Interim Results 2012

Stuart Hendry, Chief Executive Officer, and Matthew Hall, Chief Financial Officer will host a presentation for analysts at 10am today at M:Communications, 11th Floor, CityPoint, 1 Ropemaker Street, London, EC2Y 9AW. There will also be a live conference call with Q&A for remote users. A replay will be available after the call. To register your interest for this briefing please contact [email protected]or call +44 (0)207 920 2333.

20 September 2012

Sphere Medical Holding plc

Interim Results for the Six Months ended 30 June 2012

Cambridge, UK, 20 September 2012: Sphere Medical Holding plc (AIM: SPHR.L), ("Sphere" or "Sphere Medical" or the "Company") a leading developer of innovative monitoring and diagnostic devices for the critical care setting, is pleased to announce its unaudited interim results for the six months ended 30 June 2012.

Highlights

·; Proxima partnering and commercialisation process has attracted strong interest from a number of leading medical device companies with global distribution capabilities - discussions are ongoing and securing a commercial partner remains a core objective for 2012

·; Proxima development programme is progressing across a number of projects - disposable, monitor, software and calibration solutions

·; Dialogue underway with the FDA on Proxima including a recent meeting with the FDA to formulate the regulatory route for full market release

·; Appointment in June of Finggal Link Co. Limited as the Company's exclusive distributor for the Pelorus 1000 propofol measurement system in Japan

·; Cash and cash equivalents and monies on treasury deposit of £8.3 million (2011: £0.7 million)

Post-period end highlights

·; First order received in July from Sorin Group, the Company's distribution partner, for cardiopulmonary bypass monitors and microanalyser consumables

·; Pelorus 1500 achieved European CE Marking in July as an in-vitro diagnostic medical device

Commenting on these interim results, Dr. Stuart Hendry, Chief Executive Officer of Sphere Medical, said:

"The Company's focus over the first six months of 2012 has been on the continued advancement of the development and commercialisation of our products. The process of identifying and concluding a deal for Proxima has been intensive and we are confident of delivering a long term partnership that maximises the potential of this product. We are focused on executing our key deliverables for the second half of 2012."

A video interview with Dr. Stuart Hendry will be available from today on the Sphere Medical website www.spheremedical.com

For further information, please contact:

Notes for Editors

Sphere Medical (AIM: SPHR.L), is a medical device company developing a range of innovative monitoring and diagnostic devices designed to significantly improve patient care.

Sphere Medical's Proxima and Cardiopulmonary Bypass devices deliver real time analysis of blood gases, electrolytes, glucose and drug levels with laboratory accuracy, at the patient's bedside. Globally over 240 million blood gas and electrolyte tests are carried out on patients every year in critical care and there is an unmet need for monitoring products that are small, simple to use and cost effective with improved functionality. Sphere Medical's products can be used in a wide range of medical applications enabling faster clinical decision making and consequently improved patient outcomes, whilst also reducing costs for healthcare payers.

Sphere Medical is headquartered in Cambridge, UK. The Company has existing commercial partnerships with the leading global medical device companies.

For further information, please visit www.spheremedical.com

BUSINESS REVIEW

INTRODUCTION AND VISION

Sphere Medical continues to make considerable progress towards implementing its vision of becoming a leading innovator, developer, manufacturer and supplier of patient monitoring solutions that have the ability significantly to improve patient care and health care economics.

During the first six months of 2012 we have been focused on delivering the key priorities of securing a commercial partnering deal for Proxima and delivering the product development and regulatory milestones for 2012 which were identified at the time of the IPO in December 2011.

PROXIMA

Proxima is Sphere Medical's lead product and is being developed for critical care applications and uses our patented proprietary microanalyser technology. Proxima is a disposable patient-attached arterial blood gas analyser for use in the intensive care unit ("ICU") and operating room ("OR") in hospitals. The device is integrated into existing patient fluid lines at the bedside to allow the rapid measurement of a panel of blood parameters, including blood gases and electrolytes required for the optimum management of critically ill patients.

Rapid feedback will support more efficient and effective control of therapies such as ventilation and glucose control, which is expected to improve patient outcome and reduce the cost of care.

Proxima Generation 3 will be the first widely available commercial device from what is expected to become the Proxima family of devices. It will be a "closed system" where the blood samples and calibration solution can be reinfused into the patient after a blood gas measurement is taken thereby helping to reduce blood loss caused by frequent sampling and decrease the risk of transmission of blood borne infections. The final development of Proxima Generation 3 is progressing to plan and we expect to achieve the European CE Marking for Proxima Generation 3 around the end of this year.

Proxima partnering discussions

As anticipated in our AIM admission document, the partnership opportunity for commercialising our Proxima product has generated a high degree of interest from a number of world-leading medical device companies. Notwithstanding existing relationships, we are intent on identifying the optimal collaborator with whom we should partner Proxima. Discussions are continuing well and we expect to conclude a deal that will allow Proxima to achieve its full market potential.

Our view, which is shared by those parties with whom we are in discussions, is that the peak annual market size for Proxima is in excess of US$200 million at end user prices. A number of parties have been conducting technical due diligence through 2012 and we continue to work with potential partners with the aim of concluding a partnering collaboration.

We are committed to securing the best possible deal for the Company with the right partner that we believe maximises the potential of this and future generations of the Proxima device. We believe that, whilst the timeline for securing a partnering deal remains challenging, our stated aim of securing a deal by the end of 2012 is achievable.

Proxima research and development update

Development of the Proxima Generation 3 disposable patient-attached arterial blood gas analyser has progressed throughout the period with particular focus on the planned key areas of activity: disposable; monitor; software for the monitor; and calibration solutions.

Proxima regulatory update

Our regulatory programme for Proxima Generation 3 is progressing towards obtaining CE Mark around the end of this year.

During the period we have also focused on the US regulatory process for Proxima. We have engaged a US-based consultancy firm with appropriate regulatory expertise to assist our process and we are in active discussions with the FDA including, recently attending a meeting with the FDA to formulate the regulatory route for full market release of Proxima. UK clinical centres have been identified for Proxima post-CE Marking performance evaluation studies and these studies are expected to form the basis for the US regulatory submission.

Cardiopulmonary bypass monitor ("CPB")

We have been working closely with Sorin Group Italia S.r.l. ("Sorin"), a global company and a leader in the treatment of cardiovascular diseases and our partner for the commercialisation of the CPB system. We reported in July 2012 that Sorin had placed an order for cardiopulmonary bypass monitors and microanalyser consumables ("CPB products") for delivery around the end of this year. These CPB products represent the first sale for this product which will be used by Sorin in Market Assessment Studies which will take place in Q4 2012. We anticipate that CE Marking of the CPB product will coincide with the Market Assessment Studies.

Satisfactory completion of these Market Assessment Studies is expected to lead to a European launch by Sorin of the CPB product, which is currently scheduled for the early part of 2013.

The CPB product has been developed to enable the continuous blood monitoring of patients undergoing cardiopulmonary bypass surgery, where close monitoring of oxygenation and other blood parameters are critical. Incorporating Sphere Medical's core microanalyser technology, the CPB product will allow the clinician to track a comprehensive range of critical blood parameters in real time. This close monitoring will give clinicians an excellent assessment of a patient's status and enable them to respond rapidly to a patient's changing condition. This real time analysis is expected to contribute to improving clinical outcomes for cardiac surgery patients.

Every year approximately 1.1 million patients globally undergo cardiopulmonary bypass surgery. As guidelines become more stringent, there is a resultant growing demand for close monitoring. Sorin's market leading position in the treatment of cardiovascular diseases makes Sorin an ideal commercialisation partner to address this important market.

PELORUS

We are continuing to develop the Pelorus 1500, the world's first propofol analyser for the rapid measurement of the concentration of the intravenous anaesthetic propofol in blood samples. The development programme reached an important milestone in July 2012 with the announcement that the Pelorus 1500 has achieved CE Marking as an in-vitro diagnostic medical device.

On the commercial side, in June 2012 we announced the appointed of Finggal Link Co. Limited as our exclusive Japanese distributor for the Pelorus 1000 research device. Furthermore, we have received some early indications of interest in the Pelorus 1500 from potential commercial partners with whom Sphere Medical has an ongoing dialogue.

THE SPHERE MEDICAL TEAM

Sphere Medical continues to benefit from the hard work and expertise of its employees who, with the Board, are fully focused on delivering the demanding product development programmes, regulatory milestones and product commercial launches.

We would like to take this opportunity to thank all our employees and management for their continued commitment and shareholders for their ongoing support to Sphere Medical.

FINANCIAL REVIEW

In the six months ended 30 June 2012 no revenue was recorded (H1 2011: £2,000).

Operating expenses were £4.4 million (H1 2011: £1.9 million). Included in operating expenses are research and development and manufacturing costs of £3.3 million (H1 2011: £1.3 million) principally associated with the development of the Proxima disposable patient-attached arterial blood gas analyser. Administrative expenses were £0.7 million (H1 2011: £0.6 million).

Finance income (net) was £0.2 million (H1 2011: finance cost (net) £(0.5) million) representing interest earned on term deposits and change in the fair value of the share warrants.

During the period no research and development tax credit refund was received (H1 2011: £359,000) although a tax credit of £409,000 was received after 30 June 2012.

The loss for the period was £4.2 million (H1 2011: £2.1 million). The basic and fully diluted loss per share for the period was 11.5p (H1 2011: 12.3p).

Cash and cash equivalents and monies on treasury deposit as at 30 June 2012 were £8.3 million (H1 2011: £0.7 million).

SUMMARY AND OUTLOOK

We are pleased with the progress made during the first half of this year and remain focused on delivering our key objectives for the remainder of 2012 and early next year. Our key objectives include securing a commercial partnering deal for Proxima and completing the development and regulatory milestones to facilitate commercial product launches. Discussions with our potential partners and the FDA are progressing to plan and we are confident in delivering the key objectives, which will position the Company well for the future.

Dr. Stuart Hendry Matthew Hall

Chief Executive Officer Chief Financial Officer

Consolidated income statement

For the 6 months to 30 June 2012

Total comprehensive income equates to the loss for the period reported above.

All amounts derive from continuing operations.

The accompanying notes form an integral part of this consolidated income statement.

Consolidated statement of financial position

At 30 June 2012

The accompanying notes are an integral part of this consolidated statement of financial position.

Consolidated statement of cash flow

For the 6 months to 30 June 2012

The accompanying notes are an integral part of this consolidated statement of cash flow.

Consolidated statement of changes in equity

For the 6 months to 30 June 2012

The accompanying notes are an integral part of this consolidated statement of changes in equity.

Notes to the interim financial statements

1. Nature of financial information

These half year financial statements, which were approved by the Board on 19 September 2012, are unaudited and do not constitute statutory accounts as defined in section 434 of the Companies Act 2006.

The financial statements have been prepared under the historical cost convention and in accordance with the recognition and measurement principles of International Financial Reporting Standards ("IFRS") as adopted by the European Union. These interim financial statements do not contain all the information required for full annual financial statements and should be read in conjunction with the consolidated financial statements of the Group for the year ended 31 December 2011.

Statutory accounts for the Group and the Company for the year ended 31 December 2011, which contain an unqualified audit report from Grant Thornton UK LLP, have been delivered to the Registrar of Companies and did not contain statements under section 498(2) or section 498(3) of the Companies Act 2006. The comparative financial information for that period has been extracted without adjustment from such accounts.

The comparative information for the six months ended 30 June 2011 has been extracted from the unaudited management accounts and is correspondingly shown as unaudited.

2. Significant accounting estimates and judgements

Share options and warrants

Share options are granted over a discretionary period and vest in tranches over a three-year period. The fair value of options is determined using the Black-Scholes valuation model, which requires a number of estimates and assumptions. The significant inputs into the model are the share price at the date of grant, the exercise price, the expected option life, the expected volatility and the risk-free interest rate. The detailed assumptions are set out in Note 5.

Deferred tax asset

The Board uses its judgement in the assessment of the extent, if any, to which to recognise the deferred tax asset, based on the forecast trading performance and the expected use of trading losses.

Research and development expenditure

The Board uses its judgement in the assessment of the extent, if any, to which expenditure is identified as development expenditure rather than research expenditure. Development expenditure has not been capitalised as regulatory and other uncertainties relating to the current stage of the Group's development projects mean that all the criteria for capitalisation of development expenditure as required by International Financial Reporting Standards have not been met.

3. Principal accounting policies

The accounting policies for the six months ended 30 June 2012 are unchanged from those set out in the financial statements for the year ended 31 December 2011.

The financial statements consolidate the financial statements of Sphere Medical Holding plc and its subsidiary undertaking Sphere Medical Limited.

4. Loss per share

Fully diluted loss per share is calculated after showing the effect of outstanding options in issue. As the effect of the options would be to reduce the loss per share, the diluted loss per share is the same as the undiluted loss per share.

Calculation of loss per share is based on the following loss and numbers of shares:

5. Share capital

Share issue

No issues of shares were made during the period of 6 months to 30 June 2012

Share options

Share options are awarded to all Directors and permanent employees who have completed their probationary period at the time of the Remuneration Committee's review which is held annually or more frequently. The options generally vest in three tranches based on time since grant and have no other vesting criteria attached.

At 30 June 2012 the Company had outstanding options over ordinary shares as follows:

(1) Fully vested. Expiry 21 July 2014.

(2) Fully vested. Expiry 19 December 2015.

(3) Fully vested. Expiry 5 May 2015.

(4) Fully vested. Expiry 31 January 2016.

(5) Fully vested. Expiry 12 November 2016.

(6) Fully vested. Expiry 14 May 2017.

(7) Fully vested. Expiry 10 December 2017.

(8) Fully vested. Expiry 8 December 2018.

(9) Fully vested. Expiry 12 January 2019.

(10) Vesting 50% after one year, 25% after two years and the remaining 25% after three years of grant.

(11) Vesting 100% are conditional upon the Company signing a commercial agreement relating to Proxima Generation 3. The percentage of share options which vest reduces over time until 31 March 2013 at which point they lapse.

The estimated fair value of each share option was calculated by applying the Black-Scholes option pricing model. The model inputs were the exercise price, expected volatility (20% for all options granted to February 2008, 25% for all options granted to October 2011 and 39% for all subsequent grants), no expected dividends, contractual life to the expiry date of the option. Early exercise is not considered likely and therefore there have been no adjustments in this respect. Management has determined volatility using their knowledge of the business and comparable UK listed companies. The risk-free interest rate was taken as 5.00% for the options granted in 2004 to 2006, 5.50% for the options granted in 2007, 5.25% for the options granted in February 2008 and 3.00% for the options granted from December 2008 to October 2011 and 0.49% for all subsequent grants. The weighted average fair value of share options granted in the six months to 30 June 2012 was £0.315 (full year to 31 Dec 2011 - £0.393).

On 1 June 2012 all employees other than Directors were offered modified terms to their existing share options in the Company. Under the terms of the modified share option agreement, the modified exercise price is 92.5p per share and the vesting period has been extended for a further three years and will vest in three tranches based on time since grant.

The expense arising from share options in the period was £260,000 (full year to 31 Dec 2011 - £136,000).

6. Reconciliation of operating loss to operating cash flows

Tax credit received in the period £nil (2011 - £359k). This is due to timing of the receipt of the research and development tax credit refund. The tax credit of £409k has been received since the date of these interim financial statements.

Further Copies

Copies of this announcement and, on finalisation, the interim report will be available, free of charge, for a period of one month from the Company's Nominated Adviser and Broker, Peel Hunt LLP, Moor House, 120 London Wall, London EC2Y 5ET, Tel: 020 7418 8900 or from Sphere Medical Holding plc, Harston Mill, Harston Cambridgeshire CB22 7GG, Tel: 01223 875222. Copies of the interim report will be made available to shareholders in due course.