Quarterly Report • Jul 26, 2018
Quarterly Report
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"In the quarter several significant strategic decisions were taken, including creating a new distribution structure in the US, accessing complementary products through in-licensing and almost doubling of our European sales force, which should create opportunities for increased market penetration in the years ahead." Emil Billbäck, CEO
| KEY FIGURES | Apr– Jun | Jan – Jun | 12 months | |||
|---|---|---|---|---|---|---|
| 2018 | 2017 | 2018 | 2017 | LTM | 2017 | |
| Net Sales (SEKm) | 28.2 | 37.1 | 59,3 | 69.6 | 119.0 | 129.3 |
| Sales Growth (%) 1 | -24.1 | 47.5 | -14,8 | 43.7 | -5.4 | 23.6 |
| Gross Profit (SEKm) | 24.6 | 32.4 | 50,2 | 61.2 | 101.4 | 112.4 |
| Gross margin (%)1 | 87.4 | 87.2 | 84.6 | 88.0 | 85.2 | 87.0 |
| Operating loss (SEKm) | -37.8 | -18.4 | -70.9 | -45.8 | -124.4 | -99.3 |
| Loss for the period (SEKm) | -38.2 | -23.5 | -72.0 | -54.6 | -146.2 | -128.9 |
| Equity at period end (SEKm) | 381.2 | 464.8 | 381.2 | 464.8 | 381.2 | 450.8 |
| 1 Net debt (SEKm) |
-368.4 | -459.5 | -368.4 | -459.5 | -368.4 | -434.7 |
| Operating cash flow (SEKm) | -30.6 | -13.9 | -66.9 | -46.0 | -128.4 | -107.5 |
| Cash at period end (SEKm) | 368.4 | 558.3 | 368.4 | 558.3 | 368.4 | 533.4 |
| Earnings per share (SEK)2 | -0.75 | -0,76 | -1.42 | -1.82 | -2.84 | -3.24 |
1 APM: Alternative Performance Meausures, see financial definitions on page 16
2 Before dilution and consolidation of shares 5:1
In May 2018, we terminated our current US distribution agreement with Zimmer Biomet (ZB) in order to create the commercial platformwhich allows us to more aggressively penetrate this market from 2019 onwards. This change willl lead to better access to existing and potential customers as our own network of independent distributors will have better reach to the relevant hospitals and clinics. We are currently in a prepare and build phase to ensure that we execute
this important strategic change in the best way. Our new network of distributors will start selling 20 October 2018. In parallel with this investment, we are strengthening our US sales and marketing organisationboth to support the new distributors and to increase our US market activities significantly.
Following our termination, ZB has cancelled a majority of their orders and started to deplete their current inventory. This is the main reason that the sales in the segment North America (NA) decreased by 40% in the second quarter.
We have seen strong sales growth in Europe in the last 36 months but there are still a significant number of large cities and other regions where our CERAMENT products generate limited or no sales. We announced in the quarter that we are doubling the European sales force to meet this opportunity, especially in various trauma indications. Recruitment of sales reps isrunning to plan with the initial objective to significantly strengthen our geographical coverage in Germany, among others, before the year end.
In Europe sales increased by 18% in the quarter, negatively affected by vacancies in the sales organization. The whole segment (Europe and Rest of World) saw only a 4% increase in sales mainly due to the impact of a large Indian order in the comparative quarter in 2017.
Our two most important clinical studies are progressing as planned. Patient follow-up continues in the CERTiFy study and patient recruitment in the FORTIFY study follows plan.
In the short term we intend to broaden our offering with products that are complementary to CERAMENT. With focus on the US market we strengthen and widen our product offering by our cooperation agreement with Collagen Matrix Inc. In addition, we are evaluating new formulations of CERAMENT that could be the basis for future combination products to treat a range of orthopaedic indications.
BONESUPPORT's management is now finalizing a strategic review and will present the results at the planned Capital Market Days to be held in Stockholm and London in September.
We see consequences from the review already. The quarter had many important strategic decisions being crucial to achieving our target of becoming a leading global company within orthobiologics. By taking control of our future in the US, we have significantly enhanced our growth potential. At the same time, we are strengthening the sales organisation in Europe and broadening our product offering – taken together I am confident that these initiatives will allow us to realize our long-term goals.
With the more ambitious aspirations for the US, triggering the decision to build an own network of independent distributors, 2018 will be a transitional year with a temporary dip in sales. Hereafter we expect a strong 2019 followed by annual growth rates around 40%. Bonesupport remains well funded to execute its strategy.
CEO Emil Billbäck
BONESUPPORT's strategy comprises the following key components:
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 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. 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 BONESUPPORT's three products. The clinical team is currently building a searchable database that would allow easy access to this valuable information in order to enhance BONESUPPORT's dialogue with potential and existing customers as well as payors.
The larger clinical studies being conducted are:
| Feasibility | Initiated study | FPI | LPI | Regulatory filing |
|---|---|---|---|---|
| Feasibility | Initiated study | FPI | LPI | Publication |
FPI: First Patient In, LPI: Last Patient In
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 for a PMA submission 2020.
The CERTiFy study compares CERAMENT BVF with autograft for tibial plateau fractures. Positive results from this study could lead to CERAMENT BVF taking market shares from the autograft segment. 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.
The Chronic Osteomyelitis (CO) study in France is a Company sponsored study in preparation phase with the purpose to evaluate the effect of CERAMENT G in patients suffering from chronic bone infections. Positive results from this study could mean that CERAMENT G would be used more often to treat this type of infection. The study is also designed to provide support for CERAMENT G to be included in the reimbursement system in France. The study plans to enroll 200 patients. BONESUPPORT is working closely with the French CRIOAC (Centre de Référence des Infections Ostéo-articulaires complexes) network and its scientific board, which is specialised in CO and periprosthetic joint infections.
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.
The Italian Revision Arthroplasty Study has been discontinued, due to the study's Prinicipal Investigator leaving the hospital at which it was being conducted. BONESUPPORT plans to initiate a new Revision Athroplasty study in Germany, which will focus on a one stage revision procedure, so will provide further insights into HEOR benefits, as well as the effect of CERAMENT G & V for patients receiving revision arthroplasty in the hip or knee. This study plans to enrol 40 patients, with the first patient expected to be enrolled before the end of 2018.
BONESUPPORT is working actively to develop data showing the positive health economic effects of using BONESUPPORT's products. It is also becoming more important to show these economic benefits in relation to the registration, pricing and adoption of our products.
BONESUPPORT's commercial efforts in Europe 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 and plans to double the number of sales reps by the end of 2018 compared to the beginning of the year.
BONESUPPORT sees opportunities to expand in larger markets outside the US and Europe, such as China, Japan, India, South Korea and Australia. The registration work for both CERAMENT BVF and CERAMENT G in Australia is currently ongoing.
The focus in North America is the US market, in which CERAMENT BVF to date is distributed via Zimmer Biomet (ZB) through its national network channel of 54 distributors (ZB's exclusivity period ends 20 October 2018 and the contract ends in May 2019). BONESUPPORT's commercial team of 14 people supports sales and customer relations. BONESUPPORT terminated the agreement with ZB in May and announced its plan to build a new network of independent distributors.
This new distribution platform will allow BONESUPPORT to increase its market penetration in the coming years. The new distributors will sell CERAMENT BVF from 20th October when Zimmer Biomets' exclusivity period ends. BONESUPPORTS' sales in June and the second half of 2018 will most certainly be impacted by the termination of the agreement with ZB, since it will probably look to sell down its current inventory. ZB can continue to sell CERAMENT BVF after 20 October until 20 May 2019, on a non-exclusive basis. BONESUPPORT is well prepared to implement its new commercial and distribution platform in the US.
| Apr – Jun | Jan - Jun | FY | |||
|---|---|---|---|---|---|
| (SEKm) | 2018 | 2017 | 2018 R |
2017 | 2017 |
| Net Sales | 14.0 | 23.5 | 29.9 | 44.0 | 78.1 |
| Gross profit | 12.4 | 21.2 | 25.9 | 39.9 | 69.9 |
| Contribution | -5.9 | 7.0 | -7.9 | 15.8 | 18.8 |
Net Sales for the segment decreased by 40% compared to Q2 2017 and amounted to SEK 14.0 million. The sales decline was mainly due to two reasons, first ZB decision to cancel already placed orders in June, and secondly the continuing hardware supply issues faced by ZB. Data covering the in-market use of CERAMENT BVF indicates that end-user sales for the quarter decreased by 5%, probably as a result of alternative priorities by ZB after the termination of the agreement. Net sales per quarter are presented below.
The contribution from the segment was SEK -5.9 million (7.0). The loss was due to both lower sales volumes and an unfavoarable product mix (more small sizes) meaning that the gross margin decreased to 88.6% (90.2).
Sales and marketing costs increased to SEK 10.1 million (6.7) in Q2 due to investment in our US commercial organization and a higher level of marketing activities. R&D expenses decreased to SEK 6.3 million (8.2), due to lower costs related to the FORTIFY study.
Net sales amounted to SEK 29.9 million, a decrease of 32% compared to 2017. Decrease in sales was caused by ZBs internal hardware supply problems as well as the termination of our contract with ZB. The contribution amounted to SEK - 7.9 million (15.8).
In Europe, CERAMENT is sold via a combination of its own direct sales force and distributors. BONESUPPORT currently employs 21 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 solely sold via distributors.
During Q2, BONESUPPORT attended many Society Meetings and conferences in Europe in which both Key Opinion Leaders (KOL) and other orthopaedic surgeons participated, among those were the "World Arthroplasty Congress" in Rome, a major event, which BONESUPPORT attended for the first time, with very good impact.
| Apr – Jun | Jan - Jun | |||||
|---|---|---|---|---|---|---|
| (SEKm) | 2018 | 2017 | 2018 R |
2017 | FY 2017 |
|
| Net Sales | 14.2 | 13.7 | 29.3 | 25.6 | 51.2 | |
| Gross profit | 12.2 | 11.2 | 24.2 | 21.3 | 42.5 | |
| Contribution | -1.0 | -2.8 | -1.9 | -4.8 | -7.6 |
Net Sales for the segment increased by 4% compared to Q2 2017 and amounted to SEK 14.2 million. The growth in Europe was 18% and was negatively impacted by vacancies in our sales organization. The sales in our five direct sales countries in Europe accounted for 84% of total sales in the segment. Sales in ROW were much lower in the period when compared to Q2 2017 which included an order from India amounting to SEK 1.4 million. CERAMENT G and CERAMENT V sales increased 15% in the quarter. Net sales per quarter are presented below (SEKm).
The contribution from the segment was SEK -1.0 million (-2.8). The improved contribution is mainly due to higher sales in the period, SEK 14.2 million (13.7). Sales and marketing costs were in line with the second quarter last year and amounted to SEK 13.0 million (12.7). The improved contribution was also impacted by a higher gross margin 85.9% (81.8) due to a favorable product mix based on the growth of CERAMENT G and CERAMENT V in the direct markets.
Net Sales in the segment increased 14% compared to the same period last year and amounted to SEK 29.3 million. The sales growth was driven by greater use of our antibioticeluting products at big hospitals mainly in countries with direct sales, except for Switzerland.
The contribution improved SEK 2.9 million due to increased sales.
Net sales amounted to SEK 28.2 million (37.1), a decrease of 24%. Europe and Rest of World (EUROW) increased 4% to SEK 14.2 million (13.7), while the North Americasegment decreased 40% to SEK 14.0 million (23.5). North America was still impacted by ZB's continuing logistic problems as well as the effects of the termination of our agreement. The main sales driver in Europe is the greater use of our drug eluting products. Further details are presented in the segment sections. The currency translation effect was positive by SEK 0.5 million. Sales per quarter and LTM are presented on the right (SEKm).
Cost of sales amounted to SEK 3.5 million (4.7) leading to a gross margin of 87.4% (87.2). Compared to second quarter 2017 the gross margin was a little bit lower in North America but it was offset by higher margin in EUROW.
Selling expenses amounted to SEK 31.8 million (22.2) an increase of 43% wherof SEK 16.7 million (12.9) was employee costs. Expenses increased in both segments, with NA increasing by 76% to SEK 11.8 million (6.7), driven by the growth in our sales organization and more marketing activities. EUROW increased by 18% to SEK 14.8 million (12.5). Other selling expenses, not allocated to a specific segment, increased to SEK 5.8 million (3.0) related to general marketing.
R&D expenses amounted to SEK 17.2 million (18.7), a decrease of 8%, of which SEK 7.6 million (5.3) were employee costs and increased due to strengthening the development function. North America decreased by 23% to SEK 6.3 million (8.2) and are mainly related to costs connected to the FORTIFY study. Other R&D costs amounted to SEK 10.9 MSEK (10.5) 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 14.9 million (9.2) of which employee costs amounted to SEK 4.8 million (7.3) and other costs amounted to SEK 10.1 million (1.9). The decrease of employee costs is due to the costs related to employee options, these were SEK 2.5 million higher in same period last year. Employee costs in Q2 2018 are also positively impacted by SEK 0.7 million due to adjustment of previous accrued costs regarding the former CEO. The increase in other costs is due to an adjustment of SEK -3.8 million in the second quarter last year, a recategorization of IPO costs, combined with higher costs this year due to administrative projects and the expansion of the organization in the US.
Other income and expenses mainly consist of exchange rate gains and losses on working capital. Other operating income amounted to SEK 2.5 million (1.3) and other operating expenses amounted to SEK 1.0 million (2.0) in the quarter.
The operating result amounted to SEK -37.8 million (-18.4). The increased loss was mainly due to the lower gross contribution which decreased by 24% and amounted to SEK 24.6 million (32.4) combined with higher operating expenses amounting to SEK 64.0 (50.1) mainly due 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 (-5.2). 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 -38.2 million (-23.5), which corresponded to earnings per share of SEK -0.75 (-0.76).
Net sales amounted to SEK 59.3 million (69.6), a decrease by 15% mainly caused by lower sales in US due to the reasons described above.
Operating result was SEK -70.9 million (-45.8) impacted by lower sales, recruitments in US, increased project costs in marketing and clinical studies and the one-time costs related to the former CEO (Q1) which amounted to SEK 5.5 million.
For the reasons disclosed above, the loss for the quarter amounted to SEK -72.0 million (-54.6). It was positively impacted by lower interest costs due to repayment of loan to Kreos Capital in February. The result per share amounted to SEK -1.42 (-1.82).
| Financial position | 30 Jun | 31 Dec | |
|---|---|---|---|
| (SEKm) | 2018 | 2017 | 2017 |
| Cash and cash equivalents | 368.4 | 558.3 | 533.4 |
| Interest-bearing debt | 0.0 | 98.8 | 98.6 |
| Net debt | -368.4 | -459.5 | -434.8 |
| Equity | 381.2 | 464.8 | 450.8 |
Cash at period end was SEK 368.4 million (558.3), a decrease since year end 2017 of SEK 165.0 million. The change is mainly related to the operating cash flow of SEK -66.9 million and SEK -99.4 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. Since Year end the equity has decreased by 69.6 MSEK, mainly due to the result of SEK -72.0 million.
| Cash flow | Apr – Jun | Jan – Jun | FY | ||
|---|---|---|---|---|---|
| (SEKm) | 2018 | 2017 | 2018 2017 |
||
| Operations | -30.6 | -13.9 | -66.9 | -46.0 | -107.5 |
| Investing activities | -0.2 | -0.3 | -0.4 | -0.9 | -4.7 |
| Financing activities | 0.7 | 469.5 | -99.4 | 464.4 | 504.8 |
The operating cash flow in the period was SEK -30.6 million (-13.9), mainly attributable to the operating loss of SEK -37.8 million (-18.4) and changes in working capital of SEK 7.1 million (3.9).
The parent company BONESUPPORT HOLDING AB (publ) is a holding company. The parent company generated SEK 13.9 (0.0) million in sales related to internal services to subsidiaries. The loss in the quarter was SEK -5.5 million (-1.3). There were no investments during the period.
The BONESUPPORT Group had 68 (48) FTE (Full-Time Equivalents) during the quarter, of whom 19 (16) were in R&D.
BONESUPPORT is creating its own US commercial platform after terminating its current distribution agreement with Zimmer Biomet. ZB has cancelled most of its orders for the period June – August as a result of our termination This strategic initiative is designed to increase market penetration and gross margin in 2019 and the years ahead.
BONESUPPORT signed an agreement with Collagen Matrix Inc. and will start selling and marketing several of their products under its own brand name. These products are complementary to CERAMENT BVF in US, and could also drive sales of CERAMENT BVF in indications where CERAMENT is used in combination with these products.
The annual shareholders' meeting resolved to implement Warrants Program, one Warrants Program to management, one program to new employees and one to three members of the board. The theoretical maximum number of shares that could be issued as a result of these programs amounts to 981 096 shares, corresponding to 1.9 % dilution based on number of shares on 30 June 2018. The annual shareholders meeting appointed Simon Cartmell as new Board member.
Håkan Johansson has been appointed as BONESUPPORT'S new CFO. He will replace Björn Westberg during the autumn.
On 18 July Michael Diefenbeck, Chief Medical Officer, took over the responsibility for R&D and Clinical Affairs from Jerry Chang, previous Executive Vice President R&D, SRA and Clinical Affairs, who will leave the Company.
There is one type of share in the Company. The quota value per share is SEK 0.625. Larger shareholders in the Company are set out below. At 30 June 2018, the total number of shares in the Company amounted to 50,812,116 and the number of shareholders was 1 076.
| Shareholders 30 June 2018 | |
|---|---|
| HealthCap V LP | 13.0% |
| Stiftelsen Industrifonden | 9.4% |
| Lundbeckfond Invest A/S | 9.4% |
| Robur AB | 8.8% |
| Tredje AP-fonden | 8.0% |
| Tellacq AB | 5.8% |
| Carl Westin Ltd | 5.3% |
| Other shareholders | 40.3% |
The increase from 1 January to 30 June in the number of shares was 534,226. All of this increase was due 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 June 2018 amounted to 14,653,881 where 5 options can be converted to 1 share. A summary of the ESOPs appears in the Annual Report 2017, note 12 and in note 8 in this report.
There were three other warrant programs as of 30 June 2018 and the latest program was resolved at the Annual shareholders' meeting on 22nd of 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 June 2018 where five warrants gives the right to convert into 1 share. Further details of these warrant programs are described in note 8 and in the Annual report 2017, and on the company's website.
The Annual shareholders meeting on 22 May 2018 resolved to implement two new long-term incentive programs of which one was meant mainly for employees and one 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.
| 19 September | Capital Market Day Stockholm |
|---|---|
| 20 September | Capital Market Day London |
| 7 November 2018 | Q3 Interim report |
| February 2019 | Year end report |
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. This report has not been audited.
The CEO and the Board 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.
| Håkan Björklund, Chairman of the board |
Björn Odlander | Lars Lidgren | Simon Cartmell |
|---|---|---|---|
| Nina Rawal | Tone Kvåle | Lennart Johansson | Emil Billbäck, CEO |
This information constitutes information that BONESUPPORT HOLDING AB is obliged to make public pursuant to the EU Market Abuse Regulation. The information was submitted for publication at 08.00 CET on 26 July 2018. This Interim Report and other financial information about BONESUPPORT HOLDING AB (publ) are available at www.bonesupport.com.
| Apr - Jun | Jan – Jun | FY | ||||
|---|---|---|---|---|---|---|
| (SEK t) | Note | 2018 | 2017 | 2018 | 2017 | 2017 |
| Net Sales | 7 | 28,184 | 37,131 | 59,269 | 69,585 | 129,301 |
| Cost of Sales | -3,548 | -4,748 | -9,110 | -8,369 | -16,871 | |
| Gross profit | 24,636 | 32,383 | 50,159 | 61,216 | 112,430 | |
| Selling expenses | -31,820 | -22,231 | -59,465 | -47,002 | -92,858 | |
| Research and development expenses | -17,193 | -18,686 | -32,031 | -28,054 | -60,636 | |
| Administrative expenses | 3,8 | -14,940 | -9,160 | -31,471 | -30,850 | -57,478 |
| Other operating income | 2,530 | 1,338 | 5,461 | 2,163 | 5,282 | |
| Other operating expenses | -1,033 | -2,004 | -3,603 | -3,265 | -6,025 | |
| Operating loss | 7 | -37,820 | -18,360 | -70,950 | -45,792 | -99,285 |
| Net financial items | -5 | -5181 | -502 | -8,835 | -28,577 | |
| Loss before income tax | 7 | -37,825 | -23,541 | -71,452 | -54,627 | -127,862 |
| Income tax | -379 | -3 | -530 | -5 | -1,007 | |
| Loss for the period | -38,204 | -23,544 | -71,982 | -54,632 | -128,869 |
The loss for the period is fully attributed to the shareholders of the parent company.
| Apr – Jun | Jan – jun | Helår | ||||
|---|---|---|---|---|---|---|
| (SEK) | Note | 2018 | 2017 | 2018 | 2017 | 2017 |
| Equityholders of the parent | ||||||
| Earnings per share before dilution (SEK) | -0.75 | -0.76 | -1.42 | -1.82 | -3.24 | |
| Earnings per share after dilution (SEK)3 | -0.75 | -0.76 | -1.42 | -1.82 | -3.24 | |
| Loss for the period (SEK 1,000) | -38,204 | -23,544 | -71,982 | -54,632 | -128,869 | |
| Average number of shares (1,000)4 | 50,812 | 31,104 | 50,688 | 30,063 | 39,826 | |
| Apr – Jun | Jan - jun | FY | ||||
|---|---|---|---|---|---|---|
| (SEK t) | Note | 2018 | 2017 | 2018 | 2017 | 2017 |
| Loss for the period | -38,204 | -23,544 | -71,982 | -54,632 | -128,869 | |
| Other comprehensive income | ||||||
| Exchange differences | 198 | -6 | 312 | 6 | 2 | |
| Total comprehensive income for the period | -38,006 | -23,550 | -71,670 | -54,626 | -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 Jun | 31 Dec | |||
|---|---|---|---|---|
| (SEK t) | Note | 2018 | 2017 | 2017 |
| ASSETS | ||||
| Intangible assets | 5,040 | 4,609 | 5,244 | |
| Tangible assets | 2,854 | 634 | 3,099 | |
| Other non-current assets | 6 | 338 | 208 | 248 |
| Total non-current assets | 8,232 | 5,451 | 8,591 | |
| Inventories | 23,776 | 16,195 | 22,079 | |
| Trade receivables | 6 | 13,578 | 25,509 | 20,678 |
| Other operating receivables | 6 | 9,667 | 8,327 | 11,969 |
| Cash and cash equivalents | 6 | 368,357 | 558,288 | 533,367 |
| Total current assets | 415,378 | 608,319 | 588,093 | |
| TOTAL ASSETS | 423,610 | 613,770 | 596,684 | |
| EQUITY AND LIABILITIES | ||||
| Equity attributable to equity holders of the parent | 4 | 381,209 | 464,805 | 450,786 |
| Non-current borrowings | 6 | 0 | 69,458 | 0 |
| Provisions | 173 | 164 | 173 | |
| Total non-current liabilities | 173 | 69,622 | 173 | |
| Current borrowings | 6 | 0 | 29,334 | 98,620 |
| Trade payables | 6 | 10,343 | 13,166 | 11,553 |
| Other operating liabilities | 6 | 31,885 | 36,843 | 35,552 |
| Total current liabilities | 42,228 | 79,343 | 145,725 | |
| TOTAL EQUITY AND LIABILITIES | 423,610 | 613,770 | 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–June 2017 | 6 | -54,632 | -54,626 | ||
| Transactions with equity holders: | |||||
| New share issue | 11,012 | 499,005 | 510,017 | ||
| Transaction costs, new share issue | -33,631 | -33,631 | |||
| Allotted warrants | 1,562 | 1,562 | |||
| Share-based payment transactions | 7,179 | 7,179 | |||
| Equity 30 June 2017 | 29,144 | 1,136,488 | -300 | -700,527 | 464,805 |
| Loss July – December 2017 | -4 | -74,237 | -74,241 | ||
| Transactions with equity holders: | |||||
| New share issue | 2,280 | 57,997 | 60,277 | ||
| Transaction costst, new share issue | -5,470 | -5,470 | |||
| Share-based payment transactions | 5,415 | 5,415 | |||
| Equity 1 January 2018 | 31,424 | 1,189,015 | -304 | -769,349 | 450,786 |
| Loss Januari – June 2018 | 312 | -71,982 | -71,670 | ||
| Transactions with equity holders: | |||||
| New share issue | 334 | 334 | |||
| Transaction costst, new share issue | -1,860 | -1,860 | |||
| Allotted warrants | 740 | 740 | |||
| Share-based payment transactions | 2,879 | 2,879 | |||
| Equity 30 June 2018 | 31,758 | 1,187,895 | 8 | -838,452 | 381,209 |
| Apr - Jun | Jan - Jun | FY | ||||
|---|---|---|---|---|---|---|
| (SEK t) | 2018 | 2017 | 2018 | 2017 | 2017 | |
| Operating loss | -37,820 | -18,360 | -70,950 | -45,792 | -99,285 | |
| Non-cash adjustments | ||||||
| -Share-based transactions | 1,716 | 2,869 | 2,879 | 7,179 | 12,594 | |
| -Other | -593 | 1,183 | -679 | 1,451 | 4,113 | |
| Interest received | 0 | 0 | 0 | 0 | 3 | |
| Interest paid | -5 | -3,055 | -859 | -6,226 | -11,740 | |
| Realized exchange gains on loans | 0 | 0 | 558 | 0 | 0 | |
| Income tax paid | -996 | -494 | -1,011 | -539 | -737 | |
| Net cash flows from operating activities | -37,698 | -17,857 | -70,062 | -43,927 | -95,052 | |
| before changes in working capital | ||||||
| Changes in working capital | 7,056 | 3,939 | 3,142 | -2,101 | -12,482 | |
| Net cash flows from perating activities | -30,642 | -13,918 | -66,920 | -46,028 | -107,534 | |
| Net cash flows from investing activities | -246 | -315 | -390 | -911 | -4,688 | |
| Net cash flows from financing activities | 740 | 469,459 | -99,406 | 464,430 | 504,833 | |
| Total CF for the period | -30,148 | 455,226 | -166,716 | 417,491 | 392,611 | |
| Cash and cash equivalents at beginning of | 397,179 | 103,292 | 533,367 | 141,501 | 141,501 | |
| period | ||||||
| Net foreign exchange difference on cash and | 1,326 | -230 | 1,706 | -704 | -745 | |
| equivalents | ||||||
| Cash and cash equivalents at period end | 368,357 | 558,288 | 368,357 | 558,288 | 533,367 |
| Apr - Jun | Jan - Jun | |||||
|---|---|---|---|---|---|---|
| (SEK t) | 2018 | 2017 | 2018 | 2017 | FY 2017 |
|
| Net Sales | 13,880 | 0 | 22,530 | 0 | 37,873 | |
| Administrative expenses | -20,148 | -171 | -32,692 | -2,578 | -50,516 | |
| Other income | 63 | 23 | 630 | 23 | 23 | |
| Other expenses | -49 | -33 | -484 | -33 | -33 | |
| Operating loss | -6,254 | -181 | -10,583 | -2,588 | -12,653 | |
| Net financial items | 779 | -1,131 | 1,229 | -2,048 | -3,162 | |
| Loss before income tax | -5,475 | -1,312 | -9,354 | -4,636 | -15,815 | |
| Income tax | 0 | 0 | 0 | 0 | 0 | |
| Loss for the period | -5,475 | -1,312 | -9,354 | -4,636 | -15,815 |
Parent company loss for the period equals comprehensive income
| 30 Jun | 31 Dec | ||
|---|---|---|---|
| (SEK t) | 2018 | 2017 | 2017 |
| ASSETS | |||
| Non-current financial assets | 503,912 | 453,912 | 503,912 |
| Other receivables | 84,450 | 227 | 0 |
| Prepaid expenses | 1,248 | 912 | 715 |
| Cash | 332,554 | 542,071 | 513,945 |
| TOTAL ASSETS | 922,164 | 977,122 | 1,018,572 |
| EQUITY AND LIABILITIES | |||
| Equity | |||
| Restricted equity | 31,757 | 29,144 | 31,424 |
| Unrestricted equity | 878,103 | 847,969 | 889,317 |
| Total equity | 909,860 | 877,113 | 920,741 |
| Current liabilities | 12,304 | 120,009 | 97,831 |
| TOTAL EQUITY AND LIABILITIES | 922,164 | 997,122 | 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 |
| 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 |
| Q2 | Second 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 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 June 2018 | 30 June 2017 | 31 Dec 2017 |
|---|---|---|---|
| Non-current borrowing | 0.0 | 69.5 | 0.0 |
| Current borrowing | 0.0 | 29.3 | 98.6 |
| Cash and cash equivalents | -368.4 | -558.3 | -533.4 |
| Net debt | -368.4 | -458.5 | -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 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 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.
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 - Jun | |||
|---|---|---|---|
| Related | Service (SEK 1,000) | 2018 | 2017 |
| Seagles AB (fully owned by Lars | Consultancy, development projects | - | 44 |
| Lidgren) |
| Number of shares | Potential shares | ||
|---|---|---|---|
| 31 December 2017 | 50,277,890 | 31 december 2017 | 4,334,867 |
| Converted employee options | 534,226 | Converted employee options | -534,226 |
| Returned employee options | -20,750 | ||
| Issued warrants | 361,096 | ||
| 30 June 2018 | 50,812,116 | 30 June 2018 | 4,140,987 |
In addition to above the Annual General Meeting resolved further share based incentive programs. The theoretical maximum dilution effect of these programs amounts to 620 000 shares. 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 96.2 million at 30 June 2017. The book value was SEK 98.8 million. The loan was fully repaid on 1 February 2018.
The segments are North America ("NA") and Europe & RoW ("EURW"). 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 1.4 million (0.7). The US market (part of NA) is the only market with sales of more than 10% of the Group's total sales. Sales in the US market amounted to SEK 14.0 million (23.5), 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 | Apr - Jun 2018 | Apr- Jun 2017 | ||||||
|---|---|---|---|---|---|---|---|---|
| (SEK 1,000) | NA | EUROW | Other | Total | NA | EUROW | Other | Total |
| Net Sales | 13,993 | 14,91 | 28,184 | 23,473 | 13,658 | 37,131 | ||
| Cost of Sales | -1,544 | -2,004 | -3,548 | -2,263 | -2,485 | -4,748 | ||
| Gross profit | 12,449 | 12,187 | 24,636 | 21,210 | 11,173 | 32,383 | ||
| Operative costs | -18,386 | -13,212 | -31,598 | -14,238 | -13,992 | -28,230 | ||
| Contribution | -5,937 | -1,025 | -6,962 | 6,972 | -2,819 | 4,153 | ||
| Other operating items | -30,858 | -30,858 | -22,513 | -22,513 | ||||
| Operating result | -5,937 | -1,025 | -30,858 | -37,820 | 6,972 | -2,819 | -22,513 | -18,360 |
| Net financial items | -5 | -5 | -5,181 | -5,181 | ||||
| Result before taxes | -5,937 | -1,025 | -30,863 | -37,825 | 6,972 | -2,819 | -27694 | -23,541 |
| Product group | Apr – Jun 2018 | Apr – Jun 2017 | ||||||
| (SEK 1,000) | NA | EUROW | Total | NA | EUROW | Total | ||
| CERAMENT BVF | 13,993 | 2,695 | 16,688 | 23,473 | 3,619 | 27,092 | ||
| CERAMENT drug eluting5 | - | 11,496 | 11,496 | - | 10,039 | 10,039 | ||
| TOTAL | 13,993 | 14,191 | 28,184 | 23,473 | 13,658 | 37,131 |
5 CERAMENT with drug-eluting properties includes CERAMENT G and CERAMENT V
| Profit and loss items | Jan - Jun 2018 | Jan - Jun 2017 | ||||||
|---|---|---|---|---|---|---|---|---|
| (SEK 1,000) | NA | EUROW | Other | Total | NA | EUROW | Other | Total |
| Net Sales | 29,925 | 29,344 | 59,269 | 43,975 | 25,610 | 69,585 | ||
| Cost of Sales | -4,007 | -5,103 | -9,110 | -4,034 | -4,335 | -8,369 | ||
| Gross profit | 25,918 | 24,241 | 50,159 | 39,941 | 21,275 | 61,216 | ||
| Operative costs | -33,819 | -26,092 | -59,911 | -24,171 | -26,079 | -50,249 | ||
| Contribution | -7,901 | -1,851 | -9,752 | 15,770 | -4,804 | 10,966 | ||
| Other operating items | -61,198 | -61,198 | -56,758 | -56,758 | ||||
| Operating result | -7,901 | -1,851 | -61,198 | -70,950 | 15,770 | -4,804 | -56,758 | -45,792 |
| Net financial items | -502 | -502 | -8,835 | -8,835 | ||||
| Result before taxes | -7,901 | -1,851 | -61,700 | -71,452 | 15,770 | -4,804 | -65,593 | -54,627 |
| Jan – jun 2018 | Jan – jun 2017 | |||||||
| Product group | ||||||||
| (SEK 1,000) | NA | EUROW | Total | NA | EUROW | Total | ||
| CERAMENT BVF | 29,925 | 6,065 | 35,990 | 43,975 | 7,009 | 50,984 | ||
| CERAMENT drug eluting5 | - | 23,279 | 23,279 | - | 18,601 | 18,601 | ||
| TOTAL | 29,925 | 29,344 | 59,269 | 43,975 | 25,610 | 69,585 |
There are three different employee stock option programs and two different warrant programs. Of the three employee stock option 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 1.8 million options were vested in the period in 2018.
Employee stock options 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.
In addition to the ESOPs, 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.
| 6 No of options |
Equal to no of shares |
WAEP57 | |
|---|---|---|---|
| Balance 1 jan 2018 | 17.428.768 | 3.485.754 | 5.88 |
| Converted | -2.671.137 | -534.227 | 0.63 |
| Due/cancelled | -103.750 | -20.750 | 6.86 |
| Balance 30 jun 2018 | 14.653.881 | 2.930.776 | 6.83 |
| 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 jun 2018 | 4.606.664 | 1.210.210 | 20.87 |
6 Unallocated poptions amounts to 269,655
7 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 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 30,000 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 26 July at 14.00 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 26 July. For further details regarding participation, see the investor pages at www.bonesupport.com
Emil Billbäck, CEO T: +46 46 286 53 70 Björn Westberg, CFO T: +46 46 286 53 60 E: [email protected]
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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