aap Implantate AG resolves on concept for extensive staff reduction and extraordinary value adjustment to capitalized development costs; postponement of publication of the 2019 financial statements
aap Implantate AG / Key word(s): Restructure of Company/Annual Results
The Management Board of aap Implantate AG ("aap") resolved on March 16, 2020 with the approval of the Supervisory Board on the same day on a concept for extensive staff reduction and, in connection with the preparation of the 2019 annual and consolidated financial statements, on making an extraordinary value adjustment to capitalized development costs. In addition, against the background of the evaluation of various strategic alternatives, the Company has decided to postpone the publication of the annual financial report 2019 (HGB) and the consolidated annual financial report 2019 (IFRS) until April 30, 2020.
Starting from a headcount of 145 on February 29, 2020, aap plans to reduce its workforce by around 25% in the current financial year. The aim of the measure is to save more than EUR 1.3 million annually in personnel costs from 2021. In connection with this measure, the Company expects one-off expenses of up to EUR 0.7 million, which will have a negative impact on earnings in financial year 2020. In order to make the measure as socially acceptable as possible, the staff reduction is to be carried out in cooperation with a private transfer company.
The planned reduction in headcount is an essential part of the measures taken by the Management Board to reduce costs and increase efficiency. The decision was taken against the background of aap's current economic situation and to adjust to the actual market and sales situation. The aim of the personnel measure is to streamline the Company's cost structure sustainably and thereby increase efficiency and flexibility. In this connection measures such as changing the stock market listing and discontinuing parts of the standard trauma portfolio have already been implemented in the financial year 2019.
aap develops innovative platform technologies and products in response to unmet needs and challenges in traumatology. With its three platform technologies LOQTEQ(R) (successfully on the market since 2011), antibacterial silver coating (in approval process) and resorbable magnesium implants (in development) the Company is addressing precisely these needs.
aap as a development-intensive company capitalizes not only self-produced assets but also expenditure on in-house and development projects (capitalized development costs) for which there is a high probability of approval and economically successful marketing. Development projects must be recognized as assets if all six criteria of IAS 38 "Intangible Assets" are met. All six criteria apply equally to each other. Among other things, the Company must prove the availability of technical, financial and other resources to complete the intangible asset. All capitalized development projects (developed in-house and acquired) must be subjected to an annual impairment test. Any resulting impairment loss is to be recognized immediately in the income statement in the year in which it occurs as an impairment loss.
In the financial year 2019 aap made substantial progress in its innovative key technologies antibacterial silver coating and resorbable magnesium implants. With regard to silver coating technology the Company received, among other things, approval to conduct a human clinical study by the Federal Institute for Drugs and Medical Devices ("BfArM") and a further funding commitment of up to around EUR 2.7 million from the Federal Ministry of Education and Research ("BMBF"). In the field of resorbable magnesium implant technology, aap was able to coordinate the regulatory approval path with the U.S. Food and Drug Administration (FDA) to the greatest possible extent and in a pilot animal study with the renowned Colorado State University recorded the first very promising results.
Irrespective of the progress made in financial year 2019 and the measures introduced to reduce costs and improve efficiency, the Company will, at least for the foreseeable future, be dependent on further financing through equity or debt measures. In addition, against the backdrop of the ever-increasing regulatory requirements (conversion to MDR), there are increasing uncertainties with regard to the duration of the approval process and, associated therewith, the risk of the timely financing of the projects under development. In order to take appropriate account of the above mentioned risks, aap has decided after a thorough analysis under the leadership of the new CEO to make an extraordinary value adjustment totaling EUR 10.8 million on the development projects antibacterial silver coating technology and resorbable magnesium implant technology in the course of preparing the annual and consolidated financial statements for 2019. This non-cash effect is shown below EBITDA as an extraordinary depreciation in the income statement 2019. Irrespective of this, the Management Board remains firmly convinced that the two innovative key technologies, antibacterial silver coating and resorbable magnesium implants, will be brought to market approval, particularly in cooperation with partners and with the help of the government grants already promised.
The progress mentioned above, especially in the financial year 2019, is being followed with great interest by various global orthopedic companies that have once again confirmed their interest in aap's innovative silver coating technology in talks currently underway. Specifically, the Company is discussing in addition to joint product development and approval projects also distribution partnerships as well as licensing deals up to the sale of the technology for specific application areas. In the area of the resorbable magnesium implant technology aap has intensified talks with technology-savvy investors in order to provide the financial basis for joint further development of the technology in a timely manner. With regard to its LOQTEQ(R) platform technology, aap is in well advanced discussions on the conclusion of a development and supply agreement with a worldwide leading U.S. medical technology company.
In parallel, the Management Board is currently evaluating various strategic alternatives for increasing value. These include, among other things, joint venture agreements up to corporate transactions (e.g. mergers, share or asset deals as well as carve-outs). These measures are being examined as part of the Company's ongoing holistic strategic planning and associated efforts to evaluate all available options for increasing the inherent value of aap's comprehensive trauma product portfolio and its various patented platform technologies.
Since individual decisions in the context of this forthcoming evaluation may have to be taken into account in the annual and consolidated financial statements for 2019, the Company has decided to postpone publication of the annual financial report 2019 (HGB) and the consolidated annual financial report 2019 (IFRS) until April 30, 2020. aap will comment again on any developments in this process after the Management Board has taken concrete decisions together with the Supervisory Board or has otherwise terminated the evaluation of the issues.
16-March-2020 CET/CEST The DGAP Distribution Services include Regulatory Announcements, Financial/Corporate News and Press Releases.
|Company:||aap Implantate AG|
|Phone:||+49 (0) 30 75 01 90|
|Fax:||+49 (0) 30 75 01 91 11|
|Listed:||Regulated Market in Frankfurt (General Standard); Regulated Unofficial Market in Berlin, Dusseldorf, Hamburg, Munich, Stuttgart, Tradegate Exchange|
|EQS News ID:||998491|
|End of Announcement||DGAP News Service|