MAINSTAY MEDICAL INTERNATIONAL
Mainstay Medical International Plc:
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DGAP-News: Mainstay Medical International Plc / Schlagwort(e):
Jahresergebnis/Produkteinführung
Mainstay Medical International Plc: (News mit Zusatzmaterial)
23.03.2017 / 08:40
Für den Inhalt der Mitteilung ist der Emittent verantwortlich.
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Mainstay Medical veröffentlicht Konzernabschluss des Jahres 2016 und
Geschäftsverlauf
- Klinische Studie ReActiv8-B - planmäßiger Verlauf des Einschlusses bis
Ende 2017, erste Datenverfügbarkeit ab 2018
- Veröffentlichung von erstem Verkauf und Implantation von ReActiv8 in
Deutschland im Februar 2017
- CE-Kennzeichnung basierend auf positiven Ergebnissen der Klinischen Studie
ReActiv8-A, Ein-Jahres-Ergebnisse zeigen anhaltenden Erfolg
- Abschluss einer Privatplatzierung über 30 Millionen US-Dollar im Juni 2016
- Barmittelbestand 36,7 Millionen US-Dollar per 31. Dezember 2016
Dublin - Ireland, 23. März 2017 - Mainstay Medical International plc
("Mainstay", "Mainstay Medical" oder das "Unternehmen", Euronext Paris:
MSTY.PA und ESM der Irish Stock Exchange: MSTY.IE), ein
Medizintechnikunternehmen mit dem Ziel der Markteinführung von ReActiv8(R),
einem implantierbaren Neurostimulationssystem zur Behandlung chronischer
Kreuzschmerzen (Chronic Low Back Pain, CLBP), veröffentlicht heute den
Jahresbericht 2016.
Peter Crosby, Vorstandsvorsitzender von Mainstay Medical, sagte: "Wir sehen
erfreuliche Fortschritte bei Mainstay's Entwicklung hin zur
Kommerzialisierung von ReActiv8, einer innovativen neuen
Behandlungsalternative für viele Patienten mit chronischen Kreuzschmerzen.
Unsere klinische Studie zu ReActiv8-B verläuft nach Plan und ist ein
wichtiger Schritt in Richtung der Markteinführung in den USA, unserem
wichtigsten Zielmarkt. Zu Beginn des Jahres 2017 haben wir die Vermarktung
in Europa mit dem Verkauf von ReActiv8 in Deutschland begonnen. Wir
fokussieren uns auf diesen ersten Markt, um Erfahrungen für die mögliche
Expansion in anderen Regionen zu sammeln."
Aktueller Geschäftsverlauf
- Der Einschluss für die klinische Studie ReActiv8-B hat im September 2016
begonnen, der erste Teilnehmer unterzog sich am 6. Oktober 2016 einer
Implantation. Die ReActiv8-B-Studie ist eine internationale,
multizentrische, prospektive, randomisierte, Sham-kontrollierte dreifach
verblindete Studie mit einmaligem cross-over, durchgeführt unter dem Status
der Investigational-Device-Exemption-Regelung (IDE) der US-Bundesbehörde zur
Lebens- und Arzneimittel-Überwachung (FDA). Zweck der Klinischen Studie
ReActiv8-B ist die Sammlung von Daten zur Unterlegung des Antrags auf eine
vorwettbewerbliche Zulassung bei der US-Bundesbehörde zur Lebens- und
Arzneimittel-Überwachung (FDA), einer wichtigen Voraussetzung für den
Vertrieb von ReActiv8 in den Vereinigten Staaten. Eine Zusammenfassung der
Details zur ReActiv8-B-Studie, einschließlich der Einschlusskriterien und
einer Liste der Behandlungszentren, findet sich auf folgender Webseite:
https://clinicaltrials.gov/ct2/show/study/NCT02577354.
- Die Klinische Studie ReActiv8-B verläuft erfreulich. Es wurden 27
Standorte zur klinischen Studie registriert, von denen 18 Standorte bereits
Teilnehmer rekrutieren. Die übrigen arbeiten mit uns zusammen, um
baldmöglichst damit zu beginnen. 75 Teilnehmer wurden bisher eingeschlossen.
22 von ihnen bekamen ReActiv8 implantiert. 9 Teilnehmern sollen bald
implantiert werden oder werden noch hierzu untersucht. Nach den bisherigen
Erfahrungen erwartet Mainstay die Komplettierung des Einschlusses von
Teilnehmern für die ReActiv8-B-Studie gegen Ende des Jahres 2017 und erste
verwertbare klinische Daten im Jahr 2018, so wie bisher geplant.
- Der erste Verkauf und die Implantation für ReActiv8 in Deutschland wurden
am 1. Februar 2017 bekannt gegeben. Die Implantation von ReActiv8 führte der
Orthopäde und Neurochirurg Dr. med. Francis Kilian am Katholischen Klinikum
Koblenz-Montabaur durch. Das Unternehmen treibt Verhandlungen mit Kunden in
ganz Deutschland voran. Mainstays europäische Vertriebsaktivitäten für
ReActiv8 konzentrieren sich zunächst auf Deutschland, wo das Unternehmen das
Ziel verfolgt, die Akzeptanz von ReActiv8 in ausgewählten multidisziplinären
Wirbelsäulenzentren voranzutreiben, die eine große Patientenpopulation haben
und Referenzzentren werden sollen.
- Im Jahr 2016 hat Mainstay die CE-Kennzeichnung und Zulassung für ReActiv8
erhalten, gestützt auf die positiven Resultate der klinischen Studie
ReActiv8-A, die eine klinisch bedeutsame, statistisch signifikante und
nachhaltige Besserung bei Schmerz, Einschränkungen und Lebensqualität für
Menschen mit einschränkenden chronischen Kreuzschmerzen und wenigen anderen
Behandlungsmöglichkeiten ergeben haben. Die 2016 bekannt gegebenen
Ein-Jahres-Ergebnisse zeigten anhaltenden Behandlungserfolg.
- Im Januar 2017 hat Mainstay für ReActiv8 die Vertriebszulassung in
Australien beantragt.
- Während des Jahres 2016 erhielt Mainstay zwei neue US Patente; die
Gesamtzahl der an Mainstay Medical erteilten laufenden US-Patente beläuft
sich nun auf acht.
Aktuelle Finanzlage
Am 17. Juni 2016 wurde der Abschluss einer Privatplatzierung über 30
Millionen Euro (rund 33,7 Millionen US-Dollar) bekannt gegeben. Die
Platzierung erfolgte über die Ausgabe von 2.307.694 neuer Stammaktien für
neue und bestehende Aktionäre ("die Platzierung"). Am 11. August 2016
erfolgte die Veröffentlichung des Platzierungsprospekts ("der Prospekt") zu
der genannten Platzierung. Der Barbestand per 31. Dezember 2016 betrug 36,7
Millionen US-Dollar.
Per 31. Dezember 2016 hat das Unternehmen die Kreditlinie bei IPF Partners
über 15 Millionen US-Dollar vollständig in Anspruch genommen. Diese
Kreditlinie wurde während des Jahres 2015 bekannt gegeben und die letzte
Tranche über 4,5 Millionen US-Dollar im Juli 2016 nach Erteilung der CE
Kennzeichnung für ReActiv8 gezogen.
Die Betriebsausgaben für das Jahr 2016 betrugen 16,8 Millionen US-Dollar und
haben sich im Vergleich zum Vorjahr 2015 um 3,9 Millionen US-Dollar erhöht,
hauptsächlich verursacht durch die Kosten im Zusammenhang mit dem Beginn der
ReActiv8-B-Studie und dem Beginn der Vertriebsaktivitäten. Der Abfluss an
operativen Barmitteln im Jahr 2016 betrug 16,7 Millionen US-Dollar.
Ausblick
Die Mainstay Medical sieht den Verlauf der ReActiv8-B-Studie positiv, der
Einschluss von Teilnehmern hat schon begonnen und wird voraussichtlich gegen
Ende des Jahres 2017 abgeschlossen sein mit ersten verfügbaren Daten ab
2018, was im Rahmen der Zielplanung liegt. Bei Erfolg soll diese klinische
ReActiv8-B-Studie Level-1-Evidenz zur Wirksamkeit erbringen, mit dem die
vorwettbewerblichen Zulassung (PMA) beantragt werden soll, die einen
kommerziellen Vertrieb in den USA ermöglicht. Das Unternehmen verspricht
sich davon zudem, dass die dann vorliegenden Daten die Expansion des
Vertriebs außerhalb der Vereinigten Staaten unterstützen werden.
Mainstays europäische Vertriebsaktivitäten für ReActiv8 konzentrieren sich
zunächst auf Deutschland, wo das Unternehmen das Ziel verfolgt, die
Akzeptanz von ReActiv8 in einer ausgewählten Zahl von Wirbelsäulenzentren
voranzutreiben, die eine große Patientenpopulation mit chronischen
Kreuzschmerzen haben und die bei der Behandlung einen multidisziplinären
Ansatz verfolgen. Das Unternehmen hat einen Direktvertrieb aufgebaut, der
von einem Team erfahrener Klinikspezialisten unterstützt wird. In
Zusammenarbeit mit seinen Kunden ist das Unternehmen darauf fokussiert,
ReActiv8 in deren reguläre klinische Praxis zu integrieren, um eine neue
Behandlungsmöglichkeit für Menschen anzubieten, die unter chronischen
Kreuzschmerzen leiden. Sobald das Unternehmen Erfahrungen gesammelt und
Schlagkraft gewonnen hat, wird es seine Vertriebsaktivitäten auf andere
Zentren und Länder ausdehnen.
- Ende -
Über Mainstay
Mainstay ist ein Medizintechnik-Unternehmen mit dem Ziel, das innovative
implantierbare Neurostimulationssystem ReActiv8(R) für Menschen mit
einschränkenden chronischen Kreuzschmerzen (chronic low back pain, CLBP) auf
den Markt zu bringen. Das Unternehmen hat seinen Hauptsitz in Dublin,
Irland. Es ist mit Tochtergesellschaften in Irland, in den USA, in
Australien und in Deutschland tätig. Seine Aktien sind zum Handel an der
Börse Euronext Paris (MSTY.PA) und am ESM der Irish Stock Exchange (MSTY.IE)
zugelassen.
Über chronische Kreuzschmerzen
Eine der anerkannten Ursachen von chronischen Kreuzschmerzen (chronic low
back pain, CLBP) ist die gestörte Kontrolle des Nervensystems über die
Muskeln, die für die dynamische Stabilisierung der Wirbelsäule im unteren
Rücken zuständig sind. Eine instabile Wirbelsäule kann zu Rückenschmerzen
führen. ReActiv8 ist so konstruiert, dass es diejenigen Nerven elektrisch
stimuliert, die für die Kontraktion dieser Muskeln zuständig sind. Dadurch
hilft es, die Kontrolle über die Muskeln wieder herzustellen und die
dynamische Stabilisierung der Wirbelsäule zu verbessern, was dem Körper eine
Genesung von den chronischen Kreuzschmerzen erlaubt.
Menschen mit chronischen Kreuzschmerzen haben üblicherweise eine stark
reduzierte Lebensqualität und weisen erhöhte Werte bei Schmerz,
Einschränkungen, Depressionen, Angstzuständen und Schlafstörungen auf. Ihre
Schmerzen und Einschränkungen können trotz bester verfügbarer medizinischer
Behandlung fortbestehen. Nur ein kleiner Teil der Fälle lässt sich auf einen
pathologischen Befund oder einen anatomischen Defekt zurückführen, der mit
einem wirbelsäulenchirurgischen Eingriff korrigierbar wäre. Die Betroffenen
sind durch die Beschwerden in ihrer Arbeitsfähigkeit und Alltagstauglichkeit
stark eingeschränkt. Die Verluste an Arbeitstagen, Hilfeleistungen bei
Schwerbehinderung und Inanspruchnahme medizinischer Leistungen ist eine
erhebliche Belastung für den Einzelnen, seine Familie, die Allgemeinheit,
die Wirtschaft und die öffentliche Verwaltung.
Weitere Einzelheiten finden sich unter www.mainstay-medical.com
ACHTUNG - in den USA ist ReActiv8 durch Bundesgesetze auf den Einsatz in der
Forschung beschränkt.
Peter Crosby, Chief Executive Officer und Hugh Kavanagh, Chief Financial
Officer, halten einen Conference Call mit anschließendem Q&A für Analysten
und Investoren um 12:30pm GMT (13:30 m MEZ, 8:30am EST) am 23 März 2017. Der
Call wird in Englischer Sprache ablaufen; eine Aufzeichnung ist 30 Tage lang
verfügbar.
Einwahlnummern für den Call untenstehend:
Europa: + 44 203 139 4830
Irland: + 353 1 696 8154
Frankreich: + 33 2 9092 0977
USA: + 1 718 873 9077
Teilnehmer PIN: 75508149#
PR- und IR-Anfragen:
Consilium Strategic Communications (International Strategische Kommunikation
- Wirtschafts- und Fachmedien)
Chris Gardner, Mary-Jane Elliott, Jessica Hodgson, Hendrik Thys
Tel: +44 203 709 5700 / +44 7921 697 654
Email: mainstaymedical@consilium-comms.com
FTI Consulting (für Irland)
Jonathan Neilan
Tel: +353 1 663 3686
Email: jonathan.neilan@fticonsulting.com
NewCap (für Frankreich)
Julie Coulot
Tel: +33 1 44 71 20 40
Email: jcoulot@newcap.fr
AndreasBohne.Com/Kötting Consulting (für Deutschland)
Andreas Bohne
Tel: +49 2102 1485368
Email: abo@andreasbohne.com
Investor Relations:
LifeSci Advisors, LLC
Brian Ritchie
Tel: + 1 (212) 915-2578
Email: britchie@lifesciadvisors.com
ESM Advisers:
Davy
Fergal Meegan or Barry Murphy
Tel: +353 1 679 6363
Email: fergal.meegan@davy.ie or barry.murphy2@davy.ie
In die Zukunft gerichtete Aussagen
Diese Mitteilung enthält Aussagen, die in die Zukunft gerichtet sind oder so
verstanden werden könnten. Diese in die Zukunft gerichteten Aussagen sind
kenntlich durch Formulierungen, die in die Zukunft weisen, einschließlich
Ausdrücken wie "antizipiert", "glaubt", "schätzt", "erwartet",
"beabsichtigt", "mag", "plant", "projektiert", "sollte", "will" oder
"untersucht", oder jeweils durch deren negative oder andere Varianten, oder
durch vergleichbare Formulierungen, oder durch Darlegungen von Strategie,
Plänen, Planzielen, Zielsetzungen, künftigen Ereignissen oder Absichten.
Diese in die Zukunft gerichteten Aussagen schließen alles jenseits der
historischen Fakten ein. Sie sind Teil dieser Mitteilung und schließen
Absichten des Unternehmens, Überzeugungen oder gegenwärtige Erwartungen
unter anderem betreffend die Erlöse des Unternehmens, seine finanzielle
Lage, Vorstellungen, Finanzstrategien, Erwartungen an Produktentwurf oder
Entwicklung, regulatorische Anträge und Zulassungen, Erstattungsregelungen,
Vermarktungskosten und Marktdurchdringung ein, sie sind aber darauf nicht
beschränkt.
Es liegt in der Eigenart von in die Zukunft gerichteten Aussagen, dass sie
Risiken und Unwägbarkeiten einschließen, weil sie sich auf künftige
Ereignisse und Umstände beziehen. In die Zukunft gerichtete Aussagen sind
keine Garantien künftiger Leistungsfähigkeit, und die tatsächlichen
Ergebnisse der Tätigkeit des Unternehmens, die Entwicklung seines
Hauptproduktes, der Märkte und der Branche in der das Unternehmen tätig ist,
können wesentlich von jenen abweichen, die durch in die Zukunft gerichtete
Aussagen in dieser Mitteilung beschrieben oder angedeutet werden. Sogar wenn
die Ergebnisse der Tätigkeit des Unternehmens, seine finanzielle Lage und
sein Wachstum, sowie die Entwicklung seines Hauptproduktes, der Märkte und
der Branche, in der es tätig ist, mit den in dieser Mitteilung enthaltenen
in die Zukunft gerichteten Aussagen überein stimmen, sind diese Ergebnisse
oder Entwicklungen nicht unbedingt ein Hinweis auf Ergebnisse oder
Entwicklungen in Folgeperioden. Zahlreiche Faktoren könnten dafür sorgen,
dass Ergebnisse und Entwicklungen des Unternehmens erheblich von jenen
abweichen, die ausdrücklich oder implizit in den in die Zukunft gerichteten
Aussagen genannt sind. Das schließt den erfolgreichen Marktstart und die
Vermarktung von ReActiv8, den Fortgang und Erfolg der klinischen Studie
ReActiv8-B, die allgemeinen wirtschaftlichen und geschäftlichen Umstände,
die Bedingungen am weltweiten Medizintechnik-Markt, Branchentrends,
Wettbewerb, gesetzliche oder regulatorische Veränderungen, steuerliche
Veränderungen, die Verfügbarkeit und Kosten von Kapital, die zur Auflage und
zum Abschuss klinischer Studien benötigte Zeit, die zur Erlangung
regulatorischer Zulassungen erforderliche Zeit und Prozesse,
Wechselkursveränderungen, Veränderungen der Geschäftsstrategie sowie
politische und wirtschaftliche Unwägbarkeiten ein, ohne sich darauf zu
beschränken. Die hier genannten in die Zukunft gerichteten Aussagen sind nur
aussagekräftig zum Zeitpunkt dieser Mitteilung.
Mainstay Medical International plc and its subsidiaries
Annual Report
for the year ended 31 December 2016
Mainstay Medical International plc
Table of contents
Corporate and shareholder information 3
Chairman's statement 4
Biographies of Directors 5
Directors' report 8
Corporate governance report 19
Risk factors 23
Directors' responsibilities statement 42
Independent auditor's report 43
Consolidated statement of profit or loss and other comprehensive 45
income
Consolidated statement of financial position 46
Consolidated statement of changes in shareholders' equity 47
Consolidated statement of cash flows 48
Notes to the consolidated Financial Statements 49
Parent Company Financial Statements 68
Forward looking statements
This annual report includes statements that are, or may be deemed to be,
forward looking statements. These forward looking statements can be
identified by the use of forward looking terminology, including the terms
"anticipates", "believes", "estimates", "expects", "intends", "may",
"plans", "projects", "should", "will", or "explore" or, in each case, their
negative or other variations or comparable terminology, or by discussions of
strategy, plans, objectives, goals, future events or intentions. These
forward looking statements include all matters that are not historical
facts. They appear throughout this annual report and include, but are not
limited to, statements regarding the Company's intentions, beliefs or
current expectations concerning, among other things, the Company's results
of operations, financial position, prospects, financing strategies,
expectations for product design and development, regulatory applications and
approvals, reimbursement arrangements, costs of sales and market penetration
By their nature, forward looking statements involve risk and uncertainty
because they relate to future events and circumstances. Forward looking
statements are not guarantees of future performance and the actual results
of the Company's operations, and the development of its main product, the
markets and the industry in which the Company operates, may differ
materially from those described in, or suggested by, the forward looking
statements contained in this annual report. In addition, even if the
Company's results of operations, financial position and growth, and the
development of its main product and the markets and the industry in which
the Company operates, are consistent with the forward looking statements
contained in this annual report, those results or developments may not be
indicative of results or developments in subsequent periods. A number of
factors could cause results and developments of the Company to differ
materially from those expressed or implied by the forward looking statements
including, without limitation, the successful launch and commercialization
of ReActiv8, the progress and success of the ReActiv8-B Clinical Trial,
general economic and business conditions, the global medical device market
conditions, industry trends, competition, changes in law or regulation,
changes in taxation regimes, the availability and cost of capital, the time
required to commence and complete clinical trials, the time and process
required to obtain regulatory approvals, currency fluctuations, changes in
its business strategy, political and economic uncertainty. The
forward-looking statements herein speak only at the date of this annual
report.
Mainstay Medical International plc
Corporate and shareholder information
Directors Oern Stuge MD, Independent Non-Executive
Chairman
Peter Crosby, Chief Executive Officer and
Executive Director
David Brabazon, Independent Non-Executive
Director
Greg Garfield, Non-Executive Director
Nael Karim Kassar, Non-Executive Director
Antoine Papiernik, Non-Executive Director
James Reinstein, Independent Non-Executive
Director
Manus Rogan PhD, Non-Executive Director
Dan Sachs MD, Non-Executive Director
Secretary Tom Maher
Registered office Clonmel House
Forster Way
Swords, K67F2K3
County Dublin, Ireland
Registered number 539688
Website www.mainstay-medical.com
ISIN / Symbol IE00BJYS1G50 / MSTY.PA (Paris) and MSTY.IE
Solicitors/ Lawyers McCann FitzGerald
Riverside One
Sir John Rogerson's Quay
Dublin 2, Ireland
Jones Day
2, rue Saint-Florentin
75001 Paris, France
Independent Auditor KPMG
Chartered Accountants
1 Stokes Place
St Stephen's Green
Dublin 2, Ireland
Principal Bankers HSBC
Bank of Ireland
ESM Adviser and J&E Davy
Broker
Davy House
49 Dawson Street
Dublin 2, Ireland
Registrar Computershare Investor Services (Ireland)
Limited
Heron House
Corrig Road
Sandyford Industrial Estate
Dublin 18, Ireland
Paying Agent (in Caceis Corporate Trust
France)
1/3, Place Valhubert
75013 Paris
France
Mainstay Medical International plc
Chairman's statement
Dear Shareholder
2016 was a year of continued progress on the path to commercialization of
ReActiv8(R), and I am pleased to present the Annual Report for Mainstay
Medical International plc and its subsidiaries.
Business review
Enrollment in the ReActiv8-B Clinical Trial commenced in September 2016 and
the first subject was implanted on 6 October 2016. The purpose of the
ReActiv8-B Clinical Trial is to gather data in support of an application for
pre-market approval (PMA) from the US Food and Drug Administration (FDA), a
key step towards the commercialization of ReActiv8 in the US.
The first sale and implant of ReActiv8 in Germany was announced on 1
February 2017. The implant was performed by Dr. med. Francis Kilian,
Orthopedic and Neurosurgeon at the Catholic Hospital Koblenz-Montabaur in
Koblenz Germany. We are progressing discussions with a number of customers
across Germany. Our European commercial activities for ReActiv8 are
initially focused on Germany where the Company aims to drive adoption of
ReActiv8 in a select number of high volume multi-disciplinary spine care
centers which will become reference sites.
A detailed review of our 2016 activities can be found in the Directors'
Report on page 8 of this Annual Report.
Finance review
Cash on hand as at 31 December 2016 was $36.7 million (2015: $16.6 million).
Operating expenses were $16.8 million during the year ended 31 December 2016
(2015: $12.9 million) and the change relates primarily to the commencement
and ramp up of the ReActiv8-B Clinical Trial and to commercialization
activities.
Outlook
We are pleased with the progress of the ReActiv8-B Clinical Trial.
Enrollment is well under way and we estimate that enrollment will complete
in this Clinical Trial around the end of 2017, with data availability in
2018, which is in line with our target. If successful, the ReActiv8-B
Clinical Trial will yield level 1 evidence of efficacy, which we will use to
support an application for PMA approval to allow commercialization in the
US. We also anticipate the data from this Clinical trial will help with
expansion of commercialization of ReActiv8 outside the US.
The initial focus of our European commercial activities for ReActiv8 is on
Germany where we aim to drive adoption of ReActiv8 in a select number of
high volume multi-disciplinary spine care centers. We have recruited a
direct sales force, which is supported by our team of experienced field
clinical specialists, and we are working with customers to integrate
ReActiv8 into their routine clinical practice and provide a new treatment
option for the many people suffering from Chronic Low Back Pain. As we gain
experience and momentum, and as we identify other early opportunities to
build our business, we will consider expansion to other sites and countries.
Directors and Staff
I would like to thank the staff, consultants, clinical trial investigators
and all my fellow Directors for their support and dedication, which has
enabled the continued success of the Company. Of course, we also owe a debt
of gratitude to all those people who agreed to be subjects in our Clinical
Trials, and helped to advance ReActiv8 as an option for the millions of
people suffering from Chronic Low Back Pain. I look forward to the future
with optimism.
Yours faithfully,
Oern Stuge MD
Chairman
22 March 2017
Mainstay Medical International plc
Board of Directors
Biographies of Directors
Oern Stuge MD
Dr. Oern R. Stuge is the independent non-executive Chairman of the Board. He
is an international executive with more than 25 years of experience in the
life science sector. Dr. Stuge is the owner of Orsco Lifesciences AG,
through which he holds several executive and non-executive board memberships
and advisory roles.
Prior to founding Orsco, Dr. Stuge worked for 12 years for Medtronic, Inc.
in different roles including Senior Vice President ("SVP") & President
Europe & Central Asia, and SVP & President Cardiac Surgery. He was a member
of the Medtronic Executive Committee & Operating Committee. Dr. Stuge has
been credited for successfully transforming Medtronic's global Cardiac
Surgery business and accelerating the growth in its neurological and
cardiovascular business in Europe, Middle East & Africa.
Dr. Stuge earned an MD from University of Oslo, an MBA from IMD,
Switzerland, and an INSEAD Certificate of Corporate Governance.
Peter Crosby
Mr. Peter Crosby has been a Board member of the ultimate holding company of
the Group since he was appointed CEO of Mainstay Medical in mid-2009. Mr.
Crosby was instrumental in founding the Group, raising the 2010 and 2012
financing rounds, completing the 2014 IPO, and raising the 2016 placement.
He is an internationally experienced medical device executive who has been
chief executive officer or chairman of seven medical device companies
(public and private) in four countries.
Mr. Crosby has contributed to the development and introduction to the global
market of dozens of medical devices over a career spanning more than 30
years. After working for five years in a hospital environment, Mr. Crosby
entered industry as one of the first three employees of Cochlear, and
continued his career with executive roles in many more companies. He has
direct experience in active implantable medical devices, including cardiac
pacemakers and defibrillators (Telectronics Pacing Systems), cochlear
implants (Cochlear), left ventricular assist devices (Ventracor),
Neuromodulation (Mainstay Medical), ultrasound (Ausonics, NeoVision),
software (Cardicomm Solutions), and in-vitro diagnostics (First Medical,
Ischemia Technologies). Mr. Crosby has raised capital for many medical
device companies, and has been directly involved in the sale of several
companies.
Mr. Crosby graduated with a Bachelor of Electrical Engineering and a Masters
in Engineering Science (Biomedical Engineering) from the University of
Melbourne, Australia. He is a named inventor on over 30 patents and patent
applications, primarily in the field of biomedical engineering.
David Brabazon
Mr. David Brabazon is a co-founder of Adapt Pharma Limited and serves as
Chief Financial Officer and a board member. Adapt Pharma Limited is a US
focused specialty pharmaceuticals business with its corporate headquarters
in Ireland. Mr. Brabazon previously was a co-founder and Chief Financial
Officer of Azur Pharma plc, which merged with Jazz Pharmaceuticals plc in
early 2012. Mr. Brabazon continued to serve in the merged business as Senior
Vice President of Finance and Company Secretary until late 2012. Prior to
Azur Pharma, Mr. Brabazon served as Vice President of Finance and Group
Financial Controller of Elan Corporation plc.
Mr. Brabazon is a chartered accountant and holds a Masters of Accounting
degree from University College Dublin, Ireland and a Master of Business
Administration degree from INSEAD, France. Mr. Brabazon serves as a director
of Headway (Ireland) Limited which provides support and services to people
affected by brain injury.
Greg Garfield
Mr. Greg Garfield is a Non-Executive Director of the Company and is
Head-Medical Technologies Division of KCK-U.S., Inc. Mr. Garfield serves as
a director on the boards of numerous private and public companies in the
healthcare industry. From 2006 to 2011, he had various roles at Acclarent,
Inc., a medical technology company, including Chief Operating Officer and
General Counsel. Acclarent, Inc. was acquired by Johnson and Johnson at a
valuation of approximately $800 million cash in January 2010. From 1995 to
2006, Mr. Garfield had various roles at Guidant Corporation, a medical
technology company, including Vice President of Business Development and
General Counsel. Guidant was acquired by Boston Scientific Corporation in
2006 at a valuation of approximately $27 billion in cash and stock. Mr.
Garfield has a Bachelor of Science degree from California Polytechnic State
University and a Juris Doctorate from McGeorge School of Law, University of
the Pacific.
Nael Karim Kassar
Mr. Nael Karim Kassar is an Investment Partner of KCK Group which follows a
multi-asset strategy including venture capital and private equity.
Mr. Kassar has been a Director on the board of RefleXion Medical Inc. since
April 14, 2016 and Mainstay Medical International plc since June 17, 2016.
He serves as a Non-Executive Director of OnePhone Holding AB and as a
Director of Aerin Medical Inc., KCK Ltd., KCK Properties Ltd., Future
Finance Loan Corporation Limited, Timeshare Finance Investments Limited,
Specialty Finance ICAV Limited, Judgment Acquisition Corporation Limited,
High Sealed and Coupled "HSC" FZCO, Sentient Energy, Inc., Citizens Parking
Inc., Affirmed Networks, Inc., GFL Environmental Holdings Inc., SiGNa
Chemistry, Inc., Murosa Development S.a r.l., HPS Del Mar Holdings LLC,
BioInspire Technologies, Inc., QM Power Inc., and Sonitus Technologies, Inc.
He served as a Director of Tunnel Capital City Partners Inc. and Hibernia
NGS Limited.
Nael holds a bachelor degree in Pure Mathematics from Imperial College
London together with a Masters in Advanced Studies in Mathematics from
Cambridge University.
Antoine Papiernik
Mr. Antoine Papiernik is a Non-Executive Director of the Company and is a
Managing Partner at Sofinnova Partners, which he joined in 1997. Sofinnova
has been an initial investor and Antoine has been an active board member in
public companies like Actelion, Auris, ProQR, Novus Pharma (then sold to
CTI), Movetis (then sold to Shire), Mainstay Medical, Pixium Vision and
Stentys which went public respectively on the Zürich stock exchange, the
NASDAQ, the Milan Nuovo Mercato, the Belgium Stock Exchange, the Irish Stock
Exchange and EuroNext Paris, in Cotherix (initially NASDAQ listed, then sold
to Actelion), CoreValve (sold to Medtronic), Fovea (sold to Sanofi Aventis)
and Ethical Oncology Science (EOS sold to Clovis Oncology). He has also
invested, for Sofinnova, in and is a board member of private companies
Corwave, Rgenix, Gecko, ReCor, MD Start, Shockwave Medical, and Reflexion
Medical. Antoine has an MBA from the Wharton School of Business, University
of Pennsylvania. In 2012 and 2011 Antoine was selected by Forbes for its
"Midas List" of the world's top venture capital investors. Antoine is one of
the only Europeans on the list, and one of the few life science investors
James Reinstein
Mr. James A. Reinstein has more than 25 years of medical device experience.
James is currently the President, CEO and board member of Cutera, Inc. a
NASDAQ listed global device company at the forefront of the medical
aesthetics space. Just prior to Cutera, he was the President and CEO of
Drawbridge Health, a joint venture of GE Healthcare and GE Venture. Previous
to Drawbridge, he was the President and CEO of Aptus Endosystems Inc. where
he led the sale of the company to Medtronic for over $100 million. Prior to
joining Aptus, James served as Executive Vice-President and Chief Commercial
Officer at Cyberonics, a neuromodulation company focused on helping patients
with epilepsy, depression and chronic heart failure. James spent 17 years at
Boston Scientific in various roles and functions including business
development, marketing and general management. Most of his career at Boston
Scientific was spent working and living in Europe, Asia and Latin America.
James was employed by Procter and Gamble after graduating with a BA in
Marketing from the Terry College of Business at the University of Georgia in
Athens. He also completed post graduate studies in management at INSEAD
Business School in Fontainebleau, France. James is also a General Partner at
Palo Alto Medtech Advisors, and also sits on the board of directors of a
publicly traded company, Pixium-Vision based in Paris, France and Monteris
Medical, a privately held company located in the United States
Manus Rogan PhD, MBA
Dr. Manus Rogan is Managing Partner and co-founder of Fountain Healthcare
Partners. He has over 26 years of investment and operating experience in the
life science sector in both the US and Europe. Dr. Rogan earned a PhD in
chemistry from the University of York (sponsored by GlaxoSmithKline) and an
MBA from Trinity College Dublin.
Dr. Rogan began his career in product development at GlaxoSmithkline in the
UK and in 1996 joined Elan Corporation's business development group. For
four years he was responsible for licensing products and drug delivery
technologies in Europe and Japan. In 2001, Dr. Rogan joined Elan's Corporate
Venture Capital group in New York where he invested in private and public
biotechnology companies. Investments included Sirna (acquired by Merck,
2006) and Beyond Genomics (IPO, 2011). In his seven years at Elan, Manus
concluded over 25 investment and technology licensing transactions involving
companies in the US, Europe and Japan. Manus currently serves on the board
of Opsona Therapeutics and Mainstay Medical. He recently stepped down as
Chairman of the Irish Venture Capital Association ("IVCA") and previously
represented Fountain Healthcare Partners on the board of Amarin Corporation.
Dan Sachs MD
Dr. Dan Sachs is a physician entrepreneur and founder of KSpine Inc.,
Respicardia, Inc., Mainstay Medical Inc., and Amphora Medical, Inc., all
venture-backed medical device companies. He was previously a venture capital
investor with Investor Growth Capital and Spray Venture Partners, and served
as Instructor in Medicine on the faculty of Harvard Medical School in the
Division of Emergency Medicine.
Dr. Sachs earned an MD from the University of Michigan, and MBA from Harvard
Business School
Mainstay Medical International plc
Directors' report
The Board of Directors are pleased to report on the progress of Mainstay
Medical International plc ("Mainstay" or the "Company") and present the
Annual Report of the Company and its subsidiaries (the "Group" or "we") for
the year ended 31 December 2016.
Principal activities
Mainstay is a medical device company focused on bringing to market
ReActiv8(R), a new implantable restorative neurostimulation system to
treat people with disabling Chronic Low Back Pain ("CLBP").
The Company is headquartered in Dublin, Ireland. It has subsidiaries
operating in Ireland, the United States, Australia and Germany, and its
ordinary shares are admitted to trading on Euronext Paris (MSTY.PA) and the
ESM of the Irish Stock Exchange (MSTY.IE).
As at 31 December 2016, the Company together with its operating subsidiaries
Mainstay Medical Limited, MML US, Inc., Mainstay Medical (Australia) Pty
Limited, Mainstay Medical Distribution Limited and Mainstay Medical GmbH
form the Mainstay Medical Group.
Key performance indicators
Current key performance indicators, used by management to measure
performance and exercise control over operations are summarized below:
Securing funds - The Group has financed its operations to date principally
through the issuance of equity securities and debt funding. The management
team continues to develop and strengthen relationships to explore further
financing options. These may include strategic partnering, private placement
or public offering of equities or debt.
Effective monitoring of use of funds - Management prepares budgets and
rolling forecasts to track and monitor use of funds. Actual expenditure is
measured against budget, and is reported to and evaluated by the Directors
on a monthly basis.
Achieving milestones - The Group has defined the strategic activities and
milestones leading to commercialization of ReActiv8. These include:
- Product design and development of ReActiv8
- Conducting the ReActiv8-A Clinical Trial
- Quality System certification
- Obtaining CE Marking
- European commercialization of ReActiv8
- Obtaining approval for an Investigational Device Exemption (an "IDE") from
the US Food and Drug Administration (the "FDA") to start a clinical trial of
ReActiv8 in the US (the "ReActiv8-B Trial")
- Conducting the ReActiv8-B Trial to generate data to file a Pre-Market
Approval Application (a "PMAA") with the FDA
- Following Pre-Market Approval ("PMA"), starting the US commercialization
of ReActiv8.
Progress towards and achievement of these milestones is reported by the
management team to the Board on a regular basis. Outlined in the following
business and financial review sections of this report, we describe our
performance during the year ended 31 December 2016 on the relevant areas
above, including updates on progress towards milestones, and analysis of
expenditure and use of funds during the year.
Business review
ReActiv8-B Clinical Trial - Enrollment in the ReActiv8-B Clinical Trial
commenced in September 2016 and the first subject was implanted on 6 October
2016. The ReActiv8-B Clinical Trial is an international, multi-center,
prospective randomized sham-controlled triple blinded trial with one-way
crossover, conducted under an IDE from the FDA. The purpose of the
ReActiv8-B Clinical Trial is to gather data in support of an application for
PMA to the FDA, a key step towards the commercialization of ReActiv8 in the
US.
The primary efficacy endpoint of the ReActiv8-B Clinical Trial is a
comparison of responder rates between the treatment and control arms. The
Clinical Trial will be considered a success if there is a statistically
significant difference in responder rates between the treatment and control
arms. A responder is defined as having at least 30% improvement in Low Back
Pain reported on a 100mm Visual Analogue Scale ("VAS") between baseline and
the 120-day primary outcome assessment visit, with no increase in
medications prescribed and taken for pain in the 14 days prior to the visit.
The Clinical Trial, if successful, will provide Level 1 Evidence of efficacy
of ReActiv8, which may be used to support applications for favorable
reimbursement in the USA. In addition, evidence from the ReActiv8-B Clinical
Trial will be used to support market development activities worldwide.
The statistical design of the Clinical Trial requires data from 128 subjects
at the 120-day primary outcome assessment visit. Total subjects implanted
will also include some subjects enrolled and implanted as part of the
surgical roll-in phase, in addition to subjects implanted to achieve data
from 128 subjects in the pivotal cohort. The Trial is designed with an
"interim look" for sample size re-estimation when primary outcome data are
available from half the subjects in the pivotal cohort, and if necessary the
number of subjects in the pivotal cohort may be increased to achieve the
targeted statistical significance. The interim analysis will be performed by
a third-party independent statistician under the direction of the Data
Monitoring Committee (DMC), and the interim results, other than a DMC
recommendation regarding the findings, will remain blinded to the Group and
other study participants (including Clinical Trial investigators and
Clinical Trial sites).
IDE approval is for up to 40 clinical trial sites, and the Group will likely
focus on less than 30 sites, located in the United States, Australia,
Belgium, the Netherlands, and the United Kingdom. A summary of the protocol
including key subject selection criteria and the outcome measures can be
found at https://clinicaltrials.gov/ct2/show/study/NCT02577354.
We are pleased with the progress of the ReActiv8-B Clinical Trial. We have
selected 27 Clinical Trial sites of which 18 are enrolling subjects and the
remainder are working with us to begin enrolling as soon as possible. 75
subjects have been enrolled of whom, 22 have been implanted with ReActiv8,
and 9 subjects are either awaiting implant or are still being assessed.
Based on our experience, we estimate completion of enrollment in the
ReActiv8-B Trial around the end of 2017, with data availability in 2018,
which is in line with our target.
Commercialization - The first sale and implant of ReActiv8 in Germany was
announced on 1 February 2017. The implant was performed by Dr. med. Francis
Kilian, Orthopedic and Neurosurgeon at the Catholic Hospital
Koblenz-Montabaur in Koblenz Germany. We are progressing discussions with a
number of customers across Germany. Our European commercial activities for
ReActiv8 are initially focused on Germany where we aim to drive adoption of
ReActiv8 in a select number of high volume multi-disciplinary spine care
centers which will become reference sites. As we gain experience and
momentum, and as we identify other early opportunities to build our
business, we will expand to other sites and countries.
During 2016 we received CE Marking approval for ReActiv8 based on positive
results from the ReActiv8-A Clinical Trial. This Clinical Trial demonstrated
a clinically important, statistically significant and lasting improvement in
pain, disability and quality of life in people with disabling Chronic Low
Back Pain and few other treatment options.
On 12 January 2017, we announced we had applied for ReActiv8 to be admitted
to the Australian Register of Therapeutic Goods (ARTG) to allow for
commercialization in Australia. The ARTG application included the results of
the ReActiv8-A Clinical Trial. The Therapeutic Goods Agency will review the
application and may request additional data during the review process.
US Patents - During 2016 we announced the issuance of two new US Patents,
bringing the total current number of issued US issued Patents in the
Mainstay portfolio to eight. Mainstay continues to add to its portfolio of
issued patents and pending patent applications.
ReActiv8-A Clinical Trial/PMCF Study - The ReActiv8-A Clinical Trial is an
international, multi-center, prospective, single arm Clinical Trial of
ReActiv8. We announced the results of the first 47 subjects implanted in
this Clinical Trial, of whom, 46 reached the 90-day end point in August
2015. On 20 September 2016 we announced the one-year results from the
ReActiv8-A Clinical Trial, which showed long term sustained performance. As
at 31 December 2016, 6 additional subjects had been implanted in the
ReActiv8-A Clinical Trial.
The results show clinically important, statistically significant and lasting
improvement in pain, disability and quality of life in a population of
people with few treatment options. As detailed above, the submission for CE
Mark approval included the results of the first 47 subjects implanted in the
ReActiv8-A Clinical Trial.
Following CE marking approval, a range of activities is required for Post
Market Clinical Follow Up to gather additional data on the long term
performance and safety of ReActiv8. The ReActiv8-A Post Market Clinical
Follow-up (PMCF) Study is a continuation of the ReActiv8-A Clinical Trial
(but with CE Marked ReActiv8). 40 additional subjects are planned to be
implanted as part of the continuation of the ReActiv8-A PMCF Study.
ReActiv8-C Registry - In addition to the ReActiv8-A PMCF Study, the Group
will conduct a registry. The ReActiv8-C Registry is an international,
multi-center, data collection registry. All patients who will be implanted
with ReActiv8 during commercialization will be invited to enroll in the
ReActiv8-C Registry until the target enrollment numbers have been reached.
The purpose is to gather additional summary data on the long-term
performance of ReActiv8 in at least 50 patients.
Funding - On 17 June 2016, we announced the completion of a private
placement of EUR30 million (approximately $33.7 million) through a placement
of 2,307,694 new ordinary shares with new and existing shareholders (the
"Placement"). On 11 August 2016, we announced the publication of a
prospectus (the "Prospectus") in connection with the Placement. The
Prospectus comprised a Summary Document, a Securities Note and a
Registration Document. These documents are available on our website (
www.mainstay-medical.com).
The Group's debt facility provided by IPF was announced on 24 August 2015
for up to $15 million. During July 2016, we received the last tranche of
$4.5 million. As at 31 December 2016, the Group had drawn down the full
facility of $15 million.
Financial review
Income statement - Operating expenses related to on-going activities were
$16.8 million during the year ended 31 December 2016 (2015: $12.9 million).
On-going activities during the financial year included clinical and
regulatory activities, research and development, preparation for
commercialization and general and administrative activities.
Research and development expenses reflect costs incurred for research,
ongoing development and design of the Group's product ReActiv8. These
expenses include the salaries of engineers, technicians, quality and
regulatory specialists; the cost of outsourced development and manufacturing
activities; biocompatibility and pre-clinical studies; and quality costs
including the set-up and on-going maintenance of our quality system.
Research and development expenses also include the costs of prosecuting and
maintaining our intellectual property portfolio, including legal costs and
associated filing and maintenance fees. Research and development expenses
were $3.6 million during the year ended 31 December 2016 (2015: $2.9
million). An increase of $0.7 million is primarily driven by expansion of
the team, who also support clinical trials and commercialization.
Clinical and regulatory expenses relate to the ongoing ReActiv8-A Clinical
Trial (including the continuation of the ReActiv8-A Clinical Trial as the
ReActiv8-A PMCF Study), and preparation for and commencement of the
ReActiv8-B Clinical Trial. Also included in clinical and regulatory expenses
are expenses relating to clinical consulting; regulatory consulting; and,
salary costs for our clinical team members. All clinical and regulatory
costs are expensed as incurred. We are pleased with the progress of the
ReActiv8-B Clinical Trial, and we expect clinical and regulatory expenses to
increase significantly as enrollment in the ReActiv8-B Clinical Trial
continues to ramp up, and as we undertake post market clinical follow-up
activities. Clinical and regulatory expenses were $5.6 million during the
year ended 31 December 2016 (2015: $4.7 million). The increase of $0.9
million is primarily driven by increased consulting and clinical costs
relating to the ReActiv8-B Clinical Trial.
Selling, general and administration expenses include costs relating to the
executive, legal, finance and commercial functions. Executive, legal, and
finance expenses include the salaries and other related costs for personnel,
professional fees for accounting, audit and legal services, general and
facilities costs such as rent, insurances and IT costs. Commercial costs
during the financial year include the salaries of our direct sales force,
costs related to the development of the Group's commercial strategy, and
costs related to obtaining and expanding reimbursement for the Group's
products after regulatory approvals have been obtained and the products
become available to be sold commercially. Commercial expenses are expected
to increase with the expansion of our resources to include new personnel in
a direct sales team as we commercialize in key target markets in Europe.
Selling, general and administration expenses were $7.6 million during the
year (2015: $5.3 million). The increase of $2.3 million is primarily driven
by the expansion of our team, increase in non-cash share based payments
expense and expenditure on preparation for commercialization.
Statement of financial position - On 17 June 2016, we announced that we had
raised gross proceeds of EUR30 million (approximately $33.7 million) through
a placement of 2,307,694 new ordinary shares with new and existing
shareholders (the "Placement"). Transaction costs of approximately $1.2
million were incurred and have been offset against retained earnings.
On 24 August 2015, we announced the closing of debt financing for up to $15
million. As at 31 December 2016, the Group had drawn down the full debt
facility of $15 million. The last tranche of $4.5 million was received in
July 2016 following CE Marking approval of ReActiv8.
Following CE Marking approval which was received by the Group in May 2016,
as part of our preparation for commercialization, we have built up inventory
valued at $1.1 million as at 31 December 2016.
Cash on hand at 31 December 2016 was $36.7 million (2015: $16.6 million).
Total assets of the Group at year end were $39 million (2015: $17.6
million). The increase in cash is primarily due to the proceeds received
from the placement completed in June 2016 and the final tranche of our debt
facility, offset by ongoing operating expenditure and buildup of inventory
held for commercialization.
Operating net cash outflows for the year ended 31 December 2016 were $16.7
million (2014: $11.6 million). This operating cash outflow reflects the cost
of the research and development of ReActiv8, undertaking our clinical
trials, preparation for commercialization, the ongoing costs of being a
public company, and running the Group.
Principal risks and uncertainties
A summary of the principal risks relating to the Company and/or its industry
include the following:
- We have incurred significant operating losses and may not be able to
achieve or subsequently maintain profitability.
- We expect to require additional funds in the future in order to meet our
capital and expenditure needs and further financing may not be available
when required or, if available, could require us to agree to terms which are
specifically favorable to new investors, or to restrictions significantly
limiting our access to additional capital
- Our future financial performance is substantially dependent on the
commercial success of ReActiv8, our only product as of the date of this
Annual Report
- We operate in a highly regulated environment and regulatory approval is
required before we can market or sell ReActiv8 in any market
- Seeking and obtaining regulatory approval for medical devices can be a
long and uncertain process. Strict or changing regulatory regimes,
government policies and legislation in any of our target markets may delay,
prohibit or reduce potential sales
- We are required to conduct clinical trials for regulatory approvals and
other purposes. clinical trials carry substantial risks and are costly and
time consuming, with uncertain results.
A more extensive description of the existing and future potential risks to
Mainstay's business and to the Company's ordinary shares are outlined in the
Risk Factors section of this report, on pages 23 to 41, and should be
considered carefully by Shareholders and prospective investors.
Financial risk management
The Group is exposed to a variety of financial risks including credit risks,
liquidity risks, interest rate risks and foreign currency risks. Further
information can be reviewed in Note 19.
Risk management framework - Mainstay's Board of Directors has overall
responsibility for the establishment and oversight of the Group's risk
management framework. The Group's risk management policies are established
to identify and analyze the risks faced by the Group, to set appropriate
risk limits and controls and to monitor risks and adherence to the limits.
Due to the pre-revenue nature of the Group's activities during the financial
year, there are no significant concentrations of financial risk other than
concentration of cash with individual banks and there has been no
significant change during the financial year, or since the end of the year
to the types or extent of financial risks faced by the Group or the Group's
approach to the management of those risks.
Credit risk - Credit risk is the risk of financial loss to the Group if a
customer or counterparty to a financial instrument fails to meet contractual
obligations, and arises principally from the Group's cash and cash
equivalents and trade and other receivables.
Liquidity risk - Liquidity risk is the risk that the Group will not be able
to meet its financial obligations as they fall due. Since inception the
Group has funded its operations primarily through (i) the issuance of equity
securities and (ii) debt funding. The Group continues to explore funding
strategies (e.g.: equity, debt, partnering) to support its activities into
the future. Adequate additional financing may not be available on acceptable
terms, or at all. The Group's inability to raise capital as and when needed
would have a negative impact on the Group's financial position and its
ability to pursue its business strategy.
Foreign currency risk - The Group's reporting currency is the US Dollar. The
Group's exposure to foreign currency risk arises through expenditure
incurred in Euro and Australian Dollars. The Group's Australian subsidiary
has an Australian Dollar functional currency, and two of the Group's
subsidiaries located in Ireland and Germany have a Euro functional currency.
Interest rate risk - The Group's cash balances are maintained in short term
access accounts and carry a floating rate of interest.
The Group's debt carries a variable rate of 3-month Euribor plus a margin
ranging from 10.5% to 12.5%. Any change in the Euribor rate above zero will
directly affect the amount of interest repayable on this debt.
Outlook and future developments
We are pleased with the progress of the ReActiv8-B Clinical Trial.
Enrollment is well under way and we estimate that enrollment will be
completed around the end of 2017, with data availability in 2018, which is
in line with our target. If successful, the ReActiv8-B Clinical Trial will
yield level 1 evidence of efficacy, which we will use to support an
application for PMA approval to allow for commercialization in the US. We
also anticipate the data from this Clinical trial will help with expansion
of commercialization of ReActiv8 outside the US.
The initial focus of our European commercial activities for ReActiv8 is on
Germany where we aim to drive adoption of ReActiv8 in a select number of
high volume multi-disciplinary spine care centers. We have recruited a
direct sales force, which is supported by our team of experienced field
clinical specialists, and we are working with customers to integrate
ReActiv8 into their routine clinical practice and provide a new treatment
option for the many people suffering from Chronic Low Back Pain. As we gain
experience and momentum, and as we identify other early opportunities to
build our business, we will consider expansion to other sites and countries.
Directors and Secretary and their interests
The names of the persons who were Directors during the year are set out on
page 3.
Greg Garfield and Nael Karim Kassar were appointed to the board as
Non-Executive Directors on 17 June 2016. All other Directors served as
directors for the entire year.
The following directors, Mr Antoine Papiernik, Mr. Manus Rogan, Mr James
Reinstein, Mr Nael Kassar and Mr Greg Garfield retired at the Company's
Annual General Meeting ("AGM") held on 16 September 2016 and submitted
themselves for re-election by the shareholders. The resolutions to re-elect
each Director were passed at the Company's AGM on 16 September 2016.
It is the Board's current intention that one third of all Directors will
retire at each AGM, subject to any additional requirements under Articles 90
to 94 of the Company's Articles of Association.
The beneficial interest of the Directors and Company Secretary, who held
office at 31 December 2016, in the ordinary share capital of the Company at
the dates below were as follows:
Ordinary Ordinary shares at par
shares value of EUR0.001 each
Name At 31 December 2016 At 31
December
2015
Peter Ordinary shares of 81,400 81,400
Crosby EUR0.001 each
David Ordinary shares of 27,828 4,728
Brabazon EUR0.001 each
Dan Sachs Ordinary shares of 515,000 515,000
MD EUR0.001 each
Tom Maher Ordinary shares of 7,702 10
EUR0.001 each
The movement in ordinary shares held by Directors and Secretary between 31
December 2015 and 31 December 2016 relates to ordinary shares acquired in
the private placement completed in June 2016.
Sha- Dee- Exercise Expi- No. of No. of No. of
re med price ry ordinary ordinary vested
opti- date per date shares under shares under options as
ons of ordinary option as at option as at as at 31
gran- share 31 December 31 December December
t 2016 2015 2016
Oern 23 US$1.00 10 55,014 55,014 53,863
Stu- Jan years
ge 2013 from
MD ves-
ting
Oern 13 EUR15.50 10 17,000 - -
Stu- Dec years
ge 2016 from
MD ves-
ting
Pe- 23 US$1.00 10 75,000 75,000 73,420
ter Jan years
Cros- 2013 from
by ves-
ting
Pe- 8 EUR14.90 10 65,000 65,000 31,144
ter Jan years
Cros- 2015 from
by ves-
ting
Pe- 17 EUR17.95 10 35,000 35,000 8,750
ter Dec years
Cros- 2015 from
by ves-
ting
Pe- 13 EUR15.50 10 55,000 - -
ter Dec years
Cros- 2016 from
by ves-
ting
Da- 5 US$1.00 10 18,427 18,427 13,798
vid Dec years
Bra- 2013 from
ba- ves-
zon ting
Da- 13 EUR15.50 10 5,700 - -
vid Dec years
Bra- 2016 from
ba- ves-
zon ting
Ja- 2 EUR16.87 10 20,000 20,000 6,248
mes Sep years
A. 2015 from
Rein- ves-
stei- ting
n
Ja- 13 EUR15.50 10 6,200 - -
mes Dec years
A. 2016 from
Rein- ves-
stei- ting
n
Tom 24 EUR17.08 10 32,000 32,000 19,988
Ma- Jun years
her 2014 from
ves-
ting
Tom 8 EUR14.90 10 5,000 5,000 2,394
Ma- Jan years
her 2015 from
ves-
ting
Tom 2 EUR16.87 10 6,000 6,000 1,872
Ma- Sep years
her 2015 from
ves-
ting
Tom 17 EUR17.95 10 15,000 15,000 3,750
Ma- Dec years
her 2015 from
ves-
ting
Tom 19 EUR16.20 10 20,000 - -
Ma- Oct years
her 2016 from
ves-
ting
Except as disclosed in this report, none of the Directors, who held office
at 31 December 2016, had a beneficial interest in the share capital of the
Company or its subsidiaries and no such interest, the existence of which is
known or could with reasonable diligence be ascertained by the relevant
Director, is held by any connected person.
Antoine Papiernik held no interest in the issued share capital of the
Company other than the interests that he is deemed to hold in the Company by
virtue of the interests that he holds in Sofinnova Capital VI FCPR. At 31
December 2016, Sofinnova Capital VI FCPR owned 2,165,813 ordinary shares
amounting to approximately 32.8% of the entire issued ordinary share capital
of the Company. As at 31 December 2015, Sofinnova Capital VI FCPR owned
1,775,829 ordinary shares amounting to approximately 41.32% of the entire
issued ordinary share capital of the Company. The movement in ordinary
shares held by Sofinnova Capital VI FCPR between 31 December 2015 and 31
December 2016 relates to ordinary shares acquired in the private placement
completed in June 2016.
Manus Rogan held no interest in the issued share capital of the Company
other than the interests that he is deemed to hold in the Company by virtue
of the interests that he holds in Fountain Healthcare Partners Fund 1 LP. At
31 December 2016, Fountain Healthcare Partners Fund 1 LP owned 796,940
ordinary shares amounting to approximately 12.1% of the entire issued
ordinary share capital of the Company. At 31 December 2015, Fountain
Healthcare Partners Fund 1 LP owned 566,171 ordinary shares amounting to
approximately 13.17% of the entire issued ordinary share capital of the
Company. The movement in ordinary shares held by Fountain Healthcare
Partners Fund 1 LP between 31 December 2015 and 31 December 2016 relates to
ordinary shares acquired in the private placement completed in June 2016.
Nael Karim Kassar held no interest in the issued share capital of the
Company other than the interests that he is deemed to hold in the Company by
virtue of the interests that he holds in KCK Limited. At 31 December 2016,
KCK Limited owned 1,153,846 ordinary shares amounting to approximately 17.5%
of the entire issued ordinary share capital of the Company. At 31 December
2015, KCK Limited held no interest in the Company. The ordinary shares held
by KCK Limited as at 31 December 2016 were acquired in the private placement
completed in June 2016.
Directors' remuneration
The following table shows the amount of remuneration paid and benefits in
kind granted to the Directors by the Group for services in all capacities:
2016: Fees Salary Annual Benefits in Total
Incentive Kind
Executive Directors
Peter Crosby (Note - $551,6- $140,106 $25,110 $716,8-
2) 73 89
Non-Executive
Directors
Oern Stuge MD (Note $102,0- - - - $102,0-
1) 15 15
David Brabazon (Note $55,28- - - - $55,28-
4) 8 8
Greg Garfield - - - - -
Nael Karim Kassar - - - - -
Antoine Papiernik - - - - -
James A. Reinstein $55,28- - - - $55,28-
(Note 3) 8 8
Manus Rogan PhD - - - - -
Dan Sachs MD - - - - -
2015: Fees Salary Annual Benefits in Total
Incentive Kind
Executive Directors
Peter Crosby - $411,5- $127,650 $24,728 $563,9-
35 13
Non-Executive
Directors
Oern Stuge MD (Note $41,6- - - - $41,67-
1) 78 8
David Brabazon (Note $26,8- - - - $26,86-
4) 60 0
Antoine Papiernik - - - - -
James A. Reinstein $25,9- - - - $25,99-
(Note 3) 91 1
Manus Rogan PhD - - - - -
Dan Sachs MD - - - - -
Notes:
1. In addition to the Directors fees in 2015 above, the Group made payments
of $64,878 in 2015 under a consultancy agreement to ORSCO Life Sciences AG
(the "ORSCO Consulting Agreement"), a Swiss company which is controlled by
Oern Stuge. Details of payment to ORSCO Life Sciences AG in 2015 are
included in Note 24. On 31 December 2015, Mainstay Medical Limited and ORSCO
Life Sciences AG agreed to terminate the ORSCO Consultancy Agreement with
effect from 31 December 2015, and no payments were made in relation to the
ORSCO Consulting Agreement in 2016. On 1 January 2016, the Company entered
into a new Non-Executive Director Appointment Letter with Oern Stuge with a
Director's fee per annum of CHF 100,000.
2. Peter Crosby's salary and bonus in 2016 includes amounts relating to the
years 2013, 2014 and 2015 of approximately $130,000 arising from adjustments
related to currency and tax equalization.
3. James Reinstein was appointed to the Board on 22 June 2015. The terms of
James Reinstein's appointment letter include EUR40,000 Directors Fees per
annum plus an additional EUR10,000 per annum for each Committee Chairman
position held.
4. David Brabazon was appointed on 3 April 2014, and the terms of his
appointment letter included Directors Fees of US$20,000 per annum. With
effect from 21 October 2015, the Company revised the terms of David
Brabazon's appointment letter and the fee per annum was revised to EUR40,000
Directors Fees per annum plus an additional EUR10,000 per annum for each
Committee Chairman position held.
None of the directors exercised any share options in either 2015 or 2016.
Issued share capital
At 31 December 2016 the authorized share capital of the Company was
EUR60,000, comprised of 20,000,000 ordinary shares of EUR0.001 each,
representing 99.8% of total authorized shares (by number) and 40,000
deferred shares of EUR1.00 each, representing 0.2% of total authorized
shares (by number). A full description of the rights attached to the
ordinary and deferred shares of the Company is available in the Articles of
Association on the Company's website. Further information on share movements
is provided in Note 17.
At the Company's 2016 AGM held on 16 September 2016:
- the Directors were authorized, pursuant to Section 1021 of the Companies
Act 2014 ("2014 Act"), to allot "relevant securities" up to an aggregate
nominal value of EUR10,000, representing approximately 151% of the Company's
issued ordinary share capital as at the 29 July 2016. This authority will
expire on 16 September 2021.
- the Directors were authorized, pursuant to Section 1023 of the 2014 Act,
to dis-apply statutory pre-emption provisions in the event of a rights issue
or other pro rata offer of equity securities to shareholders for cash; or
other issue of equity securities for cash up to an aggregate nominal value
of EUR10,000 representing approximately 151% of the Company's issued
ordinary share capital as at 29 July 2016. This authority will expire on 16
September 2021.
The Company is not aware of any agreements between holders of securities
that may result in restrictions in the transfer of ordinary shares or voting
rights over ordinary shares. The Directors in their absolute discretion and
without assigning any reason therefor may decline to register any transfer
of a deferred share. The Company is authorized at any time to appoint any
person to execute on behalf of the holder(s) of deferred shares a transfer
thereof and/or an agreement to transfer the same, without making any payment
to the holder(s) thereof and persons so entitled, to such person(s) as the
Company may determine as holder(s) thereof and beneficially entitled
thereto.
At no time during 2016 were any ordinary or deferred shares in the Company
held or acquired by the Company or any subsidiary of the Company.
Share Option Plan 2016
The Group operates a share option plan (the "Plan"). As at 31 December 2016,
the Plan allows for the Company to grant share options to employees of the
Group companies, and other eligible persons. Shares are issued when share
options are exercised in accordance with the Plan.
Memorandum and Articles of Association
The Company's Articles of Association detail the rights attached to the
shares; and the rules relating to the Directors, including their
appointment, retirement, re-election and powers. Changes to the Articles of
Association must be approved by the shareholders in accordance with the
legislation in force from time to time.
At the Company's 2015 AGM held on 18 June 2015, two special resolutions were
passed to amend the Articles of Association of the Company to take account
of the Companies Act 2014 and to make some "housekeeping" changes.
A copy of the Memorandum and Articles of Association can be obtained from
the Group's website.
Substantial shareholders
As at 31 December 2016 before publication of this Directors' Report, in so
far as was notified to the Company, the following were holders of 3% or more
of the Company's issued ordinary share capital:
Shareholder No. of ordinary Percenta-
shares ge
Sofinnova Capital VI FCPR 2,165,813 32.8%
KCK Limited 1,153,846 17.5%
Fountain Healthcare Partners Fund 796,940 12.1%
1, L.P.
Dan Sachs MD 515,000 7.8%
Perceptive Life Sciences Master 321,513 4.9%
Fund, Ltd
Capricorn Health-Tech Fund NV 317,004 4.8%
Seamus Mulligan (Note 1) 281,050 4.3%
Medtronic, Inc. 235,209 3.6%
Notes:
1. Includes Ordinary Shares held by Barrymore Investments Limited (a company
controlled by Seamus Mulligan)
Going concern
The Financial Statements have been prepared on the basis that the Group is a
going concern. The Directors note the following relevant matters:
- The Group has an accumulated retained losses reserve of $94.7 million and
a reorganization reserve of $44.6 million (which is in substance, primarily,
retained losses). These losses include a non-cash expense of $66.5 million
incurred in 2014 related to fair valuing of embedded derivatives arising on
preference shares
- The Group expects to continue to incur losses in the medium term
- The Group had operating cash out flows of $16.7 million during the year
ended 2016 (2015: $11.6 million)
- Regulatory approval for the commercialization of ReActiv8 is not
guaranteed and in the US is dependent on the successful completion of the
ReActiv8-B Clinical Trial and obtaining PMA approval from the FDA
To fund the clinical trials and commercialization of ReActiv8 the Group has
raised debt and equity and it continues to explore funding strategies (e.g.:
equity, debt, partnering) to support the Group's activities into the future.
As at 31 December 2016, the Group reported cash of $36.7 million.
After making enquiries and having considered the conditions noted above and
the options available to the Group, the Directors have a reasonable
expectation that the Group can carefully monitor its cash flows and has the
ability to consider various strategies for additional funding and budgets to
manage cash (e.g.: pause projects, delay recruitment of staff and focus on
specific milestones) to ensure that the Group will have sufficient funds to
be able to meet its liabilities as they fall due for a period of at least 12
months from the date of the Financial Statements and are satisfied that the
Financial Statements should be prepared on a going concern basis.
Dividends
The Directors do not recommend the payment of a dividend.
Research and development
Certain Group undertakings are engaged in ongoing research and development
aimed at continuous improvement of the Group's product and processes.
Research and development expenditure is set forth in Note 5 to the
consolidated Financial Statements.
Related party transactions
Details of related party transactions that have taken place during the
reporting period are set forth in Note 24 to the consolidated Financial
Statements.
Political and charitable donations
During the year, the Group and Company made no donations requiring
disclosure.
Post balance sheet events
Details of important events affecting the Company which have taken place
since the end of the year are given in Note 25 to the Financial Statements.
Subsidiary undertakings
At 31 December 2016, the Company (Mainstay Medical International plc) had
the following subsidiaries and owns 100% of the called up ordinary share
capital of each such subsidiary:
- Mainstay Medical Limited ("MML") is registered in Ireland and its
principal activities include research, development, clinical and regulatory
activities and support services to other Group companies.
- MML US, Inc. is registered in the United States of America and its
principal activity is the provision of support services to other Group
companies.
- Mainstay Medical (Australia) Pty. Limited ("MMA") is registered in
Australia and its principal activity is the provision of support services to
other Group companies.
- Mainstay Medical Distribution Limited ("MMD") was incorporated in Ireland
and its principal activity is the provision of sales and distribution
services.
- Mainstay Medical GmbH ("MMG") is registered in Germany and its principal
activity is the provision of sales support services.
The Company owns 100% of the called up share capital of each of the above
subsidiaries
Accounting records
The Directors, through the use of appropriate procedures, personnel and
systems have ensured that measures are in place to secure compliance with
the Company and the Group's obligation to keep adequate accounting records
under section 281-285 of the Companies Act, 2014. The books of account of
the Company and the Group are maintained at its registered office.
Relevant audit information
The Directors believe they have taken all steps necessary to make themselves
aware of any relevant audit information and have established that the
Group's statutory auditors are aware of that information. In so far as they
are aware, there is no relevant audit information of which the Group's
statutory auditors are unaware.
Audit Committee
The Company has established an Audit Committee, refer to page 20 for further
information.
Directors Compliance Statement:
The Directors, in accordance with Section 225(2) of the Companies Act 2014,
acknowledge that they are responsible for securing the Company's compliance
with the Relevant Obligations (as defined by the Companies Act 2014), and
the Directors confirm that:
(a) a compliance policy statement has been drawn up setting out the
Company's policies that are, in their opinion, appropriate with regard to
such compliance;
(b) appropriate arrangements or structures are in place that are, in their
opinion designed to provide reasonable assurance of compliance in all
material respects with those Relevant Obligations; and
(c) a review has been conducted, during the financial year, of those
arrangements or structures.
Auditors
The auditors, KPMG, Chartered Accountants, will continue in office
accordance with Section 383 (2) of the Companies Act 2014.
A resolution authorizing the Directors to fix the auditors remuneration was
passed at the Company's AGM on 16 September 2016.
On behalf of the Board on 22 March 2017,
Oern Stuge MD Peter Crosby
Chairman CEO
Mainstay Medical International plc
Corporate governance report
The Board recognizes the importance of good governance in supporting growth
in long term shareholder value and is accordingly committed to maintaining
the highest standards of corporate governance commensurate with the size and
stage of the development of the Group.
While there is no specific corporate governance regime mandated in Ireland
for companies listed on ESM nor is there any specific corporate governance
regime mandated in France for companies who are listed on Euronext but not
incorporated in France, the Company applies recognized corporate governance
principles to the extent they are appropriate for a company of its size,
stage of development and resources.
The Board will also take account of other institutional shareholder
governance guidelines on disclosure and shareholder authorizations to the
extent they are appropriate for a company of its size, stage of development
and resources.
The Board
The Board is responsible for the supervision and control of the Company and
is accountable to the Company. The Board has reserved decision-making on a
variety of matters, including determining strategy for the Group, reviewing
and monitoring executive management performance and monitoring risks and
controls.
The Board comprises nine Directors, including one Executive Director, seven
Non-Executive Directors and the Non-Executive Chairman. The roles of
Chairman and Chief Executive Officer are not exercised by the same
individual.
The Board meets regularly (no less than four times per year) to consider
strategy, performance and the framework of internal controls. The Directors
have also established an Audit, Risk and Compliance Committee, a
Remuneration Committee, and a Nominations Committee with formally delegated
rules and responsibilities. Each of the Committees currently comprises
Non-Executive Directors only.
The Board comprises a mix of the necessary skills, knowledge and experience
required to provide leadership, control and oversight of the management of
the Company and to contribute to the development and implementation of the
Company's strategy. In particular, the Board combines a group of Directors
with diverse backgrounds within the medical device and related sectors, in
both public and private companies.
All the Directors bring independent judgment to bear on issues affecting the
Group and all have full and timely access to information necessary to enable
them to discharge their duties. The Articles require each Director retire at
the annual general meeting held in the third calendar year following the
year in which he was appointed or last re-appointed but unless he falls
within the paragraph immediately below he shall be eligible for
re-appointment.
A Director shall also retire at any annual general meeting if he has agreed
to do so (whether in accordance with the terms of his appointment or
otherwise) and, unless the Directors have agreed otherwise, he shall not be
eligible for re-appointment.
Internal control
The Board acknowledges that it is responsible for maintaining the Company's
system of internal control and risk management processes required to
safeguard the Group's assets and intellectual property. Such a system is
designed to identify, manage and mitigate financial, operational and
compliance risks inherent to the Company and the Group. The system is
designed to manage rather than eliminate the risk of failure to achieve
business objectives and can only provide reasonable, but not absolute
assurance against material misstatement or loss.
The main features of internal control and risk management processes for
preparing Financial Statements and financial reporting include:
- Board approval of the annual budget and strategy;
- Monitoring of performance against the annual budget through monthly Board
reports detailing actual results versus budget, analysis of material
variances, and re-forecasting where required;
- Finance function resourced to facilitate segregation of duties;
- Audit, Risk and Compliance Committee review of the integrity of the Annual
Report and Half-Yearly Report;
- Board review and approval of the Annual Report and Half-Yearly Report; and
- Board approved authorization limits and investment policy.
Board Committees
The Board has established a number of committees to deal with specific
matters. Brief particulars are set out below:
- Audit, Risk and Compliance Committee - Mr. David Brabazon (Independent
Chairman), Dr. Manus Rogan, Mr. James Reinstein (Independent) and Dr. Oern
Stuge (Independent);
- Nominations Committee - Dr. Oern Stuge (Independent Chairman), Mr. David
Brabazon (Independent), Mr. Antoine Papiernik and Mr. James Reinstein
(Independent);
- Remuneration Committee - Mr. James Reinstein (Independent Chairman), Mr.
David Brabazon (Independent), Mr. Antoine Papiernik, Dr. Manus Rogan and Dr.
Oern Stuge (Independent).
Audit, Risk and Compliance Committee
The Audit, Risk and Compliance Committee is chaired by Mr. David Brabazon
(the Audit, Risk and Compliance Committee Financial Expert). The Chief
Financial Officer and Chief Executive Officer may also be invited to attend
meetings of the Committee. It meets at least three times a year and is
responsible for ensuring that the financial performance of the Group is
properly monitored and reported on. The Committee also meets with and
reviews findings of the audit with the external auditor. It meets with the
auditors at least once a year without any members of management being
present and is also responsible for considering and making recommendations
regarding the appointment and remuneration of such auditors.
Remuneration Committee
The Remuneration Committee is chaired by Mr. James Reinstein. It meets at
least three times a year and considers and recommends to the Board the
framework for the remuneration of the Chief Executive Officer, Chairman,
Company Secretary, Chief Financial Officer, executive Directors and such
other officers as it is designated to consider and, within the terms of the
agreed policy, considers and recommends to the Board the total individual
remuneration package of each executive Director including bonuses, incentive
payments and share awards. It reviews the design of all incentive plans for
approval by the Board and (if required) shareholders and, for each such
plan, recommends whether awards are made and, if so, the overall amount of
such awards, the individual awards to executive Directors and the
performance targets to be used. No Director is involved in decisions
concerning his/her own remuneration.
Nominations Committee
The Nominations Committee is chaired by Dr. Oern Stuge. It meets at least
two times a year and considers the selection and re-appointment of
Directors. It identifies and nominates candidates for all Board vacancies
and reviews regularly the structure, size and composition (including the
skills, knowledge and experience) of the Board and makes recommendations to
the Board with regard to any changes.
General meeting
The Company shall hold in each year a general meeting as its annual general
meeting in addition to any other meeting in that year and shall specify the
meeting as such in the notice calling it. Not more than 15 months shall
elapse between the date of one annual general meeting and that of the next.
All general meetings other than annual general meetings shall be called
extraordinary general meetings.
The Directors may convene general meetings. Extraordinary general meetings
may also be convened on such requisition, or in default may be convened by
such requisitions, and in such manner as may be provided by the Companies
Act 2014.
Subject to the provisions of the Companies Act 2014 allowing a general
meeting to be called by shorter notice, an annual general meeting and an
extraordinary general meeting shall be called by at least 21 clear days'
notice, except that an extraordinary general meeting that is not called for
the passing of a special resolution may, subject to compliance with all
applicable provisions of the Companies Act 2014, be called by at least 14
clear days' notice.
The Directors shall specify in the notice of a general meeting the voting
record date, being a date not more than 48 hours before the general meeting
to which it relates. A person shall be entered on the register at the voting
record date in order for that person to exercise the right of a member to
participate and vote at the general meeting and any change to an entry on
the register after the voting record date shall be disregarded in
determining the right of any person to attend and vote at the meeting.
No business other than the appointment of a chairman shall be transacted at
any general meeting unless a quorum of members is present at the time when
the meeting proceeds to business. Two persons entitled to attend and to vote
upon the business to be transacted, each being a member or a proxy for a
member, shall be a quorum.
If such a quorum is not present within half an hour from the time appointed
for the meeting, the meeting, if convened upon the requisition of members,
shall be dissolved; in any other case the meeting shall stand adjourned to
the same day in the next week at the same time and place, or to such other
day and at such other time and place as the Directors may determine.
All business shall be deemed special that is transacted at an extraordinary
general meeting. All business that is transacted at an annual general
meeting shall also be deemed special, with the exception of declaring a
dividend, the consideration of the Company's statutory financial statements
and reports of the Directors and auditors, the appointment of Directors in
the place of those retiring, the appointment or re-appointment of the
auditors (subject to sections 380 and 382 to 385 of the Companies Act 2014)
and the fixing of the remuneration of the auditors.
Every member entitled to attend and vote at a general meeting may appoint a
proxy to attend, speak and vote on his behalf provided, however, that:
- a member may appoint more than one proxy provided that each proxy is
appointed to exercise the rights attached to shares held in different
securities accounts; and
- a member acting as an intermediary on behalf of a client in relation to
shares may appoint that client or any third party designated by that client
as a proxy in relation to those shares,
subject to such requirements and restrictions as the Directors may from time
to time specify.
The Company's AGM gives shareholders the opportunity to question the
Directors. The Directors must answer any question a member asks relating to
the business being dealt with at the meeting unless answering the question
would interfere unduly with the preparation for the general meeting or the
confidentiality and business interests of the Company, or the answer has
already been given on a website in the form of an answer to a question, or
it appears to the Chairman of the meeting that it is undesirable in the
interests of good order of the meeting that the question be answered.
The business of the Company is managed by the Directors who may exercise all
the powers of the Company, subject to the Companies Act 2014, the Articles
of Association and to any directions given by the members by special
resolution.
Votes
The Companies Act 2014 require that resolutions of the general meeting be
passed by the majority of votes cast (ordinary resolution) unless the
Companies Act 2014 or the Company's Articles of Association provide for 75%
majority of votes cast (special resolution). The Company's Articles of
Association provide that the Chairman has a casting vote in the event of a
tie.
At meetings, unless a poll is demanded, all resolutions are determined on a
show of hands, with every shareholder who is present in person or by proxy
having one vote so, however, that no individual shall have more than one
vote, and on a poll every member shall have one vote for every share
carrying rights of which he is the holder. On a poll a member entitled to
more than one vote need not cast all his votes or cast all the votes he uses
in the same way. At the meeting, after each resolution has been dealt with,
details will be given of the level of proxy votes lodged for and against
that resolution and also the level of votes withheld on that resolution.
Subject to the Companies Act 2014 and to such requirements and restrictions
as the Directors may, in accordance with the Companies Act 2014 specify, the
Company at its discretion may provide for participation and voting in a
general meeting by electronic means.
Subject to the Companies Act 2014 and to such requirements and restrictions
as the Directors may, in accordance with the Companies Act 2014 specify, the
Company may at its discretion provide for voting on a poll by
correspondence. Where the Company permits votes to be cast on a poll by
correspondence, it shall be required to count only those votes cast in
advance by correspondence that are received before the date and time
specified by the Company for that purpose, provided that such date and time
is not more than 24 hours before the time at which the vote is to be
concluded.
European Communities (Takeover Bids (Directive 2004/25/EC)) Regulations 2006
The Company and a subsidiary of the company, Mainstay Medical Limited
("MML") are party to a Facility Agreement dated 24 August 2015 with IPF Fund
I SCA SICAV-FIS ("IPF") whereby IPF provided a debt facility to MML of up to
$15 million. In certain circumstances in the event of a change of control of
the Company or of MML, the debt facility may become immediately repayable at
IPF's option.
Mainstay Medical International plc
Risk factors
This section addresses the existing and future material risks to Mainstay's
business. The Risk Factors listing does not set out an exhaustive list or
explanation of all risks that Shareholders or prospective investors may face
when making an investment in the Ordinary Shares and should be used as
guidance only as further risks and uncertainties not currently known to the
Board, or that the Board currently deems immaterial, may also have an
adverse effect on the Company's or the Group's financial condition,
business, prospects and/or results of operations. In such a case, the market
price of Ordinary Shares could decline and investors may lose all or part of
their investment.
RISKS RELATING TO OUR FINANCIAL CONDITION AND CAPITAL REQUIREMENTS
(a) We have incurred significant operating losses and may not be able to
achieve or subsequently maintain profitability
We have incurred significant net losses since we were founded. For the year
ended 31 December 2016, we had a comprehensive loss of $18.7 million (and a
comprehensive loss of $13.2 million in 2015). We fund our operations through
equity capital and debt, and have raised more than $85 million of equity
capital and we have drawn the full amount of the $15 million debt facility
that we announced in August 2015. We have devoted substantially all of our
resources to the research and development of ReActiv8, including completion
of our feasibility study in October 2012, progress on our ReActiv8-A
Clinical Trial (which commenced in 2014 and led to CE Marking approval in
May 2016), preparations for and commencement of our ReActiv8-B Clinical
Trial, and expansion of our intellectual property portfolio.
To implement our business strategy and generate revenue and profit in the
future, we need to, among other things, obtain regulatory approvals for
ReActiv8 (which on the date of this document is our only product) in our
target markets. We have obtained CE Marking of ReActiv8, which allows for
commercialization of ReActiv8 in the European Economic Area (the "EEA",
which includes the EU, Iceland, Liechtenstein and Norway) and Switzerland.
CE Marking approval also allows more rapid regulatory approval in certain
other countries (e.g.: Australia). There is no assurance that
commercialization in the EEA and Switzerland will be successful or will
generate sufficient revenue (and profits) to cover expenses or fund future
growth. We have not yet obtained regulatory approval for ReActiv8 in the
U.S. If U.S. regulatory approval is not obtained, then it will not be
possible to commercialize ReActiv8 in the U.S.
If we are unable to obtain additional regulatory approvals for ReActiv8 in
the U.S. and elsewhere, or if product development, manufacture, marketing,
sales or commercialization of ReActiv8 is delayed or abandoned, we may never
generate significant revenue or become profitable. Even if we do become
profitable in the short term, we may be unable to sustain or increase our
profitability on a quarterly or annual basis over the medium to long term.
In any case we will need to obtain additional capital to fund
commercialization (including expanding reimbursement), to fund continuing
research and development, and to run additional Clinical Trials. We expect
to incur losses for the foreseeable future as we continue to pursue these
objectives.
(b) We expect to require additional funds in the future in order to meet our
capital and expenditure needs and further financing may not be available
when required or, if available, could require us to agree to terms which are
specifically favorable to new investors, or to restrictions significantly
limiting our access to additional capital
We expect to require additional funds in the future in order to meet our
capital and expenditure needs, including funds to pay our financial
obligations as they fall due, continue research and development, conduct
Clinical Trials, continue our work to obtain regulatory approval and other
activities necessary to bring ReActiv8 to target markets and to establish
marketing and sales capabilities. However, we may not be able to obtain
additional financing on terms favorable to us, if at all, when needed. If we
are unable to obtain adequate financing or financing on terms satisfactory
to us, when we require it, we may cease to have operations and may need to
liquidate some or all of our assets, being, at this point, the Group's
intellectual property.
In addition, if we raise additional funds through further issues of equity
or debt or other forms of financing, existing shareholders could suffer
significant adverse financial consequences including dilution. Any new
equity securities could have rights, preferences and privileges superior to
those of current shareholders. Any debt financing secured by us in the
future could involve restrictive covenants relating to our capital raising
activities and other financial and operational matters, which may make it
more difficult for us to obtain any required additional capital.
(c) Our future financial performance is substantially dependent on the
commercial success of ReActiv8, our only product as of the date of this
document
Our only product as of the date of this document, ReActiv8, is designed to
treat people suffering from Chronic Low Back Pain ("CLBP"), a serious and
often debilitating medical condition. The success of ReActiv8 may be
negatively impacted by many factors, including regulatory delays, adverse
regulatory or legal actions, problems arising from manufacturing, research
and development and low sales in target markets. Because our business
currently relies on the success of a single product, any factors that
negatively impact the regulatory approval and commercialization of ReActiv8
would adversely affect our financial condition, business, prospects and/or
results of operations.
(d) Failure to comply with debt covenants or failure to make repayments on
our debt facility could have a material adverse effect
On 24 August 2015, Mainstay Medical Limited entered into an agreement with
IPF Partners for a debt facility of up to $15 million. Each tranche has a
repayment term of 60 months from drawdown, with interest only payments for
the first 12 months. As at 31 December 2016, Mainstay had received the full
$15 million.
The terms of the agreement include covenants, including a requirement that
Mainstay Medical Limited hold a minimum cash balance of $2 million, or
achieve revenue targets within an agreed timeframe. It also includes monthly
and quarterly reporting requirements.
The facility is secured by way of fixed and floating charges over the assets
and undertakings of Mainstay Medical Limited, and the Mortgage Debenture
includes customary terms and conditions. In addition, Mainstay Medical
International plc has created a first fixed charge in favor of IPF over its
present and future shares held in Mainstay Medical Limited.
If we fail to comply with the provisions included in the debt facility,
and/or the debt covenants, and/or fail to make repayments of principal or
interest, IPF may enforce their security, which may have a material adverse
effect our financial condition, business, prospects and/or results of
operations.
RISKS RELATING TO OUR BUSINESS AND INDUSTRY
(a) We operate in a highly regulated environment and regulatory approval is
required before we can market or sell ReActiv8 in any market
ReActiv8 is an active implantable medical device ("AIMD"), which requires
regulatory approval before it can be marketed or sold by us. At the date of
this document, the only regulatory approval we have received is CE Marking
for ReActiv8, which allows commercialization of ReActiv8 in the EEA and
Switzerland.
Regulatory approval in the U.S. is via a Pre-Market Approval ("PMA") issued
by the U.S. Food and Drug Administration ("FDA"). Timing of a PMA is
uncertain, as it depends on the progress and results of the Clinical Trial
to gather data for a Pre-Market Approval Application ("PMAA"). The process
typically takes significantly longer than obtaining CE Marking. Once
granted, the PMA does not have an expiry date; however, regulatory approvals
may be withdrawn if, for example, a new and unexpected risk emerges that
would make continued marketing of our product no longer acceptable to the
FDA. There is no guarantee that further regulatory approval will be obtained
for ReActiv8 or any other product we develop, either now or in the future.
Any such regulatory approval may also experience delays.
The regulatory approval process may delay or prevent the launch of our
product in our target markets, which would negatively impact or prevent our
ability to achieve our objectives. If we fail to obtain further approval of
ReActiv8 in a timely manner, or at all, sales of ReActiv8 may be delayed or
may not be achieved, thereby adversely affecting our ability to generate
revenues or fund our on-going activities.
(b) Seeking and obtaining regulatory approval for medical devices can be a
long and uncertain process. Strict or changing regulatory regimes,
government policies and legislation in any of our target markets may delay,
prohibit or reduce potential sales
We are primarily targeting commercialization in markets in the EEA,
Switzerland and the U.S. and we must comply with complex regulatory
requirements in these markets before we can market or sell our product in
each market. Once initial regulatory approval is gained for our product for
a particular market, any subsequent products or product modifications may
also require further regulatory approval before we can market the subsequent
or modified products.
In the EU, regulatory approval is obtained via the CE Marking process
according to the European Active Implantable Medical Devices Directive
90/385/EEC and subsequent amendments (the "AIMD Directive"), which provides
approval for the EEA and is accepted by certain other non-EEA countries,
including Switzerland. We received CE Marking approval in May 2016.
A package of legislative proposals (including proposal for a regulation on
medical devices) designed to replace the existing regulatory framework for
medical devices in the EEA, including for AIMD (the "New EU Medical Device
Regulations") is scheduled for adoption in Spring 2017. If adopted as
scheduled, it will apply as of 2020, though is subject to an EU web portal
for medical devices having been set up, which may take longer. As of
application, different transition periods apply for devices already being
commercialized. Under the new regulatory framework, (i) the regulatory
requirements for the design and manufacturing of AIMDs will be made more
stringent, (ii) there will be stricter requirements for clinical
investigations and clinical evidence, (iii) the obligations for
manufacturers to monitor the safety of their products, once placed on the
market, will increase, and (iv) manufacturers will be subject to increased
scrutiny. The impact of the New EU Medical Device Regulations overall is
uncertain and could impact the approval of future products and/or could
require additional resources to maintain compliance with the new
regulations.
In the U.S., regulatory approval is obtained via a PMA issued by the FDA.
Regulatory approval can be a lengthy, expensive and uncertain process.
Timing of a PMA is uncertain, as it depends on the progress and results of
the Clinical Trial to gather data for a PMAA. The process typically takes
significantly longer than obtaining CE Marking. Applications for regulatory
approval require extensive pre-clinical, clinical and technical testing, all
of which must be undertaken in accordance with the requirements of
regulations and guidance for the FDA. We have approval from the FDA to start
the Clinical Trial to gather data for a PMAA (the ReActiv8-B Clinical
Trial), and the first subject was enrolled in this trial in September 2016.
The regulations to which we are subject are complex and have tended to
become more stringent over time. We may be adversely affected by changes in
government policy or legislation applying to regulation of AIMDs.
(c) We are required to conduct Clinical Trials for regulatory approvals and
other purposes. Clinical Trials carry substantial risks and are costly and
time consuming, with uncertain results
The outcomes of Clinical Trials are by their nature uncertain and dependent
on a number of variables inherent to clinical research, such as the
suitability of the Clinical Trial subjects for the therapy, the experience
and the expertise of the referring and implanting medical professionals, the
ability and willingness of the Clinical Trial subjects to perform the
activities required from their participation in the trial, and the quality
of the clinical follow up.
Adverse events, both anticipated and unanticipated, and related or unrelated
to the device, occur in Clinical Trials. Significant unanticipated adverse
events associated with ReActiv8 could result in damage to our reputation,
lawsuits, suspension or delay of Clinical Trials, and/or enrolment
difficulties. Errors in associating adverse events with ReActiv8 could
result in damage to our reputation, lawsuits, suspension or delay of
Clinical Trials, and/or enrolment difficulties. Any delay or suspension of
Clinical Trials may delay the filings of regulatory submissions and
ultimately the ability to commercialize ReActiv8 and to generate revenues.
The ReActiv8-B Clinical Trial to gather data on ReActiv8 for a PMAA may not
achieve the anticipated endpoints to demonstrate safety and efficacy to the
satisfaction of the FDA to allow for the granting of a PMA. Failure to meet
the endpoints may require product redesign, new or additional Clinical
Trials, additional testing, and other measures which typically require
significant additional cost and time.
We are required to fund Clinical Trials. This typically includes the payment
of professional fees for physicians; hospital costs; fees for one or more
contract research organizations ("CROs"); data collection, retention and
management; fees for consultants to run committees; and Clinical Trial
insurance premiums. Medical device companies are usually required to provide
products and services at no charge during Clinical Trials leading to
regulatory submissions, and therefore we will not generate revenue from
product sales from the use of ReActiv8 in such Clinical Trials. We may be
required to fund the cost of surgical procedures to replace or remove the
device in clinical subjects. The costs of the Clinical Trials may exceed the
resources available to us, in the medium to long term, possibly resulting in
delayed completion, cost overruns, or failure to complete.
Results of Clinical Trials are intended to be published after the trial
concludes. Some physicians or other parties may prematurely publish clinical
results prior to conclusion of the trial, which may adversely affect future
trial enrolment, have adverse regulatory impact, prevent us from securing
patent protection, result in diminished competitive position or damage our
reputation.
(d) We are required to conduct one or more post-approval studies which could
be expensive and fail to produce the desired results
Following CE Marking approval, a range of activities is required for Post
Market Clinical Follow-Up ("PMCF") to gather additional data on long term
performance and safety of Re-Activ8, including continuation of the
ReActiv8-A Clinical Trial and implementation of a Registry. It is possible
that the PMCF may uncover problems that did not emerge during the Clinical
Trials of ReActiv8 which may result in product recall, suspension of sales,
and/or restrictions on commercialization. Such consequences could have a
material adverse effect on our financial condition, business, prospects
and/or results of operations.
As part of, or following, the FDA grant of a PMA for ReActiv8 in the U.S.
(if granted), the FDA may require us to conduct one or more post-approval
studies ("PAS"), which could be extensive, expensive and time consuming.
The PAS may uncover problems with ReActiv8 and may result in a need to
redesign certain aspects of ReActiv8 and/or conduct additional studies and
may include possible suspension from sale. Such consequences could have a
material adverse effect on our financial condition, business, prospects
and/or results of operations.
(e) Attracting physicians and subjects to perform Clinical Trials and meet
Clinical Trial objectives is costly and uncertain
Performing Clinical Trials requires the engagement of many hospitals,
clinics, and clinicians. In particular, we must engage a physician at each
Clinical Trial center to maintain overall responsibility for the conduct of
the Clinical Trial (the "Investigator"). Each Investigator may have
additional physicians or other medical professionals working under his or
her direction to conduct a trial (e.g., to recruit Clinical Trial subjects
or perform surgery or other procedures). We may not be able to attract a
sufficient number of qualified Investigators to conduct Clinical Trials
within an adequate time, and those Investigators may not be able to attract
or enroll a sufficient number of subjects to meet our Clinical Trial
objectives.
Clinical Trial subjects may be sourced from the Investigator's own practice
clinic or hospital, or may be referred from another physician. Potential
Clinical Trial subjects must sign an informed consent before undergoing
certain clinical tests to determine whether the subject meets the enrolment
criteria for the Clinical Trial (inclusion and exclusion). Once a subject is
enrolled in the Clinical Trial, the subject must comply with the trial
requirements, including clinic visits, use of ReActiv8, and undergo certain
tests. Some subjects may not comply with the requirements of the trial, or
could at any time withdraw from the trial, which could lead to poor or
unusable data, which may compromise the results of the Clinical Trial.
Failure to attract a sufficient number of eligible Clinical Trial subjects
may lead to time and cost overruns, poor quality results, or inability to
complete the Clinical Trial, all of which may materially adversely affect
our ability to achieve regulatory approval, and thereby our ability to
market our product and achieve revenues and profits.
(f) There is no guarantee that the performance of ReActiv8 in
commercialization will match the performance of ReActiv8 in Clinical Trials
While the Company will take steps including physician training and
certification, and having company sales representatives or field clinical
specialists attend implant procedures during early commercialization,
ReActiv8 clinical performance in commercialization may be different from the
clinical performance observed during the Clinical Trials for a number of
reasons, including less control on the selection of people suitable for use
of the product, use by physicians with different experience and/or training,
and failure to adhere to a follow up regimen in the absence of Clinical
Trial oversight.
Furthermore, issues with product performance may subsequently be identified
once a product is in the market. Regulatory authorities require medical
device manufacturers to monitor and report certain types of adverse events
as part of the medical device reporting ("MDR") regulations so that safety
issues can be identified and addressed quickly. When such issues are
identified, corrective actions may be required - such as modifying labelling
or instructions for use, improving training, or removing the device from the
market - to ensure proper use or patient safety. Any of these could result
in significant time delays and/or expense and/or may harm our reputation.
Such issues may result in the need for our product to be suspended from sale
or withdrawn from the market. In these circumstances our product may require
substantial redesign and/or re-engineering to address any identified issues.
This may result in the need to undertake further Clinical Trials to
re-establish the safety and efficacy of the revised product, which would be
costly and time consuming and may exceed our resources.
Any of these circumstances may have a material adverse effect on the timing
and extent of our future revenues and profitability.
(g) There is no certainty that the market for ReActiv8 will develop as
currently anticipated by the Directors or at all
The Directors believe that the potential number of people with Chronic Low
Back Pain who could benefit from ReActiv8 is large, based on our estimate of
persons suffering with Chronic Low Back Pain in our key target markets.
However, development of the market depends on several factors including
regulatory approvals, availability and level of reimbursement, acceptance of
the treatment by the medical profession, product performance after approval,
emergence of other current and future treatments for Chronic Low Back Pain,
as well as the global trend to reduce healthcare costs. If, as a result of
these factors, the market for our product does not develop as currently
anticipated, our ability to generate revenue could be materially adversely
affected.
(h) The success of ReActiv8 depends on its acceptance and adoption by
medical professionals
Our success will require acceptance and adoption by medical professionals of
ReActiv8 as a new treatment for people with Chronic Low Back Pain. Such
acceptance will depend on medical professionals being convinced of the
clinical performance, benefits, safety and cost-effectiveness of ReActiv8
and being prepared to undertake special training in certain cases.
Even if the safety and efficacy of ReActiv8 is established, medical
professionals may be hesitant to change their medical treatment practices or
accept and adopt ReActiv8, including for the following reasons:
* general conservatism about adoption of new and innovative treatment
practices;
* lack or perceived lack of long-term evidence supporting additional patient
benefits;
* perceived clinical risk of a new treatment;
* perceived liability risks associated with the use of new a product and
procedures;
* limited or lack of reimbursement and coverage within healthcare payment
systems,
* cost associated with the purchase of new product and equipment;
* other procedures competing for physician time and attention; and
* the time commitment that may be required for special training.
Economic, psychological, ethical or related concerns may limit general
acceptance and adoption of ReActiv8. Lack of acceptance and adoption of
ReActiv8 by a significant number of medical professionals may limit our
future revenues and profitability.
(i) Active implantable medical devices such as ReActiv8 carry risks
associated with the surgical procedure for implant, removal or use of the
device, failure of the device, or associated with the therapy delivered by
the device
All medical devices have associated risks. Regulatory authorities regard
AIMDs as the highest risk category of medical devices, and accordingly AIMDs
are subject to the highest level of scrutiny when seeking regulatory
approval. The risks include, among others, (i) risks associated with any
surgical procedure, such as infection, allergic reaction, and consequences
of anesthesia and (ii) risks associated with any implantable medical device
such as device movement, lead dislodgement, lead breaks or fracture,
electromagnetic interference, device failure, tissue damage including nerve
damage, pain and psychological effects. A comprehensive list of the risks
associated with ReActiv8 is included in the documentation (labelling)
provided with the device to both physicians and patients.
Adverse events associated with these risks may lead some patients to blame
us, the physician or other parties for such occurrences. This may result in
product liability lawsuits, medical malpractice lawsuits, investigations by
regulatory authorities, adverse publicity, criminal charges or other harmful
circumstances for us. Any of those circumstances may have a material adverse
effect on our ability to conduct our business, to sell ReActiv8, or to
develop future products (if any).
(j) Our business exposes us to an inherent risk of potential product
liability claims relating to the manufacturing, Clinical Trials, marketing
and sale, or recall of an active implantable medical device
Our product is an AIMD with complex electronic circuits and software. It is
not possible to design and build AIMDs which are 100% reliable as all such
devices carry a risk of failure or malfunction.
Medical device manufacturers are exposed to the risk of potential product
liability claims arising from device failures and malfunctions, product use
and associated surgical procedures. A product liability claim may be raised
as a result of factors outside our control, such as product failure,
off-label use of our product, or failure of the medical practitioners or
patients to follow the instructions for use. It is possible that a product
liability lawsuit may be lost through no fault of ours, which could result
in reputational risk, increased insurance premiums, and depression of future
sales, all of which may have an adverse effect on our financial condition,
business, prospects and/or results of operations.
Device failures discovered during the Clinical Trials may lead to suspension
or termination of the trial, which could have a material adverse effect on
our financial condition, business, prospects and/or results of operations.
Following regulatory approval and market release, device failures or
malfunctions may result in a recall of the product, which may be restricted
to a specific manufacturing lot or may impact all products in the field.
Recalls may occur at any time during the life cycle of a device once
regulatory approval has been obtained for the commercial distribution of the
device. In most markets including the U.S. and the EU, authorities may
request a manufacturer to carry out a recall, irrespective of whether the
manufacturer itself deems this is required. Recalls can impact our business
as they can be expensive, time consuming and can divert resources and
management from normal operations. Replacement of product subject to recall
can be free of charge under warranty and is therefore a potential expense
for us. In some cases, the cost of a recall can include the cost of the
surgical procedure to replace or remove a product. In addition, a recall may
impact our future sales, or may lead to the loss of key suppliers or legal
action against us by people affected by a recall and/or regulatory
authorities whose role it is to supervise the distribution and sale of
medical devices.
Consolidation of product liability claims into a class action lawsuit may
require large dedication of resources for defense, which will be time
consuming, costly, and a major distraction from the running of the business.
Following CE Marking of ReActiv8, we have purchased product liability
insurance, at a level that the Directors believe to be appropriate for a
company of our size and nature, to help cover the costs of defense of
product liability lawsuits and for damages. For products used as part of a
Clinical Trial, Clinical Trial insurance helps cover defense of lawsuits
relating to the product, which is the subject of the Clinical Trial, and for
damages, if awarded. We may not be able to maintain or increase product
liability insurance on acceptable terms, and such insurance may not provide
adequate coverage against potential liabilities. A successful claim brought
against us in excess, or outside, of our insurance coverage could have a
material adverse effect on our financial condition, business, prospects
and/or results of operations. The Company regularly reviews the level and
appropriateness of the product liability insurance in place.
(k) Competition in the medical device industry is intense and expected to
increase
Competition from medical device companies is intense and we expect it to
further increase. We may not be able to compete successfully against our
current and future competitors, including competitors with larger financial
capabilities. Whilst the Directors are not currently aware of a direct
competitor product on the market, potential competitors may develop new
products or adapt existing products or their uses for the same patient group
targeted by our product, which could present competition for ReActiv8.
Treatment for CLBP is potentially a very large market, and is attracting
potential competitors. Any potential competitors' products currently in
Clinical Trials, or in development, or developed in the future, could have
superior clinical results, could be easier to implement clinically, could be
more convenient for patients and/or less expensive than our product or could
reach commercialization before our product. Such occurrences could have a
material adverse effect our ability to generate sufficient revenues to
sustain our business.
During a Clinical Trial for regulatory approval, products are generally
provided at no charge. Entry by a competitive product into Clinical Trials,
while our product is being commercialized, could have an adverse effect on
our sales (for example, where our product is approved for use and released
to the market and the competitor is still in clinical development), or may
inhibit timely enrolment in our on-going Clinical Trials.
In addition, the commercial availability of any approved competing product
could potentially inhibit recruitment and enrolment in our Clinical Trials.
We may successfully conclude our Clinical Trials and obtain regulatory
approval but may fail to compete against potential competitors or
alternative treatments for Chronic Low Back Pain that may be available or
developed. Any inability by us to compete effectively against other medical
device companies or to effectively manage the risks related to competition
may have a material adverse effect on our financial condition, business,
prospects and/or results of operations.
(l) New or competing treatments for Chronic Low Back Pain may emerge
ReActiv8 is an AIMD designed as treatment for people with Chronic Low Back
Pain. Alternative therapies for this patient group may include, among
others, spine surgery, physical therapy (such as lumbar extensor
strengthening exercises), watchful waiting (i.e., no therapy), traction
therapy, the McKenzie Method of exercise therapy, massages, drugs (including
analgesics, opioids, sleep aids, muscle relaxants and anti-depressants),
acupuncture, steroid injections, back schools, various types of energy
application including ultrasound, transcutaneous electrical nerve
stimulation ("TENS"), osteopathic therapy, and thermotherapy, spinal cord
stimulation ("SCS"), and lumbar stabilization exercises. New treatment
options, or modifications of existing treatments or their uses, may emerge
which yield clinical results equal to, or better than, those achieved with
ReActiv8, possibly at a lower cost. Emergence of such new therapies may
inhibit our ability to develop and grow the market for ReActiv8, which would
have a material adverse effect on our financial condition, business,
prospects and results of operations.
(m) Our success will be heavily contingent on third party payment from
government providers, healthcare insurance providers or other public or
private sources
The existence of coverage and adequate reimbursement for our product by
government and private payers will be critical to market adoption for the
existing and future products. Medical professionals and hospitals will be
unlikely to use ReActiv8, at all or to a great extent, if they do not
receive adequate reimbursement for the procedures utilizing our product, and
potential patients may be unwilling to pay for the product themselves.
With the global pressure on healthcare costs, payers are attempting to
contain costs by, for example, limiting coverage for, and the level of
reimbursement for, new therapies. Any limitations on, decreases in or
elimination of payments by third party payers may have an adverse effect on
our financial condition, business, prospects and/or results of operations.
In many countries, payment for our product will be dependent on obtaining a
"reimbursement code" for the procedure and product. Obtaining a
reimbursement code can be a lengthy process (months to years) and there is
no guarantee that such a code can be obtained at satisfactory levels, or at
all.
Following granting of a "reimbursement code", payers (e.g., national health
care systems or health insurance companies) have to agree to provide
coverage for the procedure(s) that utilize our product. There is no
guarantee that such coverage can be obtained, or if obtained, that it will
be adequate to enable us to build a profitable business selling ReActiv8.
There are existing reimbursement codes applicable to ReActiv8, which
hospitals can use in Germany, Switzerland and Austria
Securing adequate or attractive reimbursement often depends on demonstrating
the cost effectiveness of a product, for example with a medical economics
study. There is also no assurance that we will be able to demonstrate cost
effectiveness of ReActiv8 in a timely manner or at all.
Failure to obtain attractive reimbursement from payers may have a material
adverse effect on our financial condition, business, prospects and results
of operations.
(n) We are dependent on access to raw materials and products and
manufacturing of our product is not guaranteed by the third parties with
whom we contract
Although we do not manufacture our product, our third party manufacturers
are dependent on continuing supply of certain raw materials. In particular,
some raw materials such as biocompatible polymers (plastics) may only be
available from a sole supplier. If the supplier of the raw material
encounters problems, goes out of business, refuses to supply certain
materials, or dramatically increases the prices of certain materials, it may
disrupt the ReActiv8 supply chain. Disruption in our supply chain via our
third party manufacturers may result in interruption of supply of our
product, which could have a material adverse impact on our ability to
proceed with commercialization, continuing Clinical Trials, and our
financial condition, and could require product redesign and/or engagement
with alternative manufacturers, which could be expensive and time consuming.
(o) Manufacturing issues may arise that are detrimental to the Group
We use external vendors to manufacture and supply ReActiv8. Vendors are
required by applicable laws and regulations to have in place and implement
appropriate quality management measures and are generally subject to
inspections by regulatory authorities. A vendor may be unable to supply the
quantity of products according to our requirements, or may suffer internal
delays or problems which could impact the quality, delivery or compliance
with the specifications of ReActiv8. This may have a material adverse effect
on our financial condition, business, prospects and results of operations.
Any identified manufacturing or quality issue may require extensive rework
of products or a complete scrapping of the inventory of affected products
and could also require suspension of distribution of products, or products
to be returned from the field for modification.
The design and development of an AIMD uses many disciplines including
electrical, mechanical, software, biomaterials, and other types of
engineering. Engineers employed by us undertaking research and development
or manufacturing activities may make an incorrect decision or make a
decision during the engineering phase without the benefit of long term
experience, and the impact of such wrong decisions may not be apparent until
well into a product's life cycle, which in either case may have a material
adverse effect on our financial condition, business, prospects and/or
results of operations.
In addition, our product is subject to extensive testing to international
standards such as for electrical safety and electromagnetic compatibility.
Changes in standards may require re-testing of our product, and there is no
assurance that compliance with an earlier standard will also mean compliance
with a more recent version of a standard.
(p) We depend on third party suppliers for the manufacture of ReActiv8.
Disruption of the supply chain, or failure to achieve economies of scale
could have a material adverse effect
We depend on a limited number of third party suppliers for the manufacture
of ReActiv8 and the loss of one or more of these third party suppliers or
their inability or unwillingness to supply us with adequate quantities of
products could harm our business in the future. A third party supplier may
be subject to circumstances which impact our ability to supply, including
enforcement action by regulatory authorities, natural disasters (e.g.,
hurricanes and earthquakes), industrial action (e.g., strikes), financial
difficulties including insolvency, pressure or demands on manufacturing
capacity (e.g.: by products for other customers that compete for
manufacturing capacity), among a variety of other internal or external
factors.
If any of our existing suppliers are unable or unwilling to meet our demand
for product or components, or fail to respect their contractual commitments
to us, or if the components or finished products that they supply do not
meet quality and other specifications, Clinical Trials or commercialization
of our product could be delayed. Alternatively, if we have to switch to a
replacement manufacturer or replacement supplier for any of our product
components, or commence our own manufacturing to satisfy market demand, we
may face additional delays and other issues, and the manufacture and
delivery of ReActiv8 could be interrupted for an extended period of time,
which interruption could delay completion of our Clinical Trials or
commercialization. Alternative suppliers may be unavailable, may be
unwilling to supply, may not have the necessary regulatory approvals, or may
not have in place an adequate quality management system.
Our suppliers, in turn, depend on their own suppliers and supply chain. Any
disruption of the supply chain could have a material adverse effect on our
financial condition, business, prospects and/or results of operations.
Our suppliers may not be able to increase yields and/or decrease
manufacturing costs over time, and the cost of goods sold may not decrease
or may in fact increase, resulting in an adverse effect on our financial
condition, business, prospects and/or results of operations.
In addition, our suppliers may discontinue supply of components or materials
upon which we rely before the end of the product life of our product. The
timing of the discontinuation may not allow us sufficient time to develop
and obtain regulatory approval for replacement products or components before
we exhaust our inventory. If suppliers discontinue supply of components or
materials, we may have to pay premium prices to our suppliers to keep their
production lines open. We may have to obtain alternative suppliers, buy
substantial inventory to last until the scheduled end of life of our product
or through such time as we have an alternative product developed and
approved by the regulatory authorities. We may have to temporarily cease
supplying our product once our inventory of the discontinued materials or
component is exhausted.
Any of these interruptions to the supply of materials or components could
result in substantial reduction in our available inventory and an increase
in our production costs, which may have a material adverse effect on our
financial condition, business, prospects and/or results of operations.
(q) Compliance with regulations for quality systems for medical device
companies is difficult, time consuming and costly. We may be found to be
non-compliant, for example as a result of future changes in or
interpretation of the regulations regarding quality systems in certain
jurisdictions
We have developed and maintained a Quality Management System ("QMS") to
ensure quality of our product and activities. The QMS is designed to be in
compliance with regulations in many different jurisdictions, including the
Quality Systems Regulations ("QSR") mandated by the FDA, and the
requirements of the AIMD Directive, including the international standard ISO
13485 required for obtaining CE Marking. In some circumstances, the
requirements of regulations and standards may be different and may be
mutually exclusive.
Compliance with regulations for quality systems for medical device companies
is difficult, time consuming and costly, and it is possible that we may be
found to be non-compliant at any time. In addition, we may be found to be
non-compliant as a result of future changes in, or interpretation of, the
regulations for quality systems. If we do not achieve compliance or
subsequently become non-compliant, the regulatory authorities may (i)
require that we take appropriate action to address non-conformance issues,
(ii) withdraw marketing clearance, (iii) require product recall, or (iv)
take other enforcement action.
Our external vendors must (in general) also comply with the QSR and ISO
13485. Any of our external vendors may become non-compliant with QSR or ISO
13485, which could result in enforcement action by regulatory authorities,
including, by way of example, a warning letter from the FDA or a requirement
to withdraw from the market or suspend distribution, export or use of
products manufactured by one or more of our vendors. This may have a
material adverse effect on our financial condition, business, prospects and
results of operations.
Any change or modification to a device may require further approvals
(depending on the jurisdiction) and must be made in compliance with
appropriate regulations (QSR for the U.S. and the AIMD Directive for
Europe), which compliance may cause interruption to or delays in the
marketing and sale of our product. U.S. federal, state and other laws
regarding the manufacture and sale of AIMDs are subject to future changes,
as are administrative interpretation and policies of regulatory agencies. If
we fail to comply with applicable laws where we would intend to market and
sell our product, we could be subject to enforcement action including recall
of our devices, withdrawal of approval or clearance and civil and criminal
penalties. If any of these events occurs, there may be a material adverse
effect on our financial condition, business, prospects and/or results of
operations.
(r) In some markets we may depend on distributors for the market and sale of
ReActiv8 over which we have little or no control
For some markets our intended distribution strategy may be to rely on third
party distributors for ReActiv8.
In markets where we may depend on distributors, we would not directly
control the performance of a distributor. Thus the level of sales we
generate, and the profitability we achieve, in those markets may depend on
the efforts of others. A distributor's failure to perform according to
expectations and/or contractual obligations may have an adverse effect on
our reputation, financial condition, business, prospects and/or results of
operations.
(s) We may be unable to attract and retain management and other personnel we
need to succeed
We rely on the expertise and experience of our Directors, senior management
and other key employees and contractors in management, research and
development, clinical and regulatory matters, sales and marketing and other
functions. The retention and performance of our Directors, senior management
and other key employees are therefore significant factors in our ability to
achieve our objectives. The departure of any of these individuals without
timely and adequate replacement, or the loss of any of our senior management
may have a material adverse effect on our financial condition, business,
prospects and results of operations and there can be no guarantee that we
would be able to find and attract other individuals with similar levels of
expertise and experience or similar relationships with commercial partners
and other market participants. In addition, our competitive position could
be materially adversely affected if a member of senior management
transferred to another company seeking to develop a rival product.
Our future growth will require hiring a number of qualified clinical,
scientific, commercial and administrative personnel. If we are unable to
identify, attract, retain and motivate these highly skilled personnel, we
may be unable to continue our development, commercialization or growth.
We have entered into indemnification agreements with our Directors and
senior management, including certain contractors. As a consequence of such
indemnification agreements, we may have to use our resources to indemnify
such persons, which could have an adverse effect on our financial condition,
business, prospects and results of operations.
(t) We rely on third parties for management services, manufacturing,
marketing, regulatory advice and other services that are crucial to our
business
In order to carry out our business, we depend heavily on third party
consultants, contractors, distributors, manufacturers, agents and numerous
other partners for core and non-core services and functions, including
management functions (e.g.: certain payroll services), clinical studies,
applications for regulatory approval, commercial operations and other
services and functions that may involve interactions with government and
quasi-government authorities. As a result, if any of these parties fails to
perform as promised or intended or contracted, our business plans for
obtaining regulatory approval for ReActiv8 in targeted geographies and
commercializing ReActiv8 may suffer, and our business may be materially
adversely affected.
(u) We may be at risk for non-compliance with applicable laws and
regulations
Doing business on a worldwide basis requires us to comply with the laws and
regulations of various jurisdictions. In particular, our operations are
subject to anticorruption laws and regulations, which may include the U.S.
Foreign Corrupt Practices Act of 1977 (the "FCPA"), the UK Bribery Act of
2010, Irish anti-bribery laws and regulations, and anti-bribery laws and
regulations in other countries, including those having implemented the OECD
Anti-Bribery Convention. Anticorruption laws prohibit corporations and
individuals from paying, offering to pay, or authorizing the payment of
anything of value to another person, including but not limited to a
government official, government staff member, political party, or political
candidate in an attempt to obtain or retain business or to otherwise
improperly influence a person; the laws are broad and many apply to private
as well as public bribery and also penalize the receipt as well as the
giving of bribes. In the course of establishing and expanding our commercial
operations and seeking regulatory approvals in the EU, the U.S., and
internationally, we will need to establish and expand business relationships
with various third parties and will interact more frequently with various
officials, including regulatory authorities and physicians employed by
state-run healthcare institutions who may be deemed to be "foreign
officials" under the FCPA or similar laws, or who may otherwise be
candidates for illicit payments in exchange for improper benefits. We have
implemented policies and procedures designed to ensure compliance with the
FCPA, UK Bribery Act of 2010, Irish anti-bribery laws and other similar
laws, however acts or omissions of any of the parties we rely on, including
Directors, executive officers, employees, third party consultants,
contractors, distributors, manufacturers, agents and numerous other
partners, could potentially cause us to incur liability under applicable
laws and regulations.
Our operations may also be subject to applicable laws and regulations on
economic sanctions and export controls, including those administered by the
U.S. and the EU, which are complex and may be violated inadvertently.
In case of a violation of any of the anti-bribery, economic sanctions or
export control laws, we could be subject to fines, confiscation of profits
or legal sanctions, such as termination of authorizations, licenses,
concessions and financing agreements, suspension of our operations, or
prohibitions on contracting with public authorities. Any such violation,
even if prohibited by our policies, could have a material adverse effect on
our financial condition, business, prospects and results of operations.
(v) Information Technology ("IT") forms a key support requirement within our
business. Any failure of our IT systems could present a substantial risk to
our business continuity
The efficient operation of our business depends on information technology
systems. We rely on our information technology systems to help manage our
administration, marketing, accounting and financial functions, manufacturing
processes, and our research and development functions.
The regulatory and legal environment of our industry requires us to maintain
records for long periods of time, sometimes indefinitely. In most cases,
those records are kept in electronic form and without paper copies.
We use third party suppliers to provide computing, communication, data
storage and backup services, and failure of any of those third party
suppliers may have an adverse effect on our ability to operate, which could
have an adverse effect on our financial condition, business, prospects and
results of operations. Although industry standard practices are in place for
regular information backup, failure of our IT systems infrastructure may
result in the inability to continue business until the records are
recreated, and this may have an adverse effect on our financial condition,
business, prospects and results of operations.
Our employees and contractors often work from home offices, in particular
employees or contractors who need to be close to the customer base to enable
rapid support (for example, field clinical specialists). This requires
strong IT infrastructure support (telephone, email, internet access), which
must be continuously maintained. Failure of our IT infrastructure, a
security breach by a malicious third party, or loss of critical information
may have an adverse effect on our financial condition, business, prospects
and results of operations.
Our employees frequently utilize portable laptop or notebook computers.
Loss, theft or damage to a portable computer could result in loss of key
information (in some cases to a competitor), which could have a material
adverse effect on our financial condition, business, prospects and results
of operations.
(w) U.S. "anti-inversion" tax laws could negatively affect our results
Under rules contained in U.S. tax law (Section 7874 of the Internal Revenue
Code), a non-U.S. company, such as Mainstay Medical International plc, can
be subject to tax as a U.S. corporation in the event it acquires
substantially all of the assets of a U.S. corporation and the equity owners
of that U.S. corporation own at least 80 per cent. of the non-U.S. company's
stock by reason of their holding stock in the U.S. corporation.
In the 2014 Corporate Reorganization, the Company acquired the assets (being
shares in MML) of Mainstay Medical Inc. ("MMI") (a U.S. corporation), and
former shareholders of MMI became shareholders of the Company. The ownership
of equity that former shareholders of MMI received in the 2014 Corporate
Reorganization is substantially below the 80 per cent. standard for
application of the above U.S. rules. Accordingly, the Directors do not
believe these rules should apply. There can, however, be no assurance that
the IRS will not challenge the determination that these rules are
inapplicable. In addition to the 2014 Reorganization, there was an earlier
Group reorganization transaction in 2012. The Directors do not believe
integrated treatment of this transaction with the 2014 Reorganization to be
appropriate because there are independent business reasons for undertaking
these transactions. In the event that the U.S. anti-inversion rules are held
to apply to us, we would be subject to the U.S. federal income tax on our
worldwide income, which would negatively impact the cash available for
distribution and the value of the Ordinary Shares.
(x) We are exposed to foreign exchange risk
We are, and will in the future be increasingly, exposed to exchange rate
fluctuations including, among others, the Euro, U.S. Dollar, Australian
Dollar, and Pound Sterling. Fluctuations of exchange rates outside a
budgeted range may affect revenues, expenses, or our ability to raise future
capital if it is needed, and may have an adverse impact on our financial
condition, business, prospects and results of operations.
RISKS RELATING TO INTELLECTUAL PROPERTY
(a) Any inability to fully protect and exploit our intellectual property may
adversely impact our financial condition, business, prospects and results of
operations
Our success depends significantly on our ability to protect our proprietary
rights, including the intellectual property related to and incorporated in
ReActiv8. We rely on a combination of patent protection, trademarks and
trade secrets, and we use confidentiality and other contractual agreements
to protect our intellectual property. We generally seek patent protection
where possible for those aspects of our technology and product that, the
Directors believe, provide significant competitive advantages. As at 8 March
2017, our patent portfolio includes eight granted U.S. patents, 13 patents
outside the U.S. and 34 U.S. and foreign patent applications in the patent
families. However, we may be unable to adequately protect our intellectual
property rights or may become subject to a claim of infringement or
misappropriation, which we may be unable to settle on commercially
acceptable terms. We cannot be certain that our pending or future patent
applications will result in issued patents. In addition, we do not know
whether any issued patents will be upheld as valid or will be proven to be
enforceable against alleged infringers or that they will prevent the
development of competitive patents or provide meaningful restriction against
potential competitors or against potential competitive technologies.
The process of obtaining patent protection involves filing applications in
multiple jurisdictions and patent offices, and may take many years. Success
in one jurisdiction does not guarantee success in another jurisdiction,
particularly as different jurisdictions may apply different legal
principles. For example, it is possible to obtain a patent for a medical
method in the U.S., but such patents cannot be applied for in Europe.
Therefore, there may be circumstances where an invention is patented in one
jurisdiction but a patent cannot be obtained in one or more other
jurisdictions.
In responding to our patent application, a patent office may reject one or
more (or sometimes all) claims. This may lead to an extensive dialogue
between our patent attorneys and the patent office in an effort to reach
agreement and grant of a patent. There is no assurance that such efforts
will be successful, and thus no assurance that all patent applications will
result in an issued patent.
There is no assurance that our intellectual property rights will not be
challenged, invalidated, circumvented or rendered unenforceable. Parties
seeking to compete with us (directly or indirectly) or other third parties
may successfully challenge and invalidate or render unenforceable our issued
patents, including any patents that may be issued in the future or could
develop competitor products to ReActiv8. This could prevent or limit our
ability to stop potential competitors from marketing products that are
identical or substantially equivalent to ours. In addition, such parties may
be able to design around our patents, obtain competitive patents or other
intellectual property rights regardless of prior art in our patents or
patent applications, or develop products that provide outcomes that are
comparable to our product but that are not covered by our patents.
Much of the Company's value is in our intellectual property, and any
challenge to our intellectual property portfolio (whether successful or not)
may impact the value of ReActiv8 and the Company.
(b) We could become subject to intellectual property litigation or other
disputes that could be costly, result in the diversion of management's time
and efforts, require us to pay damages, prevent us from marketing ReActiv8
or other products and/or reduce the margins for ReActiv8
Third party patents or other intellectual property may emerge which may have
a materially adverse effect on our ability to commercialize ReActiv8 and
there is no assurance that such third party patents or intellectual property
will not emerge.
The medical device industry is characterized by rapidly changing products
and technologies and there is intense competition to establish intellectual
property and proprietary rights to use these new products and the related
technologies. This vigorous protection and the pursuit of intellectual
property rights and positions has resulted and will continue to result in
extensive litigation and administrative proceedings over patent and other
intellectual property rights. Whether a product infringes a patent involves
complex legal and factual issues, and the determination is often uncertain
in advance. There may be existing or future patents that ReActiv8 may
inadvertently infringe. Potential competitors may have or develop patents
and other intellectual property that they assert our product infringes.
Any infringement claims against us, even if without merit, may cause us to
incur substantial costs, and could place a significant strain on our
financial resources and/or divert the time and efforts of management from
our core business. In addition, any potential intellectual property
litigation could force us to do one or more of the following: stop
selling/using our product or using technology that contains the allegedly
infringing intellectual property; forfeit the opportunity to license our
technology to others or to collect royalty payments based upon successful
protection and assertion of our intellectual property against others; pay
substantial damages to the party whose intellectual property rights we may
be found to be infringing; redesign those products that contain or utilize
the allegedly infringing intellectual property; or attempt to obtain a
license to the relevant intellectual property from third parties, which may
not be available on reasonable terms or at all. Any of these circumstances
may have a material adverse effect on our financial condition, business,
prospects and results of operations.
Requirements to obtain licenses to third party intellectual property rights
may arise in the future. If we need to license any third party intellectual
property, we could be required to pay lump sums or royalties on sales of our
future products. In addition, there can be no assurances that, if we are
required to obtain licenses to third party intellectual property, we will be
able to obtain such licenses on commercially reasonable terms or at all. Our
inability to obtain required third party intellectual property licenses on
commercially reasonable terms or at all could have a material adverse impact
on our business, results of operations, financial condition or prospects.
(c) Changes in patent law could diminish the value of patents in general,
thereby impairing our ability to protect our existing and future products
Recent patent reform legislation could increase the uncertainties and costs
surrounding the prosecution of our patent applications and the enforcement
or defense of our issued patents. On 16 September 2011, the Leahy-Smith
America Invents Act, or the Leahy-Smith Act, was signed into law. The
Leahy-Smith Act includes a number of significant changes to U.S. patent law.
These include provisions that affect the way patent applications are
prosecuted, redefine prior art, may affect patent litigation, and switched
the U.S. patent system from a "first-to-invent" system to a "first-to-file"
system. Under a "first-to-file" system, assuming the other requirements for
patentability are met, the first inventor to file a patent application
generally will be entitled to the patent on an invention regardless of
whether another inventor had made the invention earlier. The U.S. Patent and
Trademark Office (the "USPTO") developed new regulations and procedures to
govern administration of the Leahy-Smith Act, and many of the substantive
changes to patent law associated with the Leahy-Smith Act, in particular,
the first-to-file provisions, only became effective on 16 March 2013. The
Leahy-Smith Act and its implementation could increase the uncertainties and
costs surrounding the prosecution of our patent applications and the
enforcement or defense of our issued patents, all of which could have a
material adverse effect on our financial condition, business, prospects and
results of operations.
In addition, patent reform legislation may pass in the future that could
lead to additional uncertainties and increased costs surrounding the
prosecution, enforcement and defense of our patents and applications.
Furthermore, the U.S. Supreme Court and the U.S. Court of Appeals for the
Federal Circuit have made, and will likely continue to make, changes in how
the patent laws of the U.S. are interpreted. Similarly, foreign courts have
made, and will likely continue to make, changes in how the patent laws in
their respective jurisdictions are interpreted. We cannot predict future
changes in the interpretation of patent laws or changes to patent laws that
might be enacted into law by the U.S. or other countries. Those changes may
affect our patents or patent applications and our ability to obtain
additional patent protection in the future.
(d) Obtaining and maintaining patent protection depends on compliance with
various procedural, document submission, fee payment and other requirements
imposed by government patent agencies, and our patent protection could be
reduced or eliminated for non-compliance with these requirements
The USPTO and various other non-U.S. government patent agencies require
compliance with a number of procedural, documentary, fee payment, and other
similar provisions during the patent application process. In addition,
periodic maintenance fees on issued patents often must be paid to the USPTO
and other non-U.S. patent agencies over the lifetime of the patent. While an
unintentional lapse can in many cases be cured by payment of a late fee or
by other means in accordance with the applicable rules, there are situations
in which non-compliance can result in abandonment or lapse of the patent or
patent application, resulting in partial or complete loss of patent rights
in the relevant jurisdiction. Non-compliance events that could result in
abandonment or lapse of a patent or patent application include, but are not
limited to, failure to respond to official actions within prescribed time
limits, non-payment of fees and failure to properly legalize and submit
formal documents. If we fail to maintain the patents and patent applications
covering our product or procedures, we may not be able to stop a potential
competitor from marketing products that are the same as, or similar, to our
own, which could have a material adverse effect on our financial condition,
business, prospects and results of operations.
(e) We may not be able to adequately protect our intellectual property
rights throughout the world
Filing, prosecuting and defending patents on our product in all countries
throughout the world would be prohibitively expensive. The requirements for
patentability may differ in certain countries, particularly developing
countries, and the breadth of patent claims allowed can be inconsistent. In
addition, the laws of some countries may not protect our intellectual
property rights to the same extent as laws in the U.S. Consequently, we may
not be able to prevent third parties from practicing our inventions in some
or all countries outside the U.S. Potential competitors may use our
technologies in jurisdictions where we have not obtained patent protection
to develop their own products and, further, may export otherwise infringing
products to territories in which we have patent protection that may not be
sufficient to terminate infringing activities.
We do not have patent rights in certain countries in which a market for
ReActiv8 may exist. Moreover, in some jurisdictions where we do have patent
rights, proceedings to enforce such rights could result in substantial costs
and divert our efforts and attention from other aspects of our business,
could put our patents at risk of being invalidated or interpreted narrowly,
and our patent applications at risk of not issuing. Additionally, such
proceedings could provoke third parties to assert claims against us. We may
not prevail in any lawsuits that we initiate and the damages or other
remedies awarded, if any, may not be commercially meaningful. Thus, we may
not be able to stop a competitor from marketing and selling in certain
countries products that are the same as or similar to our products and our
competitive position in those countries could be harmed.
(f) We depend on confidentiality agreements with third parties to maintain
confidential information
We rely upon unpatented confidential and proprietary information, including
technical information, and other trade secrets to develop and maintain our
product and competitive position. While we generally enter into
confidentiality and invention assignment agreements with our employees and
other third parties to protect our intellectual property, there can be no
assurance that they will provide meaningful protection for our trade secrets
and proprietary information, that those employees or third parties will not
breach such agreements or that adequate remedies will be available in the
event of an unauthorized use or disclosure of such information. Unauthorized
use or disclosure of our confidential and proprietary information may have a
material adverse effect on our financial condition, business, prospects and
results of operations.
RISKS RELATING TO OUR SHARES
(a) We may be a passive foreign investment company ("PFIC") for 2016 or
subsequent years, which could result in adverse U.S. federal income tax
consequences to U.S. investors
For U.S. federal income tax purposes, a non-U.S. corporation will be
considered a passive foreign investment company, or PFIC, for any taxable
year if either (1) at least 75% of its gross income for such year is passive
income or (2) at least 50% of the value of its assets (based on an average
of the quarterly values of the assets during such year) is attributable to
assets that produce or are held for the production of passive income. If we
are a PFIC for any taxable year during which a U.S. holder holds shares, the
U.S. holder may be subject to adverse tax consequences, including (1) the
treatment of any gain on disposition as ordinary income, rather than capital
gain qualifying for preferential rates, (2) the application of an interest
charge with respect to such gain and certain dividends and (3) compliance
with certain reporting requirements. The Directors do not believe that the
Company was a PFIC for its 2015 taxable year, although the U.S. Internal
Revenue Service ("IRS") may disagree with this conclusion in the event it
audits any U.S. shareholder's tax reporting. Based on the value and
composition of our assets, we may, however, be a PFIC for 2016 and
potentially for future taxable years. The determination of PFIC status is
fact-specific, and a separate determination must be made for each taxable
year (after the close of each such taxable year). Each U.S. shareholder is
strongly urged to consult its tax advisors regarding these issues.
(b) The market price and/or liquidity of our securities may fluctuate widely
in response to various factors which may limit or prevent investors from
selling their Ordinary Shares
The market price and/or liquidity of Ordinary Shares could be subject to
wide fluctuations, in response to many risk factors listed in this section,
beyond our control including (without limitation):
* actual or anticipated fluctuations in our financial condition and
operating results;
* our failure to obtain regulatory approval for ReActiv8 beyond CE Marking;
* our failure to commercialize ReActiv8;
* adverse results or delays in our Clinical Trials;
* actual or anticipated changes in our growth rate;
* competition from existing products or new products that may emerge;
* announcements by us, our collaborators or our potential competitors of
significant acquisitions, strategic partnerships, joint ventures, strategic
alliances, or capital commitments;
* adverse regulatory decisions;
* the inability to establish potential strategic alliances;
* unanticipated serious safety concerns related to the use of our product;
* failure to meet or exceed financial estimates and projections of the
investment community or that we provide to the public;
* issuance of new or updated research or reports by securities analysts;
* fluctuations in the valuation of companies perceived by investors to be
comparable to us;
* price and volume fluctuations in trading of our Ordinary Shares on the ESM
of the Irish Stock Exchange or Euronext Paris;
* additions or departures of key management or scientific personnel;
* disputes or other developments related to proprietary rights, including
patents, litigation matters, and our ability to obtain patent protection for
our technologies;
* our inability to obtain reimbursement by commercial third-party payers and
government payers and any announcements relating to coverage policies or
reimbursement levels;
* announcement or expectation of additional debt or equity financing
efforts;
* issuances by the Company of Ordinary Shares or transfers or sales of
Ordinary Shares by shareholders;
* issue or exercise of share warrants or share options; and
* general economic and market conditions.
The above and related market and industry factors may cause the market
price, demand and/or liquidity of our Ordinary Shares to fluctuate
substantially, regardless of our actual operating performance, which may
limit or prevent investors from readily selling their Ordinary Shares. In
addition, the stock market in general, and development stage companies in
particular, have experienced extreme price and volume fluctuations that have
often been unrelated or disproportionate to the operating performance of
these companies.
(c) Our Ordinary Share ownership is concentrated in the hands of our
principal Shareholders, who may be able to exercise a direct or indirect
controlling influence on us
Our eight largest Shareholders together own approximately 87.5% of our
Ordinary Shares in issue at 31 December 2016. As a result, these
Shareholders (or a combination of some of these Shareholders), if they were
to act together, would have significant influence over all matters that
require approval by our ordinary Shareholders, including the election of
directors and approval of significant corporate transactions. Subject to
customary Shareholder protections on takeovers and related party
transactions, corporate action might be taken even if other ordinary
shareholders oppose them. This concentration of ownership might also have
the effect of delaying or preventing a change of control of our company that
other ordinary Shareholders may view as beneficial.
(d) If securities or industry analysts do not publish research or publish
unfavorable research about our business, the price of our Ordinary Shares
and trading volume could decline
The trading market for our Ordinary Shares depends in part on the research
and reports that securities or industry analysts publish about us or our
business. If few or no securities or industry analysts cover us, the trading
price for our Ordinary Shares could be negatively impacted. If one or more
of the analysts who covers us downgrades this recommendation on our Ordinary
Shares, publishes unfavorable research about our business, ceases coverage
of our company or fails to publish reports on us regularly, demand for our
Ordinary Shares could decrease, which could cause the price of our Ordinary
Shares or trading volume to decline.
(e) We do not currently intend to pay dividends, and, consequently, the
ability to achieve a return on investment will depend on appreciation in the
price of the shares
We have never declared or paid any cash dividends on our Ordinary Shares and
do not currently intend to do so for the foreseeable future. We currently
intend to invest our future earnings, if any, to fund our growth. Therefore,
you are not likely to receive any dividends on your shares for the
foreseeable future and the success of an investment in shares will depend
upon any future appreciation in the value of the Company. Consequently,
investors may need to sell all or part of their holdings of shares after
price appreciation, which may never occur, as the only way to realize any
future gains on their investment. Investors seeking cash dividends should
not purchase our Ordinary Shares.
(f) Any dividends paid by us may be subject to Irish dividend withholding
tax
We do not currently expect to declare or pay dividends on our Ordinary
Shares for the foreseeable future. To the extent that we determine in the
future to pay dividends, in certain limited circumstances, dividend
withholding tax (currently at a rate of 20% for Irish tax residents) may
arise in respect of dividends paid on our Ordinary Shares. A number of
exemptions from dividend withholding tax exist, such that shareholder's
resident in EU member states (other than Ireland) or other countries with
which Ireland has signed a double tax treaty, which would include the U.S.,
should generally be entitled to exemptions from dividend withholding tax
provided that the appropriate documentation is in place. Shareholders should
note the requirement to complete certain dividend withholding tax forms in
order to qualify for many of the exemptions.
(g) Dividends received by Irish residents and certain other shareholders may
be subject to Irish income tax
We do not currently expect to declare or pay dividends on our Ordinary
Shares for the foreseeable future. However, if we do decide to pay
dividends, then dividends received by Irish residents and certain other
shareholders may be subject to Irish income tax. However, shareholders
entitled to an exemption from Irish dividend withholding tax on dividends
received from us will not be subject to Irish income tax in respect of those
dividends, unless they have some connection with Ireland other than their
shareholding in us (for example, they are resident in Ireland). Shareholders
who are not Irish tax residents who receive dividends subject to Irish
dividend withholding tax will generally have no further liability to Irish
income tax on those dividends.
(h) A future transfer of your Ordinary Shares, may be subject to Irish stamp
duty
Any transfer of your Ordinary Shares could be subject to Irish stamp duty
(currently at the rate of 1% of the higher of the price paid or the market
value of the shares acquired). Payment of Irish stamp duty is generally a
legal obligation of the transferee. The potential for stamp duty to arise
could adversely affect the value of your shares.
(i) Any sale, purchase or exchange of the Ordinary Shares may become subject
to the European Financial Transaction Tax
On 14 February 2013, the EU Commission adopted a proposal for a Council
Directive (the "Draft Directive") on a common financial transaction tax (the
"FTT"). According to the Draft Directive, the FTT should have been
implemented and should have entered into effect in 11 EU Member States
(Austria, Belgium, Estonia, France, Germany, Greece, Italy, Portugal, Spain,
Slovakia and Slovenia, each a "Participating Member State") toward the
middle of 2014. The implementation was later deferred to June 2016 and as of
the date of this document is not implemented. In March of 2016, Estonia
indicated its withdrawal from enhanced cooperation.
Pursuant to the Draft Directive, the FTT was to be payable on financial
transactions provided at least one party to the financial transaction was
established or deemed established in a Participating Member State and there
was a financial institution established or deemed established in a
Participating Member State which was a party to the financial transaction,
or was acting in the name of a party to the transaction. Under the Draft
Directive, the FTT should have not applied, however, to (inter alia) primary
market transactions referred to in Article 5(c) of Regulation (EC) No
1287/2006, including the activity of underwriting and subsequent allocation
of financial instruments in the framework of their issue.
The rates of the FTT were to be fixed by each Participating Member State but
for transactions involving financial instruments other than derivatives
would have amounted to at least 0.1 per cent. of the taxable amount. The
taxable amount for such transactions would have been generally determined by
reference to the consideration paid or owed in return for the transfer. The
FTT would have been be payable by each financial institution established or
deemed established in a Participating Member State which was either a party
to the financial transaction, or acting in the name of a party to the
transaction or where the transaction had been carried out on its account.
Where the FTT due had not been paid within the applicable time limits, each
party to a financial transaction, including persons other than financial
institutions, would have become jointly and severally liable for the payment
of the FTT due.
The Draft Directive has not been adopted. Following Estonia's withdrawal, a
proposal combining a broader scope and lower rates, as well as several
specific rules, is currently being discussed between the ten other
Participating Member States, with the objective to adopt a new proposal in
2017.
Investors should therefore note, in particular, that any sale, purchase or
exchange of Ordinary Shares could become subject to the FTT at a minimum
rate of 0.1 per cent. The investor may be liable to pay this charge or
reimburse a financial institution for the charge, and/or the charge may
affect the value of the Ordinary Shares. Under the terms of the current
version of the Draft Directive, the issuance of new Ordinary Shares would
have been out of the scope of the FTT. It remains uncertain whether the
final version of the Draft Directive that could eventually be adopted, if
any, would provide otherwise.
The FTT proposal is still subject to negotiation between the Participating
Member States and therefore may be changed at any time. Moreover, once a
final agreement on such FTT proposal is reached (the "FTT Directive"), it
will need to be implemented into the respective domestic laws of the
Participating Member States, and the domestic provisions implementing the
FTT Directive might deviate from the FTT Directive itself.
In any case, investors should consult their own advisers in relation to the
consequences of the FTT associated with subscribing for, purchasing, holding
and disposing of Ordinary Shares.
(j) The rights of our shareholders in respect of our corporate affairs may
differ from the rights typically offered to shareholders of a typical U.S.
corporation or other non-Irish corporations, and these differences may make
our shares less attractive to investors
We are incorporated under Irish law and, therefore, certain of the rights of
holders of our shares are governed by Irish law, including the provisions of
the Irish Companies Act 2014, and by our memorandum and articles of
association. These rights differ in certain respects from the rights of
shareholders in typical U.S. corporations or other non-Irish corporations
and these differences may make our shares less attractive to investors. The
principal differences, regarded by the Board, include the following:
* under Irish law, dividends may only be declared if we have, on an
individual entity basis, profits available for distribution, within the
meaning of the Irish Companies Act 2014
* under Irish law, each shareholder present at a meeting has only one vote
unless a poll is called, in which case each holder gets one vote per share
owned. Under Irish law, it is only on a poll that the number of shares
determines the number of votes a holder may cast
* under Irish law, each shareholder generally has pre-emptive rights to
subscribe on a proportionate basis to any issuance of new shares.
Pre-emptive rights may be dis-applied under Irish law for renewable periods
of up to five years by Irish companies by way of a provision in their
articles of association or special resolution of their shareholders (being a
resolution approved by no less than 75% of the votes cast by shareholders in
general meeting). At our AGM in 2016, shareholders approved, for a period
ending on 21 September 2021, the disapplication of statutory pre-emption
rights with respect to the issuance of share capital with a nominal value of
EUR10,000, representing approximately 151% of our issued Ordinary Shares as
at 29 July 2016. However, we cannot guarantee that the existing
disapplication of pre-emption rights will not in future be revoked or that,
following expiry of the existing disapplication, that shareholders will
approve any future resolution to dis-apply pre-emption rights and, in any of
those events, future equity fundraisings would be more cumbersome, costly
and time consuming
* under Irish law, certain matters require the approval of 75% of the
shareholders, including amendments to our Articles of Association. This may
make it more difficult for us to complete corporate transactions deemed
advisable by our Board
* under Irish law, a bidder seeking to acquire all issued Ordinary Shares in
a tender offer would need to receive shareholder acceptance in respect of
90% of our issued Ordinary Shares (other than Ordinary Shares already in the
beneficial ownership of the bidder) in order to proceed to "squeeze out" the
remaining ordinary shareholders. If this 90% threshold is not achieved in
the offer, under Irish law, the bidder cannot complete a "second step
merger" to obtain 100% control of us. Accordingly, receipt of acceptances in
respect of 90% of our issued Ordinary Shares (other than Ordinary Shares
already in the beneficial ownership of the bidder) would typically be a
condition in a tender offer to acquire our Ordinary Shares; and
* under Irish law, shareholders may be required to disclose information
regarding their equity interests upon our request, and the failure to
provide the required information could result in the loss of rights or a
restriction of rights attaching to the shares, including prohibitions on the
transfer of the shares.
(k) Irish law may afford fewer remedies in the event shareholders suffer
losses compared to the U.S. or other jurisdictions
As an Irish company, we are governed by the Irish Companies Act 2014 and
Irish company law generally, which differ in some material respects from
laws generally applicable to typical U.S. corporations and other non-Irish
corporations and their shareholders, including, among others, differences
relating to interested director and officer transactions and shareholder
lawsuits. Likewise, the duties of directors and officers of an Irish company
generally are owed to the company only. Shareholders of Irish companies
generally do not have a personal right of action against directors or other
officers of the company and may exercise such rights of action on behalf of
the company only in limited circumstances. You should also be aware that
Irish law does not allow for any terms of legal proceedings directly
equivalent to the class action available in U.S. courts. Accordingly,
holders of our shares may have more difficulty protecting their interests
than would holders of shares of a company organized in a jurisdiction of the
U.S.
(l) A takeover offer for the Company's securities would be subject to
supervision by French and Irish regulatory authorities, which may add
complexity to, and delay completion of, any takeover offer for the Company
As a company with its registered office in Ireland and whose securities are
admitted to trading on a regulated market (within the meaning of Directive
93/22/EEC) in France only, the Company is, for the purposes of Directive
2004/25/EC of the European Parliament and the Council dated 21 April 2004
(the "Takeover Directive"), a shared jurisdiction company. This means that a
takeover offer or bid for its securities would be subject to the Irish
Takeover Rules of the Irish Takeover Panel in some respects, but also
subject to the general regulation (règlement général) (the "French
Takeover
Rules") of the Autorité des marchés financiers (the "AMF") in most other
respects.
In the case of a takeover offer for a shared jurisdiction company, the
Takeover Directive provides that matters relating to the consideration
offered in the case of a bid, in particular the price, and matters relating
to the bid procedure, in particular the information on the offeror's
decision to make a bid, the contents of the offer document and the
disclosure of the bid, shall be dealt with in accordance with the rules of
the Member State in which the securities of the company are admitted to
trading on a regulated market, in this case France. Matters relating to the
information to be provided to the employees of the offeree company and
matters relating to company law, in particular the percentage of voting
rights conferring "control" and any derogation from the obligation to launch
a bid, as well as the conditions under which the board of the offeree
company may undertake any action which might result in frustration of the
bid, shall be determined by the rules of the Member State in which the
Company has its registered office, in this case, Ireland.
The Company is currently the only shared jurisdiction company (current or
previous) for the purposes of the Takeover Directive where, in the case of a
takeover offer, the relevant competent authorities would be those of France
and Ireland. Accordingly, a takeover offer for the Company would be
supervised by two competent authorities, who would need to agree amongst
themselves the correct delineation, with respect to such takeover offer,
between the application of their respective takeover rules, as well as
between their respective responsibilities and powers. The Company believes
that this could lead to additional complexity in planning, making and/or
completing any such takeover offer, which in turn could result in an
extension of the transaction timetable and increased transaction costs.
(m) Future sales of Ordinary Shares by existing shareholders could depress
the market price of the Ordinary Shares
If our existing shareholders sell, or indicate an intent to sell,
substantial amounts of Ordinary Shares in the public market, the trading
price of the Ordinary Shares could decline significantly.
Mainstay Medical International plc
Directors' responsibilities statement
Statement of the Directors in respect of the Annual Report and Financial
Statements
The Directors are responsible for preparing the Annual Report and the
Group and Company Financial Statements, in accordance with applicable
law and regulations.
Company law requires the Directors to prepare group and company
financial statements for each financial year. Under that law and in
accordance with the ESM Rules, the Directors have prepared the Group
Financial Statements in accordance with International Financial
Reporting Standards ("IFRS") as adopted by the European Union ("EU")
and have elected to prepare the Company Financial Statements in
accordance with IFRS as adopted by the EU, as applied in accordance
with the Companies Act 2014. The Financial Statements are required by
company law to give a true and fair view of the assets, liabilities
and financial position of the Group and the Company and of the profit
or loss of the Group.
In preparing each of the Group and Company Financial Statements, the
Directors are required to:
select suitable accounting policies and then apply them consistently;
make judgements and estimates that are reasonable and prudent;
state that the Financial Statements comply with IFRS as adopted by the
EU, as applied in accordance with the Companies Act 2014; and
prepare the Financial Statements on the going concern basis unless it
is inappropriate to presume that the Group and the Company will
continue in business.
The Directors are responsible for keeping adequate accounting records
that disclose with reasonable accuracy at any time the assets,
liabilities and financial position and profit or loss of the Group and
Company and enable them to ensure that their Financial Statements of
the Group and Company are prepared in accordance with applicable IFRS
as adopted by the EU, and with the Companies Act 2014.
They have general responsibility for taking such steps as are
reasonably open to them to safe guard the assets of the Group and
Company and to prevent and detect fraud and other irregularities.
Under applicable law, the Directors are responsible for the
maintenance and integrity of the corporate and financial information
included on the Company's website. Legislation in the Republic of
Ireland governing the preparation and dissemination of financial
statements may differ from legislation in other jurisdictions. The
Directors are also responsible for preparing a Directors' Report that
complies with the requirements of the Companies Act 2014.
Each of the current Directors, whose names are listed in the Corporate
Information confirms that they consider that the Annual Report and
Financial Statements, taken as a whole is fair, balanced and
understandable and provides the information necessary for shareholders
to assess the Company's and the Group's performance, business model
and strategy. Each of the current Directors also confirms that to the
best of each person's knowledge and belief:
the Financial Statements prepared in accordance with IFRS as adopted
by the EU give a true and fair view of the assets, liabilities and
financial position of the Company and the Group and of the loss of the
Group; and
the Directors' Report contained in the Annual Report includes a fair
review of the development and performance of the business and the
position of the Company and Group, together with a description of the
principal risks and uncertainties that they face.
The statutory Directors' Report is deemed to comprise pages 8 to 22.
On behalf of the Board on 22 March 2017,
Oern Stuge MD Peter Crosby
Chairman CEO
INDEPENDENT AUDITOR'S REPORT TO THE MEMBERS OF MAINSTAY MEDICAL
INTERNATIONAL PLC
We have audited the Group and Company financial statements
(''financial statements'') of Mainstay Medical International plc for
the year ended 31 December 2016 which comprise the consolidated
statement of profit or loss and other comprehensive income, the
consolidated and parent company statements of financial position, the
consolidated and parent company statements of changes in equity, the
consolidated and parent company statements of changes in cash flows
and the related notes. The financial reporting framework that has been
applied in their preparation is Irish law and International Financial
Reporting Standards ("IFRS") as adopted by the European Union and as
regards the Company financial statements, as applied in accordance
with the provisions of the Companies Act 2014.
Opinions and conclusions arising from our audit
1 Our opinion on the financial statements is unmodified
In our opinion:
the Group financial statements give a true and fair view of the
assets, liabilities and financial position of the Group as at 31
December 2016 and of its loss for the year then ended;
the Company statement of financial position gives a true and fair view
of the assets, liabilities and financial position of the Company as at
31 December 2016;
the Group financial statements have been properly prepared in
accordance with IFRS as adopted by the European Union;
the Company financial statements have been properly prepared in
accordance with IFRS as adopted by the European Union as applied in
accordance with the provisions of the Companies Act 2014; and
the Group financial statements and Company financial statements have
been properly prepared in accordance with the requirements of the
Companies Act 2014.
2 Our conclusions on other matters on which we are required to report by the
Companies Act 2014 are set out below
We have obtained all the information and explanations which we consider
necessary for the purposes of our audit.
In our opinion the accounting records of the Company were sufficient to
permit the financial statements to be readily and properly audited and the
financial statements are in agreement with the accounting records.
In our opinion the information given in the Directors' Report is consistent
with the financial statements.
3 We have nothing to report in respect of matters on which we are required
to report by exception
ISAs (UK & Ireland) require that we report to you if, based on the knowledge
we acquired during our audit, we have identified information in the annual
report that contains a material inconsistency with either that knowledge or
the financial statements, a material misstatement of fact, or that is
otherwise misleading.
In addition, the Companies Act 2014 requires us to report to you if, in our
opinion, the disclosures of directors' remuneration and transactions
required by sections 305 to 312 of the Act are not made.
INDEPENDENT AUDITOR'S REPORT TO THE MEMBERS OF MAINSTAY MEDICAL
INTERNATIONAL PLC (continued)
Basis of our report, responsibilities and restrictions on use
As explained more fully in the Statement of Directors'
Responsibilities set out on page 42, the Directors are responsible for
the preparation of the financial statements and for being satisfied
that they give a true and fair view and otherwise comply with the
Companies Act 2014. Our responsibility is to audit and express an
opinion on the financial statements in accordance with Irish law and
International Standards on Auditing (UK and Ireland). Those standards
require us to comply with the Financial Reporting Council's Ethical
Standards for Auditors.
An audit undertaken in accordance with ISAs (UK & Ireland) involves
obtaining evidence about the amounts and disclosures in the financial
statements sufficient to give reasonable assurance that the financial
statements are free from material misstatement, whether caused by
fraud or error. This includes an assessment of: whether the accounting
policies are appropriate to the Group and Company's circumstances and
have been consistently applied and adequately disclosed; the
reasonableness of significant accounting estimates made by the
Directors; and the overall presentation of the financial statements.
In addition, we read all the financial and non-financial information
in the Annual Report to identify material inconsistencies with the
audited financial statements and to identify any information that is
apparently materially incorrect based on, or materially inconsistent
with, the knowledge acquired by us in the course of performing the
audit. If we become aware of any apparent material misstatements or
inconsistencies, we consider the implications for our report.
Whilst an audit conducted in accordance with ISAs (UK & Ireland) is
designed to provide reasonable assurance of identifying material
misstatements or omissions it is not guaranteed to do so. Rather the
auditor plans the audit to determine the extent of testing needed to
reduce to an appropriately low level the probability that the
aggregate of uncorrected and undetected misstatements does not exceed
materiality for the financial statements as a whole. This testing
requires us to conduct significant audit work on a broad range of
assets, liabilities, income and expense as well as devoting
significant time of the most experienced members of the audit team, in
particular the engagement partner responsible for the audit, to
subjective areas of the accounting and reporting.
Our report is made solely to the Company's members, as a body, in
accordance with section 391 of the Companies Act 2014. Our audit work
has been undertaken so that we might state to the Company's members
those matters we are required to state to them in an auditor's report
and for no other purpose. To the fullest extent permitted by law, we
do not accept or assume responsibility to anyone other than the
Company and the Company's members as a body, for our audit work, for
this report, or for the opinions we have formed.
22 March 2017
Sean O'Keefe
for and on behalf of
KPMG
Chartered Accountants, Statutory Audit Firm
1 Stokes Place, St. Stephen's Green. Dublin 2
Mainstay Medical International plc
Consolidated statement of profit or loss and other comprehensive income
for the year ended 31 December 2016
($'000) No- Year ended 31 Year ended 31
te- December 2016 December 2015
s
Revenue - -
Operating expenses 5 (16,828) (12,864)
Operating loss (16,828) (12,864)
Finance expense 8 (1,808) (323)
Net finance expense (1,808) (323)
Loss before income taxes (18,636) (13,187)
Income taxes 10 (122) (48)
Loss for the year (18,758) (13,235)
Net loss attributable to equity (18,758) (13,235)
holders
Basic and diluted loss per share (in 9 ($3.38) ($3.08)
$)
Other Comprehensive Income
Items that may be reclassified
subsequently to the statement of
profit or loss:
Foreign currency translation 35 -
differences of foreign operations
Total comprehensive loss for the year (18,723) (13,235)
Total comprehensive loss attributable (18,723) (13,235)
to equity holders
The accompanying notes form an integral part of these financial statements.
Mainstay Medical International plc
Consolidated statement of financial position
at 31 December 2016
($'000) No- 31 December 31 December
tes 2016 2015
Non-current assets
Property, plant and equipment 11 255 242
Current assets
Prepayments and other receivables 12 889 661
Income tax receivable 103 70
Inventory 13 1,123 -
Cash and cash equivalents 14 36,670 16,624
Total current assets 38,785 17,355
Total assets 39,040 17,597
Equity
Share capital 17 64 61
Share premium 17 106,360 72,588
Share based payment reserve 20 4,606 2,691
Undenominated capital reserve 18 49,273 49,273
Reorganization reserve 18 (44,573) (44,573)
Foreign currency translation 18 35 -
reserve
Retained loss (94,707) (74,816)
Shareholders' equity 21,058 5,224
Non-current liabilities
Loans and borrowings 15 13,276 10,084
Total non-current liabilities 13,276 10,084
Current liabilities
Loans and borrowings 15 2,268 305
Income tax payable 58 17
Trade and other payables 16 2,380 1,967
Total current liabilities 4,706 2,289
Total liabilities 17,982 12,373
Total equity and liabilities 39,040 17,597
The accompanying notes form an integral part of these financial statements.
On behalf of the Board on 22 March 2017,
Oern Stuge MD Peter Crosby
Chairman CEO
Mainstay Medical International plc
Consolidated statement of changes in shareholders' equity
for the year ended 31 December 2016
($'000) Sha- Share Unde-no- Reorga- For- Share Retai- Total
re premium minated ni-zati- eign based ned equity
ca- capital on cur- payment loss
pi- reserve reserve ren- reserve
tal cy
tran-
sla-
tion
re-
ser-
ve
Balance 61 72,584 49,273 (44,573) - 1,162 (61,5- 16,926
as at 1 81)
January
2015
Profit - - - - - - (13,2- (13,23-
and 35) 5)
loss
Other - - - - - - - -
compre-
hensive
income
Total - - - - - - (13,2- (13,23-
compre- 35) 5)
hensive
loss
for the
year
Transac-
tions
with
owners
of the
Compa-
ny:
Share - - - - - 1,529 - 1,529
based
pay-
ments
Issue - 4 - - - - - 4
of
shares
on
exerci-
se of
share
options
or
war-
rants
Balance 61 72,588 49,273 (44,573) - 2,691 (74,8- 5,224
at 31 16)
Decem-
ber
2015
Balance 61 72,588 49,273 (44,573) - 2,691 (74,8- 5,224
as at 1 16)
January
2016
Profit - - - - - - (18,7- (18,75-
and 58) 8)
loss
Other - - - - 35 - - 35
compre-
hensive
income
Total - - - - 35 - (18,7- (18,72-
compre- 58) 3)
hensive
loss
for the
year
Transac-
tions
with
owners
of the
Compa-
ny:
Issue 3 33,725 - - - - (1,17- 32,551
of 7)
Shares
Share - - - - - 1,959 - 1,959
based
pay-
ments
Issue - 47 - - - (44) 44 47
of
shares
on
exerci-
se of
share
options
or
war-
rants
Balance 64 106,360 49,273 (44,573) 35 4,606 (94,7- 21,058
at 31 07)
Decem-
ber
2016
The accompanying notes form an integral part of these consolidated financial
statements.
Mainstay Medical International plc
Consolidated statement of cash flows
for the year ended 31 December 2016
($'000) No- Year ended 31 Year ended 31
tes December 2016 December 2015
Cash flow from operating
activities
Loss for the year (18,758) (13,235)
Add/(less) non-cash items
Depreciation 11 120 78
Finance expense 8 1,808 323
Share-based compensation 20 1,959 1,529
Add/(less) changes in working
capital
Prepayments and other (454) (391)
receivables
Inventory (929) -
Trade and other payables 561 142
Taxes paid (117) 19
Interest paid (934) (27)
Net cash used in operations (16,744) (11,562)
Cash flow from investing
activities
Acquisition of property and 11 (195) (248)
equipment
Net cash used in investing (195) (248)
activities
Cash flow from financing
activities
Proceeds from issue of shares 17 33,775 4
Transaction costs on issue of 17 (1,177) -
shares
Proceeds of borrowings 15 4,500 10,500
Transaction costs on issue of 15 (113) (353)
borrowings
Net cash from financing 36,985 10,151
activities
Net increase/(decrease) in cash 20,046 (1,659)
and cash equivalents
Cash and cash equivalents at 16,624 18,283
beginning of year
Cash and cash equivalents at 14 36,670 16,624
end of year
The accompanying notes form an integral part of these financial statements.
Mainstay Medical International plc
Notes to the consolidated Financial Statements
1 General information and reporting entity
Mainstay Medical International plc (the "Company") is a company incorporated
and registered in Ireland. Details of the registered office, the officers
and advisers to the Company are presented on the Corporate and Shareholder
Information page.
The Consolidated Financial Statements ("the Financial Statements") for the
years ended 31 December 2016 and 31 December 2015 comprise the results of
the Company and of its subsidiaries (together the "Group").
At 31 December 2016, the Group comprises the Company and its operating
subsidiaries Mainstay Medical Limited, MML US, Inc., Mainstay Medical
(Australia) Pty. Limited, Mainstay Medical Distribution Limited and Mainstay
Medical GmbH.
The Company's shares are quoted on Euronext Paris and ESM of the Irish Stock
Exchange.
Mainstay is a medical device company focused on bringing to market ReActiv8,
an implantable restorative neurostimulation system to treat disabling
Chronic Low Back Pain ("CLBP").
2 Basis of preparation
Statement of compliance
The Financial Statements have been prepared in accordance with
International Financial Reporting Standards ("IFRS") as issued by the
International Accounting Standards Board ("IASB"), as endorsed by the
European Union ("EU") and in accordance with the ESM rules of the
Irish Stock Exchange. The Company Financial Statements have also been
prepared in accordance with IFRS as adopted by the EU, in accordance
with ESM rules and as applied in accordance with the Companies Act
2014 (the "2014 Act"), which permits a company that publishes its
company and group financial statements together to take advantage of
the exemption in Section 304 of the 2014 Act from presenting to its
members both its company statement of profit or loss and other
comprehensive income and related notes which form part of the approved
company financial statements.
The Financial Statements are available on the Group's website.
The IFRSs adopted by the EU applied by the Group in the preparation of these
Financial Statements are those that were effective for accounting periods
beginning on or after 1 January 2016 with no early adoption of forthcoming
requirements.
The Financial Statements were authorized for issue by the Board of Directors
on 22 March 2017.
Going concern
The Financial Statements have been prepared on the basis that the Group is a
going concern. The Directors note the following relevant matters:
- The Group has an accumulated retained losses reserve of $94.7 million and
a reorganization reserve of $44.6 million (which is in substance, primarily,
retained losses). These losses include a non-cash expense of $66.5 million
incurred in 2014 related to fair valuing of embedded derivatives arising on
preference shares
- The Group expects to continue to incur losses in the medium term
- The Group had operating cash out flows of $16.7 million during the year
ended 2016 (2015: $11.6 million)
- Regulatory approval for the commercialization of ReActiv8 is not
guaranteed and in the US is dependent on the successful completion of the
ReActiv8-B Clinical Trial and obtaining PMA approval from the FDA
To fund the clinical trials and commercialization of ReActiv8 the Group has
raised debt and equity and it continues to explore funding strategies (e.g.:
equity, debt, partnering) to support the Group's activities into the future.
As at 31 December 2016, the Group reported cash of $36.7 million.
After making enquiries and having considered the conditions noted above and
the options available to the Group, the Directors have a reasonable
expectation that the Group can carefully monitor its cash flows and has the
ability to consider various strategies for additional funding and budgets to
manage cash (e.g.: pause projects, delay recruitment and focus on specific
milestones) to ensure that the Group will have sufficient funds to be able
to meet its liabilities as they fall due for a period of at least 12 months
from the date of approval of the Financial Statements and are satisfied that
the Financial Statements should be prepared on a going concern basis.
Basis of measurement
The Financial Statements are prepared on the historic cost method,
except for:
Share based payments, which are initially measured at grant date fair
value; and
Derivative financial instruments, which are measured at fair value
through profit or loss and other comprehensive income.
Currency
The Financial Statements are presented in US Dollars ("$"), which is
the functional and presentational currency of the Company. Balances in
the Financial Statements are rounded to the nearest thousand ("$'000")
except where otherwise indicated.
Use of estimates and judgements
The preparation of the Financial Statements in conformity with IFRS
requires management to make judgements, estimates and assumptions.
Estimates are reviewed on an ongoing basis. The areas where judgement
has the most significant effect on amounts recognized in the Financial
Statements are:
Initial fair value measurement of equity-settled share based payments
(Note 20);
Measurement of derivative financial instruments held at fair value
(Note 19).
Details of the inputs into the fair values of each of the above are provided
in the relevant notes as listed above. Fair value disclosures for financial
instruments as required by IFRS 13 are provided in Note 19.
Basis of consolidation
The Financial Statements comprise the consolidated results of Mainstay
Medical International plc and its subsidiaries.
3 Significant accounting policies
The Financial Statements have been prepared applying the accounting policies
as set out below. These have been applied consistently for all years
presented. In addition, the Group applied the standards listed below for the
first time in the current year:
- Annual improvements to IFRSs 2012-2014 cycle (effective date 1 January
2016)
- Disclosure initiative (amendments to IAS 1) (effective date 1 January
2016)
- IAS 16 and IAS 38 (amended) - Property, Plant and Equipment and Intangible
Assets (effective date 1 January 2016)
- IAS 16 and 41 - Bearer Plants (effective date 1 January 2016)
- IFRS 11 (amended) - Accounting for acquisitions of interests in Joint
Operations (effective date 1 January 2016)
None of these have had any material impact on the Group's implementation of
accounting policies or on its reported results.
A number of new standards and amendments to standards are effective for
future periods. The date noted is the IASB effective date:
- IFRS 9 - Financial Instruments (effective 1 January 2018)
- IFRS 15 - Revenue from contracts with customers (effective 1 January 2018)
- Disclosure initiative (amendments to IAS 7) (effective 1 January 2017, not
yet endorsed by the EU)
- IAS 12 (amended) - recognition of deferred tax assets for unrealized
losses (effective 1 January 2017, not yet endorsed by the EU)
- IFRS 2 (amended)- Share Based Payments (effective 1 January 2018, not yet
endorsed by the EU)
- IFRS 12 (amended) - Disclosure of Interests in Other Entities (effective 1
January 2017, not yet endorsed by the EU)
- IFRS 16 - Leases (effective 1 January 2019, not yet endorsed by the EU)
The above listed new standards and amendments to standards with an effective
date of 1 January 2017 are not expected to have a material impact on the
Group.
The above listed new standards and amendments to standards with an effective
date after 1 January 2017 are under review by the Group.
a) Subsidiaries
Subsidiaries are entities controlled by the Group. The Group controls
an entity when it is exposed to, or has rights to, variable returns
from its involvement with the entity and has the ability to affect
these returns through its power over the entity. The financial
statements of subsidiaries are included in the Financial Statements
from the date that control commences until the date that control
ceases.
b) Pension costs
The Group provides pensions to its employees in Ireland and Australia
under three defined contribution schemes. Obligations for
contributions to the defined contribution schemes are expensed as the
related service is provided.
c) Property, plant and equipment
Property, plant and equipment is stated at cost less accumulated
depreciation. Depreciation is calculated to write off the cost of each asset
over its estimated future life, as follows:
Computer and office equipment: 3 - 5 years
d) Leases
Operating leases related to the Group's offices are charged to profit
or loss on a straight line basis over the lease term. An operating
lease is one where the majority of risks and rewards of the asset are
not transferred to the Group over the lease term. The Group has no
finance leases.
e) Taxation
Tax expense comprises current and deferred tax. Current and deferred
taxes are recognized in the consolidated statement of profit or loss
and other comprehensive income except to the extent that they relate
to a business combination, or items recognized directly in equity.
Current tax is the expected tax payable or receivable on the taxable
result for the year and any adjustments in relation to tax payable or
receivable in respect of the previous years.
Deferred tax is recognized in respect of temporary differences between
the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for taxation purposes. Deferred tax is
not recognized for:
temporary differences on the initial recognition of assets and
liabilities in a transaction that is not a business combination and
that affects neither accounting nor taxable profit; and
temporary differences related to subsidiaries to the extent that it is
probable that they will not reverse in the foreseeable future.
Deferred tax is measured at the tax rates at which the temporary
differences are expected to reverse, using tax rates enacted or
substantively enacted at the reporting date. Deferred tax assets and
liabilities are offset where the entity has a legally enforceable
right to set off current tax assets against current tax liabilities
and the deferred tax assets and liabilities related to the same
taxation authority. Deferred tax assets are recognized to the extent
that it is probable that there will be taxable profits in the
foreseeable future against which they can be utilized.
The Group recognizes tax credits as a component of income tax in
jurisdictions where the tax credit regime is not, in substance a
government grant.
f) Foreign currency transactions and balances
Transactions in foreign currencies are recorded at the rate prevailing
at the date of the transactions. Any resulting monetary assets and
liabilities are translated at the exchange rate at the reporting date
and all exchange differences thereon are dealt with in consolidated
profit or loss.
The income statement and balance sheet of subsidiaries that have a
functional currency different from the presentation currency are
translated into the presentation currency as follows:
assets and liabilities at each reporting date are translated at the
closing rate at the reporting date of the balance sheet; and
income and expenses in the income statement and statement of
comprehensive income are translated at average exchange rates for the
year. Average exchange rates are only permissible if they approximate
actual. The average exchange rates are a reasonable approximation of
the cumulative effect of the exchange rates on transaction dates.
All resulting exchange differences are recognized in other
comprehensive income, and are taken to a separate currency reserve
within equity, the foreign currency translation reserve.
g) Financial instruments
I) Non-derivative financial assets
Financial assets are initially recognized on the date they are
originated and when the Group obtains contractual rights to receive
cash flows. The Group derecognizes financial assets when the
contractual rights to cash flows expire or it transfers the right to
receive cash flows in a transaction which transfers substantially all
the risks and rewards of ownership of the asset.
Cash and cash equivalents
Cash and cash equivalents comprise cash balances and call deposits
with maturities of three months or less.
II) Non-derivative financial liabilities
The Group's non-derivative financial liabilities comprise the following
categories:
Loans and borrowings
These are initially recorded at fair value less applicable transaction
costs and are subsequently measured at amortized cost using the
effective interest method over the contractual term of the associated
liability.
Trade and other payables
Trade and other payables are measured initially at fair value and
subsequently at amortized cost.
III) Derivative financial instruments
Embedded derivatives that meet the separation criteria of IAS 32 are
recorded separately on initial recognition at fair value through
profit or loss.
h) Equity
Ordinary share capital is recognized directly in equity at fair value
on issue and is not subsequently re-measured.
i) Impairment
Financial assets
Financial assets are assessed at each reporting date to determine if
there is objective evidence of impairment. The Group considers the
need for impairment of financial assets at both an individual and
collective level. Impairment losses are recognized in profit or loss
in the consolidated statement of profit or loss and other
comprehensive income.
Non-financial assets
All non-financial assets, other than deferred taxes are reviewed at
the reporting date to determine whether there is evidence of
impairment. If such indicators exist, then the asset's recoverable
value is determined. An impairment loss is recognized if the carrying
value exceeds the recoverable amount. Recoverable amount is the
greater of an asset's value in use and its fair value. In assessing
value in use, the estimated future cash flows associated with the
asset are discounted to their present value using a pre-tax discount
rate that reflects current market conditions.
j) Provisions
A provision is recognized if, as a result of a past event, the Group
has a present obligation that it is probable, will result in an
outflow of resources and this can be estimated reliably.
k) Finance income and expense
Finance income comprises foreign exchange gains on financial items and
deposit interest. Interest income is recognized as it accrues. Finance
costs comprise interest on borrowings and foreign exchange losses.
l) Share based payments
The grant date fair value of equity-settled share based awards made to
employees and non-employees is recognized as an expense, with a
corresponding adjustment to equity, over the vesting period of the
award. The amount recognized as an expense is adjusted to reflect the
number of awards for which the achievement of service and non-market
conditions are expected to be met, such that the amount ultimately
recognized represents only vested awards.
The grant-date fair value of share options granted to employees is
determined using a Black-Scholes model, details of which are provided
in Note 20. The grant-date fair value of share options granted to
non-employees is determined based on the fair value of services
received in return for the option, or where such a value is not
available, based on the same model as used for employee options.
Options can only be settled by way of share issues.
m) Warrants
Warrants issued alongside debt instruments are initially recognized at fair
value with a corresponding reduction in the debt instrument liability
whereon this adjustment to the liability is amortized to the income
statement on an effective interest rate basis.
All warrants issued by the Group can only be settled in a fixed number of
equity instruments and accordingly are classified as equity instruments.
Equity instruments are not re-measured over the life of the instrument.
n) Earnings per ordinary share
Basic earnings per share are calculated by dividing net profit/ (loss)
attributable to equity holders for the year by the weighted average
number of ordinary shares in issue during the year.
Diluted earnings per share are calculated by dividing net profit
attributable to equity holders for the year by the weighted average
number of ordinary shares in issue during the year after adjusting for
the effects of all potential dilutive ordinary shares that were
outstanding during the financial period.
o) Research and development expenditure
Expenditure on research is charged to the income statement in the year
in which it is incurred.
Expenditure on development is charged to the income statement in the
year in which it is incurred with the exception of development
expenditure that is incurred in the development of an intangible asset
that is available for sale; is intended to be developed for sale; and
for which the likelihood of development and sale is probable; which is
capitalized. No costs have been capitalized to date.
p) Inventories
Inventories are stated at the lower of cost and net realizable value. The
cost of inventories is based on the first in - first out principle and
includes expenditure in acquiring the inventories and bringing them to their
existing location and condition. Net realizable value is the estimated
selling price less the estimated costs of completion and the estimated costs
necessary to make the sale. Provision is made, where necessary, for aged,
slow moving, obsolete and defective inventories.
4 Segment reporting
Due to the current nature of the Group's current activities, the Group
considers there to be one operating segment Active Implantable Medical
Devices ("AIMD"s). The results of the Group are reported on a consolidated
basis to the Chief Operating Decision Maker of the Group, the Chief
Executive Officer. There are no reconciling items between the Group's
reported consolidated statement of profit or loss and other comprehensive
income and statement of financial position and the results of the AIMDs
segment.
The Group has operations in Europe, the US and Australia. The non-current
assets held in these jurisdictions are detailed below:
($'000) 31 December 2016 31 December 2015
Ireland 75 207
United States 180 35
Australia - -
Total non-current assets 255 242
5 Operating expenses
($'000) Year ended 31 Year ended 31
December 2016 December 2015
Research and development 3,582 2,893
expenses
Clinical and regulatory 5,599 4,669
expenses
Selling, general and 7,647 5,302
administration expenses
Total operating expenses 16,828 12,864
6 Employee numbers and benefits
As of 31 December 2016, the Group's employees were based in Ireland,
Germany, the United States and Australia.
The table below sets out the number of employees of the Group for each
financial year shown, analyzed by category:
($'000) Year ended 31 Year ended 31
December 2016 December 2015
Research and development 12 9
and quality
Clinical and regulatory 8 6
Selling, general and 12 8
administration
Total employee numbers 32 23
Parent company employees
General and 7 6
administration
The aggregate payroll costs of these employees, including Directors, were as
follows for each financial year shown:
>
($'000) Year ended 31 Year ended 31
December 2016 December 2015
Wages and salaries 3,731 2,812
Other remuneration 921 823
Social security costs/ 306 213
payroll taxes
Share based payments 1,959 1,529
Pension 62 51
6,979 5,428
7 Statutory information and Auditor's remuneration
The loss before income tax has been arrived at after charging the following
items for each financial year shown:
($'000) Year ended 31 Year ended 31
December 2016 December 2015
Audit of these financial 65 47
statements
Other assurance services 132 21
Taxation advisory services 65 42
Total auditor's 262 110
remuneration
Depreciation of plant and 120 78
equipment
Rentals payable under 205 176
operating leases
Research and development 3,582 2,893
expenditure
8 Finance expense
($'000) Year ended Year ended
31 December 2016 31 December 2015
Finance expense
Foreign exchange loss (107) (53)
Interest expense on borrowings (1,701) (270)
Total finance expense (1,808) (323)
9 Earnings per share
As the Group is incurring operating losses, there is no difference between
basic and diluted earnings per share.
Year ended 31 Year ended 31
December 2016 December 2015
Loss for the year ($'000) 18,758 13,235
Weighted average number of 5,548,880 4,294,617
ordinary shares in issue
Loss per share $3.38 $3.08
In accordance with IFRS, share options and warrants are not included in the
weighted average number of ordinary shares for the purposes of calculating
diluted earnings per share as they are anti-dilutive. Refer to note 20, for
information on shares options and warrants outstanding as at 31 December
2016 and 31 December 2015.
10 Taxes
Current income tax assets and liabilities for the current and prior years
are measured at the amount expected to be recovered from or paid to the
relevant taxation authorities. The tax rates and tax laws used to compute
the amount are those used in Ireland, the United States, Australia and
Germany.
($'000) Year ended 31 Year ended 31
December 2016 December 2015
Irish income tax - -
Income tax in other
jurisdictions:
Foreign current tax 106 50
Adjustments in respect of 16 (2)
prior years
Total income tax charge 122 48
Certain companies within the Group provide services to other group
companies, and consequently generate revenues and profits that are subject
to corporation tax in Australia, United States and Germany.
Reconciliation of effective tax rate
($'000) Year ended 31 Year ended 31
December 2016 December 2015
Loss before tax (18,636) (13,187)
Taxed at tax rate in (2,329) (1,648)
Ireland of 12.5%
Non-deductible expenses 288 202
Tax credits (103) (69)
Foreign rate differential 183 35
Adjustments in respect of 16 (2)
prior periods
Unrecognized tax losses 2,067 1,530
Total income tax 122 48
charge/(credit)
Unrecognized deferred tax assets
The Group has unrecognized potential deferred tax assets as follows. These
potential assets are not recognized because future taxable profits against
which they can be utilized are not sufficiently certain. The availability of
these losses does not expire.
Capital allowances on intellectual property which is recognized as an asset
for tax purposes but is not capitalized under IFRS will be available should
the Group generate relevant income in future periods against which the
capital allowances are deductible.
Gross
timing
diffe-
rences:
At 1 Ari- Adjust- At 31 Ari- Adjust- At 31
Janua- sing ment in Decem- sing ment in Decem-
ry in respect ber in respect ber
2015 year of prior 2015 year of prior 2016
years years
Unrecogni- 26,168 12,240 (2,048) 36,360 16,541 (221) 52,680
zed tax
losses
Intangi- 15,000 - - 15,000 - - 15,000
ble
assets
Share 1,158 (228) - 930 315 - 1,245
based
payments
Total 42,326 12,012 (2,048) 52,290 16,856 (221) 68,925
gross
timing
diffe-
rences
Unrecogni- 5,609 1,439 (256) 6,792 2,119 (28) 8,883
zed
deferred
tax asset
11 Property, plant & equipment
Computer and office Computer and office
equipment equipment
($'000) Year ended 31 Year ended 31
December 2016 December 2015
Cost
At beginning of year 378 130
Additions 195 248
Transfer to inventory (124) -
At end of year 449 378
Depreciation
At beginning of year 136 58
Charge for the year 120 78
Transfer to inventory (62) -
At end of year 194 136
Carrying value at end 255 242
of year
During 2016, computer equipment which had been purchased for use in Clinical
Trials, and which had been recognized as Property, Plant and Equipment
during 2015, was transferred at its written down value into inventory, as it
is intended now that this equipment will be sold in the normal course of
business.
12 Prepayments and other receivables
($'000) Year ended 31 Year ended 31
December 2016 December 2015
Prepayments 744 588
VAT recoverable 100 42
Other receivables 45 31
Total prepayments and 889 661
other receivables
13 Inventory
($'000) Year ended Year ended
31 December 2016 31 December 2015
Raw Materials 137 -
Work in Progress 108 -
Finished Goods 878 -
Total inventory 1,123 -
There were no provisions netted against inventory as at 31 December 2016.
14 Cash and cash equivalents
($'000) Year ended Year ended
31 December 2016 31 December 2015
Cash in bank accounts - USD 36,615 16,584
Cash in bank accounts - Euro 53 35
Cash in bank accounts - AUD 2 5
Total cash and cash equivalents 36,670 16,624
15 Interest bearing loans and borrowings
IPF Debt Financing
On 24 August 2015, Mainstay Medical Limited entered into an agreement with
IPF Partners for a debt facility of up to $15 million. The facility can be
drawn in three tranches. Each tranche has a repayment term of 60 months from
drawdown, with interest only payments for the first 12 months.
The initial tranche ("Tranche A") of $4.5 million was received on 9
September 2015. The interest rate on Tranche A is 3-month Euribor plus a
margin of 12.5%.
A second tranche ("Tranche B") of $6 million was received on 3 December
2015. The interest rate on Tranche B is 3-month Euribor plus a margin of
11.5%.
A third tranche ("Tranche B") of $4.5 million was received on 28 July 2016.
The interest rate on Tranche B is 3-month Euribor plus a margin of 10.5%.
Other expenses directly associated with the facility of $466,000 (2015:
$353,000) are offset against the carrying value of the debt and are
amortized to profit or loss over the commitment term on an effective
interest rate basis.
The facility is secured by way of fixed and floating charges over the assets
and undertakings of Mainstay Medical Limited, and the Mortgage Debenture
includes customary terms and conditions. In addition, Mainstay Medical
International plc has created a first fixed charge in favor of IPF over its
present and future shares held in Mainstay Medical Limited.
The terms of the agreement include a requirement that Mainstay Medical
Limited hold a minimum cash balance of $2 million, or achieve revenue
targets within an agreed timeframe. It also includes monthly and quarterly
reporting requirements. The Group is not in breach of any covenants at 31
December 2016 and has not been in breach at any reporting date.
($'000) Year ended 31 Year ended 31
December 2016 December 2015
Loans and borrowings -
current
Term loan 2,025 225
Deferred finance cost (91) (71)
Accrued interest 334 151
Total current loans and 2,268 305
borrowings
Loans and borrowings -
non-current
Term loan 12,975 10,275
Deferred finance cost (142) (248)
Accrued interest 443 57
Total non-current loans 13,276 10,084
and borrowings
Total loans and borrowings 15,544 10,389
16 Trade and other payables
($'000) Year ended Year ended
31 December 2016 31 December 2015
Trade and other payables 1,570 1,204
Payroll tax liability 113 81
Accrued expenses 697 682
Total trade and other payables 2,380 1,967
17 Called up share capital
The Company's ordinary shares are quoted in Euro and have been translated in
US Dollars at the rates prevailing at the date of issue.
Authorized and Issued Share Capital
Authorized 31 December 31 December
2016 EUR 2015 EUR
20,000,000 ordinary shares of EUR0.001 20,000 20,000
each
40,000 deferred shares of EUR1.00 each 40,000 40,000
60,000 60,000
Issued, called up and fully paid 2016 $ 2015 $
6,611,952 (2015: 4,298,203) ordinary 8,555 5,954
shares of EUR0.001 each
40,000 deferred shares of EUR1.00 each 55,268 55,268
63,823 61,222
In $'000 64 61
Details of movement in issued shares:
During 2015, 4,062 options over ordinary shares were exercised by the
holders and the Company issued 4,062 ordinary shares. Proceeds of $4,062
were received on issue of the shares.
On 17 June 2016, the Company raised gross proceeds of EUR30 million
(approximately $33.7 million) through a placement of 2,307,694 new ordinary
shares. This issuance of new ordinary shares was recorded in the Statement
of Financial Position in USD at the rate ruling on the date of the
transaction. Transaction costs directly attributable to the issue of the new
ordinary shares, of approximately $1.2 million, have been offset against
retained earnings (in accordance with the Companies Act 2014).
During 2016, 6,055 warrants over ordinary shares were exercised by the
holders and the Company issued 6,055 ordinary shares. Proceeds of $46,624
were received on issue of the shares.
Movement of
shares
Number of shares Ordinary Deferred
shares shares
At 1 January 2015 4,294,141 40,000
Issue of ordinary shares on exercise of 4,062 -
share options
At 31 December 2015 4,298,203 40,000
At 1 January 2016 4,298,203 40,000
Issue of shares 2,307,694 -
Issue of ordinary shares on exercise of 6,055 -
share warrants
At 31 December 2016 6,611,952 40,000
Movement of
shares
$'000 Share capital Share
premium
At 1 January 2015 61 72,584
Issue of ordinary shares on exercise of - 4
share options
At 31 December 2015 61 72,588
At 1 January 2016 61 72,588
Issue of shares 3 33,725
Issue of ordinary shares on exercise of - 47
share warrants
At 31 December 2016 64 106,360
18 Other reserves
($'000) 31 December 31 December
2016 2015
Reorganization reserve (44,573) (44,573)
Undenominated capital reserve 49,273 49,273
Foreign currency translation 35 -
reserve
Total other reserves 4,735 4,700
Reorganization reserve
The reorganization reserve represents a reserve related to requirements of
Irish Companies Acts. It comprises (i) fair value differences on ordinary
shares arising as a result of group restructurings in 2012 and 2014; and
(ii) the pre-acquisition retained losses of subsidiaries at the date of the
2012 and 2014 restructurings. Further information on these transactions are
available in our 2015 Annual Report and our 2014 IPO Prospectus, available
on the Group's website.
Undenominated capital reserve
The undenominated capital reserve represents the fair value movement on
embedded derivatives associated with preference shares between the issue of
the shares and their conversion (during 2014) which does not meet the
definition of Share Premium under the Irish Companies Act. The Company
therefore recorded this fair value movement in a "Undenominated Capital
Reserve" on conversion. This reserve is not distributable. Further
information on these transactions are available in our 2015 Annual Report.
Foreign currency translation reserve
The currency reserve reflects the foreign exchange gains and losses that
arise on foreign operations that have a functional currency that differs
from the presentation currency of the Company. The assets and liabilities of
these subsidiaries are translated at the closing rate at the reporting date,
income and expenses in the income statement are translated at the average
rate for the year and resulting exchange differences are taken to the
currency reserve within equity. Refer to Note 3 for further information.
The Group has two subsidiary companies with a Euro functional currency.
These companies were incorporated during 2016. The Group has one subsidiary
company with an AUD functional currency. This company was incorporated
during 2013. The foreign currency translation differences relating to the
translation of this subsidiary's operations as at 31 December 2015 were
immaterial.
19 Financial instruments
Financial risk management
In terms of financial risks, the Group has exposure to credit risk,
liquidity risk and market risk (comprising foreign currency risk and
interest rate risk). This note presents information about the Group's
exposure to each of the above risks together with the Group's
objectives, policies and processes for measuring and managing those
risks.
Risk management framework
Mainstay's Board of Directors has overall responsibility for the
establishment and oversight of the Group's risk management framework.
The Group's risk management policies are established to identify and
analyze the risks faced by the Group, to set appropriate risk limits
and controls and to monitor risks and adherence to the limits. Risk
management systems and policies will be reviewed regularly as the
Group expands its activities and resource base to take account of
changing conditions.
Due to the pre-revenue nature of the Group's activities during the
financial year, there are no significant concentrations of financial
risk other than concentration of cash with individual banks and there
has been no significant change during the financial year, or since the
end of the year to the types or extent of financial risks faced by the
Group or the Group's approach to the management of those risks.
Credit risk
Credit risk is the risk of financial loss to the Group if a customer
or counterparty to a financial instrument fails to meet contractual
obligations, and arises principally from the Group's cash and cash
equivalents and trade and other receivables. Credit risk is managed on
a Group basis. The Group's objective is to manage credit risk.
The carrying value of receivables is a reasonable approximation of
fair value. As at 31 December 2016 and 31 December 2015, maximum
exposure to credit risk is represented by the carrying value of cash
held with the Group's financial institutions, and other receivables.
The Group maintained its cash balances with its principal financial
institutions throughout the year, and the Group limits its exposure to
any one financial institution by holding cash balances across a number
of financial institutions. The Group's principal financial
institutions have investment grade ratings at 31 December 2016.
The credit rating status of the Group's principal financial
institutions is reviewed by the Audit Committee or the Board annually.
The cash balance is reported to the Board of Directors on a monthly
basis, and a monthly review of all cash balances held at each
institution is carried out by the CFO.
The Group maintains the majority of its cash in USD denominated
accounts. Please see Note 14 for further information on cash balances
held.
Liquidity risk
Liquidity risk is the risk that the Group will not be able to meet its
financial obligations as they fall due.
Since inception the Group has funded its operations primarily through
(i) the issuance of equity securities and (ii) debt funding. The Group
continues to explore funding strategies (e.g.: equity, debt,
partnering) to support its activities into the future. Adequate
additional financing may not be available on acceptable terms, or at
all. The Group's inability to raise capital as and when needed would
have a negative impact on the Group's financial position and its
ability to pursue its business strategy.
The following is an analysis of the maturity of the contractual
(undiscounted) outflows associated with the Group's financial liabilities at
31 December 2016 and as at 31 December 2015.
($'000) Carry- Cash flow Less Between Between
ing (total) than 1 1-2 years 2-5 years
value year
31 December 2016:
Trade and other 2,438 2,438 2,438 - -
payables
Interest bearing 15,544 21,574 3,323 4,121 14,130
loans and borrowings
At 31 December 2016 17,982 24,012 5,761 4,121 14,130
31 December 2015:
Trade and other 1,984 1,984 1,984 - -
payables
Interest bearing 10,389 15,757 1,099 3,026 11,632
loans and borrowings
At 31 December 2015 12,373 17,741 3,083 3,026 11,632
Foreign currency risk
The Group's reporting currency is the US Dollar. The Group's exposure
to foreign currency risk arises through expenditure incurred in Euro
and Australian Dollars. The Group's Australian subsidiary has an
Australian Dollar functional currency, and two of the Group's
subsidiaries located in Ireland and Germany have a Euro functional
currency.
The Group did not have material asset or liability amounts in foreign
currencies at year end other than net receivables, trade payables and
accruals of EUR468,000 (2015: EUR394,000) arising in companies with US
Dollar functional currencies. A strengthening (or weakening) of the US
Dollar against the Euro of 5% would have (decreased)/ increased the
loss for the year by $23,000 (2015: $53,000). Any reasonable or likely
movement between the US Dollar and the Australian Dollar is considered
not likely to have a material impact on the Group's statement of
profit or loss and other comprehensive income.
The following table sets forth, for the years indicated, certain information
concerning the exchange rate between: (i) the Euro and the US Dollar; (ii)
the Australian Dollar and the US Dollar:
Euro per USD1.00 End of year Average
Year ended 31 December 2015 1.0887 1.1045
Year ended 31 December 2016 1.0541 1.1069
Australian Dollar per USD1.00 End of year Average
Year ended 31 December 2015 0.7308 0.7463
Year ended 31 December 2016 0.7222 0.7430
Interest rate risk
The Group's cash balances are maintained in short term access accounts
and carry a floating rate of interest. A 50 basis points change in the
rate of interest applied to the cash balance held by the Group would
not have had a material impact on the Group's statement of profit or
loss in the year.
At 31 December 2016, the principal outstanding on MML's loan from IPF
was $15,000,000. This loan carries a variable rate of 3-month Euribor
plus a margin ranging from 10.5% to 12.5%. The terms of the debt
agreement stipulate that if Euribor is less than zero, it is deemed to
be zero. Any change in the Euribor rate above zero will directly
affect the amount of interest repayable on this debt.
A 25 basis point increase in Euribor above zero would have increased
the loss by $37,500 on a full year basis based on the drawn down loan
balance as at 31 December 2016 (2015: $26,250 on a full year basis
based on the drawn down loan balance as at 31 December 2015).
Fair values and carrying amounts for all financial instruments:
>The following table shows the carrying amounts and fair values of financial
assets and financial liabilities as at 31 December 2016 and 31 December
2015:
($'000) Designated Loans Financial Total Fair
at fair and liabilities carrying value
value receiva- at amortized value
bles cost
Assets
Cash and cash - 36,670 - 36,670 N/A
equivalents
Liabilities
Trade and other - - (2,438) (2,438) N/A
payables
Interest - - (15,544) (15,544) (15,400)
bearing loans
and borrowings
At December - 36,670 (17,982) 18,688 N/A
2016
($'000) Designated Loans Financial Total Fair
at fair and liabilities carrying value
value receiva- at amortized value
bles cost
Assets
Cash and cash - 16,624 - 16,624 N/A
equivalents
Liabilities
Trade and other - - (1,984) (1,984) N/A
payables
Interest - - (10,389) (10,389) (10,389)
bearing loans
and borrowings
At December - 16,624 (12,373) 4,251 N/A
2015
The fair value of derivatives embedded in the Group's debt at 31 December
2015 and at 31 December 2016 was not material.
Estimation of fair values:
We disclose our financial instruments that are measured in the
statement of financial position at fair value using the following fair
value hierarchy for valuation inputs. The hierarchy prioritizes the
inputs into three levels based on the extent to which inputs used in
measuring fair value are observable in the market. Each fair value
measurement is reported in one of three levels which are determined by
the lowest level input that is significant to the fair value
measurement in its entirety. These levels are:
Level 1: Inputs are based upon quoted prices (unadjusted) in active
markets for identical assets or liabilities.
Level 2: Inputs are based upon other than quoted prices included in
Level 1 that are observable for the asset or liability, either
directly (i.e. as prices) or indirectly (i.e. derived from prices).
Level 3: Inputs for the asset or liability that are not based on
observable market data (unobservable inputs).
Cash and trade payables are settleable within 30 days and accordingly
fair value is deemed to be equal to carrying value.
The fair value of interest bearing loans and borrowings is calculated
based on the present value of future contractual principal plus
interest cash flows discounted at appropriate market rates of
interest. The fair value of interest-related embedded derivatives in
the Group's debt, which were not material as at 31 December 2016, are
calculated by reference to scheduled cash flows and market interest
rates. These are classified as Level 2.
There were no transfers into or out of any classification of financial
instruments in any period.
Details of key unobservable inputs and the methodologies used by the Group
in determining the fair values of derivative financial instruments and the
fair value disclosures for other financial instruments held at amortized
cost as at 31 December 2016 and 31 December 2015 are detailed in the table
below
Type Valuation approach Key Interaction between key
unobser- unobservable inputs and
vable fair value
inputs
Loans Discounted cash flows based Interest An increase in the
and on contractual cash flows rate interest rate would
borro- at a market rate of 12.3%-15- reduce the fair value of
wings interest. .0% the liability.
20 Share based payments
Stock Incentive Plan
The Group operates a share option plan (the "Plan"). As at 31 December
2016, the Plan allows for the Company to grant options over ordinary
shares of Mainstay Medical International plc to employees of the Group
companies, directors, consultants and other contractors. As at 31
December 2016, 992,388 share options over ordinary shares of the
Company that have been granted under the Plan are outstanding.
The Plan allows for flexibility in the grant conditions of each
individual option, including variations on the amounts of options
granted, the vesting requirements for each option and the expiration
terms of the options.
Share Options
Details of share options granted that are outstanding as at 31 December
2016:
Number of instruments in Contractual life of
thousands options
Options granted in 41 10 years from grant
2010
Options granted in 17 10 years from grant
2011
Options granted in 3 10 years from grant
2012
Options granted in 232 10 years from
2013 vesting
Options granted in 85 10 years from
2014 vesting
Options granted in 300 10 years from
2015 vesting
Options granted in 315 10 years from
2016 vesting
Total share options 993
in issue
The above options all include service vesting conditions related to employee
and non-employee service and vest over periods ranging from one to four
years.
The following table provides a reconciliation of the total share options in
issue at the end of each year shown:
(Number of Year ended Weighted Year ended Weighted
instruments in 31 December average 31 December average
thousands) 2016 exercise price 2015 exercise price
2016 2015
At beginning 690 EUR9.32 394 EUR4.09
of year
Options 315 EUR15.93 307 EUR16.39
granted during
the year
Options (5) EUR0.95 (1) EUR0.93
expired
unexercised
Options (7) EUR17.18 (6) EUR15.68
forfeited
Options - - (4) EUR0.95
exercised
Outstanding at 993 EUR11.53 690 EUR9.50
end of year
Exercisable at 445 EUR6.25 265 EUR2.55
end of year
Total non-cash expense charged to profit and loss in relation to share
options for the year ended 31 December 2016 was $1,959,000 (2015:
$1,529,000).
The value of services received in return for the share options granted to
employees and non-employees was based on the fair value of the options
granted, measured using a Black-Scholes model with the following inputs:
Year of Grant
2016 2015
Weighted average share price (EUR) 15.93 16.39
Weighted average exercise price (EUR) 15.93 16.39
Weighted average expected share volatility 60% 60%
Expected term (years) 7 7
Expected dividends - -
Risk free rate (average) 0.03% 0.57%
Fair value of option ($) 9.96 10.76
Warrants
On 2 December 2011, Silicon Valley Bank provided the Company with a loan of
$2,000,000, the loan was repaid in full on 7 March 2014.
In connection with these borrowings, MML issued immediately exercisable
warrants to purchase up to 13,000 shares at $7.70 per share with an
expiration date of 2 December 2021. The fair value of these warrants on the
date of issue was $69,000.
During 2016, 6,055 warrants were exercised. As at 31 December 2016, 6,945
warrants remain unexercised.
21 Contingencies
The Directors and management are not aware of any contingencies that may
have a significant impact on the financial position of the Group.
Subsidiary guarantee
The Company has guaranteed the liabilities of its subsidiary in Ireland in
respect of any losses or liabilities (as defined in section 357 of the
Companies 2014 Act) for the years ended 31 December 2016 and 31 December
2015.
Operating lease commitments
The Group has entered into various leasing contracts for the purpose of
renting buildings and equipment. There are no restrictions or liens placed
upon the Group by entering into these leases.
Operating lease expenses amounted to $205,353 for the year ended 31 December
2016 (2015: $175,595).
The future aggregate minimum lease payments under non-cancellable operating
leases are payable as follows:
($'000) 31 December 31 December
2016 2015
Within one year 254 121
After one year but no more than five 664 208
years
More than five years - -
Total operating leases 918 329
22 Pension schemes
Defined contribution schemes
The Group operates defined contribution pension schemes for certain
employees in Ireland and Australia. The assets of the schemes are held
separately from those of the Group in independently administered funds. The
advice of a professionally qualified pension consultant was taken in the
setting up and maintenance of the schemes.
Total pension costs of the defined contribution schemes for the year ended
31 December 2016 amounted to $62,333 (2015: $50,781). There were no accruals
or prepayments in respect of the pension costs at 31 December 2016 (2015:
None).
23 Subsidiary undertakings
At 31 December 2016, the Company had the following subsidiaries and owns
100% of the called up ordinary share capital of each such subsidiary:
- Mainstay Medical Limited is registered in the Republic of Ireland.
- MML US, Inc. is registered in the United States of America.
- Mainstay Medical (Australia) Pty. Limited is registered in Australia.
- Mainstay Medical Distribution Limited is registered in Ireland.
- Mainstay Medical GmbH is registered in Germany.
24 Related party transactions
During 2016, the Group purchased services of $Nil (2015: $64,878) from Orsco
Life Sciences AG, a company controlled by Oern Stuge MD, a Director of
Mainstay Medical International plc.
There were no balances due to or from related parties as at 31 December 2016
(2015: None).
Key management compensation and Directors' remuneration
>The Group defines key management as its non-executive directors, executive
directors and senior management. Details of remuneration for key management
personnel are provided below:
($'000) 31 December 2016 31 December 2015
Salaries 1,644 1,355
Non-executive directors' fees 213 95
Other remuneration 760 818
Payroll taxes 181 137
Share based payments 1,556 1,248
Pension 22 21
Total remuneration 4,376 3,674
Aggregate amount of emoluments paid to or receivable by the Directors during
the year:
($'000) 31 December 2016 31 December 2015
Salaries 552 412
Non-executive directors' fees 213 95
Other remuneration 165 152
Payroll taxes 71 31
Share based payments 540 548
Total remuneration 1,541 1,238
25 Events subsequent to 31 December 2016
There were no events subsequent to the year ended 31 December 2016 that
would have a material impact on the Financial Statements.
Parent Company Financial Statements
Mainstay Medical International plc
Company statement of financial position
At 31 December 2016
($'000) No- 31 December 31 December
tes 2016 2015
Non-current assets
Investment in subsidiary (d) 51,370 50,233
Current assets
Prepayments and other receivables (a) 204 112
Amounts due from subsidiary (c) 26,834 11,793
undertakings
Cash and cash equivalents (b) 25,146 7,490
Total current assets 52,184 19,395
Total assets 103,554 69,628
Equity
Share capital 17 64 61
Share premium 17 106,360 72,588
Share based payment reserve 20 4,606 2,691
Undenominated capital reserve 49,273 49,273
Retained loss (57,421) (55,580)
Surplus/(deficit) on shareholders' 102,882 69,033
equity
Current liabilities
Trade and other payables (e) 672 595
Total current liabilities 672 595
Total liabilities 672 595
Total equity and liabilities 103,554 69,628
On behalf of the Board on 22 March 2017,
Oern Stuge MD Peter Crosby
Chairman CEO
Company statement of changes in equity
At 31 December 2016
($'000) Sha- Share Un-denomi- Share Retained Total
re premium nated based loss equity
capi- capital payment
tal reserve reserve
Balance at 31 61 72,584 49,273 1,162 (54,962) 68,118
December 2014
Comprehensive - - - - (618) (618)
loss for the
year
Transactions
with owners
of the
Company:
Share based - - - 1,529 - 1,529
payments
Issue of - 4 - - - 4
ordinary
shares on
exercise of
share options
and warrants
Balance at 31 61 72,588 49,273 2,691 (55,580) 69,033
December 2015
Balance at 31 61 72,588 49,273 2,691 (55,580) 69,033
December 2015
Comprehensive - - - - (708) (708)
loss for the
year
Transactions
with owners
of the
Company:
Issue of 3 33,725 - - (1,177) 32,551
Shares
Share based - - - 1,959 - 1,959
payments
Issue of - 47 - (44) 44 47
ordinary
shares on
exercise of
share options
and warrants
Balance at 31 64 106,360 49,273 4,606 (57,421) 102,882
December 2016
Company statement of cash flows
At 31 December 2016
($'000) No- Year ended 31 Year ended 31
tes December 2016 December 2015
Cash flow from operating
activities
Net loss attributable to equity (708) (618)
holders
Add/(less) non-cash items
Share-based compensation 821 730
Add/(less) changes in working
capital
Prepayments and other (15,132) (10,065)
receivables
Trade and other payables 77 29
Net cash used in operations (14,942) (9,924)
Cash flow from financing
activities
Proceeds from issue of shares 33,775 4
Transaction costs on issue of (1,177) -
shares
Net cash from financing 32,598 4
activities
Net increase/(decrease) in cash 17,656 (9,920)
and cash equivalents
Cash and cash equivalents at (b) 7,490 17,410
beginning of year
Cash and cash equivalents at 25,146 7,490
end of year
Notes to the Company Financial Statements
Notes 1, 2, 3, 17, 20, 25 to the Consolidated Financial Statements (as
provided earlier herein) also directly apply to the Company Financial
Statements. The accounting policies of the Company are the same as the
accounting policies of the Group as set out in Note 3 to the consolidated
Financial Statements, with the exception of:
Business Combinations
The Company was incorporated to be the parent company of the Group for
the purposes of the initial public offering. This was accounted for in
accordance with IAS 27, whereby the Company measured in its separate
Financial Statements its interest in subsidiaries at the fair value of
the ordinary and preference shares in issue by MML at 3 April 2014,
the date of the 2014 Reorganization.
In addition, the following notes are specific to the Company statement of
financial position:
(a) Prepayments and other receivables
($'000) 31 December 2016 31 December 2015
Prepayments 189 98
VAT recoverable 15 14
204 112
(b) Cash and cash equivalents
($'000) 31 December 2016 31 December 2015
Cash in bank accounts - USD 25,142 7,483
Cash in bank accounts - Euro 3 6
Cash in bank accounts - AUD 1 1
25,146 7,490
(c) Amounts due from subsidiary undertakings
($'000) 31 December 31 December
2016 2015
Mainstay Medical Limited 26,246 11,793
Mainstay Medical Distribution 588 -
Limited
26,834 11,793
(d) Investment in subsidiary
($'000) 31 December 31 December
2016 2015
Opening balance 50,233 49,434
Investment in subsidiary - -
Effect of group share based 1,137 799
payments
Closing balance 51,370 50,233
(e) Trade and other payables
($'000) 31 December 2016 31 December 2015
Trade and other payables 488 -
Payroll tax liability 80 61
Accrued expenses 104 534
672 595
(f) Financial instruments
The Company's policies for managing financial instruments risks are the same
as those for the Group. The Company's primary financial instruments and
their associated risks are as follows:
Financial assets
The Company's only financial assets are cash and cash equivalents, which are
held in the currencies details in note (c). A 5% change in the exchange rate
between the US dollar and the Euro would have altered the Company's loss for
the year by $18,300 (31 December 2015: $19,500). The carrying value of the
Company's cash is the same as its fair value.
Financial liabilities
The Company's only financial liabilities are trade payables and accruals as
set out in Note (e). All amounts fall due for payment within 30 days and the
carrying value represents the fair value of these liabilities.
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Dokumenttitel: Mainstay Medical International Plc:
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557375 23.03.2017
°
Mainstay Medical International Plc:
Am 23. März 2017 um 08:41 Uhr
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