Dignitana publishes Year End Financial Report 2015

Year End Financial Report - Summary:

Significant events during the year
 

• On 8 December 2015, Dignitana received clearance from the American Food and Drug Administration (FDA) to begin selling the scalp cooling system, DigniCap®, in the USA.
• Dignitana participated in the yearly breast cancer meeting, San Antonio Breast Cancer Symposium (SABCS), which opened the day after the company received the FDA clearance. The news was greeted very positively during the symposium and the company received a large number of enquiries expressing interest. Dignitana caught the media's attention including CBS Morning News as well as a number of local TV stations.
• The United States Patent and Trademark Office has granted Dignitana a patent that adds protection to the company's scalp cooling technology. The new patent protects Dignitana's unique channel system design in the cooling cap.
• In May, the company took part in the annual ASCO cancer congress in Chicago where the results of the clinical study were presented. The company's poster was chosen from among 500 others to be presented in a poster discussion that was very well attended. In connection with the congress, NBC Nightly News broadcast a long feature about the DigniCap® system and how it can improve the quality of life for patients. The results for the clinical study showed that the DigniCap® scalp cooling system reduced hair loss in 7 out of 10 breast cancer patients.
• Dignitana has started a subsidiary, Dignitana Inc, in the USA and appointed Bill Cronin to run the company. The company has set up its office in Dallas, Texas. Following the FDA clearance, a total of five persons were hired at Dignitana Inc.
• During the year, Dignitana carried out two share issues. In January, a share issue to existing shareholders raised 16.9 Million SEK for the company before issuance costs. In July, a share issue targeting a number of American investors brought in a further 28 Million SEK before issuance costs.
  
  

Significant events after the end of the year

• The company has signed contracts with six customers in the USA. The first installations of DigniCap® at customers' facilities are in progress.

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

For Dignitana, 2015 will go down in the company history as a milestone year in which we finally received the FDA clearance and the green light to sell in the USA. We have fought long and hard during the Pre Market Approval (PMA) process which was then transformed into a de novo 510 (k). After intensive and close cooperation with the FDA, the company was granted clearance the day before the most important breast cancer symposium (San Antonio Breast Cancer Symposium) in the USA started. Interest from the USA has been much better than our highest expectations both from the medical profession and patients. At present, the clearance covers all types of breast cancer. The company will look to expand the indication for use of our device to other varieties of solid tumors by means of a supplementary application to the FDA.

The company and its’ marketing efforts were assisted by tremendous press and media coverage during 2015. NBC Nightly News did a lengthy and excellent feature story on Dignitana during the annual American Society of Clinical Oncology Conference (ASCO) in Chicago at the end of May. The story reported on a clinical trial participant that did not experience hair loss during her chemotherapy treatment. Since May the company has been featured on CBS Morning News, in the New York Times Science Edition and some additional fifty TV or newspaper articles. This coverage has created tremendous awareness of and demand for our device from both patients and treatment providers.

The company began setting up an American subsidiary, Dignitana, Inc. while the regulatory process was being completed. Bill Cronin, who has several years of experience in the US scalp cooling industry was appointed to build up the new organization. The head office is located in Dallas and there are five employees at present. The sales force covers all of the USA and all team members have previous experience in scalp cooling.

The three states where success is especially important for us are California, Texas and New York. As well as being the three most populated states, many top rated cancer treatment facilities are located there and will be integral to driving adoption rates for our product in the US.

To date, we have six contracts signed by sites in the USA. These customers represent a cross section of the US oncology market and range from small community centers to larger research facilities and are spread across the USA. The business model we adopted for the American market has been proven to work. In short, we lease out the system and are paid per treatment. The new payment model means that turnover should increase meaningfully and lead to better profitability in the long run.

We are working on obtaining healthcare reimbursement for DigniCap® in the USA. We will have to show that DigniCap® has a positive effect on the quality of life of patients and much of this information was collected during the clinical trial.

Deliveries to our European distributor, Sysmex Europe GmbH, have dropped significantly in 2015, after we delivered large volumes in 2014. Sysmex experienced important sales growth, but they built up large inventories which they are now obliged to reduce. Sysmex plays an important role in our product development process as they have stringent requirements concerning product quality and performance.

Sales in China are awaiting the Chinese government's approval of patient remuneration rates. We need to undertake an approval process in each state which delays the overall process. Our distributor, Konica Minolta Medical & Graphic, is working patiently with Chinese hospitals and the appropriate authorities. Konica Minolta has selling rights in Japan as well and has now started the process to obtain regulatory approval there.

Annual turnover was significantly lower than in 2014, very much due to Sysmex not living up to the volume intake that we had originally agreed upon. I hope that Sysmex will start reordering during the course of 2016.

Financial comments

• As of September 2015 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 146 TSEK during Q4 and 609 TSEK during the whole year 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 13.7 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 1.6 million SEK.
• Dignitana AB costs in the USA 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 1.9 million SEK for Q4 and accumulated to 5.5 million SEK for the whole year.
• Inventory in stock is higher than the corresponding period last year, as the company manufactured and built inventory ready to be delivered to the USA with short term notice.

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 Adviser. 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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