RNS No 9673c
GYRUS GROUP PLC
23rd February 1999
GYRUS GROUP PLC
Interim Results for the six months
ended 31 December 1998
Gyrus - which specialises in the development and manufacture of a new
generation of radiofrequency energy based systems for use in advanced minimal
access and outpatient surgical procedures - announces its Interim Results for
the six months ended 31 December 1998 and highlights follow:
- Product sales turnover increased by 135% (#1.7 million to #4 million)
- Margins on product sales nearly doubled to 38%, losses reduced to #0.9
million (#1.9 million in 1997)
- Strong product pipeline with rapid growth potential utilising the
installed base of generators
- FDA 510(K) approval to market a new Versapoint electrode form in the USA
- Cash reserves standing at #6.6 million, sufficient to carry company into
profitability
- Successful placing of 7.198 million shares (23%) representing the entire
holding of the original venture capitalists
Commenting on these results today Managing Director Dr Mark Goble said "This
has been an excellent half year period for the company in which we have met
our major goals. We have consolidated early growth, are reaping the benefit of
an interactive and dynamic collaborative partnership with the world's leading
medical device company and fully expect to see profit margins continuing to
improve over the year."
Earlier this month Nomura Securities placed 23% of the issued share capital,
representing the entire holding of the original venture capital investors.
Following this placement Johnson and Johnson Development Corporation continues
to hold 17.8% of the shares and founders 21%.
"The success of the recent placing of venture capital shares suggests a
growing realisation of the investment opportunity afforded by the medical
technology sector, as companies such as Gyrus are able to capture a portion of
the economic advantages new technologies provide in eliminating or reducing
hospital stay" said Dr Goble.
VAPR System
The Interim Results announced today show that partners Mitek continue to make
good progress with sales of the VAPR arthoscopic system, based on the Gyrus
PlasmaKinetic- technology, in the USA. Sales increased to 75,000 electrodes
(28,000 in the corresponding period last year). This is in line with the
growth in installed generators, now 1800 (600 in the same period last year)
and revenue from the sales of associated disposables will also rise.
Interest in the technology has been boosted with the introduction of the VAPR
Flex. This novel 'bendable' electrode makes it possible for surgeons to
readily access difficult areas in the joint space and broadens the application
for the system. The Directors expect that further new products will be
launched during Summer 1999 which will extend the range of procedures possible
and increase the disposable revenue stream.
The VAPR system has now received approval in Japan and will be launched
shortly. Experience in the US market is likely to make for early acceptance.
Versapoint
The Women's Healthcare market also continues to grow and the VersaPoint
hysteroscopic system has a very strong market position as it enables a
'see and treat' approach to out-patient management of uterine disorders.
The Group today announces FDA 510 (K) approval on a new and more powerful
electrode. The US launch will take place shortly, extending the performance
of this technology in the hysteroscopic management of uterine disorders.
Johnson & Johnson continue to invest in educational programmes, recognising
the need for more training in the use of this highly efficient minimally
invasive therapy.
Gyrus Endourology System
The third Gyrus product is the Endourology System, which is being sold by the
company directly. Now launched in the UK, France and Spain, the Endourology
System will be introduced in Italy and Germany shortly. A 510 (K) submission
to the FDA was made in February 1999 enabling the company to actively pursue a
marketing partner for the US.
Improved patient outcomes and reduced costs have been substantiated by leading
urological surgeons. About 150 cases have been performed to date and a
multi-centre study with the Endourology System is now underway. This will
validate the promotional claims and quantify the cost savings compared to
conventional techniques.
To meet anticipated manufacturing demands the company will build a new #2.5
million facility adjacent to the existing Gyrus plant at St Mellons in Wales.
This plant will come on stream early in 2000. The expansion is supported by a
grant of #500,000 from the Welsh Office.
NOTE
A copy of the Interim Results Statement, together with a Company Backgrounder,
is available on request from
Jean Garon PR - telephone (01628) 483040,
fax (01628) 486796 or e-mail: jean@garonpr.demon.co.uk
Please call if you would like an interview with Dr Mark Goble, Managing Director
of the Gyrus Group.
There will be an Analyst/Broker meeting at 10am on Tuesday 23rd February.
This will take place at LBWest Panmure, New Broad Street House, 35 New Broad
Street, London EC2M 1NH.
Press interviews can be arranged by calling the main office of Jean Garon PR
on (01628) 483040 or Jean Garon on her mobile (0836) 227446.
Gyrus Group PLC
Interim Statement
Chairman's Statement
In this interim statement I am pleased to report that Gyrus continues to reach
its goals by consolidating sales growth through meeting customer demand,
significantly improving product gross margins, maintaining a new product flow
and developing expanded market opportunities.
For the interim period July to December 1998 we are pleased to announce that
product sales turnover is up from #1.7m in the same period of 1997 to #4m, an
increase of 135%. For the comparable period, margins on product sales have
nearly doubled to 38% resulting in a lower than expected loss of #0.9m
compared to #1.9m in 1997, reducing loss per share to 2.9p (1997 8.5p). Cash
has been carefully managed and stands at #6.6m, sufficient to take us through
to profitability.
We announced in February that 7.198 million shares (amounting to approximately
23% of the issued share capital of the Company), representing the entire
holding of the Company's original venture capitalist investors, were
successfully placed with the range of UK and Continental European
institutional investors by Nomura Securities.
It is pleasing to report that our partners, Mitek, continue to experience
strong market acceptance for VAPR, the arthroscopic system based on our
PlasmaKinetic technology. Sales increased from 28,000 electrodes in the same
period of 1997 to 75,000 electrodes in 1998. The installed generator base has
grown from 600 to 1800 providing a platform for continued growth in
disposables revenue. During the period a new 'bendable' electrode form was
introduced - VAPR Flex, which enables surgeons to more easily access difficult
locations in the joint space. Further development activities will enable us
to introduce additional products to the portfolio in the early part of 1999,
thereby extending the range of procedures and increasing the revenue derived
from each installed generator. Over the remainder of the year, global rollout
of the VAPR system will continue with launch in Japan imminent, following
regulatory approval received in December 1998.
We have seen growing acceptance of VersaPoint, our hysteroscopic system sold
through Gynecare who continue to develop a synergistic product portfolio to
address the rapidly growing women's healthcare market. We announce today FDA
510(k) approval on a new, more powerful electrode. US launch will occur in
the next couple of weeks increasing procedure applications in the
hysteroscopic management of uterine disorders. Johnson & Johnson is committed
to developing this opportunity based on training surgeons to increase the
conversion rate from conventional open surgery to day case hysteroscopic
techniques.
The Gyrus endourology system for the treatment of benign prostatic hypertrophy
(BPH) has continued to gain acceptance amongst leading urological surgeons.
Since the introduction it has been used in about 150 cases with initial
reports in line with our claims of less bleeding and shorter hospital stays.
A multicentre study is underway to assess performance against conventional
techniques to support our claims of improved patient outcomes and reduced
cost.
End user sales of the endourology system in the UK and Spain were recorded in
the period. Further endorsement of the technology based on the results from
our ongoing study will, however, be key to realising the anticipated growth in
sales. We have now launched the product in UK, France, and Spain and plans
are well advanced for introduction into Italy and Germany. A 510(k)
submission to the FDA for approval to market in the USA was made in February
1999, following which we are actively pursuing a distribution partner for the
US market.
The improvement in product gross margins over the last 18 months has been a
result of several factors; selling prices in the market have held up or
increased, demand forecasting and component procurement has improved, cost
reduction programmes and production efficiencies have been effectively
introduced.
The Company's research and development activities were restructured during the
period. The Design and Development group is responsible for the continued
development of the launched products whilst the Technology Development group
is devoted to the research and development of new techniques. This change has
resulted in two areas of undiluted focus with a clear mission for each group,
early indications are that this has had a very successful impact on each
group's productivity.
The Technology Development group has re-engineered the second technology
platform to more closely simulate the advantages of PlasmaKinetic technology
when used in air or gas-filled body cavities. This activity has broadened the
range of potential applications over those originally envisaged for Platform
2. Pre-clinical studies will be completed in the current quarter following
which negotiations with corporate partners can be accelerated.
The Company's business development strategy is based on direct sales and
marketing activity as well as alliances with third parties where appropriate.
To this end, senior management are continuing the search to identify suitable
partners for selected market applications for its advanced technologies. A
number of avenues are being explored, both as they relate to new indications
for use of PlasmaKinetic systems as well as markets for Platform 2.
An occupational hazard of selling product in the US is the assertion of patent
infringement by competitors. In February 1998 Arthrocare asserted eight
claims from four patents against Johnson & Johnson as the US importer of our
VAPR and VersaPoint systems. The court, in a judgement released in December
1998, denied Arthrocare an injunction because of substantial questions raised
as to the validity of all eight claims at suit. Outside the US, the European
Patent Office has rejected attempts by Arthrocare to similarly apply
retrospective amendments to the scope of their claims. The expert opinion
provided from a broad range of academics, industry sources and independent
legal reviews adds considerable weight to our contentions of invalidity.
However, the outcome of the jury trial, scheduled for May 1999, can never be a
certainty for either party. Over the next few months we anticipate that our
position will be further strengthened by issuance of additional US patents
more specifically directed at our PlasmaKinetic technology, the first of which
we are pleased to report is now under Notice of Allowance.
Plans are well advanced for the construction of a new facility adjacent to our
existing plant in St. Mellons. This will involve a capital expenditure of
#2.5 million, which will be supported by a grant of #500,000 from the Welsh
Office. In view of improved efficiencies in our present facility, we have
been able to delay commencement of construction by six months compared to our
original plans. As a result of this revision, it is expected that the new
plant will be completed late in 1999, and commissioned early in 2000.
In summary it has been an excellent period for the Company, consolidating its
early growth, improving its margins, restructuring the organisation and
ensuring the robustness of its procedures and systems. The Company has
continued to attract and retain excellent individuals at all operational
levels
The board wishes to thank the management and staff, suppliers and investors
for their continued commitment, support and confidence in the future of Gyrus
Group PLC.
Brian Steer
Chairman
Gyrus Group PLC
Consolidated profit and loss accounts
for the six months ended 31 December 1998
Six months Six months Year
ended ended ended
31 Dec 31 Dec 30 June
1998 1997 1998
(unaudited) (unaudited) (audited)
#000 #000 #000
Product sales 3,675 1,565 5,089
Development fees 0 210 212
Royalties 335 95 408
Turnover - continuing
operations 4,010 1,870 5,709
Cost of sales (2,474) (1,331) (4,043)
Gross profit 1,536 539 1,666
Selling and distribution
expenses (422) (290) (717)
General and administration
expenses (1,156) (1,335) (3,042)
Research and development
expenses (1,090) (891) (2,319)
Operating loss - continuing
operations(1,132) (1,977) (4,412)
Interest receivable
and similar income 257 130 506
Interest payable and
similar charges (33) (78) (100)
Loss on ordinary activities
before taxation (908) (1,925) (4,006)
Tax on loss on ordinary
activities 0 0 0
Loss for the financial period
retained for equity
shareholders (908) (1,925) (4,006)
Loss per ordinary share
(pence) -basic (2.9)p (8.5)p (14.9)p
Loss per ordinary share
(pence) -fully diluted (2.9)p (8.5)p (14.9)p
There are no recognised gains or losses other than the loss for each of the
periods stated above.
Consolidated balance sheets
as at 31 December 1998
31 Dec.1998 31 Dec. 1997 30 June 1998
(unaudited) (unaudited) (audited)
#000 #000 #000
Tangible assets 1,537 1,519 1,773
Current assets
Stocks 2,364 645 1,550
Debtors 1,355 936 1,527
Investments - cash on deposit 6,000 11,000 8,300
Cash at bank and in hand 583 1,328 378
10,302 13,909 11,755
Creditors:amounts falling due
within one year (1,805) (1,943) (2,401)
Net current assets 8,497 11,966 9,354
Creditors: amounts falling due
after more than one year (243) (331) (291)
Deferred income (417) (1,066) (749)
Net assets 9,374 12,088 10,087
Capital and reserves
Share capital 13,929 13,854 13,854
Merger reserve 3,561 3,561 3,561
Profit and loss account (8,116) (5,327) (7,328)
Equity shareholders' funds 9,374 12,088 10,087
Reconciliation of movements in shareholders' funds
31 December 1998 31 December 1997 30 June 1998
(unaudited) (unaudited) (audited)
#000 #000 #000
At beginning of period 10,087 159 159
Loss for the financial
period attributable to
equity shareholders (908) (1,925) (4,006)
New share capital issued 75 13,854 13,854
Charge in relation to share-
related awards 120 0 80
At end of period 9,374 12,088 10,087
Consolidated cash flow statement
for the six months ended 31 December 1998
Six months ended Six months ended Year ended
31 December 1998 31 December 1997 30 June 1998
(unaudited) (unaudited) (audited)
#000 #000 #000
Net cash outflow from
operating activities (2,223) (1,931) (5,207)
Returns on investment and
servicing of finance
Interest received 261 94 427
Interest paid (19) (55) (67)
Interest element in financial
lease rental payments (14) (14) (28)
Net cash flows for returns on
investments and servicing finance 228 25 332
Taxation 0 0 0
Capital expenditure and financial
investments
Purchase of tangible fixed assets (94) (431) (960)
Sale of tangible fixed assets 0 0 2
(94) (431) (958)
Cash outflow before management of
liquid resources and financing (2,089) (2,337) (5,833)
Management of liquid resources
Cash placed on short term deposit 2,300 (11,000) (8,300)
Financing
Capital element of finance lease
rental payments (63) (28) (65)
Bank loan (18) (18) (135)
Issue of share capital, net of
issue costs 75 13,777 13,777
Net cash (outflow) inflow
from financing (6) 13,731 13,577
Increase(decrease) in cash in the
period 205 394 (556)
Reconciliation of net cash flow
to movement in net funds
Six months ended Six months ended Year ended
31 December 1998 31 December 1997 30 June 1998
(unaudited) (unaudited) (audited)
#000 #000 #000
Increase(decrease) in cash
in the period 205 394 (556)
Cash outflow from decrease
in debt and lease financing 81 46 200
(Decrease)increase in liquid funds (2,300) 11,000 8,300
(2,014) 11,440 7,944
New finance leases 0 (42) (71)
Change in net funds (2,014) 11,398 7,873
Net funds at beginning of period 8,253 380 380
Net funds at end of period 6,239 11,778 8,253
Analysis of net funds
Six months ended Six months ended Year ended
31 December 1998 31 December 1997 June 1998
(unaudited) (unaudited) (audited)
#000 #000 #000
Cash at bank and in hand 583 1,328 378
Finance leases (165) (236) (228)
Debt due within one year (36) (136) (36)
Debt due after one year (143) (178) (161)
Current asset investments 6,000 11,000 8,300
Net funds at end of period 6,239 11,778 8,253
Reconciliation of operating loss to cash flow from operating activities
Six months ended Six months ended Year ended
31 December 1998 31 December 1997 30 June 1997
Operating loss (1,132) (1,977) (4,412)
Depreciation charges 330 186 505
Profit on disposal of fixed assets 0 0 0
Increase in stocks (814) (385) (1,290)
Decrease(increase) in debtors 168 (568) (1,116)
(Decrease)increase in creditors (563) 1,103 1,633
Decrease in deferred income (332) (290) (607)
Share-related awards 120 0 80
(2,223) (1,931) (5,207)
Notes to the Interim Statement
1. Basis of preparation
The interim statement has been drawn up under the same accounting policies as
those used for the financial statements for the year ended 30 June 1998. The
interim financial statements do not constitute statutory accounts as they are
unaudited. They have however been reviewed by KPMG Audit Plc and their report
is set out below. On 20 October 1997 Gyrus Group PLC acquired the entire
share capital of Gyrus Medical Limited in a share for share exchange. The
financial information for the six month period ended 31 December 1997 and the
year ended 30 June 1998 has been prepared by consolidating Gyrus Group PLC and
Gyrus Medical Limited under merger accounting principles as if Gyrus Group PLC
had always owned Gyrus Medical Limited. The annual report and accounts of
Gyrus Group PLC for the year ended 30 June 1998 received an unqualified audit
report and have been filed with the Registrar of Companies.
2. Loss per share
The loss per share is based on losses of #908,000 (six months ended 31
December 1997: loss of #1,925,000 and year ended 30 June 1998: loss of
#4,006,000), and on 31,031,028 ordinary shares (six months ended 31 December
1997: 22,683,924 and year ended 30 June 1998: 26,834,016), being the weighted
average number of shares in issue during the period.
3. Dividend
The directors do not recommend payment of a dividend.
4. Approval
This Interim Statement was approved by the Board of Directors on 22 February
1999.
5. Copies of the Interim Statement
Copies of the interim statement will be sent to all shareholders and further
copies are available at the Company's registered office, Fortran Road, St
Mellons, Cardiff, CF3 0LT.
Review Report by KPMG Audit Plc to the Directors of Gyrus Group PLC
We have reviewed the interim financial information for the six months ended 31
December 1998 set out on pages three to seven which is the responsibility of,
and has been approved by the Directors. Our responsibility is to report on
the results of our review.
Our review was carried out having regard to the Bulletin "Review of Interim
Financial Information" issued by the Auditing Practices Board. This review
consisted principally of applying analytical procedures to the underlying
financial data, assessing whether accounting policies have been consistently
applied and making enquiries of Group management responsible for financial and
accounting matters. The review was substantially less in scope than an audit
performed in accordance with Auditing Standards and accordingly, we do not
express an audit opinion on the interim financial information.
On the basis of our review:
in our opinion, the interim financial information has been prepared using
accounting policies consistent with those adopted by Gyrus Group PLC in its
financial statements for the year ended 30 June 1998 and taking into account
the group reorganisation referred to in note 1 to this interim statement; and
we are not aware of any material modifications that should be made to the
interim information as presented.
KPMG Audit Plc
Chartered Accountants 22 February 1999
Cardiff
END
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