Mediwatch-Final Results

Mediwatch Plc

Profits up 5% on the back of continued Group investment programme

Mediwatch Plc (AIM: MDW, 'Mediwatch' or 'the Group'), the innovative urological diagnostic company, announces its full year results for the year ending 31 October 2009.


Financial highlights

Record revenues, increasing by 11% to £10.4m (2008: £9.3m)

Profit from continuing operations for the year, increased by 5% to £425,000 (2008: £403,000)

Cash flow from operations was £866,000 (2008: £658,000)

Raised £332,000 in November 2009 to finance four major opportunities


Operational highlights

Profit achieved on the back of significant investment in the US sales and marketing organisation during the first half

Successful launch of the PSAwatchTM system into Asia, Mexico, UK and other European countries

Increase in sales following successful launch of the Portascan+ bladder scanner system

Worldwide joint sales and marketing agreement for PSAwatchTM with Inverness Medical Innovations

Continued investment in strong R&D programme across all product categories


Omer Karim, Mediwatch Chairman said:

"Our increase in sales and profits over the last 12 months, in the light of the current economic environment is testament to the quality of products and the unique technology we have developed.
With continued strengthening of our distribution channels and the addition of complimentary products and services, we continue to build on our 'one-stop-shop' strategy in the urology diagnostics market.

The Group is well placed for 2010 with its range of new products and services to capitalise on the international opportunities and challenges of worldwide reduction in healthcare spending"


Overview

Mediwatch had a successful year, particularly in light of the world economic environment. The Group posted record revenues along with an increase in profits. PSAwatch has been launched in several markets and a worldwide joint distribution agreement has been reached. In the US, the Group invested in sales and marketing in the first half of the year and the positive results of this investment were realised in the second half of the year.

In March 2009, a five year joint sales and marketing agreement was signed with Inverness Medical Innovations to market the PSAwatch system around the world. With their expertise in the point of care market, particularly in GP's offices the Group hopes to obtain greater market share during 2010.

Looking forward, Mediwatch plans to make investments in the UK based sales and marketing organisation to extend our worldwide reach. Additionally, the Group is looking to develop additional complimentary products enhancing the "one-stop-shop" strategy it brings to the market. The internal R&D team continues to make improvements to the existing lines and bring more outsourced processes in-house.

Post year-end, a successful fundraising exercise was completed to fund working capital and to finance feasibility studies for new opportunities which Mediwatch has identified as part of its growth plans.


Financial Review

Revenue was in line with market expectations and up by 11% at £10.4m (2008: £9.3m). This was mainly attributable to a strong contribution from the US operation and a very good performance from the UK.

Gross margins were 41% (2008: 44% as restated) mainly due to price pressure at the time of the economic downturn. In the second half of the year margins began to improve due to outsourced processes being brought in-house and efficiencies being engineered into the products.
The Group continued to invest in its sales and marketing infrastructure which saw overheads increase to £3.9m (2008: £3.4m as restated) during the year.

Other operating income of £130,000 (2008: £17,000) was due to a substantial increase in the R&D tax credit to which the Group was eligible for the year. As expected, finance costs were reduced to £46,000 (2008:£138,000).

The Group reported pre-tax profits of £425,000 (2008: 408,000) and has accumulated UK tax losses amounting to £3,840,000.

Basic and diluted earnings per share were 0.3p (2008: 0.3p),

Cash flow from operations contributed £866,000 (2008: £658,000). The increase for the current year is mainly attributable to a net reduction in working capital.

Investing activities required £772,000 (2008: £657,000). This increase was due to an increase in capitalised development projects during the year.



Operational Review

Strategic overview

The Mediwatch "one-stop-shop" strategy is being accepted in the marketplace and is drawing the attention of other larger diagnostic companies with whom the Group has joint venture opportunities. In the coming year the Group will explore these opportunities and create these alliances where they bring greater value to our customers. Specifically, the following opportunities are currently being pursued:

To work with an international corporation on a joint venture, sharing technology and pursuing a common marketing campaign;

A project with a different international medical company, assessing the potential of using its technology with Mediwatch's bioassays;

A marketing opportunity with a biomedical company to promote its point-of-care system alongside the Mediwatch PSA system for assessment of urological problems; and

Licensing a bladder cancer marker from a different bioscience company and to conduct a research project using that marker with the Mediwatch BioScan reader system.

Mediwatch continues to expand its interest in the urology diagnostics sector and is looking to add new products in the urodynamics and biomedical sides. Both of these new product categories should provide positive growth opportunities which should contribute to the second half of 2010.

Sales and Marketing

In order to increase market share in the largest market in the world, the US market, a programme has been implemented to increase the sales and service coverage through a network of highly skilled nurses and through an extended sales force.

This team will continue to be evaluated and extended throughout 2010 so that it is capable of taking on a larger product range which the Group plans to bring to the market during this period. As a result of the success of this programme, the Group is in the process of evaluating its sales and marketing efforts outside the US to become more in line with the US structure.

The Group will continue to exhibit at major urological meetings in the US and Europe and around the world through its dealer network as a way of increasing its brand awareness as a "one-stop-shop" for urology diagnostics.


Urodynamics

This year saw a greater penetration of the Group's newly designed and engineered urodynamic systems. This will be followed by the launch of new technology with lower manufacturing costs and simpler application bringing greater value to customers and aiding the Group to obtain a larger share of the market. A new biofeedback device for the urogynaecology market will also be introduced, which will work in tandem with the new range of ultrasound systems.

Ultrasound

After the successful launch of the two bladder scanner systems, two more are now due for launch. These will be digitally controlled, giving better accuracy and measurements. Mediwatch is also negotiating with a large multinational company to license their technology which will provide a comprehensive device for carrying out biopsies, also incorporating disposable supplies.

Services

A new mobile diagnostics service will be operated through skilled nurses, which will create opportunities to present a cost efficient diagnostic service to physicians, with no major capital outlay. This service will incorporate new diagnostic procedures which should launch in the first half of 2010 and will run in parallel to the change in US government expenditure in regards to reimbursement and presenting a wider medical facility to all individuals. Initial efforts will be concentrated in Florida with the potential to be rolled out to the other 49 states through our nurse network.

Research and Development

The Group has maintained its focus on improving its existing portfolio as well as developing new products, with R&D expenditure increasing to £663,000 (2008: £451,000).

The key uroflowmetry range has been reengineered and relaunched to reduce manufacturing costs while modernising and improving the features of the product range. Continued investment in the key software for urodynamics (Sensic) continues to add new features and benefits (wireless communication and video capabilities) to the product offering.

Work has commenced on a project to develop a common platform supporting future urodynamic and ultrasound products with reduced costs and increased capabilities.

A new range of urodynamic disposables have been designed and launched for the specific needs of the UK, Middle East and Australian markets.

Excellent progress is being made on the FDA submission for the PSAwatch. Mediwatch has engaged the services of a specialist group to expedite this process.


Mediwatch Biomedical

During 2009, one of the Group's lead scientists has been investigating new cancer markers and technology to compliment that which Mediwatch has already developed. In January 2010, the Group plans to start a small trial on a prostate cancer marker which will complement our PSA test. The results of this will be known in the second half of 2010. A new marker for bladder cancer is also being obtained to place on our existing technology base. Work on this begins in the first quarter of 2010.

The Group is also currently developing a new biotech diagnostic technology with a large European company. If successful, a feasibility study will start on some new and existing urology markers. The outcome of this opportunity will be known in the second quarter of 2010.

An Australian professor of oncology, who is an expert in cancer cell development, has been engaged as a consultant to assist in diagnosing unique urology markers. This research will commence in the beginning of 2010.

Outlook

Mediwatch has had a successful 12 months, increasing sales and profits in the light of an economic downturn, which reinforces the quality of products and the benefits of the technology the Group has developed.

The economic and political climate in the US and the overseas territories will be a challenge for all medical companies as governments seek to reduce healthcare costs. Mediwatch is well placed to capitalise on these challenges by redesigning more efficient technology for its "one-stop-shop" strategy and by bringing manufacturing processes in-house to reduce costs.

Prostate cancer awareness is now gathering pace internationally with pressure being placed on government bodies to augment national screening programmes. As this happens, Mediwatch is again well placed to take advantage with its diagnostic systems.

During 2010, Mediwatch will be adding complimentary products to its existing range allowing it to leverage its growing sales and marketing channels. The Group is also looking to develop joint ventures and strategic partnerships with market leaders to bring increased value to its customers worldwide.


The board expects that 2010 will be another exciting phase in Mediwatch's growth and success.



Mediwatch-Final Results