ORTHOCELL LIMITED

Appendix 4E Preliminary final Report

,.Rules 4.3A

Appendix 4E

Preliminary final report

Name of entity

ABN or equivalent company reference 57 118 897 135	Financial year ended (‘current period’)
57 118 897 135	30 June 2015

For announcement to the market

For announcement to the market
	$AUD
Revenues from continuing operations Loss from ordinary activities after tax attributable to Net loss for the period attributable to members	Up 31.6% to 1,690,308 members Up 71.5% to (3,742,715) Up 71.5% to (3,742,715)
Dividends (distributions)		Amount per security	Franked amount per security
Interim dividend		Nil	- ¢
Final dividend		Nil	- ¢
Previous corresponding period		Nil	- ¢
+Record date for determining entitlements to the dividend, (in the case of a trust,distribution)	N/A
	N/A

The above results should be read in conjunction with the notes and commentary contained in this report.

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Appendix 4E Preliminary final Report

Management Discussion and Analysis

1. Overview

Orthocell is a commercial-stage, regenerative medicine company focused on developing products for a variety of tendon, cartilage and soft tissue injuries. Orthocell’s portfolio of products include TGAapproved stem cell therapies Autologous Tenocyte Implantation (Ortho-ATI™) and Autologous Chondrocyte Implantation (Ortho-ACI™), which aim to augment, repair, replace or regenerate areas which have been damaged by disease, injury or the ageing process. The Company’s other major product is Celgro™, a collagen medical device which facilitates tissue repair and healing in a variety of orthopaedic, reconstructive and surgical applications and is being readied for first regulatory approval.

The net loss after tax of the consolidated entity for the year ended 30 June 2015 was $3,742,715 (2014: net loss of $2,182,185). The increase in net loss is mainly due to the increase in research and development activities and working capital requirements in the current period.

2. Principal activities

The principal activity of the economic entity during the financial year was development, clinical trials, sales and marketing of cell therapies and commercialisation of related technologies.

3. Key Events during the year and to the date of this Report

Initial Public Offering

On 18 July 2014 the Company closed its $8 million oversubscribed initial public offering after receiving strong support from domestic and international institutions, funds and Australian retail investors. The Company shares commenced trading on ASX on 12 August 2014.

Presentation of Ortho-ATI positive clinical trial results at key Australian and international health conferences

Orthocell’s positive 3-5 year data from a study of its tendon cell treatment for tennis elbow were presented at the 15th European Federation of National Associations of Orthopaedics and Traumatology (EFORT) held in London and the International Cartilage Repair Society Annual Scientific Meeting held in Chicago.

In May 2015, Orthocell announced it had presented as invited speakers a paper entitled Cells, Scaffolds and Bioreactors for the Regeneration of Human Tendons at the World Stem Cells and Regenerative Medicine Congress, a leading international regenerative medicine conference in London. Orthocell’s current and future approaches to the regeneration of tendon tissue were presented with particular focus on the recent breakthrough by the Company in demonstrating its new technology to grow human tendons outside of the body.

Regional conferences included the Australian Orthopaedic Association’s Annual Scientific Meeting, Sports Medicine Australia’s ‘Be Active’ Annual Scientific Conference and the Hong Kong Orthopaedic Association Annual Scientific Meeting.

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Appendix 4E Preliminary final Report

Positive Ortho-ATI study findings published in prestigious journal

In April 2015 the Company announced its long-term study into its Ortho-ATI[TM] treatment for chronic tennis elbow was published in the prestigious American Journal of Sports Medicine (AJSM).

Orthocell’s long-term study shows the effectiveness of Ortho-ATI™ as a disease modifying treatment providing sustained pain relief and significant functional improvements for tennis elbow sufferers.

Orthocell’s pipeline product development

Orthocell continues to grow its pipeline products and validation of Ortho-ATI[TM] with the announcement of first human tendons grown in laboratory and its exciting cell factory concept. Orthocell’s success in growing human tendons in a laboratory for the first time was believed to be a world first breakthrough involving the growing human tendons in the laboratory. Orthocell collaborated with researchers at University of Western Australia, Curtin University, Griffith University and University of Auckland with the research being sponsored by Orthocell through a Federal ARC Linkage Grant.

Further to this, Orthocell also published and announced the pipeline development of its cell factory concept for the concentration of tissue specific growth factors for the repair and regeneration of articular cartilage. This was published in the journal ‘Tissue Engineering and Regenerative Medicine’.

First patients in Hong Kong treated with Ortho-ATI[TM] therapy

In February 2015 Orthocell announced it has expanded its presence into Asia with the first patients treated with its world-leading tendon repair therapy in Hong Kong. The two patients underwent the Ortho-ATI[TM] therapy by respected Hong Kong Orthopaedic Surgeon Dr Jason Brockwell from leading sports orthopaedic group Asia Medical Specialists.

Asia is a key growth region for Orthocell and its innovative regenerative medicine therapies. The global regenerative medicine market has been forecast to reach $US67.6 billion in 2020, from $US16.4 billion in 2014, with the Asia-Pacific region expected to be the fastest growing region[1] .

BoneSupport agreement

In December 2014 Orthocell announced its new partnership with BONESUPPORT, an emerging leader of injectable bone substitutes, to develop a suite of unique bone substitute products for the bone repair market. These products will utilise the unique eluting bone remodelling capabilities of CERAMENT[TM] and the important collagen properties of Celgro[TM] to create a novel bone repair product that will not only support the damaged bone, but induce the superior growth of new bone matrix.

Celgro[TM] Patents granted

During the year the Company was granted both Chinese and US patents for its Celgro™ technology covering the manufacture of biological materials to repair damaged soft tissue. The patents provide important protection to the Celgro™ product range as Orthocell prepares for registrations and commercialisation in global markets.

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Approval for Celgro dental study and study commencement

On 9 March 2015 Orthocell announced that the company had been granted ethical approval for a clinical study using Celgro[TM] collagen membrane for the treatment of bone defects around dental implants. With more than 3 million dental implant procedures carried out in US every year and that number growing by 500,000 a year this represents a significant potential market opportunity for Celgro™.

The pilot study is an important step in the development of Celgro™ and further demonstrates that Celgro™ is a very valuable product in the large and growing regenerative medicine market.

Investor roadshow

In March 2015 Orthocell™ conducted an investor roadshow in Melbourne and Sydney. The accompanying company presentation was released to the market outlining the positive steps forward that the company has made since its IPO in August of last year.

R&D tax incentive cash refund

In May 2015 Orthocell received an R&D tax incentive cash refund of $1,157,820 for the financial year 2013/14. The R&D Tax Incentive is an Australian Government program supporting Australian companies undertaking research and development in Australia. Orthocell anticipates that it will also be eligible to receive an R&D tax rebate for its R&D programs being undertaken for the 2014/15 financial year.

Transfer of Ortho-ACI[TM] technology and royalty generation

During the year the Company completed the transfer of its Ortho-ACI[TM] technology to Chinese partner GrandHope Biotech Co Ltd, triggering the final tranche payment of a license fee, and generated royalties from the first sales of the Ortho-ACI[TM] in China.

Biomet Distributorship

Following the acquisition of Biomet Australia Pty Ltd (Biomet) by Zimmer Ltd (Zimmer), the Company and Biomet mutually agreed to the termination of a distributorship agreement between the parties under which the Company distributed Biomet products. As part of the termination of the agreement, Orthocell will receive a total of $268,652. The Company does not consider the termination of the agreement will impact materially on the company’s operations or results.

4. Future outlook

The Company continues to progress the clinical trials for development of the evidence base and regulatory approvals for its cell therapies and Celgro products. The Company also continues to grow sales in the Australian and some Asian markets to assist with cash flow needs while it focuses on undertaking trials towards gaining approvals in the significant US, European and Japanese markets.

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Appendix 4E Preliminary final Report

Condensed Income Statement For the year ended 30 June 2015

	Notes	for the year ended 30 June 2015 $	for the year ended 30 June 2014 $
Operating revenue	4	1,690,308	1,284,413
Operating expenses	4	(6,590,844)	(3,997,024)
Profit / (loss) from continuing operations before income tax		(4,900,536)	(2,712,611)
Income taxbenefit		1,157,821	530,426
Net profit / (loss) attributable to members of Orthocell Limited		(3,742,715)	(2,182,185)

Earnings per share	for the year ended 30 June 2015 $	for the year ended 30 June 2014 $
Basic earnings/(loss) per share from continuing operations	(0.05)(1)	(0.61)(1)
Diluted earnings/(loss) per share from continuing operations	(0.05)(1)	(0.61)(1)

(1) Based on a weighted average number of shares totalling 75,657,100 (ordinary shares) as at 30 June 2015 (2014: 3,561,056 ordinary and preference shares). Following the conversion of preference shares, division of shares and issue of shares in August 2014 pursuant to the prospectus dated 28 May 2014 the Company currently has 82,500,000 ordinary shares on issue.

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Appendix 4E Preliminary final Report

Condensed Statement of Financial Position As at 30 June 2015

As at 30 June 2015
	Notes	as at 30 June 2015 $	as at 30 June 2014 $
Current assets Cash and cash equivalents Receivables Inventories Other	1	4,774,108 178,377 150,665 82,052	3,467,352 126,716 151,871 305,335
Total current assets		5,185,202	4,051,274
Non-current assets Property, plant and equipment Intangibles		306,129 1,044,802	286,893 799,714
Total non-current assets		1,350,931	1,086,607
Total assets		6,536,133	5,137,881
Current liabilities Trade and other payables Employee benefits Other		755,863 310,395 235,849	3,855,443 232,010 218,540
Total current liabilities		1,302,107	4,305,993
Non-current liabilities Other		850,236	755,700
Total non-current liabilities		850,236	755,700
Total liabilities		2,152,343	5,061,693
Net assets		4,383,790	76,188
Equity Issued capital Option reserve Accumulated losses	6	15,302,482 798,405 (11,717,097)	8,050,570 - (7,974,382)
Total equity		4,383,790	76,188

See chapter 19 for defined terms

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Appendix 4E Preliminary final Report

Condensed Cash Flow Statement For the year ended 30 June 2015

Condensed Cash Flow Statement For the year ended 30 June 2015
	Notes	for the year ended 30 June 2015 $	for the year ended 30 June 2014 $
Cash flows from operating activities Receipts from customers (inclusive of GST) Payments to suppliers & employees (inclusive of GST) Receipt from license fee Grants received Interest received R&D tax concession received		1,266,115 (5,647,332) 270,356 62,058 123,369 1,157,821	1,099,848 (3,477,304) - 78,894 15,110 530,426
Net cash flows from /(used) inoperating activities		(2,767,613)	(1,753,026)
Cash flows from investing activities Payments for patent and IP costs Payments forproperty, plant and equipment		(263,235) (56,111)	(268,381) (4,872)
Net cash flows used in investing activities		(319,346)	(273,253)
Cash flows from financing activities Proceeds from issue of shares - pre IPO Proceeds from issue of shares - IPO Share issue costs		- 5,014,900 (621,185)	2,164,440 2,985,100 (247,053)
Net cash flows from financing activities		4,393,715	4,902,487
Net increase (decrease) in cash held Cash and cash equivalents at beginningofperiod		1,306,756 3,467,352	2,876,208 591,144
Cash and cash equivalents at end of period	1	4,774,108	3,467,352

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Appendix 4E Preliminary final Report

Condensed Statement of Changes in Equity For the year ended 30 June 2015

	Issued Capital $	Option reserve $	Accumulated losses $	Total equity $
At 30 June 2013	5,921,133	85,148	(5,792,197)	214,084
Issue of shares, net of costs Option reserve Lossforperiod	2,044,289 85,148 -	- (85,148) -	- - (2,182,185)	2,044,289 - (2,182,185)
At 30 June 2014	8,050,570	-	(7,974,382)	76,188
Issue of shares, net of costs Issue of options Lossforperiod	7,251,912 - -	- 798,405 -	- - (3,742,715)	7,251,912 798,405 (3,742,715)
At 30 June 2015	15,302,482	798,405	(11,717,097)	4,383,790

1. Reconciliation of cash

Reconciliation of cash at the end of the period (as shown in the consolidated statement of cash flows) to the related items in the accounts is as follows:	As at 30 June 2015 $	As at 30 June 2014 $
Cashat bank	4,774,108	482,303
Cash at bank held on trust	-	2,985,049
Total cash at end of period	4,774,108	3,467,352

2. Non-cash financing and investing activities

No significant non-cash financing and investing activities have occurred during the period.

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3. NTA backing

3. NTA backing
	30 June 2015 $	30 June 2014 $
Net tangible asset backing	0.04(1)	(0.19)(1)

4. Revenue and expenses

4. Revenue and expenses
	for the year ended 30 June 2015 $	for the year ended 30 June 2014 $
Operating revenue Sales and services revenue Finance revenue - interest received Other income	790,430 123,369 776,509	691,405 15,110 577,898
Total operating revenue	1,690,308	1,284,413
Operating expenses Cost of sales Employment related expenses Amortisation and depreciation Other expenses	652,856 3,339,507 59,355 2,539,126	597,151 1,643,418 37,830 1,718,625
Total operating expenses	6,590,844	3,997,024

5. Dividends paid and proposed

No dividends have been paid or proposed during the year.

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6. Issued capital

6. Issued capital
	for the year ended 30 June 2015 $	for the year ended 30 June 2014 $
Ordinary shares (net of issue costs)	15,302,482	3,313,427
Preference shares seriesA(net of issue costs)	-	3,303,563
Preference shares seriesA2(net of issue costs)	-	1,433,580
Issued and fully paid	15,302,482	8,050,570

	Number of shares	$
At 30 June2014	3,865,856	8,050,570
Divisionofshares(1)	58,634,144	-
Issue of shares at Initial Public Offering (net of issue costs)	20,000,000	7,251,912
At 30 June2015	82,500,000	15,302,482

7. Group structure

Companies within the Orthocell Group (all wholly owned) carry out designated activities:

Ausbiomedical Pty Ltd – nil activity

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Appendix 4E Preliminary final Report

8. After balance day events

No matters or circumstances have arisen since the end of the financial year which significantly affected or may significantly affect the operations of the Company, the results of those operations or the state of affairs of the Company in future financial years.

9. Annual meeting

(Preliminary final report only)

The annual meeting will be held as follows:

The annual meeting will be held as follows:
Place	Building 191 Murdoch University South Street Murdoch WA 6150
Date	24 November 2015
Time	10:00am
Approximate date the+annual report will be available	23 October 2015

See chapter 19 for defined terms

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Appendix 4E Preliminary final Report

Compliance statement

1 This report has been prepared in accordance with AASB Standards, other AASB authoritative pronouncements and Urgent Issues Group Consensus Views or other standards acceptable to ASX.
2 This report, and the[+] accounts upon which the report is based (if separate), use the same accounting policies.
3 This report does give a true and fair view of the matters disclosed.
4 This report is based on[+] accounts to which one of the following applies. (Tick one)
The[+] accounts have been  The[+] accounts have been audited. subject to review.
The[+] accounts are in the  The[+] accounts have not yet process of being audited been audited or reviewed. or subject to review.

Sign here: Date: 28 August 2015 (Managing Director)

Print name: Paul Anderson

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AI assistant

ORTHOCELL LIMITED Annual Report 2015

65477_rns_2015-08-27_24664f35-4009-436b-b108-50a8ba7fd12d.pdf

Appendix 4E

Preliminary final report

Name of entity