IRRAS AB (PUBL)INTERIM REPORT JANUARY–MARCH 2019

Focus on US – first sales in US reported early April and acquisition of complementary products in May

First quarter, January - March 2019

• Net revenue totaled SEK 0.0 million (5.9).
• Operating loss (EBIT) amounted to SEK -39.1 million (-21.1).
• Loss after tax totaled SEK -38.7 million (-17.8).
• Earnings per share before and after dilution amounted to SEK -1.61 (-0.75).
    

Important events during the quarter

First patients in the US successfully treated with IRRAflow®
At the beginning of January, the first patients in the United States were treated with our lead product, IRRAflow. The successful treatments were performed at the University of California– Irvine.

New financial targets
In February the company presented new financial targets. The targets are:
- Revenue exceeding SEK 275 million in 2021
- Gross margin exceeding 72% in 2021
- Cash-flow positive by Q4 2021

Strengthened executive management team
In March, Vinny Podichetty, MD, MS, was hired as VP of Global Clinical Affairs. He is reporting to the President, CEO, and will serve as a member of the executive team.

Evaluates possible listing on Nasdaq Stockholm’s main market*
The company announced its plans to evaluate a possible listing of its share at the Nasdaq Stockholm’s main market in 2019. In addition to Carnegie, IRRAS has also engaged Pareto as a financial advisor.
  

Important events after the end of the first quarter

Collaboration with AMI-USC
The company entered into an agreement with the Alfred E. Mann Institute for Biomedical Engineering at the University of Southern California (AMI-USC). Under the terms of the agreement, IRRAS will acquire assets and intellectual property from DermaPort, Inc.

Update on CE-mark recertification
The company received a response from G-MED, its Notified Body, that requests clarifications and additional information regarding the CE Mark recertification of the company’s IRRAflow Catheter.
G-MED asked for additional technical clarifications and updates of certain previous older reports performed by the previous Swedish development partner. The requests are part of the routine review cycle and will be addressed by IRRAS in a timely manner.

First sales in US reported
Physician support for IRRAflow has been generated at more than 35 US hospitals. The product approval process is underway at more than 20 hospitals, and almost 10 additional sites are actively evaluating the technology. The feedback thus far has been positive. The first US sales were reported first week of April.

Strengthened position in US by acquiring assets 
IRRAS has strengthened its position in the US by acquiring assets of InnerSpace Neuro Solutions. The assets, including four FDA-cleared products, complement IRRAflow and will support IRRAS’ positioning as a leading company in the space. The sales of the new products are expected to start in Q3.
  

Comments from the President and CEO 

Launch in US
The launch in the US continues according to plan. The first patients were successfully treated in January, and the initial treated patients have been followed with great interest by a number of US hospitals. At the moment, we have support from physicians at more than 35 US hospitals, and our commercial team is taking the needed steps for these facilities to evaluate IRRAflow.
In April, AANS (American Association of Neurological Surgeons) held its yearly scientific meeting in San Diego. IRRAS participated and generated significant interest. Our direct sales team is now following up with these leads across the US. In connection with AANS, we had also our first US KOL meeting, which was very well received by the participants.
We believe that the sales process in the US for a new technology takes up to 6 months after initial contact with a new customer before revenue is generated. Our US launch commenced during Q4 2018, and our launch remains on track with the first purchase orders shipped to customers in early April.

Strengthened position in US by acquiring assets, including four FDA-cleared neurocritical care products
We have strengthened our position in US by acquiring the assets of InnerSpace Neuro Solutions. These assets include four FDA-cleared products that complement IRRAflow and will support IRRAS’ positioning as a leading player in the space. We will initiate sales of the acquired products in Q3. The acquired patents and expertise overlap with planned IRRAflow product development and will result in an accelerated timeline and significantly reduced development costs. The acquired products have been used in over 2 000 patients, and their clinical utility is supported by a number of scientific publications.
This acquisition fits perfectly with our strategy to use our innovative fluid exchange technology as a cornerstone to become domain dominant in neurocritical care. We have been following InnerSpace for over a year and are very pleased to complete this transaction. By adding these products to our portfolio, we will use their existing sales channels to introduce IRRAflow to new customers, and our team can now offer US hospitals additional cutting edge products to treat neurocritical care patients. This is a unique opportunity for IRRAS to strengthen our position and become a leading supplier in US, the world’s most important neurosurgical market.

Update received on CE Mark re-certification of IRRAflow
In April, we received the feedback from G-MED after a lengthy period. G-MED has asked for additional technical clarifications and updates of certain previous older reports. The requests are part of the routine review cycle, and we believe that all of their comments are addressable. Having established a productive dialogue with the notified body, we have a clear path forward, and we anticipate responding shortly to the list of questions. We will continue to work closely with the G-MED team to reintroduce this innovative medical device to the EU market, offering patients, neurosurgeons, and hospitals an effective, intelligent solution to treat intracranial bleeding.

First quarter financial overview
The first US sales were reported first week of April. Thus, due to the delay in the recertification of the CE mark in the EU and pending sales in the US, no sales were reported during the first quarter of 2019.
EBIT for the first quarter of the year was SEK -39.1 million (-21.1). The increased costs are primarily attributable to the planned organizational expansion within sales and marketing, production, R&D and administration. The average number of employees in the first quarter of 2019 was 32, compared with 17 in the year-earlier period.
Our available liquidity as of March 31, 2019 amounted to SEK 116 million, including short- and long-term financial investments.

Building for future growth at IRRAS
At IRRAS, our mission is clear: to change the lives of millions by creating medical products that transform the current treatment of intracranial bleedings. We believe that IRRAflow will ultimately become the new standard of care in this field, and, during the quarter, we continued to make progress toward accomplishing this mission.
With the US launch, the anticipated recertification of the CE mark in the EU, our registration of our product in additional countries, and our portfolio of differentiated technology and unique products, we believe that we are setting the foundation to become domain dominant in the neurocritical care market.
    

President and CEO Kleanthis G. Xanthopoulos, Ph.D.
   
  

Financial information

Kleanthis G. Xanthopoulos, Ph.D, President and CEO
kleanthis.xantopoulos@irras.com

Fredrik Alpsten
CFO and Deputy CEO
+46 706 67 31 06
fredrik.alpsten@irras.com
   

This document is considered information that IRRAS is obliged to disclose pursuant to the EU Market Abuse Regulation. The information was released for public disclosure, through the agency of the contact person above, on May 7, 2019 at 8:00 a.m. (CET).

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