Dear Shareholders,


We are concluding yet another intense quarter for Episurf Medical. We are continuing to deliver on our strategy, and the activity level is high across our business. We are approaching the completion of two of our most important milestones ever, namely the approval to start a clinical trial in the US and the launch of an individualised ankle implant. We are improving our results during the quarter, driven both by increased revenues and lowered operating expenses.


Continued preparations for the US market

Our preparations for the initiation of a clinical trial in the US continued with full force during the quarter. The US project is the largest project that the company has ever engaged in, and we want to ensure that the preparatory work is carried out in the best possible manner. In line with our communication at the end of July, we have received feedback from the FDA on our original application, and we are now providing final answers to such feedback. In addition to the dialogue with the FDA, we have engaged in preliminary site recruitment. In our opinion, there is a great interest in participating in the study, and we look forward to communicating more once details are set, and we can formalise the site recruitment.


Our ankle implant
We have not yet received CE-mark of the ankle implant. We have to admit that we had hoped for a quicker process, but we are nevertheless hopeful to achieve this in the coming weeks. We have noticed a demand for this product among our group of existing and potential customers, and we hope to be able to offer the product shortly. In the meantime, our preparations for a clinical trial with the Talus implant continued during the quarter.



“We have now treated close to 400 patients in Europe, and the reported resultsshow excellent patient improvements.”


Strong clinical results
Recently, it was announced that clinical data from the large European multicenter study that is ongoing was accepted for presentation at no less than three important clinical congresses. At the annual meeting of the Australian Knee Society, data was presented by Associate Professor Karl Erikson from the Stockholm South General Hospital. At the
annual meeting of the Danish Orthopaedic Society, Professor Martin Lind presented clinical results from the study, and at the annual meeting of the European Orthopaedic Research Society in Galway, Ireland, an abstract from the study was accepted as a poster presentation. The study shows excellent early clinical results, and we can conclude that our technology is helping patients in the “gap age” (35–60). We know that there is a significant number of potential patients out there in the treatment gap in need of a viable treatment option. The results clearly show that Episealer® could be a solution for them.


Delivering on our strategy for a global establishment

We continued to deliver on our strategy of broadening our geographic reach. We are carefully and cost consciously reviewing new geographies as we know that achievement on our long-term targets is dependent upon full market access for the Episealer® technology in several global geographies.
In Japan, we participated in a first consultation meeting with the regulatory authority for designing a regulatory strategy leading to market access in Japan. We also decided to enter the Polish market through a co-operation with a local partner. Our work to establish Episurf in India continued during the quarter, and we will communicate more once progress is made in each of these regions. In this context, it is also important to mention that our IP portfolio was strengthened during the quarter by new patent approvals in Japan, the US, Australia and Canada.


The Episealer® process is based on a detailed analysis of a patient’s MR images. These images are converted to a transparent and dynamic 3D-visualisation of the knee joint. At the end of the third quarter, we took a significant step in the continuous development of our proprietary software platform by the CE-marking of a new knee joint visualisation tool. The tool, named Epioscopy®, is a web-based application based on artificial intelligence (AI), providing an overview of a knee joint’s clinical condition. The product is intended to assist healthcare professionals in their planning of optimal treatments for patients’ knees by interactive 3D visualisation of structures and possible structural
deviations. In addition to great benefit for our customers, this product is also essential from the perspective of longterm profitability as increased efficiency on our software platform will decrease costs and enable higher margins going forward.


In the third quarter, our revenues grew by 87% to SEK 1,0m and the operating expenses decreased by 7% compared to the same quarter previous year. I am pleased to conclude that despite a very high level of activity with investments in the US clinical trial, our new ankle implant and to some extent in new markets, we are continuing to improve the result. At the end of Q3, we had SEK 29,9m in available liquidity and SEK 63.0m of un-used funds on a credit facility, bringing the total available financing to SEK 92.9m.


Concluding remarks
We have now treated close to 400 patients in Europe, and the reported results show excellent patient improvements. We have come this far with a minimal amount of clinical evidence available, with published peer-reviewed results from only one multicenter study available with ten patients. The ongoing European multicenter study is fully recruited, and the size of this study is ten times the first Episealer study, i.e. 100 patients. Interim results have been presented, and we look forward to the publication of these results. Such publication will be of critical importance to us. We are also looking forward towards expanding our business into the ankle business, as well as geographically into the US market. While doing this, we are also expecting revenues in Europe to continue to grow. In summary, we are confident about the strength and uniqueness of our technology, and we know that this technology is addressing an unmet clinical need of significant size. The strategy is clear, and we are entirely focused on the execution of our strategy.


Stockholm, October 2018


Pål Ryfors, CEO