Quarterly Report • Nov 7, 2018
Quarterly Report
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▪ Net Sales amounted to SEK 14.2 million (32.7), a decrease by 56%. As expected, there were no sales in the segment North America due to the termination of our US distribution agreement in May. The increase in the segment Europe and ROW was 29%
▪ Zimmer Biomet's exclusivity for CERAMENT BVF in the US expired 20 October 2018 and BONESUPPORT's new distribution network, with currently 25 independent distributors, has started selling CERAMENT BVF from 22 October
"The preparations and the execution of our growth strategy is progressing as planned. We are confident that we are well placed to deliver strong sales growth now that we have created our new own distribution structure in the US and have expanded our sales organization in Europe."
Emil Billbäck, CEO
| KEY FIGURES | Jul– Sep | Jan – Sep | 12 months | |||
|---|---|---|---|---|---|---|
| 2018 | 2017 | 2018 | 2017 | LTM | 2017 | |
| Net Sales (SEKm) | 14.2 | 32.7 | 73.5 | 102.3 | 100.6 | 129.3 |
| Sales Growth (%) 1 | -56.4 | 23.1 | -28.1 | 36.4 | -23.8 | 23.6 |
| Gross Profit (SEKm) | 13.0 | 28.7 | 63.1 | 89.9 | 85.6 | 112.4 |
| Gross margin (%)1 | 91.0 | 87.8 | 85.9 | 87.9 | 85.2 | 87.0 |
| Operating loss (SEKm) | -57.1 | -20.1 | -128.1 | -65.9 | -161.4 | -99.3 |
| Loss for the period (SEKm) | -57.5 | -22.9 | -129.5 | -77.5 | -181.0 | -128.9 |
| Equity at period end (SEKm) | 325.0 | 499.7 | 325.0 | 499.7 | 325,0 | 450.8 |
| 1 Net debt (SEKm) |
-313.2 | -476.3 | -313.2 | -476.3 | -313.2 | -434.7 |
| 1 Operating cash flow (SEKm) |
-54.4 | -35.8 | -121.3 | -81.8 | -147.0 | -107.5 |
| Cash at period end (SEKm) | 313.2 | 567.6 | 313.2 | 567,6 | 313.2 | 533.4 |
| Earnings per share (SEK)2 | -1.13 | -0.47 | -2.55 | -2.13 | -3.66 | -3.24 |
1 APM: Alternative Performance Measures, see financial definitions on page 15
2 Before dilution and consolidation of shares 5:1
In May 2018, we terminated the US distribution agreement with Zimmer Biomet (ZB) to establish our own commercial platform which would allow us to more aggressively penetrate this significant market opportunity. We have been successful in attracting very competent med-tech distributors in the US, which
have more than 500 sales representatives, having well established relations with orthopedic surgeons.
There were no new orders from ZB in the quarter, which was expected given our termination of the agreement. We started selling CERAMENT BVF through our new distributors on 22 October.
We continue to see strong sales growth in Europe. However, there is still a significant number of large cities and other regions where our CERAMENT products have low market penetration. We announced in May that we plan to double the size of European sales force before the year end. These recruitments progressed during Q3 to accelerate market penetration, especially in the trauma segment, a very significant opportunity for CERAMENT. Further hires are expected in Q4 and we expect to see a gradual increase in sales growth from the beginning of 2019.
Europe grew by 29% in the quarter, driven by the antibiotic eluting products, CERAMENT G and CERAMENT V.
At the annual European Bone and Joint Infection Society (EBJIS) meeting in Helsinki 6-8 September, no less than 10 independent scientific presentations were held showing the many advantages of CERAMENT. Among others, positive results were presented on bone remodeling and the successful prevention of bone fracture infections when using CERAMENT G.
The FORTIFY study, which will be the basis for our planned CERAMENT G registration application in the US, remains in patient rectruitment phase. The CERTiFy study, which is the first clinical study of its kind to compare a synthethic bone graft substitute (CERAMENT BVF) with autograft is completed. Top-line results are expected to be announced by the end of 2018 with scientific publication planned for the beginning of 2019.
In the short term we intend to broaden our offering with products that are complementary to CERAMENT. With focus on the US market, we plan to launch the demineralized bone matrix products from MTF Biologics Inc. at the end of Q1 2019. This will be followed by a launch in Q2 2019 of a number of products which has been developed by Collagen Matrix Inc.
In September BONESUPPORT held Capital Market Days in Stockholm and London. During these events, part of the management team highlighted the many growth initiatives that were launched recently as well as provided an update on the progress of the clinical studies and activities to generate health economic data to confirm CERAMENT's strong market position. The presentation held in Stockholm was recorded and is available on BONESUPPORT's home page.
BONESUPPORT's high ambition in the US, lead to the decision to create our own distribution network of independent distributors. Hence, 2018 will be a transition year with a temporary decline in sales. Thereafter, we expect strong sales growth in 2019 followed by annual sales growth rates around 40%. BONESUPPORT is well funded to execute its strategy.
CEO Emil Billbäck
BONESUPPORT's strategy comprises the following key components:
Leading clinical evidence and HEOR data
Effective commercial platform
BONESUPPORT has an innovative, unique and differentiated product offering with CERAMENT BVF and the antibiotic eluting 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:
In addition to the portfolio mentioned above, BONESUPPORT is looking at a number of near-term opportunities including complementary products to CERAMENT and from further product development of the CERAMENT platform. These include CERAMENT in other formulations and in combination with other products. 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 it entered 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 created the industry's leading clinical database, with more than 130 publications related to CERAMENT.
At the annual European Bone & Joint Infection Society (EBJIS) meeting in Helsinki in September 10 independent scientific papers were presented showing clinical result with CERAMENT G and CERAMENT V in the indications trauma, chronic osteomyelitis and diabetic foot. The papers showed among others significantly better bone healing from the use of CERAMENT G versus Calcium sulfate, histology validated bone remodelling and treatment outcome of CERAMENT G on chronic bone infection.
| STUDY | Feasibility | Initiated study | FPI | LPI | FDA Filing |
|---|---|---|---|---|---|
| FORTIFY (US, DE, UK, PL - G) | |||||
| STUDY | Feasibility | Initiated study | FPI | LPI | Publication |
| CERTiFy (DE) – BVF | |||||
| DF (Diabetic Foot, IT – G) | |||||
| RA (Revision Artroplasty, DE – G,V) |
The FORTIFY study is an IDE study to support a PMA filing for CERAMENT G in the US. The study is targeting the enrollment of up to 230 patients at up to 30 centers globally, of which 15 are in the US. Positive results from the study and subsequent
FDA approval could provide CERAMENT G with access to a significant commercial opportunity in the US market. Patient enrollment is proceeding according to plan with a PMA filing expected in 2020.
The CERTiFy study compares CERAMENT BVF with autograft for tibial fractures. Positive results from this study could lead to CERAMENT BVF becoming established as a more favourable treatment standard than autograft. The last patient in the CERTiFy study was enrolled (total 136) in December 2017 and patient follow up and evaluation is now ongoing. Initial results from the study are expected at the end of 2018 and a scientific publication is planned for early 2019.
The Diabetic Foot (DF) study in Italy is evaluating the effect of CERAMENT G & V for patients with diabetic foot. All 35 patients have now been enrolled and treated, and a manuscript of the results will be submitted to a scientific journal in the coming weeks. Positive results from this study, could mean that CERAMENT G or CERAMENT V will be used more often to reduce infections and amputations in this patient population.
BONESUPPORT is planning a Revision Arthroplasty study in Germany which will evaluate the effect of CERAMENT G for patients with periprosthethic joint infection (PJI). Patients will be treated via a one stage exchange of the implants, using CERAMENT G to fill gaps and voids around the prostheses and to promote and protect bone healing in the hip or knee. The study is planned to recruit 40 patients, with the first patient expected to be recruited in early 2019.
It was decided not to go ahead with the planned Chronic Osteomyelitis (CO) study in France before patient recruitment was started, as the cost, scope and the study timeline no longer met the requirements of the Company.
BONESUPPORT is working actively to develop data showing the positive health economic effects of using BONESUPPORT's products. It is becoming more important to show these economic benefits in relation to the registration, pricing and adoption of our products.
The Company is currently conducting a comparable study on total treatment cost of chronic bone infections at the Nuffield Orthopaedic Centre, Oxford University Hospital, UK. The study is designed to compare the total costs to the NHS (National Health Service) of treating Osteomyelitis patients over a five-year period 2013-2017. Initial data from this study have shown that using CERAMENT G in a single stage procedure successfully treats chronic osteomyelitis and reduces the length of stay and the number of procedures needed. The full economic analysis from this study is expected in the coming months. Data from the study could be used in several countries actively working to reduce the costs of managing patients with chronic osteomyelitis.
BONESUPPORT's commercial efforts are focused on larger clinics, such as university clinics. This focus facilitates effective market promotion which is designed to drive product adoption and to increase market penetration. In time, this approach is expected to generate higher sales from smaller clinics as they adopt the clinical approaches used by the larger clinics.
BONESUPPORT has recently recruited product specialists/sales reps focusing on trauma, particularly in the UK, Germany and Sweden as part of its plans to double the number of sales reps by the end of 2018 compared to the beginning of the year. Three new sales reps were recruited in the quarter. We expect this increase, together with a more focused steering and prioritization, will generate positive effects on the European sales from 2019 and onwards.
BONESUPPORT sees opportunities to expand in larger markets outside the US and Europe, such as China, Japan, India, South Korea and Australia, subject to regulatory procedures and registrations.
The focus in North America is the US market, where up until recently CERAMENT BVF has been distributed via Zimmer Biomet (ZB). BONESUPPORT terminated the agreement with ZB in May and announced that the company planned to set up its own distribution structure with independent distributors. ZB's exclusivity was discontinued 20 October 2018. BONESUPPORT's own organization in the US consists of 21 employees in conjunction with the new distributors to drive the market penetration of CERAMENT BVF.
This new distribution platform will allow BONESUPPORT to increase its market reach for the target group for CERAMENT BVF.
| Jul – Sep | Jan - Sep | |||||
|---|---|---|---|---|---|---|
| (SEKm) | 2018 | 2017 | 2018 R |
2017 | 2017 | |
| Net Sales | 0.0 | 21.6 | 29.9 | 65.6 | 78.1 | |
| Gross profit | 0.0 | 19.3 | 25.9 | 59.2 | 69.9 | |
| Contribution | -20.2 | 6.6 | -28.8 | 22.3 | 18.8 |
There were no sales for the segment as ZB did not place any new orders as a result of BONESUPPORTs termination of the distribution agreement. Therefore, we also do not any longer receive any end-user data. Net sales per quarter is presented below.
The contribution from the segment was SEK -20.2 million (6.6). The loss was due to no sales in the quarter.
Sales and marketing costs increased to SEK 13.9 million (8.0) in Q3 due to investment in our US commercial organization ahead of the new distribution structure and a higher level of marketing activities. R&D expenses increased to SEK 6.3 million (4.7), due to increased patient recruitment in the FORTIFY study.
Net sales amounted to SEK 29.9 million, a decrease of 54% compared to 2017. The sales decrease was caused by ZB's internal supply problems as well as the negative effect of our termination of the ZB agreement.
The contribution amounted to SEK -28.8 million (22.3). The negative contribution is due to the combination of lower sales and increased costs as we strengthened the organization in connection with the new distribution structure.
In Europe, CERAMENT is sold via a combination of the company's own direct sales force and distributors. BONESUPPORT currently employs 22 people in its commercial organization in the UK, Germany, Switzerland, Sweden and Denmark and works with specialty distributors in a further eight markets. In Rest of World (ROW), the Company's products are sold solely via distributors.
During the quarter additional sales people have been hired in among others Germany, England and the Nordics, with the ambition of almost doubling the sales force before year end. This investment enables a more aggressive market promotion towards the segment trauma, which holds a major potential for CERAMENT.
| Jul - Sep | Jan - Sep | |||||
|---|---|---|---|---|---|---|
| (SEKm) | 2018 | 2017 | 2018 R |
2017 | FY 2017 |
|
| Net Sales | 14.2 | 11.1 | 43.6 | 36.8 | 51.2 | |
| Gross profit | 13.0 | 9.4 | 37.2 | 30.7 | 42.5 | |
| Contribution | -2.6 | -3.6 | -4.5 | -8.4 | -7.6 |
Net Sales for the segment increased by 29% compared to Q3 2017 and amounted to SEK 14.2 million. The growth in Europe was 29% and could have been higher but for vacancies in our sales organization. Sales in our five direct sales countries in Europe accounted for 85% of total sales in the segment, driven by increased use of the antibiotic eluting products CERAMENT G and CERAMENT V, which increased by 35% in the quarter. Net sales per quarter is presented below (SEKm).
The contribution from the segment was SEK -2.6 million (-3.6). The improved contribution is mainly due to higher sales in the period, SEK 14.2 million (11.1). The improved contribution was also the result of a higher gross margin 91.0% (84.9) due to a favorable product mix based on the growth of CERAMENT G and CERAMENT V in the direct markets. Sales and marketing costs increased to SEK 15.6 million (12.9) due to recruitment costs and new employees within the sales organization in Europe.
Net Sales in the segment increased 19% compared to the same period last year and amounted to SEK 43.6 million (36.7). The growth in Europe was 26%. The sales growth was driven by greater use of our antibiotic-eluting products at big hospitals mainly in countries with direct sales.
The contribution amounted to SEK -4.5 million (-8.4). The positive development compared to the same period last year is mainly due to increased sales.
Net sales amounted to SEK 14.2 million (32.7), a decrease of 56%. The segment EUROW increased 29% to SEK 14.2 million (11.1), while the NA-segment had no sales as a result of our termination of the distribution agreement in the US. The main sales driver in Europe is the greater use of CERAMENT G and CERAMENT V. Further details are presented in the segment sections. The currency translation effect was positive by SEK 1.1 million. Sales per quarter and LTM are presented on the right (SEKm).
Cost of sales amounted to SEK 1.3 million (4.0) leading to a gross margin of 91.0% (87.8). The gross margin increased due to a higher relative share of sales from the drug eluting products in Europe.
Selling expenses amounted to SEK 35.1 million (24.4), an increase of 44%. Employee cost was SEK 18.7 million (12.0). Expenses increased in both segments, with NA increasing by 74% to SEK 13.9 million (8.0), driven by the growth in our sales organization and more marketing activities. EUROW increased by 21% to SEK 15.6 million (12.9) due to recruitment expenses and expansion of the sales organization. Other selling expenses, not allocated to a specific segment, increased to SEK 5.6 million (3.5).
R&D expenses amounted to SEK 16.4 million (12.8), an increase of 28%. Employee cost was SEK 5.7 million (4.7), driven by strengthening of the development function. NA increased by 34% to SEK 6.3 million (4.7) and are mainly related to increased costs connected to the FORTIFY study. Other R&D costs amounted to SEK 10.1 MSEK (8.1) and consisted of general R&D activities and ongoing clinical studies and further progress of the pipeline, not related to a specific segment.
Administrative expenses amounted to SEK 17.5 million (11.1) of which employee costs amounted to SEK 11.0 million (7.0). The employee costs consisted of SEK 4.2 million (3.8) related to share incentive programs, SEK 2.1 million related to additional salary costs for the resigning CFO and SEK 4.7 million (3.2) related to other personnel costs. Other costs amounted to SEK 6.5 million (4.1) with the increase being due to various projects and the new structure in the US.
Other income and expenses mainly consist of exchange rate gains and losses on working capital. Other operating income amounted to SEK 1.8 million (1.0) and other operating expenses amounted to SEK -2.9 million (-1.5) in the quarter.
The operating result amounted to SEK -57.1 million (-20.1). The increased loss was mainly due to no sales in the US in combination with higher operating costs of SEK 70.1 million (48.8), mainly due to to increased number of employees in US and higher administration expenses. The transaction currency effect was not significant.
Net financial items amounted to SEK -0.0 million (-2.4). There were no loan related interest expenses since the Kreos Capital loan was repaid in the first quarter 2018.
For the reasons disclosed above, the loss for the quarter amounted to SEK -57.5 million (-22.9), which corresponded to earnings per share of SEK -1.13 (-0.47).
Net sales amounted to SEK 73,5 million (102,3), a decrease of 28% mainly caused by lower sales in US due to the reasons described above.
Operating result was SEK -128,1 million (-65,9) impacted by lower sales, recruitments in US, increased project costs in marketing and clinical studies.
For the reasons disclosed above, the loss for the quarter amounted to SEK -129,5 million (-77,5). The outcome was positively impacted by lower interest costs due to repayment of loan to Kreos Capital in February. The result per share amounted to SEK -2.55 (-2.13).
| Financial position | 30 Sep | ||||
|---|---|---|---|---|---|
| (SEKm) | 2018 | 2017 | 2017 | ||
| Cash and cash equivalents | 313.2 | 567.6 | 533.4 | ||
| Interest-bearing debt | 0.0 | 91.4 | 98.6 | ||
| Net debt | -313.,2 | -476.3 | -434.7 | ||
| Equity | 325.0 | 499.7 | 450.8 |
Cash at period end was SEK 313.2 million, a decrease of SEK 220.2 million from beginning of the year. The change is related to the operating cash flow of SEK -121.3 million and SEK -98.9 million from financing activities. The last part is the result of the repayment of the loan from Kreos Capital of SEK 93.3, the termination fee and accrued interest of SEK 8.7 million and prepaid loan on SEK 3.4 million.
| Cash flow | Jul – Sep | Jan – Sep | FY | ||
|---|---|---|---|---|---|
| (SEKm) | 2018 | 2017 | 2018 | 2017 | 2017 |
| Operations | -54.4 | -35.8 | -121.3 | -81.8 | -107.5 |
| Investing activities | -0.6 | -2.4 | -1.0 | -3.3 | -4.7 |
| Financing activities | 0.5 | 47.9 | -98.9 | 512.3 | 504.8 |
The operating cash flow in the period was SEK -54.4 million (-35.8), mainly attributable to the operating loss of SEK -57.1 million (-20.1).
The parent company BONESUPPORT HOLDING AB (publ) is a holding company. The parent company generated SEK 13.7 (0.0) million in sales related to internal services to subsidiaries. The loss in the quarter was SEK -4.8 million (-2.1). There were no investments during the period.
The BONESUPPORT Group had 70 (59) FTE (Full-Time Equivalents) January-September, of whom 21 (17) were in R&D.
On 18 July Michael Diefenbeck, Chief Medical Officer, took over the responsibility for R&D and Clinical Affairs. Jerry Chang, previous Executive Vice President R&D and Clinical Affairs, has left the company.
Håkan Johansson was hired as new CFO, replacing Björn Westberg, starting 12 November.
BONESUPPORT signed an agreement 2 August with MTF Biologics Inc. to strengthen the product offering in the US by gaining access to two bone graft substitutes containing dematerialized bone matrix (DBM). These products will add to our offering when they are launched in 2019 and forward.
Zimmer Biomet's exclusivity for distribution of CERAMENT BVF in US expired on 20 October 2018, and BONESUPPORT's new network of 25 independent distributors started selling CERMAMENT BVF from 22 October 2018.
There is one type of share in the Company. The quota value per share is SEK 0.625. At 30 September 2018, the total number of shares in the Company amounted to 51,555,917 and the number of shareholders was 1,876. The larger shareholders are presented below.
| Shareholders 30 September 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 | 41.1% |
The increase in number of shares from 1 January to 30 September was 1,278,027 was all 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 employed by or holds an assignment within the Group. The number of outstanding options as of 30 September 2018 amounted to 7,427,690 where five options can be converted to one share. A summary of the ESOPs appears in the Annual Report 2017, note 12 and in note 8 in this report.
The Annual shareholders meeting 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 620,000 performance shares during first quarter 2022. More information is provided in these programs in note 8.
There were three other warrant programs as of 30 September 2018 with the latest program being resolved at the Annual shareholders' meeting on 22 May 2018 and amounts to 361,096 warrants (each warrant gives the right to convert into 1 share). Further information on this program can be found on the company's website. The number of warrants in the
other two programs amounted to 4,245,568 as of 30 September 2018 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.
| 27 February 2019 | 2018 Year End report |
|---|---|
| 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:
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 interim 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)
This information constitutes information that BONESUPPORT HOLDING AB (publ) is obliged to make public pursuant to the EU Market Abuse Regulation. The information was submitted for publication at 08.00 CET on 7 November 2018. This Interim Report and other financial information about BONESUPPORT HOLDING AB (publ) are available at www.bonesupport.com.
| Jul - Sep | Jan – Sep | FY | ||||
|---|---|---|---|---|---|---|
| (SEK t) | Note | 2018 | 2017 | 2018 | 2017 | 2017 |
| Net Sales | 7 | 14,246 | 32,677 | 73,515 | 102,262 | 129,301 |
| Cost of Sales | -1,287 | -3,989 | -10,937 | -12,358 | -16,871 | |
| Gross profit | 12,959 | 28,688 | 63,118 | 89,904 | 112,430 | |
| Selling expenses | -35,086 | -24,368 | -94,551 | -71,370 | -92,858 | |
| Research and development expenses | -16,426 | -12,834 | -48,457 | -40,888 | -60,636 | |
| Administrative expenses | 3,8 | -17,531 | -11,149 | -49,002 | -41,999 | -57,478 |
| Other operating income | 1,818 | 1,007 | 7,279 | 3,170 | 5,282 | |
| Other operating expenses | -2,851 | -1,457 | -6,454 | -4,722 | -6,025 | |
| Operating loss | 7 | -57,117 | -20,113 | -128,067 | -65,905 | -99,285 |
| Net financial items | -4 | -2,373 | -506 | -11,208 | -28,577 | |
| Loss before income tax | 7 | -57,121 | -22,486 | -128,573 | -77,113 | -127,862 |
| Income tax | -37 | -401 | -907 | -406 | -1,007 | |
| Loss for the period | -57,498 | -22,887 | -129,480 | -77,519 | -128,869 |
The loss for the period is fully attributed to the shareholders of the parent company.
| Jul – Sep | Jan – Sep | FY | ||||
|---|---|---|---|---|---|---|
| (SEK) | Note | 2018 | 2017 | 2018 | 2017 | 2017 |
| Equityholders of the parent | ||||||
| Earnings per share before dilution (SEK) | -1.13 | -0.47 | -2.55 | -2.13 | -3.24 | |
| Earnings per share after dilution (SEK)3 | -1.13 | -0.47 | -2.55 | -2.13 | -3.24 | |
| Loss for the period (SEK 1,000) | -57.498 | -22,887 | -129,480 | -77,519 | -128,869 | |
| Average number of shares (1,000)4 | 50.836 | 48,852 | 50,738 | 36,935 | 39,826 |
| Jul – Sep | Jan - Sep | FY | ||||
|---|---|---|---|---|---|---|
| (SEK t) | Note | 2018 | 2017 | 2018 | 2017 | 2017 |
| Loss for the period | -57,498 | -22,887 | -129,480 | -77,519 | -128,869 | |
| Other comprehensive income | ||||||
| Exchange differences | -69 | -48 | 243 | -42 | 2 | |
| Total comprehensive income for the period | -57,567 | -22,935 | -129,237 | -77,561 | -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.
| 30 Sep | 31 Dec | |||
|---|---|---|---|---|
| (SEK t) | Note | 2018 | 2017 | 2017 |
| ASSETS | ||||
| Intangible assets | 4,995 | 4,661 | 5,244 | |
| Tangible assets | 3,154 | 2,749 | 3,099 | |
| Other non-current assets | 6 | 366 | 168 | 248 |
| Total non-current assets | 8,515 | 7,576 | 8,591 | |
| Inventories | 25,923 | 19,458 | 22,079 | |
| Trade receivables | 6 | 11,088 | 33,493 | 20,678 |
| Other operating receivables | 6 | 10,750 | 9,506 | 11,969 |
| Cash and cash equivalents | 6 | 313,168 | 567,637 | 533,367 |
| Total current assets | 360,849 | 630.094 | 588,093 | |
| TOTAL ASSETS | 369,364 | 637,672 | 596,684 | |
| EQUITY AND LIABILITIES | ||||
| Equity attributable to equity holders of the parent | 4 | 325,024 | 499,722 | 450,786 |
| Non-current borrowings | 6 | 0 | 61,462 | 0 |
| Provisions | 173 | 164 | 173 | |
| Total non-current liabilities | 173 | 61,626 | 173 | |
| Current borrowings | 6 | 0 | 29,895 | 98,620 |
| Trade payables | 6 | 7,929 | 8,681 | 11,553 |
| Other operating liabilities | 6 | 36,238 | 37,748 | 35,552 |
| Total current liabilities | 44,167 | 76,324 | 145,725 | |
| TOTAL EQUITY AND LIABILITIES | 369,364 | 637,672 | 596,684 |
| (SEK t) | 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–September 2017 | -42 | -77,519 | -77,561 | ||
| Transactions with equity holders: | |||||
| New share issue | 12,900 | 557,002 | 569,902 | ||
| Transaction costs, new share issue | -38,656 | -38,656 | |||
| Allotted warrants | 1,562 | 1,562 | |||
| Share-based payment transactions | 10,171 | 10,171 | |||
| Equity 30 September 2017 | 31,032 | 1,189,460 | -348 | -720,422 | 499,722 |
| Loss October – December 2017 | 44 | -51,350 | -51,306 | ||
| Transactions with equity holders: | |||||
| New share issue | 392 | 392 | |||
| Transaction costst, new share issue | -445 | -445 | |||
| Share-based payment transactions | 2,423 | 2,423 | |||
| Equity 1 January 2018 | 31,424 | 1,189,015 | -304 | -769,349 | 450,786 |
| Loss Januari – September 2018 | 243 | -129,480 | -129,237 | ||
| Transactions with equity holders: | |||||
| New share issue | 799 | 799 | |||
| Transaction costst, new share issue | -1,860 | -1,860 | |||
| Allotted warrants | 740 | 740 | |||
| Share-based payment transactions | 3,796 | 3,796 | |||
| Equity 30 September 2018 | 32,223 | 1,187,895 | -61 | -895,033 | 325,024 |
| Jul – Sep | Jan – Sep | FY | |||
|---|---|---|---|---|---|
| (SEK t) | 2018 | 2017 | 2018 | 2017 | 2017 |
| Operating loss | -57,117 | -20,113 | -128,067 | -65,905 | -99,285 |
| Non-cash adjustments | |||||
| -Share-based transactions | 917 | 2,992 | 3,796 | 10,171 | 12,594 |
| -Other | 1,459 | 561 | 780 | 2,012 | 4,113 |
| Interest received | 0 | 0 | 0 | 0 | 3 |
| Interest paid | -4 | -2,809 | -863 | -9,035 | -11,740 |
| Realized exchange gains on loans | 0 | 0 | 558 | 0 | 0 |
| Income tax paid | -5 | 13 | -1,016 | -526 | -737 |
| Net cash flows from operating activities | -54,750 | -19,356 | -124,812 | -63,283 | -95,052 |
| before changes in working capital | |||||
| Changes in working capital | 400 | -16,461 | 3,542 | -18,562 | -12,482 |
| Net cash flows from operating activities | -54,350 | -35,817 | -121,270 | -81,845 | -107,534 |
| Net cash flows from investing activities | -638 | -2,415 | -1,028 | -3,326 | -4,688 |
| Net cash flows from financing activities | 465 | 47,860 | -98,941 | 512,290 | 504,833 |
| Total CF for the period | -54,523 | 9,628 | -221,239 | 427,119 | 392,611 |
| Cash and cash equivalents at beginning of | 368,357 | 558,288 | 533,367 | 141,501 | 141,501 |
| period | |||||
| Net foreign exchange difference on cash and | -666 | -279 | 1,040 | -983 | -745 |
| equivalents | |||||
| Cash and cash equivalents at period end | 313,168 | 567,637 | 313,168 | 567,637 | 533,367 |
| Jul - Sep | Jan - Sep | FY | |||
|---|---|---|---|---|---|
| (SEK t) | 2018 | 2017 | 2018 | 2017 | 2017 |
| Net Sales | 13,711 | 0 | 36,241 | 0 | 37,873 |
| Administrative expenses | -18,689 | -1,301 | -51,278 | -3,879 | -50,516 |
| Other income | 65 | 0 | 128 | 23 | 23 |
| Other expenses | -142 | 0 | -626 | -33 | -33 |
| Operating loss | -5,055 | -1,301 | -15,535 | -3,889 | -12,653 |
| Net financial items | 210 | -817 | 1,439 | -2,865 | -3,162 |
| Loss before income tax | -4,845 | -2,118 | -14,096 | -6,754 | -15,815 |
| Income tax | 0 | 0 | 0 | 0 | 0 |
| Loss for the period | -4,845 | -2,118 | -14,096 | -6,754 | -15,815 |
Parent company loss for the period equals comprehensive income
| 30 Sep | 31 Dec | ||
|---|---|---|---|
| (SEK t) | 2018 | 2017 | 2017 |
| ASSETS | |||
| Non-current financial assets | 604,652 | 453,912 | 503,912 |
| Other receivables | 27,768 | 463 | 0 |
| Prepaid expenses | 1,068 | 864 | 715 |
| Cash | 288,987 | 559,151 | 513,945 |
| TOTAL ASSETS | 922,475 | 1,014,390 | 1,018,572 |
| EQUITY AND LIABILITIES | |||
| Equity | |||
| Restricted equity | 32,222 | 31,032 | 31,424 |
| Unrestricted equity | 874,101 | 898,824 | 889,317 |
| Total equity | 906,323 | 929,856 | 920,741 |
| Current liabilities | 16,152 | 84,534 | 97,831 |
| TOTAL EQUITY AND LIABILITIES | 922,475 | 1,014,390 | 1,018,572 |
| 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 |
| CF | Cash Flow |
| 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 |
| Exemption from regulatory approval to conduct clinical studies on a medical device | |
| IDE (Investigational | |
| 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 |
| Q3 | Third quarter |
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 and also forms 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) | 30 Sep 2018 | 30 Sep 2017 | 31 Dec 2017 |
|---|---|---|---|
| Non-current borrowing | 0.0 | 61.5 | 0.0 |
| Current borrowing | 0.0 | 29.9 | 98.6 |
| Cash and cash equivalents | -313.2 | -567.6 | -533.4 |
| Net debt | -313.2 | -476.3 | -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 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 2017. New or amended standards or interpretations of standards effective as of 1 January 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 performace obligation for which revenue is recognized at time of delivery. IFRS 16 Leases was adopted by the EU on 31 October 2017 and is applicable from 1 January 2019. The implementation of IFRS 16 will impact the Financial Reports but the impact will not be significant. Effects are currently calculated and will be disclosed in the Year-End report.
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 - Sep | |||
|---|---|---|---|
| Related | Service (SEK 1,000) | 2018 | 2017 |
| Seagles AB (owned by Lars Lidgren) | Consultancy, development projects | - | 44 |
| 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 | 1,278,027 | Converted employee options | -1,278,027 |
| Returned employee options | -722,187 | ||
| Potential performance shares | 435,000 | ||
| Issued warrants | 361,096 | ||
| 30 September 2018 | 55,555,917 | 30 September 2018 | 3,130,750 |
Further information on page 9.
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 88.4 million at 30 September 2017. The book value was SEK 91.4 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. All financial instruments are within hierarchy level 2.
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.
Sales in Sweden amounted to SEK 1.3 (0.9). The US market (part of NA) is, along with the markets Germany and UK, the only markets with sales of more than 10% each of the Group's total sales. Sales in the US market amounted to SEK 0.0 million (21.6), where the customer is an American distributor. No other customer accounts for more than 10% of Group Net Sales. The sales per product group is presented below.
| Profit and loss items | Jul - Sep 2018 | Jul - Sep 2017 | ||||||
|---|---|---|---|---|---|---|---|---|
| (SEK 1,000) | NA | EUROW | Other | Total | NA | EUROW | Other | Total |
| Net Sales | 0 | 14,246 | 14,246 | 21,600 | 11,077 | 32,677 | ||
| Cost of Sales | 0 | -1,287 | -1,287 | -2,315 | -1,674 | -3,989 | ||
| Gross profit | 0 | 12,959 | 12,959 | 19,285 | 9,403 | 28,688 | ||
| Operative costs | -20,209 | -15,588 | -35,797 | -12,729 | -12,972 | -25,701 | ||
| Contribution | -20,209 | -2,629 | -22,838 | 6,556 | -3,569 | 2,987 | ||
| Other operating items | -34,279 | -34,279 | -23,100 | -23,100 | ||||
| Operating result | -20,209 | -2,629 | -34,279 | -57,117 | 6,556 | -3,569 | -23,100 | -20,113 |
| Net financial items | -4 | -4 | -2,373 | -2,373 | ||||
| Result before taxes | -20,209 | -2,629 | -34,283 | -57,121 | 6,556 | -3,569 | -25,473 | -22,486 |
| Product group | Jul – Sep 2018 | Jul – Sep 2017 | ||||||
| (SEK 1,000) | NA | EUROW | Total | NA | EUROW | Total | ||
| CERAMENT BVF | 0 | 2,241 | 2,241 | 21,600 | 2,206 | 23,806 | ||
| CERAMENT drug eluting5 | - | 12,005 | 12,005 | - | 8,871 | 8,871 | ||
| TOTAL | - | 14,246 | 14,246 | 21,600 | 11,077 | 32,677 |
| Profit and loss items | Jan - Sep 2018 | Jan - Sep 2017 | ||||||
|---|---|---|---|---|---|---|---|---|
| (SEK 1,000) | NA | EUROW | Other | Total | NA | EUROW | Other | Total |
| Net Sales | 29,925 | 43,590 | 73,515 | 65,575 | 36,687 | 102,262 | ||
| Cost of Sales | -4,007 | -6,390 | -10,937 | -6,348 | -6,010 | -12,358 | ||
| Gross profit | 25,918 | 37,200 | 63,118 | 59,227 | 30,677 | 89,904 | ||
| Operative costs | -54,028 | -41,680 | -95,708 | -36,901 | -39,050 | -75,951 | ||
| Contribution | -28,810 | -4,480 | -32,590 | 22,326 | -8,373 | 13,953 | ||
| Other operating items | -95,477 | -95,477 | -79,858 | -79,858 | ||||
| Operating result | -28,810 | -4,480 | -95,477 | -128,067 | 22,326 | -8,373 | -79,858 | -65,905 |
| Net financial items | -506 | -506 | -11,208 | -11,208 | ||||
| Result before taxes | -28,810 | -4,480 | -95,983 | -128,573 | 22,326 | -8,373 | -91,066 | -77,113 |
| Product group | Jan – Sep 2018 | Jan – Sep 2017 | ||||||
| (SEK 1,000) | NA | EUROW | Total | NA | EUROW | Total | ||
| CERAMENT BVF | 29,925 | 8,122 | 38,047 | 65,575 | 8,960 | 74,535 | ||
| CERAMENT drug eluting5 | - | 35,468 | 35,468 | - | 27,727 | 27,727 | ||
| TOTAL | 29,925 | 43,590 | 73,515 | 65,575 | 36,687 | 102,262 |
5 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 2.3 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.
| ESOP's | 6 No of options |
Equal to no of shares | WAEP6 |
|---|---|---|---|
| Balance 1 jan 2018 | 17,428,768 | 3,485,754 | 5.88 |
| Converted | -6,390,145 | -1,278,029 | 0.63 |
| Due/cancelled | -3,610,933 | -722,187 | 9.91 |
| Balance 30 Sep 2018 | 7,427,690 | 1,458,538 | 8.48 |
| Performance shares | No of options | Equal to no of shares | WAEP7 |
|---|---|---|---|
| Balance 1 jan 2018 | - | - | - |
| Issued 8 | 435,000 | 435,000 | 0.00 |
| Balance 30 Sep 2018 | 435,000 | 435,000 | 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 30 Sep 2018 | 4,606,664 | 1,210,210 | 20.87 |
6 Unallocated poptions amounts to 3,776,838
7 Weighted Average Exercise Price (SEK) per share on outstanding options
8 Additional allocation may be done during the remaing allocation period until 31 December 2018
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 bio- ceramic 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 7 November at 10.00 CET, where CEO Emil Billbäck and CFO Björn Westberg 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 7 November. For further details regarding participation, see the investor pages at www.bonesupport.com
Emil Billbäck, CEO
T: +46 46 286 53 70
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.
BONESUPPORT HOLDING AB (publ), corporate identity number 556802-2171
Board of Directors BONESUPPORT HOLDING AB (publ)
We have reviewed the condensed interim report for BONESUPPORT HOLDING AB (publ) as at September 30, 2018 and for the nine months period then ended. The Board of Directors and the Managing Director are responsible for the preparation and presentation of this interim report in accordance with IAS 34 and the Swedish Annual Accounts Act. Our responsibility is to express a conclusion on this interim report based on our review.
We conducted our review in accordance with the International Standard on Review Engagements ISRE 2410 Review of Interim Financial Statements Performed by the Independent Auditor of the Entity. A review consists of making inquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing and other generally accepted auditing standards in Sweden. The procedures performed in a review do not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.
Based on our review, nothing has come to our attention that causes us to believe that the interim report is not prepared, in all material respects, in accordance with IAS 34 and the Swedish Annual Accounts Act regarding the Group, and in accordance with the Swedish Annual Accounts Act regarding the Parent Company.
Malmö, November 7, 2018
Ernst & Young AB
Johan Thuresson Authorized Public Accountant
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