Medistim

Quarterly Report • Aug 19, 2015

Medistim ASA Second Quarter 2015

Kari E. Krogstad, President and CEO Thomas Jakobsen, CFO August 19th, 2015

Disclaimer

The information included in this Presentation contains certain forward-looking statements that address activities, events or developments that Medistim ASA ("the Company") expects, projects, believes or anticipates will or may occur in the future. These statements are based on various assumptions made by the Company, which are beyond its control and are subject to certain additional risks and uncertainties. The Company is subject to a large number of risk factors including but not limited to economic and market conditions in the geographic areas and markets where Medistim is or will be operating, IP risks, clinical development risks, regulatory risks, fluctuations in currency exchange rates, and changes in governmental regulations. For a further description of other relevant risk factors we refer to Medistim's Annual Report for 2014. As a result of these and other risk factors, actual events and our actual results may differ materially from those indicated in or implied by such forward-looking statements. The reservation is also made that inaccuracies or mistakes may occur in this information given above about current status of the Company or its business. Any reliance on the information above is at the risk of the reader, and Medistim disclaims any an all liability in this respect.

Table of contents

• 1. Highlights second quarter
• 1. Financial statements
• 1. Business segments update
• 1. Implementing the strategy

1. Highlights second quarter

8

Highlights second quarter 2015

	Q2 2015	Q o Q
• Double digit growth in the second quarter Strong development in the USA continues, with o 40.6 % revenue growth in NOK, 8.8 % in USD Sale of 3.party products up 20.9 % to MNOK 18.2 o	Revenue MNOK 57.3 (47.9)	19.6%
• MNOK 11.7 in EBIT for the quarter Including a one-off accrual of 3.2 MNOK related to the o termination of the Medtronic distribution agreement	EBIT MNOK 11.7 (11.7)	0.0 %
• Building out the sales force in the USA	Currency	11.9 %
• Sponsoring the REQUEST study, a pioneering registry study	No of units sold:
done by leading hospitals in North America and Europe	Systems 19	9.5 %
• The general assembly decided a dividend of NOK 1.40 per	Flow probes 1 506	1.0 %
share based upon 2014 results (NOK 0.80)	Imaging probes 7	-30.0 %
	Procedures (USA) 11 045	12.7 %

2. Financial statements

Profit and loss Q2 2015

Profit & loss	Q2 2015	Q2 2014
All numbers in NOK 1000
Sales	57 254	47 868
Cost of goods sold	13 787	12 323
Salary and sosial expenses	15 513	12 947
Other operating expenses	10 365	8 855
Total operating expenses	39 666	34 125
Op. res. before depr. and write-offs (EBITDA)	17 589	13 743
EBITDA %	30,7 %	28,7 %
Depreciation	2 649	2 072
Write offs and provisions	3 200	-
Operating result EBIT)	11 740	11 671
EBIT %	20,5 %	24,4 %
Financial income	2 874	2 429
Financial expenses	1 279	2 178
Net finance	1 595	251
Pre tax profit	13 335	11 922
Tax	2 867	4 765
Result	10 468	7 158
Dividend	25 362	14 481

Sales per Quarter (TNOK)

EBIT per Quarter (TNOK)

Profit and loss H1 2015

Profit & loss	H1 2015	H1 2014
All numbers in NOK 1000
Sales	115 161	96 725
Cost of goods sold	30 767	25 304
Salary and sosial expenses	34 377	29 722
Other operating expenses	20 005	18 699
Total operating expenses	85 149	73 725
Op. res. before depr. and write-offs (EBITDA)	30 013	23 000
EBITDA %	26,1 %	23,8 %
Depreciation	5 202	4 110
Write offs and provisions	3 200	-
Operating result (EBIT)	21 610	18 890
EBIT %	18,8 %	19,5 %
Financial income	11 120	3 541
Financial expenses	8 487	3 269
Net finance	2 633	272
Pre tax profit	24 243	19 162
Tax	6 365	6 801
Result	17 878	12 361
Dividend	25 362	14 481

EBIT per Quarter (TNOK)

12 19.08.2015 Medistim ASA Q2 2015

Balance sheet - Assets

Balance sheet	30.06.2015	31.12.2014
All numbers in NOK 1000
Assets
Intangible assets	53 581	53 257
Fixed assets	15 414	15 276
Total intangible and fixed assets	68 994	68 533
Inventory	43 387	36 874
Customers receivables	33 787	39 948
Other receivables	10 034	8 658
Cash	28 442	49 475
Total current assets	115 650	134 955
Total assets	184 644	203 488

• Inventory build up related to MiraQ product line introduction
• Cash reduced due to dividend payment of MNOK 25,4 in May 2015

Balance sheet - Equity and liability

Balance sheet	30.06.2015	31.12.2014
All numbers in NOK 1000
Share capital	4 585	4 585
Premium fund	41 852	41 852
Other equity	85 431	92 659
Total equity	131 868	139 096
Total long term debt	9 226	13 117
Total short term debt	43 550	51 275
Total equity and liability	184 644	203 488

• 14.6 MNOK in interest bearing debt

3. Business segments update

Flow probes and systems in units

• The number of flow probes sold are up by 1% over Q2 last year

• System sales at the same level as Q2 last year
• Of the 4 MiraQ systems sold, 3 were sold in Europe and 1 in the Middle East

Imaging probes and systems in units

Imaging probes in units

• 12 imaging probes sold when including sales to capital accounts in the USA
• Slow quarter after an increasing trend for the previous 4 quarters

• Slow quarter for imaging systems due to timing of project closing

VeriQ C & MiraQ systems in units

Q2 revenue performance by region

Mill NOK	Q2 '15	Q2 '14	Q / Q	H1 15	H1 14	H / H
Europe	31,6	27,5	15,1 %	65,0	59,4	9,4 %
USA	20,5	14,6	40,6 %	36,5	25,2	44,7 %
Asia & Jp	2,9	3,3	-13,2 %	8,7	7,7	13,6 %
ROW (MEA, CAN, SA)	2,3	2,5	-9,3 %	4,9	4,3	12,0 %
Total	57,3	47,9	19,6 %	115,2	96,7	19,1 %

• In Europe, the regional performance for Q2 was driven by strong 21% growth from 3. party products. For the first half, 3. party products increased with 6,8 MNOK or 22 % over last year. Sale of own products ended at 27.0 MNOK in first half, down 4.5 %. However, the sale recovered from the slow Q1 performance and grew 8.0 % to 13.4 MNOK in Q2.

• In the USA, the strong growth continues, partly driven by favorable currency. Currency neutral growth was 8.8 % for Q2 and 13.0 % for the first half.
• Both Asia/Japan and ROW are so far smaller sales territories for Medistim, and quarterly performance varies significantly. Performance at first half is positive for both territories.

Positive currency effects for Q2 with 5.2 MNOK and for the first half with 9.6 MNOK. Average rate to USD was 7.73 in H1 2015 vs 6.04 in 2014. Average rate to EUR was 8.64 in H1 2015 vs 8.28 in 2014.

Q2 revenue performance by product

Mill NOK	Q2 '15	Q2 '14	Q/Q	H1 15	H1 14	H15/H14
Procedures (USA)	17,9	11,7	53,1 %	33,3	22,1	50,7 %
Flow probes	15,0	13,9	7,5 %	28,8	28,3	1,7 %
Flow systems (VeriQ & MiraQ)	3,4	2,8	23,6 %	6,1	6,9	-11,4 %
Imaging systems (VeriQ C & MiraQ)	2,1	3,3	-35,5 %	6,8	6,4	5,6 %
Imaging probes	0,3	0,4	-34,1 %	1,2	0,9	31,7 %
3rd party	18,2	15,1	20,9 %	38,0	31,2	22,0 %
Other	0,4	0,7	-49,3 %	1,0	1,0	5,8 %
Total revenues	57,3	47,9	19,6 %	115,2	96,7	19,1 %

• Procedure sale in the USA: The number of flow procedures is up 14.0% and imaging procedures up 1.0 %. For the first half flow procedures is up with 10.1 % and imaging procedures is up with 41.3 %. Positive contribution from currency.
• Flow probes revenue: At the same level as last year. Number of procedures are growing, however part of this increase is absorbed by reduced pricing of probes in Germany.
• Flow systems: The number of systems sold in Q2 is at the same level as LY. The growth in NOK is related to currency and split between distributor and direct sales. First half is down due to the weak Q1.
• Imaging systems and probes: Slow quarter but at the same level as last year for the first half.
• 3rd party products: Very strong quarter and first half with 21 % and 22 % growth respectively.

4. Implementing the strategy

Growth opportunities – underdeveloped markets

• 1. Strengthen our position as market leader by establishing combined TTFM & Imaging as the new standard of care through
• o Early adopter KOL support
• o Easier conversion to imaging with MiraQ
• 2. Fight ignorance and indifference to QA by increasing the level of evidence and awareness through
• o Clinical marketing
• o Educational programs
• o Increase sales capacity
• 3. Product innovation and positioning to target new segments in vascular and open heart surgery
• o MiraQ Vascular

High performance US sales organization

RESULTS H1 2015

• Revenues up by 45 % in NOK, 13 % in USD
• Number of procedures up by 12.7 %
• o 41 % growth in imaging procedures
• 14 new accounts
• 6 TTFM accounts converted to Imaging

Time to expand the US sales operations

A large untapped market

• The US market represents about 1/3 of the global opportunity, with 230 000 CABG procedures
• Medistim has 14% market penetration in the USA vs. 70-80% of the European and Japanese markets
• Sales revenues from the US in 2014 was MNOK 56.5

Time to expand

• Momentum is building
• Further interest expected from the REQUEST study and it's participating US centers
• Need to increase our capacity to reach more hospitals

Action

• Building out the sales force from 13 to 18 sales representatives
• 16 territories
• 50-100 heart hospitals per territory

The organization is ready

• Strong leadership secures alignment around the commercial strategy
• Confident team after delivering double digit procedure and revenue growth over the past 5 quarters

Growth opportunities – all CABG markets

• 1. Strengthen our position as market leader by establishing combined TTFM & Imaging as the new standard of care through
• o Early adopter KOL support
• o Easier conversion to imaging with MiraQ
• 2. Fight ignorance and indifference to QA by increasing the level of evidence and awareness through
• o Clinical marketing
• o Educational programs
• o Increase sales capacity
• 3. Product innovation and positioning to target new segments in vascular and open heart surgery
• o MiraQ Vascular

The Challenge

• Clinical outcomes in CABG continue to be dissatisfactory
• Early postoperative graft failure is associated with high morbidity and mortality
• o Major adverse cardiac events (5-10%)
• o Stroke (1-3%)
• o Mortality (1-3% at 30 days)
• o Re-interventions (>5% within 12 months)

"Over the next 5 years,

mortality should be reduced from the current 1.9% to < 1%

stroke should be reduced from the current 1.5% to < 0.5%"

Michael J. Mack, Baylor Heart Hosptial, STS conference, January 2012 25 19.08.2015 Medistim ASA Q2 2015

A NEW WORKFLOW - A NEW STANDARD OF CARE

Ultrasonic Surgical Guidance & Quality Assessment

Improve surgical outcome, demonstrate quality and increase cost efficiency

What is the study protocol?

• Perform ultrasound imaging of the aorta, conduit arteries in situ, compromised coronary arteries and completed grafts (anastomosis)
• Perform TTFM on completed grafts

• The procedures will be done with Medistim's devices (VeriQ C™ and MiraQ™)

• Record all changes to the surgical procedure and the number of revisions done to the grafts based on the flow and imaging data

• Capture major adverse cardiac and cerebrovascular events (MACCE)

Why are these data interesting to the surgical community?

• The hypothesis motivating the REQUEST registry study is that employing a new and unique combination of functional flow measurement and morphological ultrasound imaging data may enable surgeons to
• o make better informed decisions during coronary surgery
• o improve surgical quality and outcomes
• o contribute to improved healthcare efficiency from this surgical procedure

• The study is the first of its kind to investigate the value of implementing both TTFM and intraoperative ultrasound imaging as a concerted effort to provide surgical guidance and graft quality assessment

• REQUEST a prospective, multicenter registry study:

• o Performed by leading heart programs in Europe, USA and Canada:

  • Erasmus MC, Rotterdam, NL / Coordinating Investigator Prof. A. P. Kappetein
  • University of Oxford, UK / Principal Investigator Prof. David Taggart
  • University of Essen, GER / Principal Investigator Dr. Daniel Wendt
  • University G D'Annunzio-Chieti, IT / Principal Investigator Prof. Gabriele Di Giammarco
  • Mount Sinai Beth Israel, New York, USA / Principal Investigator Prof. John D. Puskas
  • George Wash. Univ., VA MC, Washington DC, USA / Principal Investigator Dr. Gregory D. Trachiotis
  • University of Calgary, CAN / Principal Investigator Dr. Teresa Kieser

• What is Medistim's interest?

• o Enhance the general interest for and attention to the need for improved surgical guidance and graft assessment in CABG
• o Gain support from leading experts in the field based on clinical evidence
• o Create consensus for a recommended workflow
• o Obtain endorsement for this workflow by medical associations and health authorities in the USA and other countries
• Medistim's role
• o Sponsoring with EUR 1 million
• Timelines:
• o Study kicked off in Q2 2015
• o Plan to enroll 1,000 patients over 18-24 months