Bonesupport Holding

Quarterly Report • Jul 25, 2019

APRIL - JUNE 2019

CERAMENT G AND CERAMENT V GROWING WITH 64 PERCENT Q2

APRIL - JUNE 2019

• Net sales amounted to SEK 37.3 million (28.2), an increase of 32 percent compared with the previous year. Europe and the rest of the world (EUROW) reported continued strong growth of 59 percent compared to the corresponding period last year. Sales in the US reported growth of 6 percent compared with the previous year and a continued sequential increase of 28 percent from the previous quarter.
• CERAMENT G and CERAMENT V grew by 64 percent compared to Q2 2018.
• Gross margin amounted to 86.5 percent (87.4).
• Operating profit amounted to SEK -47.8 million (-37.8), where the increased loss is mainly due to the item affecting comparability of SEK 11 million, which was charged to the period.
• Earnings per share before and after dilution, was SEK -0.93 (-0.75).

SIGNIFICANT EVENTS

• Distribution rights for the former US distributor, Zimmer Biomet, ceased at the end of May.
• The period was affected by a non comparability item with a negative impact of SEK 11.0 million. The item is a provision related to product returns from the previous US distributor, Zimmer Biomet.
• In April, it was announced that Vikram Johri is leaving his role as GM & EVP Commercial Operations EUROW.
• The General Meeting approved a share-related incentive program to employees.

JANUARY - JUNE 2019

• Net sales amounted to SEK 70.1 million (59.3), an increase of 18 percent compared with the previous year. Europe and the rest of the world (EUROW) reported strong growth of 49 percent compared to the corresponding period last year. Sales in the US reported a 12 percent decline, which should be viewed in the perspective of the changes made in the distribution structure.
• CERAMENT G and CERAMENT V grew by 58 percent compared with the corresponding period in 2018.
• The gross margin was 86.2 percent (84.6).
• Operating profit totaled SEK -86.8 million (-71,0), where the increased loss was mainly due to the item affecting comparability of SEK 11 million.
• Earnings per share before and after dilution, was SEK -1.68 (-1.42).

SIGNIFICANT EVENTS, cont'd

• The General Meeting elected Lennart Johansson as the new Chairman of the Board.
• A GPO (Group Purchasing Organization) contract was signed with Kaiser Permanente which has 690 medical offices and 39 hospitals.

EVENTS AFTER PERIOD END

• The company has decided to focus its research and development on CERAMENT plus bisphosphonate and CERAMENT plus DBM.

	Apr - Jun		Jan - Jun			12 months
KEY FIGURES	2019	2018	2019	2018	LTM	2018
Net sales, SEK m	37.3	28.2	70.1	59.3	107.5	96.6
Sales growth, %	32.4	-24.1	18.4	-14.8	-9.7	-25.3
Gross profit, SEK m	32.3	24.6	60.5	50.2	91.8	81.5
Gross margin, % 1	86.5	87.4	86.2	84.6	85.4	84.3
Operating loss, SEK m	-47.8	-37.8	-86.8	-71.0	-190.3	-174.4
Loss for the period, SEK m	-47.9	-38.2	-87.0	-72.0	-191.4	-176.4
Equity at period end, SEK m	192.5	381.2	192.5	381.2	192.5	278.5
Net debt, SEK m 1	-161.2	-368.4	-161.2	-368.4	-161.2	-261.5
Operating cash flow, SEK m 1	-42.3	-30.6	-84.1	-66.9	-188.8	-171.6
Cash at period end, SEK m	173.1	368.4	173.1	368.4	173.1	261.5
Earnings per share, SEK	-0.93	-0.75	-1.68	-1.42	-3.73	-3.46

1 APM: Alternative performance measures, see definitions on page 18.

SOLID STRATEGY EXECUTION GOOD GROWTH IN THE QUARTER

The journey of change that began last year continues at full speed. I see the development during the second quarter as a further confirmation that our strategy works. The strong growth for our antibiotic eluting products CERAMENT G and V shows how unique our value proposition is. The positive development in the US confirms that our new structure is giving leverage.

Sales in Europe and the rest of the world (EUROW) showed strong growth of 59 percent and, as in previous quarters, our antibiotic eluting products, CERAMENT G and V, are driving growth. Sales of CERAMENT G and V rose 64 percent compared to the corresponding quarter last year. With sales totaling SEK 37.3 million, the quarter was our best ever in terms of sales, which is satisfactory as it is only eight months since we changed the distribution structure in the US.

The development in EUROW is a confirmation that we have a unique product portfolio and that we are driving our market penetration effectively. The region's sales of CERAMENT G also shape our expectations of the market potential in the US.

The transition to an independent distribution network in the US is progressing according to plan. We have good control measures and follow-up systems and our organization has acted quickly when distributors fail to deliver according to plan. During the first half of 2019, we have replaced six of our 40 distributors. We continue to finetune the distribution network and from previous experience, I believe that it takes about 10 - 12 months before a new distribution structure has solidified. Despite these adjustments, sales in the US rose sharply compared to the previous quarter.

During the quarter, we signed a number of additional GPO contracts (group purchasing organization) in the USA and I especially want to highlight our agreement with Kaiser Permanente, which has 690 medical offices, 39 hospitals and 23,000 doctors. Kaiser is a well-reputed organization with very strict requirements on its counterparts and I am proud that our competent American organization manages to establish contracts with institutions of this dignity. Sales through GPO contracts are an important part of driving our US growth.

Strong clinical evidence and health economic data are one of the cornerstones of our strategy. In the quarter, N. Jahangir et al. published a prospective study in the Journal of Orthopeadics that shows that CERAMENT G can be of great use in very difficult open bone fractures. The literature has shown that the risk of infection at this type of bone fracture is 52 percent In the study, the degree of infection was shown to be 0 percent with the use of CERAMENT G. The degree of amputation fell to 1.9 percent compared to the 16% in literature reference. These are striking results

that show the benefit and the great potential that CERAMENT has within trauma indications.

When it comes to our clinical development, we have, after careful evaluation, decided to focus on the development of CERAMENT plus bisphosphonate and CERAMENT plus demineralized bone matrix, DBM. We believe that this is the best way for BONESUPPORT to fully capitalize the unique properties of CERAMENT.

We sum up another positive quarter and I am encouraged by the fact that our stronger strategic focus is now starting to show results. Our antibiotic eluting products have rapidly taken market shares, sales in the US has delivered strong sequential growth and we have succeeded in signing agreements with some of the world's most reputable healthcare organizations. The potential of our continued journey means that I foresee future with great expectation.

Emil Billbäck

CEO

Continued development of the new distribution structure

NORTH AMERICA (NA)

The North American market is the world's largest for synthetic bone graft products and is the most important market for the company. The focus of the North America segment is the continued development of the new distribution structure that was established in October 2018. At the end of the quarter, BONESUPPORT had its own commercial organization with 21 (14) employees and 40 contracted distributors.

APRIL - JUNE

Sales

Sales for the period reported an increase of 6 percent compared with the corresponding period last year and a continued sequential increase of 28 percent from the previous quarter. Sales for the quarter amounted to SEK 14.8 million, compared with SEK 11.5 million in the first quarter of 2019. The distribution rights for the former distributor in the US, Zimmer Biomet, ceased on May 23. BONESUPPORT's own organization in the US is working to accelerate market penetration and enter into agreements that give contracted hospitals access to CERAMENT. During the quarter, an agreement was signed with Kaiser Permanente. Kaiser has 690 medical offices and 39 hospitals.

Contribution

The contribution from the segment was SEK -23.4 million (-5.9). The increased loss was mainly attributable to a comparative item of SEK 11 million, but was also an effect of the ongoing commercial investments. Sales and marketing expenses increased to SEK 29.8 million (10.1) during the second quarter related to the expansion of the organization. R&D costs amounted to SEK 6.4 million (6.3).

The item affecting comparability of SEK 11.0 million which charged the period's contribution relates to product returns from the former US distributor, Zimmer Biomet.

JANUARY – JUNE

Net sales amounted to SEK 26.3 million (29.9), which corresponds to a decline of 12 percent. The decline is to be seen in the light of the transition to a new distribution structure.

The contribution amounted to SEK -39.2 million (-7.9). The negative contribution is a combination of the item affecting comparability, lower sales and increased sales and sales marketing costs.

Net sales, gross profit and contribution, SEK m

	Apr-Jun	Apr-Jun	Jan-Jun		Jan-Jun Full year
	2019	2018	2019	2018	2018
Net Sales	14.8	14.0	26.3	29.9	34.1
Gross profit	13.4	12.4	23.7	25.9	29.6
Contribution	-23.4	-5.9	-39.2	-7.9	-45.0

Strong growth for CERAMENT G and CERAMENT V

EUROPE & REST OF WORLD (EUROW)

In Europe, CERAMENT is sold by both the company's own sales organization and by distributors. Germany, the UK, Switzerland, Sweden and Denmark are key markets where BONESUPPORT has its own sales representatives. In 2018, its own sales organization was gradually expanded and at the end of the period amounted to 25 (21) employees. The focus is on utilizing the results of the CERTiFy study to increase the use of CERAMENT. In the other eight European markets and in other parts of the world (ROW), the company cooperates with specialist distributors.

APRIL – JUNE

Sales

Sales for the segment increased by 59 percent compared with the corresponding period last year and amounted to SEK 22.5 million (14.2). Sales in our direct key markets accounted for 84.7 percent of the segment's sales and reported an increase of 60% compared with the corresponding period last year. Sales of the CERAMENT G and CERAMENT V antibiotic eluting products increased by 64 percent compared to the second quarter last year.

Contribution

The contribution from the segment was SEK 3.8 million (-1.0). The improved contribution has been achieved in spite of increased commercial investments and is the result of increased sales and gross profit. Sales and marketing expenses increased compared with the corresponding period last year and amounted to SEK 15.1 million (13.0), mainly as an effect of new recruits made to sales organizations in our key markets.

JANUARY – JUNE

Net sales amounted to SEK 43.9 million (29.3), an increase of 49 percent compared with the previous year. The sale of the antibiotic eluting products CERAMENT G and CERAMENT V increased by 58 percent.

The contribution amounted to SEK 4.7 million (-1.9). The positive contribution is attributed increased sales and improved gross margin.

Net sales, gross profit and contribution, SEK m

	Apr-Jun Apr-Jun		Jan-Jun		Jan-Jun Full year
	2019	2018	2019	2018	2018
Net Sales	22.5	14.2	43.9	29.3	62.5
Gross profit	18.8	12.2	36.8	24.2	51.8
Contribution	3.8	-1.0	4.7	-1.9	-9.7

Net sales per quarter, SEK m

RESEARCH AND DEVELOPMENT

BONESUPPORTS clinical development program focuses on further developing CERAMENT's properties, broadening clinical application areas and utilizing CERAMENT's unique drug eluting properties through the development of combination products that promote bone healing.

A number of different combinations with CERAMENT have been investigated to add osteoinductive properties, meaning the ability to actively stimulate bone growth and bone remodeling. Among other things, the company has made research in the form of preclinical candidates that has combined CERAMENT with bisphosphonates, bone morphogenic proteins (BMP), bone marrow aspirate (BMA) and demineralized bone matrix (DBM).

A careful evaluation of market potential, clinical benefit, therapeutic innovation and preclinical results has concluded in the following categorization:

PRIORITISED PRODUCT CANDIDATES FOR OWN DEVELOPMENT:

• CERAMENT plus bisphosphonate
• CERAMENT plus DBM

Bisphosphonate is a well-established substance in the treatment of osteoporosis. Bisphosphonate is used to limit the activity of osteoclasts, resulting in improved bone remodeling and bone density through potentiation of osteoblasts. CERAMENT plus bisphosphonate has the potential to add an important therapeutic dimension in the treatment of low-healing bone defects and fractures induced by low bone density.

Demineralized bone matrix (DBM) is based on allograft reduced on minerals. The material has been shown to be widely used in conditions and situations where there is weak natural bone remodeling. The total market for DBM is \$ 250 million, of which the US accounts for \$ 80 million. The combination CERAMENT and DBM could create a product with both osteoconductive and osteoinductive properties, which means a therapeutic innovation with unique advantages in treating difficult-to-heal skeletal damage, especially in the segment of trauma. The product candidate CERAMENT + DBM and the launched product BONIFY replace the previous product candidate CERAMENT + BMA.

POTENTIAL PARTNER DEVELOPMENT PRODUCTS

• CERAMENT plus BMP

CLINICAL EVIDENCE, A STRATEGIC CORNERSTONE

One of the three cornerstones of the strategy is to deliver industry-leading scientific and clinical evidence that validates the many benefits of CERAMENT. There is already an extensive database of more than 130 research publications and abstracts of preclinical and clinical studies with CERAMENT. Three of the most important and largest clinical trials are CERTiFy, FORTIFY and SOLARIO.

The CERTiFy study is the largest clinical study to date that has been conducted with CERAMENT. The study is a prospective, randomised, controlled clinical trial of 137 patients at 20 leading trauma centres in Germany, the purpose of which is to compare treatment with CERAMENT BVF with transplantation of autologous bone grafts (autograft) in tibial plateau fractures where bone defects have occured. Autograft has long been the prevailing treatment practice for this type of injury. The CERTiFy study was completed in June 2018 and complete results are expected to be published in the third quarter of 2019. At the end of the previous year, BONESUPPORT announced that the main objective of the study was achieved: CERAMENT BVF has proven to be a strong alternative to autograft.

The FORTIFY study evaluates the ability of CERAMENT G to improve the treatment outcome of patients with open tibia fractures. That the fracture is "open" means that the skin has been penetrated in conjunction with the trauma. These fractures run a high risk of infection, with inadequate bone healing as a result. The primary effects to be measured in the study include the absence of deep infection at the fracture site, the absence of additional surgical procedures to promote healing and patientreported improvement. The trial will include up to 230 patients in clinics in the USA and Europe. Data from the FORTIFY study will be used to support a planned PMA (pre-market approval) application to the FDA, an important step for expected approval in the US for CERAMENT G during the second half of 2021.

BONESUPPORT invests in SOLARIO (Short or Long Antibiotic Regimes in Orthopaedic), with the aim of investigating if synthetic bone graft substitutes containing antibiotics can lead to shorter treatment times compared to systemic antibiotics and thereby reduce risk of antibiotic resistance, side effects and costs. The study is led by the Oxford University Hospital's NHS Foundation Trust in collaboration with EBJIS (European Bone and Joint Infection Society). SOLARIO is a randomized unblinded European multicenter study that is expected to recruit 500 patients. The first patient was recruited in February 2019 and the last patient data is expected to be obtained in March 2022. A positive result of the study may mean a paradigm shift for the treatment of bone infections.

FINANCIAL OVERVIEW

PROFIT AND LOSS

NON COMPARABILITY ITEM

The period April - June was affected by a non comparability item of SEK 11.0 million with a negative effect on sales costs and operating profit. The non comparability item is a provision related to product returns from the previous US distributor Zimmer Biomet.

APRIL – JUNE 2019

Net sales

Net sales amounted to SEK 37.3 million (28.2), an increase of 32 percent compared with the previous year. The EUROW segment increased by 59 percent to SEK 22.5 million (14.2). Sales growth in Europe was driven by wider use of CERAMENT G and V increased by 64 percent. Sales in the US increased by 6 percent to SEK 14.8 million as a result of the ongoing build-up of a new distribution structure. A more detailed description is given under the segment sections. The currency translation effect was positive by SEK 1.9 million.

Cost of goods sold

Cost of goods sold amounted to SEK 5.0 million (3.5), which resulted in a gross margin of 86.5 percent (87.4).

Selling expenses

Sales expenses amounted to SEK 52.7 million (31.8), an increase of 66 percent. Personnel costs amounted to SEK 21.1 million (16.7) as an effect of an expanded sales organization. Both segments increased costs, in NA by 154 percent to SEK 30.0 million (11.8), affected by the non comparability item of SEK 11 million, but also by the expanded sales organization and sales commissions amounting to 4.8 (0.0). EUROW increased by 2 percent to SEK 15.1 million (14.8), due to the ongoing expansion of the sales organization. Other sales costs, which were not allocated to the segments, increased to SEK 7.6 million (5.8), an increase that is partly due to higher personnel costs, but also to a higher level of marketing activities during the period.

Research and development costs

Research and development costs amounted to SEK 16.0 million (17.2), a decrease of 7 percent. Staff costs corresponded to SEK 7.0 million (7.6). Other expenses totaled SEK 6.4 million (9.6). The segment NA amounted to SEK 6.4 million (6.3).

Administrative expenses

Administrative expenses amounted to SEK 10.4 million (14.9), a decrease of 30 percent, of which personnel expenses amounted to SEK 5.6 million (4.8), which is partly due to a shift from consulting to personnel costs. Other expenses amounted to SEK 4.8 million (10.1), a decrease compared with the previous year, which is primarily an effect of implemented cost control programs, among other things, by reduced costs for consultants.

Other operating income and expenses

Other operating income and expenses consisted mainly of exchange gains and losses on operating assets and liabilities. Other

Net Sales per quarter, SEK m

operating income amounted to SEK 2.4 million (2.5) and other operating expenses amounted to SEK -3.4 million (-1.0) for the quarter.

Operating profit

Operating profit amounted to SEK -47.8 million (-37.8), where the increased loss was mainly due to a non comparability item of SEK 11 million and higher operating costs for implemented investments in the expansion of the sales organization with more employees.

Net financial items

Net financial items amounted to SEK -0.1 million (0.0). No interest expense was charged to net financial items since the Group's loans were repaid in the first quarter of 2018.

The result of the period

For the reasons explained above, the loss for the second quarter amounted to SEK -47.9 million (-38.2), which corresponds to earnings per share of SEK -0.93 (-0.75).

JANUARY – JUNE 2019

Net sales

Net sales amounted to SEK 70.1 million (59.3), an increase of 18 percent. The EUROW segment increased by 49 percent to SEK 43.9 million (29.3) and the NA segment fell by 12 percent to SEK 26.3 million (29.3).

Operating profit

Operating profit amounted to SEK -86.8 million (-71.0), where the sales increase contributed positively to improved gross profit, while higher operational costs for implemented investments in the expansion of the sales organization with more employees resulted in an increased loss. Furthermore, operating profit was affected by a non comparability item of SEK 11 million.

The result of the period

For the reasons explained above, the loss for the period amounted to SEK -87.0 million (-72.0), which corresponds to earnings per share of SEK -1.68 (-1.42).

FINANCIAL POSITION AND CASH FLOW

SEK m	30 June		31 Dec
Financial position	2019	2018	2018
Cash and cash equivalents	173.1	368.4	261.5
Interest-bearing debt	11.9	0.0	0.0
Net debt	-161.2	-368.4	-261.5
Equity	192.5	-11.0	192.5

SEK m	Apr-Jun	Apr-Jun	Jan-Jun	Jan-Jun	Full year
Cash flow	2019	2018	2019	2018	2018
Operations	-42.3	-30.6	-84.1	-66.9	-171.6
Investing activities	-1.7	-0.2	-2.3	-0.4	-2.7
Financing activities	-1.3	0.7	-2.6	-99.4	-98.8

OTHER DISCLOSURES

NON COMPARABILITY ITEM

The period was affected by a non comparability item with a negative impact of SEK 11.0 million. The item is a provision related to product returns from the previous US distributor, Zimmer Biomet.

PARENT COMPANY

The parent company BONESUPPORT HOLDING AB (publ) is a holding company. The parent company generated SEK 10.3 million (13.9) in the sale of internal services to subsidiaries during the quarter. The loss in the quarter was SEK -3.6 million (-5.5). No investments were made during the quarter.

STAFF

The Group had 78 (68) employees (full-time equivalent) during the period, of which 20 (19) worked in research & development.

SIGNIFICANT EVENTS DURING THE QUARTER

The General Meeting approved a share-related incentive program for employees. The General Meeting elected Lennart Johansson as the new Chairman of the Board. Distribution rights for the former US distributor Zimmer Biomet, ceased in late May.

EVENTS AFTER PERIOD END

The company has decided to focus its research and development on CERAMENT plus bisphosphonate and CERAMENT plus DBM.

SHARES AND RELATED PROGRAMS

The company has ordinary shares and C-shares issued during the year, see Note 4. The quota value of the shares is SEK 0.625 per share. As of June 30, 2019, the total number of ordinary shares was 51,795,917 divided into 2,017 shareholders. The largest shareholders are shown below.

Shareholders 30 June 2019

HealthCap VLP. .	12,7%
Stiftelsen Industrifonden. .	9,2%
Lundbeckfonden Invest A/S. .	9,2%
Swedbank Robur Fonder. .	8,6%
Tredje AP-fonden. .	,8%
Tellacq AB. .	5,7%
Carl Westin Ltd. .	5,2%
Other shareholders. .	41,5%

BONESUPPORT has three employee stock option programs, two share savings programs and three warrant programs. Information on these can be found in Note 8.

REGISTERED TRADEMARKS

BONESUPPORT and CERAMENT are registered trademarks.

FINANCIAL CALENDAR

Interim Report January – September 2019: 7 november 2019 Year end report: February 2020

THIS REPORT

This report has been prepared in both a Swedish-language and an English-language version. In the event that the versions do not conform, the Swedish-language version shall prevail. This report has not been reviewed by the company's auditor.

DECLARATION OF THE BOARD OF DIRECTORS AND THE CEO

The Board and the CEO assure that this interim report gives a true and fair view of the development and the Group's and the Parent Company's operations, position and results and describes significant risks and uncertainties faced by the companies that form part of the Group.

Lund July 25, 2019

Lennart Johansson Lars Lidgren Håkan Björklund Björn Odlander Chairman Board member Board member Board member

Board member Board member CEO

Tone Kvåle Simon Cartmell Emil Billbäck

CONDENSED CONSOLIDATED INCOME STATEMENT

		Apr - Jun		Jan - Jun		Jan - Dec
SEK t	Note	2019	2018	2019	2018	2018
Net sales	7	37,320	28,184	70,148	59,269	96,623
Cost of sales		-5,047	-3,548	-9,678	-9,110	-15,157
Gross profit		32,273	24,636	60,470	50,159	81,466
Selling expenses		-52,689	-31,820	-93,522	-59,465	-133,311
Research and development expenses		-15,987	-17,193	-32,902	-32,031	-66,064
Administrative expenses		-10,482	-14,940	-20,840	-31,471	-58,345
Other operating income		2,434	2,530	4,610	5,461	8,530
Other operating expenses		-3,369	-1,033	-4,631	-3,603	-6,680
Operating loss	7	-47,820	-37,820	-86,815	-70,950	-174,404
Net financial items		-53	-5	-97	-502	-465
Loss before income tax	7	-47,873	-37,825	-86,912	-71,452	-174,869
Income tax		-67	-379	-109	-530	-1,536
Loss for the period		-47,940	-38,204	-87,021	-71,982	-176,405

Loss for the period is attributable to equity holders of the parent.

CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

	Apr - Jun		Jan - Jun		Jan - Dec
SEK t	2019	2018	2019	2018	2018
Loss for the period	-47,940	-38,204	-87,021	-71,982	-176,405
Other comprehensive income:
Items to be reclassified to profit or loss in subsequent periods
Exchange differences	-1	198	94	312	129
Total comprehensive income for the period	-47,941	-38,006	-86,927	-71,670	-176,276

EARNINGS PER SHARE

	Apr - Jun		Jan - Jun		Jan - Dec
	2019	2018	2019	2018	2018
Equity holders of the parent
Earnings per share before dilution, SEK	-0.93	-0.75	-1.68	-1.42	-3.46
Earnings per share after dilution, SEK	-0.93	-0.75	-1.68	-1.42	-3.46
Loss for the period, SEK t	-47,940	-38,204	-87,021	-71,982	-176,405
Average number of shares, thousands	51,796	50,812	51,796	50,688	50,971

CONDENSED CONSOLIDATED BALANCE SHEET

		30 Jun		31 Dec
SEK t	Note	2019	2018	2018
ASSETS
Intangible assets		6,950	5,040	5,511
Tangible assets	1	15,786	2,854	3,885
Other non-current assets	6	282	338	375
Total non-current assets		23,018	8,232	9,771
Inventories		30,625	23,776	23,681
Trade receivables	6	28,518	13,578	18,683
Other operating receivables	6	7,453	9,667	12,538
Cash and cash equivalents	6	173,096	368,357	261,468
Total current assets		239,692	415,378	316,370
TOTAL ASSETS		262,710	423,610	326,141
EQUITY AND LIABILITIES
Equity attributable to equity holders of the parent	4	192,487	381,209	278,531
Leasing debt	1	6,693	0	0
Provisions		289	173	289
Total non-current liabilities		6,982	173	289
Leasing debt	1,6	5,189	0	0
Trade payables	6	13,118	10,343	12,472
Other operating liabilities	6	44,934	31,885	34,849
Total current liabilities		63,241	42,228	47,321
TOTAL EQUITY AND LIABILITIES		262,710	423,610	326,141

CONDOLIDATED STATEMENT OF CHANGES IN EQUITY

		Other paid in		Accumulated
SEK t	Share capital	capital	Reserves	losses	Total equity
As at January 1, 2018	31,424	1,189,015	-304	-769,349	450,786
Loss January - June 2018			312	-71,982	-71,670
New share issue	334				334
Allotted warrants		740			740
Transaction costs, new share issue		-1,860			-1,860
Share-based payment transactions				2,879	2,879
As at June 30, 2018	31,758	1,187,895	8	-838,452	381,209
Loss July - December 2018			-183	-104,423	-104,606
New share issue	615				615
Share-based payment transactions				1,313	1,313
As at January 1, 2019	32,373	1,187,895	-175	-941,562	278,531
Loss January - June 2019			94	-87,021	-86,927
Share-based payment transactions				883	883
As at June 30, 2019	32,373	1,187,895	-81	-1,027,700	192,487

Reserves comprise exchange differences on translation of foreign operations.

CONSOLIDATED STATEMENT OF CASH FLOWS

	Apr - Jun		Jan - Jun		Jan - Dec
SEK t	2019	2018	2019	2018	2018
Operating loss	-47,820	-37,820	-86,815	-70,950	-174,404
Non-cash adjustments:
-Share-based payments	441	1,716	883	2,879	4,192
-Exceptional cost	11,000	0	11,000	0	0
-Other	2,074	-593	1,369	-679	-962
Interests received	7	0	31	0	46
Interests paid	-60	-5	-128	-859	-868
Other paid financial costs	0	0	0	558	558
Income tax paid	-298	-996	-400	-1,011	-2,151
Net cash flows from operating activities before
changes in working capital	-34,656	-37,698	-74,060	-70,062	-173,589
Changes in working capital	-7,623	7,056	-9,998	3,142	1,964
Net cash flows from operating activities	-42,279	-30,642	-84,058	-66,920	-171,625
Investments in intangible assets	-1,514	-79	-1,758	-182	-997
Investments in tangible assets	-232	-52	-617	-130	-1,609
Investments/disposals of financial assets	57	-115	95	-78	-113
Net cash flows from investing activities	-1,689	-246	-2,280	-390	-2,719
New share issue	0	0	0	334	949
Transaction costs, new share issue	0	0	0	-1,860	-1,860
Allotted warrants	0	740	0	740	740
Repayments of borrowings	-1,284	0	-2,562	-98,620	-98,620
Net cash flows from financing activities	-1,284	740	-2,562	-99,406	-98,791
Net cash flow	-45,252	-30,148	-88,900	-166,716	-273,135
Cash and cash equivalents as at beginning of period	219,141	397,179	261,468	533,367	533,367
Net exchange difference	-793	1,326	528	1,706	1,236
Cash and cash equivalents as at end of period	173,096	368,357	173,096	368,357	261,468

CONDENSED PARENT COMPANY INCOME STATEMENT

	Apr - Jun		Jan - Jun		Jan - Dec
SEK t	2019	2018	2019	2018	2018
Net sales	10,313	13,880	20,625	22,530	51,578
Administrative expenses	-13,933	-20,148	-27,821	-32,692	-66,756
Other income	149	63	254	63	528
Other expenses	-402	-49	-740	-484	-1,033
Operating loss	-3,873	-6,254	-7,682	-10,583	-15,683
Net financial items	226	779	10	1,229	2,105
Loss after financial items	-3,647	-5,475	-7,672	-9,354	-13,578
Income tax	0	0	0	0	0
Loss for the period	-3,647	-5,475	-7,672	-9,354	-13,578

Parent company loss for the period equals comprehensive income.

CONDENSED PARENT COMPANY BALANCE SHEET

		30 Jun	31 Dec
SEK t	Note	2019	2018	2018
ASSETS
Non-current financial assets		704,652	503,912	704,652
Other receivables	6	68,143	84,450	153
Prepaid expenses	6	1,344	1,248	728
Cash	6	146,475	332,554	243,247
TOTAL ASSETS		920,614	922,164	948,780
EQUITY AND LIABILITIES
Equity
Restricted equity	4	32,372	31,757	32,372
Unrestricted equity		866,980	878,103	874,620
Total equity		899,352	909,860	906,992
Current liabilities	6	21,262	12,304	41,788
TOTAL EQUITY AND LIABILITIES		920,614	922,164	948,780

CONDENSED CONSOLIDATED INCOME STATEMENT PER QUARTER

	2019		2018				2017
SEK t	Q2²	Q1	Q4	Corr Q3¹	Q2	Q1	Q4	Q3
Net sales	37,320	32,828	23,108	14,246	28,184	31,085	27,039	32,677
Cost of sales	-5,047	-4,631	-3,460	-2,587	-3,548	-5,562	-4,513	-3,989
Gross profit	32,273	28,197	19,648	11,659	24,636	25,523	22,526	28,688
Gross margin %	86.5%	85.9%	85.0%	81.8%	87.4%	82.1%	83.3%	87.8%
Selling expenses	-52,689	-40,833	-38,760	-35,086	-31,820	-27,645	-21,488	-24,368
Research and development expenses	-15,987	-16,915	-17,607	-16,426	-17,193	-14,838	-19,748	-12,834
Administrative expenses	-10,482	-10,358	-9,343	-17,531	-14,940	-16,531	-15,479	-11,149
Other operating income	2,434	2,176	1,251	1,818	2,530	2,931	2,112	1,007
Other operating expenses	-3,369	-1,262	-226	-2,851	-1,033	-2,570	-1,303	-1,457
Operating loss	-47,820	-38,995	-45,037	-58,417	-37,820	-33,130	-33,380	-20,113
Net financial items	-53	-44	41	-4	-5	-497	-17,369	-2,373
Loss before income tax	-47,873	-39,039	-44,996	-58,421	-37,825	-33,627	-50,749	-22,486
Income tax	-67	-42	-629	-377	-379	-151	-601	-401
Loss for the period	-47,940	-39,081	-45,625	-58,798	-38,204	-33,778	-51,350	-22,887

Loss for the period is attributable to equity holders of the parent.

1 Correction of error was published on February 13, 2019 regarding Q3 2018 for an error that erose in connection with the transition to a new ERP system. The error relates in its entirety to the EUROPE & REST OF WORLD segment. The error refers to internal profit calculation in inventories. Due to the error gross profit and profit for the third quarter of 2018, and inventories as of September 30, 2018, were overstated with 1.3 SEK m.

2 The period was affected by a non comparability with a negative impact of SEK 11.0 million. The item is a provision related to product returns from the previous US distributor, Zimmer Biomet.

NOTE 1 GENERAL INFORMATION, ACCOUNTING PRINCIPLES

This interim report was prepared in accordance with IAS 34 Interim Financial Reporting and the Swedish Annual Accounts Act. The parent company's reporting has been prepared in accordance with RFR 2, Reporting for Legal Entities, and the Swedish Annual Accounts Act. Accounting principles have been applied as reported for the Annual Report per December 31, 2018. New or amended standards or interpretations of standards effective as of January 1, 2019 have not had any significant impact on BONESUPPORT's financial statements, except for IFRS 16 Leases described below.

IFRS 16 is applied from January 1, 2019 and replaces IAS 17. IFRS 16 implies that, in principle, all leases are recognized in the balance sheet, the right to use the leasing objects as tangible assets and the remaining lease payments as current and non-current debt. In the income statement, the leasing cost has been replaced by depreciation of the assets and interest expense on the lease liabilities. Key ratios such as equity ratio and debt/equity ratio have changed as liabilities in the balance sheet have increased. The leasing agreements that are reported in the balance sheet relate primarily to the leasing of premises. BONESUPPORT applies IFRS 16 according to a simplified method. This implies a calculation period based on the remaining payments, and that the comparison year is not recalculated. The right to use assets is valued at an amount equal to the leasing debt. Contracts shorter than 12 months have not been taken into account. As of January 1, 2019, the effect of transition to accounting in accordance with IFRS 16 means an increased balance sheet total of 14,416 SEK t.

NOTE 2 SIGNIFICANT RISKS AND UNCERTAINTIES

The Group is exposed to various financial risks. The business is impacted by many factors that could affect the Group's result and financial position. It is BONESUPPORT's strategy to continuously identify and manage risks. Financial risk management is described in Note 2, Annual Report 2018.

NOTE 3 TRANSACTIONS WITH RELATED PARTIES

The financial reports include costs related to the following transactions between BONESUPPORT and related parties.

SEK t			Jan - Jun
Related party	Service	2019	2018
Route 2 Advisors Ltd (Simon Cartmell, board member)	Consultancy	289	0

NOTE 4

NUMBER OF SHARES AND POTENTIAL SHARES

Ordinary shares	Number of shares	Potential shares
31 December 2018	51,795,917	2,951,250
30 June 2019	51,795,917	2,951,250
Series C shares
31 December 2018	0
Issued shares	505,000
30 June 2019	505,000

NOTE 5 PLEDGED SECURITIES AND CONTINGENT LIABILITIES

The US subsidiary BONESUPPORT Inc. has provided a guarantee of 56 USD t (520 SEK t) for rented premises. The parent company, BONESUPPORT HOLDING AB, guaranteed a corresponding amount.

The Group has pledged collateral for capital-invested direct pensions amounting to 979 SEK t (558).

NOTE 6 FINANCIAL ASSETS AND LIABILITIES

Fair values of current financial assets and liabilities are assessed to agree with values accounted for.

NOT 7 SEGMENT INFORMATION

The Group manages and monitors operations in the North America (NA) and Europe & Rest of World (EUROW) segments. Other comprise eliminations and other items, mainly costs for Group functions. Contribution per segment is calculated as net sales minus directly attributable operating costs. Such costs are related to cost of sales, selling expenses and research & development expenses. Assets and liabilities are not reported by segment, these are managed and monitored on Group level by mangement and the board of directors.

Net sales in Sweden (part of EUROW) was 2.6 SEK million (1.4) in Q2. US, Germany and UK were the only markets that delivered more than 10% of consolidated net sales.

SEK t		Apr - Jun 2019			Apr - Jun 2018
Profit and loss items	NA	EUROW	Other	Totalt	NA	EUROW	Other	Total
Net sales	14,776	22,544	0	37,320	13,993	14,191	0	28,184
Cost of sales	-1,347	-3,700	0	-5,047	-1,544	-2,004	0	-3,548
Gross profit	13,429	18,844	0	32,273	12,449	12,187	0	24,636
Operative costs	-36,838	-15,088	0	-51,926	-18,386	-13,212	0	-31,598
Contribution	-23,409	3,756	0	-19,653	-5,937	-1,025	0	-6,962
Other operating items	0	0	-28,167	-28,167	0	0	-30,858	-30,858
Operating result	-23,409	3,756	-28,167	-47,820	-5,937	-1,025	-30,858	-37,820
Net financial items	0	0	-53	-53	0	0	-5	-5
Result after financial items	-23,409	3,756	-28,220	-47,873	-5,937	-1,025	-30,863	-37,825

SEK t		Apr - Jun 2019			Apr - Jun 2018
Net sales per product group	NA	EUROW	Total	NA	EUROW	Total
CERAMENT BVF	14,776	3,735	18,511	13,993	2,695	16,688
CERAMENT drug eluting 1	0	18,809	18,809	0	11,496	11,496
TOTAL	14,776	22,544	37,320	13,993	14,191	28,184

SEK t		Jan - Jun 2019			Jan - Jun 2018
Profit and loss items	NA	EUROW	Other	Totalt	NA	EUROW	Other	Total
Net sales	26,295	43,853	0	70,148	29,925	29,344	0	59,269
Cost of sales	-2,588	-7,090	0	-9,678	-4,007	-5,103	0	-9,110
Gross profit	23,707	36,763	0	60,470	25,918	24,241	0	50,159
Operative costs	-62,860	-32,070	0	-94,930	-33,819	-26,092	0	-59,911
Contribution	-39,153	4,693	0	-34,460	-7,901	-1,851	0	-9,752
Other operating items	0	0	-52,355	-52,355	0	0	-61,198	-61,198
Operating result	-39,153	4,693	-52,355	-86,815	-7,901	-1,851	-61,198	-70,950
Net financial items	0	0	-97	-97	0	0	-502	-502
Result after financial items	-39,153	4,693	-52,452	-86,912	-7,901	-1,851	-61,700	-71,452

SEK t		Jan - Jun 2019			Jan - Jun 2018
Net sales per product group	NA	EUROW	Total	NA	EUROW	Total
CERAMENT BVF	26,295	6,956	33,251	29,925	6,065	35,990
CERAMENT drug eluting 1	0	36,897	36,897	0	23,279	23,279
TOTAL	26,295	43,853	70,148	29,925	29,344	59,269

1 CERAMENT drug eluting includes CERAMENT G and CERAMENT V

NOTE 8 WARRANTS AND EMPLOYEE STOCK OPTION PROGRAMS

At period end, there are three different employee stock option programs, two performance share programs and three warrant programs.

Employee stock option programs

Of the three employee stock option programs, two run over ten years and expire 2022 and 2025 and one program runs over eight years and expires 2024. For the employee stock option programs, each stock option gives the holder the right to acquire 0.2 ordinary share of the company when exercising the option. The employee stock options are vested according to a schedule in each program. A condition for allotment of options is employment or a contractual relationship with the company at each vesting date. Of the allocated 25.7 million options at January 1, 2019, 20.4 million options were vested before 1 January 2019 and 0.4 million options were vested during the first six months of the year.

Performance share programs

There is one program for employees and one program for three Directors. Both programs run over four years until 2021. Each savings share gives the opportunity to be allotted a maximum of 2,3 or 4 performance shares without payment depending on share price development and the Company's development in terms of sales and EBITDA 2018-2021. The performance shares were issued in the form of class C-shares with a subscription price and quota value of 0.625 SEK per share.

Employee stock options and performance shares are valued at fair value at the date of allocation.The total cost is distributed over the vesting period. The cost is accounted for as personnel cost and is credited to equity. The social security cost is revalued at fair value. When the options are exercised, the company issues new shares. Payments received on behalf of the shares issued are credited to equity.

Warrant programs

There are three warrant programs where the latest program was executed in 2018. Warrants in the first two programs give the holder the right to acquire 0.2 ordinary shares and the third program 1 share.

Further information on these programs is presented in Notes 12, 23 and 25 in the Annual Report 2018.

Employee stock option programs	No of options 1	Equal to no of shares
Balance January 1, 2019	6,180,190	1,236,038	9.92
Balance June 30, 2019	6,180,190	1,236,038	9.92
Peformance share programs	No of shares	Equal to no of shares	WAEP 2
Balance January 1, 2019	505,000	505,000	0.00
Balance June 30, 2019	505,000	505,000	0.00
Warrant programs	No of options	Equalt to no of shares	WAEP 2
Balance January 1, 2019	4,606,664	1,210,210	20.87
Balance June 30, 2019	4,606,664	1,210,210	20.87

1 Not allocated options amounted to 3 824 338

2 Weighted Average Exercise Price per share (SEK)

DEFINITIONS

Allograft. The transplant of an organ or tissue from one individual to another of the same species, with a different genotype.

Autograft. A bone graft harvested from the patient's own skeleton, usually from the iliac crests.

Bisphosphonate. A type of drugs that inhibits resorption of bone tissue.

BMA. Bone marrow aspirate.

BMP. Bone Morphogenic Protein.

Bone graft substitute. Synthetic material used as bone grafts instead of biological bone tissue.

C-shares. Performance shares within the Performance share programs issued in the form of C-shares

CERAMENT BVF. CERAMENT BONE VOID FILLER

CERAMENT G. CERAMENT G, CERAMENT with gentamicin

CERAMENT V. CERAMENT V, CERAMENT with vancomycin

CERTiFy. A prospective, randomized, controlled clinical trial with 137 patients in 20 leading trauma centers in Germany, aimed to compare treatment of CERAMENT BVF with autologous bone graft (autograft) transplantation

CF. Cash Flow.

Clinical study. Study on humans of e.g. a medical device or a pharmaceutical product.

DBM. Demineralized bone matrix. A bone substitute biomaterial.

DR. Doctor.

FDA. US Food and Drug Administration.

FORTIFY. A prospective, randomized, multicentercontrolled test of CERAMENT G that evaluates the ability of CERAMENT G to improve treatment outcome of patients with open shin fractures

Hematoma. A localized collection of blood outside the blood vessels.

HEOR. Health Economics and Outcomes Research. Scientific discipline that quantifies the economic and clinical outcomes of medical technology.

Histology. The study of the microscopic anatomy (microanatomy) of cells and tissues of plants and animals.

IDE. Investigational Device Emption. Exemption from regulatory approval to conduct clinical studies on a medical device.

Iliac crest. The upper wing of the hip bone (ilium).

LTM. Latest twelve months.

Micro-CT. Micro Tomography, uses X-ray scanning to recreate a 3D-model without destroying the object.

Osteoinduction. A bone graft material or a growth factor can stimulate the differentiation of osteoblasts, forming new bone tissues.

Osteomyelitis. A bacterial infection affecting bones.

PMA. Premarketing Approval is the FDA process to review Class III medical devices.

SOLARIO is a randomized unblinded European multicenter study with the aim of investigating if synthetic bone graft substitutes containing antibiotics can lead to shorter treatment times compared to systemic antibiotics.

Toxicity. The degree to which substance (a toxin or poison) can harm humans or animals.

12M. 12 Months (shows economic turn out during the latest 12 months before period end).

DEFINITIONS - ALTERNATIVE PERFORMANCE MEASURES

BONESUPPORT uses Alternative Performance Measures (APM) to enhance understandability of the information in the financial reports, both for external analysis, comparison and internal performance assessment.

Alternative Performance Measures are key figures not defined in financial reports prepared according to IFRS. The following key figures are used:

Sales growth

The difference in net sales between two periods in relation to net sales for the earlier period. Shows the operations sales performance.

Gross profit

Net sales minus cost of sales. Shows the profit to cover other costs and profit margin.

Gross margin

Net sales minus cost of sales, in relation to net sales. Shows the margin to cover costs and profit.

Contribution

Net sales minus cost of sales, minus directly attributable selling expenses and research & development expenses. A measure of result showing the performance of segments and their contribution to cover other Group costs.

Interest bearing debt

Borrowings from banks, financial institutions and lease liabilities, short and long term. Shows the debt level of the Group and forms the base for interest expenses.

Net debt

Interest bearing debt minus cash and cash equivalents. Shows the Group's net debt and is used to measure the leverage level of the Group and future funding needs.

	Apr - Jun		Jan - Jun		Jan - Dec
	2019	2018	2019	2018	2018
Net sales, SEK million	37.3	28.2	70.1	59.3	96.6
Sales growth, %	32.4	-24.0	18.4	-14.8	-25.3
Cost of sales, SEK million	-5.0	-3.5	-9.7	-9.1	-15.2
Gross profit, SEK million	32.3	24.6	60.5	50.2	81.5
Gross margin, %	86.5	87.4	86.2	84.6	84.3
Directly attributable selling expenses, SEK million	-45.5	-25.3	-81.9	-48.9	-112.6
Selling expenses, not directly attributable, SEK million	-7.2	-6.5	-11.6	-10.6	-20.7
Selling expenses, SEK million	-52.7	-31.8	-93.5	-59.5	-133.3
Directly attributable research & development expenses, SEK million	-6.4	-6.3	-13.0	-11.0	-23.6
Research & development expenses, not directly attributable, SEK million	-9.6	-10.9	-19.9	-21.0	-42.5
Research & development expenses, SEK million	-16.0	-17.2	-32.9	-32.0	-66.1
Contribution, SEK million	-19.6	-7.0	-34.5	-9.7	-54.7

	30 Jun		31 Dec
	2019	2018	2018
Non-current borrowings, SEK million	6.7	0.0	0.0
Current borrowings, SEK million	5.2	0.0	0.0
Interest bearing debt, SEK million	11.9	0.0	0.0
Cash and cash equivalents, SEK million	173.1	368.4	261.5
Net debt, SEK million	-161.2	-368.4	-261.5

ABOUT BONESUPPORT

BONESUPPORT HOLDING AB (publ), reg id. 556802-2171, with registered office in Lund, is the parent company of BONESUPPORT AB. BONESUPPORT is a fast growing orthobiologics company in the commercial phase that targets the major orthopedic markets in the US and Europe. BONESUPPORT was founded in 1999 and has its registered office in Lund with wholly owned subsidiaries in the US, UK, Germany, Sweden, Denmark, Switzerland, Spain and the Netherlands and a branch office in France.

BONESUPPORT is active in orthobiological products, developing and commercializing innovative injectable bioceramic bone graft substitutes which remodel to host bone and have the capability of eluting drugs directly into the bone void. BONESUPPORT's marketed synthetic bone graft substitutes are CERAMENT BVF, CERAMENT G and CERAMENT V, all of which are based on the novel and proprietary CERAMENT technology platform. To date, all BONESUPPORT's marketed products have undergone the medical device approval process in the markets in which they are currently available. The company is not aware of any other commercially available products with the same properties as CERAMENT G and CERAMENT V, i.e. an injectable antibiotic-eluting bone graft substitute with proven rapid remodeling into host bone.

BONESUPPORT's products represent an innovative technology backed by an intellectual property portfolio of approximately 100 registered and/or pending patents.

BONESUPPORT has 13 years of documented experience of safety and efficacy and, based on sales data, estimates that more than 35,000 treatments have been performed with its products worldwide. There is a great market potential in trauma, chronic osteomyelitis, revision arthroplasty, bone tumors and diabetic foot infections. The company's research focuses on continuing to further develop and refine the current technology and extend it to further indications by the release of other drugs.

CERAMENT BVF is currently commercially available in several markets in Europe, the US, India, Malaysia, Oman and Singapore. CERAMENT G and CERAMENT V are available in the same European markets, as well as in Malaysia and Oman. CERAMENT G is also available in India.

BONESUPPORT was founded in 1999 by Prof. Lars Lidgren, an internationally respected scientist who has been the President of various musculoskeletal societies. BONESUPPORT's mission is to bring people with bone and joint diseases back to an active life. The company is based in Lund, Sweden.

PRESENTATION OF INTERIM REPORT APRIL – JUNE 2019

The company invites investors, analysts and media to a web conference (in English) on July 25 at 13.00 CEST, where CEO Emil Billbäck and CFO Håkan Johansson will present and comment on the report and also answer questions. The report will be available on BONESUPPORT's website from 08.00 CEST on the same day and the presentation from the webcast will be uploaded during the day on July 25. For further details regarding participation, see the investor pages at www.bonesupport.com

FORWARD LOOKING STATEMENTS

The report contains certain forward looking information that reflects BONESUPPORT's current views of future events and financial and operational performance. Words such as "intends", "anticipates", "expects", "can", "plans", "estimates" and similar expressions regarding indications or forecasts of future developments or trends, and which are not based on historical facts, constitute forward looking information. Forward looking information is inherently associated with both known and unknown risks and uncertainties because it is dependent on future events

CONTACT INFORMATION

Emil Billbäck, CEO T: +46 46 286 53 70

Håkan Johansson, CFO T: +46 46 286 53 70

E: ir@bonesupport.com www.bonesupport.com and circumstances. Forward- looking information is not a guarantee of future results or developments and actual results may differ materially from results referred to in forward looking information. Forward looking information in the report is only applicable on the date of issue of the report. BONESUPPORT does not commit to publishing updates or revision of any forward- looking statements as a result of new information, future events or similar circumstances other than those required by applicable legislation.