RNS No 7257a
MEDISYS PLC
29th April 1998
Medisys PLC ("Medisys" or the "Group")
Agreement Reached to Acquire Lukens Medical Corporation
Appointments of Dr. Donald E. Panoz and Mr. David Wong as Directors
Subscription for shares by Dr. Panoz
Proposed Strategy for Effecting the Demerger of Biocure Limited
Unaudited Interim Results for six months ended 31 December 1997
The Board of Medisys, the Point-of-Care ("POC") medical device group,
announces:-
* Medisys has reached agreement to acquire, subject to certain conditions,
Lukens Medical Corporation ("Lukens"), a US manufacturer and marketer of
healthcare and surgical products, for a consideration of approximately
US$12.4 million (approximately #7.4 million);
* The appointment to the Board of Dr. Donald E. Panoz, founder of Elan
Corporation plc, the US$6.5 billion market capitalisation pharmaceutical
group, and Mr. David Wong;
* The intention of Dr. Panoz to subscribe #600,000 (approximately
US$1,000,000) for 2 million new ordinary shares in Medisys at a price of 30
pence per share and the issue of warrants to Dr. Panoz;
* The intention to effect a demerger of Biocure Limited ("Biocure"), the
Group's pharmaceutical research subsidiary;
* Interim Pre-Tax losses of #977,000 for the 6 months to December 1997 (6
months to December 1996: #21,000 loss) and the continuing development of
Hypoguard's strategy towards the development of POC and Over-the-Counter
("OTC") diagnostic products.
Enquiries to:
Brian Timmons, Finance Director, Medisys PLC
Tel: 0171 283 2500
Conditional acquisition of Lukens
The Board of Medisys announces that it has reached agreement to acquire
Lukens, a NASDAQ quoted company engaged in the manufacture and distribution of
a range of surgical and sharps disposal products complementary to both the
Needle Incinerator Company ("NIC") and Hypoguard product ranges. This
agreement is subject to, inter alia, the completion of satisfactory due
diligence of Lukens by Medisys and the raising of funds by Medisys.
The consideration for the acquisition is approximately US$12.4m in cash, equal
to US$4 per Lukens share, and the assumption by Medisys of approximately US$7m
in borrowings.
Rationale for the acquisition of Lukens
Medisys is keen to develop its activities in the US and to provide NIC, and
other Group operations, with substantial strategic impetus in the US
healthcare market. Accordingly, the Board of Medisys has determined that it is
appropriate to acquire additional operational infrastructure in the US at this
time.
The Board of Medisys believes that Lukens is well positioned to provide
Medisys with the effective corporate, manufacturing, marketing and
distribution infrastructure in the US which will provide new business
opportunities to Medisys and also reduce the cost to Medisys of establishing
its own infrastructure to progress the Group's strategic and operational
development in the US market.
Information on Lukens
Lukens is a US incorporated NASDAQ quoted company which has been engaged since
1906 in the design, development, manufacture and marketing of wound closure
products for use in the medical industry, including suture products. More
recently, through acquisitions, Lukens has engaged in the manufacture and
marketing of a line of sharps disposal containers, and also lancets used in
diabetes testing.
For the year ended 31 December 1997 Lukens announced sales of US$8.6 million
(1996: US$8.2 million), and operating profits of US$0.7 million (prior to an
exceptional write-off in 1997, relating to obsolete inventory, of US$4.1
million) (1996 operating profit: US$0.9 million prior to an exceptional write-
off of US$0.3m).
Lukens sells its products both within the US and, on a limited basis,
internationally, through independent distributors who have entered into
exclusive or non-exclusive agreements with Lukens. Lukens' US domestic
marketing strategy focuses on the general and specialised products used by
doctors and practitioners primarily outside of a hospital, i.e. in doctors'
offices, dentists' offices, veterinary practices, outpatient clinics, and
plastic surgery and ophthalmic centres. Towards the end of 1997, Lukens
refocused its marketing strategy, limiting its product offering to high margin
markets and regions. This gave rise to a substantial reduction in product
lines carried and generated the majority of the inventory write-off referred
to above.
Lukens employs in excess of 100 people.
Funding of the Lukens Acquisition
Medisys is presently engaged in discussions with advisers in the US and UK
with the aim of raising the funds required to complete the acquisition of
Lukens and to provide working capital resources for the further development of
the enlarged Group.
Board Changes
The Board of Medisys is very pleased to announce the following appointments to
the Board:
Dr. Donald E. Panoz (63)
Donald E. Panoz, who joins the Board as a non-executive Director, is founder
and a principal shareholder of Elan Corporation plc.
Elan is a leading drug delivery and pharmaceutical development company,
listed in London, Dublin and on the New York Stock Exchange. Elan's current
market capitalisation is approximately $6.5 billion.
Dr. Panoz served as Chairman of the Board of Elan from 1970 until January 1997
and as a director until April 1998. Until January 1995, he held the position
of Chief Executive Officer of Elan. Prior to Elan, he was a founder of Mylan
Laboratories and served as its President from 1960 to 1969.
Dr. Panoz will bring to Medisys his extensive experience of the US healthcare
market and of the management of high-growth healthcare companies.
On joining the Board of Medisys, Dr. Panoz has undertaken to subscribe
#600,000 (approximately US$1,000,000) for 2 million new shares in Medisys at a
price of 30 pence per share, representing approximately 1.2% of the enlarged
issued share capital of the Group. 2 million warrants to subscribe for
Medisys ordinary shares will also be issued to Dr. Panoz. The warrants have
an exercise price of 30 pence and a six year maturity.
In addition, two business associates of Dr. Panoz have undertaken to subscribe
between them #120,000 (approximately US$200,000) for 400,000 new shares in
Medisys on the same terms as Dr. Panoz. 400,000 warrants to subscribe for
Medisys ordinary shares will also be issued to these associates. These
warrants have an exercise price of 30 pence and a six year maturity.
Mr. David Wong (43)
David Wong joins the Board in the capacity of Executive Director. Mr. Wong is
the founder of MCM, an overseas investment holding company specialising in
medical and bioscience technology. MCM currently holds approximately 19.7% of
the issued share capital of Medisys, and is its largest shareholder.
These appointments are intended to provide a major impetus to Medisys'
strategic development in the US, the largest and most dynamic healthcare
market in the world, which the Board anticipates will provide a major
opportunity for Medisys in the future.
As a result of these appointments, Dr. James Chan has agreed to resign from
the Board of Medisys.
Interim Results for the Six Months ended 31 December 1997
The Group reports a pre-tax loss for the six months under review of #977,000
on turnover of #2,008,000 compared to a loss of #21,000 on turnover of
#2,185,000 for the corresponding six months of the previous year.
The period under review has been one of substantial change and development.
During the period, the acquisition of NIC was completed and the Group outcome
includes the results of NIC since 28 July 1997.
NIC
The major milestones for the NIC business since its acquisition by the Group
have been the grant of FDA approval for the clinical use of the NIC's
proprietary needle incineration system in the US market, and the appointment
of distributors in Asia, previously announced on 31 March, 1998.
NIC has also commenced development of a distributor network in the US market.
The consequences of needlestick injury are increasingly being recognised, and
your Board believes that over time this will support the build-up of NIC's
business.
The Board anticipates that the proposed acquisition of Lukens will assist
considerably in the operational development of NIC in the US.
Hypoguard
In the diabetes market, Hypoguard is encountering increased competition.
Results have also been adversely affected by new products being rolled out
later than previously anticipated in order to ensure the latest performance
standard. The results announced reflect these factors.
Following the NIC transaction undertaken last year, a wide-ranging review of
the business prospects, competitive position and market opportunities
available to Hypoguard was undertaken. Hypoguard has been engaged for many
years in the provision of glucose monitoring diagnostic systems to a range of
international medical product suppliers, in competition with large scale
multinational medical supply companies. Following this review it was
determined that Hypoguard was in possession of a technology platform which
provided the company with significant competitive advantage in the design and
development of diagnostic POC and OTC technology.
Medisys has therefore approved a strategic development programme by Hypoguard
which targets the design, development and launch of new diagnostic POC and OTC
products for immediate on-site diagnosis of a variety of conditions and
illnesses.
Towards that end, Hypoguard has acquired, through licensing and other
arrangements, exclusive enabling technologies which will significantly enhance
its diagnostics technology. Hypoguard is also engaged in early stage
collaborations with other companies in the development of specific condition
proprietary diagnostic tests which should enable Hypoguard to participate in
markets with significant revenue potential.
This strategy represents a further development of the focus of Hypoguard
towards new markets which are not dominated by large scale competitors.
Hypoguard will also continue to develop its market position in glucose
monitoring on a basis which will see a larger proportion of investment being
directed towards new opportunities which offer greater commercial potential.
Biocure
Biocure was set up to ensure the development and commercial exploitation of an
original mixture which indicated the combination of effective anti-cancer
capabilities with apparent non-toxicity. The crude mixture has now yielded
two separate molecules, both of which are now in reliable production and each
on its own appears to have effective anti-cancer properties and non-toxicity.
Work on these molecules is now sufficiently far advanced that patents are
being filed and formal pharmacological testing can now be undertaken. A full
program of pre-clinical toxicity tests are to begin shortly on one compound
and it is hoped that clinical trials can begin as soon as possible thereafter.
As set out in the Chairman's Statement in the 1997 Annual Report and Accounts,
the Board stated that if significant potential is proven or indicated to exist
as a result of the research being undertaken into these materials, then
arrangements and structures would be put in place to provide shareholders with
access to Biocure's value and potential without disrupting the Group's core
strategy of the marketing of medical devices. Given this progress, the Board
believes that the activities of Biocure should be pursued independently of
Medisys in the future and the Group's professional advisers have been
instructed to achieve this in the optimal manner.
Interim Results
Unaudited Unaudited
6 months 6 months
ended ended Year ended
31 Dec 1997 31 Dec 1996 30 June 1997
#'000 #'000 #'000
Turnover 2,008 2,185 4,096
Cost of Sales (1,399) (1,268) (5,350)
--------- --------- ---------
Gross Profit 609 917 (1,254)
Other Operating Income 260 231 504
Research & Development net
expenditure (237) (129) (154)
Distribution costs (24) (18) (35)
Administrative expenses (1,598) (948) (1,604)
--------- --------- --------
Operating profit (loss) (990) 53 (2,543)
Interest (net) 13 (74) (147)
--------- --------- --------
Loss on ordinary activities before
taxation (977) (21) (2,690)
Taxation - - 108
--------- -------- --------
Loss on ordinary activities after
taxation (977) (21) (2,582)
===== ===== =====
Loss per ordinary share (p) (0.63) (0.06) (6.12)
===== ===== =====
Balance Sheet
Group
------------- -------------
31 Dec 1997 30 June 1997
#'000 #'000
------------- -------------
Fixed Assets
Intangible assets 679 608
Tangible assets 1,166 1,155
Investments 487 -
---------- ----------
2,332 1,763
---------- ----------
Current Assets
Stocks 410 522
Debtors 1,343 944
Cash at bank and in hand 2,578 2,730
--------- ---------
4,331 4,196
-------- ---------
Creditors: amounts falling due within one year (3,858) (3,506)
--------- ---------
Net current assets(liabilities) 473 690
Total assets less liabilities 2,805 2,453
Creditors: amounts falling after more than one
year (332) (365)
---------- ---------
Net assets 2,473 2,088
====== =====
Capital & Reserves
Share Capital 1,673 667
Share Premium 1,556 2,208
Other Reserves 1,143 136
Special reserve 3,112 3,112
Profit & Loss Account (5,011) (4,035)
---------- ----------
2,473 2,088
====== ======
NOTES
1. The interim accounts for the period to 31 December, 1997 reflect the
inclusion of the results of Needle Incinerator Company Ltd. from the date
of acquisition, 28 July, 1997.
2. A loss of #243,000 is included in the December 1997 interim accounts in
respect of Biocure Limited. As stated above, the Board of Medisys
believes that the activities of Biocure should be pursued independently
of Medisys in the future.
3 The figures for the year ended 30 June 1997 are an abridged version of
the Group's full accounts for that year which received an unqualified
auditors' report and have been filed with the Registrar of Companies.
The interim report above does not constitute full accounts with the
meaning of section 240 of the Companies Act 1985.
4 The loss for the period has been added to the accumulated deficit brought
forward and, as in 1997, no dividend will be paid at this time.
5 The interim report for the six months ended 31 December 1997 has been
prepared by the Company and was approved by the Directors on 29 April
1998.
6 A copy of this announcement will be sent to all Shareholders. Further
copies are available to members of the public from the Company's
registered office, Bruce & Partners, 21 Bridge Street, Ellon, Aberdeen
AB41 9AA.
END
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