6th Jul 2007 07:00
Tissue Science Laboratories PLC06 July 2007 6 July 2007 Tissue Science Laboratories plc (TSL or The Company) Pre-close Trading Statement Tissue Science Laboratories plc (LSE:TSL), the medical technology companyspecialising in biologic tissue replacement and repair issues the following(un-audited) update on trading ahead of its AGM later today: General Surgery Having completed the transition to a direct sales team in our core US generalsurgery business in 2006, we are pleased with progress in the first half of theyear. US general surgery sales ($) for the six months to 30 June grew by c.68%compared to the corresponding period in 2006 and by c.37% relative to the secondhalf of 2006. In addition, the ongoing development of our sales force and ourmarketing platform is leading to increasing sales productivity at a territorylevel. This growth is significant and has been achieved against a background ofincreased competition for biologic materials in complex hernia repair, wherefurther new entrants have recently been attracted into the market. We are confident our strategy to reduce reliance on marketing partners for ourproducts by using a direct sales force in general surgery in the US has beenfurther validated by our trading in the first half. We look forward to updatingour shareholders further on the progress of the sales team with our interimresults in September. In Europe and Korea, we have seen solid growth from our network of distributors,with our business in these territories growing by c.27%. In the UK, growth wasimpacted in the first quarter as NHS budgetary constraints were imposed in manyareas ahead of the end of the financial year in April. Sales were unchanged overthe prior year. Marketing Partners CR Bard, our partner in urology/gynaecology, is marketing our products forpelvic floor reconstruction and the surgical treatment of incontinence. Aspreviously indicated, our products are now positioned by CR Bard alongside theirsynthetic alternatives for these indications. Sales were unchanged versus theprior year period. In orthopaedics, our partner Zimmer, Inc. has recently commenced a clinicalstudy to support the marketing of our product in rotator cuff repair of theshoulder. Until this study is reported later next year, we anticipate sales willremain at a modest level. Sales in the period were $0.1m (H1 2006 $0.2m). Foreign Exchange and Gross Margins During the first six months of the year, the US dollar/sterling exchange ratehas continued to be challenging for our business. During the period, sales weretranslated at an average exchange rate of £1 = $1.980 compared to an averagerate of £1.740 in the comparative period. Although this has affected our salesand gross margins negatively in the period, the impact on margins has beenoffset by an improvement in sales mix, driven by our higher general surgerysales in the US. Therefore we anticipate that overall gross margins in theperiod will be broadly consistent with those achieved in the same period lastyear. Development Projects and Strategy Review In April, we held an R&D teach-in to update shareholders and analysts onprogress made in our product development pipeline. We are aiming to develop welldifferentiated products by applying our process technology to porcine bone,ligament and blood vessel. We are very pleased with progress to date and arecurrently conducting a review of options for taking the development of theseproducts forward. Martin Hunt, CEO comments: "We are pleased with the performance of our general surgery business whichcontinues to develop well with strong growth and attractive margins whilst, aswe have seen over recent periods, our marketing partnerships remain morechallenging. We continue to manage our business and overheads tightly whilstmaking good progress with our product development pipeline. "We look forward to further updating shareholders at our interim results inSeptember on trading and the outcome of the review of strategy options for ourdevelopment projects." -Ends- Enquiries: Tissue Science Laboratories plc 01252 333002Martin Hunt, Chief ExecutiveDavid Jennings, Finance Director Nomura Code Securities 0207 776 1200Juliet Thompson / Clare Terlouw Hogarth Partnership Limited 0207 357 9477Melanie Toyne-Sewell/Sarah Richardson Notes to Editors Background on TSL Tissue Science Laboratories plc is a medical technology company specialising intissue repair and replacement. Headquartered in Aldershot, Hampshire, TSLfloated in November 2001 and is listed on AIM (AIM: TSL). TSL has a proprietary sheet product, derived from porcine dermis, calledPermacol(R). The Permacol(R) sheet product has been developed with a range ofunique properties to make it suitable for use in different applications,including urology/gynaecology, complex and recurrent hernia repair, shoulderrotator cuff repair and head and face repair and reconstruction. TSL sellsPermacol(R) directly in the complex and recurrent hernia surgical field and hassigned distribution agreements with CR Bard Inc (urology/gynaecology -worldwide) and Zimmer Inc (orthopaedic - worldwide). Different formulations of Permacol(R) have also been developed successfully,including an injectable version, based on the same core technology. In addition,TSL has built a development pipeline derived from other porcine tissues e.g.bone, ligament and vascular that addresses the large and fast growing surgicalimplant market. 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