Lifeline Scientific : Half-Yearly Report 2016

26 September 2016

("LSI" and or the "Company")

Lifeline Scientific (AIM: LSIC), the transplantation technology company, announces its half yearly results for the six months ended 30 June 2016. The Company is pleased to report solid progress in H1, achieving top line growth whilst advancing planned new product and territory expansion initiatives.

Financial highlights

• Transplantation products and services revenues up by 21.1% to US$18.2m (H1 2015: US$15.0m)

  • North America revenues up 20.4% to US$15.0m (H1 2015: US$12.4m)

  • Revenue outside of North America of US$3.2m up 24.4% (H1 2015: US$2.6m) representing 17.7% of total revenue (H1 2015: 17.2%)

  • LifePort® proprietary consumables up 24.7% to US$10.6m (H1 2015: US$8.5m)

• Gross profit increased 27.9% to US$11.4m (H1 2015: US$8.9m)

• Income from operations increased US$1.9m to US$2.0m (2015: US$0.1m)

• Net income increased US$1.8m to US$1.9m (H1 2015: US$0.1m)

• Net cash generated from operations of US$1.6m (H1 2015: US$1.0m)

• Cash of US$7.5m as of 30 June 2016 (as of 31 December 2015: US$6.9m)

  Operational highlights

• Installed base of LifePort Kidney Transporters grew to 219 transplant programmes in 32 countries worldwide (H1 2015: 204 programmes in 28 countries)

• Established six new LifePort sites in Europe and Middle East

• US FDA review progressing for LifePort Liver Transporter

• Several new patents issued supporting LifePort and related products

"Achievements during the first half of 2016 have helped grow our diverse commercial base from which we will continue to expand the Company's support of clinical transplant markets worldwide. Whilst the first half of 2016 has been materially better than the same period last year, the overall performance for the full year is presently expected to be broadly in line with 2015 due to exceptional demand in H1 2016 normalising in the second half. Our focus remains on the development and commercialisation of products and services designed to improve patient outcomes in transplantation."

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Lifeline Scientific, Inc. is a Chicago-based global medical technology company with regional offices in Brussels and São Paulo. The Company's focus is the development of innovative products that improve transplant outcomes and lower the overall costs of transplantation. Its lead product, LifePort Kidney Transporter, is the global market-leading medical device for hypothermic machine preservation (HMP) of donor kidneys. LifePorts and novel solutions designed for preservation of other organs are in development, with LifePort Liver Transporter next in line for commercial launch. For more information, please visit www.lifeline- scientific.com

Created with the challenges of organ recovery and transport in mind, LifePort Kidney Transporter is a proprietary medical device designed to help improve kidney preservation, evaluation and transport prior to transplantation. It has been widely studied in clinical trials throughout the world and is the standard of care for machine preservation of donor kidneys. Employed by surgeons in over 219 leading transplant programmes in 32 countries, LifePorts have successfully preserved more than 75,000 kidneys indicated for clinical transplant. For more information, please visit www.organ-recovery.com

LifePort Liver Transporter (LLT) is modelled upon the clinically proven technology platform of LifePort Kidney Transporter and the Company's early LLT prototype successfully used in clinical transplant studies by surgeons at New York-Presbyterian Hospital/Columbia University Medical Center. LifePort Liver Transporter and the Company's proprietary machine preservation solution, Vasosol®, are in the process of US and international regulatory registrations. The system is designed to help improve outcomes in liver transplantation by enabling the clinical use of hypothermic machine perfusion, and has been developed in consultation with clinical and research teams specialising in liver transplantation at Columbia University Medical Center and the University of Chicago. The system employs a rugged, streamlined ergonomic design for ease of use and transportability from donor bedside to recipient operating room. For more information, please visit: http://www.organ-recovery.com/pipeline.php

Revenues from transplantation products and services were up 21.1% to US$18.2m (H1 2015: US$15.0m), representing overall growth of 21.1% compared to the same period last year.

We continue to be successful in executing our strategic initiatives of increasing revenues in core US and EU markets and expanding our footprint in China and South America. North America remains our largest market with revenues up 20.4% to US$15.0m (H1 2015: US$12.4m). Revenues outside North America were up by 24.4% to US$3.2m (H1 2015: US$2.6m) and represent 17.7% of the total revenue for the period (H1 2015: 17.2%). Our China based distributor placed their initial major stocking order in December, 2015 following China's FDA (CFDA) approval of our full product line. Revenues for China were slightly down to US$135k (H1 2015: US$194k).

In France, adoption of the full suite of LifePort Kidney Transporter products continues to increase with 38 Transplant and Procurement centres in France and its territories deploying 133 LifePort Kidney Transporters. France remains one of the three largest national markets for kidney transplant procedures in Europe. Revenues for Europe were up 10.2% to US$2.6m (H1 2015: US$2.3m).

LifePort proprietary consumable revenue is up 24.7% at US$10.6m (H1 2015: US$8.5m) and sales of our solutions products increased by 22.4% to US$6.8m (H1 2015: US$5.6m. LifePort Kidney Transporter unit sales were down slightly to US$0.4m year-on-year (H1 2015: US$0.5m).

Gross profit increased 27.9% to US$11.4m (H1 2015: US$8.9m), due primarily to growth in trading during H1 and an increase in the proportion of higher margin proprietary consumables sold.

Net cash generated from operations for the period increased significantly to US$1.6m (H1 2015: US$1.0m). The cash position of the Company remains strong, with cash balances as of 30 June 2016 of US$7.5m (31 December 2015: US$6.9m). The Company remains debt free having paid off its revolver balance of US$2.2m at year-end 2015.

The opportunities represented by Lifeline's existing business, combined with CFDA approvals of our products and regulatory process advancement for our LifePort Liver Transporter, keep Lifeline's prospects strong for the balance of 2016 and beyond.

Post period-end, the Company provided an update on the status of its Strategic Review process which commenced following the 21 September 2015 announcement that LSI would undertake a comprehensive review of strategic and financial alternatives to enhance shareholder value. On 2 September 2016, we announced that we had entered into a definitive merger agreement with Shanghai Genext Medical Technology Co., Ltd ("SGM") in which SGM would acquire LSI for approximately US$87.8m in cash (the "Acquisition"), equating to an offer price of approximately 312 pence per share based on the US Dollar to British Pound Sterling exchange rate at the time of announcement (being 1.310) 1, which represents a 51.3% premium to the mid-market closing price on 18 September 20152. If approved by LSI shareholders, upon Closing, this all cash offer will provide full liquidity for LSI shareholders of record as of the Closing date and will also create one of the largest and fastest growing international medical technology companies serving the clinical transplant sector.

1the exact amount per share to be paid in British Pounds Sterling will be determined at the closing of the Acquisition, based on the US Dollar to British Pound Sterling exchange rate reported by the Financial Times at such time

2being the last dealing day prior to the date that Lifeline first announced the Company would launch a comprehensive review of strategic and financial alternatives to enhance shareholder value

Chairman

During the first six months of the year, we have been encouraged by continued strong growth in key geographic markets. This is a result of our on-going focus on growth in our North American based business combined with continued geographic expansion in Europe, South America and China. For the first six months of 2016, revenues outside of North America have grown to US$3.2m, representing 17.7% of total turnover.

North America

Growth in our North America base continues, with sales significantly ahead of the same period last year. The increase is due in part to contributions from a number of significant new accounts acquired in 2015.

Strategic Europe

We have established an additional six new LifePort sites in Europe and the Middle East. As the experience of using the LifePort to improve transplantation services increases, we are confident that more transplant centres across Europe will adopt LifePort in the near future.

Rest of World

Underpinning our strategy for growth in South America, Brazil continues to represent the largest and highest potential market for our products in South America, and our largest country customer to-date, with sales of more than US$500k for the period. Based upon reported significant improvement in transplant outcomes with LifePort vs standard of care, we remain confident that South America and, in particular Brazil, will contribute significantly to the growth of non-US sales in the coming years.

China

Since CFDA approval of LifePort Kidney Transporter in 4Q15, LSI has been working closely with its China based distributor to support their phased commercial launch to the nation's reported 169 renal transplant centres. Initial stocking orders were placed by our distributor during 4Q15 and we are anticipating additional stocking orders throughout the balance of 2016 in support of their product roll-out.

The Company's focus on new product innovations for the remainder of 2016 will be on preparations for commercial launch of our LifePort Liver Transporter System which is currently progressing through regulatory review.

Achievements during the first half of 2016 have given us a strong and increasingly diverse commercial base from which to expand the Company's future efforts in support of transplant markets worldwide. Whilst the first half of 2016 has been materially better than the same period last year, the overall performance for the full year is presently expected to be broadly in line with 2015, due to exceptional demand in H1 2016 normalising in the second half.

Chief Executive Officer