Medistim — Interim / Quarterly Report 2018

Apr 26, 2018

Medistim ASA First Quarter 2018

Kari E. Krogstad, President and CEO Thomas Jakobsen, CFO April 26th, 2018

Disclaimer

The information included in this Presentation contains certain forward-looking statements that address activities, events or developments that Medistim ASA ("the Company") expects, projects, believes or anticipates will or may occur in the future. These statements are based on various assumptions made by the Company, which are beyond its control and are subject to certain additional risks and uncertainties. The Company is subject to a large number of risk factors including but not limited to economic and market conditions in the geographic areas and markets where Medistim is or will be operating, IP risks, clinical development risks, regulatory risks, fluctuations in currency exchange rates, and changes in governmental regulations. For a further description of other relevant risk factors we refer to Medistim's Annual Report for 2017. As a result of these and other risk factors, actual events and our actual results may differ materially from those indicated in or implied by such forward-looking statements. The reservation is also made that inaccuracies or mistakes may occur in this information given above about current status of the Company or its business. Any reliance on the information above is at the risk of the reader, and Medistim disclaims any an all liability in this respect.

Table of contents

• 1. Highlights first quarter
• 1. Financial statements
• 1. Business segments update
• 1. Implementing the strategy

1. Highlights 1st quarter

Highlights 1st quarter 2018

•	Following two consecutive all-time high quarters,
	Q1 shows flat development in sales compared to last year

• o Currency neutral total sales down 1 %
• o Currency neutral sales of own products down 2.7 %
• o US sales up 1 % in USD, down 6.3 % in NOK
• o Number of procedures in the USA up 5.7 %
• EBIT down MNOK 2.4 to MNOK 13.6, a 15.3 % decrease
• MiraQ received an updated recommendation by UK's NICE
• Data collection in the REQUEST study is complete and the first results will be presented at AATS on May 1st
• The general meeting decided a dividend of NOK 2.00 per share (NOK 1.75)

2. Financial statements

Profit and loss Q1 2018

Profit & loss	Q1 2018	Q1 2017
All numbers in NOK 1000
Sales	74 133	74 360
Cost of goods sold	18 255	17 859
Salary and sosial expenses	26 784	25 418
Other operating expenses	12 519	11 922
Total operating expenses	57 558	55 199
Op. res. Before depr. and write-offs (EBITDA)	16 576	19 161
EBITDA %	22,4 %	25,8 %
Depreciation	2 988	3 119
Operating result (EBIT)	13 588	16 043
EBIT %	18,3 %	21,6 %
Financial income	1 387	2 113
Financial expenses	2 665	1 730
Net finance	(1 279)	383
Pre tax profit	12 309	16 426
Tax	2 865	4 567
Result	9 444	11 859

EBIT per Quarter (TNOK)

Balance sheet - Assets

Balance sheet	31.03.2018	31.12.2017
All numbers in NOK 1000			300 000
Assets			250 000
Intangible assets	44 403	45 090	200 000
Fixed assets	26 256	25 744	150 000
Total intangible and fixed assets	70 659	70 834
Inventory	63 555	62 722	100 000
Customers receivables	53 269	57 307	50 000
Other receivables	9 178	5 825	-
Cash	56 077	54 411	Q1 17	Q2 17	Q3 17	Q4 17	Q1 18
Total current assets	182 079	180 265	Intangible assets		Fixed assets	Inventory
Total assets	252 738	251 099	Accounts receivable		Other assets	Cash

• Working capital continues to be high, related to:
• MiraQ product line introduction while maintaining the VeriQ/VeriQC products with last-time-buy of components
• Securing safety level of critical components

Balance sheet - Equity and liability

Balance sheet	31.03.2018	31.12.2017
All numbers in NOK 1000
Share capital	4 585	4 585
Premium fund	44 172	44 172
Other equity	142 266	134 226
Total equity	191 023	182 983
Total long term debt	8 813	10 500
Total short term debt	52 903	57 616
Total equity and liability	252 738	251 099

• 13.7 MNOK in interest bearing debt
• The general meeting decided a dividend of NOK 2,00 per share
• Total dividend payment will be MNOK 36.4
• Dividend will be paid around 8th of May

3. Business segments update

Flow probes and systems in units

Flow probes in units (excl USA) Flow systems in units (VeriQ & MiraQ capital sales)

• 18.2% decrease in flow probe number of units
• Production capacity issues are solved

• Some build up of security stock in in some distributor markets in Q4

• 8.7 % increase in flow system in number of units

• Strong quarter for Asia; 12 systems vs 6 last year

Imaging probes and systems in units

Imaging systems in units (VeriQC & MiraQ capital sales)

Imaging probes in units (incl USA)

• Weak quarter after three consecutive strong quarters

• 16.7 % increase in imaging systems number of units
• Good quarter with growth in number of systems sold in all regions

Q1 revenue performance by region

Mill NOK	Q1 '18	Q1 '17	Q / Q	2017
Europe	40,2	36,2	11,1 %	150,3
USA	23,0	24,5	-6,3 %	104,6
Asia & Jp	8,5	9,6	-12,2 %	27,0
ROW (MEA, CAN, SA, AUS)	2,4	4,0	-39,0 %	19,6
Total	74,1	74,4	-0,3 %	301,5

• In Europe, sales increased with 11.1 % in Q1. Own products increased with 17.2 % of which 7.2 % was due to favourable currency. 3. party products increased with 4.9 %.
• In the USA, sales in NOK decreased with 6.3 % but currency neutral growth was 1.0 %.
• Both Asia/Japan and ROW are so far smaller sales territories with significant quarter to quarter variation.

Negative currency effects for 2018 vs 2017 was 0.4 MNOK .

Average actual exchange rate for USD 7.83 and EUR 9.63 versus last year USD 8.44 and EUR 8.98.

Q1 revenue performance by product

Mill NOK	Q1 '18	Q1 '17	Q/Q	2017
Procedures (USA)	19,6	21,5	-8,9 %	86,0
Flow probes	20,5	20,9	-2,1 %	78,9
Flow systems (VeriQ & MiraQ)	6,7	4,7	41,5 %	23,3
Imaging systems (VeriQ C & MiraQ)	7,3	6,9	5,6 %	32,0
Imaging probes	0,6	0,7	-19,3 %	4,2
3rd party	18,7	17,9	4,9 %	71,7
Other	0,8	1,7	-55,4 %	5,4
Total revenues	74,1	74,4	-0,3 %	301,5

• Procedure sale in the USA: The total number of procedures increased with 5.7 % in Q1. Decline in NOK is due to currency and lower revenue per procedure due to product mix.
• Flow probes: 18.2 % decrease in units. Decrease in NOK is only 2.1 % due to higher level of direct sales and currency.
• Flow systems: 8.7 % increase in units, the strong 41% growth in NOK is driven by higher level of direct sales and currency.
• Imaging systems and probes: Same sales level as last year.
• 3rd party products: Good quarter with a 4.9 % increase.

4. Implementing the strategy

Growth opportunities – in developing Medistim markets

Emerging, high-growth economies (e.g. brIC)	4
Developing Medistim markets (e.g. USA, UK, Fra)	2
Strong Medistim markets (e.g. Jp, Nordic, Germany) >50% CABG share	1		3
GEOGRAPHIES APPLICATION AREAS	CABG surgery (2 BNOK)	Vascular surgery (>1 BNOK)		Other open (1 BNOK)	heart surgery

• 1. Convert the routine Flow market to a Flow-and-Imaging market by establishing Surgical Guidance and Quality Assessment as the new standard of care through
• o Early adopter & KOL support
• o REQUEST study
• o Ease conversion from flow to imaging with MiraQ
• 2. Achieve routine use of both Flow and Imaging by fighting ignorance, indifference and ease-of-use objections through
• o Clinical marketing, Guidelines and Educational programs
• o Product innovation for ease of use
• o Increased sales force capacaity
• 3. Build and strengthen position in vascular surgery
• o Dedicated system (MiraQ Vascular) & probes
• o Build position with societies and KOLs
• 4. Offer an entry-level solution to reach emerging, pricesensitive, high-growth markets

Performance US sales organization

RESULTS Q1

• Revenues up 1 % in USD
• o Revenues down 6.3 % in NOK
• o Currency has a negative 7.2 % impact
• Number of procedures up by 5.7 %
• o 4.5 % growth in flow procedures
• o 14.0 % growth in imaging procedures
• o Revenue per procedure down about 7 % from LY due to product mix
• Capital revenues were MNOK 3.4 vs. MNOK 3 last year, a 12 % increase
• Continued growth in new customers
• o 7 completely new accounts

# of Procedures per Consecutive Quarter 5 500 6 500 7 500 8 500 9 500 10 500 11 500 12 500 13 500 14 500 Q1 13 Q2 13 Q3 13 Q4 13 Q1 14 Q2 14 Q3 14 Q4 14 Q1 15 Q2 15 Q3 15 Q4 15 Q1 16 Q2 16 Q3 16 Q4 16 Q1 17 Q2 17 Q3 17 Q4 17 Q1 18

Renewed recommendation from NICE

• The National Institute for Health and Care Excellence (NICE) have issued a renewed Medical Technologies Guidance recommending the routine use of Medistim's flowmeter system for CABG surgery within the UK's National Health Service
• Both the clinical and economical benefits of MiraQ utilization were recognized:
• o " […] intraoperative TTFM is effective in detecting imperfections that may be corrected […]. This may reduce the incidence of graft occlusions and […] perioperative morbidity and mortality."
• o The MiraQ system is associated with an estimated cost saving of £141 per patient (up from previous guideline of £115) compared with clinical assessment alone
• NICE is higly respected and their recommendations have impact also outside the UK

Growth opportunities – in developed Medistim markets

Emerging, high-growth economies (e.g. brIC)	4
Developing Medistim markets (e.g. USA, UK, Fra)	2
Strong Medistim markets (e.g. Jp, Nordic, Germany) >50% CABG share	1		3
GEOGRAPHIES APPLICATION AREAS	CABG surgery (2 BNOK)	Vascular surgery (>1 BNOK)		Other open (1 BNOK)	heart surgery

• 1. Convert the routine Flow market to a Flow-and-Imaging market by establishing Surgical Guidance and Quality Assessment as the new standard of care through
• o Early adopter & KOL support
• o REQUEST study
• o Ease conversion from flow to imaging with MiraQ
• 2. Achieve routine use of both Flow and Imaging by fighting ignorance, indifference and ease-of-use objections through
• o Clinical marketing, Guidelines & Educational programs
• o Product innovation for ease of use
• o Increased sales force capacaity
• 3. Build and strengthen position in vascular surgery
• o Dedicated system (MiraQ Vascular) & probes
• o Build position with societies and KOLs
• 4. Offer an entry-level solution to reach emerging, pricesensitive, high-growth markets

What is the study protocol?

• Perform ultrasound imaging of the aorta, conduit arteries in situ, compromised coronary arteries and completed grafts (anastomosis)
• Perform TTFM on completed grafts

• The procedures will be done with Medistim's devices (VeriQ C™ and MiraQ™)

• Record all changes to the surgical procedure and the number of revisions done to the grafts based on the flow and imaging data

• Capture major adverse cardiac and cerebrovascular events (MACCE)

Why are these data interesting to the surgical community?

• The hypothesis motivating the REQUEST registry study is that employing a new and unique combination of functional flow measurement and morphological ultrasound imaging data may enable surgeons to
• o make better informed decisions during coronary surgery
• o improve surgical quality and outcomes
• o contribute to improved healthcare efficiency from this surgical procedure
• The study is the first of its kind to investigate the value of implementing both TTFM and intraoperative ultrasound imaging as a concerted effort to provide surgical guidance and graft quality assessment

34 26.04.2018 Medistim ASA Q1 2018

Study objective

Objective:

Prospective study of the number and type of CABG surgical procedure changes (to aortic manipulation and coronary grafting) based on aortic and coronary ultrasound intraoperative images and transit time flow measurements (TTFM) with the Medistim device

Protocol:

Ethical Approval published in ClinicalTrials.gov in Feb 2015

Design: Prospective study of 1000 patients (multicenter registry in 7 sites)

Patient population: Isolated CABG patients with at least 2 vessel disease

Target period: Feb 2015 – Dec 2017

2) Ultrasound assessment of conduit arteries in situ and 3) diseased coronaries

4) TTFM graft assessment (Flow, PI, DF, BF)

5) Ultrasound assessment of anastomosis

anastomosis

37 26.04.2018 Medistim ASA Q1 2018

Preliminary findings presented at ICC, New York, August 19th 2017

• 285 changes in the surgical procedure in 203 of 776 patients
• 26% of patients had at least 1 surgical change

Presentation of the first findings from the REQUEST register study

• All 1.000 patients are now included in the study
• The first findings from the study will be presented at American Association for Thoracic Surgery (AATS) conference taking place in San Diego on May 1st
• The REQUEST data will be continued to be analysed, presented and published
• The findings from REQUEST may become a significant contributor to changing clinical practice within CABG surgery

20 largest shareholders (per April 20th 2018)

20 largest shareholders in % of total number of shares 79,57 %

Name	Number of shares	Shares in %	Nationality
INTERTRADE SHIPPING	4 003 500	21,83	NOR
SALVESEN & THAMS INV	1 862 500	10,16	NOR
JPMorgan Chase Bank, NORDEA TREATY ACCOUN	1 375 246	7,50	GBR
FOLLUM CAPITAL AS	1 000 000	5,45	NOR
Skandinaviska Enskil A/C CLIENTS ACCOUNT	983 524	5,36	DNK
PROTECTOR FORSIKRING Aksjer	784 155	4,28	NOR
Citibank Europe plc S/A SEB SA UCITS	706 412	3,85	LUX
BUANES ASBJØRN JOHN	494 936	2,70	NOR
GRANDEUR PEAK INTERN BROWN BROTHERS HARRI	420 559	2,29	USA
HOLBERG NORGE VERDIPAPIRFONDET V/HOLBERG FONDSFORVA	398 656	2,17	NOR
DYVI INVEST AS	346 154	1,89	NOR
RBC Investor service S/A LUX SCV-EXEMPT-U	329 934	1,80	LUX
Danske Bank A/S 3993 NORDIC SETTLEME	285 031	1,55	DNK
State Street Bank an SSB LUX OBO ITS CLIE	264 590	1,44	USA
Danske Invest Norge	250 000	1,36	NOR
BNP Paribas Securiti BPSS MLN/PENSION FUN	233 165	1,27	ITA
REGENTS OF THE UNIVE The Bank of New York	228 373	1,25	USA
Skandinaviska Enskil SEB AB, UCITS V - Sw	218 201	1,19	SWE
NN PARAPLUFONDS 1 N. BNY MELLON SA/NV	205 624	1,12	NLD
Bank Julius Bär & Co	200 000	1,09	CHE
Total Largest shareholders	14 590 560
Total number of shares outstanding	18 337 336