Medistim — Investor Presentation 2017

Oct 24, 2017

Medistim ASA Third Quarter 2017

Kari E. Krogstad, President and CEO Thomas Jakobsen, CFO October 24th, 2017

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 2016. 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 third quarter
• 1. Financial statements
• 1. Business segments update
• 1. Implementing the strategy

1. Highlights 3rd quarter

Highlights 3rd quarter 2017

• 11.4 % increase in sales for the quarter o Currency neutral total growth is 12.7 % o Currency neutral growth of own products is 12.5% o Flow probe sales negatively impacted with MNOK 2.2, however production of flow probe capacity is improving and backorder is reduced form 500 to 250 probes o Another strong quarter for the USA with currency neutral sales up 17.8 % • EBIT up MNOK 3.5 to MNOK 19.4, an 21.6 % increase • Preliminary data from the REQUEST study supports Medistim's hypothesis that the combination of flow measurements and ultrasound imaging during cardiac bypass surgery may improve surgical outcome Revenue EBIT Currency
• MiraQ cleared for sale in China

Procedures (USA) 13 351

2. Financial statements

Profit and loss Q3 2017

Profit & loss	Q3 2017	Q3 2016	2016
All numbers in NOK 1000
Sales	75 694	67 933	268 061
Cost of goods sold	15 321	15 420	64 957
Salary and sosial expenses	26 998	23 320	89 719
Other operating expenses	10 588	10 231	45 304
Total operating expenses	37 586	33 552	135 023
Op. res. before depr. and write-offs (EBITDA)	22 788	18 962	68 081
EBITDA %	30,1 %	27,9 %	25,4 %
Depreciation	3 358	2 978	11 726
Operating result (EBIT)	19 430	15 983	56 355
EBIT %	25,7 %	23,5 %	21,0 %
Financial income	1 494	573	7 506
Financial expenses	2 993	1 213	10 334
Net finance	(1 499)	(640)	(2 828)
Pre tax profit	17 931	15 344	53 527
Tax	4 514	4 113	14 429
Result	13 417	11 230	39 098

Sales per Quarter (TNOK)

EBIT per Quarter (TNOK)

Profit and loss as of September 2017

Profit & loss	YTD Sept 2017	YTD Sept 2016	2016
All numbers in NOK 1000
Sales	219 231	200 627	268 061
Cost of goods sold	52 206	48 428	64 957
Salary and sosial expenses	71 561	64 409	89 719
Other operating expenses	36 633	32 492	45 304
Total operating expenses	108 195	96 901	135 023
Op. res. before depr. and write-offs (EBITDA)	58 831	55 298	68 081
EBITDA %	26,8 %	27,6 %	25,4 %
Depreciation	9 729	8 692	11 726
Operating result (EBIT)	49 102	46 606	56 355
EBIT %	22,4 %	23,2 %	21,0 %
Financial income	5 327	4 126	7 506
Financial expenses	6 161	5 844	10 334
Net finance	(834)	(1 719)	(2 828)
Pre tax profit	48 269	44 887	53 527
Tax	13 171	11 630	14 429
Result	35 097	33 257	39 098

Sales per Quarter (TNOK)

EBIT per Quarter (TNOK)

9

Balance sheet - Assets

Balance sheet	30.09.2017	31.12.2016
All numbers in NOK 1000
Assets
Intangible assets	46 335	51 698
Fixed assets	23 033	18 404
Total intangible and fixed assets	69 368	70 102
Inventory	62 136	59 297
Customers receivables	59 199	48 328
Other receivables	8 847	7 651
Cash	27 718	31 065
Total current assets	157 900	146 341
Total assets	227 268	216 443

• Working capital is still 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
• Increased customer receivables due to record sales for the quarter

Balance sheet - Equity and liability

Balance sheet	30.09.2017	31.12.2016
All numbers in NOK 1000
Share capital	4 585	4 585
Premium fund	44 172	44 172
Other equity	120 438	117 947
Total equity	169 195	166 704
Total long term debt	11 403	2 552
Total short term debt	46 670	47 188
Total equity and liability	227 268	216 444

• 17.1 MNOK in interest bearing debt

3. Business segments update

Status production capacity of flow probes

• Development in number of TTFM probes in backorder at the end of the quarter:

o	Q4 2016:	400
o	Q1 2017:	250
o	Q2 2017:	500
o	Q3 2017:	250
o	Est. Q4 2017:	0

• During the first half year we invested in building capacity by increasing the number of probe assembly operators
• For Q2, we saw that the immediate effect of this was negative
• o the productivity per operator went down due to new operators being in training and experienced operators spending time on giving training
• For Q3 and Q4, production capacity is gradually increasing and we will enter 2018 with an overcapacity enabling inventory build

Flow probes and systems in units

• 500 1 000 1 500 2 000 Q3 15Q4 15Q1 16Q2 16Q3 16Q4 16Q1 17Q2 17Q3 17 -

• 7.5% increase in flow probe volume sales enabled by positive trend in production capacity. Backorder has decreased by 50% to 250 probes, equaling 2,2 MNOK

• Strong sales in direct markets like Spain and Germany increases revenue

• Weak quarter for all regions except USA, going from 1 to 4 capital sales flow systems this quarter

• Good quarter despite decrease from last year

• Good quarter with number of systems sold at the same level as last year
• Strong sales in direct markets like Norway and USA explains the revenue increase

Q3 revenue performance by region

Mill NOK	Q3 '17	Q3 '16	Q / Q	YTD '17	YTD '16	Y/Y	2016
Europe	36,8	28,3	30,1 %	110,3	98,1	12,5 %	136,4
USA	27,3	23,5	16,4 %	77,1	69,1	11,5 %	91,0
Asia & Jp	8,2	8,9	-7,8 %	21,3	20,1	6,1 %	24,8
ROW (MEA, CAN, SA, AUS)	3,4	7,3	-53,5 %	10,6	13,4	-20,9 %	15,9
Total	75,7	67,9	11,4 %	219,2	200,6	9,3 %	268,1

• In Europe, Q3 was up 30.1 % due to a solid 47% volume growth of own products and strong sales in direct markets

• In the USA, Medistim delivers yet another good quarter with currency neutral growth of 17.8 %, driven by 134 % increase in capital sales
• Both Asia/Japan and ROW are so far smaller sales territories with significant quarter to quarter variation.

Negative currency effects as of September was 2.4 MNOK .

Average actual exchange rate for USD 8.31 and EUR 9.23 versus last year USD 8.38 and EUR 9.41.

Q3 revenue performance by product

Mill NOK	Q3 '17	Q3 '16	Q/Q	YTD '17	YTD '16	Y/Y	2016
Procedures (USA)	21,3	20,9	2,0 %	64,4	61,6	4,4 %	81,9
Flow probes	21,1	18,1	16,3 %	55,9	52,9	5,6 %	70,4
Flow systems (VeriQ & MiraQ)	4,5	3,7	22,3 %	13,9	12,1	15,1 %	17,7
Imaging systems (VeriQ C & MiraQ)	9,8	8,4	16,9 %	23,3	18,2	28,1 %	21,0
Imaging probes	0,9	1,2	-24,2 %	2,7	2,6	6,2 %	3,1
3rd party	16,3	14,3	13,4 %	53,9	50,3	7,2 %	68,4
Other	1,8	1,3	45,1 %	5,1	2,9	75,2 %	5,4
Total revenues	75,7	67,9	11,5 %	219,2	200,6	9,3 %	268,1

• Procedure sale in the USA: The total number of procedures grew with 18.5 % in Q3. Revenue increase is lower due to currency and a larger portion of procedures coming from capital probe sales compared to card sales.
• Flow probes revenue: 7.5 % increase in units to 1728 probes, 16.3 % in NOK due to higher level of sales in direct markets like Spain and Germany.
• Flow systems: 20 % decline in units, however 22.3 % growth in NOK because more units this quarter were sold through direct markets to end customers.
• Imaging systems and probes: Flat development in units with 11.4 % growth in NOK due to higher level of sales in direct markets.
• 3rd party products: Strong development in Q3

4. Implementing the strategy

18

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 heart surgery (1 BNOK)

• 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 & 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

High performance US sales organization

RESULTS Q3

• Revenues up by 16.4 % in NOK and 17.8 % in USD
• Number of procedures up by 18.5 %
• o 20.3 % increase in flow procedures
• o 6.3 % growth in imaging procedures
• 134 % increase in capital sales (systems and probes)
• Continued growth in new customers
• o 11 completely new accounts
• o 1 TTFM account converted to Imaging
• o 19 new and 4 converted accounts YTD

Number of procedures per year

# of Procedures per Consecutive Quarter

20

Growth opportunities – Convert Flow market to Flow & Imaging

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 & 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

GOAL: CONVERT A FLOW MARKET TO A FLOW-AND-IMAGING MARKET

Ultrasonic Surgical Guidance & Quality Assessment

Improve surgical outcome, demonstrate quality and increase cost efficiency

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

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

Status enrollment 1 August 2017: 776 patients

36

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

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

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

20 largest share holders (per 16. October 2017)

Number of shares	Shares in %	Shareholder	Account type	Nationality
4 003 500	21,83	INTERTRADE SHIPPING		NOR
1 862 500	10,16	SALVESEN & THAMS INV		NOR
1 376 596	7,51	JPMorgan Chase Bank, NORDEA TREATY ACCOUN	NOM	GBR
1 000 000	5,45	FOLLUM CAPITAL AS		NOR
784 155	4,28	PROTECTOR FORSIKRING		NOR
730 470	3,98	Skandinaviska Enskil A/C CLIENTS ACCOUNT	NOM	DNK
639 692	3,49	Citibank Europe plc S/A SEB SA UCITS	NOM	LUX
519 936	2,84	BUANES ASBJØRN JOHN		NOR
420 559	2,29	GRANDEUR PEAK INTERN BROWN BROTHERS HARRI		USA
398 656	2,17	HOLBERG NORGE VERDIPAPIRFONDET V/HOLBERG FONDSFORVA		NOR
391 241	2,13	RBC Investor service S/A LUX SCV-EXEMPT-U	NOM	LUX
346 154	1,89	DYVI INVEST AS		NOR
336 143	1,83	BNP Paribas Securiti BPSS MLN/PENSION FUN	NOM	ITA
262 412	1,43	Danske Bank A/S 3993 NORDIC SETTLEME	NOM	DNK
258 908	1,41	JPMorgan Chase Bank, JPMCB RE HB SWED FUN	NOM	SWE
250 000	1,36	Danske Invest Norge		NOR
247 891	1,35	REGENTS OF THE UNIVE The Bank of New York		USA
239 560	1,31	NN PARAPLUFONDS 1 N. BNY MELLON SA/NV		NLD
200 000	1,09	Bank Julius Bär & Co	NOM	CHE
195 608	1,07	DANSKE INVEST EUROPE Skandinaviska Enskil		FIN