Dear Shareholders,

In connection with the report for the third quarter of 2023, we clearly show we are on the right track. The expansion of the business model, both in terms of the product portfolio and geographies, is now showing clear progress, and we expect this development to continue at an increasingly rapid pace. Below, I outline what we consider to be most significant from recent developments:

  • Gross order intake grew by 67% in the quarter (to SEK 2.6 million) and by 65% during the first nine months of the year (to SEK 8.2 million). As of the reporting date, gross order intake over the past twelve months amounts to SEK 11.0 million, and we have grown by 61% during this period. Net sales grew by 86% (to SEK 2.6 million) during the quarter. During the start of the fourth quarter, we started to see the US contribution properly, and the US market already constitutes a significant share of the gross order intake.
  • During October 2023, we surpassed the entire October 2022 gross order intake after just two weeks. In summary, we continue to see increasingly strong growth outside the US, while the US is now starting to make a material contribution to gross order intake from the fourth quarter onwards. We recently submitted the 510(k) application for another product for the US market, with an expected launch in 2024, and we look forward with great optimism to the coming quarters.
  • The user base (the number of orthopaedic surgeons using the Episealer® implant during a given period) continues to grow increasingly rapidly. The user base grew by 26% in the quarter and by 42% during the rolling 12 months up to and including the reporting date, where we have now reached 130 orthopaedic surgeons on a rolling 12-month basis. We feel that it is easier and easier for us to recruit customers, and customers are adopting the technology ever faster. In the last three months, we have also had more new users than ever, with almost two new customers per week. Our strategy will also positively impact this key figure by adding the US market from the fourth quarter as well as an additional market segment in the US in 2024.
  • Our geographic expansion generates value. In 2023, 19 countries have contributed to the gross order intake, and we have study clinics in additional countries. It is becoming increasingly clear that the combination of strong clinical evidence, broadened product range, and hard work through local presence over many years is starting to pay off – and we expect continued progress in our geographical expansion. Our recent restructuring means that we continue to have business managers in our most important regions, and our global presence continues, although with an even greater focus on distributor sales.

In summary, we expect continued growth in new and existing markets. Our products are not sold off the shelf, meaning no one buys a tray of Episealer® implants. Instead, we sell patient by patient. This possibly means that sometimes, getting started with a customer might take longer time than desired – but on the other hand, it provides stability when the technology is adopted.

We now have a steady increase in usage and gross order intake for some time, with low volatility, in our opinion. We have significant portions of our total addressable market of about USD 2 billion available to us, and now we want to take significant steps commercially. We do not provide forecasts, but we have previously exemplified the future using scenario analysis, in which we reach a customer base of 1,000 customers globally. At expected pricing, 7 implants per year on average, such a scenario results in an annual revenue level of SEK 250 million. We are now working hard to expand the customer base, increase the usage at each clinic, and confirm pricing globally.

Another important data point to mention is our first experience from sales of the Episealer® Patellofemoral System, a product approved in the US with the clinical indication osteoarthritis. We expect the conversion ratio from MR scan to Episealer® implant to be higher than for Episealer® Knee and Episealer® Talus. This is because the patients have already reached the osteoarthritis stage, and the probability of an intervention with a prosthesis, all else being equal, is greater than for patients with focal lesions. Of the first 10 US MRI scans we received with a request for the Episealer® Patellofemoral System, all resulted in Episealer® surgery, and the conversion ratio thus amounted to 100%. The pricing in the US meets our expectations, and although the US launch is at an early stage, it shows precisely the right development. We expect this development to continue within the knee market and in 2024 into the big toe market as well.

The reorganisation we announced in July is ongoing and will fully affect the figures from the start of 2024. This will mean a significant improvement in the cost level, and we expect clear profit improvements in 2024. We had SEK 80.7 million in liquidity at the end of the third quarter, and our current funding is deemed sufficient throughout 2024. We consider the most critical milestone in the near term to be the FDA approval for the Episealer® MTP-System. Our application was recently submitted and is now following the FDA review process.

Stockholm, October 2023


Pål Ryfors CEO