Q-Med's sales increase 70%

Q-MED's interim report for the first nine months of 1999 *Net sales increased 71% to SEK 99 (58) million. *Income after financial items amounted to SEK 14.6 (14.2) million *New product - Deflux 3 - approved for the treatment of stress urinary incontinence Revenues and income Q-Med reports continued strong growth during the period. Sales amounted to SEK 98.7 (57.7) million, which is an increase of 71 per cent compared with the corresponding period the preceding year. Operating income was SEK 14.6 (14.2) million, which resulted in a lower profit margin than the previous year. This was due to heavy investment in research and product development and to market- related costs for the building up of the company's own sales organisation in priority markets. Restylane® - the company's product within the area of aesthetics for the filling out of lips, facial wrinkles and facial folds - is the product which is the primary driving force behind Q-Med's sales growth. Sales from Restylane® increased during the first nine months by 88 per cent to SEK 85.0 (45.2) million. The increase is due both to increased demand in existing markets and to the introduction of the product in new markets. During 1999 distribution agreements have been signed for, among others, Argentina and India. Q-Med's product Deflux®, within the area of urology, for the treatment of vesicoureteral reflux, a malformation of the urinary bladder in small children, was approved in December 1998 for the European market and a launch of the product is being carried out in selected markets during 1999. Sales of the iron preparation Venofer have developed well during 1999 and increased 31 per cent to SEK 12.1 (9.2) million. This growth can be attributed primarily to greater demand in the Swedish market, but also reflects a general price increase to compensate for a price increase from the supplier. Jan - July - Full Sept Sept year (SEK million) 1999 1998 @ % 1999 1998 @ % 1998 Net sales 98.7 57.7 + 71 32.8 21.6 + 52 85.2 Operating income 14.6 14.2 + 3 1.3 6.0 - 78 12.5 Earnings after 13.3 13.6 - 2 0.8 5.7 - 86 11.9 financial items The gross margin improved 3.7 percentage points, owing to considerably improved capacity utilisation as well as improved productivity due to investment in a new production line. Operating income for the period amounted to SEK 14.6 (14.2) million, which gives an operating margin of 14.8 (24.6) per cent. Q-Med is continuing to make market investments in order to reach the objective of being a market leader within the area of implants/facial aesthetics with the Restylane® product. Costs for marketing and sales increased 98 per cent during 1999 compared with 1998, from SEK 21.7 million to SEK 42.9 million. These costs thereby constituted 43.4 (37.6) per cent of sales. Several products based on Q-Med's patented NASHA technology are under development. In order to come on to the market quickly with these new applications the funding of research and development work has been intensified and amounted to SEK 14.8 (4.0) million, an increase of 272 per cent. Costs for research and development amounted, in terms of a percentage of sales, to 15.0 (6.9) per cent. The increase in Q- Med's operating costs can primarily be attributed to increased personnel costs. Income for 1999 was positively affected by an extraordinary book revenue of SEK 2.2 million. The effect of this item, which is reported among other operating revenues, has largely been counteracted by a drop in revenues from the terminated co-operation with an American company within the area of urology. Amortisation and depreciation of SEK 4.6 (1.9) million have been charged against income, of which SEK 0.5 (0.5) million was amortisation of goodwill. Income after financial items amounted to SEK 13.3 (13.6) million. Due to the fact that Q-Med's expansion has been financed partly by the company's own funds and partly by existing and extended bank credit facilities, the net interest expense has increased to SEK -1.3 (-0.6) million. Investments and cash flow Investments in machinery and equipment during the period amounted to SEK 13.2 (29.4) million, and these were largely attributable to Q-Med's production and office building in Uppsala. Furthermore, during the period Q-Med has invested SEK 3.7 (0.0) in the American research company Ixion Inc., which in collaboration with Q-Med and using NASHA technology carries out research into the cultivation and transplantation of insulin-producing cells with a view to treating diabetes. Q-Med's operating working capital increased by SEK 16.1 (0.3) million due to the company's growth. The cash flow after the investments made during the period was negative, SEK -20.1 (-24.5) million. Personnel Q-Med has further strengthened its organisation during 1999 and employed people for its marketing organisation, research and development and quality assurance. The total number of employees as of September 30 was 99 (68), with 77 (53) in Sweden. Settlement Please find attached Appendix 2 regarding the settlement with Biomatrix, Inc. Deflux for the treatment of stress urinary incontinence In September, Q-Med's product Deflux® for the indication of stress urinary incontinence was approved (CE-marked) for marketing and sales in Europe. Stress urinary incontinence is the most common urinary incontinence. It is estimated that 30 per cent of all women over the age of 50 suffer from stress urinary incontinence to some extent. In Sweden alone the cost of treatment for stress urinary incontinence - mainly nappies and sanitary towels - is estimated to amount to approximately SEK 2.5 billion per year. Clinical studies that have been carried out with Deflux® have shown very good results, with up to 80 per cent of the patients treated either cured or considerably improved. Deflux® has been previously approved for the treatment of vesicoureteral reflux, a not uncommon malformation of the urinary bladder in small children. In the case of this indication Deflux® has been able to replace extensive surgical interventions or long-term treatment with antibiotics. Q-Med AB (publ) The Board Queries should be addressed to Per-Olof Wallström, President and Chief Executive Officer, on +46 18 474 90 00 or +46 70 974 90 70. Q-Med AB (publ), Seminariegatan 21, SE-752 28 Uppsala, Sweden. Tel: +46(0)18-474 90 00. Fax: +46(0)18-474 90 01. Corporate identity number 556258-6882. ------------------------------------------------------------ Please visit http://www.bit.se for further information The following files are available for download: http://www.bit.se/bitonline/1999/10/22/19991022BIT00330/bit0001.pdf http://www.bit.se/bitonline/1999/10/22/19991022BIT00330/bit0002.doc