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Bonesupport Holding
Earnings Release • May 2, 2019
3016_10-q_2019-05-02_fa30106a-2beb-43e1-9a7d-e7d455ba8f2a.pdf
Earnings Release
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JANUARY – MARCH 2019
STRONG GROWTH FOR CERAMENT G AND CERAMENT V Q1
"The strategic changes initiated in 2018 begin to show results. Our antibiotic-eluting products grew by 54 percent in the quarter and we see a significant improvement in business performance. We remain determined to execute our strategy for growth and market penetration." Emil Billbäck, CEO
JANUARY – MARCH 2019 SIGNIFICANT EVENTS
- Net sales amounted to SEK 32.8 million (31.1), an increase of 6 percent compared with the same period previous year. Europe and the rest of the world (EUROW) reports continued strong growth of 41 percent compared with the corresponding period last year. Sales in the US have decreased by 28 percent compared with the same period previous year, but at the same time showed a sequential growth from SEK 4.2 million in the last quarter of 2018 to SEK 11.5 million in the current quarter.
- CERAMENT G and CERAMENT V grew by 54 percent compared to Q1 2018.
- Gross margin of 85.9 percent (82.1).
- Operating profit totaled SEK -39.0 million (-33.1).
-
Earnings per share before and after dilution , was -0.75 (-0.67).
-
Annelie Aava Vikner joined the company as Executive Vice President Global Marketing & Communications on March 1.
- In March, BONIFY™, a demineralized bone matrix (DBM), was launched in the US. The launch is a result of the strategic partnership with MTF Biologics.
EVENTS AFTER PERIOD END
• In April it was announced that Vikram Johri is leaving BONESUPPORT and his role as GM & EVP Commercial Operations EUROW.
| KEY FIGURES Jan-Mar |
||
|---|---|---|
| 2019 | 2018 | |
| Net Sales, SEKm | 32,8 | 31,1 |
| Sales Growth, % 1 | 5,6 | -4,2 |
| Gross Profit, SEKm | 28,2 | 25,5 |
| Gross Margin, % 1 | 85,9 | 82,1 |
| Operating loss, MSEK | -39,0 | -33,1 |
| Loss for the period, MSEK | -39,1 | -33,8 |
| Equity at period end, MSEK | 240,0 | 416,8 |
| Net Debt, MSEK | -206,0 | -397,2 |
| Operating cash flow, MSEK 1 | -41,8 | -36,3 |
| Cash at period end, MSEK | 219,1 | 397,2 |
| Earnings per share, SEK | -0,75 | -0,67 |
1 APM: Alternative performance measures, see definitions on page 17.
MESSAGE FROM THE CEO
STRONG GROWTH IN EUROPE AND CONTINUED PROGRESS IN THE US
The first quarter of 2019 was my fourth quarter as CEO of BONESUPPORT. Much has happened during this time and the major strategic changes initiated in 2018 are now starting to show results.
Sales in Europe and the rest of the world showed strong growth of 41 percent, and it is particularly our CERAMENT G and V products that drive growth. Sales of CERAMENT G and V grew with 54 percent compared to Q1 last year. This even though the new sales representatives we have employed are not yet in full productivity.
In terms of earnings, the first quarter meant a significant improvement over the fourth quarter 2018. We continue to invest focused in our Sales and Marketing organization as well as in Research and Development. At the same time, we have rationalized the administrative costs. The program for cost control that was initiated at the end of 2018 continues and we are progressively becoming more focused in our investments.
US SHOWING STRONG SEQUENTIAL GROWTH
Sales in the US grew sharply compared to the previous quarter. The sales were generated by a balanced mix of established and new customers. Our year-on-year sales are of course still affected by the terminated distribution agreement with Zimmer Biomet, but the transition to an independent distribution network is progressing rapidly and according to plan.
During the quarter, another GPO contract (group purchasing organization) was signed in the USA. This time with Ascension, which carries out care in 21 states and has 151 affiliated hospitals. At the end of 2018, we signed a GPO agreement with HCA (Health Care Administration Americas) which has 1,200 affiliated healthcare facilities. Additional GPO contracts will be an important part of driving growth in the US.
In March, we presented a new addition to our product range in the US. BONIFY, available through the strategic partnership with MTF Biologics, is a unique bone graft consisting of 100 percent demineralized bone matrix (DBM). This gives BONIFY osteoinductive properties, meaning properties that stimulate the remodeling of new bone. In this way, BONIFY complements our technology platform CERAMENT, which is osteoconductive, meaning that it functions as a "scaffolding" in support of the creation of new bone.
UNIQUE CLINICAL EVIDENCE VALIDATES THE UNIQUE PROPERTIES OF CERAMENT
BONESUPPORT'S commercial success is largely based on CERAMENT's strong scientific evidence. At the end of 2018, the results of the large CERTiFy study were published, which show that CERAMENT BVF is equivalent to autograft. During Q1, two more unique studies have been published confirming CERAMENT's ability to remodel into new bone. The most recent published study is the first of its kind on humans, which through radiological data and histological biopsy data, validates CERAMENT remodeling into new bone. I expect these unique and compelling clinical data to contribute to the company's continued success.
In summary, the first quarter of 2019 gives a good view of the potential of our continued journey. In the past year, we have established a stronger strategic focus and the business has developed rapidly in the right direction.
Emil Billbäck, CEO
New commercial organization in the US with 21 employees and 40 contracted distributors
NORTH AMERICA (NA)
The US market is the world's largest for synthetic bone graft products and thus the company's most important market. 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 employees and 40 contracted distributors.
JANUARY – MARCH
Sales
Sales for the period showed a decrease of 28 percent compared with the corresponding period last year, but at the same time displayed a significant increase to SEK 11.5 million compared to SEK 4.2 million in the last quarter of 2018. Until May 20, Zimmer Biomet may sell any remaining stock of CERAMENT BVF. BONESUPPORT's own organization in the US is working to accelerate market penetration and conclude comprehensive agreements that give contracted hospitals access to CERAMENT. During the quarter, an important agreement was concluded with Ascension, which gives access to additional 151 hospitals.
Contribution
The contribution from the segment was SEK -15.7 million (-2.0). The increased loss relates to the lower sales and the ongoing commercial investments. Sales and market expenses increased to SEK 19.4 million (10.1) during the first quarter due to expansion of the organization. R&D costs increased slightly 6.6 MSEK (5.1), mainly related to the FORTIFY study.
| Jan - Mar | ||
|---|---|---|
| SEKm | 2019 | 2018 |
| Net Sales | 11.5 | 15.9 |
| Gross profit | 10.3 | 13.5 |
| Contribution | -15.7 | -2.0 |
Net Sales per quarter, SEKm
20
Sales of CERAMENT G and CERAMENT V increased by 54 percent in the quarter
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. During 2018, the sales organization was gradually expanded and amounted to 25 positions at the end of the period. The focus is on utilizing the strength of the CERTiFy study to gain market share from autograft. In the other eight European markets and in other parts of the world (ROW), the company cooperates with specialist distributors.
JANUARY - MARCH
Sales
Sales for the segment increased by 41 percent compared to the corresponding period last year and amounted to SEK 21.3 million. Sales in direct key markets accounted for 87 percent of the segment's sales. Sales of the antibiotic-eluting products CERAMENT G and CERAMENT V together increased by 54 percent compared to the first quarter last year.
Contribution
The contribution from the segment was SEK 0.9 million (-0.8). Sales and Marketing costs increased compared with the corresponding period last year and amounted to SEK 17.0 million (13.0), mainly as an effect of new recruits made to sales organizations in our key markets.
| Jan - Mar | ||
|---|---|---|
| SEKm | 2019 | 2018 |
| Net Sales | 21.3 | 15.2 |
| Gross profit | 17.9 | 12.1 |
| Contribution | 0.9 | -0.8 |
Net Sales per quarter, SEKm
CLINICAL STUDIES
The most significant clinical studies are described below.
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 arisen. 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 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 patient-reported 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 at the end of 2021.
A new study is 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 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
Net Sales
Net sales amounted to SEK 32.8 million (31.1), an increase of 6 percent compared with the same period previous year. The EUROW segment increased by 41 percent to SEK 21.3 million (15.2). Sales growth in Europe was driven by wider use of CERAMENT G and V, which increased by 54 percent. Sales in the US decreased by 28 percent to SEK 11.5 million due to 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 2.3 (-1.3).
Cost of goods sold
Cost of goods sold amounted to SEK 4.6 million (5.6), which resulted in a gross margin of 85.9 percent (82.1), as effect of a favorable product mix.
Selling expenses
Selling expenses amounted to SEK 40.8 million (27.6), an increase of 48 percent. Staff costs totaled to SEK 22.7 million (15.4). Both segments increased costs, in NA by 92 percent to SEK 19.4 million (10.1), driven by the expansion of the sales organization and increased marketing activities and in EUROW by 18 percent to SEK 17.0 million (13.0), due to the ongoing expansion of the sales organization. Other selling expenses, which were not allocated to the segments, decreased to SEK 4.4 million (4.5).
Research and Development
Research and development costs amounted to SEK 16.9 million (14.8), an increase of 14 percent. Staff costs corresponded to SEK 7.2 million (6.6). Other expenses totaled SEK 9.7 million (9.7). The NA segment increased by 12 percent to SEK 6.6 million (5.9), mainly due to the increased costs for the FORTIFY study.
Administrative expenses
Administrative expenses amounted to SEK 10.4 million (16.5), a decrease of 37 percent, of which personnel costs totaled to SEK 4.2 million (7.7), where the decrease was largely attributable to expenses for the outgoing CEO for the same period last year. Other expenses amounted to SEK 6.2 million (8.8), a decrease compared with the corresponding quarter of 2018, as an effect of implemented cost control programs.
Other operating income and expenses
Other operating income and expenses consisted mainly of exchange gains and losses on operating assets and liabilities. Other operating income amounted to SEK 2.2 million (2.9) and other operating expenses amounted to SEK -1.3 million (-2.6) for the quarter.
Operating result
Operating profit amounted to SEK -39.0 million (-33.1), where the increased loss is mainly explained by higher operating costs from implemented investments in the expansion of sales organization, with more employees in the sales organizations in the US and Europe, and a lower turnover in the US followed by the conversion in distribution structure.
Net financial items
Net financial items amounted to SEK 0.0 million (-0.5). No interest expense was charged to net financial items since the Group's loans were repaid in the first quarter of 2018. The corresponding period last year was charged with interest expenses of SEK 1.1 million.
Loss for the period
For the reasons explained above, the loss for the first quarter amounted to SEK -39.1 million (-33.8), which corresponds to earnings per share of SEK -0.75 (-0.67).
FINANCIAL POSITION AND CASH FLOW
| Financial position | 31 Mar | ||
|---|---|---|---|
| SEKm | 2019 | 2018 | |
| Cash and cash equivalents | 219.1 | 397.2 | |
| Interest-bearing debt | 13.1 | 0 | |
| Net debt | -206.0 | -397.2 | |
| Equity | 240.0 | 416.8 |
| Cash flow | 31 Mar | |
|---|---|---|
| SEKm | 2019 | 2018 |
| Operations | -41.8 | -36.3 |
| Investing activities | -0.6 | -0.1 |
| Financing activities | -1.3 | -100.1 |
Cash and cash equivalents at the end of the period amounted to SEK 219.1 million, a decrease of SEK 42.2 million since the beginning of the year. The change mainly consisted of cash from operating activities amounting to SEK -41.8 million (-36.1), mainly attributable to operating loss of SEK -39.0 million (-33.1).
OTHER DISCLOSURES
PARENT COMPANY
The parent company BONESUPPORT HOLDING AB (publ) is a holding company. The Parent Company generated SEK 10.3 million (8.6) in sales of internal services to subsidiaries during the quarter. The loss in the quarter was SEK -4.0 million (-3.9). No investments were made during the quarter.
EMPLOYEES
The Group had 72 (64) employees (full-time equivalent) during the period, of which 20 (18) worked in research & development.
SIGNIFICANT EVENTS DURING Q1
Annelie Aava Vikner took up the position of Executive Vice President Global Marketing & Communications on March 1.
In March, BONIFY ™, a demineralized bone matrix (DBM), was launched. BONIFY is a result of the agreement concluded with MTF Biologics in the previous year.
SIGNIFICANT EVENTS AFTER PERIOD END
In April it was announced that Vikram Johri is leaving BONESUPPORT and his role as GM & EVP Commercial Operations EUROW
SHARES AND RELATED PROGRAMS
The company has two class of shares. The quota value of the shares is SEK 0.625 per share. As of March 31, 2019, the total number of ordinary shares amounted to 51,795,917 divided into 1,774 shareholders. The major shareholders are shown below.
Shareholders 31 of March 2019
| HealthCap V LP . | 12.7% |
|---|---|
| Stiftelsen Industrifonden. . | 9.2% |
| Lundbeckfonden Invest A/S. . | 9.2% |
| Robur AB. . | 8.7% |
| Tredje AP-fonden. . | 7.8% |
| Tellacq AB. . | 5.7% |
| Carl Westin Ltd. . | 5.2% |
| Other shareholders. . | 41.4% |
BONESUPPORT now has three employee stock option programs, two share saving programs and three warrant programs. Information on these can be found in Note 8. FINANCIAL CALENDAR
AGM: May 14, 2019
Interim report January – June 2019: July 25, 2019 Interim report January – September 2019: November 7, 2019
NOMINATION COMMITTEE
The Nomination Committee is selected based on the principles adopted at the Annual General Meeting on May 22, 2018. These principles are described on the BONESUPPORT website. The Committee's main task is to present proposals regarding the composition and remuneration of the Board of Directors, which will be held on 14 May 2019 in Lund. The members of the nomination committee are:
- Jacob Gunterberg, Chairman of the committee, representing HealthCap V LP
- Håkan Björklund, Chairman of the board
- Johan Kördel, representing Lundbeckfonden Invest A/S
- Jonas Jendi, representing Stiftelsen Industrifonden
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.
ASSURANCE
The CEO confirm that this full year report provides a true and fair view of the development of the group's and parent company 's operations, position and performance, as well as describing material risks and uncertainties faced by the companies that form part of the group.
Emil Billbäck, CEO
CONDENSED CONSOLIDATED INCOME STATEMENT
| SEK t | Jan - Mar | |||
|---|---|---|---|---|
| Note | 2019 | 2018 | Jan - Dec 2018 |
|
| Net sales | 7 | 32,828 | 31,085 | 96,623 |
| Cost of sales | -4,631 | -5,562 | -15,157 | |
| Gross profit | 28,197 | 25,523 | 81,466 | |
| Selling expenses | -40,833 | -27,645 | -133,311 | |
| Research and development expenses | -16,915 | -14,838 | -66,064 | |
| Administrative expenses | 3, 8 | -10,358 | -16,531 | -58,345 |
| Other operating income | 2,176 | 2,931 | 8,530 | |
| Other operating expenses | -1,262 | -2,570 | -6,680 | |
| Operating loss | 7 | -38,995 | -33,130 | -174,404 |
| Net financial items | -44 | -497 | -465 | |
| Loss before income tax | 7 | -39,039 | -33,627 | -174,869 |
| Income tax | -42 | -151 | -1,536 | |
| Loss for the period | -39,081 | -33,778 | -176,405 |
Loss for the period is attributable to equity holders of the parent
CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
| Jan - Mar | Jan - Dec | ||
|---|---|---|---|
| SEK t | 2019 | 2018 | 2018 |
| Loss for the period | -39,081 -33,778 |
-176,405 | |
| Other comprehensive income | |||
| Items to be reclassified to profit or loss in subsequent periods | |||
| Exchange differences | 95 | 114 | 129 |
| Total comprehensive income for the period | -38,986 | -33,664 | -176,276 |
EARNINGS PER SHARE
| Jan - Mar | Jan - Dec | ||
|---|---|---|---|
| SEK | 2019 | 2018 | 2018 |
| Equityholders of the parent | |||
| Earnings per share before dilution | -0.75 | -0.67 | -3.46 |
| Earnings per share after dilution | -0.75 | -0.67 | -3.46 |
| Loss for the period, SEK t | -39,081 | -33,778 | -176,405 |
| Average number of shares, thousands | 51,796 | 50,563 | 50,971 |
CONDENSED CONSOLIDATED BALANCE SHEET
| 31 Mar | 31 Dec | |||
|---|---|---|---|---|
| SEK t | Note | 2019 | 2018 | 2018 |
| ASSETS | ||||
| Intangible assets | 5,616 | 5,155 | 5,511 | |
| Tangible assets | 1 | 17,138 | 3,014 | 3,885 |
| Other non-current assets | 338 | 218 | 375 | |
| Total non-current assets | 23,092 | 8,387 | 9,771 | |
| Inventories | 23,785 | 21,988 | 23,681 | |
| Trade receivables | 6 | 27,427 | 26,153 | 18,683 |
| Other operating receivables | 6 | 9,988 | 9,010 | 12,538 |
| Cash and cash equivalents | 6 | 219,141 | 397,179 | 261,468 |
| Total current assets | 280,341 | 454,330 | 316,370 | |
| TOTAL ASSETS | 303,433 | 462,717 | 326,141 | |
| EQUITY AND LIABILITIES | ||||
| Equity attributable to equity holders of the parent | 4 | 239,987 | 416,759 | 278,531 |
| Leasing debt | 1 | 7,960 | 0 | 0 |
| Provisions | 289 | 173 | 289 | |
| Total non-current liabilities | 8,249 | 173 | 289 | |
| Leasing debt | 1, 6 | 5,178 | 0 | 0 |
| Trade payables | 6 | 12,245 | 7,956 | 12,472 |
| Other operating liabilities | 6 | 37,774 | 37,829 | 34,849 |
| Total current liabilities | 55,197 | 45,785 | 47,321 | |
| TOTAL EQUITY AND LIABILITIES | 303,433 | 462,717 | 326,141 |
CONDOLIDATED STATEMENT OF CHANGES IN EQUITY
| Other paid in | Accumulated | ||||
|---|---|---|---|---|---|
| SEK t | Share capital | capital | Reserves | losses | Total equity |
| As at 1 January 2018 | 31,424 | 1,189,015 | -304 | -769,349 | 450,786 |
| Loss January - March 2018 | 114 | -33,778 | -33,664 | ||
| New share issue | 334 | 334 | |||
| Transaction costs, new share issue | -1,860 | -1,860 | |||
| Share-based payment transactions | 1,163 | 1,163 | |||
| As at 31 March 2018 | 31,758 | 1,187,155 | -190 | -801,964 | 416,759 |
| Loss April - December 2018 | 15 | -142,627 | -142,612 | ||
| New share issue | 615 | 615 | |||
| Allotted warrants | 740 | 740 | |||
| Share-based payment transactions | 3,029 | 3,029 | |||
| As at 1 January 2019 | 32,373 | 1,187,895 | -175 | -941,562 | 278,531 |
| Loss January - March 2019 | 95 | -39,081 | -38,986 | ||
| Share-based payment transactions | 442 | 442 | |||
| As at 31 March 2019 | 32,373 | 1,187,895 | -80 | -980,201 | 239,987 |
Reserves comprise exchange differences on translation of foreign operations.
CONSOLIDATED STATEMENT OF CASH FLOWS
| jan - mar | |||
|---|---|---|---|
| SEK t | 2019 | 2018 | 2018 |
| Operating loss | -38,995 | -33,130 | -174,404 |
| Non-cash adjustments: | |||
| -Share-based payments | 442 | 1,163 | 4,192 |
| -Other | -705 | -86 | -962 |
| Interests received | 24 | 0 | 46 |
| Interests paid | -68 | -854 | -868 |
| Other paid financial costs | 0 | 558 | 558 |
| Income tax paid | -102 | -15 | -2,151 |
| Net cash flows from operating activities before changes in working capital | -39,404 | -32,364 | -173,589 |
| Changes in working capital | -2,375 | -3,914 | 1,964 |
| Net cash flows from operating activities | -41,779 | -36,278 | -171,625 |
| Investments in intangible assets | -244 | -103 | -997 |
| Investments in tangible assets | -385 | -78 | -1,609 |
| Investments/disposals of financial assets | 38 | 0 | -113 |
| Net cash flows from investing activities | -591 | -181 | -2,719 |
| New share issue | 0 | 334 | 949 |
| Transaction costs, new share issue | 0 | -1,860 | -1,860 |
| Allotted warrants | 0 | 0 | 740 |
| Repayments of borrowings | -1,278 | -98,620 | -98,620 |
| Net cash flows from financing activities | -1,278 | -100,146 | -98,791 |
| Net cash flow | -43,648 | -136,605 | -273,135 |
| Cash and cash equivalents as at beginning of period | 261,468 | 533,367 | 533,367 |
| Net exchange difference | 1,321 | 380 | 1,236 |
| Cash and cash equivalents as at end of period | 219,141 | 397,142 | 261,468 |
CONDENSED PARENT COMPANY INCOME STATEMENT
| Jan - Mar | Jan - Dec | ||
|---|---|---|---|
| SEK t | 2019 | 2018 | 2018 |
| Net sales | 10,312 | 8,650 | 51,578 |
| 0 | |||
| Administrative expenses | -13,888 | -12,544 | -66,756 |
| Other income | 105 | 0 | 528 |
| Other expenses | -338 | -435 | -1,033 |
| Operating loss | -3,809 | -4,329 | -15,683 |
| Net financial items | -216 | 450 | 2,105 |
| Loss after financial items | -4,025 | -3,879 | -13,578 |
| Income tax | 0 | 0 | 0 |
| Loss for the period | -4,025 | -3,879 | -13,578 |
Parent company loss for the period equals comprehensive income.
CONDENSED PARENT COMPANY BALANCE SHEET
| 31 Mar | ||||||
|---|---|---|---|---|---|---|
| SEK t | Note | 2019 | 2018 | 2018 | ||
| ASSETS | ||||||
| Non-current financial assets | 704,652 | 503,912 | 704,652 | |||
| Other receivables | 6 | 29,682 | 54,273 | 153 | ||
| Prepaid expenses | 6 | 423 | 331 | 728 | ||
| Cash | 6 | 190,159 | 371,102 | 243,247 | ||
| TOTAL ASSETS | 924,916 | 929,618 | 948,780 | |||
| EQUITY AND LIABILITIES | ||||||
| Equity | ||||||
| Restricted equity | 4 | 32,372 | 31,757 | 32,372 | ||
| Unrestricted equity | 870,595 | 883,578 | 874,620 | |||
| Total equity | 902,967 | 915,335 | 906,992 | |||
| Current liabilities | 6 | 21,949 | 14,283 | 41,788 | ||
| TOTAL EQUITY AND LIABILITIES | 924,916 | 929,618 | 948,780 |
CONDENSED CONSOLIDATED INCOME STATEMENT PER QUARTER
| 2019 | 2018 | 2017 | ||||||
|---|---|---|---|---|---|---|---|---|
| SEK t | Q1 | Q4 | Corr Q3 1 | Q2 | Q1 | Q4 | Q3 | Q2 |
| Net sales | 32,828 | 23,108 | 14,246 | 28,184 | 31,085 | 27,039 | 32,677 | 37,131 |
| Cost of sales | -4,631 | -3,460 | -2,587 | -3,548 | -5,562 | -4,513 | -3,989 | -4,748 |
| Gross profit | 28,197 | 19,648 | 11,659 | 24,636 | 25,523 | 22,526 | 28,688 | 32,383 |
| Gross margin % | 85.9% | 85.0% | 81.8% | 87.4% | 82.1% | 83.3% | 87.8% | 87.2% |
| Selling expenses | -40,833 | -38,760 | -35,086 | -31,820 | -27,645 | -21,488 | -24,368 | -22,231 |
| Research and development expenses | -16,915 | -17,607 | -16,426 | -17,193 | -14,838 | -19,748 | -12,834 | -18,686 |
| Administrative expenses | -10,358 | -9,343 | -17,531 | -14,940 | -16,531 | -15,479 | -11,149 | -9,160 |
| Other operating income | 2,176 | 1,251 | 1,818 | 2,530 | 2,931 | 2,112 | 1,007 | 1,338 |
| Other operating expenses | -1,262 | -226 | -2,851 | -1,033 | -2,570 | -1,303 | -1,457 | -2,004 |
| Operating loss | -38,994 | -45,036 | -58,416 | -37,819 | -33,129 | -33,379 | -20,112 | -18,359 |
| Net financial items | -44 | 41 | -4 | -5 | -497 | -17,369 | -2,373 | -5,181 |
| Loss before income tax | -39,038 | -44,995 | -58,420 | -37,824 | -33,626 | -50,748 | -22,485 | -23,540 |
| Income tax | -42 | -629 | -377 | -379 | -151 | -601 | -401 | -3 |
| Loss for the period | -39,080 | -45,624 | -58,797 | -38,203 | -33,777 | -51,349 | -22,886 | -23,543 |
Loss for the period is attributable to equityholders 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 30 September 2018, were overstated with 1.3 SEK m.
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 31 December 2018. New or amended standards or interpretations of standards effective as of 1 January 2019 have not had any significant impact on BONESUPPORT's financial statements, except for IFRS 16 Leases described below.
IFRS 16 is applied from 1 January 2019 and replaces IAS 17. IFRS 16 means 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.
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 continIn 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 means a calculation period based on the remaining payments, that the comparison year is not recalculated. The right to use assets are valued at an amount equal to the leasing debt. Contracts shorter than 12 months have not been taken into account. As of 1 January 2019, the effect of transition to accounting in accordance with IFRS 16 means an increased balance sheet total of 14,416 SEK t.
uously 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.
| Jan - Mar | |||
|---|---|---|---|
| Related party | Service | 2019 | 2018 |
| Route 2 Advisors Ltd (Simon Cartmell, styrelseledamot) | Consultancy | 179 | 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 | |||
| 31 March 2019 | 51,795,917 | 2,951,250 | |||
| Series C shares | |||||
| 31 December 2018 | 0 | ||||
| Issued shares | 505,000 | ||||
| 31 March 2019 | 505,000 |
NOTE 5 PLEDGED SECURITIES AND CONTINGENT LIABILITIES
The US subsidiary BONESUPPORT Inc. has provided a guarantee of 56 USDt (519 SEKt) for rented premises. The parent company, BONESUPPORT HOLDING AB, guaranteed a corresponing 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 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 board of directors.
Net sales in Sweden (part of EUROW) was 2.1 SEK million (0.8) in Q1. US, Germany and UK were the only markets that delivered more than 10% of consolidated net sales.
| SEK t | Jan-Mar 2019 | Jan-Mar 2018 | ||||||
|---|---|---|---|---|---|---|---|---|
| Profit and loss items | NA | EUROW | Other | Totalt | NA | EUROW | Other | Total |
| Net sales | 11,519 | 21,309 | 0 | 32,828 | 15,932 | 15,153 | 0 | 31,085 |
| Cost of sales | -1,241 | -3,390 | 0 | -4,631 | -2,464 | -3,098 | 0 | -5,562 |
| Gross profit | 10,278 | 17,919 | 0 | 28,197 | 13,468 | 12,055 | 0 | 25,523 |
| Operative costs | -26,022 | -16,983 | 0 | -43,005 | -15,432 | -12,881 | 0 | -28,313 |
| Contribution | -15,744 | 936 | 0 | -14,808 | -1,964 | -826 | 0 | -2,790 |
| Other operating items | 0 | 0 | -24,187 | -24,187 | 0 | 0 | -30,340 | -30,340 |
| Operating result | -15,744 | 936 | -24,187 | -38,995 | -1,964 | -826 | -30,340 | -33,130 |
| Net financial items | 0 | 0 | -44 | -44 | 0 | 0 | -497 | -497 |
| Result after financial items | -15,744 | 936 | -24,231 | -39,039 | -1,964 | -826 | -30,837 | -33,627 |
| SEK t | Jan-Mar 2019 | Jan-Mar 2018 | ||||
|---|---|---|---|---|---|---|
| Product group | NA | EUROW | Total | NA | EUROW | Total |
| CERAMENT BVF | 11,519 | 3,221 | 14,740 | 15,932 | 3,370 | 19,302 |
| CERAMENT drug eluting 1 | 0 | 18,088 | 18,088 | 0 | 11,783 | 11,783 |
| TOTAL | 11,519 | 21,309 | 32,828 | 15,932 | 15,153 | 31,085 |
1 CERAMENT drug eluting includes CERAMENT G and CERAMENT V
NOTE 8 WARRANTS AND EMPLOYEE STOCK OPTION PROGRAMS
There are three different employee stock option programs, two performance share programs and three warrant programs.
Employee stock option programs
Of the thre employee stock option programs two runs over 10 years and expires 2022 and 2025 and one program runs over 8 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 each vesting date. Of the allocated 25.7 million options at 1 January 2019, 20.4 million options were vested before 1 January 2019 and 0.3 million options were vested during the period.
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 par 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 gives the holder the right to acquire 0.2 ordinary shares and the third program 1 ordinary share.
Further information on these programs is presented in note 12, 23 and 25 in the Annual report 2018.
| Employee stock option programs | No of options 1 | Equal to no of shares | WAEP 2 | |
|---|---|---|---|---|
| Balance 1 Jan 2019 | 6,180,190 | 1,236,038 | 6,180,190.00 | |
| Balance 31 Mar 2019 | 6,180,190 | 1,236,038 | 6,180,190.00 | |
| Peformance share programs | No of shares | Equal to no of shares | WAEP 2 | |
| Balance 1 Jan 2019 | 505,000 | 505,000 | 0.00 | |
| Balance 31 Mar 2019 | 505,000 | 505,000 | 0.00 | |
| Warrant programs | No of options | Equalt to no of shares | WAEP 2 | |
| Balance 1 Jan 2019 | 4,606,664 | 1,210,210 | 20.87 | |
| Balance 31 Mar 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.
BMP. Bone Morphogenic Protein.
Bone graft subsitute. ynthetic 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 twelv 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.
Toxicity. The degree to which substance (a toxin or poison) can harm humans or animals.
DEFINITIONS - ALTERNATIVE PERFORMANCE MEASURES
BONESUPPORT uses Alternative Performance Measures (APM) to enhance understandability of the information in the financial reports, both for external analysis and 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.
| Jan - Mar | |||
|---|---|---|---|
| 2019 | 2018 | 2018 | |
| Net sales, SEK million | 32.8 | 31.1 | 96.6 |
| Sales growth, % | 5.6 | -14.5 | -25.3 |
| Cost of sales, SEK million | -4.6 | -5.6 | -15.2 |
| Gross profit, SEK million | 28.2 | 25.5 | 81.5 |
| Gross margin, % | 85.9 | 82.1 | 84.3 |
| Directly attributable selling expenses, SEK million | -36.4 | -23.2 | -112.6 |
| Selling expenses, not directly attributable, SEK million | -4.4 | -4.5 | -20.7 |
| Selling expenses, SEK million | -40.8 | -27.6 | -133.3 |
| Directly attributable research & development expenses, SEK million | -6.6 | -5.1 | -23.6 |
| Research & development expenses, not directly attributable, SEK million | -10.3 | -9.7 | -42.5 |
| Research & development expenses, SEK million | -16.9 | -14.8 | -66.1 |
| Contribution, SEK million | -14.8 | -2.8 | -54.7 |
| Non-current borrowings, SEK million | 8.0 | 0.0 | 0.0 |
| Current borrowings, SEK million | 5.2 | 0.0 | 0.0 |
| Interest bearing debt, SEK million | 13.1 | 0.0 | 0.0 |
| Cash and cash equivalents, SEK million | 219.1 | 397.2 | 261.5 |
| Net debt, SEK million | -206.0 | -397.2 | -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 CERAMENTTM BVF, CERAMENTTM G and CERAMENTTM 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 12 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 is available in the same European markets, as well as in India, Malaysia and Oman, whereas CERAMENT V is available in the same markets as CERAMENT G, except for 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 JANUARI-MARCH 2019
The company invites investors, analysts and media to a web conference (in English) on 2 May at 10.00 CET, 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 CET on the same day and the presentation from the webcast will be uploaded during the day on 2 May. 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: [email protected] 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.