Focus on long-term growth creates setback in sales

FIRST QUARTER 2024/25 (MAY – JULY)

• Net sales amounted to 18.5 (20.4) MSEK, which is a decrease of 9.5% compared with the corresponding period last year.
• Operating profit amounted to -12.0 (-2.9) MSEK. The operating result amounted to -10.6 MSEK excluding currency effects of -1.4 MSEK, most of which are unrealized internal accounts receivables.
• Profit/loss after tax amounted to  -9.4 (-2.9) MSEK, which resulted in earnings per share of SEK -0.49 (-0.1).
• Cash flow from operating activities amounts to -10.5 MSEK (-2.6), change in working capital was -3.5 MSEK (-7.1) and investing activities -2.6 (-1.9). Total cash flow was 29.3 (-12.1) MSEK. Liquid assets as of 2024-07-31 amount to 46.2 (29.9) MSEK, not including 33.7 MSEK in accounts receivables.  

Significant events in the quarter

• Integrum entered a commercial collaboration and distribution agreement with Hanger, the leading provider of amputee care and prosthetics in the US that delivers care to almost one-third of all amputees in the country.
• Integrum carried out an issue of 961,539 new series B shares, at a subscription price of SEK 52 per share, raising proceeds of approximately SEK 50 million.
• The company has finalized a trade term loan facility agreement of about 24 MSEK as an option to finance its accounts receivables.
• The company signed a Memorandum of Understanding with Coapt LLC, with the intention to provide Integrum the possibility to combine Coapt’s pattern recognition technology with the continued development of e-OPRA® Implant System.
• Integrum announced that the company has received market approval for the OPRA® Implant System in Israel.

CEO’s statement

In the first quarter of our fiscal year 2024/2025, we report on an important collaboration in the US with Hanger and a setback in revenue. Besides the expected continued volatility quarter to quarter, the decline can be explained both by inventory buildup in our newly entered markets during the previous quarters, and that our US organization had to prioritize executing the collaboration deal with Hanger over short-term sales activities. We stay confident that our overall strategy to build momentum through entering new markets and building strong collaborations will deliver over time.

Revenues totaled 18.5 MSEK during the quarter, which corresponds to -9.5 percent growth compared to the corresponding quarter last year (-9.6 percent in local currency). Operating profit amounted to -12.0 MSEK. The cash position, which on 31 July amounted to 46.2 MSEK together with 33.7 MSEK in accounts receivables, provides a solid basis for continued market investments to boost our long-term growth.

Collaborating with the industry leader in the US
In June, we announced the signing of a commercial and distribution collaboration with Hanger, the US industry leader in amputee care and prosthetics, which provides care to almost one-third of all amputees in the country. We are excited about this collaboration. For us, having Hanger promote our ground-breaking innovation in a broad amputee care setting in the US is of immense value as we expect this, once fully operational, will increase our patient pipeline. We have respect for the complexity of introducing a new advanced technology in a large organization and expect that it will take time. However, the agreement should start generating accelerated growth this fiscal year.

Capital raised to accelerate commercialization and strengthen the organization
While the Hanger collaboration is a great long-term opportunity for Integrum, it is frustrating to realize that our US organization had to deprioritize short-term sales to secure the deal. It underpins the need to strengthen our sales organization further. We will strengthen the organization with focus on the US and the prosthetists. We will intensify our commercial endeavors in the US. Altogether, this will build on the successful establishment in the US already accomplished and help us establish more strategic partnerships without losing focus on ongoing business. The directed issue that we successfully carried out in June, providing approximately SEK 50 million to the company. Further, we have secured an extended credit line of up to 34 MSEK. The funding will be used for investments into commercial resources and distribution, as well as clinical affairs and continued product portfolio expansion.

Inventory build-up in newly entered markets
We recently entered the United Kingdom, Israel, Turkey, and Ukraine, and the funding from our directed issue in June will now help us accelerate the efforts in these markets. The initial stage of a new market entry is characterized by a build-up in inventory, creating a gap from market entry to stable sales curves, which in part explains the relatively weak revenues for this quarter. However, following initial fluctuations, these new market entries can be expected to start generating a more stable revenue growth.

Every new market entry also has its own demands. In the United Kingdom, regulatory clearance has taken longer than expected. Even if the UK has decided to accept every product with an MDR approval, the authorities need to proceed with administrative processes to validate all documentation. This means a heavy workload both for us as a company and for the authorities, but we expect the process to be finalized relatively soon.

Prioritizing strategic affairs for long-term growth
The collaboration agreement with Hanger is important ,but as the process of establishing it is and will be time-consuming, it came at the price of a reduced focus on short-term sales activities in the US. It remains a strategic priority to achieve further partnerships of this kind, and by strengthening our organizational capacity we should be able to avoid similar trade-offs between short and long-term goals in the future.

With our clear focus on actions that will leverage our technology long term, we will ensure that more and more people will have the opportunity to regain mobility after suffering from limb loss.

Mölndal, 29 August 2024
 

Rickard Brånemark

Chief Executive Officer

The interim report can be found here:

https://integrum.se/investor-relations/financial-reports-calendar/

This disclosure contains information that Integrum AB is obliged to make public pursuant to the EU Market Abuse Regulation (EU nr 596/2014). The information was submitted for publication, through the agency of the contact person, on 29-08-2024 07:00 CET.