GYG Gyg Plc

RNS No 6307f
GYRUS GROUP PLC
30 June 1999



GYRUS ANNOUNCE FINAL SETTLEMENT
OF U.S. LITIGATION

As announced on Friday 25th June, Gyrus have agreed terms of settlement of the
US litigation brought by Arthrocare in February 1998 against Ethicon Inc
relating to their importation, sale and distribution of Gyrus's arthroscopic
and hysteroscopic systems in the US market.  Final settlement terms have now
been signed.

The arthroscopic and hysteroscopic systems are manufactured by Gyrus and
licensed to Ethicon Inc.  Under the terms of the settlement agreement, Ethicon
will license Arthrocare's US patents in the arthroscopic and hysteroscopic
gynaecology markets and Arthrocare has dismissed the legal action.

Both Ethicon and ArthroCare will continue to be active in developing the
arthroscopic market.  Ethicon will pay Arthrocare a license fee and ongoing
royalties on sales in the United States of certain arthroscopic and
gynaecological products.  The settlement agreement also establishes a
procedure for resolution of certain intellectual property disputes in these
two markets without resorting to litigation.  Additional terms of the
settlement agreement were not disclosed. 

The settlement of the US litigation will remove what could have been a
significant risk to Gyrus's future growth and has simultaneously provided a
much stronger barrier to other competitors seeking to enter the market.  With
final resolution of this issue, Gyrus can now confidently move forward in
developing additional markets and alliances.

In a separate agreement, Gyrus and Ethicon will share the costs of settlement
including ongoing royalties on a proportional basis, comparable to their
respective sharing of sales revenue.  Gyrus will record an exceptional charge
of approximately #0.9M against the costs related to settling the litigation
including legal costs already expensed during the course of the proceedings. 
Other aspects of the agreement include an extension of Gyrus's manufacturing
exclusivity for the US market.  Gyrus and Ethicon are also negotiating terms
to support a more aggressive product development program for both the
arthroscopic and hysteroscopic product lines.

The first arthroscopic system was launched by Gyrus and Ethicon's Mitek
subsidiary in the second quarter of 1997, since when Gyrus has sold more than
250,000 electrodes.  Two new electrode forms were introduced during 1998 and a
small diameter form is due to be launched shortly, with the aim of maximising
revenue from an installed generator base now exceeding 2,500 units in the US
and Europe. 

In the first half of the current financial year, Gyrus was able to report a
135% leap in product sales (#4 million from #1.7 million), along with a sharp
drop in pre-tax losses (#0.9 million from #1.9 million).   Despite the
settlement costs, cash reserves are sufficient to reach profitability.  Cash
burn has been reduced significantly over the second half of the year, with net
cash flow now approaching a neutral position. 

Gyrus has been at the leading edge of an evolution in the surgical treatment
of diseases using minimal access techniques for the last five years. 
PlasmaKinetic surgery - the name given to the application of their new
radio-frequency energy delivery technology - can be uniquely controlled to
remove and modify body tissues using minimal access techniques.  This novel
surgical procedure will transform treatment for a variety of routine
conditions and often in an outpatient environment with no need for a hospital
stay.  Rapid recovery, safety and cost effectiveness give use of this
technique major advantages in comparison to conventional open surgery.

In addition to the arthroscopic and hysteroscopic market applications for
Gyrus's PlasmaKinetic technology, the third niche market centres on urological
surgery and the management of prostatic diseases in particular (Gyrus
Endourology System).  Gyrus is undertaking the challenging task of developing
its own market presence in this sector and has appointed a direct sales force
in the UK with country managers running distribution in Spain, France and
Italy.  A 510(k) has been submitted and approval is awaited prior to moving to
the next stage of discussions with potential US partners.  

Independent figures predict that the world-wide market in this niche will grow
significantly.  Currently estimated $150 million p.a. future growth will be
driven by (a) an ageing population and (b) the introduction of an improved
surgical treatment competitively positioned against the higher long-term cost
of continuous control using pharmaceutical management. 

Gyrus employs 190 people at its headquarters and manufacturing plant near
Cardiff, Wales. The plant includes a 3,000sq. ft. Class 10,000 Clean Room
where the single use disposables for use with PlasmaKinetic systems are
produced.  Plans to develop an adjacent site - which will increase production
capacity significantly from January 2000 - have been approved and the company
is now moving into its next rapid scale up phase.

Gyrus Group PLC has its UK headquarters at Gyrus Group PLC., Fortran Road, St
Mellons, Cardiff, Wales CF3 0LT.  Tel: (01222) 300100, fax: (01222) 300101. 
You can also visit the company on the web at: www.gyrus.co.uk


Enquiries:

Shareholders, Brokers, Analysts, etc
GYRUS GROUP PLC
Dr Mark Goble, Managing Director, or       Tel: (01222) 300100
John Bradshaw, Finance Director            Fax: (01222) 300101

Press
JEAN GARON PR                              Tel: (01628) 483040
Jean Garon or Linda Hicks                  Fax: (01628) 486796


END

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