TIDMIRSH
Mainstay Medical International plc ("Mainstay" or the "Company",
Euronext Paris: MSTY.PA and Euronext Growth of Euronext Dublin:
MSTY.IE), a medical device company focused on bringing to market
ReActiv8®, an implantable neurostimulation system to treat
disabling Chronic Low Back Pain, today provides a company update
and reports its financial results for the half year ended 30 June
2019.
Jason Hannon, CEO of Mainstay, said: "We continue to make
significant progress on our key corporate objectives of pursuing
regulatory approval in the U.S. and advancing the commercial
validation effort in Germany and other select European markets. I
am pleased to report that we submitted the pre-market approval
(PMA) application for ReActiv8 to the U.S. Food and Drug
Administration (FDA) in August. Pending the FDA's acceptance of the
PMA for review, anticipated in October 2019, we expect a decision
regarding approval around the end of 2020. We also continue to make
progress working with key physician partners in Germany who are
incorporating ReActiv8 into their practices in order to validate
commercial adoption, refine patient selection strategies and follow
ongoing patient progress."
Business Update
-- In August 2019, Mainstay submitted the PMA application to the FDA based upon the totality of its clinical data for ReActiv8. Pending acceptance of the submission by the FDA, anticipated in October 2019, a decision regarding approval is expected around the end of 2020. The pivotal clinical trial upon which the PMA submission was based is the 204-patient ReActiv8-B clinical study. A summary of the clinical trial results is as follows: The primary efficacy endpoint of the study was a comparison of responder rates between the treatment and control groups as measured on the visual analog scale (VAS) of pain, with responders defined as having a 30% or greater improvement on this measure between baseline and 120 days after randomization, without any increase in pain medication and/or muscle relaxants taken in the two weeks prior to the primary endpoint assessment visit. In the treatment group the responder rate at 120 days was 57%, compared to 47% in the control group, resulting in a difference that is not statistically significant. The protocol included a pre-specified analysis of the primary endpoint data examining the cumulative proportion of responders, which is a comparison of ranks and inherently preserves information over a dichotomized endpoint, thereby improving statistical power. In that analysis, a statistically significant difference between the treatment and control groups was demonstrated, with the treatment group showing a higher proportion of responders across all threshold levels. The protocol also included a pre-specified analysis of the primary endpoint where Mainstay adjusted for patients who increased their pain medications for reasons unrelated to their back pain. In that analysis, the responder rate at 120 days in the treatment group was 61%, compared to 47% in the control group, resulting in a difference that is statistically significant. Statistically significant differences on a number of key secondary endpoints and supplemental analyses were observed in the treatment group as compared to the control group at 120 days, including reduction from baseline in pain as measured by both mean reduction in VAS and percent of pain relief (PPR), change from baseline in disability measured by the Oswestry Disability Index (ODI), change from baseline in quality of life measured by the European Quality of Life Score on Five Dimensions (EQ-5D), subject global impression of change (SGIC), clinician global impression of change (CGI) and patient treatment satisfaction as measured by the treatment satisfaction questionnaire (TSQ). Improvements in the percentage of patients reporting pain reduction continued beyond the 120-day assessment through one year for both groups. The percentage of the 160 patients in the treatment and control groups that had completed the one-year assessment having a 30% or greater reduction in low back pain VAS at that assessment without a significant increase in pain medication was 66%. These data are subject to change as the remaining patients reach the one-year assessment. The protocol permitted patients to adjust their back pain medication usage after the 120-day assessment point. At one year, 49% of the 61 patients in both groups combined who were on opioids at baseline had discontinued or decreased their use of opioids. These results are subject to change as the remaining patients reach the one-year assessment. The incidence and type of adverse events (AEs), including serious AEs, compares favorably to that of spinal cord stimulator devices, with no unanticipated AEs related to the device, procedure or stimulation.
-- In Germany, Mainstay's initial European market, the Company's re-focusing of its commercial validation efforts was undertaken throughout 2018. Mainstay is now solely dedicated to building a small number of reference sites where high volumes of patients are treated with ReActiv8, allowing the Company to gather associated clinical data, refine patient selection processes for commercial markets, and gain the learnings needed to accelerate commercial launch in future markets.
Financial Update
-- Since the beginning of 2019, Mainstay has conducted financing activities that have resulted in approximately $28 million of cash runway extension: On 29 July 2019, Mainstay completed financing transactions consisting of the issuance of 4,649,775 new ordinary shares at a purchase price of EUR3.00 per share and the drawdown of EUR3.0 million in additional debt from the Company's existing lender, IPF Partners, resulting in aggregate gross proceeds of EUR16.9 million (US$18.9 million). On 18 April 2019, Mainstay and its subsidiary, Mainstay Medical Limited, entered into an amendment to their agreement with IPF Partners relating to the existing debt facility. Pursuant to the amendment: The repayment schedule for the three existing tranches drawn under the debt facility was amended such that no principal or interest will be repaid until 2021, with the principal and accrued interest to be amortized over the period from January 1, 2021 through September 30, 2023. A new tranche of EUR3.0 million (approximately $3.34 million) was made available to Mainstay, which was drawn down by Mainstay on 29 July 2019. The repayment schedule for the new tranche will be the same as the amended repayment schedule for the three existing tranches. The interest rate for all tranches will be 8% per annum, with interest accruing but capitalized prior to January 1, 2021. The interest rates previously applicable to the initial three tranches ranged from 10.5% to 12.5%. The 5% repayment fee applicable to each existing tranche was eliminated. All principal and accrued interest from all tranches will automatically convert into ordinary shares of the Company at a price per share of EUR8 upon the earlier of (a) FDA approval of Mainstay's PMA application for ReActiv8, (b) the date by which at least 900,000 ordinary shares of the Company are publicly sold on-market by non-affiliates of Mainstay since April 2019 at a price per share of at least EUR8, or (c) IPF Partners' election to undertake such conversion, in each case unless the Company elects to satisfy such obligation in whole or in part in cash. The minimum cash covenant was amended so that Mainstay is required to hold cash at least equal to its projected cash expenditures for operations and debt repayment for the next three months, and the covenant relating to the achievement of commercial milestones was eliminated. Mainstay issued to IPF Partners warrants to purchase 1.5 million of its ordinary shares at a price per share of EUR6 at any time prior to the 6th anniversary of the amendment date.
-- Revenue during the six-month period ended 30 June 2019 was $0.6 million ($0.36 million in 1H18).
-- Operating expenses for the six-month period ended 30 June 2019 were $9.5 million ($15.8 million in 1H18). The decrease was driven primarily by reduced costs relating to activities for the ReActiv-8 B clinical trial following the completion of all implants, as well as a decrease in payroll related costs following a reduction in headcount within 2019.
-- Cash on hand as at 30 June 2019 was $5.8 million (31 December 2018: $29.7 million). Cash on hand at 31 July 2019 was $23.5 million.
Details of ReActiv8-B Clinical Trial
The ReActiv8-B clinical trial is an international, multi-center,
prospective, randomized, active sham-controlled, blinded trial with
one-way cross-over, conducted under an IDE from the FDA. A total of
204 patients with chronic low back pain refractory to physical
therapy were implanted with ReActiv8 at leading clinical sites in
the U.S., Europe and Australia and randomized 1:1 to therapy or
control. In the treatment group, the ReActiv8 pulse generator was
programmed to deliver electrical stimulation expected to elicit
episodic contractions of the multifidus muscle. In the control
group, the ReActiv8 device was programmed to provide a low level of
electrical stimulation. Following assessment of the primary
endpoint at 120 days, patients in the control group crossed-over to
receive levels of electrical stimulation similar to those in the
treatment group. The FDA's review of the PMA may result in the FDA
not agreeing with Mainstay's interpretation of its clinical data,
including whether statistical significance was achieved for one or
more endpoints.
Investor Conference Call
Jason Hannon, Chief Executive Officer, and Matthew Onaitis,
Chief Financial Officer, will host a conference call and Q&A
for analysts and investors at 13:00 BST (08:00 EDT, 14:00 CEST) on
20 September 2019. The call will be conducted in English and a
replay will be available for 30 days. Dial-in details for the call
are:
Europe: +44 333 300 0804
Ireland: +353 1 431 1252
France: +33 170750711
Germany: +49 6913803430
USA: +1 6319131422
Participant PIN: 34020721#
- End
This announcement contains inside information within the meaning
of the EU Market Abuse Regulation 596/2014.
About Mainstay
Mainstay is a medical device company focused on commercializing
an innovative implantable restorative neurostimulation system,
ReActiv8®, for 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,
Germany and the Netherlands, and is listed on regulated market of
the Euronext Paris (MSTY.PA) and the Euronext Growth market of
Euronext Dublin (MSTY.IE).
About Chronic Low Back Pain
One of the root causes of CLBP is impaired control by the
nervous system of the muscles that dynamically stabilize the spine.
ReActiv8 is designed to electrically stimulate the nerves
responsible for contracting these muscles to improve dynamic spine
stability, allowing the body to recover from CLBP.
People with CLBP usually have a greatly reduced quality of life
and score significantly higher on scales for pain, disability,
depression, anxiety and sleep disorders. Their pain and disability
can persist despite the best available medical treatments, and only
a small percentage of cases result from an identified pathological
condition or anatomical defect that may be correctable with spine
surgery. Their ability to work or be productive is seriously
affected by the condition and the resulting days lost from work,
disability benefits and health resource utilization put a
significant burden on individuals, families, communities, industry
and governments.
Further information can be found at www.mainstay-medical.com
CAUTION - in the United States, ReActiv8 is limited by federal
law to investigational use only.
PR and IR Enquiries: LifeSci Advisors, LLC Brian RitchieTel: + 1
(212) 915-2578Email: britchie@lifesciadvisors.com
FTI Consulting (for Ireland) Jonathan Neilan or Patrick
BerkeryTel. : +353 1 765 0886Email: mainstay@fticonsulting.com
Euronext Growth Advisers: Davy Fergal Meegan or Barry MurphyTel:
+353 1 679 6363Email: fergal.meegan@davy.ie or
barry.murphy2@davy.ie
Forward looking statements
This announcement 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 announcement and include, but
are not limited to, statements regarding the Company's intentions,
beliefs or current expectations concerning, among other things, the
FDA's review of the Company's PMA application for ReActiv8, the
clinical data relating to ReActiv8, the potential for the FDA to
approve ReActiv8 for marketing in the United States, the Company's
expected cash runway and 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 and other commercial performance.
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,
the development of its main product, and 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 announcement. 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 announcement, 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 final outcome of the Company's ReActiv8-B
clinical trial, the outcome of the Company's interactions with the
FDA on the PMA application for ReActiv8, the successful launch and
commercialization of ReActiv8, general economic and business
conditions, 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, and political and
economic uncertainty. The forward-looking statements herein speak
only at the date of this announcement.
Mainstay Medical International plc and its subsidiaries
Half Year Report comprising Interim Management
Report and condensed consolidated
Financial Statements for the half year ended 30 June 2019
Mainstay Medical International plcTable of contents
Corporate and shareholder information 3
Interim Management Report 4
Director's Responsibilities Statement 11
Condensed consolidated statement of profit 12
or loss and other comprehensive income
Condensed consolidated statement of financial position 13
Condensed consolidated statement of changes in shareholders' equity 14
Condensed consolidated statement of cash flows 15
Notes to the condensed consolidated Financial Statements 16
Forward looking statements
This 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 report and include, but are not
limited to, statements regarding the Company's intentions, beliefs
or current expectations concerning, among other things, the FDA's
review of the Company's PMA application for ReActiv8, the clinical
data relating to ReActiv8, the potential for the FDA to approve
ReActiv8 for marketing in the United States, the Company's expected
cash runway and 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
and other commercial performance.
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,
the development of its main product, and 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 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 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 final outcome of the Company's ReActiv8-B clinical study, the
outcome of the Company's interactions with the FDA on a PMA
application for ReActiv8, the Company's cash position, the
successful launch and commercialization of ReActiv8, general
economic and business conditions, 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,
and political and economic uncertainty. The forward-looking
statements herein speak only at the date of this report.
Mainstay Medical International plcCorporate and shareholder
information
Directors Oern Stuge MD, Independent
Non-Executive Chairman
Jason Hannon, 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
Dan Sachs MD, Non-Executive Director
Secretary Matthew Onaitis
Registered office 77 Sir John Rogerson's Quay
Block C, Grand Canal Docklands
Dublin 2, 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
Latham Watkins
885 3rd Avenue,
NY 10022, USA
Independent Auditor KPMG
Chartered Accountants
1 Stokes Place
St Stephen's Green
Dublin 2, Ireland
Principal Bankers HSBC
Bank of Ireland
ESM Adviser and Broker J&E Davy
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 France) Caceis Corporate Trust
1/3, Place Valhubert
75013 Paris, France
Mainstay Medical International plcInterim Management Report
The Board of Directors is pleased to report on the progress of
Mainstay Medical International plc (Mainstay or the Company) and
present the Half Year Report for the half year ended 30 June 2019
of the Company and its subsidiaries (the Group or we).
Principal activities
Mainstay is a medical device company focused on commercializing
ReActiv8®, an implantable restorative neurostimulation system
designed to treat an underlying cause of disabling Chronic Low Back
Pain (CLBP).
The Company is headquartered in Dublin, Ireland. It has
subsidiaries operating in Ireland, the United States, Australia,
the Netherlands and Germany, and its ordinary shares are admitted
to trading on Euronext Paris (MSTY.PA) and Euronext Growth operated
by Euronext Dublin (MSTY.IE). As at 30 June 2019, the Company
together with its operating subsidiaries Mainstay Medical Limited,
MML US, Inc., Mainstay Medical (Australia) Pty Limited, Mainstay
Medical Distribution Limited, Mainstay Medical B.V. and Mainstay
Medical GmbH, form the Mainstay Medical Group.
Business update
In August 2019, the Company submitted a pre-market approval
(PMA) application to the United States Food & Drug
Administration (FDA) for ReActiv8. Assuming acceptance of the
submission by the FDA in October 2019, a decision on approval is
expected in late 2020. The FDA's review of the PMA may result in
the FDA not agreeing with the Company's interpretation of its
clinical data, including whether statistical significance was
achieved for one or more endpoints.
The pivotal clinical trial upon which the PMA submission was
based is 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.
Information about the Clinical Trial can be found at
https://clinicaltrials.gov/ct2/show/study/NCT02577354.
A total of 204 subjects were implanted with ReActiv8 at leading
clinical sites in the U.S., Europe and Australia and randomized 1:1
to therapy or control 14 days after implant. In the treatment
group, the ReActiv8 pulse generator was programmed to deliver
electrical stimulation expected to elicit episodic contractions of
the multifidus muscle. In the control group, the ReActiv8 device
was programmed only to provide a low level of electrical
stimulation. Following assessment of the primary endpoint at 120
days, subjects in the control group crossed-over to receive levels
of electrical stimulation similar to those in the treatment
group.
The subjects in the study had an average age of 47, and an
average duration of chronic low back pain of 14 years. This patient
population had tried many other treatment alternatives, including
physical therapy and drugs, with limited success, and 79% of the
subjects were on pain medication at baseline.
The primary efficacy endpoint of the study was a comparison of
responder rates between the treatment and control groups as
measured on the visual analog scale (VAS) of pain, consisting a
0-10 scale with 0 being no pain and 10 being the worst imaginable
pain. Responders are defined as having a 30% or greater improvement
on this measure between baseline and 120 days after baseline,
without any increase in pain medication and/or muscle relaxants
taken in the two weeks prior to the primary endpoint assessment
visit. The following table shows the result on the primary efficacy
endpoint:
Primary Efficacy Endpoint TreatmentN=102 ControlN=102 Differencep-value
Responder (=30% Reduction 57.1% 46.6% 10.4%p=0.138
in Low Back Pain
VAS and no Increase in
Pain Medications)
The same data as above, presented in a cumulative proportion of
responders analysis that was pre-specified in the investigational
plan, demonstrated a statistically significant difference
(p<0.05) between the treatment and control groups, with the
treatment group showing a higher proportion of responders across
all threshold levels. This analysis, which is a comparison of
ranks, inherently preserves information over a dichotomized
endpoint, thereby improving statistical power.
In addition, the analysis of difference in mean low back pain
VAS reduction between the treatment group and the control group was
statistically significant (p<0.05) at the 120-day visit.
The investigational plan for the study also includes a
pre-specified analysis, assessing the impact of medication and/or
muscle relaxant increases to treat acute, unrelated pain conditions
on the primary endpoint. Such patients, as a result of increasing
pain medication and/or muscle relaxants, are deemed non-responders
under the study protocol.
The specific implementing methods of this supplementary analysis
were defined by the independent statistician advisors prior to the
unblinding of the data. In consultation with its advisors, the
Company determined that a valid way to handle the subjects with
pain medication increases for reasons unrelated to low back pain
would be to analyze the endpoint with these subjects removed, as
pain medication use for reasons unrelated to low back pain was an
exclusion criterion in the study. By doing so, inference is limited
to the population of subjects taking pain medication only for
reasons related to low back pain, as intended by the patient
selection criteria in the trial protocol.
Six subjects had increases in pain medications for reasons other
than low back pain. The following table presents the results of the
primary efficacy endpoint in the subjects not requiring an increase
in pain medications for reasons other than for low back pain,
showing a clinically-meaningful and statistically-significant
difference:
Primary Efficacy Endpoint TreatmentN=96 ControlN=102 Differencep-value
Responder (=30% Reduction 60.6% 46.7% 14.0%p=0.048
in Low Back Pain
VAS and no Increase in
Pain Medications)
Numerous secondary endpoints and supporting analyses were
collected to assess improvements in the treatment group as compared
to the control group at 120 days, including reduction from baseline
in pain as measured by both mean reduction in VAS and percent pain
relief (PPR), change from baseline in disability measured by the
Oswestry Disability Index (ODI), change from baseline in quality of
life measured by the European Quality of Life Score on Five
Dimensions (EQ-5D), subject global impression of change (SGIC),
clinician global impression of change (CGI), patient treatment
satisfaction as measured by the treatment satisfaction
questionnaire (TSQ) and pain resolution (VAS =2.5 cm). As shown in
the following table, when evaluating the therapy across multiple
dimensions of subject outcomes, the treatment effect is significant
in seven of the eight secondary endpoints/supporting analyses: mean
reduction in VAS, PPR, ODI, EQ-5D, SGIC, treatment satisfaction and
CGI:
TreatmentN=102 ControlN=102 Differencep-value
Endpoint N Mean ± SD(Min, Max)or N (%) N Mean ± SD(Min, Max)or N (%)
Change 100 -3.3 ± 2.7(-8.5, 3.0) 101 -2.4 ± 2.9(-8.8, 3.5) 0.9p = 0.032
in
Low
back
pain
VAS
Percent 100 52 ± 32(0, 100) 101 35 ± 36(0, 100) 17p = 0.001
Pain
Relief
Change 100 -17.5 ± 15.1(-58.0, 20.0) 101 -12.2 ± 14.6(-48.0, 32.0) 5.4p = 0.011
in
ODI
Change 100 0.186 ± 0.199(-0.365, 0.782) 100 0.115 ± 0.178(-0.640, 0.665) 0.071p = 0.009
in
EQ-5D
Subject NAp = 0.003
Global
Impression
of
Change
Much 100 32 (32%) 101 18 (18%)
better
Better 100 22 (22%) 101 16 (16%)
A 100 25 (25%) 101 29 (29%)
little
better
No 100 10 (10%) 101 24 (24%)
change
A 100 6 (6%) 101 5 (5%)
little
worse
Worse 100 4 (4%) 101 6 (6%)
Much 100 1 (1%) 101 3 (3%)
worse
Satisfied NAp = 0.001
with
Treatment
Definitely 100 61 (61%) 101 40 (40%)
Yes
Maybe 100 29 (29%) 101 37 (37%)
Definitely 100 10 (10%) 101 24 (24%)
Not
Clinician NAp = 0.001
Global
Impression
Much 100 57 (57%) 100 22 (22%)
Better
Slightly 100 26 (26%) 100 29 (29%)
Better
About 100 16 (16%) 100 42 (42%)
the
Same
Slightly 100 1 (1%) 100 5 (5%)
Worse
Much 100 0 (0%) 100 2 (2%)
Worse
Remitters 100 34 (34%) 101 28 (28%) 6.3%
(VAS p = 0.335
=
2.5)
At the 120-day visit, subjects in the control group were allowed
to cross-over to receive stimulation at a therapeutic level. All
control subjects elected to cross-over at this timepoint. At the
time of filing of the PMA, 160 subjects had completed the 1-year
assessment visit, consisting of 80 in each group. In this
population, all efficacy outcomes for the treatment group and for
the control group post crossover progressively improved through the
1-year assessment visit, consistent with the rehabilitative nature
of the therapy (8 months of therapy for the crossover group). These
results are subject to change as additional subjects complete the
1-year assessment visit.
Outcomes at 1 year (8 months of therapy for the crossover
group):
-- VAS Responders: 69% in the treatment group 63% in the crossover group
-- Change in VAS: -4.4 in the treatment group -4.4 in the crossover group
-- Average Percent Pain Relief: 67% in the treatment group 66% in the crossover group
-- Average ODI Change: 21-point reduction in the treatment group 20-point reduction in the crossover group
-- Average EQ-5D Change: 0.218-point increase in the treatment group 0.183-point increase in the crossover group
-- Average SGIC: 76% Better or Much Better in the treatment group 72% Better or Much Better in the crossover group
-- Average Treatment Satisfaction: 82% Definitely Satisfied in the treatment group 76% Definitely Satisfied in the crossover group
-- Average CGI: 78% Much Better in the treatment group 71% Much Better in the crossover group
Although the study was not designed to reduce medications after
the 120-day visit, subjects were allowed to change medications
after that timepoint. As the following table shows, of the 61
patients (treatment and crossover groups combined) who were on at
least one opioid-containing medication at baseline and had a 1-year
visit, 28% had discontinued use of opioids, and an additional 21%
had decreased opioid use, for an overall rate of 49% of patients
who decreased or discontinued opioids by the 1-year visit.
Medication Change Status Opioid
% (n/N)
Discontinued or Decreased 49% (30/61)
No Change 44% (27/61)
Increased or Added 7% (4/61)
Notably, patients who decreased or discontinued opioids had
similar efficacy results as the overall population. In addition,
97% of those who were not on an opioid at baseline and had a 1-year
visit remained off opioids.
The incidence and type of adverse events (AEs), including
serious AEs, compares favorably to that of spinal cord stimulator
devices, with no unanticipated AEs related to the device, procedure
or stimulation.
Funding - On 29 July 2019, we announced the completion of a
EUR16.9 million financing (approximately $18.9 million). The
financing transactions consist of the issuance of 4,649,775 new
ordinary shares at a purchase price of EUR3.00 per New Share and
the drawdown of EUR3.0 million (approximately $3.34 million) in
additional debt from the Company's existing lender, IPF Partners.
The funds are being used to advance the PMA review process with the
FDA and continue the commercial validation effort in Germany and
other select European markets.
On 18 April 2019, the Company and its subsidiary, Mainstay
Medical Limited, entered into an amendment to its agreement with
IPF Partners relating to their existing debt facility. Pursuant to
the amendment:
-- The repayment schedule for the three existing tranches drawn under the debt facility was amended such that no principal or interest will be repaid until 2021, with the principal and accrued interest to be amortized over the period from January 1, 2021 through September 30, 2023.
-- A new tranche of EUR3.0 million (approximately $3.34 million) was made available to the Company, conditioned upon the Company raising at least $10 million in gross proceeds from one or more offerings of equity prior to 30 June 2019, which date was amended to 31 July 2019. The repayment schedule for the new tranche will be the same as the amended repayment schedule for the three existing tranches.
-- The interest rate for all tranches is 8% per annum.
-- The 5% repayment fee applicable to each existing tranche was eliminated.
-- All principal and accrued interest from all tranches will automatically convert into ordinary shares of the Company at a price per share of EUR8 upon the earlier of (a) FDA approval of the Company's PMA application for ReActiv8, (b) the date by which at least 900,000 ordinary shares of the Company are publicly sold on-market by non-affiliates of the Company since 18 April 2019 at a price per share of at least EUR8, or (c) IPF Partners' election to undertake such conversion, in each case unless the Company elects to satisfy such obligation in whole or in part in cash.
-- The minimum cash covenant was amended so that the Company is required to hold cash at least equal to its projected cash expenditures for operations and debt repayment for the next three months, and the covenant relating to the achievement of commercial milestones was eliminated.
-- The Company issued to IPF Partners warrants to purchase 1.5 million of its ordinary shares at a price per share of EUR6 at any time prior to the 6th anniversary of the amendment date. The Company has issued further conditional warrants to IPF Partners that will become exercisable only to the extent the Company elects to repay the debt in cash rather than issue ordinary shares when a conversion of the debt is triggered. As such, the conditional warrants are intended to ensure that, notwithstanding any such election to repay in cash, IPF Partners retains the right to subscribe for ordinary shares of the Company on the terms and conditions that would otherwise have applied.
Commercialization - In Germany, the Company's initial European
market, commercial repositioning efforts in order to better focus
efforts on key physician targets were undertaken throughout 2018.
The Company continues to focus on commercial validation by working
with key physician partners who identify appropriate ReActiv8
patients in their centres in order to validate commercial adoption,
refine patient selection strategies and follow ongoing patient
progress.
Financial review
Income Statement - Revenue during the six-month period ending 30
June 2019 was $0.6 million ($0.4 million during the same period in
2018). Revenue was generated from sales of ReActiv8 systems to
customers in Germany, Ireland and the UK.
Operating expenses related to on-going activities were $9.5
million during the half year ended 30 June 2019 (same period in
2018: $15.8 million). On-going activities during the financial year
included research and development, clinical and regulatory
activities, selling, general and administrative activities.
Research and development expenses were $1 million during the
six-month period ended 30 June 2019 ($2 million during the same
period in 2018). The decrease of $1 million is primarily driven by
reduced payroll related costs following a reduction in headcount in
2019.
Clinical and regulatory expenses were $2.9 million during the
six-month period ended 30 June 2019 ($7.2 million during the same
period in 2018). The decrease of $4.3 million is primarily driven
by decreased direct trial costs relating to activities for the
ReActiv-8 B clinical trial, following the announcement in July 2018
of the completion of all implants.
Selling, general and administrative expenses were $5.6 million
during the half year ended 30 June 2019 ($6.6 million during the
half year ended 30 June 2018). The decrease of $1 million is
primarily driven by the reduction in recruitment fees, travel and
training costs, as well as certain marketing and market research
costs.
Statement of financial position - Total assets of the Group at
30 June 2019 were $9.7 million (31 December 2018: $19.4 million).
Cash on hand at 30 June 2019 was $5.8 million (31 December 2018:
$15.5 million). Cash used in operating activities was $8.8 million
during the period (30 June 2018: $14.8 million) and is reflective
of our decreased operating expenses.
Since inception the Group has funded its operations primarily
through the issuance of equity securities and debt funding. The
Group intend to continue to explore funding strategies (e.g.,
equity, debt, partnering) to support its activities into the
future.
Principal risks and uncertainties
The principal risks and uncertainties faced by the Group and/or
its industry for the remaining six months of 2019 remain unchanged
from the risks disclosed in the 2018 Annual Report, which is
available on our website.
A summary of the principal risks relating to the Company and/or
its industry include the following:
-- We have incurred significant operating losses and cash outflows 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 which are dilutive to current investors, specifically favorable to new investors, or to restrictions significantly limiting our access to additional capital or other activities.
-- Our future financial performance is entirely dependent on the commercial success of ReActiv8, our only product as of the date of this Report, obtaining adequate reimbursement for ReActiv8, and rates of product adoption and market penetration.
-- We operate in a highly regulated environment and regulatory approval is required before we can market or sell ReActiv8 in any market.
-- To date, the only regulatory approval to the market ReActiv8 is our CE Mark relating to the European Economic Area, or EEA, and Switzerland. Seeking and obtaining regulatory approval for medical devices in the United States and elsewhere can be a long and uncertain process. The failure to achieve regulatory approval in the United States or in other key markets, the loss of our CE Mark, or strict or changing regulatory regimes, government policies and legislation in any of our target markets may delay, prohibit or reduce potential sales.
-- Failure to comply with debt covenants or failure to make repayments on our debt facility could have a material adverse effect.
-- 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.
-- Any inability to fully protect and exploit our intellectual property may adversely impact our financial condition, business, prospects and results of operations.
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 the
Annual Report, on pages 24 to 56, and should be considered
carefully by shareholders and prospective investors.
Outlook and future developments
Our objectives for the remainder of 2019 and into 2020 are to
advance the PMA review process with the FDA following filing in
August 2019; and to continue the commercial validation effort in
Germany and other select European markets by working with key
physician partners who identify appropriate ReActiv8 patients in
their centers in order to validate commercial adoption, refine
patient selection strategies and follow ongoing patient
progress.
Related party transactions
Refer to note 11.
Going concern
The Directors have evaluated whether there are conditions and
events, considered in aggregate, that raise doubt about the Group's
ability to continue as a going concern within one year of the date
of issue of the consolidated financial statements. The Directors
note the following relevant matters:
-- The Group had cash of $5.8 million as at 30 June 2019 ($15.5 million as at 31 December 2018).
-- The Group had operating cash out-flows of $8.8 million for the 6 months ended 30 June 2019 (year ended 31 December 2018: $27.3 million).
-- Due to the phase of development of the Group, the Group expects to continue to incur losses in the medium term due to the ongoing investment required in research and development, clinical and commercial activities and expects to continue to seek funding from investors or other finance providers as required.
-- The Group has an accumulated retained loss reserve of $168.2 million and a reorganization reserve of $44.6 million as at 30 June 2019 (31 December 2018: $157 million and $44.6 million, respectively).
-- The Group has funded operations to date through the proceeds of equity funding of approximately $123.5 million and as at 30 June 2019, debt with an outstanding principal of $9.45 million.
-- On 29 July 2019, we announced the completion of a EUR16.9 million financing (approximately $18.9 million). The financing transactions consist of the issuance of 4,649,775 new ordinary shares at a purchase price of EUR3.00 per share and the drawdown of EUR3.0 million (approximately $3.34 million) in additional debt from the Company's existing lender.
The Directors have considered the conditions noted above and
other factors, and believe that the Group will have sufficient
funds to be able to meet its liabilities as they fall due for a
period of at least 12 months from the date of the Financial
Statements and are satisfied that the Financial Statements should
be prepared on a going concern basis.
Auditors
The condensed consolidated Financial Statements have not been
reviewed by the Company's auditors.
Mainstay Medical International plcDirectors' responsibilities
statement
Statement of the Directors in respect of Half Year Financial
Report
Each of the Directors of the Company (the Directors), whose
names and functions are listed in the Corporate and Shareholder
Information, confirm that, to the best of each person's knowledge
and belief:
(a) the condensed consolidated Financial Statements comprising
the condensed consolidated statement of profit or loss and other
comprehensive income, the condensed consolidated statement of
financial position, the condensed consolidated statement of changes
in equity, the condensed consolidated statement of cash flows and
related notes 1 to 12 have been prepared in accordance with IAS 34
Interim Financial Reporting as adopted by the EU.
(b) the interim management report includes a fair review of the
information required by:
On behalf of the Board on 19 September 2019,
Oern Stuge MD Jason Hannon
Chairman CEO
Mainstay Medical International plcCondensed consolidated
statement of profit or loss and other comprehensive incomefor the
half year ended 30 June 2019
($'000) Notes Half year ended Half year ended 30 June 2018
30 June 2019
Unaudited Unaudited
Revenue 4 552 358
Cost of sales (316) (170)
Gross profit 236 188
Operating expenses (9,559) (15,849)
Operating loss (9,323) (15,661)
Finance expense (net) (1,018)
(1,760)
Net finance expense (1,760) (1,018)
Loss before income (11,083) (16,679)
taxes
Income taxes 6 (63) 156
Loss for the half year (11,146) (16,523)
Net loss attributable (11,146) (16,523)
to equity holders
Basic and diluted loss 5 (1.27) (2.01)
per share (in $)
Other Comprehensive
Income
Items that are or may
be reclassified
subsequently
to the statement of
profit or loss:
Foreign currency (20) 56
translation
differences
of foreign operations
Total comprehensive (11,166) (16,467)
loss
for the half year
Total comprehensive (11,166) (16,467)
loss attributable
to equity holders
The accompanying notes form an integral part of these condensed
consolidated interim Financial Statements.
Mainstay Medical International plcCondensed consolidated
statement of financial positionat 30 June 2019
($'000) Notes 30 June 2019 31 December 2018
Unaudited Audited
Non-current assets
Property, plant and equipment 191 235
Right of use asset 414 -
Total non-current assets 605 235
Current assets
Inventory 2,251 2,575
Trade and other receivables 871 813
Income tax receivable 212 213
Cash and cash equivalents 5,806 15,545
Total current assets 9,140 19,146
Total assets 9,745 19,381
Equity
Share capital 8 67 67
Share premium 143,898 143,897
Other reserves 4,606 4,626
Share based payment reserve 15,797 11,716
Retained loss (168,219) (157,022)
Surplus/ (deficit) on (3,851) 3,284
shareholders' equity
Non-current liabilities
Loans and borrowings 7 9,684 8,791
Derivative financial instruments 7 1,098 -
Total non-current liabilities 10,782 8,791
Current liabilities
Loans and borrowings 7 215 3,158
Income tax payable 64 18
Deferred revenue 62 -
Trade and other payables 2,473 4,130
Total current liabilities 2,814 7,306
Total liabilities 13,596 16,097
Total equity and liabilities 9,745 19,381
The accompanying notes form an integral part of these condensed
consolidated interim Financial Statements.
Mainstay Medical International plcCondensed consolidated
statement of changes in shareholders' equityfor the half year ended
30 June 2019
($'000) Share capital Share premium Other Share based Retained loss Total equity
Reserves payment
reserve
Balance 64 106,414 4,593 7,613 (124,505) (5,821)
as
at 1
January
2018
Loss for - - - - (16,523) (16,523)
the
half
year
Other - - 56 - - 56
comprehensive
income
for the
half
year
Total - - 56 - (16,523) (16,467)
comprehensive
loss
for the
half
year
Transactions
with
owners
of
the
Company:
Share - - - 1,852 - 1,852
based
payments
Issue of 3 37,483 - - (1,440) 36,046
shares
on
exercise
of
share
options
or
warrants
Balance 67 143,897 4,649 9,465 (142,468) 15,610
at
30 June
2018
(Unaudited)
Loss for - - - - (14,554) (14,554)
the
half
year
Other - - (23) - - (23)
comprehensive
income
Total - - (23) - (14,554) (14,577)
comprehensive
loss
for the
half
year
Transactions
with
owners
of
the
Company:
Share - - - 2,251 - 2,251
based
payments
Issue of - - - - - -
shares
on
exercise
of
share
options
or
warrants
Balance 67 143,897 4,626 11,716 (157,022) 3,284
at 31
December
2018
Opening - - - - (51) (51)
adjustment
on
initial
application
of IFRS
16
Adjusted 67 143,897 4,626 11,716 (157,073) 3,233
balance
at
1
January
2019
Loss for - - - - (11,146) (11,146)
the
half
year
Other - - (20) - - (20)
comprehensive
income
for the
half
year
Total - - (20) - (11,146) (11,166)
comprehensive
loss
for the
half
year
Transactions
with
owners
of
the
Company:
Share - - - 4,081 - 4,081
based
payments
Issue of - 1 - - - 1
shares
Balance 67 143,898 4,606 15,797 (168,219) (3,851)
at
30 June
2019
(Unaudited)
The accompanying notes form an integral part of these condensed
consolidated interim Financial Statements.
Mainstay Medical International plcCondensed consolidated
statement of cash flowsfor the half year ended 30 June 2019
($'000) Notes Half year ended Half year ended
30 June 2019 30 June 2018
Unaudited Unaudited
Cash flow from operating
activities
Net loss for the (11,146) (16,523)
half year
Add/(less) non-cash items
Depreciation 174 50
Finance expense 1,760 1,018
Share-based compensation 10 2,102 1,852
Income taxes 6 63 (156)
Add/(less) changes
in working capital
Trade and other (58) (306)
receivables
Inventory 324 (80)
Trade and other payables (1,793) 76
Taxes paid (16) (112)
Interest paid (245) (603)
Net cash used in (8,835) (14,784)
operations
Cash flow from investing
activities
Acquisition of property (6) (26)
and equipment
Net cash used (6) (26)
in investing
activities
Cash flow from financing
activities
Gross proceeds from - 37,486
issue of shares
Transaction costs on - (1,440)
issue of shares
Repayment of borrowings 7 (750) (1,500)
Payment of lease 7 (148) -
liabilities
Net cash (outflow)/inflow (898) 34,546
from
financing activities
Net (decrease)/increase (9,739) 19,736
in
cash and cash equivalents
Cash and cash equivalents 15,545 9,975
at beginning of period
Cash and cash equivalents 5,806 29,711
at 30 June 2019
The accompanying notes form an integral part of these condensed
consolidated interim Financial Statements.
Mainstay Medical International plcNotes to the condensed
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 Half Year Report and condensed consolidated Financial
Statements for the periods ended 30 June 2019 and 30 June 2018
comprise the results of the Company and of its subsidiaries
(together the Group).
At 30 June 2019, the Group comprises the Company and its
operating subsidiaries Mainstay Medical Limited, Mainstay Medical
Distribution Limited, Mainstay Medical GmbH, Mainstay Medical B.V.,
MML US, Inc. and Mainstay Medical (Australia) Pty. Limited.
The Company's shares are quoted on Euronext Paris and Euronext
Growth operated by Euronext Dublin.
Mainstay is a medical device company focused on commercializing
ReActiv8®, an implantable restorative neurostimulation system
designed to treat an underlying cause of disabling Chronic Low Back
Pain (CLBP).
2. Basis of preparation
Statement of compliance
The condensed consolidated Financial Statements have been
prepared in accordance with IAS 34 Interim Financial Reporting as
adopted by the EU. They do not include all the information and
disclosures necessary for a complete set of IFRS Financial
Statements. However, selected explanatory notes are included to
explain events and transactions that are significant to an
understanding of the changes in the Group's financial position and
performance since the last annual consolidated financial statements
as at and for the year ended 31 December 2018.
The comparative information provided in the condensed
consolidated Financial Statements relating to the periods ended 30
June 2018 and 31 December 2018 does not comprise the statutory
financial statements of the Group. Those statutory financial
statements for the year ended 31 December 2018 on which the
auditors gave an unqualified audit opinion, have been delivered to
the Companies Registry Office.
There are no significant or material changes to judgements or
estimates used in these condensed consolidated Financial Statements
compared with those used in the consolidated Financial Statements
for the year ended 31 December 2018.
The condensed consolidated Financial Statements were authorized
for issue by the Board of Directors, on 19 September 2019.
Going concern
The Directors have evaluated whether there are conditions and
events, considered in aggregate, that raise doubt about the Group's
ability to continue as a going concern within one year of the date
of issue of the consolidated financial statements. The Directors
note the following relevant matters:
-- The Group had cash of $5.8 million as at 30 June 2019 ($15.5 million as at 31 December 2018).
-- The Group had operating cash out-flows of $8.8 million for the 6 months ended 30 June 2019 (year ended 31 December 2018: $27.3 million).
-- Due to the phase of development of the Group, the Group expects to continue to incur losses in the medium term due to the ongoing investment required in research and development, clinical and commercial activities and expects to continue to seek funding from investors or other finance providers as required.
-- The Group has an accumulated retained loss reserve of $168.2 million and a reorganization reserve of $44.6 million as at 30 June 2019 (31 December 2018: $157 million and $44.6 million, respectively).
-- The Group has funded operations to date through the proceeds of equity funding of approximately $123.5 million and as at 30 June 2019, debt with an outstanding principal of $9.45 million.
-- On 29 July 2019, Mainstay announced the completion of a EUR16.9 million financing (approximately $18.9 million). The financing transactions consist of the issuance of 4,649,775 new ordinary shares at a purchase price of EUR3.00 per share and the drawdown of EUR3.0 million (approximately $3.34 million) in additional debt from the Company's existing lender.
The Directors have considered the conditions noted above and
other factors, and believe that the Group will have sufficient
funds to be able to meet its liabilities as they fall due for a
period of at least 12 months from the date of the Financial
Statements and are satisfied that the Financial Statements should
be prepared on a going concern basis.
Currency
The condensed consolidated Financial Statements are presented in
US Dollars ($), which is the functional and presentational currency
of the Company. Balances in the condensed consolidated Financial
Statements are rounded to the nearest thousand ($'000) except where
otherwise indicated.
Basis of consolidation
The condensed consolidated Financial Statements comprise the
consolidated results of Mainstay Medical International plc and its
subsidiaries.
Significant accounting policies
With the exception of the newly implemented policies noted
below, the condensed consolidated Financial Statements have been
prepared applying the accounting policies that were applied in the
preparation of the Group's consolidated Financial Statements for
the year ended 31 December 2018, which were prepared in accordance
with IFRS and are available on the Company's website
(www.mainstay-medical.com). These accounting policies have been
applied consistently for all periods presented.
The Group has initially adopted IFRS 16 Leases from 1 January
2019. A number of other new standards are effective from 1 January
2019, but they do not have a material effect on the Group's
financial statements
a) Leases
The Group has initially adopted IFRS 16 Leases from 1 January
2019. IFRS 16 introduced a single, on-balance sheet accounting
model for lessees. As a result, the Group, as a lessee, has
recognized right-of-use assets representing its rights to use the
underlying assets and lease liabilities representing its obligation
to make lease payments.
The Group has applied IFRS 16 using the modified retrospective
approach, under which the cumulative effect of initial application
is recognized in retained earnings at 1 January 2019. Accordingly,
the comparative information presented for 2018 has not been
restated. The details of the changes in accounting policies are
disclosed below.
Definition of a Lease
As a lessee, the Group previously classified leases as operating
or finance leases based on its assessment of whether the lease
transferred substantially all of the risks and rewards of
ownership. Under IFRS 16, the Group recognizes right-of-use assets
and lease liabilities for leases. The Group has elected not to
recognize right-of-use assets and lease liabilities for some leases
of low-value assets and has applied the exemption not to recognize
right-of-use assets and liabilities for leases with less than 12
months of lease term.
The Group recognizes a right-of-use asset and a lease liability
at the lease commencement date. The right-of-use asset is initially
measured at cost, and subsequently at cost less any accumulated
depreciation and impairment losses, and adjusted for certain
remeasurements of the lease liability.
The lease liability is initially measured at the present value
of the lease payments that are not paid at the commencement date,
discounted using the interest rate implicit in the lease or, if
that rate cannot be readily determined, the Group's incremental
borrowing rate. Generally, the Group uses its incremental borrowing
rate as the discount rate.
3. Segment reporting
Due to the nature of the Group's current activities, the Group
considers there to be one operating segment, Active Implantable
Medical Devices (AIMDs). 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) 30 June 2019 31 December 2018
Ireland 227 101
Germany 2 2
United States 376 132
Total non-current assets 605 235
The Group's total revenue by country is detailed below:
($'000) Half year ended Half year ended 30 June 2018
30 June 2019
Ireland 39 90
Germany 387 250
Other Europe 126 18
Total revenue by country 552 358
4. Revenue
($'000) Half year ended Half year ended
30 June 2019 30 June 2018
Revenue arising from the sale of goods 552 358
552 358
5. Earnings per share
As the Group is incurring operating losses, there is no
difference between basic and diluted earnings per share.
Half year ended Half year ended
30 June 2019 30 June 2018
Weighted average number of 8,771,472 8,235,367
ordinary shares in issue
Loss per share 1.27 2.01
6. Taxes
Current income tax assets and liabilities for the current and
prior periods are measured at the amount expected to be recovered
from or paid to the relevant taxation authorities. The tax charge
has been prepared based on the Group's best estimate of the
weighted average tax rate that is expected for the full financial
year. The tax rates and tax laws used to compute the amount are
those used in Ireland, Germany, the Netherlands, the United States
and Australia.
7. Interest bearing loans and borrowings
On 24 August 2015, MML entered into the IPF debt facility for up
to $15.0 million. The facility was drawn down in three tranches. As
at 31 December 2018 and 30 June 2019, the principal outstanding was
$10.2 million and $9.45 million respectively. In April 2019 a new
tranche of EUR3.0 million (approximately $3.34 million) was made
available to Mainstay, conditional upon Mainstay raising at least
$10 million in gross proceeds from one or more offerings of equity
prior to June 30, 2019. This deadline was extended to July 31, 2019
by agreement with IPF. On 29 July Mainstay completed an equity
offering, raising gross proceeds of EUR13.9 million, and announced
the drawdown of EUR3.0 million in additional debt from the new
tranche of the existing debt facility.
In April 2019, the Company and IPF amended the terms of their
existing agreements such that all the principal and interest
payments are deferred until 2021, the loan term was extended to
2023 and the interest rate on all tranches was changed to 8%. The
loan is also convertible in certain circumstances to ordinary
shares at a price of EUR8 per share.
The Company considers the amendment to be a significant
modification of the terms of the debt. Accordingly the previous
loans and associated accruals were de-recognized and the new loan
was recognized at fair value, resulting in a loss recognized in the
period of $1.1 million. The Company accounts for the conversion
option as a derivative financial instrument carried at fair value
through the statement of profit or loss.
The fair value of the conversion option is determined using a
Black-Scholes model whose principal assumptions at 30 June 2019
were:
Stock price ($) 4.14
Exercise price (EUR) 8
Volatility 58.95%
Expected term (years) 4
In connection with the amendment to the debt facility, the
Company also granted 1.5 million warrants over ordinary shares to
IPF with an exercise price of EUR6. The fair value of the warrants
on the grant date of $1.9 million, which was also calculated using
a Black-Scholes model, was recognized in finance costs as part of
the net cost of modification of the debt.
($'000) 31 December 2018
30 June 2019
Loans and borrowings - current
Term loan - 3,000
Deferred finance cost - (90)
Accrued interest - 248
Lease liabilities 215 -
Total current loans and borrowings 215 3,158
Loans and borrowings - non-current
Term loan 9,247 7,200
Deferred finance cost - (103)
Accrued interest 190 1,694
Lease liabilities 247 -
Total non-current loans and borrowings 9,684 8,791
Total loans and borrowings 9,899 11,949
8. 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 30 June 2019 31 December 2018
EUR EUR
20,000,000 ordinary shares of EUR0.001 each 20,000 20,000
40,000 deferred shares of EUR1.00 each 40,000 40,000
60,000 60,000
Issued, called up and fully paid 2019 2018
$ $
8,771,729 (31 December 2018: 8,770,229) 11,242 11,240
ordinary shares of EUR0.001 each
40,000 deferred shares of EUR1.00 each 55,268 55,268
66,510 66,508
In $'000 67 67
9. Financial instruments
Financial risk management
In terms of financial risks, the Group has exposure to credit
and financial 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.
The Group has no significant concentrations of financial risk
other than concentration of cash with individual banks. The Group
is also exposed to credit risk arising on trade receivables, with
further information provided below. There has been no other
significant change during the half year or since the end of the
half year to the types or quantum of financial risks faced by the
Group or the Group's approach to the management of those risks,
other than in connection with the revised terms negotiated with IPF
as disclosed in note 7.
Credit and financial 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 maximum exposure to credit
risk is represented by the carrying amount of each asset. The
carrying value of receivables is a reasonable approximation of fair
value.
Trade and other receivables
Trade receivables comprise amounts due from customers, all of
which were current at 30 June 2019 and 31 December 2018. The
Group's credit risk management policy and process in relation to
trade receivables involves carrying out credit checks where
appropriate, and by active credit management. The utilization of
credit limits is regularly monitored. In addition, it involves
periodically assessing the financial reliability of customers,
considering their financial position, past experience and other
factors.
The Company does not have exposure to significantly different
categories of customer and accordingly details of credit risk by
customer type or jurisdictions is not provided.
There were no material impairment losses recorded in the period
and the provision for expected credit losses at 30 June 2019 is
immaterial. The carrying value of trade receivables of $0.2 million
at 30 June 2019 ($0.1 million at 31 December 2018) represents the
maximum exposure to credit risk.
Cash and cash equivalents
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 several financial institutions. The Group's
principal financial institutions have investment grade ratings at
30 June 2019. 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 most of its cash in USD denominated accounts. The
Group held cash and cash equivalents of $5.8 million as at 30 June
2019.
Guarantees
The Company has guaranteed the payment of the liabilities and
commitments of its subsidiaries in Ireland (as defined in section
357 of the Companies 2014 Act) for the years ended 31 December 2018
and 31 December 2017.
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 the issuance
of equity securities and debt funding. The Group intends to
continue 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 expenditures
incurred in Euros and Australian Dollars.
The Group's Australian subsidiary has an Australian Dollar
functional currency and three of the Group's subsidiaries located
in Ireland, Germany and the Netherlands 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. 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 half year ended.
At 30 June 2019, the principal outstanding on MML's loan from
IPF was $9,450,000. The repayment schedule for the four existing
tranches drawn under the debt facility is such that no principal or
interest will be repaid until 2021, with the principal and accrued
interest to be amortized over the period from 1 January 2021
through 30 September 2023. The interest rate for all tranches will
be 8% per annum, with interest accruing but capitalized prior to
January 1, 2021.
10. Share based payments
Share Options
The terms and conditions of the Group's share option plan are
disclosed in the 2018 Annual Report. The charge of $2.1 million for
the half year ended 30 June 2019 (30 June 2018: $1.9 million) is
the grant date fair value of various share options and RSUs granted
in the current and prior years, which are being recognized within
the statement of profit or loss and other comprehensive income over
the vesting period related to service. 7,500 options were granted
in the six months ended 30 June 2019 (30 June 2018: 279,878
options). The Company also recognized $1.9 million in the profit
and loss related to the fair value of warrants granted to IPF as
disclosed in Note 7. This amount has been recorded in finance
expense as it related to the modification of the debt.
The Employee Incentive Plan was amended in January 2019 to allow
for the issue of RSUs, being rights to receive Ordinary Shares at
no cost to the relevant employee, director or consultant. The
Company has granted 381,000 RSUs as at 30 June 2019.
11. Contingencies
The Directors and management are not aware of any contingencies
that may have a significant impact on the financial position of the
Group.
12. Related party transactions
There were no balances due to or from related parties as at 30
June 2019 and 30 June 2018.
Key management compensation and Directors' remuneration
The Group defines key management as its non-executive directors,
executive directors and senior management. Details of remuneration
for key management personnel for the six-month reporting period are
provided below:
($'000) 30 June 2019 30 June 2018
Salaries 604 428
Non-executive directors' fees 130 135
Other remuneration 65 223
Payroll taxes 27 23
Share based payments 1,288 1,609
Pension - -
Total remuneration 2,114 2,418
13. Events subsequent to 30 June 2019
On 29 July 2019, we announced the completion of a EUR16.9
million financing (approximately $18.9 million). The financing
transactions consist of the issuance of 4,649,775 new ordinary
shares at a purchase price of EUR3.00 per share and the drawdown of
EUR3.0 million (approximately $3.34 million) in additional debt
from the Company's existing lender.
View source version on businesswire.com:
https://www.businesswire.com/news/home/20190919005800/en/
This information is provided by Business Wire
(END) Dow Jones Newswires
September 20, 2019 02:00 ET (06:00 GMT)
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