Dignitana publish interim financial report for Q3 2015

Interim Financial Report - Summary:

Significant events during the period

• Net sales is lower than the corresponding period last year, due to the fact that Sysmex changed their contractual volumes, and Konica Minolta has yet to finalize the reimbursement processes in China.
• In the beginning of July Dignitana performed a private placement of 2.5 million shares to a group of American investors. The total amount before issuance costs was roughly 28 million SEK. The two largest investors were C3 Device Partners, of which Bill Cronin is the Managing Partner, and Green Park & ​​Golf Ventures, both based in Dallas, Texas.
• Dignitana, Inc. is registered as a company in the State of Delaware in the United States. Dignitana, Inc. is a wholly owned subsidiary of Dignitana AB and the company will publish consolidated reports from this point forward.
• An Extraordinary General Meeting was held in Lund on August 13. During this meeting Bill Cronin was elected to the Board and the issuance of warrants to the US management team was also approved.
• The subscription period for the warrants expired in September and in total 82 000 warrants were subscribed for out of the 168 000 that were covered by the resolution from the shareholders meeting. The price per warrant was SEK 2.03 and each warrant entitles the holder to subscribe for shares in the company at a price of 29.40 per share during June 2018.

Significant events after the period end

• In November, TÜV SÜD, Dignitana´s Notified Body, successfully performed the annual quality audit for keeping the CE certificate. No major nonconformities were noted.
• Dignitana received a US patent for the design of the labyrinth paths in its cooling cap, DigniCap®. The patent extends to 2031. Previously, the same patent has been granted in Europe, China, Korea and Japan.

Comments from Jan Richardsson, CEO, Dignitana AB (publ)

During the last quarter we have been fully focused on getting the approval from the FDA (Food and Drug Administration) for our scalp cooling system, DigniCap®. When the submission was converted from a PMA to a De Novo 510(k) we had hoped for a faster process. The positive is that the slow handling has not been because of Dignitana, but because of we have submitted an extensive submission that has taken FDA some time to go through.

We are in an intensive contact with FDA at the moment and we feel that FDA is doing everything they can in order to speed up the handling process. It has been a long process, but I am confident that we shall receive the FDA approval shortly. We have used this time to build out our sales and support team in the US so that once our system is cleared for use we will be able to be in a position to commercialize DigniCap® quickly.

There are several reasons why the US will be our most important market in the future. First it is by far the largest medical device market in the world, secondly the frequency of breast cancer is high and increasing (230 000 new breast cancer cases per year).

The payment model (pay-per-treatment) that we will use in the US will eventually create consistent profitability. The new business model is based on the fact that our systems shall be used at high frequency and therefore our employees need to be active educating and informing the hospitals. To maintain control and ensure over the adoption and usage process we have decided to have our own staff on the field that focus only on our product instead of going through a distributor. We have succeeded in attracting staff who previously worked with scalp cooling and they will become employees of Dignitana, Inc. as soon as FDA has given us their clearance. Dignitana, Inc. will be headquartered in Dallas with personnel across the United States in key regional markets.

Sales to end customers continue to increase for Sysmex in 2015, but they still believe that their stock is too large. Sysmex has a team of 5 people who works exclusively with the sale of our scalp cooling system, DigniCap®. An interesting development is that Sysmex has started receiving orders sponsored by charity organizations. As mentioned in the previous report, we have agreed with Sysmex that they may forego the agreed volumes this year in order to work through existing inventory and put themselves in a better position for future growth opportunities.

Konica Minolta is continuing with its efforts to obtain reimbursement in China. For the Chinese State to determine which reimbursement it will allow, Konica Minolta have to conduct clinical trials in each state they want to sell in. At the same time they are preparing to submit an application for market approval in Japan. They will initiate the PMDA application upon FDA clearance.

Financial Comments

• As of this Q3 report Dignitana AB reports consolidated group financials, including the subsidiary Dignitana, Inc. Costs related to the subsidiary starting September 1, are now being paid by Dignitana, Inc. FDA-related costs will continue to be capitalized in the Parent Company. The Company reports no comparative figures for the Group as it did not exist during 2014.
• Own work capitalized in the income statement amounts to 66 TSEK during Q3 and refers to the time Dignitana staff has put into the FDA project. Along with the other costs of the clinical study and FDA project these costs are capitalized as intangible assets. The total amount of intangible assets amounted to SEK 12.6 million SEK. DigniCap® system including accessories used in the clinical study are capitalized as tangible assets and depreciated over five years. The value of these amounts to 1.1 million SEK.
• Dignitana AB costs in the United States to set up the subsidiary and prepare for the launch cannot be capitalized as assets. These costs are included in the external costs, amounting to about 1.7 million SEK for Q3 and accumulated to 3.5 million SEK for the whole year.
• During the start-up of the subsidiary in the US, Dignitana AB provided a shareholder contribution and a long-term loan to the subsidiary.
• Inventory in stock is higher than the corresponding period last year, as the company manufactured and built inventory ready to be delivered upon clearance from the FDA.

The complete report will be found on our webpage http://www.dignitana.se/eng

Media Contact:

Jan Richardsson

CEO, Dignitana AB (publ)

Ph  46 (0)46 16 30 92

E jan.richardsson@dignitana.com

About Dignitana AB (publ)
Dignitana is a Swedish public company, based in Lund, and manufacturer of the medical cooling device DigniCap®. Dignitana is continuously researching and developing new uses for DigniCap®. Dignitana AB is listed on the OMX Nasdaq First North stock exchange and has appointed Erik Penser Bankaktiebolag as Certified Advisor. For more information visit www.dignitana.com

About the scalp cooling system DigniCap®
Dignitana’s core product - DigniCap® - is a patented scalp-cooling system that offers cancer patients the ability to keep their hair during chemotherapy. DigniCap® is developed to provide continuous cooling with high efficacy, safety and acceptable patient comfort.

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