Proxima CE Marking Received and Trading Update

06 June 2014: Sphere Medical Holding plc (AIM: SPHR.L) (“Sphere Medical” or the “Company”), a leading developer of innovative monitoring and diagnostic products for the critical care setting, today announces that the Proxima system, its patient-attached arterial blood analyser for use in intensive care and the operating room, has received CE marking under the EU Medical Devices Directive and also provides a business and trading update.

As previously indicated at the time of the Preliminary Results in February 2014, we expected to receive all four Proxima CE marks for the Company’s Proxima system before the end of the first half of 2014. We are pleased to announce that all four CE marks have now been received for the Proxima system, which will allow us to proceed with the Post Market Clinical Follow-up Study at the Queen Elizabeth Hospital, Birmingham and the commercial launch in 2014, further details of which are provided in this announcement.
Sphere Medical has continued to trade satisfactorily in the period and its financial results are ahead of the Board's expectations.

Operational update since Wolfgang Rencken’s appointment as CEO.

Since his appointment as Chief Executive Officer at the end of February 2014, Wolfgang Rencken has focused on bringing about a commercial and customer-centred culture at Sphere Medical. He has undertaken a thorough review of the Proxima system development programme. Within the Company the Product Development and Product Realisation teams have concentrated their efforts on addressing improvements to product reliability and steadily improving production yields.

In order to position the Company for the commercial launch of Proxima in 2014 the Sales and Marketing team has focused on market segmentation and clearly defining the clinical benefits of Proxima within each target market. The Company will initially target key strategic UK hospitals in specific clinical application areas suitable for early adoption of the Proxima system.

Financial update

Operating expenses continue to be tightly controlled and the Company’s operating loss for Q1 2014 was less than budgeted. Unaudited cash balance at 30 April 2014 stood at £7.8 million which includes payment of various exceptional cash items in connection with the change of CEO announced in February 2014.

Proxima CE mark update As described at the time of the Preliminary Results in 27 February 2014, the CE marking process at Sphere Medical involved separate CE marking reviews and approvals for each of the four Proxima system elements; flush, sensor, monitor and vials. The approach undertaken by the CE marking authority has been to review each of the individual components within the system as a whole with the consequence that the complete CE marking approval process has proceeded significantly slower than anticipated. However, we are now pleased to announce that each of the four individual CE marks has been received and, as a consequence, the Proxima system is a CE marked medical device.

The following is a summary of the function of each of the individual CE marked element within the Proxima system.

Sensor – Class IIa medical device

The sensor is a disposable electronic device performing blood gas analysis on-demand and is fitted in-line to an existing arterial line. Blood gas and electrolyte parameters can be measured by drawing blood back up the arterial line so that the patient’s blood comes into contact with the sensor.

Vials – Class I sterile medical device

The calibration and quality control solutions are provided in sterile vials and are used to calibrate and routinely check the function of the sensor during use.

Flush – Class III infused medical device

The flush is supplied in a sterile bag and its principle modes of action are to propagate the pressure wave form, keep the lines patent and check the function of the sensor. The flush and the whole blood sample used for the measurement are re-infused into the patient during use.

Monitor – Class IIa medical device

This monitor is attached to an IV pole and contains the electronics and software to convert the signal and display the results obtained from the sensor. The monitor was initially CE marked as a Class I medical device in January 2014.

However, owing to the sophistication of the software within the monitor and since planned future product enhancements will add further functionality to the software, the device was re-classified by our CE mark reviewer as a Class IIa medical device in late April 2014. Despite this recent reclassification the Company managed to avoid any material delay in the receipt of the CE mark.

Proxima Post Market Clinical Follow-up Study

We have now received all necessary approvals to commence our Proxima Post Market Clinical Follow-up Study at the Queen Elizabeth Hospital, Birmingham. The study will commence shortly. As previously stated, the timetable for this study is approximately three months to completion. In order to ensure a smooth transition into the study, we recently completed an internally simulated study within SphereMedical’s blood laboratory mirroring the planned Post Market Clinical Follow-up Study outlined above. This simulated study demonstrated positive data when comparing Proxima to other blood gas analysers.

Collaboration with OCD

The OCD collaboration agreement continues to progress satisfactorily, focussing on the product improvements planned for Proxima. On 16 January 2014 it was announced that Carlyle Group has agreed to acquire OCD. The completion of the acquisition is expected in June 2014. Commenting on the CE marking and the trading update, Sphere Medical’s Chief Executive Officer, Wolfgang Rencken, said:

“Within the past three months, since my appointment as CEO, I have been impressed by the potential of the Proxima technology. A very considerable effort has gone into the CE marking process and today’s announcement of its successful completion represents a significant milestone for the Company and is the beginning of Proxima's commercial future.

This is an exciting time for the Company, its partners, investors and staff and I am delighted to have joined at such a pivotal time.”