MDY Healthcare plc

Commercial launch of natural healthcare business

Year end business and portfolio update

29 September 2008: MDY Healthcare plc ("MDY Healthcare" or the "Company"), the strategic investor in healthcare companies, today announces the commercial launch of Trust William (www.trustwilliam.com), its multi-channel retail business selling natural healthcare products direct to consumers. MDY Healthcare also provides a pre-close update on its overall business and investment portfolio ahead of the completion of its financial year on 30 September 2008. The Company anticipates announcing its final results in December and intends to publish its annual report shortly thereafter following completion of the audit process.

Highlights

• Commercial launch of Trust William (www.trustwilliam.com), the Company's multi-channel retail business selling natural healthcare products direct to consumers

• Continued strong performance from major strategic investments.

• Strong sales growth from Stanmore Implants Worldwide since acquisition in March 2008

• Reviewing valuation of the Company's holding in Medivance following continued sales growth and progress towards operating breakeven

• Key clinical trial underway for AOI Medical's AscendXTM VCF Reduction System

• Disappointing performance from smaller quoted investments and trading portfolio despite some share price improvements in second half  

Charles Spicer, CEO, said:

"We are delighted to be launching Trust William on schedule and intend to establish it as a leading UK direct retailer of natural healthcare products.  Our investment in Stanmore Implants Worldwide was a landmark deal for us this year and Stanmore has already delivered impressive sales growth. We are also very pleased with the continued progress being made by our two other major strategic investments - Medivance and AOI Medical." 

MDY Healthcare shareholders qualify for a special shareholders' offer (spend £30 or more and save £10) details of which will be sent to shareholders next week. Any shareholder who does not receive their offer voucher should email info@mdyhealthcare.com or contact the Trust William customer services team on 0800 046 1846.

For further information, please contact:

Notes for editors:

About MDY Healthcare

MDY Healthcare plc is a sector specialised strategic investing company quoted on AIM (ticker symbol: MDY).  The company seeks to achieve superior returns for shareholders by investing globally in companies, both public and private, across the healthcare sector.  The directors, executives and senior advisors have significant operational and investment experience in the sector and therefore the ability to identify and review a wide range of potential investments. 

Further information can be found on the website www.mdyhealthcare.com.  

MDY Healthcare plc

Commercial launch of natural healthcare business

Year end business and portfolio update

29 September 2008: MDY Healthcare plc ("MDY Healthcare" or the "Company"), the strategic investor in healthcare companies, today announces the commercial launch of Trust William, its multi-channel retail business selling natural healthcare products direct to consumers.  MDY Healthcare also provides a pre-close update on its overall business and investment portfolio ahead of the completion of its financial year on 30 September 2008.  The Company anticipates announcing its final results in December and intends to publish its annual report shortly thereafter following completion of the audit process.

The two key events in last twelve months have been the acquisition of Stanmore Implants Worldwide by us and a group of investors lead by Brian Steer (former chairman of Gyrus Group plc) and the launch of Trust William (www.trustwilliam.com), the direct-to-consumer joint venture with William Ransom & Son. We are also pleased to report continued progress from our two other major strategic investments, Medivance and AOI Medical.  

The majority of the value in our investments now lies in private companies each of which has performed well in the period. Consequently, our portfolio has only been partially affected by the global stockmarket instability over the last year.   However, the share prices of our quoted strategic investments in Minster Pharma, Allergy Therapeutics and Lombard Medical have continued to suffer badly in what has been a very difficult year for most quoted companies as highlighted in our interims. The performance of our trading portfolio, while significantly improved in the second half, remains similarly disappointing over the full year.  

Launch of Trust William 

We are delighted to announce the commercial launch, on schedule, of Trust William, which started trading earlier this month. Trust William is a multi-channel retail business selling natural healthcare products direct to consumers via its website, www.trustwilliam.com and a recently launched catalogue backed by a freephone customer services line. Trust William's product range is based around six key natural active ingredients: Aloe Vera, Echinacea, Glucosamine, Manuka Honey, Omega 3 and Tea Tree Oil supplemented by a number of other natural family healthcare products.  

Trust William, as well as benefiting from the facilities and staff of its two shareholders, is being led by Miles Stevens-Hoare. Miles has been working with us on the project since March and is now assuming the role of Chief Executive of Trust William.  Miles is a proven and experienced new business developer with significant experience in the mail order, online and direct selling environments. He was previously Managing Director of the Book Clubs and Fairs division of Scholastic UK Ltd, the UK's largest children's and school book publisher and distributor. 

MDY Healthcare shareholders qualify for a special shareholders' offer (spend £30 or more and save £10) details of which will be sent to shareholders next week.  Any shareholder who does not receive their offer voucher should email info@mdyhealthcare.com or contact the Trust William customer services team on 0800 046 1846.

Stanmore Implants Worldwide Limited ("SIW")

SIW has performed extremely well since the completion of the acquisition in March 2008 by the investor group led by Brian Steer.  MDY Healthcare invested £3 million in SIW and has approximately 20% of the issued share capital on a fully-diluted basis. Unaudited sales for the first seven months exceeded £3 million, which was ahead of the company's budget and represents 18% growth over the previous year.  Growth is being driven by increased take up of the METS (modular endoprosthetic tumour system) product range and particularly strong sales of the non-invasive Juvenile Tumour Systems including into the US.  SIW has seen good growth generally in exports particularly in France, Greece, Hong Kong, India and Australia with sales in 15 countries in total.

Under the new ownership, SIW is expanding its skilled workforce, re-branding its marketing activities and developing a new global electronic communication system to support the work of customers.  New state-of-the-art premises have been secured and the company plans to move into them in early 2009.

SIW continues to make encouraging progress with its clinical trials of ITAP, its innovative device for directly attaching prosthetic devices to the skeleton of amputees. This is being developed for a wide-range of applications including upper and lower limb, digits and craniofacial prostheses. The first upper limb device which was implanted in a 7/7 bomb victim has now been in situ for over twelve months and continues to perform well.  The trial on lower limbs is now underway at the Royal National Orthopaedic Hospital in Stanmore and the Royal Orthopaedic Hospital in Birmingham.  The MHRA-approved digit trial has now completed recruitment with the final devices being implanted in September 2008. Given the significant potential of the US market for ITAP, SIW's management is now exploring opportunities to accelerate clinical trials on the technology in the US.

Despite the increased investment in clinical trials, marketing, staffing and premises, the gross margin remains over 60% and the company remains cash generative and profitable after tax.  The management team and shareholders are keen to continue to grow the business aggressively internationally through mergers, acquisitions and commercial alliances with other specialist musculoskeletal companies.

Medivance, Inc

Our investment in Medivance, the Colorado-based leader in the emerging field of therapeutic temperature management, continues its excellent progress. Following a strong performance in the first eight months of 2008, the company is now on target to achieve its 2008 plan which requires continued strong global sales growth and a move into operating breakeven towards the end of the year.  In order to provide for this continued rapid growth the company is moving to a new manufacturing, administration and distribution facility close to its current facilities which will double its capacity.  

Since we first invested in December 2006, Medivance has quadrupled its rate of sales and moved from a substantial loss-making position to close to operating at breakeven. Medivance's patented, FDA-approved Arctic Sun™ device is now used in more than 70% of the top US hospitals and is also being increasingly adopted by smaller teaching and community hospitals. International adoption of the Arctic Sun™ continues in Europe, Asia and Australia.  We have invested approximately $5 million to date in Medivance and now own approximately 9.8% of the fully-diluted equity.

Based on this strong performance we are reviewing our valuation of our holding in Medivance with our professional advisers for inclusion in our preliminary results, which we expect to announce in December 2008.

AOI Medical Inc.

In June 2008, AOI commenced its key 60 patient clinical study for its AscendXTM VCF  Reduction System and has announced that the first three patients met the acute procedural success criteria demanded by the protocol. AOI has confirmed that the progress of the trial is consistent with the planned regulatory filing with the US FDA later this year. Market launch is expected shortly thereafter.  

In May 2008 AOI secured shareholder approval to waive pre-emption rights in connection with a possible issue of up to 15 million new common shares to secure future financing. As at 30 June 2008 the company had money market investments of $7.0m.  MDY Healthcare has invested a total of approximately £1.8 million and has approximately 8.6% of the issued share capital.

Quoted Investments

Over the last twelve months we have experienced extremely challenging conditions in the public markets generally, specifically in our sector and for smaller capitalisation companies.  Both the techMark mediscience and the AIM all-share indices are down over 30% in the last 12 months.

As the majority of our assets are in private investments and cash, we have managed to mitigate the losses to the overall portfolio from the public investments.  However given our increased focus on larger, more strategic investments, we have reviewed our investment strategy in quoted companies.  Going forward we will be less likely to invest smaller stakes in public companies but rather focusing on opportunities where we can own a significant stake as we do in AOI, Medivance, Trust William and Stanmore and add value as a strategic investor.  

Consequently we have classified our investments into two portfolios - "major strategic investments" and the "smaller quoted portfolio". The former comprises our four major investments: Stanmore, Medivance, AOI and Trust William.  The smaller quoted portfolio includes our investments in Allergy Therapeutics, Minster Pharma and Lombard Medical along with our trading portfolio.  While overall the trading portfolio has performed poorly this year, there has been a noticeable improvement in the last few months. In particular, the share prices of our two largest investments, Axis-Shield plc and Immunodiagnostic Systems Holdings plc, have improved over the last twelve months. 

Conclusion and Outlook

We are delighted to be launching Trust William on schedule and intend to establish it as a leading UK direct retailer of natural healthcare products. The investment in Stanmore Implants Worldwide has been a landmark deal for us this year with significant potential for value creation.  It demonstrates that excellent investments are available in the medtech sector and that MDY Healthcare can attract sophisticated investors to invest alongside it.  Medivance continues its impressive sales growth while the clinical progress of AOI Medical's key product is encouraging. As anticipated in our interims, the market for smaller public companies continues to be extremely challenging so we are especially pleased with the quality of, and progress made by, our overall portfolio which we believe will create significant shareholder value next year and beyond.

RNS news service provided by Hemscott Group Limited.