Year-end report 1999
2/18/2000 2:06 AM EST
* The certification process for ligament products has been intensified and
applications could be filed earlier than previously planned. This
increases the possibility to certify at least one ligament product already
in year 2000. The market potential for Artimplant's ongoing development
projects within the ligament area is estimated to SEK 20-30 billion.
* At the Annual General Meeting of the Swedish Society of Medicine in
December 1999 a 12-month or more follow-up was presented on the results
from the 20 patient pilot study initiated during the fourth quarter 1997.
The follow-up shows that joint stability in the operated knee well equals
that of the undamaged knee.
* A multicenter study, including at least 200 patients with damaged
anterior crutiate ligament (ACL) in the knee is proceeding. The operation
series is expected to be concluded towards the end of the first quarter
year 2000. Early results from the ongoing thumb ligament study show that
Artimplant's material functions well surgically and that the patients
attain subjective as well as objective joint stability.
* During the first quarter year 2000 Artimplant received an approval from
ethics committee as well as National Finnish Board of Health and Welfare
to conduct a clinical study including 50 patients with damaged ACL's. This
study will be part of a second ACL multicenter study.
* During year 2000 Artimplant is entering a market phase and plans to
recruit to several key positions. The company plans to conclude the
recruitment of a Sales and Marketing Director in the near future.
* Artimplant has initiated the incorporation of a subsidiary with the aim
to exploit the carrier technology within the drug delivery area. Trial
series made with a number of pharmaceutical compounds have shown promising
results.
* During 1999 Artimplant signed agreements with Mölnlycke Health Care and
Genzyme Tissue Repair.
* Revenues for the group amounted to 20.0 MSEK (11.4 MSEK). The operating
result amounted to -14.7 MSEK (-8.5 MSEK). Result after financial items
amounted to -14.2 MSEK (-3.5 MSEK). Earnings per share after taxes
amounted to -1.72 SEK (-0.42 SEK).
Artimplant's result 1999
Net sales for the Group during 1999 amounted to 20.0 MSEK (11.4 MSEK).
Operating result during the period amounted to -14.7 MSEK (-8.5 MSEK). The
result includes marketing expenses amounting to 1.9 MSEK, mainly referring
to ongoing market surveys preceeding the planned product launches. Result
after financial items amounted to -14.2 MSEK (-3.5 MSEK). Goodwill
relating to the acquisition of GMC amounted to 13.0 MSEK and is
depreciated over 20 years.
The Parent company's net sales of 1.6 MSEK mainly refers to proceeds from
Mölnlycke Health Care.
Net sales for the subsidiary Gothenburg Medical Center (GMC), consolidated
as of May 1st , 1998, amounted to 19.0 MSEK. During the same period the
previous year, net sales amounted to 18.8 MSEK. Operating result during
1999 amounted to 1.4 MSEK (2.4 MSEK). An additional orthopedic surgery
specialist has been recruited during 1999.
Operations
Artimplant is a biomaterial company focused on unmet medical needs in the
field of orthopedic surgery. The company develops biodegradable implants,
in order to provide injured tissue with temporary relief and support the
body's natural healing processes. Combinations of material make it
possible to custom-tailor characteristics such as strength, elasticity and
resorption rate in accordance with a vast number of specifications. The
company has gradually expanded its development activities to include more
than a dozen projects based on Artimplant's technology. The product
portfolio includes fibers for production of ligaments, solid materials for
production of bone fracture implants, and membranes for treatment of
conditions such as chronic wounds and cartilage injuries.
During year 2000 Artimplant is entering a market phase and consequently
plans to recruit to several key positions. The company plans for example
to conclude the recruitment of a Sales and Marketing Director in the near
future. In prospect of the planned market launch towards end off year
2000, in-depth quantitative and qualitative market research has been
carried out regarding products estimated to be closest to market launch.
The certification process for ligament products has been intensified and
applications could be filed earlier than previously planned. This
increases the possibility to certify at least one ligament product
certified already in year 2000. Considering the positive early follow-up
results from the pilot study regarding ACL and thumb ligaments, and the
large market potential for Artimplant's ligament products, increased
priority has been given to this market segment. According to the company's
assessment the market potential for Artimplant's ongoing development
projects within the ligament market segment amounts to SEK 20-30 billion.
Weak competition within the ligament market, as well as the relatively
limited target groups within orthopedic surgery and hand surgery, makes
the earnings potential, as well as the possibility to quickly attain a
high market penetration, appear attractive for the different ligament
products. For many of the ligament products under clinical trial there are
currently no adequate treatment alternatives.
Artimplant has earlier patented a method to couple a growth factor to
biodegradable polymer material. Artimplant has initiated the incorporation
of a subsidiary in order to exploit the carrier technology within the drug
delivery area. Trial series made during the latter part of 1999 have shown
that the company's biodegradable polymer material, to which various
pharmaceutical compounds have been coupled, can be well suited for
controlled release of pharmaceuticals and other active substances over a
long period of time.
Anterior Crutiate Ligament (ACL)
At the Annual General Meeting of the Swedish Society of Medicine in
December 1999 Associate Professor Lars Peterson presented results from the
pilot study including 20 patients with ACL injuries, which was initiated
during the fourth quarter 1997. The patients in the study have undergone
so called augmentation with Artimplant's biodegradable implant in
combination with the patient's own patellar tendon. The results show that
after 12 months or more all patients included in the pilot study had
gained joint stability in the operated knee equal to that of the undamaged
knee. Artimplant's implant made possible earlier mobility training, stress
and functional training after surgery with maintained stability compared
to the surgical technique today most frequently used.
A first multicenter study at six centers including at least 200 patients
with damaged ACL's was initiated in Sweden during 1999. The clinical study
complies with the current FDA recommendations for a PMA-application
procedure (Pre-market Approval). The operation series is expected to be
concluded by the end of the first quarter year 2000.
During the first quarter year 2000 Artimplant received an approval from
ethics committee as well as National Finnish Board of Health and Welfare
to conduct a clinical study including 50 patients with damaged ACL's. This
study will be part of a second ACL multicenter study. Instead of using
parts of the patient's patellar tendon as done in the pilot and
multicenter studies, tendons from the back of the patient's thigh
(hamstrings) will be used. One of the potential advantages is less
complications at donor site compared to if the patellar tendon is used.
Hand surgery
During 1999 Artimplant initiated two pilot studies within hand surgery for
treatment of injured thumb ligaments and osteoarthritis at the base of the
thumb. The operation series regarding treatment of damaged thumb ligaments
was concluded in December 1999. Early follow-up results for the limited
number of treated patients show that Artimplant's biodegradable thumb
ligament implant functions well surgically and the patients attain
subjective as well as objective joint stability. Provided that continued
follow-up results continue to be positive, Artimplant plans to file for
certification based on a six months follow-up, in order to launch the
thumb ligament implant in Europe.
The operation series in the second hand surgery study for treatment of
osteoarthritis at the base of the thumb with a so called spacer is
expected to be completed during the first quarter year 2000. The early
follow-up results for the limited number of patients show that treatment
with Artimplant's biodegradable spacer leads to significant pain
reduction. The company's assessment is that a six months follow-up is
adequate in order to ascertain adequate pain reduction, however, a longer
follow-up period is needed in order to establish lasting and satisfactory
results with regards to joint stability and grasp strength.
Bone fracture
Artimplant has developed solid biodegradable materials for use in fixation
systems for various types of surgical bone fracture treatment. The aim
with the biodegradable bone fracture implants is to eliminate the need for
re-operation. Artimplant has received approval from ethical committee to
perform clinical studies with biodegradable bone fracture implants. The
company plans to launch a first bone fracture implant during year 2000,
assuming the remaining required authority approvals are received in time.
One of the first bone fracture applications is a product for fixation of
ankle fracture. According to the National Swedish Board of Health and
Welfare approximately 6,000 patients per year are hospital treated for
ankle fractures in Sweden and the corresponding figure in the US is
approximately 440,000.
Genzyme Tissue Repair
In September 1999, a first development collaboration agreement was signed
between Artimplant and Genzyme Tissue Repair (GTR), which states that
Artimplant's subsidiary GMC shall carry out a clinical trial for GTR to
evaluate alternative fixation systems during cartilage replacement
procedures.
Genzyme Corporation is one of the five largest biotech companies in the
world and is a leading developer of biological products for injuries such
as cartilage damage and severe burns. In 1997 GTR recieved FDA approval
for CarticelTM , autologous cultured chondrocytes for the repair of
articular cartilage defects in the knee joint. Autologous chondrocyte
transplantation (cartilage replacement) was approved by the FDA on the
basis of clinical documentation from patients treated at Gothenburg
Medical Center (GMC).
In October 1999, a new agreement was reached that will allow GTR to test
Artimplant's biodegradable membranes in developing a second generation of
CarticelTM .
Mölnlycke Health Care
In April 1999, Artimplant and Mölnlycke Health Care (MHC) signed an
agreement concerning a long term research and development collaboration.
The objective is to create an additional technological platform for MHC's
future product generations within the area of advanced wound care, in this
case based on Artimplant's patented technology of biodegradable polymer
materials. Specification of the first product for post-surgical wounds is
ongoing and the goal is to reach a clinical phase during year 2000.
MHC is a leading manufacturer and distributor of products for wound care
and single-use products for surgical interventions, with revenues
amounting to approximately SEK 2bn per year. The market growth for
advanced wound care products is 15-20 per cent per year.
The research and development within the framework of the agreement is paid
for by MHC. For products that are developed within the collaboration,
Artimplant will receive licensing fees. Results from the research within
wound care can also be applied within Artimplant's core market area
orthopedic surgery.
Investments and financial position
Investments during 1999 amounted to 19.0 MSEK (30.9 MSEK), whereof 17.3
MSEK (26,0 MSEK) were made in immaterial assets. An additional earnings-
based payment of 4.0 MSEK referring to the acquisition of GMC has been
made during the second quarter.
In connection with the financing of Artimplant's early explorative
research, warrants were issued during the period 1995 to 1997. On June
30th 1999, the total number of warrants amounted to 1,750,000 with the
right to subscribe for one series B share each at a price of SEK 16 during
the period July 1, 1999 - December 31, 1999. All warrants were subscribed
and the new issue was paid in full at year-end. At year-end 621,000
subscribed shares, corresponding to 9.9 MSEK in equity, had not been
registered. After full subscription of the warrants the number of shares
amounts to 8,250,000, whereof 1,000,000 series A and 7,250,000 series B.
Shareholders' equity amounts to 77.4 MSEK, or SEK 9.38 per share.
At the end of the reporting period liquid assets increased by 2.2 MSEK
amounting to 39.7 MSEK (37.5 MSEK).
Employees
The number of employees at the end of the reporting period amounted to 41
(46), whereof 25 (35) were employed at GMC. The reduction in personnel at
GMC is due to the planned focus on orthopedic surgery and outsourcing of
physiotherapy. The number of consultants tied to the parent company
amounted to 11 (11).
Dividend
The Board of Directors proposes that no dividend be paid for the financial
year 1999.
Financial statements
The income statement for 1999 is compared with the corresponding period in
st
1998. GMC has been consolidated as of May 1 , 1998.
KEY RATIOS, GROUP
1999 1998
Net result per share, SEK -1,72 -0,53
Net result per share fully diluted, SEK - -0,42
Equity per share, SEK 9,38 9,77
Equity per share fully diluted, SEK - 11,09
Number of shares 7 629 000 6 500 000
at end of reporting period
Number of shares fully diluted 8 250 000 8 250 000
Return on shareholders´ equity, % neg neg
Return on capital employed, % neg neg
Equity ratio, % 90 87
Paid-in, not registered new issue included when calculating per share
ratios for 1999.
INCOME STATEMENT ARTIMPLANT
Group Group Parent Parent
Amounts in thousand SEK 1999 1998 1999 1998
Net sales 20 032 11 426 1 613 144
Cost of goods & services sold -16 267 -10 051 -1 613 -144
Gross profit 3 765 1 375 0 0
Research & development expenses -9 187 -5 127 -9 187 -5 127
Marketing expenses -1 892 - -1 892 -
Administrative expenses -7 338 -4 726 -4 239 -3 579
Share in group results - - 1 691 2 589
Operating result -14 652 -8 478 -13 627 -6 117
Interest income & other financial 753 1 961 640 1 834
income
Interest expenses & other financial -314 -39 -310 -39
expenses
Income from sale of warrants - 3 063 - 3 063
Financial items net 439 4 985 330 4 858
Result after financial items -14 213 -3 493 -13 297 -1 259
Taxes 60 26 - -
Net result for reporting period -14 153 -3 467 -13 297 -1 259
Note: Depreciation
included in Income
Statement
Group Group Parent Parent
Amounts in thousand SEK 1999 1998 1999 1998
Capitalized R&D expenses 7 600 3 968 7 600 3 968
Patents 544 435 544 435
Goodwill 699 333 - -
Machinery and equipment 1 750 1 287 1 391 965
Total depreciation 10 593 6 023 9 535 5 368
BALANCE SHEET ARTIMPLANT
Group Group Parent Parent
Amounts in thousand SEK Dec 31, Dec 31, Dec 31, Dec 31,
1999 1998 1999 1998
ASSETS
Capitalized R&D expenses 22 287 13 002 22 287 13 002
Patents 1 199 1 320 1 199 1 320
Goodwill 12 954 13 653 - -
Total intangible fixed assets 36 440 27 975 23 486 14 322
Machinery and equipment 4 556 4 035 4 023 3 266
Construction in progress 0 601 0 601
Total tangible fixed assets 4 556 4 636 4 023 3 867
Shares in subsidiary - - 17 996 17 996
Total financial fixed assets - - 17 996 17 996
Total fixed assets 40 996 32 611 45 505 36 185
Receivables 2 408 1 058 988 -
Receivables group companies - - 602 2 211
Other receivables 681 744 679 744
Prepaid expenses and accrued 2 037 1 192 1 846 1 016
income
Total short term receivables 5 126 2 994 4 115 3 971
Cash and bank 39 660 37 524 37 153 33 236
Total current assets 44 786 40 518 41 268 37 207
TOTAL ASSETS 85 782 73 129 86 773 73 392
Group Group Parent Parent
Amounts in thousand SEK Dec 31, Dec 31, Dec 31, Dec 31,
1999 1998 1999 1998
SHAREHOLDERS' EQUITY & LIABILITIES
Equity
Share capital 763 650 763 650
Paid-in, not registered new issue 9 936 - 9 936 -
Restricted reserves 83 016 66 324 83 016 66 324
Total restricted capital 93 715 66 974 93 715 66 974
Non-restricted reserves -2 208 - - -
Net result for reporting period -14 153 -3 467 -13 297 -1 259
Total non-restricted period -16 361 -3 467 -13 297 -1 259
Total equity 77 354 63 507 80 418 65 715
Deferred tax 179 240 - -
Other provisions 200 300 - -
Total provisions 379 540 - -
Other long term liabilities 200 300 200 300
Total long term liabilities 200 300 200 300
Accounts payable 2 640 1 130 2 334 993
Tax liabilities 2 - - -
Other short term liabilities 894 4 673 544 4 320
Accrued expenses and prepaid 4 313 2 979 3 277 2 064
income
Total short term liabilities 7 849 8 782 6 155 7 377
TOTAL SHAREHOLDERS' EQUITY &
LIABILITIES 85 782 73 129 86 773 73 392
CASH FLOW ANALYSIS Group Group Parent Parent
Amounts in thousand SEK 1999 1998 1999 1998
CURRENT OPERATIONS
Result after financial items -14 213 -3 493 -13 297 -1 259
Adjustment for items not effecting 10 517 5 629 9 559 5 375
cash flow
Taxes paid -1 -5 - -
Cash flow from current operations
before
changes in working capital -3 697 2 131 -3 738 4 116
Cash flow from changes in working
capital
Increase(-) decrease(+) in -2 132 893 -144 -2 499
receivables
Increase(+) decrease(-) in 3 067 196 2 778 1 120
liabilities
Cash flow from current operations -2 762 3 220 -1 104 2 737
INVESTMENTS
Acquisition of subsidiaries -4 000 -10 144 -4 000 -13 996
Acquisition of intangible fixed -17 308 -12 032 -17 308 -12 032
assets
Acquisition of tangible fixed -1 694 -3 866 -1 571 -3 819
assets
Cash flow from investments -23 002 -26 042 -22 879 -29 847
FINANCING
New share issue 28 000 - 28 000 -
Repayment of loans -100 -100 -100 -100
Cash flow from financing 27 900 -100 27 900 -100
Cash flow for the year 2 136 -22 922 3 917 -27 210
Liquid funds at beginning of year 37 524 60 446 33 236 60 446
Liquid funds at end of year 39 660 37 524 37 153 33 236
Other financial information:
Annual General Meeting: May 3, 2000
Six-month report: Aug. 25, 2000
Three-month report: May, 3 2000
Nine-month report: Nov. 1, 2000
Artimplant is a biomaterial company focused on unmet needs in the field of
orthopedic surgery. Artimplant's business concept is to develop,
manufacture and market biodegradable implants that provide the injured
tissue with temporary relief and support the body's natural healing
process. The vision is to be world-leading within biologically degradable
implants that stimulate self-healing and re-create an active life. The
Company's researchers, which represent a unique combination of
interdisciplinary competence, have synthesized a vast number of
biodegradable polymers, that can be tailored for use in a number of
different medical-treatment areas.
Artimplant has developed and patented a resorbable ligament implant that
currently is undergoing clinical trial including 200 patients for
treatment of injured anterior cruciate ligament (ACL). Early follow-up
results from the pilot study using Artimplant's ACL implant show both
subjective and objective joint stability in the operated knee, and the
technique made possible relatively early rehabilitation. A ruptured ACL in
the knee is one of the most frequent ligament injuries and often leads to
lifelong detrimental effects for the injured, and substantial costs to
society. Artimplant's technology can be applied in numerous other areas,
and the development activities have expanded to include more than a dozen
projects.
Artimplant's goal is to launch at least one product year 2000. As part of
Artimplant's market strategy Gothenburg Medical Center (GMC) was acquired
with the purpose of establishing Swedish headquarters for Artimplant
Academy - a forum for advanced clinical research, application and
education within orthopedic surgery.
Artimplant is listed on the OM Stockholm Stock Exchange O-list.
Gothenburg, February 18, 2000
Artimplant AB (publ)
Anders Cedronius
Chief Executive Officer
For further information, please contact: www.Artimplant.se
Lars-Erik Nygren, CFO, tel: +46 - 31 - 746 5600 or Kari Odhnoff, Investor
Relations, tel: +46 - 708 - 639 341.