LiDCO Group Plc 30 March 2005 FOR IMMEDIATE RELEASE 30 March 2005 LiDCO GROUP PLC PRELIMINARY RESULTS LiDCO, the UK-based, AIM-traded cardiovascular monitoring company, announces its Preliminary Results for the 13 months ended 31 January 2005 Corporate Highlights • Sensor and fee for use unit sales increased by 91% to 19,623 over the previous year (10,260) - fourth year in a row of disposable sales growth over 90% • Planned transition from capital sales well advanced with disposable revenue (recurring sales) now 66% of product sales - up from 20% in 2002 and 33% in 2003 • An independent clinical study shows £4,000 cost savings per patient, potentially worth £500m per annum to the UK's NHS • The installed base of PulseCO/LiDCOplus monitors increased by 30% to 770 at the end of the period (2003:591) • Contract signed with Philips Medical Systems and launch of the LiDCOplus v3.0 software - creates a communications link between LiDCO's monitoring system and Philips' patient monitors • A placing of £3.7m (net) of new shares was completed in June 2004, providing capital to support the new US, European distributor programmes and additional R&D Sales Expansion • Distributors - five appointed in the US with appointments in Germany and Austria, further increasing global sales reach • Further product approvals - lithium chloride drug registration achieved in: Austria, Italy, Sweden, Norway, Ireland, Bulgaria and Denmark (see separate press release issued today) • Sales growth of 35% in our priority markets (excluding the Far East) at £2.3m (2003: £1.7m): USA up 24%, UK up 32%, Europe up 55% • Worldwide uptake of LiDCO's technology with 46% of installed monitors in the US, 35% in Europe and 19% in ROW • Continual growth of disposable sales expected in 2005 from additional monitor placements into the recently expanded distribution territories Financial Highlights • Total revenues of £2.5m /constant currency £2.6m (2003: £2.7m) • Pre-tax operating loss steady at £4.2m (2003: £4.1m) • Loss per share down at 4.34p from 5.34p • Administration expenses were held at £6.0m (2003: £6.1m) • Cash outflow before financing £3.8m (2003: £3.4m) Dr Terry O'Brien, Chief Executive of LiDCO, stated: "We have a compelling product coupled with clear outcome data that shows that use of the product produces a significant reduction in post surgical complications and hospital costs. We are looking forward to an acceleration of sales during 2005 through our considerably expanded global distributor network." Enquiries: LiDCO Group Plc 020 7749 1500 Terry O'Brien (CEO) terry@lidco.com Theresa Wallis (Chairman) theresa.wallis@lidco.com Buchanan Communications Tim Anderson tima@buchanan.uk.com 020 7466 5000 Mary-Jane Johnson mary-janej@buchanan.uk.com James Strong jamess@buchanan.uk.co Durlacher Ltd Grant Harrison (Head of Corporate Broking) 020 7459 3600 The investor presentation 'Preliminary Results - 13 months ended 31st January 2005' will be available on the LiDCO website (www.lidco.com). CHIEF EXECUTIVE OFFICER'S STATEMENT INTRODUCTION The US spent $1.2bn in 2002 on patient monitoring products and, with an annual growth rate of 8.9%, hospitals will continue to allocate a significant percentage (30 - 40%) of their resources to critical care patients. There remains a growing need for advances in cardiovascular monitoring and the care of such hospital patients. The size of the available market therefore is not in doubt. The challenge for LiDCO in 2004 was to get into the position where the Company could fully exploit the potential for its technology to meet this growing need. Therefore it was key to complete residual registration activities in a number of new territories and appoint additional distributors in these territories. These activities have now been concluded successfully. Following product approvals the publication of independent clinical studies showing both patient and economic benefits is crucial to the development of the minimally invasive monitoring market. With this in mind I am pleased to report that during the year, a number of trials using LiDCO's technology have concluded positively. Of these trials the most powerful report was the one presented on 22 March 2005 at the 25th International Symposium on Intensive Care and Emergency Medicine in Brussels - following the conclusion of a prospective controlled trial conducted by St George's Hospital, London. This trial has demonstrated that better post operative intensive care can be achieved with the use of LiDCO's minimally invasive technology and importantly that such care translates into benefits for both the patient and cost savings for the healthcare provider. The savings achieved through adoption of this approach to the hospital per year have been estimated at £2m. This represents a saving of £4,000 per patient through an average reduction in stay of more than ten bed days per patient treated. It has been estimated that if this form of advanced cardiovascular care was implemented throughout the UK, savings of up to £500m per annum could be achieved for the NHS. BUSINESS REVIEW During the period we have made significant advances in the development of a truly worldwide sales and distribution network. In order to do so a number of regulatory milestones were reached in 2004 and in early 2005. We have paid particular attention to the European market - as this is the most developed territory for the adoption of advanced minimally invasive cardiovascular monitoring. We have received full approvals for marketing in eight additional territories: Italy, Germany, Austria, Norway, Sweden, Denmark, Ireland and Bulgaria. These latest registrations now provide LiDCO with full marketing approval in thirteen European countries. Following these additional registrations we are now selling product in a greatly expanded group of territories: Germany, Austria, Italy, Sweden, Holland, Belgium, Denmark, Czech Republic, Croatia, Spain, Sweden, Norway and the UK. We expect continued and significant sales growth in Europe during 2005. We also extended our sales reach in the USA, signing agreements with five regional distributors. We are supporting these distributors with our direct sales staff and will continue to appoint additional organisations throughout 2005. Our ambition is to achieve full coverage of the USA market through a mixed direct and distributor sales force. In May 2004 the company announced it had contracted with Philips Medical Systems ("Philips") to create a communications link between LiDCO's proprietary, stand-alone monitoring system (LiDCOplus Monitor) and Philips' patient monitors, via the Philips Open VueLink Interface protocol. The communications link allows Philips customers access to LiDCO's proprietary, minimally-invasive hemodynamic monitoring data on the IntelliVue Patient Monitor. The integration of critical care parameters and hemodynamic data derived from the LiDCOplus monitor will allow a fuller picture of the patient's condition and history to be displayed and accessed throughout the hospital. I am pleased to say that this communication link software has now been completed and launched. In addition, for those hospitals without Phillips monitors we have provided a real time ethernet based communication feature. This means that LiDCO monitors can now be interfaced through both proprietary and inexpensive non proprietary protocols. This is a major step forward as hospital information systems can now be updated with LiDCO's oxygen delivery data, shown by the St George's trial to be fundamental to improving outcomes for surgical patients. We believe that there is a growing requirement from intensive care staff and the hospital administration for the provision and clinical audit of such crucial information. Our experience is that interconnectivity of hemodynamic monitors to hospital information systems is becoming a key part of the hemodynamic monitor purchase specification. Our PC based monitor approach is highly flexible and able to accommodate this developing requirement. TRADING REVIEW Sales, Margins and Placing In the period turnover was modestly down in comparison to 2003. This was a consequence of our continuing strategy to promote monitor rental and disposable sales at the expense of one-off revenues from capital sales to distributors and hospitals. Revenues in 2003 were also boosted by the receipt of an initial £0.7m stocking order from Japan. Thus the overall revenue figure disguises the underlying strong growth of revenue in Europe and the USA - which was increased by 32% over the previous year. This reflects continued encouraging levels of disposable usage and the expansion in the installed monitor base - up 30% (from 591 to 770 systems). Overall disposable sales increased strongly in the period - up by 87%. Thus 2004 was the fourth year in succession where we have seen such growth in recurring revenue. These more predictable revenues from sales of disposables, fee for use and rentals now account for the majority (64%) of total revenue - see Table 1. Table 1 Revenue Summary - Showing Transition to Annuity Stream Sales Detail January 2005 December 2003 £'000 £'000 Capital Sale 803 1,669 Sensor Revenue 1,456 844 Monitor Fee per Use 120 0 Licence Fees 77 204 Total 2,456 2,717 Total @ constant currency 2,586 Installed Base at Period End (number of 770 591 monitors) As disposable sales increase in existing markets and territories that were added in the second half of the year the Company expects continued strong recurring revenue growth in 2005. We continue to make progress in the USA which represents 46% of our installed base of monitors. We expect that, in addition to the sales achieved by our own sales team, there will be a growing contribution from the five US regional agents who, following training, are starting to make an impact on income. The global interest in minimally invasive technology is supported by the widespread distribution of our installed base of monitors US (46%), Europe (35%), ROW (17%). Cost controls have been maintained and the underlying monthly cash usage is steady despite servicing a larger distributor sales organisation in a considerably expanded number of territories. Our expectation is that the installed base of monitors (770 as at January 31 2005) will continue to increase and our first commercial milestone of an installed base of 1,000 monitors looks within reach during 2005. In order to support the sales expansion in the US and Continental Europe, and to finance product development, the Company concluded a placing of shares in June raising approximately £3.7 million (net). It was gratifying to see a number of our existing investors supporting this financing round, and at the same time we were able to welcome a number of new institutional investors. Hospitals will always need to maintain a high standard of patient care - which means a constant need for the latest technology, despite budget restraints. In January 2005 LiDCO signed an agreement with a major US finance house - a leading provider of equipment acquisition solutions for acute-care hospitals throughout the United States and Canada. We will use the flexible leasing programs on offer to help sell equipment to US hospital customers via leasing programs that give hospitals the ability to obtain equipment immediately and pay for it in monthly installments. The provision of this facility greatly enhances the ability of our sales team and agents to provide appropriate financing solutions for our customers. US Turnover in 2004 was £935,000 (2003: £754,000) an increase of 24% despite an adverse currency impact from the weakening dollar of £131,000. Currency adjusted turnover (£1.1m) shows an increase of 41%. Capital sales of monitors represented 27% of systems placed in the period (2003: 58%). The number of monitors placed and sales of sensors/fees for use increased by 36% and 111% respectively compared to 2003. A number of distributors were appointed during the second half of 2004 to supplement our existing direct sales force, and increase the sales coverage within the USA. The training of their staff took place during the second half of 2004 and sales have commenced. Further appointments of US agents are expected in 2005. Given the lengthy US capital sales cycle, the rental/consignment model was introduced during the last quarter of 2003 to accelerate market penetration of our monitoring systems alongside the existing capital sales option, and sales through higher charges on disposables ("Upcharge"). Under this new model, customers are charged a fee each time they use the LiDCOplus software, but pay no up-front fee for the monitor. Furthermore, they can cost-effectively calibrate their installed LiDCOplus system using third party products, as well as LiDCO sensors, thereby further increasing the range of clinical situations in which our monitors can be used. With this sales model we have had successes at a number of US hospitals where we have been able to provide advanced, real-time cardiovascular monitoring, while still saving the hospital money against their existing revenue budget for invasive monitoring. UK Turnover in the UK increased by 32% to £930,000 (2003: £706,000) with both monitor placements and sensor numbers increasing by 64%. Sales in the UK are made via a direct sales force of 7 people, ensuring that LiDCO is kept in direct contact with clinical developments in the critical care community and can rapidly adapt its products to meet changing demands. As in the US, a variety of sales models are also used in the UK, with hospitals able to select from simple capital purchase, up charged sensor prices (but no capital purchase) or, more recently, a fee for use programme. The flexibility offered to NHS hospitals assists them in the acquisition of the LiDCO technology according to local budgetary and planning circumstances. We expect sales growth in the UK to be accelerated through adoption of the protocol for improving outcome in high risk surgery patients pioneered at St George's hospital. Continental Europe Turnover for the period was £386,000 - an increase of 55% (2003: £249,000). With the first wave of mutual recognition approvals only achieved in late 2003, first sales into continental Europe started in earnest in mid 2004. The registration process has continued, with second wave approvals received in the first quarter of 2005. There are now 13 European territories open to LiDCO and its products, with further European approvals scheduled for 2006. Sales in Europe are made via a network of distributors supported by LiDCO staff based in the UK and Northern Europe. The market for less invasive cardiovascular monitoring is most advanced in Europe, compared to the rest of the world and interest in adopting minimally invasive monitoring is strong. We expect significant sales growth in 2005. Far East, Japan and the Rest of the World Sales in the Far East, Japan and the Rest of the World totalled £204,000 (2003: £822,000). Adjusting for the one-off stocking order received from our Japanese distributor in 2003 (£700,000), reveals a sales increase in territories outside of Japan. In Japan, following their purchase of an initial stocking order of 100 monitors in 2003 our distributor Nipro have established a number of key clinical reference sites for our technology. The strategy is to concentrate on these centers initially and then expand sales through local referrals. The market for real time hemodynamic monitoring is less well developed in Japan when compared to Europe - 2005 will therefore represent a year where the product advantages are still being established by our distributor partner. We therefore expect modest sales during this market development period. RESEARCH AND DEVELOPMENT AND PRODUCT APPLICATIONS Focus on improving hospital patient outcomes and reducing costs Our core development activities centre on the acquisition and intelligent display, through a platform PC based monitor, of combinations of measurements, that have been proven to influence hospital patient outcomes positively, and thereby reduce costs. The advantages to be obtained through targeting one such parameter (oxygen delivery) have already been demonstrated. LiDCO believe that there will be an increasing recognition of the advantages of this form of hemodynamic driven care. Hemodynamic Driven Care & Intravenous fluid management: The Company expects to add a further software product to simplify and make safer the administration of fluids for re-hydration purposes. Knowing the precise amount of fluids to administer is surprisingly difficult. Too little fluid and the oxygen delivery and blood pressure can fall to dangerous levels. Too much can result in overloading the circulation and heart resulting in a greatly extended hospital stay. LiDCO is developing a unique interface allowing the nurse/physician-led optimisation of fluid administration to such patients. This development activity will result in an intelligent fluid administration screen and new software product. This will not only improve safety but also help in the implementation of early goal directed therapy (EGDT) in surgery patients. Oxygen Delivery & Consumption Ratio Patent Application: Improved outcomes are achieved when the consumption and delivery of oxygen are well matched - the EGDT / St George's study is an example of where increasing oxygen delivery to pay back an oxygen debt has markedly improved outcome. To further simplify the monitoring of the relationship of these two parameters LiDCO have filed a patent on a unique way of calculating and displaying their relationship in a simplified form. Through such a display, the user can be alerted to any deterioration in this key ratio and a menu of appropriate responses is presented e.g. giving additional blood, more fluids or the administration of a drug. It is our intention to add this functionality to our software. Potential Neonatal Application for the LiDCOplus Monitor Monitoring of cardiovascular status in the unwell pre-term baby (neonate) is mostly limited to the continuous measurement of blood pressure through an umbilical artery catheter. However, these blood pressure values, although useful, may not accurately reflect actual tissue perfusion with oxygen. The continuous measurement of cardiac output and estimation of oxygen delivery in these very small babies has not been possible, except intermittently by echocardiography. Researchers from the Clinical Science Department (Child Health), University of Bristol, UK have shown that continuous analysis of cardiac output is possible with the LiDCOplus Monitor. The cardiac output trend derived from our monitor shows a closer correlation to changing tissue oxygen perfusion than standard arterial blood pressure monitoring. They conclude that "This methodology is applicable to the term and preterm infant in assessing cardiovascular function, using either a standard umbilical catheter, or a peripheral arterial line." The LiDCOplus Monitor is not registered for use in subjects less than 40 kgs in weight; however, this work has encouraged us to further investigate the potential for sales of the LiDCOplus Monitor in neonatal intensive care units. If an attractive business case can be made then the appropriate steps will be taken for registration of this new clinical indication. Terry O'Brien Chief Executive Officer LiDCO Group Plc Consolidated Profit and Loss Account for the 13 months ended 31 January 2005 - Unaudited Thirteen months ended Year ended 31 January 31 December 2005 2003 £'000 £'000 (restated) TURNOVER 2,456 2,717 Cost of sales (808) (808) Gross profit 1,648 1,909 Administration expenses (5,965) (6,090) OPERATING LOSS (4,317) (4,181) Interest receivable and similar income 77 68 LOSS ON ORDINARY ACTIVITIES BEFORE TAX (4,240) (4,113) Tax on loss on ordinary activities 41 238 LOSS ON ORDINARY ACTIVITIES AFTER TAX (4,199) (3,875) AND RETAINED FOR THE PERIOD/YEAR Loss per share (basic and diluted) (p) 4.34 5.34 The prior period restatement is due to a change in accounting policy, as set out in note 2. All amounts derive from continuing operations. There are no recognised gains or losses for the current or preceding years other than as stated above. LiDCO Group Plc Balance Sheet as at 31 January 2005 - Unaudited The Group 31 January 31 December 2005 2003 £'000 £'000 (restated) FIXED ASSETS Intangible fixed assets 313 421 Tangible fixed assets 1,221 1,305 Investments - - 1,534 1,726 CURRENT ASSETS Stocks 1,165 1,665 Debtors 1,510 1,201 Cash at bank and in hand 1,607 1,600 4,282 4,466 CREDITORS: amounts falling due within one year (558) (515) NET CURRENT ASSETS 3,724 3,951 TOTAL ASSETS LESS CURRENT LIABILITIES 5,258 5,677 CREDITORS: amounts falling due after more than one year (123) (198) NET ASSETS 5,135 5,479 CAPITAL AND RESERVES Called up share capital 495 386 Share premium 17,142 13,396 Merger reserve 8,513 8,513 Other reserve (88) (88) Profit and loss account (20,927) (16,728) EQUITY SHAREHOLDERS' FUNDS 5,135 5,479 The prior period restatement is due to a change in accounting policy, as set out in note 2. These financial statements were approved by the Board of Directors on 30 March 2005. LiDCO Group Plc Consolidated Cash Flow Statement for the 13 months ended 31 January 2005 - Unaudited Thirteen months ended 31 January Year ended 31 2005 December 2003 £'000 £'000 Net cash outflow from operating activities (3,544) (3,094) Returns on investment and servicing of finance 77 68 Capital expenditure and financial investment (381) (344) Cash outflow before financing (3,848) (3,370) Financing 3,855 996 Increase/(Decrease) in cash in the year 7 (2,374) Reconciliation of net cash flow to movement in net funds - Unaudited Thirteen months ended 31 January Year ended 31 2005 December 2003 £'000 £'000 Movement in cash in the period 7 (2,374) Net funds at 1 January 1,600 3,974 Net funds at 31 January/31 December 1,607 1,600 Reconciliation Of Movement In Consolidated Shareholders' Funds - Unaudited For the Thirteen Months ended 31 January 2004 Thirteen months ended 31 January Year ended 31 2005 December 2003 £'000 £'000 (restated) Loss for the financial period/year (4,199) (3,875) Issue of shares 3,855 996 Net reduction in equity shareholders' funds (344) (2,879) Opening equity shareholders' funds 5,479 8,358 Closing equity shareholders' funds 5,135 5,479 NOTES TO THE PRELIMINARY RESUTS For the 13 months ended January 2004 1. NATURE OF THE FINANCIAL INFORMATION The financial information set out in this preliminary announcement which was approved by the board on the 30 March 2005 does not constitute the Group's statutory accounts for the 13 months ended 31 January 2005 and the year ended 31 December 2003. The financial information for the year ended 31 December 2003 is derived from the statutory accounts for that year which have been delivered to the Registrar of Companies. The auditors reported on those accounts; their report was unqualified and did not contain a statement under s237(2) or (3) Companies Act 1985. However, the auditors drew attention in their report to the company's disclosures regarding its requirement for further funding which was subject to shareholder approval. The statutory accounts for the 13 months ended 31 January 2005 will be finalised on the basis of the financial information presented by the directors in this preliminary announcement and will be delivered to the Registrar of Companies following the company's annual general meeting. The preliminary results have been prepared in accordance with applicable accounting standards. The particular accounting policies adopted are the same as those adopted in the financial statements for the year ended 31 December 2003, excepted as discussed below in note 2. The financial information is prepared on a going concern basis which assumes that the company will have sufficient funds to continue in operational existence for the foreseeable future. This assumption is based on a forecast level of new sales about which there is uncertainty. The directors believe sufficient further financing will be available should these sales not occur. 2. RESTATEMENT OF COMPARATIVE FIGURES Following the introduction of UITF 38 ("Accounting for Employee Share Ownership Trusts") the company restated its figures to exclude the LiDCO Group Plc Employee Benefit Trust. This change had the effect of transferring the Investments balance of £60,000 (2003: £38,000) directly to reserves. Changes in the value of shares held in the Trust are no longer shown in the Company's results. 3. DIVIDENDS It remains the Group's policy that no dividends will be paid until future operations have provided appropriate levels of distributable profits. 4. DISTRIBUTION Copies of this statement will be available for collection free of charge from the Company's registered office at 16 Orsman Road, London N1 5QJ. Notes for Editors: General Notes about LiDCO Plc LiDCO is a UK-based AIM-traded developer, manufacturer and leading supplier of minimally invasive, computer-based hemodynamic monitoring equipment and disposables used primarily for the management of critical care and cardiovascular risk hospital patients. Use of LiDCO's technology has been shown to significantly reduce the complications (particularly infections) and costs associated with major surgery The technology was invented in the Department of Applied Physiology based at St Thomas' Hospital, London where the Company maintains a research base. The Company's manufacturing facility is in Hoxton, London and its current products are: LiDCOplus and PulseCO monitors: computer-based platforms for displaying a range of real-time, continuous hemodynamic parameters including cardiac output, oxygen delivery and fluid volume; LiDCO disposables: accurately determine cardiac output in a minimally-invasive manner. Distribution Network: The Company has achieved registration of its products in 13 markets in Europe, the USA and Japan. It sells direct to the NHS in the UK, and through a worldwide network of specialty critical care distributors. Background to the recently published clinical trial: Better than standard care - (EGDT) improves outcome in high risk surgery patients: The results of a major trial at St George's Hospital, London using LiDCO's minimally invasive monitoring technology were presented during the 25th International Symposium on Intensive Care and Emergency Medicine in Brussels (21st to 25th March). The results have revealed the following: Savings in the cost of treating patients amounting to an average of £4,000 per patient. Extrapolated nationally, this would equate to a saving of £500 million per annum for the NHS The monetary saving (£248,000) - resulted from 640 hospital days saved for 62 patients, an average of more than 10 bed days per patient The savings in cost and time were associated with a significant reduction in medical complications (particularly infections - which were halved) through the use of LiDCO's minimally invasive technology to improve tissue oxygen levels following surgery. For many patients standard surgical and post operative care is adequate. However, there is a group of patients at higher risk of surgical morbidity (tissue damage) and mortality (death). The risk is related to the patient's preoperative fitness level and, in particular, how their cardiovascular (heart and circulation) and respiratory (oxygenation) reserves respond to the stress of surgery. Low reserves/levels of fitness translate into a higher risk of complications. A number of studies have shown that the use of early goal-directed therapy (EGDT) to achieve and maintain adequate tissue oxygenation in such patients can result in a reduction in complications, a better clinical outcome and commensurately lower hospital costs. Why is EGDT not available to all high risk surgery patients? Adoption of EGDT in general surgery patients has been inhibited by the invasive and complex nature of more traditional monitoring equipment which is catheter based (the catheter has to be inserted into the heart). The risk of infection and tissue damage coupled to the resource/cost implications of using such complex catheter based technologies has slowed the application of such advanced cardiovascular care to a wide patient population. Post surgical EGDT is an ideal application for the minimally invasive LiDCOplus monitor: LiDCO's technology is less invasive as it does not require the insertion of additional catheters into the heart. It can be used in conscious or unconscious patients, and is designed to be quick and easy to set up. The monitor can be used by both doctors and nurses to measure and display beat to beat trends in blood flow and oxygen delivery to the body. Using this technology the maintenance of a target oxygenation level and/or the 'early' and rapid pay back of any oxygen debt incurred during surgery can be both achieved and, importantly, documented. The LiDCOplus monitor screen software has been specifically designed to be highly visible at a distance for routine monitoring once the patient is stabilized, whilst also providing more detailed feedback when the clinician or nurse is administering the intravenous fluids and powerful drugs that are used to increase blood flow and oxygen delivery. Summary of the advantages of the LiDCOplus technology in the treatment of high risk surgery patients: No additional staff are needed to set and achieve oxygen delivery targets The technology can be used by a nurse and does not require a specialist clinician It can be set up quickly and easily The monitor is specially designed to be make precise critical measurements easy to read and interpret, enabling swift corrective action to be taken when needed The technology enables an audit trail of medical data to be recorded and passed to the hospital's patient information system via the Philips Open VueLink Interface protocol or LiDCO's non proprietary ether net connection Significantly less invasive with commensurately lower infection rate reduced risk of tissue damage and less trauma for the patient than with older catheter based technologies Collectively, these factors mean better clinical outcomes for patients, lower demands on critical care units staff, and lower costs overall for the healthcare provider. 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