SOURCE: Lombard Medical Technologies PLC

August 29, 2013 02:00 ET

Lombard Medical Technologies Half Yearly Report

LONDON--(Marketwired - Aug 29, 2013) -


Press Information



               Lombard Medical Technologies PLC
              ("Lombard Medical" or the "Company")

        Interim results for the six months ended 30 June 2013

             Aorfix™ Launch in the US Underway

London, UK, 29 August 2013 - Lombard Medical Technologies PLC
(AIM: LMT), the specialist medical technology company focused on
innovative vascular products, today announces its unaudited interim
results for the six months ended 30 June 2013.

Operational highlights

- US FDA approval of AorfixTM for the endovascular repair of AAAs
  (Abdominal Aortic Aneurysms)
  o Only endovascular stent graft approved in US for use in cases with
    neck angulations up to 90 degrees
  o Unique 0-90 degree label indication enabling treatment of broadest
    range of AAA anatomies
  o Compelling case for use over competing products supported by
    extensive body of clinical evidence
  o One of only nine PMAs (pre-market approvals) granted by the FDA in
    H1 2013
- AorflexTM next generation delivery system approved by the FDA in
  June for commercial use in the US
- Aorfix US commercial launch underway, formal launch event at VEITH
  Symposium, November 2013
  o Initial commercial cases successfully completed
  o Direct sales team of 20 people recruited and product training
    completed
  o Physician training programme commenced
- Approval for Aorfix in Japan on track, approval anticipated in H1
  2014

Financial highlights

- Total revenue increased 2%, in line with expectations, to GBP2.0m
  (H1 2012: GBP2.0m)
- Aorfix commercial revenue increased 8% to GBP1.7m (H1 2012: GBP1.6m)
  o Revenue increased 6% in the four main EU markets (UK, Germany,
    Italy and Spain) to GBP1.1m (H1 2012: GBP1.0m)
  o Revenue in Germany increased by 47% offsetting the effect of
    continued EVAR centre consolidation in the UK
  o Revenue outside the main EU markets increased 9% to GBP0.6m (H1
    2012: GBP0.5m)
- Significant increase in demand for Aorfix in Germany and
  Spain offsetting decline in demand for Aorfix in UK which is expected
  to stabilise in H2 2013
  o Combined demand for Aorfix over the four main EU markets steady
    with 194 patients treated (H1 2012: 195)
- Operating loss increased by 11% to GBP4.8m (H1 2012: GBP4.4m)
- Loss after taxation increased by 14% to GBP4.9m (H1 2012: GBP4.4m)
- Financing
  o Aorfix US approval triggered receipt GBP13.5m (net of expenses) of
    the c.GBP14.1m Second Tranche of the two tranche April 2011
    fundraising as well as the Company's ability to draw down $2.5m
    from the $5.0m loan facility granted by its exclusive Japanese
    distribution partner, Medico's Hirata Inc.
  o GBP20.9m (net of expenses) raised from a placing, subscription and
    offer of shares in June
  o GBP3.0m Convertible Loan Notes issued to Invesco in 2012 were
    converted into new Ordinary Shares
- Strong cash position - GBP34.3m as at 30 June 2013 (30 June 2012:
  GBP5.2m)

Post period events

- Appointment of Raymond W. Cohen as Non-executive Chairman in July

Commenting on the results, Simon Hubbert, Chief Executive of Lombard
Medical, said:"During the period we received FDA approval to commercialise
our
AorfixTM stent graft device in the US, a milestone event which has
transformed the future prospects of the Company. Importantly, approval
included a significantly differentiated 0-90 degree label claim, making
Aorfix the only device approved to treat both standard and difficult to
treat cases of AAAs. Much progress has been achieved since approval in
February, including the recruitment and subsequent training of our own
direct sales force in June. Physician training programmes are also
underway and we have successfully completed a number of commercial
cases in centres across the US. We remain confident of capturing a
significant share of the large AAA market."

                                -Ends-

For further information:

Lombard Medical Technologies PLC               Tel: +44(0)1235 750 800
Simon Hubbert, Chief Executive Officer
Ian Ardill, Chief Financial Officer

Canaccord Genuity Limited                      Tel: +44(0)20 7523 8000
Lucy Tilley / Tim Redfern /
Henry Fitzgerald O'Connor
/ Dr Julian Feneley

FTI Consulting                                  Tel: +44(0)20 7831 3113
Simon Conway / Susan Stuart /
Victoria Foster Mitchell

Allen & Caron                                   Tel: +1 (949) 474 4300
Matt Clawson


About Abdominal Aortic Aneurysms

AAAs are a balloon-like enlargement of the aorta which, if left
untreated, may rupture and cause death. Approximately 4.5 million
people are living with AAAs in the developed world and each year
600,000 new cases are diagnosed. In the U.S. aortic aneurysm disease is
among the leading cause of death and it is estimated that 1.7 million
people over the age of 55 have an AAA. The market for the repair of
AAAs in the U.S. is valued at more than $600 million annually, and is
forecast to grow to $1.6 billion worldwide by 2015 according to
independent market research.


About Lombard Medical

Lombard Medical Technologies PLC (AIM: LMT) is a medical device company
focused on device solutions for the $1.3 billion per annum abdominal
aortic aneurysm (AAA) repair market. The Company's lead product,
AorfixTM, is an endovascular stent graft which has been specifically
designed to solve the problems that exist in treating complex tortuous
anatomy, which is often present in advanced AAA disease. Aorfix is the
only stent graft approved for AAA neck angulations of up to 90 degrees
and is currently being commercialized worldwide. Aorfix is the first
AAA stent graft not of U.S. origin to gain FDA approval. The Company is
headquartered in Oxfordshire, England with U.S. operations in Irvine,
CA.

Further background on the Company can be found at
 www.lombardmedical.com .

Chief Executive's Review

The first half of 2013 was one of the most significant periods in
Lombard Medical's history, dominated by the news in February that the
Company's AorfixTM device received FDA approval for commercial sale in
the US. US approval of Aorfix, the Company's product for the treatment
of AAAs, provides a strong platform for future growth in the world's
largest EVAR market and will create significant shareholder value going
forward.

In addition to achieving US approval of Aorfix, Lombard Medical also
received FDA approval for AorflexTM, the Company's next generation
delivery system for the Aorfix stent graft which is already
commercially available in Europe. The Company also completed the
recruitment of its own direct sales force and is well advanced in the
process of building its US business infrastructure, which includes
relocating its US commercial headquarters to Irvine, California in Q3
2013.

The US commercial launch of Aorfix is underway and a number of Aorfix
procedures have been successfully completed post FDA approval. The
Aorfix physician training programme is being rolled out across the US
and has met with high levels of physician enrolment. A formal launch
event of Aorfix with the new Aorflex delivery system, will take place
at the 40th Annual Symposium on Vascular and Endovascular Issues (VEITH
Symposium) in New York City in November 2013.

Revenue

Total revenue increased by 2%, in line with expectations, to GBP2.0m
(H12012: GBP2.0m).

Aorfix commercial revenue increased by 8% to GBP1.7m (H1 2012: GBP1.6m).
Aorfix revenue in the main four EU markets (UK, Germany, Italy and
Spain) grew by 6% to GBP1.1m (H1 2012: GBP1.0m). The particularly
strong growth in revenue and demand seen in Germany and Spain during
the period helped to counter the impact of UK EVAR centre
consolidation. Combined demand for Aorfix over the four main EU markets
held at the 2012 level with 194 patients treated (H1 2012: 195
patients). Demand and revenue differ due to the effect of distributor
stocking/destocking in Italy and Spain.

Aorfix commercial revenue outside of the main EU markets increased by
9% to GBP0.6m (H1 2012: GBP0.5m) driven largely by distributors in the
EMEA region. Commercial revenues of non-Aorfix product from our Lombard
Medical Scotland facility decreased by 18% to GBP0.3m (H1 2012:
GBP0.4m).

Aorfix regulatory approval in the US sets the stage for significant
growth

The FDA's decision in February to approve commercialisation of Aorfix
in the US is a significant milestone for the Company and the key driver
of future growth.

The FDA's approval included a label indication for the treatment of
patients with angulations at the neck (top) of the aneurysm of up to 90
degrees. This gives Aorfix the broadest label for such a device on the
US market and makes it the only endovascular stent graft approved for
use in high angle (>60 degrees) cases. Such a high angle indication
can already be found on the European label for Aorfix. It is estimated
that approximately 30% of all patients have some tortuosity either at
the neck of the aneurysm or in the iliac arteries, and it is to this
segment of patients that Aorfix is targeted with its uniquely flexible
design.

US EVAR market - a substantial and growing market

The US EVAR market was estimated to be $625 million in 2012 and is
expected to grow to $964 million in 2018, representing a CAGR of 7.5
per cent.

The competitive landscape in the US is more favourable to that in the
EU with fewer competitors approved in the 0 to 60 degree angle market
and no competitor with approval to treat neck angles above 60 degrees.
In the EU two such devices are approved but these are limited for use
in patients with AAA neck angles of up to 75 degrees, specifically
where the neck length is at least 15mm. All other approved devices in
the EU are approved for use in cases with up to 60 degree angles, with
the exception of one device which has no angle indication and is not
approved in the US. The average selling price of EVAR devices in the
US is materially higher than that of equivalent devices in the EU.

In a closely regulated and litigious country such as the US, there is
significant focus on 'on-label' use of products. Physicians are subject
to regulatory pressure to avoid, where possible, 'off-label' use of
devices. Aorfix is approved for use 'on-label' in patients across a
broader indication of neck angles than its competitors with the
consequence that Aorfix can be used by physicians in patients
displaying highly tortuous anatomies where such patients would
otherwise need to be treated 'off-label' using an AAA device. The broad
indication of Aorfix will promote the treatment of AAAs using EVAR for
some patients where FDA-approved 'on-label' products were not
previously available; current treatment options are either open surgery
or use of 'off-label' devices.

Aorfix US commercial launch strategy on track

The Company is launching Aorfix with the new Aorflex delivery system in
the US and a number of commercial cases have already been successfully
completed since approval earlier this year. A formal launch event of
Aorfix with the Aorflex delivery system will take place at the VEITH
Symposium in New York in November 2013.

Preparations for the US commercial launch of Aorfix are on-track and
the Company has recruited its own direct sales force and marketing
infrastructure to launch Aorfix in the US. Initially Lombard Medical
will be focussing on the c. 300 centres which perform more than 50% of
the EVAR operations in the US. US commercial sales have commenced, with
several procedures successfully performed to date.

During the period, the Company hired Michael Gioffredi, President of
Operations in the US, who has 30 years' experience in medical device
companies, the majority of which has been in vascular sales and
marketing roles. A sales team of 20 people with experience in EVAR,
peripheral vascular sales or related fields is now in place. In June,
this new team attended and successfully completed the in-depth training
programme about the use of Aorfix and the EVAR procedure.

The sales team is now focused on increasing US physician knowledge of
Aorfix and organising their participation in physician training
programmes, which commenced at various US venues in August. 11
physician training programmes were completed in August at specialist
training centres and EVAR centres, with 9 physician training programmes
planned in September.

Marketing efforts for Aorfix will leverage the device's unique label in
the underserved tortuosity segment which represents up to 30% of all
EVARs. The Company calculates this segment of the market to be
currently valued at c.$185m and expected to grow to c.$290m in 2018.
Aorfix is the only approved device to treat such highly angulated cases
but also works well in treating less challenging anatomies (0-60
degrees).

RoW Aorfix update

We continue to work with our exclusive Japanese distribution partner,
Medico's Hirata Inc., to obtain Aorfix approval in Japan. Medico's
Hirata is a leading supplier and developer of medical device products
in Japan, with the sales infrastructure to maximise the potential of
Aorfix in this important market. The Japanese market for EVAR products
is estimated to be worth $100m and is one of the fastest growing in the
world. Medico's Hirata remains in dialogue with the Japanese PMDA
(Pharmaceuticals and Medical Devices Agency) to achieve regulatory
approval for Aorfix, which we anticipate will be granted in H1 2014.

Clinical data

Lombard Medical has remained committed to the collection of data in its
Retrospective Aorfix Data Retrieval Registry (RADAR). The RADAR
registry now contains data from over 1,900 Aorfix cases and enables the
Company to present on the largest clinical experience ever compiled on
complex anatomy EVAR patients at conferences around the world.

New Product Development

Lombard Medical made progress with two new product development projects
in line with our continuous commitment to providing innovative
endovascular solutions which meet clinicians' needs and improve patient
outcomes.

The first project is focused on improving clinicians' experience during
Aorfix stent graft delivery. The new delivery system, Aorflex, was
launched in Europe in April 2012 and has received positive clinician
feedback since launch. The submission for the US approval of the
Aorflex delivery system was made to the FDA in April 2013 and in June
2013 Aorflex was approved for commercial use in the US. The Company's
formal US commercial launch of Aorfix will include Aorflex as the stent
graft's delivery system.

The Company has also made progress towards expanding the size range of
Aorfix, thereby addressing the needs of patients with AAAs with aortic
neck diameters either too large or too small for the current product
size range. Based on published clinical data, management estimates this
to be up to 25 per cent. of the total AAA patient population. A wider
range of sizes will be available for custom order (customised to a
physician's requirements and not requiring a CE Mark) in Europe in the
second half of 2013. A clinical study to support regulatory approval of
the most widely used combinations of sizes in the expanded size range
is anticipated to commence in 2014.

The Company is also planning and developing further iterations of the
Aorfix product and its delivery system, including a reduction in the
device profile and the inclusion of a repositionable graft top-end to
assist the physician in placing the graft accurately during the
procedure.

The Board

After two years of service as Lombard Medical's Chairman and following
the achievement of FDA approval for Aorfix in the United States, John
Rush announced in April that he would step down as Non-executive
Chairman of the Company, pending completion of a comprehensive search
for his successor. I would like to thank John for his service as
Chairman and I am pleased that John remains an active and committed
member of the Board as a Non-executive Director.

Post period end, in July, the Board appointed Raymond W. Cohen as
Non-executive Chairman. Ray, a US national, has extensive international
medical device experience having held several Chairman and CEO
positions on the boards of both publicly listed and private life
sciences companies in the US and Europe. Ray served as Chief Executive
Officer of Vessix Vascular, Inc., a developer of a renal denervation
system used to treat uncontrolled hypertension. During his tenure as
CEO, the company was acquired by Boston Scientific Corporation in a
structured transaction valued at up to $425 million.

In May, Thomas Casdagli, Non-executive Director, resigned from the
Board. Thomas was the Non-executive Director appointed by MVM in
accordance with its right to appoint a Non-executive Director for so
long as MVM held in excess of 5% of the issued share capital of the
Company. With MVM's shareholding falling to 3.5% following the equity
fundraising in June, Thomas stepped down from the Board. I would like
to thank Thomas for his service as a Director since his appointment in
2011.

Outlook

US FDA approval of Aorfix combined with the funds raised in June to
commercialise this product, have materially changed Lombard Medical's
future prospects. The Company has launched Aorfix in the US and
expects to hold a formal launch event at the VEITH Symposium in New
York City in November 2013.

With our uniquely labelled device and the resources to effectively
commercialise Aorfix, we are confident of securing a meaningful share
of the significant and growing US EVAR market and of growing revenues
in Europe. With the help of our partner in Japan, one of the fastest
growing markets in the world, we anticipate approval of Aorfix in H1
2014. Together these events will translate into the creation of
significant value for shareholders going forward.

Principal Risks and Uncertainties

The Principal Risks and Uncertainties faced by the Company remain as
reported on page 18 of the Annual Report for the year ended 31 December
2012, with the exception of the Financial Resources risk. The Company
was successful in raising finance in addition to the second tranche of
the May 2011 fundraising, mitigating this risk.

Financial Review

Total revenue for the period increased 2% to GBP2.0m (H1 2012: GBP2.0m).

Commercial Aorfix revenue increased by 8% to GBP1.7m (H1 2012: GBP1.6m),
with growth in Germany, Spain and Italy offset by a decline in the UK
following the consolidation of centres performing EVAR over the past 18
months. Revenue from distributors outside the main EU markets returned
to growth in the period. Other commercial revenues declined by 18% to
GBP0.3m (H2 2011: GBP0.4m) due to the decrease in OEM revenues generated by
the Company's Prestwick facility.

The gross profit of GBP0.6m (H1 2012: GBP0.6m) represented a gross
margin of 32% (H1 2012: 30%). The gross margin is in line with
expectations and reflects low production volumes in the first half of
the year ahead of the stock build for US launch commencing in July. An
increase in gross margin is expected from the second half of the year,
driven by the combination of increased volumes, a higher average
selling price in the US and the on-going process improvement programme,
which is currently in its data gathering phase.

Selling, marketing and distribution expenses increased by 48% to
GBP2.1m (H1 2012: GBP1.4m) due to increases in sales and marketing
headcount and activity in the US following FDA approval, in readiness
for the US launch.

Research and development expenditure decreased by 16% to GBP2.1m (H1
2012: GBP2.5m) as clinical and regulatory expenditure reduced on the
Aorfix clinical trial following FDA approval.

Administrative expenses increased by 24% to GBP1.3m (H1 2012: GBP1.1m).
This is primarily due to a share option charge of GBP0.1m in the current
year following the changes made to the performance criteria in June,
compared with a credit of GBP0.3m in the prior year.

Finance costs of GBP0.3m (H1 2012: GBP0.1m) were incurred as a result of
the accounting for the effective interest payable on the convertible
loan notes.

The tax credit of GBP0.2m (H1 2012: GBP0.1m) consisted of an estimate
of GBP0.2m for the R&D tax credit arising in the period (H1 2012:
GBP0.3m less an adjustment of GBP0.2m for an overestimate of the R&D
tax credit in the prior year accounts).

The loss and total comprehensive expense for the period increased by
14% to GBP5.0m (H1 2012: GBP4.4m).

The net cash outflow from operating activities decreased by 21% to
GBP4.0m (H1 2012: GBP5.1m) principally due to decreased working capital
requirements of GBP0.7m (H1 2012: increase of GBP0.5m).

Net cash used in investing activities increased to GBP0.5m (H1 2012:
GBP0.1m) due to purchase of sales and marketing equipment to support
the US launch.

Net cash flows from financing activities were GBP36.0m (H1 2012:
GBP2.8m), and consisted of the following:

- The US approval of Aorfix in February triggered the receipt by the
  Company of the GBP13.5m (net of expenses) second tranche of the two
  tranche April 2011 fundraising.
- Aorfix approval also triggered the Company's ability to draw down
  $2.5m from the $5.0m loan facility granted by its exclusive Japanese
  distribution partner, Medico's Hirata Inc.
- In June, the Company raised an additional GBP20.9m (net of expenses)
  through a placing, subscription and offer of new shares. The
  fundraising received strong support from the Company's existing
  shareholders as well as a number of new top tier institutional
  investors.

As previously announced, the Company expects to use the net proceeds of
the June fundraising, together with its existing cash resources,
approximately as follows:

- Build the sales and marketing infrastructure to launch Aorfix in
  the US
- Following US launch, continue to grow Aorfix market share in the
  US
- Expand Aorfix production capacity
- Develop next generation products, line extensions and delivery
  devices
- Clinical trials
- Grow the rest of world sales of Aorfix and launch in select new
  territories (including Japan in H1 2014)
- General working capital purposes

In June, the GBP3.0m Convertible Loan Notes issued to Invesco Asset
Management Limited, the Company's largest shareholder, in 2012 were
converted into new Ordinary Shares, effectively extinguishing the debt.

The Company had cash of GBP34.3m as at 30 June 2013 (30 June 2012:
GBP5.2m) which we anticipate will be sufficient to enable the Company
to achieve its longer-term goals in the US market and to support
Lombard Medical's strategy through to cash generation.

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