chairman's address to holders. Annual General Meeting Brisbane,...

chairman's address to holders. Annual General Meeting Brisbane, 25 October 2004 Address to shareholders by Chairman John Massey Ventracor is a company in rapid transition and the past year is no exception. Ventracor has passed a number of critical milestones and the focus on commercialising our leading VentrAssist™ cardiac assist device has continued apace. I find it frustratingly difficult to explain in written or spoken words just how much progress has been made as Ventracor evolves into our vision of becoming a world competitive medical device company.
The progress we have made this past year is again testimony to an excellent team effort involving many talented and committed people, both within and outside the company. You will readily see on page 10 of the Annual Report that we are attracting outstanding and well experienced people to join the Ventracor team. I will return to this important topic later. The more significant milestones this year were the completion of the Pilot Trial designed to determine the safety of the device in humans, and the commencement of the Pivotal Trial to support our CE marking application to obtain approval to sell throughout the European Union. I publicly recognise the contribution being made by the gravely ill patients, and their families, as part of the process of being able to offer the VentrAssist™ to the hundreds of thousands of people worldwide who, like them, are suffering advanced heart failure. I also acknowledge the many highly skilled professionals involved in the Pilot Trial and in particular, Professors Don Esmore and David Kaye, the medical investigators at The Alfred Hospital who led the successful Pilot Trial.
As we move into the four centres in Australia, the one in New Zealand and the initial one in Europe, it is gratifying that we are receiving the support and commitment from well recognised experts to participate with us in the Pivotal Trial programme. This year has seen a rapid expansion of our facilities in Chatswood and the opening of a new facility at Kirrawee, south of Sydney, which typifies the pace of our progress. The upgrading and expansion of our manufacturing facilities including new clean rooms and assembly areas, the installation and commissioning of our own sterilisation capability and the redevelopment of all the other research and development and working environments represent the practical implications of Ventracor’s move to bring all critical processes in-house. Ventracor has also entered into an agreement for the supply and implementation of a sophisticated carbon coating chamber and we have also contracted the International Centre for Health Outcomes and Innovation Research of Columbia University in New York to design and conduct the US clinical trials programme.
Ventracor has already engaged or is in the process of engaging the best international advisers available to work with us in attracting maximum reimbursement for VentrAssist™ both during the clinical trials and beyond, as well as experts in the US and Europe to become involved in clinical engineering support and clinical training. The Board and Management have concentrated considerable energy on identifying and minimising the potential risks to Ventracor’s business. Internal compliance and control systems for the operational and compliance activities, and associated management systems have been thoroughly reviewed and a comprehensive risk management process implemented. A critically important element in being able to focus on the speedy commercialisation of VentrAssist™ was the decision to undertake the two tranches of fundraising during the second half of calendar year 2003.
The placement and rights issue raised approximately $67 million gross which has placed Ventracor in a significantly better financial position than many other similar companies both here and internationally, including most of our potential competitors worldwide. At the end of the financial year Ventracor had cash in the bank of $60 million which has allowed, and will continue to allow, the process of commercialisation to be accelerated in an optimal manner without the inhibition of a lack of financial resources. Total expenditure increased in line with expectations from $14.9 to $18.8 million during the financial year. $7.2 million of this was incurred on manufacturing, production, clinical affairs, regulatory affairs, quality assurance and clinical training to support current and anticipated clinical trial activity, and a further $3.6 million was expensed for research and development expenditure. The loss for the year was $15.9 million. In my opinion based on internal and external assessments, the Board has led Ventracor successfully over the year and set the standards for the company generally. We are committed to sound
Corporate Governance standards which need to evolve and keep pace as Ventracor develops. Current details of our Corporate Governance regime are included in the Annual Report and changes are incorporated on the website when they occur. The Board has again undertaken an independently facilitated Board Performances Review which assesses both collective and individual contributions. As I foreshadowed in the Annual Report, the Board has decided to add an additional independent Non-Executive Director with broad commercial skills and experience gained in the international medical device industry. As a result of a broadly based search, I am pleased to announce that, subject to completion of the necessary formalities, the Board intends to appoint Mr Ross Harricks as a Director at its next meeting on 12 November 2004. Ross’ qualifications include having a Bachelor of Science (in Maths and Physics), a Bachelor of Mechanical Engineering with Honours and a Masters of Business Administration from the European Institute of Business Administration (INSEAD) in France. His work experience includes being General Manager of EMI Medical before
joining the Nucleus Group in 1983 which was then the leading international medical technology group, including both Telectronics and Cochlear, as the Group Marketing Executive responsible for international markets. Based in the United States from 1985, Ross was, for some years, President of Nucleus subsidiaries which included building a successful USA medical equipment distribution business. Ross has also been involved with “start-ups” and was a Director of ResMed Limited for 5 years until 1995. At present he is the Founder / CEO of AtCor Medical which has completed FDA approvals for a new cardiovascular device and is expanding its penetration of the US market. Ross understands the process that Ventracor is undertaking and his experience, particularly in the cardio vascular medical device area, will add value to both the Board and the Company generally. As a matter of course, shareholders will have the opportunity to endorse Ross’ appointment at next year’s AGM.
It is our Managing Director and Chief Executive Officer, Dr. Colin Sutton and the professional and dedicated team which has made this a successful year. Last year at the AGM you will recall that I introduced the original six scientists who worked on the VentrAssist™. So that you have a direct opportunity to meet some of the new people working at Ventracor, as part of Colin’s presentation to you, he will introduce five of the new important senior people who have joined Ventracor over the year as well as one of the inventors, Dr John Woodard. I am sure you will again be impressed by these people. The ongoing successful performance of Ventracor is heavily dependent on the commitment and dedication of the highly skilled members of staff. That is why the Board is recommending that Ventracor introduce long-term incentive plans to reward staff at various levels, to ensure their continuing loyalty and to allow them to participate in the long-term increase in shareholder value from the input of their considerable expertise and experience. On behalf of the Board, I express our appreciation of the ongoing support, commitment and indeed, passion of our shareholders.
Another chapter has been written in Ventracor’s history as we rapidly evolve into a worldwide medical device company. We have the product, the skills and the will to succeed and deliver real value for our shareholders. I formally present the Financial Statements for the year ended 30 June 2004, together with the Reports of Directors and Auditors thereon for your consideration. It is now my pleasure to introduce Dr. Colin Sutton to support my presentation. John Massey Chairman 25 October 2004 (ends)