D. Medical Industries Ltd. Reports Third Quarter 2010 Financial Results
TIRAT CARMEL, ISRAEL--(Marketwire - November 24, 2010) - D. Medical Industries Ltd. (NASDAQ: DMED)(TASE: DMDC)("D. Medical" or the "Company"), a medical device company engaged through its subsidiaries in the research, development, manufacture and sale of innovative products for diabetes treatment and drug delivery, today announced financial results for the three and nine months ended September 30, 2010. The unaudited selected consolidated financial statements presented below were prepared in accordance with International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board (IASB). A convenience U.S. dollar translation of NIS amounts is provided using the rate of NIS 3.665 to US$1.00, the representative rate of exchange as of September 30, 2010 as published by the Bank of Israel.
Third Quarter Highlights:
- In August 2010, D. Medical completed its initial public offering in the United States of 1,500,906 of its ordinary shares at a price per share of US$7.00. - D. Medical entered into a definitive agreement with UPG (Suzhou) EPZ Co. Ltd. for the manufacture and supply of the consumable components of the Company's Adi durable insulin pump, its universal infusion sets and, when available, its insulin patch pump. - Third quarter recognized revenues were NIL although D. Medical supplied products for a total of NIS 747 thousand (US$ 204 thousand) during the period as compared to NIS 721 thousand (US$ 186 thousand) for the second quarter of 2010. Due to a significant increase in receivable days resulting from the Company's efforts to increase market penetration of its products, the Company does not believe that third quarter sales met its revenue recognition criteria and therefore, has resolved not to recognize these sales as revenues at this time. - Third quarter cost of sales increased 50% on a sequential basis to NIS 2,144 thousand (US$ 585 thousand), as compared to NIS 1,431 thousand (US$ 390 thousand) for the second quarter of 2010. The increase was mainly attributed to the preparation of a new production line at a sub-contractor site and the training of new staff. - Operating loss for the third quarter increased 56% on a sequential basis to NIS 9,367 thousand (US$ 2,556 thousand), as compared to NIS 6,022 thousand (US$ 1,643 thousand) for the second quarter of 2010. The increase was attributed to the industrialization of the Company's patch pump and to the preparation of a new production line.D. Medical commenced sales and marketing operations in late 2009. Sales for the three and nine months ended September 30, 2010 were nil and NIS 1,264 thousand (US$ 345 thousand), respectively. D. Medical has resolved not to recognize its third quarter sales as revenues, although it supplied products for a total of NIS 747 thousand (US$ 204 thousand), because the Company believes that these sales did not meet its revenue recognition criteria. Cost of sales for the three and nine months ended September 30, 2010 amounted to NIS 2,144 thousand (US$ 585 thousand) and NIS 4,873 thousand (US$ 1,329 thousand), respectively. D. Medical had no sales and costs of sales for the periods ended September 30, 2009, during which it was still focusing solely on its research and development operations. The increase in the cost of sales in the third quarter was due to the preparation for a higher volume of production accompanied with current low yield in production. R&D expenses for the three and nine months ended September 30, 2010 amounted to NIS 3,733 thousand (US$ 1,019 thousand) and NIS 8,043 thousand (US$ 2,195 thousand), respectively. The increase in the third quarter was due to the preparation for commercialization of the Company's patch pump.
D. Medical's attributed comprehensive loss for the three months ended September 30, 2010 amounted to NIS 9,011 thousand (US$ 2, 459 thousand), or NIS 1.28 (U.S. $0.35) per share, as compared to NIS 4,445 thousand (US$ 1,213 thousand), or NIS 0.96 (US$ 0.26) per share, for the three months ended September 30, 2009. D. Medical's attributed loss for the nine months ended September 30, 2010 amounted to NIS 29,000 thousand (US$ 7,913 thousand), or NIS 4.65 (US$ 1.27) per share, as compared to NIS 16,115 thousand (US$ 4,397 thousand), or NIS 3.52 (US$ 0.96) per share, for the nine months ended September 30, 2009. The loss for the first nine months of 2010 reflects registration costs of NIS 6,049 thousand (US$ 1,650 thousand) and fair value losses on warrants at fair value through profit or loss of NIS 2,469 thousand (US$ 674 thousand) as a component of financial costs, all incurred during the first six months of 2010.
"These financial results reflect the tremendous efforts that everyone at D. Medical made to meet the Company's goals of moving towards mass production and commercially introducing the patch pump in a timely manner," said Efri Argaman, D. Medical's Chief Executive Officer. "Once we achieve mass production with the help of our new manufacturing partner, UPG, we expect to expand our manufacturing volumes and reduce our cost of sales. This will allow us to more fully capitalize on the cost-effectiveness of our unique spring-based design as we prepare to launch product sales in our five initial target markets - Mexico and the BRIC countries of Brazil, Russia, India and China - commencing in 2011."
As at September 30, 2010, D. Medical had cash and cash equivalents of NIS 47,163 thousand (US$ 12,868 thousand). This compares to NIS 24,388 thousand (US$ 6,654 thousand) as at December 31 2009. The increase is mainly attributable to proceeds from D. Medical's U.S. initial public offering and from the exercise of warrants, affected during the first quarter of 2010, less cash used in operating activities during the nine months ended September, 30, 2010.
Main Events Subsequent to Quarter-End:
- In October 2010, D. Medical announced the execution of an agreement with
Pharmaserve-Lilly S.A.C.I. for the distribution of the Company's ADI
durable insulin pump, related consumables and its Universal Detach Detect
Infusion Sets in Greece.
- In November 2010, D. Medical reported on a proposed transaction by its
publicly held subsidiary, NextGen Biomed Ltd. ("NextGen"). NextGen has
executed a non-binding memorandum of understanding to purchase ClearPath
Ltd. and Innosense Ltd., two privately held Israeli companies engaged in
the functional food and beverages industry. If materialized, D. Medical
will hold 12% of NextGen, which is expected to allow D. Medical to focus
entirely on diabetes treatment and drug delivery.
- In November 2010, the Company announced the grant of a total of 337,100
options to purchase its ordinary shares, par value NIS 0.32 per share, to
various executive officers, managers, other employee and consultants of D.
Medical and its subsidiaries. Such options will vest over a period of 4
years. The options granted to Israeli employees will be granted at an
exercise price of NIS 25.33 per share (except for one officer, who will
receive a portion of his options at an exercise price of NIS 32.864),
while options granted to non-Israeli employees/consultants will be granted
at an exercise price of US$7 per share.
- In November 2010, D. Medical resolved the following with respect to its
chief executive officer's compensation: (i) an increase of his gross
monthly salary from NIS 45,624 (US$ 12,449) to NIS 55,780 (US$ 15,220),
linked to the Israeli Consumer Price Index as known on November 2, 2010;
(ii) the grant of a bonus of NIS 240,000 (US$ 65,484); and (iii) the grant
of 56,700 options to purchase D. Medical's ordinary shares, at an exercise
price of NIS 25.33 per share.
Conference Call
D. Medical will host a conference call to discuss these results today, November 24, at 8:30 a.m. (Eastern Standard Time). Those wishing to access the live conference call by telephone should dial 877-312-5445 (within the United States) or 253-237-1128 (outside of the United States) several minutes prior to the beginning of the call. The call will also be webcast live and archived for 30 days on the company's website at http://www.dmedicalindustries.com under the "Events" tab in the Investors section.
About D. Medical
D. Medical is a medical device company engaged through its subsidiaries in the research, development, manufacture and sale of innovative products for diabetes treatment and drug delivery. D. Medical has developed durable and semi-disposable insulin pumps, which continuously infuse insulin into a patient's body, using its proprietary spring-based delivery technology. D. Medical believes that its spring-based delivery mechanism is cost-effective compared to the motor and gear train mechanisms that drive competitive insulin pumps and also allows it to incorporate certain advantageous functions and design features in its insulin pumps. D. Medical has also developed an infusion set for insulin pumps and is focusing its research and development efforts on the development of next generation insulin pumps and a device that will combine a continuous glucose monitoring system and an insulin pump on the same patch. For more information, visit http://www.dmedicalindustries.com.
Forward-Looking Statements
This press release contains forward-looking statements (as defined by the Israeli Securities Law, 1968, Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended) that involve risks and uncertainties. These statements include, forecasts, goals, uncertainties and assumptions and relate, inter alia, to D. Medical's future expectations in connection with its level of sales and cost of sales, manufacturing volumes, the cost-effectiveness of its spring-based design, target markets and timing of markets penetration. The forward-looking statements are based on D. Medical's current expectations and beliefs which are based on, among other things, its analysis of publicly available information and market research reports. All forward-looking statements are subject to certain risks, uncertainties and assumptions that could cause actual results to differ materially from those described in the forward-looking statements. Such risks and uncertainties include, but are not limited to, the impact of general economic conditions, competitive products, product demand, product performance, the performance of D. Medical's contract manufacturer and distributors, regulatory trends and approvals and healthcare reform legislation. If one or more of these risks and/or uncertainties materialize, or if the underlying assumptions prove to be incorrect, D. Medical's actual results, performance or achievements could differ materially from those expressed in, or implied by, any such forward-looking statements or results which are based upon such assumptions. No assurances can be given that any of the events anticipated by the forward-looking statements will transpire or occur, or of any of them will transpire or occur, what impact it will have on D. Medical's results of operations or financial condition. D. Medicals does not undertake to update any forward-looking statements.
D. MEDICAL INDUSTRIES LTD.
CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
NIS in thousands
Convenience
translation
into US$ (in
thousands)
September 30, December 31, September 30,
2010 2009 2010
-------------- -------------- --------------
(Unaudited) (Audited) (Unaudited)
-------------- -------------- --------------
Assets
CURRENT ASSETS:
Cash and cash equivalents 47,163 24,388 12,868
Short term deposits 3,667 208 1,001
Trade accounts receivable 1,058 103 289
Other 2,283 1,097 623
Inventory 2,663 499 727
-------------- -------------- --------------
Total current assets 56,834 26,295 15,508
-------------- -------------- --------------
NON-CURRENT ASSETS:
Property and equipment, net 3,306 2,103 902
Intangible assets, net 14,493 14,482 3,954
Long-term deposits and loans 192 285 52
-------------- -------------- --------------
Total non-current assets 17,991 16,870 4,908
-------------- -------------- --------------
Total assets 74,825 43,165 20,416
-------------- -------------- --------------
-------------- -------------- --------------
Liabilities and equity
CURRENT LIABILITIES:
Trade and other payables:
Trade accounts payable 2,856 1,165 779
Other 2,920 2,695 797
-------------- -------------- --------------
Total current liabilities 5,776 3,860 1,576
-------------- -------------- --------------
NON-CURRENT LIABILITIES:
Warrants - 2,606 -
Provision for royalties to the
Israeli Office of Chief
Scientist 4,927 4,048 1,344
Liability to minority interest 3,144 3,085 858
Liability for severance pay -
net 70 233 19
-------------- -------------- --------------
Total non-current liabilities 8,141 9,972 2,221
-------------- -------------- --------------
Total liabilities 13,917 13,832 3,797
-------------- -------------- --------------
EQUITY:
Equity attributable to owners
of the parent: Share capital -
issued and outstanding -
December 31, 2009 - 5,384,342
shares September 30, 2010 -
7,625,523 shares
Ordinary shares 2,500 1,783 682
Share premium and other
reserves 225,222 167,355 61,452
Warrants and equity portion of
convertible debt 3,048 3,048 832
Accumulated losses (172,442) (143,442) (47,051)
-------------- -------------- --------------
58,328 28,744 15,915
MINORITY INTEREST 2,580 589 704
-------------- -------------- --------------
Total equity 60,908 29,333 16,619
-------------- -------------- --------------
Total liabilities and equity 74,825 43,165 20,416
-------------- -------------- --------------
-------------- -------------- --------------
D. MEDICAL INDUSTRIES LTD.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
NIS in thousands except per share data
Three months ended Nine months ended
September 30 September 30
--------------------------- ---------------------------
2010 2009 2010 2009
------------- ------------- ------------- -------------
(Unaudited)
-------------------------------------------------------
CONTINUING
OPERATIONS:
Sales - - 1,264 -
Cost of sales 2,144 - 4,873 -
------------- ------------- ------------- -------------
2,144 - 3,609 -
Research and
development
expenses - net 3,733 3,990 8,043 10,183
Selling and
marketing expenses 1,087 - 2,409 -
General and
administrative
expenses 2,770 1,460 7,992 3,615
Other (income)
expenses - net (367) 248 (265) 122
------------- ------------- ------------- -------------
Operating loss 9,367 5,698 21,788 13,920
------------- ------------- ------------- -------------
Registration costs - - 6,049 -
Finance income (61) (36) (212) (908)
Fair value losses
(gains) on warrants
at fair value
through profit or
loss - (1,215) 2,469 2,850
Finance costs 639 177 1,054 862
------------- ------------- ------------- -------------
Finance (income)
costs - net 578 (1,074) 3,311 2,804
------------- ------------- ------------- -------------
LOSS AND TOTAL
COMPREHENSIVE LOSS
FOR THE PERIOD 9,945 4,624 31,148 16,724
------------- ------------- ------------- -------------
------------- ------------- ------------- -------------
ATTRIBUTABLE TO:
Owners of the
parent 9,011 4,445 29,000 16,115
Minority interest 934 179 2,148 609
------------- ------------- ------------- -------------
9,945 4,624 31,148 16,724
------------- ------------- ------------- -------------
------------- ------------- ------------- -------------
LOSS PER SHARE
ATTRIBUTABLE TO THE
EQUITY HOLDERS OF
THE COMPANY -
Basic and diluted 1.28 0.96 4.65 3.52
------------- ------------- ------------- -------------
------------- ------------- ------------- -------------
Convenience translation into US$ (in
thousands)
-----------------------------------------
Three months ended Nine months ended
Year ended September 30 September 30
December -------------------- --------------------
31, 2009 2010 2010
------------ -------------------- --------------------
(Audited) (Unaudited)
------------ -----------------------------------------
CONTINUING
OPERATIONS:
Sales 368 - 345
Cost of sales 657 585 1,329
------------ -------------------- --------------------
289 585 984
Research and
development
expenses - net 13,193 1,019 2,195
Selling and
marketing expenses 698 297 657
General and
administrative
expenses 5,563 755 2,181
Other (income)
expenses - net (714) (100) (72)
------------ -------------------- --------------------
Operating loss 19,029 2,556 5,945
------------ -------------------- --------------------
Registration costs - - 1,650
Finance income (243) (17) (58)
Fair value losses
(gains) on warrants
at fair value
through profit or
loss (244) - 674
Finance costs 473 174 288
------------ -------------------- --------------------
Finance (income)
costs - net (14) 157 904
------------ -------------------- --------------------
LOSS AND TOTAL
COMPREHENSIVE LOSS
FOR THE PERIOD 19,015 2,713 8,499
------------ -------------------- --------------------
------------ -------------------- --------------------
ATTRIBUTABLE TO:
Owners of the
parent 18,435 2,459 7,913
Minority interest 580 254 586
------------ -------------------- --------------------
19,015 2,713 8,499
------------ -------------------- --------------------
------------ -------------------- --------------------
LOSS PER SHARE
ATTRIBUTABLE TO THE
EQUITY HOLDERS OF
THE COMPANY -
Basic and diluted 3.89 0.35 1.27
------------ -------------------- --------------------
------------ -------------------- --------------------
Contacts:
D. Medical Industries LTD
Amir Loberman
Chief Financial Officer
T: +972-73-2507100
info@springnow.com
North American Investor Contact:
Stephen Kilmer
T: 905-690-2400
M: 905-906-6908
stephen@dmedicalindustries.com
Israeli Investor Relations
Iris Lubitch
T: 972-775538007
Iris@EffectiveIR.co.il