Dear fellow Shareholders,

Following a very turbulent time during the pandemic, with significant volatility between the quarters, we have experienced a positive customer acquisition trend for several consecutive quarters. In the previous CEO statement, I clearly stated that this was a key priority now as we are not only coming out of the pandemic but also having a more commercial focus, as this is the next step for us. Hence, I am pleased with this development. Following growth in our quarterly customer base of 24% and 72% during Q1 and Q2 2022, the customer base grew by 48% in Q3. We are still exposed to significant pandemic-related backlogs of knee replacement patients. Just like last year, we experienced a very low activity level during the European summer months of July and August. This hampered the sales activities during the quarter, so seeing such strong growth in the customer base is very encouraging. We know reasonably well what volumes we can expect in a normalized world. Hence customer acquisition remains a priority.

Commercialization

This year has seen significant activity and restructuring in our direct and indirect (distribution markets) commercial strategies. We are still very much going through a period of change and are not reaping the full benefits of these changes yet. The main message underlying these changes is that we are investing in resources for both sales channels.

The main focus in our direct commercial organization is on sales execution, ensuring that we take the next step to accelerate growth in our more established markets. In these more established markets, the procedure of focal resurfacing is gaining more acceptance, with inclusions in NICE Guidelines in the UK, and joint registries in both the UK and Sweden.

The focus with our indirect markets is mostly new market entry, establishing our brand and acquiring first customers. Many of our arrangements with new markets were established as the pandemic approached, or even under the pandemic, so we are revisiting these partnerships and now getting started again. From a market potential perspective, we are excited to focus on market introductions in India, the UAE and Australia. Over the coming months we will also not hesitate to take on additional markets, as we continue to see global interest in our products.

Product development

For the Episealer® Patellofemoral System, Episurf is still in the 510(k) review process with the FDA to receive market clearance within a few months. The company has been working interactively with the FDA through the Submission issue request pathway to discuss the agency’s feedback to establish a clear response strategy to close the outstanding questions and receive clearance. The company still aims for market clearance in late 2022 or Q1 2023 and is in an intense period to prepare for a product launch. Post-FDA clearance, a major effort point of emphasis will involve the recruitment of local distributors, and we are already having discussions with distributors in a number of different geographic locations across the US.

For the Episealer® MTP-system, we will provide further details on the timetable shortly. Intense development work as well as verifications and validations are currently performed, in parallel with Episurf having a dialogue with the FDA through the Pre-submission pathway, to prepare for a 510(k) submission. Additionally, we’ve been engaged with a number of US foot and ankle surgeons to ensure our R&D efforts match their unmet medical needs.

Clinical development

The EPIC-Knee IDE study, conducted both in the US and Europe to prepare for a later FDA application for the Episealer® Knee implants, has struggled greatly under the pandemic and the time following the pandemic. Across the board and regardless of study type, clinics have struggled to focus on research studies and the traction has been lost. This autumn, however, there is promising study progress in the EPIC-Knee study. Episurf’s Medical Advisor Prof. Leif Ryd has met with all the US investigators in person to discuss how we can work together for better progress. A clinical protocol amendment designed to facilitate patient recruitment was submitted to the FDA and just received approval last week. We have also seen multiple study sites send in their first MRI scans for potential patients.

The various studies on the Episealer Talus continued during the quarter. The prospective study conducted in several European countries has reached recruitment of 44% and the Italian Talus study conducted at the Rizzoli Orthopaedic Institute in Bologna, Italy, is close to being fully recruited, which is expected to happen before the end of the year.

Concluding remarks

The slightly higher costs during the quarter are mainly a result of the intense activities in the US. We have executed a protocol adjustment in the EPIC knee study, and the two 510(k) processes we are engaged in have also seen high activity.

We look forward to the coming weeks and months with great optimism. I have been attending surgery myself in Germany, and my participation was subject to COVID testing and other related protocols. So it’s not frictionless, but I believe we are managing it well, and overall, we are taking significant steps in the right direction. On our Capital Markets Day, to be held on November 16, we are providing additional details on our global commercial opportunities, which believe are of significant size in the years to come.

Stockholm, November 2022

 

Pål Ryfors, CEO