IRVINE, Calif., Aug. 22, 2016 (GLOBE NEWSWIRE) — Lombard Medical, Inc. (NASDAQ:EVAR), a medical device company focused on endovascular aneurysm repair (EVAR) of abdominal aortic aneurysms (AAAs), today reported financial results, provided business highlights for the second quarter and six months ended June 30, 2016, and announced a significant operational restructuring and the exploration of strategic alternatives to enhance shareholder value.
Second quarter 2016 global revenue was $3.8 million, representing a 30.1 percent sequential increase from $2.9 million in the 2016 first quarter. Revenue from both the Altura® and Aorfix™ endovascular stent grafts in Lombard’s European direct sales markets in the United Kingdom (UK), Germany and the Netherlands grew 20.9 percent sequentially and 42.6 percent year-over-year.
Restructuring and Strategic Update
Lombard announced it is allocating its resources to exclusively support the new Altura AAA stent graft system and the recently CE-marked IntelliFlex™ LP delivery system for Aorfix in the European Union, Japan and other key international markets. The Aorfix sales force in the US has been eliminated and the majority of commercial operations have transitioned to the Company’s facility in the UK. As a result of the restructuring, the cash requirements associated with operations have been significantly reduced.
CEO Simon Hubbert said, “Our shift in geographical commercial focus is starting to deliver strong sales growth in the Western Europe direct markets as Altura gains traction. We expect to see this growth accelerate as we expand Altura into new centers. We are very encouraged by the physician feedback and excellent clinical results we are seeing from Altura and believe that with the introduction of the new IntelliFlex delivery system for Aorfix, we now have a world-class product portfolio providing a full range of solutions for the treatment of AAA.
“In the US, the FDA is requiring additional clinical data to support the application for US approval of the IntelliFlex delivery system. This pushes the potential approval timeline out significantly,” added Hubbert. “We have, therefore, decided to discontinue funding commercial operations in the US at this time and instead solely focus our resources on growing revenue in Europe, Japan, and other key international markets where we are able to benefit from the enhanced Aorfix delivery system as well as the direct and synergistic effect of Altura.”
In addition, in order to enhance shareholder value, the Company’s board of directors has engaged Cain Brothers as its investment banker to begin a process of exploring strategic alternatives, including a potential sale of the Company or disposition of certain assets, as well as distribution or other strategic partnerships. Separately, the Company will also be evaluating additional financing opportunities during this time.
There can be no assurance that Lombard will enter into any strategic or financing transaction in connection with this process. Lombard does not plan to disclose or comment on developments regarding its strategic alternatives review process until further disclosure is deemed appropriate.
Operational Highlights
- In Japan, Aorfix procedure rates continued to rise as physicians performed 135 Aorfix procedures in the 2016 second quarter as compared to 95 in the prior year period. These procedures represent an approximate 7.5 percent share of the total Japanese AAA market. The continued share gain did not translate directly to revenue growth in the period as Lombard’s Japanese distribution partner continued to sell through inventory in anticipation of the launch of the new Aorfix IntelliFlex delivery system.
- CE Mark approval was received in June for the Aorfix IntelliFlex delivery system with the first commercial use following shortly thereafter in Orense, Spain.
- Positive 30-day clinical results were reported in May on 57 patients who were implanted with Altura.
- The Altura ALTITUDE Global Registry will be conducted in Europe to evaluate the use of Altura in real world procedures with a planned enrollment of 1,000 patients starting in late 2016.
- The Altura and Aorfix stent graft systems were featured in scientific presentations at the International Symposium on Endovascular Therapeutics (SITE 2016) in Barcelona, Spain. Aorfix was also featured in a scientific presentation at the 2016 Japanese Society for Vascular Surgery Annual Meeting in Tokyo, and positive five-year clinical data on Aorfix were presented at the 2016 Society for Vascular Surgery Annual Meeting in National Harbor, Maryland.
- On August 9, 2016, Medico’s Hirata, the Company’s Japanese distribution partner, provided the Company with a $2.4 million low interest loan and exercised its right to acquire an option to extend the current Aorfix distribution agreement to 2028.
Financial Results
For the 2016 second quarter global revenue was $3.8 million as compared to $4.5 million in the same prior year period. For the first six months of 2016, global revenue was $6.7 million as compared to $7.9 million in the prior year period. The year-over-year reduction in revenue is attributable to the redeployment of commercial resources from the US to Europe to support the launch of Altura coupled with delayed stocking orders from the Company’s distribution partner in Japan as it prepares for approval and launch of the IntelliFlex delivery system.
Gross margin for the 2016 second quarter and first six months was 10.9 percent and 20.8 percent, respectively, compared to 51.7 percent and 49.4 percent for the prior year periods. Second quarter margins were adversely impacted by several factors including the manufacturing start-up expense related to the launch of the Altura product line into Europe and other locations outside the US. Additionally, reduced overhead absorption on lower volume coupled with the Company’s transition of manufacturing activities to the new generation IntelliFlex delivery system contributed to the margin variance.
Operating expenses for the 2016 second quarter and first six months were reduced to $7.7 million and $16.0 million, respectively, compared to $10.6 million and $21.9 million in the prior year periods. The significant decrease in operating expense was accomplished by the reduction in the US sales force, trimming non-essential programs and general cost control activities in all areas of the business.
The net loss for this year’s second quarter was $8.3 million, or $0.42 loss per share, compared to a net loss of $8.2 million, or $0.51 loss per share, for the second quarter of 2015. For the first six months of 2016, the net loss was $15.9 million, or $0.80 loss per share, compared to $17.7 million, or $1.10 loss per share, for the prior year period.
As of June 30, 2016, the Company had cash and cash equivalents of $13.0 million.
Due to the suspension of the US commercial operation, Lombard feels it is also prudent to amend its revenue guidance for the year to between $13 million and $15 million, driven in the second half by continued procedure and revenue growth in the Company’s go-forward core markets of Europe and Japan.
Conference Call
Lombard’s management will discuss the Company’s financial results for the second quarter and six months ended June 30, 2016 and provide a general business update during a conference call beginning at 4:30 p.m. Eastern Time today, Monday, August 22, 2016. To join the call, participants may dial 1-877-407-4018 (domestic), 0800-756-3429 (UK toll-free) or 1-201-689-8471 (international). To listen to a live webcast of the conference call, visit the Investors/Events and Presentations section of the Lombard website at www.lombardmedical.com. An archived replay of the webcast will be available shortly following the completion of the call.
About Lombard Medical, Inc.
Lombard Medical, Inc. is a medical device company focused on the $1.7bn market for minimally invasive treatment of abdominal aortic aneurysms (AAAs). The Company has global regulatory approval for Aorfix™, an endovascular stent graft which has been specifically designed to treat patients with the broadest range of AAA anatomies, including aortic neck angulation up to 90 degrees. The Company has also achieved CE Mark for the Altura® endograft system, an innovative ultra-low profile endovascular stent graft that offers a simple and predictable solution for the treatment of more standard AAA anatomies. Altura was launched in the UK and Germany in February 2016 with a broader international rollout currently underway. For more information, please visit www.lombardmedical.com.
Forward-Looking Statements
This announcement contains forward-looking statements that reflect the Company’s current expectations regarding future events. These forward-looking statements generally can be identified by the use of words or phrases such as “believe,” “expect,” “future,” “anticipate,” “look forward to,” “intend,” “plan,” “foresee,” “may,” “should,” “will,” “estimates,” “outlook,” “potential,” “optimistic,” “confidence,” “continue,” “evolve,” “expand,” “growth” or words and phrases of similar meaning. Statements that describe objectives, plans or goals also are forward-looking statements. Forward-looking statements are subject to risks, management assumptions and uncertainties. Actual results could differ materially from those projected herein and depend on a number of factors, including the success of the Company’s research and development and commercialization strategies, the uncertainties related to the regulatory process and the acceptance of the Company’s products by hospitals and other medical professionals, the uncertainty of estimated revenues and profits, the uncertainty of current domestic and international economic conditions that could adversely affect the level of demand for the Company’s products and increased volatility in foreign exchange rates, the inability to raise additional funds, and the risks, uncertainties and other factors described under the heading “Risk Factors” in the Company’s Form 20-F filed with the Securities and Exchange Commission dated April 29, 2016. Readers are urged to consider these factors carefully in evaluating the forward-looking statements. The forward-looking statements included herein are made only as of the date of this report and the Company undertakes no obligation to update these statements in the future.
– Tables Follow –
| Consolidated Statements of Comprehensive Loss (In Thousands, Except Per Share Amounts) (Unaudited) |
||||||||||||||||||
| Three months ended June 30, | Six months ended June 30, | |||||||||||||||||
| 2016 | 2015 | 2016 | 2015 | |||||||||||||||
| Revenue | $ | 3,803 | $ | 4,535 | $ | 6,725 | $ | 7,944 | ||||||||||
| Cost of sales | 3,388 | 2,191 | 5,326 | 4,019 | ||||||||||||||
| Gross profit | 415 | 2,344 | 1,399 | 3,925 | ||||||||||||||
| Selling, marketing and distribution expenses | 3,487 | 5,679 | 7,597 | 11,947 | ||||||||||||||
| Research and development expenses | 2,291 | 2,604 | 4,597 | 5,046 | ||||||||||||||
| Administrative expenses | 1,930 | 2,297 | 3,818 | 4,925 | ||||||||||||||
| Total operating expenses | 7,708 | 10,580 | 16,012 | 21,918 | ||||||||||||||
| Operating loss | (7,293 | ) | (8,236 | ) | (14,613 | ) | (17,993 | ) | ||||||||||
| Finance income | 14 | 35 | 71 | 82 | ||||||||||||||
| Finance costs | (538 | ) | (234 | ) | (1,086 | ) | (256 | ) | ||||||||||
| Change in fair value of contingent liabilities | (708 | ) | — | (708 | ) | — | ||||||||||||
| Loss before taxation | (8,525 | ) | (8,435 | ) | (16,336 | ) | (18,167 | ) | ||||||||||
| Taxation | 210 | 239 | 415 | 428 | ||||||||||||||
| Loss for the period | $ | (8,315 | ) | $ | (8,196 | ) | $ | (15,921 | ) | $ | (17,739 | ) | ||||||
| Other comprehensive income/(loss): | ||||||||||||||||||
| Items that may subsequently be reclassified to profit or loss | ||||||||||||||||||
| Currency translation differences | (1,242 | ) | 1,637 | (2,352 | ) | 250 | ||||||||||||
| Total comprehensive loss for the period | $ | (9,557 | ) | $ | (6,559 | ) | $ | (18,273 | ) | $ | (17,489 | ) | ||||||
| Basic and diluted loss per ordinary share | ||||||||||||||||||
| From continuing operations | $ | (0.42 | ) | $ | (0.51 | ) | $ | (0.80 | ) | $ | (1.10 | ) | ||||||
| Consolidated Balance Sheets (In Thousands, Except Per Share Amounts) (Unaudited) |
||||||||||||
| June 30, 2016 |
December 31, 2015 |
|||||||||||
| Assets | ||||||||||||
| Goodwill | $ | 15,756 | $ | 16,052 | ||||||||
| Intangible assets | 21,219 | 21,889 | ||||||||||
| Property, plant and equipment | 2,429 | 3,043 | ||||||||||
| Trade and other receivables | 171 | 176 | ||||||||||
| Non-current assets | 39,575 | 41,160 | ||||||||||
| Inventories | 8,544 | 6,462 | ||||||||||
| Trade and other receivables | 5,379 | 4,168 | ||||||||||
| Taxation recoverable | 1,862 | 1,618 | ||||||||||
| Cash and cash equivalents | 12,979 | 32,332 | ||||||||||
| Current assets | 28,764 | 44,580 | ||||||||||
| Total assets | 68,339 | 85,740 | ||||||||||
| Liabilities | ||||||||||||
| Trade and other payables | 7,384 | 8,236 | ||||||||||
| Current portion of borrowings | 1,047 | — | ||||||||||
| Current liabilities | 8,431 | 8,236 | ||||||||||
| Borrowings | 22,377 | 23,115 | ||||||||||
| Deferred tax liabilities | 674 | 674 | ||||||||||
| Contingent consideration | 11,308 | 10,600 | ||||||||||
| Non-current liabilities | 34,359 | 34,389 | ||||||||||
| Total Liabilities | 42,790 | 42,625 | ||||||||||
| Net assets | $ | 25,549 | $ | 43,115 | ||||||||
| Equity | ||||||||||||
| Called up share capital | $ | 199 | $ | 199 | ||||||||
| Share premium account | 63,853 | 63,853 | ||||||||||
| Capital reorganization reserve | 205,686 | 205,686 | ||||||||||
| Translation reserve | (1,082 | ) | 1,270 | |||||||||
| Accumulated loss | (243,107 | ) | (227,893 | ) | ||||||||
| Total equity | $ | 25,549 | $ | 43,115 | ||||||||
| Consolidated Statements of Changes in Equity (In Thousands, Except Per Share Amounts) (Unaudited) |
||||||||||||||||||||||||||||||
| SHARE CAPITAL |
SHARE PREMIUM ACCOUNT |
TRANSLATION RESERVE |
CAPITAL REORGANIZATION RESERVE |
ACCUMULATED LOSS |
TOTAL EQUITY |
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| At January 1, 2015 | $ | 162 | $ | 49,608 | $ | 2,245 | $ | 205,686 | $ | (192,868 | ) | $ | 64,833 | |||||||||||||||||
| Loss for the period | — | — | — | — | (17,739 | ) | (17,739 | ) | ||||||||||||||||||||||
| Share-based compensation | — | — | — | — | 865 | 865 | ||||||||||||||||||||||||
| Currency translation | — | — | 250 | — | — | 250 | ||||||||||||||||||||||||
| At June 30, 2015 | $ | 162 | $ | 49,608 | $ | 2,495 | $ | 205,686 | $ | (209,742 | ) | $ | 48,209 | |||||||||||||||||
| At January 1, 2016 | $ | 199 | $ | 63,853 | $ | 1,270 | $ | 205,686 | $ | (227,893 | ) | $ | 43,115 | |||||||||||||||||
| Loss for the period | — | — | — | — | (15,921 | ) | (15,921 | ) | ||||||||||||||||||||||
| Share-based compensation | — | — | — | — | 707 | 707 | ||||||||||||||||||||||||
| Currency translation | — | — | (2,352 | ) | — | — | (2,352 | ) | ||||||||||||||||||||||
| At June 30, 2016 | $ | 199 | $ | 63,853 | $ | (1,082 | ) | $ | 205,686 | $ | (243,107 | ) | $ | 25,549 | ||||||||||||||||
| Consolidated Cash Flow Statements (In Thousands) (Unaudited) |
||||||||||
| Six Months Ended June 30, |
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| 2016 | 2015 | |||||||||
| Cash outflow from operating activities | ||||||||||
| Loss before taxation | $ | (16,336 | ) | $ | (18,167 | ) | ||||
| Depreciation and amortization of licenses, software and property, plant and equipment | 1,196 | 730 | ||||||||
| Share based compensation expense | 707 | 865 | ||||||||
| Loss on disposal of tangible assets | 14 | 65 | ||||||||
| Net finance expense/(income) | 1,015 | 199 | ||||||||
| Change in fair value of contingent liabilities | 708 | — | ||||||||
| Increase in inventories | (2,793 | ) | (266 | ) | ||||||
| Decrease in receivables | (1,613 | ) | (235 | ) | ||||||
| Increase/(decrease) in payables | (446 | ) | 988 | |||||||
| Net cash used in operating activities | (17,548 | ) | (15,821 | ) | ||||||
| Research and development tax credits received / (income tax paid) | (6 | ) | 975 | |||||||
| Net cash outflow from operating activities | (17,554 | ) | (14,846 | ) | ||||||
| Cash flows from investing activities | ||||||||||
| Interest received | 46 | 66 | ||||||||
| Purchase of property, plant and equipment | (249 | ) | (830 | ) | ||||||
| Purchase of intangible assets | — | (15 | ) | |||||||
| Net cash flows used in investing activities | (203 | ) | (779 | ) | ||||||
| Cash flows from financing activities | ||||||||||
| Interest paid | (791 | ) | (88 | ) | ||||||
| Proceeds from issue of loan notes | — | 11,000 | ||||||||
| Loan notes transaction costs | — | (352 | ) | |||||||
| Net cash flows (used in)/from financing activities | (791 | ) | 10,560 | |||||||
| (Decrease)/increase in cash and cash equivalents | (18,548 | ) | (5,065 | ) | ||||||
| Cash and cash equivalents at beginning of period | 32,332 | 53,334 | ||||||||
| Effects of exchange rates on cash and cash equivalents | (805 | ) | 110 | |||||||
| Cash and cash equivalents at end of period | $ | 12,979 | $ | 48,379 | ||||||
CONTACT: For further information: Lombard Medical, Inc. Simon Hubbert, Chief Executive Officer Tel:+1 949 379 3750 / +44 (0)1235 750 800 William J. Kullback, Chief Financial Officer Tel: +1 949 748 6764