ARTIMPLANT INTERIM REPORT January 1- March 31, 2002

ARTIMPLANT INTERIM REPORT January 1-March 31, 2002 Confidential negotiations on licenses and partnership agreements are under way with several global enterprises in the field of orthopedics. One of the parties has completed its initial scientific due diligence procedure. A series of operations began that are part of a multicenter study on the Artelontm Spacer CMC-1 (Spacer). The study was approved in 2001 by the requisite government agencies and the committee on research ethics. It comprises a total of 108 patients and is being conducted at six clinics in Sweden. Scheduled financial information: Six-month interim report: August 21, 2002 Nine-month interim report: November 6, 2002 Interim reports are made available at Artimplant's web site, www.artimplant.se, at the same time as they are distributed to the media. For additional information, please contact: Anders Cedronius, Chief Executive Officer, phone +46 (0)31 746-5600, anders.cedronius@artimplant.se Lars Erik Nygren, Chief Financial Officer, phone +46 (0)31 746-5600, lars.erik.nygren@artimplant.se Ulf Åkerblom, Executive Vice President, Corporate Development, phone +46 (0)709 675-999, ulf.akerblom@artimplant.se Artimplant Artimplant specializes in biodegradable materials for use in orthopedic surgery. Artimplant is active in the research, development, and manufacture of biologically degradable implants with the goal of recreating active lives for patients. The biodegradable material the Company has developed is based on a new technology that is opening new markets in the field of orthopedic surgery as well as other specialized fields where there are significant medical needs. Artimplant has already developed and patented several different degradable ligament implants, now undergoing clinical trials. The Company is focusing on three high-priority areas for its degradable material, called Artelontm: an augmentation device for anterior cruciate ligament reconstruction, hand surgery, and augmentation sutures. Artimplant is listed on the O list of Stockholmsbörsen, the stock exchange in Stockholm. ARTIMPLANT'S EARNINGS, JANUARY-MARCH 2002 Consolidated net sales for January-March 2002 totaled SEK 6.5 million (SEK 6.0 million for the same period the preceding year). The operating loss for the period totaled SEK 14.5 million (SEK 10.4 million loss). The loss after taxes was SEK 14.0 million (SEK 9.1 million loss). The parent company's net sales of SEK 0.2 million consisted primarily of compensation from Mölnlycke Health Care. Net sales by the subsidiary Gothenburg Medical Center (GMC) for the period reached SEK 6.4 million (SEK 6.2 million). The deficit expanded as a result of rising research and development costs and costs associated with efforts to license the first of Artimplant's products. AN OUTLINE OF ARTIMPLANT'S PROJECT PORTFOLIO At Artimplant, the product development process consists of six phases. Evaluate whether or not Idea an idea is technically and commercially feasible as a project Definition Identify and define the clinical, technical, and commercial demands on a design Development Specify requirements Artelon Sternum and design Suture Verification Verify requirements and design Validation Validate, adapt for Artelon Spacer CMC-1 production, and register the product for the market Product Follow-up, monitor, and Artelon Augmentation management fine-tune Device ACL At present, about 10 additional project ideas are being evaluated for their technical and commercial feasibility. AN OUTLINE OF ARTIMPLANT'S CLINICAL PROGRAM ACL Study 2001 2002 2003 Pilot 22 Extended 4-year 5-year patients Q3 results Q2 results Q2 Multicenter I 2-year 3-year patellar tendon results Q2 results Q2 201 patients Multicenter II 1-year 2-year hamstring tendon results Q2 results Q2 101 patients Accelerated Start Q3 1-year 2-year rehab, pilot, results Q4 results Q4 patellar tendon 10 patients SPACER Study 2001 2002 2003 Pilot 1-year results Q3 Multicenter I, 3- Start Q4 Patients 1-year year, 108 included Q1- results Q4 patients Q3 STERNUM SUTURE Study 2001 2002 2003 Pilot 20 Start Q2 1-year patients results Q2 BUSINESS ACTIVITIES During the first quarter of the year, efforts aimed at licensing the Company's three high-priority products-ACL, Spacer, and Sternum Suture- became more proactive. Contacts were established with five global players in orthopedic surgery with whom we are negotiating. One of the parties has completed a scientific due diligence procedure. Our goal is to sign two licensing agreements this year. Artimplant's skills are concentrated in materials technology and in the specialized field of orthopedic surgery. In marketing, we have chosen not to set up in-house operations but to work with established, global players that can quickly place our products in the market. Artimplant expects its materials technology to have applications in several other categories of therapy, in addition to orthopedic surgery. To develop such products, Artimplant plans to collaborate with other enterprises on research that leverages the Company's materials expertise in degradable polymers. An example of such collaboration is the wound- care project with Mölnlycke Health Care. ACL During 2001, an educational program was conducted that targeted selected leading orthopedic surgeons in Europe, as part of future marketing efforts for the augmentation device. There is interest in the ACL partly because the product can shorten the rehabilitation period after an operation on the anterior cruciate ligament. Several doctors have noted that the need for reinforcement is particularly great among elderly patients, because their own tendons are of poorer quality when used as grafts. Artelon ACL is made of a patented polyurethane urea that is spun and then woven into a band that is operated into the knee to augment an injured anterior cruciate ligament. This is the most common ligament injury and often leads to lifelong suffering for the injured person as well as significant costs to society. Artimplant's first product to receive CE approval is intended to reinforce the tissue taken from the patient, usually from the patellar (kneecap) tendon or hamstring (rear of the thigh), that is operated into the knee to replace the injured tendon. The global market potential is estimated at roughly SEK 10 billion. Thus far, Artimplant has initiated four clinical studies with this application. A pilot study began in the autumn of 1997 with 22 patients. Some of the patellar (knee-cap) tendon in these patients was augmented using Artimplant's implant. The first randomized multicenter study began in the spring of 1999 with 201 patients. Half of the group were operated on in the same way as in the pilot study, while the other half were operated on without augmentation bands. This study complies with recommendations from the U.S. Food and Drug Administration (FDA) for long-term follow-up (at least 24 months after operation). A second randomized multicenter study, comprising 101 patients, began in the spring of 2000 at clinics in Sweden and Finland. Half of that group received tendons from the hamstring augmented by Artimplant's implant, and half of the group received hamstring without augmentation. An accelerated rehabilitation study began in 2001 involving 10 patients who were operated on using the ACL device with patellar tendon. The goal of this study is to prove that patients can be rehabilitated faster with retained knee stability. Three-year results from the pilot study under way on ACL show that all patients' knees are stable, that Artimplant's degradable material Artelontm is biocompatible, and that connective tissue vascularizes and grows into the material. Spacer Thumb-base arthritis is one of the most common injuries of wear and tear on the ligaments of the hand. Most common among women age 40 and over, the ailment also strikes men. An estimated 10 percent of the population over 55 years of age are at risk. No satisfactory method of treatment is currently available. In its initial stages, painkillers are prescribed. Surgical treatment by arthrodesis (fusing the joint) reduces motion, while tendon arthroplasty (reconstructing the joint) can cause problems such as instability or reduced gripping strength. The market potential is estimated at roughly SEK 10 billion. Artimplant's Spacer is a band designed to serve as a replacement for the damaged cartilage between the last thumb bone and the carpal bone. The band remains in the body until the damaged cartilage has recovered. The operation is less invasive than joint fusion and requires only local anesthesia. The Spacer is a new method for treating a common ailment, so extensive tests are required to substantiate its functionality. One-year follow-up results from clinical trials show that the Spacer has a beneficial effect on joint stability, gripping strength, and perceived pain. A multicenter study involving 108 patients is being conducted at six clinics in Sweden. Sternum Suture In certain operations, such as open-heart surgery, the surgeon must split the breast bone (sternum). After the operation, the breast bone is closed using sternum sutures. The most common materials used for sternum sutures today are steel and polydioxanone (in PDS). Steel suture may need to be removed because some patients experience irritation, and the steel can cut into the bone. PDS is soft and degradable but loses its strength quickly. Consequently, PDS is used primarily for patients with allergic reactions to metal suture. The most common suture material is surgical silk, but it is unsuitable for the sternum, partly because of its strength. Artimplant's Sternum Suture combines the properties of steel and silk by being soft yet strong and elastic. The market potential in Europe and the United States is estimated at a total of SEK 2.5 billion. INVESTMENTS AND FINANCIAL POSITION For January-March 2002, investments amounted to SEK 3.8 million (SEK 9.4 million), including SEK 3.6 million (SEK 8.1 million) for intangible assets. At the end of the period, liquid funds were SEK 49.8 million (SEK 123.2 million). EMPLOYEES At March 31, 2002, the number of employees was 70 (66), which included 34 (33) employees of the subsidiary Gothenburg Medical Center (GMC). At that time, the number of consultants associated with the Company was 7 (11). Elisabeth Liljensten has been appointed head of research. She was previously responsible for the Company's biological and preclinical research. The former head of research, Hans Bertilsson, will now work on business intelligence and the evaluation of trends in biomaterials development on an international level. PATENTS The Company's degradable implant polymers are protected by several patents, including the main patent (Artelontm) approved in Sweden, the United States, Europe, and several other countries. Patents have been sought for numerous variations on the basic theme of degradable polymers. Patents have been granted in several countries for a few technologies for specific applications. Patents have been granted for degradable material for molded forms in several countries, including Sweden, the United States, and the European region. Artimplant has been granted five patents in Sweden, four of which are also recognized internationally. Applications for nine more patents have been submitted. ------------------------------------------------------------ This information was brought to you by Waymaker http://www.waymaker.net The following files are available for download: http://www.waymaker.net/bitonline/2002/05/03/20020503BIT00170/wkr0001.doc The Full Report http://www.waymaker.net/bitonline/2002/05/03/20020503BIT00170/wkr0002.pdf The Full Report