Artimplant interim report January 1 - September 30 2002

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ARTIMPLANT INTERIM REPORT JANUARY 1- SEPTEMBER 30, 2002 FOCUS ON COMMERCIALIZATION; NEW CEO AND LEANER ORGANIZATION Tord Lendau took up his duties as the new CEO on 3 October. Tord Lendau has solid experience in commercializing projects in the med-tech industry. New organization with prioritization of short-term projects with commercial potential. Staffing is being decreased more than 40 percent, contributing to a cost reduction of nearly fifty percent. The company has signed its first licensing contract with Mölnlycke Health Care. The contract is initial confirmation of the potential of Artimplant's material technology. Global med-tech companies are currently increasingly interested in the company's material technology regarding four specific projects. The company has established a regulatory plan aiming at FDA approval, which will improve the commercial conditions for future licensing agreements. Artimplant is in the final phase of solving the company's long-term financing. The solution, including the divestiture of Gothenburg Medical Center, is intended to securing cash needs until the company is cash- flow positive. SCHEDULED FINANCIAL INFORMATION: Release of year-end results: 14 February 2003 Interim report for the first 30 April 2003 quarter of 2003: Interim report for the first six 29 August 2003 months of 2003: Interim report for the first three 7 November 2003 quarters of 2003: The reports are available on Artimplant's website, and at the same time they are being distributed to the media. For further information please contact: Tord Lendau, CEO, Tel. +46 (0) 708 369 403, Ulf Åkerblom, investor relations, Tel. +46 (0) 709 675 999, ARTIMPLANT Artimplant is a biomaterials company concentrating on solutions to problems in the field of orthopedic surgery. Artimplant performs research and development and the manufacturing process of biologically degradable implants with the aim of restoring an active life. The company's internally developed biomaterial is based on a new technology which opens up new markets in the field of orthopedic surgery and a number of other specialist areas in which there is a great medical need. Artimplant has developed and patented a number of different degradable ligament implants, which are undergoing clinical trials. The company's business model is to license products and technology out to global partners. Artimplant is listed on OM Stockholmsbörsen's O-list. NEW CEO Tord Lendau took up his duties as the CEO of Artimplant AB on 3 October 2002. Tord Lendau, born in 1957, has long experience as a company manager in the med-tech industry, most recently as CEO of Noster System AB. Tord Lendau is also a member of a number of med-tech companies' boards, incl. Diamyd Medical AB, which is listed on the O-list, and the NASDAQ-listed ArthroCare Inc. During the first half of the 1990s he was the CEO of Synectics Medical AB, which was later acquired by Medtronic in the USA. REDUCED COSTS AND NEW, SLIMMER ORGANIZATION As from 1 November Artimplant has a new, more efficient organization. The new organization is concentrating on the five prioritized projects that it is deemed will provide the fastest possible contribution towards a positive cash flow. The projects are as follows: Artelon Spacer CMC-I for treating thumb base arthritis Artelon Augmentation Device ACL for reinforcement when reconstructing the anterior cruciate ligament Development of manufacturing process for producing wound-care products within the parameters of the licensing agreement with Mölnlycke Health Care AB Artelon ACL Prosthesis for replacement of ruptured anterior cruciate ligament Artelon Reinforcement Bands for a number of applications for orthopedic treatment of injuries to the shoulder, foot, ankle and knee MBL negotiations have been held with the relevant union organizations, and staffing (excluding those of the subsidiary Gothenburg Medical Center) is being reduced by 15 from the present total of 34. The cuts are principally staff in the fields of administration and production, but also to a certain extent functions in the field of research and clinical trials. Furthermore, significant savings are being made with regard to consultancy expenses, premises rental and patents. A number of consultancy contracts are being wound up. The company is leaving its present office premises and gathering all the staff in smaller premises in the same property. The patent protection is in principle restricted to covering the EU, the USA, Japan, China and Australia, which are the big, important markets for the products, which Artimplant is developing. The company anticipates cutting operating costs by close to fifty percent during 2003. The new management group comprises the following persons: Tord Lendau, CEO Ulf Åkerblom, Corporate Development (incl. Investor Relations) Elisabeth Liljensten, R&D Anders Östin, Manufacturing Process Development Tore Karlsson, temporary CFO MATERIAL TECHNOLOGY COMMERCIALLY CONFIRMED In September Artimplant signed an initial contract confirming the commercial potential of the company's material technology. It is a collaborative and licensing contract with Mölnlycke Health Care AB in the field of wound care, giving Artimplant royalty revenue when sale of the first products on the market commences in 2006. Before that, Artimplant will develop a manufacturing process for the material to be used in the products, after which Mölnlycke Health Care AB will perform clinical trials. The process development is being jointly financed, whilst the clinical trials are being financed by Mölnlycke Health Care AB. Contacts are progressing with identified global orthopedics companies regarding licensing rights to distribute, market and sell Artimplant's internally developed products in the field of orthopedics - products based on spinning and weaving textile structures from Artelon. A total of seven confidentiality contracts have been signed. Furthermore, a global USA-based company has shown interest in Artelon in the form of foam to be used for bone grafts, above all in hip reconstructions. CLEAR FDA PLAN ESTABLISHED Since the USA is responsible for around 60 percent of the global orthopedics market, it is of crucial significance for Artimplant's future commercial success that the company's products based on Artelon be approved by the FDA (the American authority which approves marketing of drugs and med-tech products). Artimplant has assessed that the fastest way to get an Artelon-based product approved is to submit an application for Artelon Spacer CMC-I. A dossier is currently being put together, consultations are being planned, and an initial meeting with the FDA is planned for April 2003. Immediately after this, Artimplant is taking a definitive stand on the form of the application for approval of the Artelon Spacer CMC-I. Approval can be obtained at the earliest in the latter part of the fourth quarter of 2003. It is estimated that it will be possible to obtain a CE certificate, i.e. approval for sale of the Artelon Spacer CMC-I in the EU countries etc., during the first quarter of 2003. ARTIMPLANT'S FUTURE FINANCING Artimplant's new strategy is aimed at faster attainment of a position whereby ongoing business and investments in research and product development are financed by income from paying customers. This situation will not occur until about two years' time. Thus the board and management are working on a solution involving alternative financing to guarantee that the capital requirement is met until the company has a positive cash flow. An announcement as to the form this financing will take is expected to be released shortly. Part of the financing solution is for the company to sell the Gothenburg Medical Center. PROJECT PORTFOLIO AND PRODUCT PORTFOLIO Artelon Spacer CMC-I Thumb base arthritis is one of the most common wear injuries in the hand, above all affecting women over the age of 40, but also affecting men. It is estimated that a total of around 10 percent of the population over the age of 55 is at risk. At present there is no satisfactory treatment. An initial step is to use analgesics. Surgical treatment involves arthrodesis, creating reduced movement, or tendon arthroplasty, which can lead to problems with strength of grip and instability. The potential market is estimated at upwards of SEK 10 billion. Artimplant's Spacer is intended to function as a replacement for the injured cartilage between the last thumb bone and the wrist bone. The operation is less extensive than arthrodesis and arthroplasty, and can be performed under local anesthetic. Since the spacer is a new method of treating a common complaint, the function must be confirmed through clinical tests. A multi-center study involving 108 patients has been commenced, and is being performed at six hospital departments in Sweden. The results of two-year follow-ups in the pilot study show that the spacer has a positive effect on joint stability, strength of grip and perceived pain. Artelon Augmentation Device ACL Injury to the anterior cruciate ligament is the commonest ligament injury and often leads to permanent disability for the person injured and significant expense for society. Artimplant's first CE-marked product is intended to strengthen the tissue taken from the patient, often part of the patellar tendon or tissue from the back of the thigh, and it can be operated into the knee as a replacement for the damaged tendon. The global market potential is estimated at around SEK 10 billion. The three-year results of the ongoing pilot study regarding ACL show that all patients have stable knees, that Artimplant's degradable material Artelon(TM) is tissue-friendly, and that connective tissue and blood vessels grow into the material. The two-year results of the first multi-center trial show that the stability of the knee operated on is comparable to that of the non- damaged knee, which is an expected result. Furthermore, the results of the pilot study are confirmed in the first multi-center study. Artelon ACL Prosthesis An ACL prosthesis is a pure implant, i.e. it is not necessary to use the body's own tissue. This project has now been commenced, and the product, which is being developed, will have considerably more potential than the reinforcement band Artelon Augmentation Device ACL. The indications Artimplant has received in connection with licensing discussions with potential partners point to considerable interest in the ACL prosthesis, primarily in the US. Artelon Reinforcement Bands The Reinforcement Band Project is a logical and cost-effective extension of Artimplant's future product portfolio, since the technology is based on the same fiber and textile development, which led to the Spacer and ACL products. There is a considerable clinical need to be able to handle ligament damage in shoulder, knee and ankle joints. The project covers a number of applications, including a rotator cuff in the shoulder joint, collateral ligaments in the knee joint and Achilles tendon, and talofibular ligaments in the foot and ankle. Artelon Sternum Suture The Sternum Suture Project has been given lower priority. In the short and medium term the company is focusing on projects in the field of orthopedics, and on generating revenue as quickly as possible. The sternum suture for open-heart surgery does not fit into the strategy. The technology, which has been developed for the sternum suture project, is directly applicable to the products that are being developed for reinforcement bands. ARTIMPLANT'S CLINICAL PROGRAM - SUMMARY Artelon Spacer CMC-I Trial 2003 Pilot 3-year follow-up Q2 Multi-center I, 3-year 1- year follow-up Q4 Artelon Augmentation Device ACL Trial 2003 Pilot 5- year follow-up Q3 Multi-center I patellar tendon 3- year follow-up Q3 Multi-center II hamstring tendon 2- year follow-up Q3 Accelerated rehab, pilot, 2- year follow-up Q4 patellar tendon PATENT The degradable implant polymers are protected by a number of patents, including the so-called main patent (Artelon(TM)), which as well as in Sweden has been approved in the USA, Europe and a number of other countries. Patents are being sought for a number of variants, which come under the basic category of degradable polymers. For some application technologies, patents have been obtained both in Sweden and internationally. Patents for degradable materials for molded forms have been obtained in a number of countries, including Sweden, the USA and Europe. Artimplant has five patents approved in Sweden and internationally. A further nine patent applications have been submitted. For strategic reasons, the company has decided to concentrate the patent protection to cover the EU, the USA, Japan, China and Australia. ARTIMPLANT'S EARNINGS, JANUARY-SEPTEMBER 2002 Consolidated net sales for the period January-September 2002 was SEK 18.2 million (16.2). The operating loss for the period was SEK -40.7 SEK (-40.6). The loss after tax was SEK -40.0 million (-37.3). The parent company's net turnover of SEK 0.2 million primarily refers to compensation from Mölnlycke Health Care. The net turnover for the subsidiary Gothenburg Medical Center was SEK 18.6 million (17.0). The loss for GMC was SEK -2.0 million (0.1). Severance expenses for personnel were charged to operations during the period. The loss increased as a result of more expenditure on research and development and increased costs associated with efforts to license the first of Artimplant's products. INVESTMENTS AND FINANCIAL POSITION The investments during January-September totaled SEK 10.0 million (32.4), of which SEK 9.6 million (28.6) was for intangible assets. At the end of the period, liquid assets totaled SEK 19.4 million (86.6). STAFF The number of staff as of September 30, 2002 was 67 (70), of whom 33 (33) were employed at the subsidiary Gothenburg Medical Center. The number of consultants associated with the company at the same time was 7 (10). ------------------------------------------------------------ This information was brought to you by Waymaker The following files are available for download: The full report The full report