of doing this beyond our direct markets is through distributors who have access to the appropriate customers. We have appointed Burke and Burke in Italy and Prhoinsa in Spain as regional distributors of Proxima. Both of these distributors are well placed within their markets to sell Proxima. Burke and Burke received their first Proxima 4 shipment in December 2016, as soon as Proxima 4 was launched. Prhoinsa will get underway in the second quarter of 2017. We are in discussions with distributors in other European markets and are targeting a sales presence in 60% of the European Union by the end of 2017.
PRODUCT DEVELOPMENT
As well as the addition of glucose to the panel of analytes, Proxima is now suitable for use with children weighing 15kg and over. Together these changes expand the addressable market fourfold to around GBP130m in Europe.
Proxima also has improved connectivity to hospital information systems, an important issue for many hospitals. Connectivity is now available between Proxima and Conworx and Clinisys data management systems, which are used extensively in European hospitals and beyond. This enables the seamless transfer of test results from Proxima into patient records and laboratory information systems. We are also working on connectivity to other leading hospital data management systems and expect to introduce this over the coming months.
A number of improvements in the user experience have also been introduced in Proxima 4, with more in development. The system set up process has been simplified and the time required to complete the set up significantly reduced. We are also currently developing a software update that will allow results to be presented graphically as a trend, rather than just at one point in time. This enhancement will bring added value and provide a further point of difference between Proxima and traditional blood gas analysers. Another piece of feedback on Proxima 3 was a request for some scheduling functionality to remind users when the next reading is due to be taken. It is intended to incorporate this in the next software update.
Beyond Proxima 4, the plan is to add lactate and make more improvements in the functionality and usability of the system, including automating the set up process, and in time adapt the system for use with neonates.
TIME AND MOTION STUDY
In conjunction with University Hospital Southampton, we have conducted a time and motion study to examine the workflow impacts of Proxima. Results were presented at the British Association of Critical Care Nurses annual conference in September 2016. The study involved 20 patients and showed a statistically significant reduction of over 20% in total time taken to deliver results to the bedside by comparing Proxima with the existing standard process in a highly optimised, well equipped cardiac ICU involving near-patient benchtop blood gas analysers.
The results of this study confirmed the significant workflow benefits from using Proxima on unstable patients requiring frequent blood gas measurements.
PRODUCTION
In preparation for increased demand for Proxima, we have been expanding our manufacturing capability. In February 2016, we opened our new manufacturing facility in St Asaph, north Wales, which should give us adequate capacity to meet our manufacturing needs for the next few years. Production of Proxima components at St Asaph has commenced on plan and we are in the process of a phased transfer of more elements of the manufacturing process from our site at Harston, Cambridge to St Asaph.
INTELLECTUAL PROPERTY
Our intellectual property portfolio is a key asset and we continue to invest in the maintenance and development of our IP estate. We have a variety of patents registered or applied for over the past two decades, with a range of expiry dates up to 2033. We currently have 20 patents either granted or in application, covering chip and sensor design and manufacture, design of analytical systems, methods for chemical assay and methods for sensor calibration. We have an ongoing process of reviewing the patent register in order to focus our financial support on our core patent families and any new intellectual property.
KEY PERFORMANCE INDICATORS
The Group measures its performance according to a wide range of key performance indicators, which during 2016 were as below. A set of similarly challenging measures has been defined for 2017.
Key Performance Comment
Indicator
----------------------- ------------------------------------------------------------------
Development milestones
* Proxima 4 received CE mark certification
* A number of minor updates to Proxima 3 were developed
and rolled out during the year
----------------------- ------------------------------------------------------------------
Revenue indicators
and lead indicators * First Proxima 3 sales achieved in Germany and Belgium
* First Proxima 4 sales achieved
* A growing number of leads being generated and
hospital evaluations being undertaken
* Proxima 3 patient connections up to more than 170
----------------------- ------------------------------------------------------------------
Production
* Throughout the period we have maintained a sufficient
supply of product
----------------------- ------------------------------------------------------------------
Management of
cash resources * The Group's cash and short-term investments totalled
GBP3.2 million at 31 December 2016, better than
budget.
* A GBP3 million loan facility was put in place in
January 2017, from which a GBP1.5 million loan has
been drawn.
----------------------- ------------------------------------------------------------------
FINANCIAL REVIEW
Revenue for the year ended 31 December 2016 was GBP30,000 (2015: GBP15,000).
Operating expenses before amortisation were GBP5.1 million (2015: GBP6.1 million). Selling and marketing expenses increased from GBP1.0 million to GBP1.3 million, and production overheads increased from GBP1.3 million to GBP1.4 million reflecting the move towards commercialisation of Proxima. Administration costs reduced from GBP2.2 million to GBP1.7 million. GBP0.7 million (2015: GBP1.7 million) of product development costs were expensed in the period and GBP2.1 million (2015: GBP0.9 million) of product development costs were capitalised.
Net finance income was GBP72,000 (2015: GBP91,000), primarily representing interest earned on cash deposits.
During the year, GBP0.6 million was received in respect of research and development tax claims for 2015 (2015: GBP0.6 million based on 2014 claims). No accrual has been made for any research and development tax claim for the 2016 year.
The post-tax loss for the year was GBP4.5 million (2015: GBP5.5 million). The basic and fully diluted loss per share for the year was 3.2 pence (2015: 4.8 pence). The number of ordinary shares in issue was unchanged throught the year at 141.8 million.
Cash and short-term investments as at the end of the year were GBP3.2 million (2015: GBP10.0 million). In January 2017 a GBP3.0 million loan facility was put in place and an initial GBP1.5 million loan was drawn. A further GBP1.5 million loan is conditionally available until March 2018. The loans are repayable by 2020. The Company is exploring the best financing options to support its working capital requirements through the on-going commercialisation of Proxima.
THE TEAM AT SPHERE MEDICAL
There were no changes to the Board during 2016 or subsequently.
The Group continues to be supported by a very strong Medical Advisory Board (MAB), which comprises leading critical care clinicians from across Europe. In January 2016 Dr Michael Grocott joined the MAB. Professor Grocott is the Professor of Anaesthesia and Critical Care Medicine at the University of Southampton (UoS) and heads the UoS Centre for Human Integrative Physiology. His research interests include human responses to hypoxia, measuring and improving outcome following surgery, lung injury, and fluid therapy.
Sphere Medical continues to benefit from the hard work and expertise of its employees who, with the Board, are fully committed to the success of Proxima. The Board would like to take this opportunity to thank all our employees for their continued commitment.
OUTLOOK
We are pleased to have launched Proxima 4 as planned and early market reaction is very encouraging. The Board remains committed to pursuing the further development and full commercialisation of the Proxima platform and is exploring its financing options to ensure the Company has sufficent working capital to continue this strategy and to maximise value for shareholders.
Consolidated statement of comprehensive income
for the year ended 31 December 2016
Notes 2016 2015
GBP000 GBP000
------------ ------------
Revenue 30 15
Cost of sales (20) (2)
____________ ____________
Gross profit 10 13
Selling and marketing expenses (1,327) (978)
Production overheads (1,392) (1,279)
Product development (727) (1,675)
Administrative expenses (1,705) (2,194)
Operating expenses (net) (5,151) (6,126)
Operating loss (5,141) (6,113)
Finance income 72 91
Loss before taxation (5,069) (6,022)
Tax credit 556 557
Loss and total comprehensive
income for the period attributable
to the equity holders of the
parent (4,513) (5,465)
Loss per share attributable
to the equity holders of the
parent
Basic and diluted 2 (3.2p) (4.8p)
Consolidated statement of financial position
at 31 December 2016
Notes 2016 2015
GBP000 GBP000
-------- --------
ASSETS
Non-current assets
Property, plant and equipment 3 189 103
Intangible assets 4 2,928 896
3,117 999
Current assets
Inventories 427 384
Trade and other receivables 181 127
Cash and cash equivalents 3,241 10,028
Total assets 6,966 11,538
EQUITY
Called up share capital 5 1,418 1,418
Share premium account 58,031 58,102
Other reserve 2,705 2,786
Profit and loss account (55,945) (51,693)
Equity shareholders' funds 6,209 10,613
LIABILITIES
Current liabilities
Trade and other payables 757 925
Total liabilities 757 925
Total equity and liabilities 6,966 11,538
Consolidated statement of cash flow
for the year ended 31 December 2016
Notes 2016 2015
GBP000 GBP000
------- -------
Operating activities 6 (4,521) (5,117)
Cash flows from investing
activities
Purchase of property, plant
and equipment (183) (101)
Purchase of intangible assets (2,089) (892)
Sale of property, plant and
equipment 5 -
Interest received 72 91
(2,195) (902)
Cash flows from financing
activities
Issue of share capital - 13,176
Issue expenses (71) (830)
Discharge of finance lease
liabilities - (2)
(71) 12,344
Net change in cash and cash
equivalents in the year (6,787) 6,325
Cash and cash equivalents
at beginning of year 10,028 3,703
Cash and cash equivalents
at end of year 3,241 10,028
Consolidated statement of changes in equity
For the year ended 31 December 2016
Share Share Other Retained Total
capital premium reserve loss equity
GBP000 GBP000 GBP000 GBP000 GBP000
-------- -------- -------- -------- -------
Balance as at 31 December
2014 594 46,580 2,933 (46,503) 3,604
Loss for the year ended
31 December 2015 - - - (5,465) (5,465)
Total comprehensive
income for the period - - - (5,465) (5,465)
Issue of share capital 824 12,352 - - 13,176
Issue expenses - (830) - - (830)
Employee share-based
compensation - - 128 - 128
Reclassification following
lapse of options - - (275) 275 -
Transactions with owners 824 11,522 (147) 275 12,474
Balance as at 31 December
2015 1,418 58,102 2,786 (51,693) 10,613
Loss for the year ended
31 December 2016 - - - (4,513) (4,513)
Total comprehensive
income for the period - - - (4,513) (4,513)
Issue expenses - (71) - - (71)
Employee share-based
compensation - - 180 - 180
Reclassification following
lapse of options - - (261) 261 -
Transactions with owners - (71) (81) 261 109
Balance as at 31 December
2016 1,418 58,031 2,705 (55,945) 6,209
Notes
1. Basis of preparation
The financial information set out in the announcement does not constitute the Group's statutory accounts for the year ended 31 December 2016 or 31 December 2015. The auditor has confirmed that the auditor's report that is required to be contained in the Annual Report and Accounts 2016 includes an unmodified opinion together with an emphasis of matter paragraph on going concern relating to the potential need to raise additional finance, as described in the Going Concern paragraph below. The statutory accounts for the year ended 31 December 2016 have not yet been delivered to the Registrar of Companies. The statutory accounts for the year ended 31 December 2015 were delivered to the Registrar of Companies as published on the Group's website on 23 March 2016.
Going concern
At 31 December 2016 the cash balance available to the Group was GBP3.2m while for the year the cash outflow from operating activities was GBP4.5m. In January 2017 the Group agreed a GBP3.0m loan facility with Silicon Valley Bank and drew an initial GBP1.5m loan.
The Board's confidence that the commercialisation of the Group's principal product, Proxima, will prove to be successful has been reinforced by the launch of Proxima 4 into the European market, and by the positive reception it has received, including the first sales and the appointment of distributors in Italy and Spain. However, the Group's revenues from sales of products are expected not to be sufficient for the Group to become cash generative from commercial operations over the next 12 months.
The Group is intending to raise additional finance and has a good track record of being able to do so finance when it has needed to do so.
The Board of Directors has concluded that the combination of these circumstances represents a material uncertainty which may cast significant doubt about the Group's ability to continue as a going concern and, therefore that it may be unable to realise its assets and discharge its liabilities in the normal course of business.
Nonetheless, with GBP3.2m of cash as at 31 December 2016, the GBP1.5m additional cash funding in January 2017, a clear 2017 budget approved by the Board of Directors, a strong business plan for the next several years and the Group's track record of raising additional finance, the Board of Directors have reasonable expectation that the business will be able to continue in operation for at least 12 months from the date of approval of these financial statements. For these reasons, the Board of Directors continue to adopt the going concern basis of accounting in preparing these financial statements.
2. Loss per share
Fully diluted loss per share is calculated after showing the effect of outstanding options in issue. As the effect of the options would be to reduce the loss per share, the diluted loss per share is the same as the undiluted loss per share.
Calculation of loss per share is based on the following loss and numbers of shares:
2016 2015
GBP000 GBP000
-------------- --------------
Loss attributable to equity
holders in the Company (4,513) (5,465)
Number ('000) Number ('000)
-------------- --------------
Weighted average number
of equity shares in issue
for basic loss per share 141,758 114,457
Loss per Loss per
share (pence) share (pence)
--------------- ---------------
Basic and diluted loss per
share (3.2) (4.8)
3. Property, plant and equipment
2016 2015
Plant and equipment GBP000 GBP000
-------- --------
Cost:
At start of year 1,674 1,754
Additions 183 101
Disposals (5) (181)
At end of year 1,852 1,674
Depreciation:
At start of year 1,571 1,646
Disposals (3) (181)
Provided in the year 95 106
At end of year 1,663 1,571
Net book value:
At end of year 189 103
At end of previous year 103 108
4. Intangible assets
Capitalised 2016 2015
Software Development Total Total
GBP000 GBP000 GBP000 GBP000
----------- -------------- -------- --------
Cost:
At start of year 135 888 1,023 131
Additions 5 2,084 2,089 892
At end of year 140 2,972 3,112 1,023
Amortisation:
At start of year 127 - 127 119
Provided in the year 10 47 57 8
At end of year 137 47 184 127
Net book value:
At end of year 3 2,925 2,928 896
At end of previous
year 8 888 896 12
5. Share capital
2016 2015
---------------------------- --------------------------
Start End of Start End of
of period period of period
period
Issued and fully paid
Ordinary Shares (number)
of GBP0.01 141,757,872 141,757,872 59,208,660 141,757,872
Ordinary Shares (nominal) GBP1,417,579 GBP1,417,579 GBP592,087 GBP1,417,579
of GBP0.01
Share issue
No shares were issued during the period (2015: 82,352,582)
6. Reconciliation of operating loss to operating cash flows
2016 2015
GBP000 GBP000
-------- ---------
Operating activities -
loss for the period before
interest and tax (5,141) (6,113)
Depreciation 92 106
Amortisation 57 8
Share-based payments 180 128
Increase in inventory (43) (169)
(Increase)/decrease in
trade and other receivables (54) 77
(Decrease)/increase in
trade and other payables (168) 289
Taxes received 556 557
(4,521) (5,117)
This information is provided by RNS
The company news service from the London Stock Exchange
END
FR OKODQDBKBQBB
(END) Dow Jones Newswires
February 28, 2017 02:01 ET (07:01 GMT)
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