Navamedic — M&A Activity 2015

Aug 4, 2015

Navamedic acquires Swedish medtech company Observe Medical

Navamedic acquires Swedish medtech company Observe Medical

Navamedic ASA announced today that the Company has acquired Observe Medical

International AB (OM). The initial purchase price is NOK 35 million, with

additional payments dependent on performance in the coming years.

Patients in intensive care need constant medical attention to keep the body

functioning. Pulse, blood pressure and urine production are key parameters being

monitored. Almost all patients receiving intensive care have a urinary catheter

inserted, and the production of urine is closely monitored in order to detect

potential organ failure. Today's methods for monitoring the urine production are

manual, time consuming and might provide inaccurate readings. Observe Medical

has developed an automated, digital urine meter Sippi® for use in intensive care

wards. The product was launced in March 2015 in the German and Nordic markets

and has been well received by initial users, and a strong sales growth is

expected.

Sippi® saves time for health care personnel, while also improving accuracy and

patient safety. Sippi® has been under development since 2009, and has received

approval for hospital use in Europe and the United States. OM estimates that 20

million traditional urine monitoring kits are sold annually, representing a

global market of approximately NOK 2 billion. Sippi®  represents a new patent

pending technological solution to urine monitoring with improved user

friendliness and accuracy

"Navamedic's strategy is to expand the product portfolio in areas where our

commercialization capabilities in specialized healthcare adds value, building on

our strong relationships with hospitals throughout the Nordic markets. The

acquisition of Observe Medical is an important milestone in achieving this,

while adding substantial market opportunities in other geographies, positioning

our company for continued growth" said CEO Tom Rönnlund. "The acquisition of OM

also creates a new business area for Navamedic where we are the product- and

IPR-owner for a product with global reach", CEO Rönnlund continued.

Navamedic aims at establishing OM's product line as the global niche leader,

through building a network of distributors in key markets. The global intensive

care capacity is more than 360,000 hospital beds. Germany is the largest single

market in Europe, with 24,000 intensive care beds,and Sippi® was launched there

earlier this year. Navamedic will continue the launch in other European markets

and also eventually develop the business into other global markets.

Navamedic is acquiring 100% of the outstanding shares in Observe Medical AB, key

investors are the Danish venture fund Seed Capital and the Company's founders.

Of the NOK 35 million initial payment, NOK 25 million is a cash consideration,

while NOK 10 million will be paid through the issue of new Navamedic shares.

According to the agreement, the share price for the new shares will be the

volume-weighted average price in the 30 days period from 15 days prior to the

announcement of the transaction until 15 days after the announcement. The number

of new shares issued is expected to be within the Board of Director's mandate to

increase share capital.

Furthermore, a seven per cent sales royalty based on annual Sippi®  sales above

NOK 7.5 million, increasing to 15 per cent on sales exceeding NOK 100 million

per year, will be paid to the former shareholders of OM for the years 2016-2023.

Finally, six milestone payments based on set sales targets for the product.

Sales targets need to be reached within end of 2026. Total possible milestone

payment will over the next 11 years potentially reach a maximum of NOK 125

million, in addition to sales royalties. The six potential milestone payments

will be triggered as follows:

a)         NOK 6 million upon accumulated sales in excess of NOK 50 million

b)         Additional NOK 6 million upon accumulated sales in excess of NOK 75

million

c)         Additional NOK 6 million upon accumulated sales in excess of NOK 100

million

d)         Additional NOK 13 million upon accumulated sales in excess of NOK

300 million

e)         Additional NOK 34 million upon accumulated sales in excess of NOK

600 million

f)          Additional NOK 60 million upon accumulated sales in excess of NOK

900 million

Navamedic has secured bank financing of the initial cash consideration. Upon

completion, Observe Medical will be a wholly owned subsidiary of Navamedic. OM's

founders and management will remain with the company. OM is expected to provide

a positive cash flow from 2017. Until then, Navamedic's cash flow and

established credit lines will secure sufficient working capital for the

development of OM.

Key figures Observe Medical AB

--------------------------------------------------

SEK 1,000 2014 2013* 2012

Sales 89 254 0

Operating result -16 360 -14 860 -13 862

EBT -16 543 - 14 991 -13 896

Net result -16 622 -14 991 -13 896

Fixed assets 4 062 3 366 3 224

Current assets 2 027 5 759 5 356

Equity 830 4 250 5 338

Long term debt 815 1 169 642

Short term debt 4 444 3 706 2 600

Total balance 6 090 9 125 8 580

--------------------------------------------------

*) Sales 2013 includes test sales of the beta version of the product.

Management Observe Medical AB

Magnus Emmoth (b. 1966), CEO

MBA from Kellogg School of Management, Chicago, Illinois, USA. Broad experience

from the finance industry and medtech companies. One of OM's three founders.

Mikael Charléz (b 1962), Marketing and Sales Manager

Business graduate from the University of Gothenburg's School of Business,

Economics and Law, Sweden.16 years of marketing and business development

experience in the health care industry. One of OM's three founders.

Mikael Löfgren (b.1974), Development Manager

University degree in electrotechnical engineering from the Faculty of

Engineering at Lund University, Sweden. Long experience from the medtech

industry with particular expertise in sensor technology. One of OM's three

founders.

Annette Colin Lövgren (b.1965), Finance manager

Educated in finance, marketing and law at Lund University, Sweden. Broad

experience from the biotech and medtech industry.

Arctic Securities AS acts as financial advisor in connection with the

acquisition.

This is an Extended Release in accordance with Oslo Børs' Continuing Regulations

of Stock Exchange Listed Companies, section 3.4. An Information Memorandum,

presenting the acquisition in further detail as required by Oslo Børs, will be

published at a later date.

For further information, please contact CEO TomFor further information, please

contact CEO Tom Rönnlund, telephone +46 727 320 321 or CFO Bjørn Lindholt,

telephone +47 9300 6601.

Navamedic ASA is a Norwegian pharmaceutical products company, delivering

products to hospitals, pharmacies and health products stores in the Nordic and

Benelux markets. The Company operates three business areas; Pharma Products,

Medical Nutrition and Consumer Care based on its relationship with a number of

pharmaceutical products manufacturers. Navamedic is listed on the Oslo Stock

Exchange (ticker: NAVA).

www.navamedic.com

www.observemedical.com

This information is subject of the disclosure requirements pursuant to section

5-12 of the Norwegian Securities Trading Act.

[HUG#1943399]