Artimplant six-month report 2002

ARTIMPLANT INTERIM REPORT January 1-June 30, 2002 Artimplant is negotiating with several global enterprises in medical- technology that wish to secure licenses for products that the Company has developed in-house for orthopedics. In addition, discussions are under way concerning partnership agreements based on the degradable polymer technology that the Company has developed and which has potential application in several areas of orthopedics as well as in other categories of therapy. Efforts towards product licensing and partnering boosted costs for the period. As a whole, the Group posted a loss of SEK 28.2 million (SEK 21.1 million loss), corresponding to SEK -3.04 per share (SEK -2.28). In May, two-year results from the pilot study on Spacer were reported to European hand surgeons at their congress in Amsterdam. The study confirms that patients with thumb-base arthritis who are treated with Spacer achieve better gripping strength and greater reduction of pain than patients treated by traditional methods. CEO Anders Cedronius, who recently turned 60, notified the Board of Directors that he wishes to resign. The Board has begun the search for his successor. He will remain CEO for the time being, and the Board intends for Cedronius to continue working on special projects and serving on the Board even after his successor takes over. Scheduled financial information: 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 and 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 Artelon(TM): 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-JUNE 2002 Consolidated net sales for the period January-June 2002 totaled SEK 13.1 million (SEK 11.7 million for the same period the preceding year). The operating loss for the period was SEK 29.0 million (SEK 23.4 million loss). The loss after taxes was SEK 28.2 million (SEK 21.1 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) reached SEK 13.2 million (SEK 12.1 million). GMC's loss after taxes was SEK 2.0 million (SEK 0.3 million profit). 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. 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 and Artelon Sternum 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 project ideas in addition to the above are being evaluated for their technical and commercial feasibility. AN OUTLINE OF ARTIMPLANT'S CLINICAL PROGRAM ACL Study 2002 2003 Pilot 22 4-year results Q3 5-year results Q3 patients Multicenter I 2-year results Q3 3-year results Q3 patellar tendon 201 patients Multicenter II 1-year results Q3 2-year results Q3 hamstring tendon 101 patients Accelerated 1-year results Q4 2-year results Q4 rehab, pilot, patellar tendon 10 patients SPACER Study 2002 2003 Pilot, 15 3-year results Q2 patients Multicenter I, Patients included Q1-Q3 1-year results Q4 three-year, 108 patients STERNUM SUTURE Study 2002 2003 Pilot 20 Planned start Q3 1-year results Q4 patients BUSINESS ACTIVITIES During the period, work continued on licensing the three products developed by the Company: ACL, Spacer, and Sternum Suture. Confidential negotiations are under way with several global players. In addition to licensing particular products as mentioned above, Artimplant is striving to set up partnering agreements for the technology the Company has developed. Artimplant expects applications using its materials technology will be found in several other categories of therapy, in addition to orthopedic surgery. By conducting research in collaboration with companies having specialized expertise in these fields, Artimplant expects to be able to bring new products to market more quickly. One example of such collaboration is the wound-care project with Mölnlycke Health Care. To fortify the Company's position during protracted negotiations on licensing, the Board has begun evaluating various financing options. ACL 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 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 Artelon(TM) 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 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 trials are required to substantiate its functionality. A multicenter study involving 108 patients is being conducted at six clinics in Sweden. Two-year follow-up results from clinical trials show that the Spacer has beneficial effects on joint stability, gripping strength, and perceived pain. 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. Surgical silk is commonly used for sutures, but it is unsuitable for sternum sutures, 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 combined is estimated at SEK 2.5 billion. INVESTMENTS AND FINANCIAL POSITION Investments for the January-June period totaled SEK 7.2 million (SEK 21.7 million), including SEK 6.7 million (SEK 18.9 million) for intangible assets. At June 30, liquid funds totaled SEK 35.8 million (SEK 107.1 million). EMPLOYEES At June 30, 2002, the number of employees was 69 (69), including 33 (33) people employed by the subsidiary Gothenburg Medical Center. At that time, the number of consultants associated with the Company was 7 (11). CEO Anders Cedronius has notified the Board of Directors that he wishes to resign, and the Board has started looking for his successor. Cedronius will remain as CEO for the time being and, after his successor has taken over, will work on special projects for the Company and continue to serve as a member of the Board. Elisabeth Liljensten, previously responsible for the Company's biological and preclinical research, became head of research at April 2. PATENTS The Company's degradable implant polymers are protected by several patents, including the main patent (Artelon(TM)) approved in Sweden, the United States, Europe, and several other countries. Patents have been applied for covering several variations on the basic theme of degradable polymers. Swedish and international patents have been granted for a few specific applications. Patents for degradable materials have been granted in several countries, including Sweden, the United States, and the European region. Artimplant has been granted five patents in Sweden 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/2002/08/21/20020821BIT00170/wkr0001.doc The full report http://www.waymaker.net/bitonline/2002/08/21/20020821BIT00170/wkr0002.pdf The full report

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