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Sphere Medical Holding PLC: THE INVESTMENT CASE

Sphere Medical set for step change as Proxima 4 launches

The company's nominated adviser said a partnership deal should be signed by the end of 2016
Sphere Medical set for step change as Proxima 4 launches
Proxima 4 is a major step in the company's commercialisation strategy

Sphere Medical Holdings PLC (LON:SPHR) has launched the next generation of its breakthrough blood gases monitor in Europe.

The enhanced Proxima 4, which also analyses electrolytes and metabolites, comes with a broader array of functions.

A major milestone

It means the device can be deployed in a wider patient group, including those requiring blood sugar control and those undergoing cardiac surgery.

In fact, Sphere reckons there has been a four-fold increase in the potential market as a result of the upgrades, representing almost half the patients in intensive care.

Chief executive Wolfgang Rencken explained the European launch of the new unit was an important milestone on the “route to making the company commercially successful”.

“We look forward to updating the market during 2017 on progress with the marketing, and on progress with further updates and enhancements to the system,” he added.

Surgical rooms the target market

Proxima 4 is used to monitor patients in the intensive care unit and operating room.

It is different from competing monitoring technology as blood is drawn over the sensor but then returned to the patient.

This closed system has a number of benefits. In particular it conserves blood, reducing the possibility of hospital acquired anaemia and potentially the need for transfusions. It also limits the infection risk.

The new version is applicable to a much wider list of medical conditions and can also be used on children.

Momentum picking up

In September, Sphere reported narrowed  losses as the Proxima 3 blood gas analyser units gained more commercial traction.

During the period, Sphere notched up the first commercial sales of Proxima 3 in Germany, while it also made its first sales into Belgium in August.

Usage of the product was also up, with the number of patients connected to Proxima 3 increasing by 52% from the second half of 2015.

Around 150 patients have been treated in some form with Proxima technology so far and Sphere said the feedback has been good leading to a “healthy pipeline” for the upgraded Proxima 4 units.

The Cambridge-based firm said a “large proportion” of hospitals that trialled the Proxima 3 have indicated an interest in bringing on board the enhanced fourth version.

New manufacturing plant in Wales

Proxima is a blood gas analyser for use in critical care environments that can help doctors make quicker, more informed decisions about a patient’s treatment.

The firm opened its new production facility in North Wales earlier this year, and said it hopes to move more elements of production to the site over the next year or two.

Sphere hopes by doing so, it can “substantially lower” the cost of the products it makes there.

Proxima 4 will now start to contribute

In the six months to the end of June, despite a slight fall in revenues Sphere posted a loss before tax of £2.6mln, down from last year’s figure of £3.5mln.

Sphere managed to keep a tight grip on costs as its operating expenses of £3.7mln came in under budget.

At the end of the period, the company had £6.6mln in cash and cash equivalents.

Spain adds another piece to distributor network

Sphere Medical has appointed a distributor for Spain, Proyectos Hospitalarios, its second overseas distributor for Proxima 4 after an agreement with Burke & Burke to sell into Italy was signed in July.

Sphere already has a direct sales presence in the UK, Germany, The Netherlands and Belgium.

The exclusive distribution agreement includes an initial stocking order which has already been received, and is expected to ship in in the second quarter of 2017.
Prhoinsa will buy both monitors and consumables from Sphere, but can rent them out if it wants.

Panmure Gordon expects expansion of the distributor network to continue and as it does and sales start to come though it will reduce the 30% discount rate it used in coming to a 17p target price.


--updates for Spain distributorship, target price --


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