Continued strong growth

CONTINUED STRONG GROWTH · The Swedish company Q-Med AB has continued its strong growth during 2001. Turnover increased by 60 per cent during the year to SEK 380.2 (237.2) million. During the fourth quarter turnover increased by 50 percent and amounted to SEK 122.7 (81.9) million. · Operating income excluding Ixion amounted to SEK 55.3 (42.3) million for 2001, with an operating margin of 14.5 (17.8) percent. During the fourth quarter the corresponding operating income was SEK 19.7 (18.6) million and the operating margin 16.1 (22.7) percent. Key ratios 2001 Amounts in SEK millions 2001 2000 % 2001 2000 % Jan - Dec Oct - Dec Turnover 380,2 237,2 +60 122,7 81,9 +50 Gross margin 343,2 212,1 +62 114,1 73,6 +55 Gross margin, % of turnover 90,3 89,4 93,0 89,9 Operating income 23,7 33,7 -30 11,0 14,6 -25 Operating income, % of turnover 6,2 14,2 8,9 17,8 Operating income excluding 55,3 42,3 +30 19,7 18,6 +6 Ixion Operating income excluding Ixion, % of turnover 14,5 17,8 16,1 22,7 Income after financial items 35,4 44,0 -20 13,9 17,6 -21 Net income for the year 35,3 35,1 +1 12,8 13,1 -2 Number of employees at year-end 266 197 +35 Profit per share, SEK 1:43 1:46 -2 Share price at year-end, SEK 173 192 -10 Market value 4.277 4.713 -9 Bengt Ågerup, President and CEO, comments as follows: "2001 was yet another year of strong growth for Q-Med. Q-Med started its present business operations in 1995 as a close company. Since then, the company has developed at a furious pace. During the years 1996 - 2000 the turnover almost doubled each year. In the same way there was more or less a doubling of the net income year after year. Turnover during 2001 reached an impressive SEK 380 million even though we couldn't quite maintain the doubling rate. The increase compared with the previous year amounted to 60 percent. During the year we have invested very heavily in research and development. 2001 has been characterized by laying a platform for continued expansion. We could also express it as the year being used to sow for a harvest which will start to come during 2002. About 70 new employees have been recruited during the year and Q-Med has at present just over 260 employees in 8 countries and sales occur in 60 markets. Q- Med has a very strong position and is ready for further expansion." Enclosure: Report on Operations 2001. Queries should be addressed to Bengt Ågerup, President and CEO, on 018- 474 90 00 or 070-974 90 25. Q-Med AB (publ) REPORT ON OPERATIONS 2001 THE YEAR 2001 IN BRIEF * January: Construction of new office and laboratory premises of 11,000 m2 is begun adjacent to the existing facility in Uppsala. ? May: Q-Med's product DUROLANE for the treatment of osteoarthritis of the knee is approved in Europe. * June: The FDA, the American regulatory authority, inspects Q- Med's quality system and production facility in Uppsala without adverse remarks. * June: Bengt Ågerup resumes as President and CEO of Q-Med after Per Olof Wallström. * July: Inclusion of the 130 patients taking part in the clinical study with RESTYLANE in the USA is completed. * July: Inclusion of the more than 340 patients taking part in the clinical study with DUROLANE in the USA and elsewhere is completed. * September: Q-Med acquires all the shares of its distributor in Italy, Nuova ICT. * September: Q-Med's first product is approved in the USA - DEFLUX for the treatment of vesicoureteral reflux in children. * September: Bengt Ågerup is chosen as Entrepreneur of the Year in Sweden. * October: Long-term data on DEFLUX are published in the American scientific journal, the "Journal of Urology". * December: Q-Med opens an American head office in Washington DC. Q-Med is a rapidly growing and profitable biotechnology/medical device company that develops, produces and markets medical implants. All products are based on the company's patented technology for the production of NASHA - Non-Animal Stabilized Hyaluronic Acid. Q-Med's operations focus on the four areas of Esthetics, Orthopedics, Uro- Gynecology, and Cell Therapy and Encapsulation. The products RESTYLANE, RESTYLANE Fine Lines and PERLANE are used for the filling out of lips and facial wrinkles and today account for the majority of sales. Development of MACROLANE for body contouring, for example breast augmentation, is ongoing. DUROLANE, Q-Med's product for the treatment of osteoarthritis of the knee joint, has been approved in Europe since May 2001. DEFLUX is a product which has been approved in Europe and the USA for the treatment of vesicoureteral reflux (malformation of the urinary bladder) in children. ZUIDEX for the treatment of stress urinary incontinence in women is estimated to be available in Europe in the middle of 2002. Since July 2000 Q-Med has owned a majority interest in the American biotechnology company Ixion Biotechnology, Inc., with research within cell therapy for diabetes. Q-Med today has over 260 employees, with approximately 180 at the company's production facility and head office in Uppsala, 20 at Ixion and the remainder in wholly owned foreign sales companies. The Q-Med share was first listed on the O- list of the Stockholm Stock Exchange in December 1999. REVENUES Q-Med increased its sales by 60 percent during 2001 to SEK 380.2 (237.2) million. In the fourth quarter turnover amounted to SEK 122.7 (81.9) million, an increase of 50 percent. Adjusted for the sales of SEK 9.9 million which were added in connection with the acquisition of Nuova ICT as of September 30, 2001 sales increased by 56 percent during 2001 and for the fourth quarter sales increased by 38 percent compared with the previous year. The reasons for the weaker growth during the fourth quarter are the strong last quarter previous year, fewer new markets and that sales within the other business units have not yet fully started. If the exchange rates which affected sales in the year 2000 had applied during 2001, sales for the Group would have been SEK 34.4 million, or 9 percent, lower. Net turnover per geographic area Jan - Dec Oct - Dec SEK millions 2001 2000 +/- 2001 2000 +/- % % Nordic countries 16,1 11,9 35 5,1 3,0 70 Rest of Europe 201,8 128,4 57 65,5 39,7 65 North and SouthAmerica 65,4 52,3 25 19,3 18,5 4 Rest of the world 96,9 44,6 117 32,8 20,7 58 Total 380,2 237,2 60 122,7 81,9 50 The Esthetics business unit · Sales amounted to SEK 371.2 (233.8) million, an increase of 59 percent. · Operating income SEK 122.1 (82.4) million and operating margin 32.9 (35.2) percent. · All patients included in the study with RESTYLANE in the USA. · All shares of the Italian distributor NUOVA ICT acquired. Net turnover and operating income Esthetics Net turnover for Esthetics amounted to SEK 371.2 (233.8) million for the year, of which SEK 119.6 (80.7) million is attributable to the fourth quarter. Operating income for the business unit amounted to SEK 122.1 (82.4) million, which for the year 2001 gives an operating margin of 32.9 (35.2) percent. In quarter four operating income was SEK 41.9 (35.5) million and the operating margin 35.0 (44.0) percent. Jan - Dec Oct - Dec SEK millions 2001 2000 +/- 2001 2000 +/- % % Net turnover 371,2 233,8 59 119,6 80,7 48 Operating income 122,1 82,4 48 41,9 35,5 18 Operating margin, % 32,9 35,2 - 35,0 44,0 - The strong development of sales within Esthetics gave an increase in turnover of 59% compared with 2000. Sales which were added in connection with the acquisition of Nuova ICT consisted almost entirely of esthetics products. Adjusted for these sales, growth during 2001 amounted to 55 percent. The same adjustment for the fourth quarter gives a sales increase of 36% compared with 2000, instead of 48 percent when ICT's sales are included. During the year growth was strongest in Asia (included in the Rest of the world), where above all development in Japan and South Korea are very positive. The foundation for the continued growth is that Q-Med's products are gaining market shares, continuing good market growth and the opening up of new markets. During the year new distributors were established in several countries, including Israel, Jordan, Malaysia, the Netherlands, Slovakia, the Czech Republic, South Africa, Estonia, Latvia, Lithuania and Thailand as well as in a couple of countries in the Middle East. Q-Med's products for facial esthetics are at present sold in 60 countries. In August 2000 Q-Med was notified by the FDA (Food and Drug Administration), the American regulatory authority, that the company's application to start clinical trials within facial esthetics with RESTYLANE had been approved. Final approval was obtained in January 2001 from an ethical committee. Recruitment of the 130 patients who are included in the study was completed in July. The results from the study will form the basis of the application for registration in the USA. It is estimated that this application will be submitted in the middle of 2002. In September all the shares of the Italian distributor Nuova ICT were acquired. Since the end of 1996 the company has acted as exclusive distributor of Q-Med's facial esthetic products in Italy and as such has been very successful. Through the acquisition of Nuova ICT with 45 people on their books full time Q-Med will achieve an even stronger presence in one of the most important markets. In addition to the strategic reasons for the acquisition Nuova ICT will add just over SEK 40 million to Q-Med's turnover per year for the skin and peeling products which the company sells under licence. The purchase sum for Nuova ICT amounts to Euro 5.2 million, to which should be added supplementary purchase sums of a maximum of Euro 1.8 million. The supplementary purchase sums are dependent on Nuova ICT's financial results during three years (2001, 2002 and 2003). It has preliminarily been deemed that Nuova ICT has reached its financial objectives for payment of the first supplementary purchase sum of Euro 0.6 million. The approval process in Japan has been delayed and the launch is now planned for 2004. The reason for the delay from the previously planned launch in 2003 is, amongst other things, that the Japanese authorities have demanded further documentation in connection with the BSE problem in Japan. Now that Q-Med has proved the non-animal origin of the company's products, the company's position has been strengthened both from an authority and from a market point of view. Q-Med will during 2002 carry out a study for supplementary clinical documentation, which will form the basis of the registration application. Q-Med has been selling RESTYLANE in Japan for just over two years. Sales and the number of customers are increasing according to plan. In accordance with the regulations, the doctors are able to directly import RESTYLANE and Q-Med has the right to give certain medical information. The difference compared to a registration is that Q-Med can then proceed to actively market the product in the country. Within the Esthetics field Q-Med is working on developing a new product, MACROLANE, for body contouring, that is the augmentation of different parts of the body. The first area where clinical studies will be carried out is breast augmentation. At the beginning of 2002 a pilot study will be carried out on a small number of patients. This study will form the basis of continued clinical studies which will constitute the foundation of a registration application. ------------------------------------------------------------ This information was brought to you by Waymaker http://www.waymaker.net The following files are available for download: http://www.waymaker.net/bitonline/2002/02/08/20020208BIT00510/bit0002.doc The full year-end report http://www.waymaker.net/bitonline/2002/02/08/20020208BIT00510/bit0002.pdf The full year-end report