In the DACH region, Medartis systematically introduced its new CMF system, Modus^(R) II. Within Medartis' smallest segment, patient-specific solutions as well as digital planning software are an important customer need and a key differentiator in the market. Medartis was able to leverage its expertise in this field (CMX), although pandemic restrictions in most countries prevented a return to normal levels. EU supply chain hub implemented A major project in H1 was the creation of a European supply chain hub at its Germany subsidiary in Umkirch. Although a small hub already existed, Swiss-European discussions regarding the bilateral agreement with the European Union as well as the implementation of the European Medical Device Regulation (MDR) caused additional regulatory requirements. As a result, products for the European market are now sold indirectly through the German hub, whereas in the past, they were sold directly from Medartis' headquarters in Basel. This milestone project was successfully implemented in May.

Medartis also continued to invest in its organisation in 2021. This concerned not only the size and capabilities of its sales teams, but also other strategic functions. The global workforce increased globally by 5% to 649 employees, reflecting business, R&D and geographic expansion.

FINANCIAL PERFORMANCE

During the first half of 2021, Medartis was able to increase its gross margin by 1.6% points to 83.6%. A positive geographical mix effect (i.e. a larger proportion of sales from countries with higher selling prices) as well as manufacturing efficiency were the main drivers of this improvement.

Operating expenses (OPEX), which comprise selling & distribution, administration and R&D expenses, amounted to CHF 55.4 million or 75.3% relative to net sales (2020: 84.9%). OPEX improved in relative terms due to higher selling volumes and the resulting operating leverage. Selling & distribution expenses make up the largest part of the OPEX expenses (59.3%), and increased in absolute terms due to the sales force expansion and the creation of new subsidiaries in Spain, JP and China. In contrast, sales force travel, training & education and event & marketing activities were lower than planned due to the pandemic contact restrictions. IT and supply chain costs rose in 2021 due to MDR-related projects as well as the establishment of new subsidiaries. R&D expenses increased by CHF 2.7 million year-on-year to CHF 10.5 million. This reflects the company's strategy to further expand its product portfolio and to drive innovation. In the future, Medartis will also expand its R&D resources into the US in order to develop new products specifically intended for the North American market - especially in the foot & ankle business. Administration expenses comprise regulatory, quality, IT, HR, finance and supply chain management increased by CHF 1 million due to project related IT & logistic costs for the creation of the European supply chain hub as well as additional costs for the new subsidiaries.

EBITDA improved considerably to CHF 14.1 million (2020: CHF 5.2 million) due to the aforementioned gross profit improvement and better OPEX efficiency. The EBITDA margin increased by 10% points and reached 19.2%.

Depreciation & amortisation (D&A) increased by CHF 1.0 million to CHF 7.9 million (10.8% of net sales). The majority of the depreciation expenses relate to machinery, surgical tools & containers in consignment stocks and are correlated with the anticipated sales development. Operating profit (EBIT) reached CHF 6.3 million in H1 2021, and the corresponding margin reached 8.5%. This compares to an operating loss of CHF 1.7 million in the prior year.

The financial result in H1 improved to CHF 1.7 million in H1 2021 from a negative CHF 5.0 million in the prior year, when the company encountered currency losses of CHF 4.3 million. During H1 2021 Medartis took various actions to reduce its foreign exchange exposure. This will help the company to reduce future foreign exchange volatility. Income tax expenses stood at CHF 0.9 million compared to a tax income of CHF 0.8 million in H1 2020. The year-on-year change reflects the higher operating profit and includes certain effects resulting from the implementation of the European hub.

As a result of the above factors, net profit reached CHF 7.1 million in H1 2021. This compares to a loss of CHF 5.8 million in H1 2020. Basic EPS increased accordingly from CHF -0.50 per share in H1 2020 to CHF 0.60 per share in the current period. Thanks to its increased top line, improved profitability and FX de-risking, the company increased its cash holdings from CHF 82.7 million at the end of 2020 to CHF 84.1 million on 30 June 2021. Operating cashflow in H1 2021 improved significantly to CHF 9.0 million (H1 2020: CHF 0.2 million) despite a sales-related increase in accounts receivable and inventory. The company invested CHF 4.1 million in its equipment and facilities compared to CHF 5.7 million in the previous year. The majority of these CAPEX investments were due to an increased number of consignment set containers and instruments, which is the basis for future implant growth, i.e. plates and screws. Free cashflow^[3] turned to a positive CHF 3.3 million in 2021 (2020: CHF -6.9 million), primarily due to the improved profitability and lower CAPEX.

NEW BOARD MEMBERS PROPOSED The Medartis Board of Directors has announced proposals for leadership succession intended to take effect at the next Annual General Meeting on 6 April 2022. Roland Hess (member since 2017) and Dr. Jürg Greuter (member since 1997) have decided to retire from the Board by this date. Nadia Tarolli Schmidt and Ciro Roemer have agreed to stand for election to the Board.

Nadia Tarolli Schmidt has worked with the business law firm VISCHER AG since 2005. She is a partner and co-head of the company's tax team and heads the social security practice. She has advised numerous Swiss and international clients with a focus on the financial, healthcare and life sciences industries. Her background, extensive experience in business law, specific skills in the areas of taxation, social security, corporate law and her experience in M&A complement well with the other members and make her a valuable addition to the Board. She also acts as judge at the Basel tax court and serves on various boards and foundations. Nadia Tarolli Schmidt is a Swiss-Italian dual citizen and a registered Swiss attorney at law and a Swiss certified tax expert.

Ciro Roemer is an expert in the medical device industry, with in-depth knowledge of global healthcare systems and medical technology markets. He has over 35 years of industry experience across Europe and in the US, which has been defined by Medartis as one of its main growth markets. He recently retired as the chairman of the Johnson & Johnson Medical Devices Companies in North America. Previously, he held leading positions at Synthes and in J&J's medical device business. He also served as a Board member of the AO Foundation, the leading global network for orthopaedic surgeons and healthcare professionals. Ciro Roemer also acted as Vice Chairman of Eucomed, the European medical device industry association. Ciro Roemer was born in 1962 and is a Dutch citizen. He graduated from BIGRA Amsterdam with a Bachelor's degree in Health Science, and completed the Advanced Management Program at Harvard Business School in the United States. ADJUSTED FULL-YEAR 2021 OUTLOOK (barring any unforeseen circumstances, especially due to the COVID-19 pandemic) Based on the strong performance in H1 and despite a more challenging baseline in H2, Medartis expects full-year sales growth (CER) of at least 20%. This outlook assumes a higher number of elective surgical procedures in its key markets in H2 as the pandemic fades. Furthermore, the company confirms its assumption of stable EBITDA margin development in 2021 as it continues to invest in its sales force and product pipeline, and assumes a gradual pick up of training & marketing activities during the remainder of the year. ANALYSTS' AND MEDIA CONFERENCE CALL Medartis will present its 2021 half-quarter results to representatives of the financial community and media in a webcast conference call today at 10.30 a.m. Swiss time. The webcast will be hosted by Christoph Brönnimann (CEO) and Dirk Kirsten (CFO) and can be accessed via the following link: Webcast conference H1 2021 results. The webcast language will be English. A replay of the webcast will be available on our website shortly after the conference. If you wish to download the slide deck, we recommend that you download the presentation file under the following link. The half-year financial report is available here.

Participants may alternatively use the following phone numbers to connect to the call: 


Switzerland/Europe +41 (0) 58 310 50 00 
UK                 +44 (0) 207 107 06 13 
US                 +1 (1) 631 570 56 13

For other international numbers, see media.choruscall.ch

IMPORTANT DATES AND UPCOMING INVESTOR EVENTS 


2021 
19 August     Virtual International Investor Roadshow 
16 September  UBS Best of Switzerland Conference 
4 November    ZKB Switzerland Conference 
18 November   Credit Suisse Mid Cap Conference 
2022 
8 March       2021 Full-Year Results Presentation 
6 April       Annual General Meeting 2022

Your contact: Fabian Hildbrand Head of Corporate Communications Investor contact: investor.relations@medartis.com Media contact: corporate.communication@medartis.com +41 61 633 37 36

About Medartis

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August 17, 2021 00:30 ET (04:30 GMT)