Year-end report 1999


Year-end report 1999 * 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. ------------------------------------------------------------ Please visit http://www.bit.se for further information The following files are available for download: http://www.bit.se/bitonline/2000/02/18/20000217BIT01350/bit0001.doc http://www.bit.se/bitonline/2000/02/18/20000217BIT01350/bit0002.pdf

About Us

Artimplant is a research- and development company, active within bio-materials.