AtCor Medical Reports $2.3 Million Profit for H1 FY2013

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Strong sales, margins, and cash flow. Successful launch of groundbreaking new SphygmoCor XCEL system.

AtCor Medical Holdings Limited (ASX:ACG), the developer and marketer of the SphygmoCor® system which measures central blood pressures and arterial stiffness non-invasively, today announced net profit after tax of $2.3 million for the first half of FY2013, compared with a loss of $0.9 million in the previous corresponding period (pcp). Continued execution of AtCor’s core strategic initiatives resulted in H1 sales of $5.4 million, up 43% pcp.

“We are very pleased to report strong sales growth and a profit for the first half, said AtCor Medical chief executive officer, Duncan Ross. “The result reflected a rebound in pharmaceutical clinical trials, where our business is expanding its reach to new clients and into new drug categories.”

Sales:

In the US, strong pharmaceutical and research sales led to a sales increase of 54% above pcp. Despite continued economic challenges in southern Europe, sales volume was maintained even though the company’s headcount reduced from 3 to 2 people, and the region made positive contribution to earnings. The launch of the SphygmoCor® XCEL, which dramatically improves ease of use in clinical practice and in pharmaceutical research sites, contributed to sales growth of 18% in Australia and New Zealand, but sales in Asia declined, based on order timing and the lead time required to secure XCEL registration in key markets such as China, Japan and Korea.

Gross margin:

Gross margin increased to 88.0% from 87.3% pcp. The company continued to focus on costs and manage the mix of its products and services, with a number of recertified systems placed into pharmaceutical trials. This month the company introduced an automated testing system for its XCEL product. AtCor continues to work with suppliers to uncover ways to improve efficiency and reduce cost.

Cash and expense management:

AtCor has been very focused on reducing cost and not investing in expenses or capacity ahead of demand. In June 2012, further expense reductions were identified and implemented. This resulted in operating expenses being reduced by 21%, to $3.5 million.

Cash flow was positive and a marked improvement over H1 FY2012. Cash balance at 31 December was $2.1 million compared to $1.1 million at 30 June 2012. Net cash inflow for H1 2013 was $1.0 million compared to a net outflow of $0.7 million in the pcp. Cash flow from operating activities (excluding the R&D tax credit of $0.70 million received in December 2012) was positive for both H1 FY2013 quarters and was $0.41 million for the half year, reflecting strong sales performance and effective cost management.

Focus:
AtCor continues to focus and invest in 4 core areas.

Growing our pharmaceutical clinical trials business:
AtCor has established itself as a premier supplier of devices and clinical trial services to support the non–invasive measurement of central aortic blood pressure and arterial stiffness. The annual market for AtCor’s pharmaceutical trials business is estimated in excess of US $100 million. While AtCor has established positions with key pharmaceutical companies in hypertension, chronic obstructive pulmonary disease and other therapeutic areas, large opportunities remain to add to AtCor’s client base and pursue new drug compounds, such as in diabetes and cardio-oncology; the emerging focus on the cardiovascular effects of cancer drugs. More pharmaceutical orders are expected in H2.

Clinical market development:
In November, AtCor announced it had received FDA 510k clearance to begin marketing the SphygmoCor® XCEL in the US and, effective 1 January, a category III CPT (Common Procedural Terminology) code covering the SphygmoCor® test was officially released by the American Medical Association (AMA) (0311T). Clinicians now have a specific code to apply for equitable reimbursement from payers, and stronger clinical sales in the US are expected in H2. Previously, ease of use (now addressed by XCEL) and the lack of a specific reimbursement code were the two main barriers to market penetration. Working with key opinion leaders and their medical societies that specialise in managing complex cases of hypertension, AtCor has developed a geographic centered plan to drive growth in this segment. The specialist market is estimated to be worth US $100 million per year. In addition, the general practitioner and internal medicine market for SphygmoCor is estimated in excess of US $250 million per year.

Partnering and leveraging our technology:
SphygmoCor is a platform technology. Our core competence is centered on waveform measurement and analysis. We continue to assess partnership opportunities to expand both product breadth to current markets we serve and to leverage our technology into new segments. Our alliance and joint product development underway with SunTech Medical will strengthen each company’s position in current markets served. Discussions underway in cardiac resynchronization therapy and intracranial pressure, if successful, will allow AtCor access to new markets by supplying technology to new partners. Our IP - in these areas and in our core technology - is strong.

Our People:
“At 31 strong, the tireless and entrepreneurial spirit of our people is AtCor’s greatest asset. We have assembled a dedicated, hard driving team of industry veterans, many of whom have been schooled in blue-chip medical device companies and have the ability to translate those skills in the right balance to fit our scale. From customers to our business partners not a week goes by when a complement does not pass my desk recognising a team member that has performed above and beyond in delighting our customers,” stated AtCor Medical chief executive officer, Duncan Ross.

“We thank you for your continued support and look forward to keeping you apprised of our progress.”

About AtCor Medical
AtCor Medical develops and markets products for the early detection of cardiovascular risk and management of cardiovascular disease. Its technology allows researchers and clinicians to measure central blood pressure non-invasively. The company’s SphygmoCor® system visibly identifies the effects of reflected blood pressure in the central aortic pressure wave, effects which cannot be detected with standard blood pressure monitoring. More than 3,100 SphygmoCor® systems are currently in use worldwide at major medical institutions, research institutions and in various clinical trials with leading pharmaceutical companies, and the company’s technology have been featured in over 700 peer-reviewed studies published in leading medical journals. AtCor has operations in Australia, the United States, and Europe. For further information, please visit our web site at http://www.atcormedical.com

For further information, please contact:

Duncan Ross – AtCor Medical CEO
+1 (630) 228 8873

Peter Manley – AtCor Medical CFO
+61 (2) 8815 8811

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