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Lombard Medical Reports 2016 Fourth Quarter, Full Year Financial Results

OXFORDSHIRE, U.K.--(BUSINESS WIRE)--Apr. 18, 2017-- Lombard Medical, Inc. (NASDAQ: EVAR), a medical device company focused on endovascular aneurysm repair of abdominal aortic aneurysms, today reported financial results for the fourth quarter and year ended December 31, 2016.

Recent Operational Highlights

  • The signing of a strategic partnership with MicroPort Scientific Corporation (HK: 0853), a leading global manufacturer and marketer of a diversified portfolio of medical devices. Highlights of the partnership include:
    • An investment by MicroPort of $15 million;
    • Manufacturing of certain product components in MicroPort’s Shanghai facilities to begin in the second half of 2017 as well as a technology license to manufacture the products for the China market;
    • Exclusive marketing rights granted to MicroPort for Lombard’s product portfolio for China and Brazil. MicroPort expects to launch the Aorfix™ Endovascular Stent Graft in China in the second half of 2018.
  • Regulatory approval in Japan for the Company’s new IntelliFlex™ LP Delivery System for Aorfix in January 2017 and the successful completion of the first 15 patient cases in Japan.

CFO William Kullback said, “During 2016, we took the necessary steps to focus resources exclusively on supporting the sales growth in the European Union, Japan and other key international markets while significantly reducing our operating expenses. Moreover, our partnership with MicroPort is expected to lower our manufacturing costs and increase our margins.

“Going forward, we see solid growth in Japan for Aorfix given the strong adoption of our new IntelliFlex LP delivery system since the launch earlier this year,” added Kullback. “We also have made significant progress in the Altura™ ALTITUDE Global Registry, with recruitment anticipated to begin in UK centers in Q2 of this year.”

Financial Results

For the fourth quarter, global revenue was $2.4 million and $12.2 million for the full year 2016. Operating expenses were $3.5 million in the fourth quarter and $26.7 million for all of 2016. The significant decrease in operating expense in the fourth quarter was primarily attributable to the elimination of US sales force costs and non-essential programs.

The year-over-year reduction in revenue is primarily attributable to the redeployment of commercial resources from the US to Europe to support the launch of the Altura endovascular stent graft along with delayed stocking orders from the Company’s Japanese distribution partner as it prepared for approval and launch of the IntelliFlex LP delivery system in early 2017.

In the 2016 fourth quarter, the Company reported a negative gross margin of 25.3 percent while gross margin for 2016 was 9.4 percent. Gross margins were adversely impacted by several factors including manufacturing start-up expense related to the launch of the Altura product line coupled with the Company’s transition of manufacturing activities to the new generation IntelliFlex delivery system.

The net loss for the fourth quarter of 2016 was $7.7 million, or $0.37 loss per share, compared to a net loss of $11.6 million, or $0.58 loss per share, for the fourth quarter of 2015. For 2016, the net loss was $31.0 million, or $1.54 loss per share, compared to $37.8 million, or $2.13 loss per share, for the prior year.

As of December 31, 2016, the Company had cash and cash equivalents of $20.8 million.

About Lombard Medical, Inc.

Lombard Medical, Inc., based in Oxfordshire, U.K., develops, manufactures and markets an innovative range of minimally invasive abdominal aortic aneurysm endovascular repair products. The Company has global regulatory approval for Aorfix, an endovascular stent graft that has been specifically designed to treat patients with aortic neck angulation up to 90 degrees. Lombard also manufactures and markets CE-marked Altura, an ultra-low profile endovascular stent graft that offers a simple and predictable solution for the treatment of standard AAA anatomies. The Altura endograft system is sold in select European markets. 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.

 
Consolidated Statements of Comprehensive Loss
(In Thousands, Except Per Share Amounts)
(Unaudited)
         
 

Three months ended
December 31,

Twelve months ended
December 31,

2016     2015 2016     2015
Revenue $ 2,400 $ 2,943 $ 12,169 $ 15,114
Cost of sales   3,007     2,113     11,027     8,296
Gross profit (607 ) 830 1,142 6,818
 
Selling, marketing and distribution expenses 825 5,794 12,022 23,125
Research and development expenses 1,333 3,318 7,669 11,279
Administrative expenses   1,378     3,638     6,972     11,707
Total operating expenses   3,536     12,750     26,663     46,111
Operating loss   (4,143 )   (11,920 )   (25,521 )   (39,293)
 
Finance income 4 20 93 134
Finance costs (677 ) (269 ) (2,310 ) (860)
Change in fair value of financial instruments 1,412 1,412
Change in fair value of contingent liabilities (1,833 ) (2,830 )
Impairment-goodwill and long-lived intangibles   (3,360 )       (3,360 )  
Loss before taxation (8,597 ) (12,169 ) (32,516 ) (40,019)
Taxation   905     564     1,481     2,215
Loss for the period $ (7,692 ) $ (11,605 ) $ (31,035 ) $ (37,804)
 
Other comprehensive income/(loss):

Items that may subsequently be reclassified to profit or loss currency translation differences

  (1,103 )   (287 )   (4,155 )   (975)
Total comprehensive loss for the period $ (8,795 ) $ (11,892 ) $ (35,190 ) $ (38,779)
 

Basic and diluted loss per ordinary share from continuing operations

$ (0.37 ) $ (0.58 ) $ (1.54 ) $ (2.13)
 

 
Consolidated Balance Sheets
(In Thousands, Except Per Share Amounts)
(Unaudited)
         
 

December 31,
2016

December 31,
2015

Assets
Goodwill $ 14,662 $ 16,052
Intangible assets 18,148 21,889
Property, plant and equipment 1,373 3,043
Trade and other receivables       176  
Non-current assets 34,183 41,160
 
Inventories 6,877 6,462
Trade and other receivables 3,821 4,168
Taxation recoverable 2,089 1,618
Cash and cash equivalents   20,797     32,332  
Current assets   33,584     44,580  
Total assets 67,767 85,740
 
Liabilities
Trade and other payables 5,805 8,236
Current portion of borrowings   4,267      
Current liabilities 10,072 8,236
 
Borrowings 30,292 23,115
Deferred tax liabilities 674
Contingent consideration   13,430     10,600  
Non-current liabilities   43,722     34,389  
Total Liabilities 53,794 42,625
   
Net assets $ 13,973   $ 43,115  
 
Equity
Called up share capital $ 280 $ 199
Share premium account 68,710 63,853
Capital reorganization reserve 205,686 205,686
Translation reserve (2,885 ) 1,270
Accumulated loss   (257,818 )   (227,893 )
Total equity $ 13,973   $ 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

At January 1, 2015 $ 162 $ 49,608 $ 2,245 $ 205,686 $ (192,868 ) $ 64,833
Loss for the period (37,804 ) (37,804 )
Share-based compensation 2,779 2,779
Issuance of ordinary shares 37 14,245 14,282
Currency translation       (975 )         (975 )
At December 31, 2015 $ 199 $ 63,853 $ 1,270   $ 205,686 $ (227,893 ) $ 43,115  
 
At January 1, 2016 $ 199 $ 63,853 $ 1,270 $ 205,686 $ (227,893 ) $ 43,115
Loss for the period (31,035 ) (31,035 )
Share-based compensation 1,110 1,110
Issuance of ordinary shares 81 4,857 4,938
Currency translation       (4,155 )         (4,155 )
At December 31, 2016 $ 280 $ 68,710 $ (2,885 ) $ 205,686 $ (257,818 ) $ 13,973  
 

 
Consolidated Cash Flow Statements
(In Thousands)
(Unaudited)
     
 

Twelve Months Ended
December 31,

2016     2015
Cash outflow from operating activities
Loss before taxation $ (32,516 ) $ (40,019 )
Depreciation and amortization of licenses, software and property, plant and equipment 2,138 1,798
Share based compensation expense 1,110 2,779
Loss on disposal of tangible assets 389 66
Net finance expense/(income) 2,217 726
Change in fair value of contingent liabilities 2,830
Change in fair value of financial instruments (1,412 )
Impairment-goodwill and long-lived intangibles 3,360
Increase in inventories (1,481 ) (1,779 )
Decrease in receivables 2 (185 )
Decrease in payables   (1,818 )   234  
Net cash used in operating activities (25,181 ) (36,380 )
Research and development tax credits received / (income tax paid)   (14 )   2,584  
Net cash outflow from operating activities (25,195 ) (33,796 )
 
Cash flows from investing activities
Interest received 54 87
Purchase of property, plant and equipment (265 ) (1,239 )
Proceeds from disposal of tangible assets 117
Cash paid for acquisition (200 )
Purchase of intangible assets       (15 )
Net cash flows used in investing activities (94 ) (1,367 )
 
Cash flows from financing activities
Interest paid (1,450 ) (688 )
Proceeds from issue of loan notes 12,407 21,000
Loan notes transaction costs (88 ) (438 )
Loan notes repaid (5,331 )
Proceeds from issue of ordinary shares 5,000
Shares issuance transaction costs   (62 )    
Net cash flows (used in)/from financing activities   15,807     14,543  
(Decrease)/increase in cash and cash equivalents (9,482 ) (20,620 )
 
Cash and cash equivalents at beginning of period 32,332 53,334
Effects of exchange rates on cash and cash equivalents   (2,053 )   (382 )
Cash and cash equivalents at end of period $ 20,797   $ 32,332  
 

Source: Lombard Medical, Inc.

Lombard Medical, Inc.
William J. Kullback, +1-949-748-6764
Chief Financial Officer
bill.kullback@lombardmedical.com