November 2012 |  ISSUE 3

Dr Ron Weinberger, CEO

IN THIS ISSUE:

A growing sales force in  the US and EU

Industry engagement delivers valuable feedback on a changing infection control environment

More about the outdated disinfection methods Trophon trumps

Meeting the team:  Keith Koby, VP for US Sales

Dear ShareholdersIt has been a very busy quarter as we have strengthened our internal sales capability and engaged with industry as part of a concerted effort to support our long-term sales prospects. In this issue we review these activities, meet our new sales staff, and take a look at some aspects of disinfection technology and the changing regulatory landscape that impact on Nanosonics’ business.

Progress in accessing new markets  and sales team growth

Nanosonics has invested in its sales capacity in the last quarter. We have sought and appointed experienced executives with international track records in healthcare device sales. Our appointments have included five new regional sales managers in the US, who have between them more than a century of experience working in sales for some of the largest companies in medical devices including GE Healthcare, Kimberly-Clark, Siemens Medical, Olympus and Baxter.

These new members of the Nanosonics team significantly boost our on-the-ground expertise in the US, to support our existing distribution and sales efforts with our US partner, GE Healthcare.

We have also appointed new staff in Europe. Bryn Tudor-Owen joins us as Regional Sales Manager in the UK, bringing more than 20 years experience in medical device and supplies sales.

Bryn has consistently driven strong sales growth for large players such as GE Healthcare and is now tasked with growing Nanosonics’ growth in the UK.

In Germany we have appointed Ralf Schmahling to help drive Nanosonics’ sales and marketing efforts. Ralf has more than 10 years experience in health care sales and management, with strong networks in the very large and important German market.

These staff have all joined Nanosonics in the last month, and we welcome them onboard. A full induction for the European team is in the works, and they will soon be joined by a new Regional Manager for France. Later in this issue we share the background of one of our key sales executives, Keith Koby, who has worked with us this year in the planning and roll-out of our global sales strategy.

In the last financial year Nanosonics delivered significant sales growth which was a great outcome for our first full year of sales in markets outside Australia and New Zealand. We are now focused on maximising our growth in Europe, the United States and Asia, the markets where the greatest long-term value opportunities for Nanosonics lie.

In Asia our short-term work focuses on regulatory approval and other aspects of progressing market entry. In the United States and Europe we are committed to maximising exposure to key decision makers and purchasers; negotiation and awareness raising of our superior product. Expert staff with strong networks will deliver the best outcomes on this work, which is the rationale for our strategic hiring in these regions.

Nanosonics ShareholderQuarterly Report

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nanosoncis limited |  shareholder quarterly report

Our expanded sales force is a particularly timely move, as evidence continues to emerge from Europe of growing awareness of the changing paradigms of infection control, particularly in the areas served by our current product range: intracavity ultrasound probes.

Regulatory news

In late June the Medicines and Healthcare Products Regulatory Agency (MHRA) in the UK issued an alert to its stakeholders disclosing it had become aware of an incident where a patient death from hepatitis B infection may have been associated with a contaminated probe. The alert reiterated the need to appropriately decontaminate all types of reusable ultrasound probes and review current protocols.

In August Health Facilities Scotland (a strategic division of the National Health Service) launched a national survey of current decontamination practices of intracavity ultrasound probes.

Outside the regulatory sphere, two new scientific papers have been published showing evidence for contamination of ultrasound probes with the cancer-causing human papilloma virus and various other bacterial and viral infections. These were published in the Journal of Emergency Medicine and The Healthcare Infection Society and demonstrate the clinical community’s interest in exploring the infection risks in these common procedures.

Major conferences deliver sales and expanding networks

Throughout October Nanosonics has attended international conferences in the areas of infection control, consistently receiving praise for the innovativeness of the NanoNebulant platform and Trophon EPR in particular.

In Australia, the UK and Croatia the Nanosonics team met with key opinion leaders and infection control decision makers and gained valuable feedback, including suggestions that Trophon EPR be part of a new standard of care – the exact position, of course, that Nanosonics is advocating in the industry.

In the article inside, there is a more detailed look at these conferences, the attendees and outcomes for Nanosonics. As we seek to build market presence and scope new markets, the contact network we are growing will prove invaluable in giving us on-the-ground knowledge to speed our growth, keep us up-to-date with industry developments and help inform our internal product development.

Closing out the quarter with a major award

We were delighted to cap off a busy quarter by winning the Emerging Exporter Award at the Premier’s NSW Export Awards in mid-October. These are the longest running business awards in Australia, this year being their 50th year. I congratulate the Nanosonics team on their receipt of the award, and thank them for all the hard work they’ve put into growing the company.

Nanosonics now progresses as a National Finalist in the 50th Australian Export Awards managed by AusTrade which will be held on the 27th November in Canberra.

Looking ahead

We are encouraged by Nanosonics’ sales growth, with both new and existing customers, and have laid out comprehensive plans for building on our successes to date. The nature of device sales to large facilities means that we see variations in inter-quarter results as significant commitments are made to be timed with fixed asset acquisition cycles and institutional budgets. Our first quarter sales figures do not reflect the strong growth that will be reflected over the full-year.

Over the next six to nine months, we are confident our investment in business development will continue to deliver the increased market penetration we have been witnessing throughout the last financial year.

As always, if there is a particular aspect of Nanosonics or Trophon EPR you would like more information about, please let us know.

We welcome your feedback which you can send to: info@nanosonics.com.au or via post to McGregor Grant, CFO, Nanosonics Limited, Unit 24 566 Gardeners Road, Alexandria NSW 2015.

Dr Ron Weinberger Managing Director

Case study:

Canada-based healthcare provider Radiology Consultants Associated indicated that improving workflow was their primary key buying criteria. Their original intent was to purchase a legacy chemical product system-wide. Once Nanosonics had arranged a meeting and worked through all the benefits of Trophon EPR on a cost and productivity basis, the customer agreed to purchase 52 units on a price guarantee for two years.

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nanosoncis limited |  shareholder quarterly report

Booth at the UK Infection Prevention Congress 2012 held recently in Liverpool, England. The large event was a great success for Nanosonics.

Nanosonics continue industry engagement at international conferences

In our last newsletter, we identified that building Nanosonics’ presence in international conferences was proving a powerful way to meet the key opinion leaders in infection control and gather important market information.

In the last quarter, members of the Nanosonics team have visited three further conferences:

• Infection Prevention Society (IPS) , October 1-3, Liverpool, UK

• Australasian College for Infection Prevention and Control (ACIPC) , October 8-12, Sydney

• 12th Congress of the International Federation of Infection Control (IFIC), October 10-13, Zagreb, Croatia.

Each of these conferences resulted in a wave of positive feedback for Trophon EPR and the NanoNebulant technology, and provided sales, valuable contacts and information on changing aspects of infection control procedures in global healthcare systems. The Infection Prevention Society conference in Liverpool gave important insights into the important UK market. The guidelines for high-level disinfection of intracavity probes in the UK are currently under development and the vast majority of infection prevention nurses and microbiologists commented that a system such as Trophon EPR “was a great solution” to potentially standardise the practice. The automation and traceability features of the Trophon drew a lot of attention as these significantly improve on today’s undefined practices, which are open to user error.

As outlined in the introduction to this issue, there are a number of incidents emerging from the UK national health system that are raising awareness among stakeholders of the importance of ultrasound probe disinfection procedures and their review by practitioners.

The inaugural Conference for the Australasian College for Infection Prevention and Control took place in Sydney in October. Nanosonics took this ‘home ground’ opportunity to connect with the local market and refresh relationships with existing and potential customers.

The 12th Congress of the International Federation of Infection Control held in Zagreb, Croatia was a very important event for Nanosonics, giving the company access to important European decision makers in the area of infection control.

This conference was particularly notable for the number of high-ranking infection control decision makers in attendance, including Presidents, Chairman and Heads of significant infection control organisations in their home countries.

The theme that came through strongly was one of a sea change in European attitudes towards infection control, paralleling the changes we are seeing in the United States. At Zagreb there was considerable discussion around ‘link staff’ in infection control – staff specially trained and dedicated to overseeing infection control protocols at hospitals and other centres.

Anecdotally, these specialised staff are appearing with more frequency and the next step will be an emergence of standardised European protocols for infection control, representing an opportunity to influence the conversation at this crucial stage and push for new, higher levels of disinfection that require technologies like Trophon EPR.

Case study: A hospital technician in the Northwestern US was allergic to Cidex OPA and had to be reassigned to a different facility and restricted to non-critical tasks. The reassignment was inconvenient as it required a much longer drive to get to work. Once the hospital purchased Trophon EPR, she was able to resume her previous position and eliminate the long daily commute.

Case study: New York-based Montefiore Medical Center, the University Hospital for the Albert Einstein College of Medicine, participated in Nanosonics’ trial program which resulted in a multi-department purchase of 23 units. Ease of use, time savings, elimination of personal protective equipment and ease of tracking were key drivers. Trophon EPR’s simplicity and speed, which allowed faster patient turnover, was critical to their purchasing decision. Patient volume makes optimizing essential procedures like high-level disinfection a key area for improvement for many centres Nanosonics is engaging.

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Existing outdated disinfection methods

Trophon EPR’s superiority to existing high-level disinfection methods is a core part of Nanosonics’ offering to our customers. Intracavity ultrasound probes require high-level disinfection (rather than less thorough cleaning techniques) because they come in contact with parts of the body that are not sterile and can harbour infectious microorganisms such as bacteria that can cause disease. It is a healthcare provider’s responsibility to safeguard patients’ health while under their care, so minimisation of cross-infection is a priority.

Decades of heavy antibiotic use have seen the emergence of resistant microbes that are of particular concern to modern healthcare systems. There are a number of bacteria, fungi and viruses that present a particular risk to patients in healthcare settings where these infections are particularly common. With the high proportion of obstetric and gynaecological applications for intracavity ultrasound procedures, the risk of passing on sexually transmitted infections are a particular concern for operators.

Regulators hold devices like these to higher standards of disinfection than instruments that only come into contact with areas of a patient unlikely to harbour serious pathogens. Chemical agents that provide a high level of cleansing are required. For example, in Australia, the Therapeutic Goods Association requires that intracavity ultrasound probes be cleaned between patients with one of three chemical agents:

1. Glutaraldehyde (a toxic, pungent liquid that causes severe skin irritation upon exposure)

2. Cidex OPA (a special formulation of glutaraldehyde)

3. Hydrogen peroxide, used with Trophon EPR.

The use of glutaraldehyde requires that staff wear personal protective gear and conduct disinfection in dedicated areas away from patients. Often only the head of the probe is disinfected in these procedures. The disinfection process can take 20 minutes or more.

Trophon EPR disinfects the entire probe in as little as seven minutes, the process taking place in the closed Trophon system with no emission of any harmful chemicals. This allows the disinfection to take place at the point-of-care, near the patient. Nanosonics’ NanoNebulant hydrogen peroxide solution breaks down to eco-friendly oxygen and water, so there is no need for personnel to wear protective gear or have dedicated rooms for disinfecting ultrasound probes.

Nanosonics LimitedUnit 25, 566 Gardeners Road Alexandria NSW 2015 AustraliaT +61 2 8063 1600 E info@nanosonics.com.auwww.nanosonics.com.au

REGISTER FOR NEWSTo register and receive this newsletter and other announcements via email please visit our investor centre at http://www.nanosonics.com.au/Investor-Centre/Investor-Centreor contact us at info@nanosonics.com.au

Meet the team:

Keith Koby, VP for Sales, USA

During the last 6 months, Keith worked with Nanosonics on the planning and roll-out of our global sales strategy. We’re pleased to share that Keith has been appointed as a full-time Nanosonics business leader, heading up the new USA sales team.

Keith spent 16 years with GE Healthcare in a variety of sales, sales management, service, and engineering assignments. His recent position with GE in 2006 was as General Manager of Ultrasound Service Sales and Marketing, responsible for a $117 million service contract business.

After GE, Keith joined Cantel Medical in Milwaukee where he was Director of Sales. Cantel Medical produces infection prevention and control products. Keith achieved nearly 35%/year growth over several years and $50 million in sales through a 45 person US sales force.

Keith’s background in GE and multiple medical device firms makes him well suited to lead the sales development of Nanosonics in the US.

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