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UPDATE: Sphere Medical's tie up with J&J unit validates Proxima's market opportunity, says CEO

Published: 00:56 29 Jun 2013 AEST

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Sphere Medical's (LON:SPHR)  collaboration with a subsidiary of American giant Johnson & Johnson to produce the next iteration of its breakthrough blood gas monitoring device, validates the market opportunity for the firm's Proxima technology, says chief executive Stuart Hendry.

The tie-up is with Ortho Clinical Diagnostics (OCD), a subsidiary of the medical devices giant.

In addition, Sphere annouced it will spend £7.9mln developing the Proxima 4 device as it unveiled plans to raise £8.4mln.

Under the agreement OCD and Sphere will form a steering group and team to carry out a market assessment of Proxima 4, develop the product and assess its operational capabilities. The firm is finalising the development of Proxima 3 in the next few months.

"Not only are we talking about a  collaboration to develop a new product but we are also talking about enhancing significantly our operational capabilities in terms of volumes of production, quality and so on, that will allow us to supply product one day on a global scale," Hendry told Proactive.

Proxima is a device which analyses blood gases and can be used in hospital operating theatres or intensive care units and the peak annual market size for Proxima is more than US$200 million, the firm has said previously.

The bulk of the financing, £5.1mln, will be done via a placement with new and existing institutions, while the Johnson & Johnson Development Corporation (JDCC) is subscribing for £3.3mln of equity – a a huge vote of confidence in Sphere’s potential.

Hendry said he believes this "validates the market opportunity in that the Proxima technology can be applied to very substantial markets" and validates the technology itself, as well as Sphere's competency.

There is a further £5mln of equity financing available via a facility provided by Darwin Strategic, part of Henderson Global.

Earlier Hendry said in a statment: "The board's principal strategic objective is to transition the group to becoming revenue generating and ultimately a cash generative company through the exploitation of its products and intellectual property. 

“We are now in advanced preparations for Proxima 3 CE marking and expect to launch Proxima 3 into the UK market in the first half of 2014.  

“Today's announcement of our collaboration with OCD and the accompanying equity investment by JJDC and new and existing investors, points to a strong future for Proxima and consequently for Sphere."

In its final 2012 results, reported today, Sphere reported a cash and equivalents stood at Dec 31 at £54.4 mln (2011: £12.1mln).

The firm recorded product revenue of £46,000 (2011: £40,000) and the pre-tax loss was £7.7 mln (2011: loss of £5.9 mln).

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