Quarterly Report • Feb 28, 2019
Quarterly Report
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▪ BONESUPPORT announced on January 4, 2019 that Annelie Aava Vikner will join as new Executive Vice President Global Marketing & Communications in March.
"The result from CERTiFy shows that CERAMENT is a strong alternative to autograft. This is groundbreaking and can lead to an improved standard treatment of bone defects that do not heal naturally" Emil Billbäck, CEO
| Key Figures | Oct-Dec | Jan-Dec | |||
|---|---|---|---|---|---|
| 2018 | 2017 | 2018 | 2017 | ||
| Net Sales (SEKm) | 23.1 | 27.0 | 96.6 | 129.3 | |
| Sales growth (%) 1 | -14.5 | -8.8 | -25.3 | 23.6 | |
| Gross Profit (SEKm) | 19.6 | 22.5 | 81.5 | 112.4 | |
| Gross Margin (%)1 | 85.0 | 83.3 | 84.3 | 87.0 | |
| Operating Loss (SEKm) | -45.0 | -33.4 | -174.4 | -99.3 | |
| Loss for the period (SEKm) | -45.6 | -51.4 | -176.4 | -128.9 | |
| Equity at period end (SEKm) | 278.5 | 450.8 | 278.5 | 450.8 | |
| 1 Net debt (SEKm) |
-261.5 | -434.7 | -261.5 | -434.7 | |
| 1 Operating cash flow (SEKm) |
-50.4 | -25.7 | -171.6 | -107.5 | |
| Cash at period end (SEKm) | 261.5 | 533.4 | 261.5 | 533.4 | |
| Earnings per share (SEK)2 | -0.88 | -1.03 | -3.46 | - 3.24 |
1 APM: Alternative Performance Measures, see financial definitions on page 15
2 Before dilution and consolidation of shares 5:1
In November we announced that CERAMENT BVF is an adequate alternative to autograft. This was confirmed by the results of our groundbreaking CERTiFy study, which is the first to compare a synthetic bone graft with autograft. Since autograft requires at least two surgical procedures and leads to prolonged pain for many patients, alternatives to autograft have long been requested. Despite
this, autograft has been the standard treatment for bone defects associated with tibial fractures. We are very confident that the CERTIFy study will contribute to a change. We estimate that, only in the five largest European markets, approximately 100,000 procedures are performed annually with autograft on skeletal injuries
On October 23, our new network of independent distributors began selling CERAMENT BVF in the US. All internal systems worked and already during the first day our first customer order was received and delivered. In December, the Company signed an agreement with HCA to enable offering CERAMENT BVF to HCA's more than 1,800 sites of care, where we previously had limited presence under the Zimmer Biomet agreement. This is one of many examples of positive effects that follows froman independent distribution network. Sales in the quarter for segment North America amounted to SEK 4.2 million, which resulted in a full-year sale of SEK 34.1 million. The sharp decline compared with the previous year was an expected and natural consequence of the transition to the new distribution structure. No orders from Zimmer Biomet were expedited after the distribution agreement was terminated. In 2019, we expect significant benefits from the new structure.
Growth in Europe is strong, driven by successes with the antibiotic-eluting products CERAMENT G and CERAMENT V. During the fourth quarter, sales of CERAMENT G and V increased by 45 percent and on a full-year basis, the increase was 33 percent. During Q4, several new sales representatives were recruited to new territories. 11 new sales representatives have been employed in our European key markets since May. We expect these resources to contribute continuously to sales growth in 2019.
We are continuing to build a high-performing organization that executes the strategy we defined in 2018. We have recently launched a program to strengthen our cost control and focus our investments to maximize our resources, both human and financial.
Emil Billbäck, CEO
BONESUPPORT's strategy comprises of the following key components:
Innovation Leading clinical evidence and HEOR data
Effective commercial platform
BONESUPPORT has an innovative, unique and differentiated product offering with CERAMENT BVF and the antibioticeluting products, CERAMENT G and CERAMENT V.
BONESUPPORT currently has four candidates in its pre-clinical development pipeline, which are designed to enhance bone growth through capitalizing on the drug-eluting capabilities of CERAMENT. The candidates are:
The company is currently conducting a thorough evaluation of the development portfolio to identify which product candidate/s should be prioritized for further development work.
In addition to the portfolio mentioned above, BONESUPPORT is looking at several near-term opportunities including products complementary to CERAMENT and developments of the CERAMENT platform. These include CERAMENT in various formulations and product combinations. BONESUPPORT signed an agreement in May with Collagen Matrix Inc. to gain access to a number of products, based on natural and synthetic bone material, and in August entered into an agreement with MTF Biologics to gain access to two bone graft substitutes containing demineralized bone matrix (DBM). These products will strengthen our offering in the US from 2019 and onwards.
BONESUPPORT has as one of the three cornerstones of its strategy to deliver industry-leading scientific and clinical evidence that validates the many benefits of CERAMENT. BONESUPPORT already has a comprehensive database of more than 130 research publications and abstracts of preclinical and clinical studies with CERAMENT. Two of the most important and largest clinical trials are CERTiFy and FORTIFY.
The larger studies being conducted are:
| STUDY | Feasibility | Initiated study | FPI1 | LPI1 | FDA Filing |
|---|---|---|---|---|---|
| FORTIFY (US, DE, UK, PL- G) | |||||
| STUDY | Feasibility | Initiated study | FPI1 | LPI1 | Publication |
| CERTiFy (DE – BVF) | 2019 | ||||
| DF (Diabetic Foot, IT – G) | |||||
| RA (Revision Artroplasty, DE – G,V) |
1 FPI: First Patient In, LPI: Last Patient In
The CERTiFy study is the largest clinical study to date with CERAMENT. The study is a prospective, randomized, controlled clinical trial with 137 patients at 20 leading trauma centers in Germany, aiming to compare treatment of CERAMENT BVF with transplantation of autologous bone graft (autograft) in tibial fractures with bone defect. Autograft has long been the standard of care for this type of injury. The CERTiFy study was completed in June 2018 and complete results are expected to be published in 2019. Already in a press release in November, BONESUPPORT announced that the main objective of the study was achieved: CERAMENT BVF has proven to be an adequate alternative to autograft.
The FORTIFY study evaluates the ability of CERAMENT G to improve the treatment outcome of patients with open tibia fracture. An "open" fracture means that the skin has been penetrated in connection with trauma. These fractures run a high risk of infection with a consequential insufficient bone healing. The primary purpose is to demonstrate the absence of deep infection at the fracture site, avoiding further interventions to support healing as well aspatient reported improvement. The study will include up to 230 patients at clinics in the US and Europe. Data will be used to support a planned PMA (pre-market approval) application at the FDA, an important step for approval at the end of 2021. Recruitment of patients is ongoing.
BONESUPPORT works strategically with clinical studies to demonstrate the clinical and health economic value of the company's innovative technology. In 2019, BONESUPPORT will publish data that demonstrate the health economic effects of CERAMENT G and CERAMENT V in the treatment of bone infection in the UK. The data is collected over five years to show the significant healthcare savings that can be achieved when using CERAMENT G and CERAMENT V.
BONESUPPORT also carries out several smaller projects to demonstrate the economic benefits of using CERAMENT G and CERAMENT V reducing re-infections, new hospitalizations and avoid repeated surgical procedures.
The purpose of all studies is to scientifically demonstrate CERAMENT's good clinical effects and how an increased use of CERAMENT has positive health economic effects in the form of reduced number of procedures, reduced length of stay and thus reduced health queues.
BONESUPPORT has in 2018 strengthened its presence in Europe by recruiting sales representatives with a specific focus on trauma. In total, the number of sales representatives has doubled in 2018 and totals 25 at the end of the year. The expanded sales organization, together with a more focused governance and prioritization, is expected to continue to have positive effects on sales in Europe in 2019.
In 2018, the strategic decision was made to establish a new distributor organization with better opportunity to penetrating the entire US market. At the end of the year, BONESUPPORT had its own commercial organization in the USA with 21 employees and 38 contracted distributors with a total of more than 500 sales representatives.
The focus of the North America segment is the USA, where CERAMENT BVF was previously exclusively distributed via Zimmer Biomet (ZB). BONESUPPORT has built up a new distribution structure which is active since October 23, 2018. The new distribution structure enables a better geographical reach of the target group for CERAMENT BVF. At the end of the year, BONESUPPORT had its own commercial organization in the USA with 21 employees and 38 contracted distributors with a total of more than 500 sales representatives.
| Oct – Dec | Jan - Dec | ||||
|---|---|---|---|---|---|
| (SEKm) | 2018 | 2017 | 2018 R |
2017 | |
| Net Sales | 4.2 | 12.6 | 34.1 | 78.1 | |
| Gross profit | 3.7 | 10.7 | 29.6 | 69.9 | |
| Contribution | -16.8 | -3.5 | -45.0 | 18.8 |
The low sales for the period should be viewed against the ongoing development phase with training for distributors' sales representatives and conversion of customer contracts. No sales to Zimmer Biomet was reported during the period. Net sales per quarter are shown below (SEKm).
The contribution from the segment was SEK -16.8 million (-3.5). The increased loss was due to ongoing commercial investments and the low sales.
Sales and marketing expenses increased to SEK 15.3 million (6.2) during the fourth quarter. R&D costs decreased to SEK 5.9 million (7.2), mainly as the corresponding period in the previous year included initiation costs for the FORTIFY study.
Net sales amounted to SEK 34.1 million (78.1), a decrease of 56% compared with 2017. Net Sales was impacted by the transition to the new distribution network and the ceased distribution agreement with Zimmmer Biomet, as well as their supply problems that affected the first half of the year. The contribution amounted to SEK -45.0 million (18.8). The negative contribution was mainly due to the significantly lower sales combined with increased costs for strengthening the organization in connection with the new distribution structure.
In Europe, CERAMENT is sold both through the company's own sales organization as well as through distributors. In its key markets, the UK, Germany, Switzerland, Sweden and Denmark, BONESUPPORT has expanded its own sales and marketing organization from 14 to 25 employees. This investment enables a more aggressive penetration of the trauma segment, which has great potential for CERAMENT.
Within eight European markets, the company cooperates with specialist distributors. In other parts of the world (ROW) BONESUPPORT sells only through distributors.
| Oct – Dec | Jan - Dec | |||
|---|---|---|---|---|
| (SEKm) | 2018 | 2017 | 2018 R |
2017 |
| Net Sales | 18.9 | 14.5 | 62.5 | 51.2 |
| Gross profit | 15.9 | 11.8 | 51.8 | 42.5 |
| Contribution | -3.9 | 0.8 | -9.7 | -7.6 |
Net sales for the segment increased by 31% compared to the fourth quarter of 2017 and amounted to SEK 18.9 million. The increase in Europe was 27%. Sales from the five European countries with direct sales accounted for 84% of the segment's sales, driven by increased use of the CERAMENT G and CERAMENT V antibiotic-eluting products, which together increased by 45% in the quarter. Net sales per quarter are shown below (SEKm).
The contribution from the segment was SEK -3.9 million (0.8). Sales and market expenses in the segment increased to SEK 15.8 million (11.0), primarily as an effect of previously mentioned investments in the sales organization in the key markets.
Net sales for the segment increased by 22% compared to the full year 2017 and amounted to SEK 62.5 million (51.2). The increase in Europe was 27%. Sales increased as a result of a wider use of mainly the antibiotic-eluting products at major clinics, especially in countries with direct sales. The growth of antibiotic-eluting products was 33%. The contribution amounted to SEK -9.7 million (-7.6). The negative trend compared to the same period in 2017 is mainly due to implemented investments in the sales organization, which are burdened in the short term despite positive sales development.
Net sales amounted to SEK 23.1 million (27.0), a decrease of 15%. The EUROW segment increased by 31% to SEK 18.9 million (14.5). The sales increase in Europe is driven by the wider use of CERAMENT G and V. Sales in the US decreased by 67% to SEK 4.2 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 at SEK 1.6 million.
Cost of sales amounted to SEK 3.5 million (4.5) leading to a gross margin of 85% (83).
Sales expenses amounted to SEK 38.8 million (21.5), an increase of 80%. Personnel costs totaled SEK 25.8 million (12.0). Both segments increased costs, with NA increasing by 145% to SEK 15.2 million (6.2), driven by the expansion of the sales organization and increased marketing activities and EUROW increased by 71% to SEK 18.8 million (11.0) as a result of ongoing expansion of the sales organization. Other sales costs, which were not allocated to the segments, increased to SEK 4.8 million (4.3).
Research and development costs amounted to SEK 17.6 million (19.7), a decrease of 11%. Personnel costs corresponded to SEK 5.7 million (5.7). Other expenses totaled SEK 11.9 million (14.0). The NA segment decreased by 18% to SEK 5.9 million (7.2), mainly as the corresponding period in the previous year included initiation costs for the FORTIFY study.
Administrative expenses amounted to SEK 9.3 million (15.7), a decrease of 41%, of which personnel costs totaled SEK 4.2 million (6.0), the decrease being largely attributable to lower costs for share-related incentive programs. Other expenses amounted to SEK 5.1 million (9.5). The corresponding period last year was charged partly with costs attributable to the IPO of SEK 0.4 million but also costs for bad dept provisions of SEK 1.6 million.
Other operating income and expenses consisted mainly of exchange gains and losses on operating assets and liabilities. Other operating income amounted to SEK 1.3 million (2.1) and other operating expenses totaled SEK -0.2 million (-1.3) for the quarter.
Operating loss amounted to SEK -45.0 million (-33.4), where the increased loss was mainly due to lower sales in the US combined with higher operational costs from implemented investments in the expansion of the sales organization, with more employees in both the US and Europe.
Net financial items amounted to SEK 0.0 million (-17.4). No interest expense was charged to net financial items in the period since the Group's loans were repaid in the first quarter of 2018. The result during the corresponding period last year was charged with interest expenses but also fees in connection with the loan prepayment of SEK 8.9 million.
For the reasons explained above, the loss for the fourth quarter amounted to SEK -45.6 million (-51.4), which corresponds to earnings per share of SEK -0.88 (-1.03).
Net sales amounted to SEK 96.6 million (129.3), a decrease of 25%. The NA segment reported a decline in sales of SEK 44.0 million attributable to ongoing changes in the distribution structure, while the EUROW segment reports continued growth with a revenue increase of SEK 11.3 million during the period.
Operating loss was SEK -174.4 million (-99.3), mainly due to lower sales and expansion of sales organization, with more employees in the US and Europe.
Loss for the period amounted to SEK -176.4 million (-128.9), mainly due to the lower operating loss as described above and the positive impact of lower interest expenses as a result of the repayment in February of the loan to Kreos Capital. Earnings per share amounted to SEK -3.46 (-3.24).
| Financial position | 31 Dec | |
|---|---|---|
| (SEKm) | 2018 | 2017 |
| Cash and cash equivalents | 261.5 | 533.4 |
| Interest-bearing debt | 0 | 98.6 |
| Net debt | -261.5 | -434.7 |
| Equity | 278.5 | 450.8 |
Cash and cash equivalents amounted to SEK 261.5 million at the end of the period, a decrease of SEK 271.9 million since the beginning of the year. The change related to cash flow from operating activities amounting to SEK -171.6 million and SEK -98.8 million from financing activities. The latter mainly consists of the repayment of the loan to Kreos Capital of SEK -93.3 million, SEK -8.9 million in costs for termination and remaining interest and SEK 3.4 million in prepaid loan.
| Cash flow | Oct – Dec | Jan – Dec | ||
|---|---|---|---|---|
| (SEKm) | 2018 | 2017 | 2018 | 2017 |
| Operations | -50.4 | -25.7 | -171.6 | -107.5 |
| Investing activities | -1.7 | -1.4 | -2.7 | -4.7 |
| Financing activities | 0.2 | -7.5 | -98.8 | 504.8 |
Cash flow from operating activities for the quarter was SEK -50.4 million (-25.7), mainly attributable to operating loss of SEK -45.0 million (-33.4).
The parent company BONESUPPORT HOLDING AB (publ) is a holding company. The Parent Company generated SEK 29.0 million (37.9) in sales of internal services to subsidiaries during the quarter. The loss in the quarter was SEK -1.7 million (-9.1). No investments were made during the period.
The BONESUPPORT Group had 72 (60) employees (full-time equivalents) during the year, of whom 20 (17) worked in Research & Development.
BONESUPPORT's new distributor network, which at the end of the period included 38 independent distributors, started the sale of CERAMENT BVF on October 23, 2018, at the same time Zimmer Biomet's exclusivity for CERAMENT BVF ended
In November, the first results of the CERTiFy study were presented, which show that CERAMENT BVF is an adequate alternative to autograft.
BONESUPPORT announced on January 4, 2019 that Annelie Aava Vikner will join as new Executive Vice President Global Marketing & Communications in March.
The company has one class of shares. The quota value of the shares is SEK 0.625 per share. As of December 31, 2018, the total number of shares amounted to 51,795,917 distributed among 1,805 shareholders. The major shareholders are shown below.
| Shareholders 31 December 2018 | |
|---|---|
| HealthCap V LP | 12.8% |
| Stiftelsen Industrifonden | 9.3% |
| Lundbeckfond Invest A/S | 9.3% |
| Robur AB | 8.7% |
| Tredje AP-fonden | 7.8% |
| Tellacq AB | 5.7% |
| Carl Westin Ltd | 5.2% |
| Other shareholders | 41.3% |
From 1 January to 31 December, the number of shares increased by 1,518,027. All shares were related to the conversion of shares as part of the ESOPs (Employment Share Option Programs). BONESUPPORT now has three ESOPs. A condition for vesting is that the option holder on each vesting day is employmed by or holds an assignment within the Group. The number of outstanding options as of December 31, 2018 amounted to 6,180,190, where five options can be converted to one share. A summary of ESOPs appears in the Annual Report 2017, note 12 and in note 8 in this report.
The Annual General Meeting (AGM) on 22 May 2018 resolved to implement two new long-term incentive programs. One was meant mainly for employees and the other for three members of the Board. Both programs offer the possibility to participate in a performance-based share saving program that will entitle the participant allotment of ordinary shares in the company free of charge for each invested ordinary share based on the company's performance 2018-2021. Both programs could result in potential dilution based on the full issuance of the 505,000 performance shares during first quarter 2022. More information is provided in these programs in note 8.
There were three other warrant programs as of 31 December 2018 with the latest program being resolved at the Annual General Meeting (AGM) on 22 May 2018 and amounts to 361,096 warrants (each warrant gives the right to convert into 1 share). The number of warrants in the other two programs amounted to 4,245,568 where five warrants gives the right to convert into 1 share. Further details of these warrant programs are described in note 8.
More information about these share related incentive programs is available on the company's website.
| 8 May 2019 | January – March 2019 Interim report |
|---|---|
| 25 July 2019 | January – June 2019 Interim report |
| 7 November 2019 | January – September 2019 Interim report |
| April 2019 | Annual Report 2018 |
| 14 May 2019 | AGM |
The nomination committee is elected based on the principles decided at the AGM 22 May 2018. These principles are described on BONESUPPORT's website. The task of the committee is to present a proposal to the AGM, which is planned to 14 May 2019. The members of the 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 has been prepared in both a Swedish and an English version. In the event of any discrepancy between the two, the Swedish version shall apply.
The CEO confirms 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
BONESUPPORT HOLDING AB (publ)
| Oct - Dec | Jan - Dec | ||||
|---|---|---|---|---|---|
| (SEKt) | Note | 2018 | 2017 | 2018 | 2017 |
| Net Sales | 7 | 23,108 | 27,039 | 96,623 | 129,301 |
| Cost of Sales | -3,460 | -4,513 | -15,157 | -16,871 | |
| Gross profit | 19,648 | 22,526 | 81,466 | 112,430 | |
| Selling expenses | -38,760 | -21,488 | -133,311 | -92,858 | |
| Research and development expenses | -17,607 | -19,748 | -66,064 | -60,636 | |
| Administrative expenses | 3,8 | -9,343 | -15,749 | -58,345 | -57,478 |
| Other operating income | 1,251 | 2,112 | 8,530 | 5,282 | |
| Other operating expenses | -226 | -1,303 | -6,680 | -6,025 | |
| Operating loss | 7 | -45,037 | -33,380 | -174,404 | -99,285 |
| Net financial items | 41 | -17,369 | -465 | -28,577 | |
| Loss before income tax | 7 | -44,996 | -50,749 | -174,869 | -127,862 |
| Income tax | -629 | -601 | -1,536 | -1,007 | |
| Loss for the period | -45,625 | -51,350 | -176,405 | -128,869 |
| Oct - Dec | Jan - Dec | ||||
|---|---|---|---|---|---|
| (SEK) | Not | 2018 | 2017 | 2018 | 2017 |
| Equityholders of the parent | |||||
| Earnings per share before dilution (SEK) | -0.88 | -1.03 | -3.46 | -3.24 | |
| Earnings per share after dilution (SEK)3 | -0.88 | -1.03 | -3.46 | -3.24 | |
| Loss for the period (SEK 1,000) | -45,625 | -51,350 | -176,405 | -128,869 | |
| Average number of shares (1,000)4 | 51,664 | 50,006 | 50,971 | 39,826 |
| Oct - Dec | Jan - Dec | ||||
|---|---|---|---|---|---|
| (SEKt) | Not | 2018 | 2017 | 2018 | 2017 |
| Loss for the Period | -45,625 | -51,350 | -176,405 | -128,869 | |
| Other comprehensive income | |||||
| Exchange differences | -114 | 44 | 129 | 2 | |
| Total comprehensive income for the period | -45,739 | -51,306 | -176,276 | -128,867 |
3 / Dilution effects for negative earnings per share should not be adjusted for.
4 / Average number of shares is recalculated after the share consolidation 5:1.
| 31 Dec | |||
|---|---|---|---|
| (SEKt) | Note | 2018 | 2017 |
| ASSETS | |||
| Intangible assets | 5,511 | 5,244 | |
| Tangible assets | 3,885 | 3,099 | |
| Other non-current assets | 6 | 375 | 248 |
| Total non-current assets | 9,771 | 8,591 | |
| Inventories | 23,681 | 22,079 | |
| Trade receivables | 6 | 18,683 | 20,678 |
| Other operating receivables | 6 | 12,538 | 11,969 |
| Cash and cash equivalents | 6 | 261,468 | 533,367 |
| Total current assets | 316,370 | 588,093 | |
| TOTAL ASSETS | 326,141 | 596,684 | |
| EQUITY AND LIABILITIES | |||
| Equity attributable to equity holders of the parent | 4 | 278,531 | 450,786 |
| Non-current borrowings | 6 | 0 | 0 |
| Provisions | 289 | 173 | |
| Total non-current liabilities | 289 | 173 | |
| Current borrowings | 6 | 0 | 98,620 |
| Trade payables | 6 | 12,472 | 11,553 |
| Other operating liabilities | 6 | 34,849 | 35,552 |
| Total current liabilities | 47,321 | 145,725 | |
| TOTAL EQUITY AND LIABILITIES | 326,141 | 596,684 |
| (SEKt) | Issued capital |
Other paid in capital |
Reserves | Accumulated losses |
Total equity |
|---|---|---|---|---|---|
| Equity at 1 January 2017 | 18,132 | 669,552 | -306 | -653,074 | 34,304 |
| Loss January–December 2017 Transactions with equity holders: |
2 | -128,869 | -128,867 | ||
| New share issue | 13,292 | 557,002 | 570,294 | ||
| Transaction costs, new share issue | -39,101 | -39,101 | |||
| Allotted warrants | 1,562 | 1,562 | |||
| Share-based payment transactions | 12,594 | 12,594 | |||
| Equity 1 January 2018 | 31,424 | 1,189,015 | -304 | -769,349 | 450,786 |
| Loss Januari – December 2018 | 129 | -176,405 | -176,276 | ||
| Transactions with equity holders: | |||||
| New share issue | 949 | 949 | |||
| Transaction costst, new share issue | -1,860 | -1,860 | |||
| Allotted warrants | 740 | 740 | |||
| Share-based payment transactions | 4,192 | 4,192 | |||
| Equity 31 December 2018 | 32,373 | 1,187,895 | -175 | -941,562 | 278,531 |
| Oct - Dec | Jan - Dec | |||
|---|---|---|---|---|
| (SEKt) | 2018 | 2017 | 2018 | 2017 |
| Operating loss | -45,037 | -33,380 | -174,404 | -99,285 |
| Non-cash adjustments | ||||
| -Share-based transactions | 396 | 2,423 | 4,192 | 12,594 |
| -Other | -1,742 | 2,101 | -962 | 4,113 |
| Interest received | 46 | 3 | 46 | 3 |
| Interest paid | -5 | -2,705 | -868 | -11,740 |
| Realized exchange gains on loans | 0 | 0 | 558 | 0 |
| Income tax paid | -1,135 | -211 | -2,151 | -737 |
| Net cash flows from operating activities | ||||
| before changes in working capital | -47,477 | -31,769 | -173,589 | -95,052 |
| Changes in working capital | -2,878 | 6,080 | 1,964 | -12,482 |
| Net cash flows from operating activites | -50,355 | -25,689 | -171,625 | -107,534 |
| Net cash flow from investing activities | -1,691 | -1,362 | -2,719 | -4,688 |
| Net cash flow from financing activities | 150 | -7,457 | -98,791 | 504,833 |
| Total cash flow for the period | -51,896 | -34,508 | -273,135 | 392,611 |
| Cash and cash equivalents at beginning of | 313,168 | 567,637 | 533,367 | 141,501 |
| period | ||||
| Net foreign exchange difference on cash and | 196 | 238 | 1,236 | -745 |
| equivalents | ||||
| Cash and cash equivalents at period end | 261,468 | 533,367 | 261,468 | 533,367 |
| Oct - Dec | Jan - Dec | |||
|---|---|---|---|---|
| (SEKt) | 2018 | 2017 | 2018 | 2017 |
| Net Sales | 29,048 | 37,873 | 51,578 | 37,873 |
| Administrative expenses | -31,371 | -46,637 | -66,756 | -50,516 |
| Other income | 400 | 0 | 528 | 23 |
| Other expenses | -407 | 0 | -1,033 | -33 |
| Operating loss | -2,330 | -8,764 | -15,683 | -12,653 |
| Net financial items | 666 | -297 | 2,105 | -3,162 |
| Loss before income tax | -1,664 | -9,061 | -13,578 | -15,815 |
| Income tax | 0 | 0 | 0 | 0 |
| Loss for the period | -1,664 | -9,061 | -13,578 | -15,815 |
Parent company loss for the period equals comprehensive income.
| 31 Dec | ||
|---|---|---|
| (SEKt) | 2018 | 2017 |
| ASSETS | ||
| Non-current assets | 704,652 | 503,912 |
| Other receivables | 153 | 0 |
| Prepaid expenses | 728 | 715 |
| Cash | 243,247 | 513,945 |
| TOTAL ASSETS | 948,780 | 1 018,572 |
| EQUITY AND LIABILITIES Equity |
||
| Restricted equity | 32,372 | 31,424 |
| Unrestricted equity | 874,620 | 889,317 |
| Total equity | 906,992 | 920,741 |
| Current liabilities | 41,788 | 97,831 |
| TOTAL EQUITY AND LIABILITIES | 948 780 | 1,018,572 |
| 2018 | 2017 | |||||||
|---|---|---|---|---|---|---|---|---|
| (SEKt) | Q4 | Corr Q31 | Q2 | Q1 | Q4 | Q3 | Q2 | Q1 |
| Net Sales | 23,108 | 14,246 | 28,184 | 31,085 | 27,039 | 32,677 | 37,131 | 32,454 |
| Cost of Sales1 | -3,460 | -2,587 | -3,548 | -5,562 | -4,513 | -3,989 | -4,748 | -3,621 |
| Gross Profit1 | 19,648 | 11,659 | 24,636 | 25,523 | 22,526 | 28,688 | 32,383 | 28,833 |
| Gross Margin (%)1 | 85,0 | 81,8 | 87,4 | 82,1 | 83,3 | 87,8 | 87,2 | 88,8 |
| Selling expenses | -38,760 | -35,086 | -31,820 | -27,645 | -21,488 | -24,368 | -22,231 | -24,771 |
| Research and | -17,607 | -16,426 | -17,193 | -14,838 | -19,748 | -12,834 | -18,686 | -9,368 |
| development expenses | ||||||||
| Administrative expenses | -9,343 | -17,531 | -14,940 | -16,531 | -15,479 | -11,149 | -9,160 | -21,690 |
| Other operating income | 1,251 | 1,818 | 2,530 | 2,931 | 2,112 | 1,007 | 1,338 | 825 |
| Other operating costs | -226 | -2,851 | -1,033 | -2,570 | -1,303 | -1,457 | -2,004 | -1,261 |
| Operating loss | -45,037 | -58,417 | -37,820 | -33,130 | -33,380 | -20,113 | -18,360 | -27,432 |
| Net financial items | 41 | -4 | -5 | -497 | -17,369 | -2,373 | -5,181 | -3,654 |
| Loss before income tax | -44,996 | -58,421 | -37,825 | -33,627 | -50,749 | -22,486 | -23,541 | -31,086 |
| Income tax | -629 | -377 | -379 | -151 | -601 | -401 | -3 | -2 |
| Loss for the period | -45,625 | -58,798 | -38,204 | -33,778 | -51,350 | -22,887 | -23,544 | -31,088 |
The result for the periods is fully attributed to the shareholders of the parent company.
1Correction of error was published on February 13, 2019 regarding Q3 2018 for an error that arose 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 was overstated with SEK 1.3 million.
| AUTOGRAFT | A bone graft harvested from the patient's own skeleton, usually from the iliac crest |
|---|---|
| BONE GRAFT SUBSITUTE | Synthetic material used as bone grafts instead of biological bone tissue |
| CERAMENT BVF | CERAMENT™ BONE VOID FILLER |
| CERAMENT G | CERAMENT™G, CERAMENT™ BVF with gentamicin |
| CERAMENT V | CERAMENT™V, CERAMENT™ BVF with vancomycin |
| CLINICAL STUDY | Study on humans of a medical device or a pharmaceutical product, for example |
| DR | Doctor |
| FDA | US Food and Drug Administration |
| 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 | Exemption from regulatory approval to conduct clinical studies on a medical device |
| Device exemption) | |
| ILIAC CREST | The upper wing of the hip bone (Ilium) |
| LTM | Last Twelve Months |
| MICRO-CT | Microtomography: 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 tissue | |
| OSTEOMYELITIS | A bacterial infection affecting bones |
| PMA | Premarketing Approval is the FDA process of reviewing Class III medical devices |
| Q4 | Fourth quarter |
| TOXICITY | The degree to which a substance (a toxin or poison) can harm humans or animals |
BONESUPPORT uses Alternative Performance Measures (APM) to make the financial report more understandable for both external analysis and comparison, including internal performance assessment. APM's have not been defined in IFRS financial statements. The following (definitions below) are used:
| Contribution | Revenues minus directly allocated Cost of sales, Selling and R&D expenses. Shows the operational performance for each segment. |
|---|---|
| Earnings per share (EPS) | Net result divided by average number of shares before dilution |
| Shows the operational performance, including depreciations and amortizations | |
| Gross profit | Net Sales minus Cost of Sales. Shows the profit to cover others costs and profit margin. |
| Gross margin | (Revenues – Cost of Sales)/Net Sales. Shows the gross profit in relation to Net sales, indicating the |
| margin to cover costs and profit | |
| Interest-bearing debt | Borrowings from banks and other financial institutions, short and long term |
| Shows the debt level of the Company, also forming the basis of interest costs | |
| Net debt | Interest-bearing debts minus cash and cash equivalents. Shows the leverage level of the Company |
| Operating cash flow | Net cash flows from operating activities |
| Operating result (EBIT) | Operating result shows the operative result including depreciation |
| Sales growth | The difference in Net Sales between two periods in relation to the Net Sales for the previous |
| corresponding period. Shows how the Company performs in its sales operations |
| Reconciliation of APM – Net debt (SEKm) | 31 Dec 2018 | 31 Dec 2017 |
|---|---|---|
| Non-current borrowing | 0.0 | 0.0 |
| Current borrowing | 0.0 | 98.6 |
| Cash and cash equivalents | -261.5 | -533.4 |
| Net debt | -261.5 | -434.7 |
This interim report was prepared in accordance with IAS 34 Interim Financial Reporting and the Swedish Annual Accounts Act. The Parent Company's accounts have been prepared in accordance with RFR 2, Accounting for Legal Entities, and the Annual Accounts Act. Accounting principles have been applied to the annual report as of December 31, 2017. New or amended standards or interpretations of standards effective as of January 1, 2018 have not had any significant impact on BONESUPPORT's financial statements. IFRS 15 "Revenue from contracts with customers: Revenue mainly arise from one category, sale of goods. BONESUPPORT has one performance obligation for which revenue is reported at the time of delivery. IFRS 16 "Leasing" was adopted by the EU on October 31, 2017 and is applicable from January 1, 2019. IFRS 16 means that, in principle, all leases are recognized in the balance sheet, the right to use the leasing objects as an asset and the remaining lease payments as debt. In the income statement, the leasing cost is replaced by depreciation of the assets and interest expense on the lease liabilities. Key ratios such as equity ratio and debt / equity ratio change as liabilities in the balance sheet increase. The leasing agreements that will be reported in the balance sheet relate primarily to the leasing of premises. BONESUPPORT will apply IFRS 16 according to the simplified method. This means a calculation period based on the remaining payments, that the comparison year is not recalculated and that contracts shorter than 12 months are not taken into account. As of December 31, 2018, the effect of transition to accounting in accordance with IFRS 16 estimates an increased balance sheet total of approximately SEK 14 million and that the equity ratio decreases from 86.3% to 82.6%.
The Group is exposed to various financial risks. The business is impacted by many factors that could impact the company's result and financial position. BONESUPPORT's strategy is to continuously identify and manage risks. Further details can be found in the Annual report 2017, note 2.
The income statements include costs related to the following transactions between BONESUPPORT AB and related parties.
| Jan - Dec | |||
|---|---|---|---|
| Related | Servise (SEKt) | 2018 | 2017 |
| Seagles AB (owned by Lars Lidgren) | Consultancy, development projects | - | 44 |
| Seagles AB (owned by Lars Lidgren) | Patent transfer | 600 | 500 |
| Route 2 Advisors Ltd (Simon Cartmell) | Consultancy | 81 | - |
| Number of shares | Potential shares | ||
|---|---|---|---|
| 31 December 2017 | 50,277,890 | 31 December 2017 | 4,334,868 |
| Converted employee options | 1,518,027 | Converted employee options | -1,518,027 |
| Returned employee options | -731,687 | ||
| Potential performance shares | 575,000 | ||
| Issued warrants | 361,096 | ||
| 31 December 2018 | 51,795,917 | 31 december 2018 | 2,951,250 |
Further information on page 9.
The US subsidiary BONESUPPORT Inc has provided a guarantee of \$ 56,000 for its office rent. The parent company, BONESUPPORT HOLDING AB, guarantees a corresponding amount of SEK 502 thousand.
In addition, the Group has pledged collateral for capital-invested direct pensions amounting to SEK 1.0 million
When the loan agreement with Kreos Capital was signed in September 2016, the company issued many securities to Kreos Capital. The agreement was voluntarily terminated by BONESUPPORT and the loan fully repaid as of 1 February 2018. The securities were released on the same day.
Fair values of current financial assets and liabilities are assessed and agree with values accounted for. The fair value of the loan was SEK 98.6 million at 31 December 2017. The book value was SEK 98.6 million. The loan was fully repaid on 1 February 2018. Other financial assets and liabilities are current and fair values are assessed agree with values accounted for.
The segments are North America ("NA") and Europe & RoW ("EUROW"). Others include Eliminations and others in which the main part relates to Head office functions. Contribution per segment is calculated as Total revenues minus costs that are directly attributable to the segment. Such costs are directly related to Cost of sales, selling expenses and R&D. There is no allocation to segments for Group assets or liabilities as the control of these is only conducted at the total Group level by management and the Board.
Net sales in Sweden (part of EUROW) were SEK 2.1 million (0.8) for the quarter. The US market (part of NA), together with the markets Germany and the UK, are the only ones that each make up more than 10% of the Group's net sales during the period January to December 2018.
| Profit and loss items | Oct - Dec 2018 | Oct - Dec 2017 | ||||||
|---|---|---|---|---|---|---|---|---|
| (SEKt) | NA | EUROW | Other | Total | NA | EUROW | Other | Totalt |
| Net Sales | 4,201 | 18,907 | 23,108 | 12,552 | 14,487 | 27,039 | ||
| Cost of Sales | -489 | -2,971 | -3,460 | -1,839 | -2,674 | -4,513 | ||
| Gross profit | 3,712 | 15,936 | 19,648 | 10,713 | 11,813 | 22,526 | ||
| Operative costs | -20,560 | -19,883 | -40,443 | -14,231 | -11,041 | -25,272 | ||
| Contribution | -16,848 | -3,947 | -20,795 | -3,518 | 772 | -2,746 | ||
| Other operating items | 0 | 0 | -24,242 | -24,242 | -30,634 | -30,634 | ||
| Operating result | -16,848 | -3,947 | -24,242 | -45,037 | -3,518 | 772 | -30,634 | -33,380 |
| Net financial items | 0 | 0 | 41 | 41 | -17,369 | -17,369 | ||
| Result before taxes | -16,848 | -3,947 | -24,201 | -44,996 | -3,518 | 772 | -48,003 | -50,749 |
| Product group | Oct - Dec 2018 | Oct - Dec 2017 | ||||||
| (SEKt) | NA | EUROW | Totalt | NA | EUROW | Totalt | ||
| CERAMENT BVF | 4,201 | 2,871 | 7,072 | 12,552 | 3,467 | 16,019 | ||
| CERAMENT drug eluting5 | 16,036 | 16,036 | - | 11,020 | 11,020 | |||
| TOTAL | 4,201 | 18,907 | 23,108 | 12,552 | 14,487 | 27,039 | ||
| Profit and loss items | Jan - Dec 2018 | Jan - Dec 2017 | ||||||
|---|---|---|---|---|---|---|---|---|
| (SEKt) | NA | EUROW | NA | EUROW | NA | EUROW | NA | EUROW |
| Net Sales | 34,126 | 62,497 | 96,623 | 78,127 | 51,174 | 129,301 | ||
| Cost of Sales | -4,496 | -10,661 | -15,157 | -8,187 | -8,684 | -16,871 | ||
| Gross profit | 29,630 | 51,836 | 81,466 | 69,940 | 42,490 | 112,430 | ||
| Operative costs | -74,588 | -61,563 | -136,151 | -51,132 | -50,091 | -101,223 | ||
| Contribution | -44,958 | -9,727 | -54,685 | 18,808 | -7,601 | 11,207 | ||
| Other operating items | 0 | 0 | -119,719 | -119,719 | -110,492 | -110,492 | ||
| Operating result | -44,958 | -9,727 | -119,719 | -174,404 | 18,808 | -7,601 | -110,492 | -99,285 |
| Net financial items | 0 | 0 | -465 | -465 | -28,577 | -28,577 | ||
| Result before taxes | -44,958 | -9,727 | -120,184 | -174,869 | 18,808 | -7,601 | -139,069 | -127,862 |
| Product group | Jan - Dec 2018 | Jan - Dec 2017 | ||||||
|---|---|---|---|---|---|---|---|---|
| (SEKt) | NA | EUROW | NA | EUROW | NA | EUROW | NA | EUROW |
| CERAMENT BVF | 34,126 | 10,993 | 45,119 | 78,127 | 12,682 | 90,809 | ||
| CERAMENT drug eluting6 | 0 | 51,504 | 51,504 | - | 38,492 | 38,492 | ||
| TOTAL | 34,126 | 62,497 | 96,623 | 78,127 | 51,174 | 129,301 |
5 CERAMENT drug eluting includes CERAMENT G and CERAMENT V
6 CERAMENT drug eluting includes CERAMENT G and CERAMENT V
There are three different employee stock option programs (ESOPs), two performance shares program and two different warrant programs.
Two of them run over 10 years and expire in 2022 and 2025. The third program runs over 8 years and expires in 2024. Each stock option or warrant gives the holder the right to acquire 0.2 ordinary shares of the company when exercising the option or warrant. The employee stock options are vested according to a schedule in each program. Of the 25.7 million options that were already allocated, 18.0 million options were vested before 1 January 2018 and 2.4 million options were vested in the period in 2018.
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 depending on share price development and the Company's development in terms of net sales and EBITDA.
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 for the shares issued are credited to equity.
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 note 12, 23 and 25 in the annual report 2017.
| No of options7 | Equal to no of shares | WAEP8 |
|---|---|---|
| 17,428,768 | 3,485,754 | 5.88 |
| -7,590,145 | -1,518,029 | 0.63 |
| -3,658,433 | -731,687 | 9.90 |
| 6,180,190 | 1,236,038 | 9.92 |
| Performance shares | No of options | Equal to no of shares | WAEP7 |
|---|---|---|---|
| Balance 1 Jan 2018 | - | - | - |
| Issued | 575,000 | 575,000 | 0.00 |
| Returned | -70,000 | -70,000 | 0.00 |
| Balance 31 Dec 2018 | 505,000 | 505,000 | 0.00 |
| Warrant programs | No of options | Equal to no of shares | WAEP7 |
|---|---|---|---|
| Balance 1 Jan 2018 | 4,245,568 | 849,114 | 22.97 |
| Issued | 361,096 | 361,096 | 15.94 |
| Balance 31 Dec 2018 | 4,606,664 | 1,210,210 | 20.87 |
7 Unallocated options amounts to 3,824,338
8 Weighted Average Exercise Price (SEK) per share on outstanding options
BONESUPPORT HOLDING AB (publ), reg. ID 556802-2171, is the parent company in the BONESUPPORT Group, in which operations are executed in BONESUPPORT AB and its subsidiaries in the US, the UK, Germany, Switzerland and the Netherlands.
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 a twelve-year track record of safety and efficacy of its products in treating patients with an estimated number of around 35,000 procedures performed with its products worldwide, based on sales data. There is a large, addressable market opportunity across trauma, chronic osteomyelitis, revision arthroplasty and infected diabetic foot and the Company's research focuses on continuing to further develop and refine the present technology to extend into additional indications by the elution of other drugs and growth factors.
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.
The company invites investors, analysts and media to a web conference (in English) on 27 February 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 27 February. For further details regarding participation, see the investor pages at www.bonesupport.com
Emil Billbäck, CEO T: +46 46 286 53 70
Håkan Johansson, CFO T: +46 46 286 53 70
E: [email protected] www.bonesupport.com
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 and circumstances. Forwardlooking 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 forwardlooking statements as a result of new information, future events or similar circumstances other than those required by applicable legislation.
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