Q-MED
ANNUAL REPORT
Hanna Eriksson Material Planner
Place of work: Supply Chain
09 09
ABOUT Q-MED
03 Business concept, vision and overall objectives
04 2009 in brief 06 President’s statement 08 Objectives and strategies 10 Esthetics product area
12 Esthetics Restylane® product area 16 Esthetics Macrolane™ product area 18 Hospital Healthcare product area 20 Research and development 22 NASHA™
23 Quality 24 Co-workers 26 Environment
CONTENTS
FINANCIAL INFORMATION AND NOTES
28 Report of the Board of Directors 31 Consolidated comprehensive income
statement
33 Consolidated balance sheet 35 Consolidated cash flow analysis 36 Changes in shareholders’ equity for
the Group
37 Income statement for the Parent Company 38 Balance sheet for the Parent Company 40 Cash flow analysis for the Parent Company 41 Changes in shareholders’ equity for
the Parent Company 42 Notes
67 Auditor’s report
SHAREHOLDER INFORMATION ETC.
69 Corporate Governance Report 74 Board of Directors and auditors 75 Senior management
76 The share 78 5-year summary 80 Quarterly data 82 Definitions and glossary 83 Annual General Meeting and
financial information
“If you feel beautiful you
will also make other people happier”.
Bengt Ågerup, Founder and CEO, Q-Med
OVERALL OBJECTIVES
Q-Med has as its overall objective high growth combined with good profitability. Q-Med shall consistently strive to meet its customers’
and other stakeholders’ expectations and needs, through constant improvements in quality and constant training. Q-Med also strives to give its shareholders a competitive return on their invested capital both in the short and long term.
PRODUCT AREAS
Esthetics – Skin, face, body
Restylane® is an internationally leading product family for esthetic beauty treatments. The products are used for smoothing out wrinkles and lines, for filling out and shaping lips, defining facial contours and improving the quality of the skin. Restylane is the world’s most documented injectable hyaluronic acid product for esthetic use and has been on the market for more than 13 years. Over 11 million Restylane treatments have been carried out all over the world.
Macrolane™ VRF is the first series of products on the market that makes it possible to shape the body without surgery. When Macrolane is injected, the gel can enlarge breasts, create volume and smooth out defects on the body. The advantages of the treatment are immediate and long-lasting, without being permanent. The hyaluronic acid in Macrolane is similar to that of the body and is therefore broken down naturally.
Hospital Healthcare
Deflux® for the treatment of a malformation of the urinary bladder in children. Durolane™ for the treatment of osteoarthritis of the knee and hip.
Solesta™ for the treatment of fecal incontinence.
Q-Med shall develop and offer safe, effective and innovative products for esthetic treatments, so that a person’s appearance reflects how they feel on the inside.
Appearance has played an important role for many years and in all cultures in the history of mankind. However, how we choose display our appearance varies a great deal between cultures
and eras. Q-Med does not provide any norms for what can be considered beautiful or about whether aging is in opposition to beauty. Q-Med believes that each individual knows best what beauty is for him or her. When someone expe- riences a heightened sense of well-being, greater self-esteem or a greater quality of life with the aid of our products, that is beauty for us.
VISION
Q-Med is a medical device company that develops, manufactures, markets and sells high quality medical implants for esthetic and medical use. The majority of the products are based on the company’s patented technology, NASHA™, for the production of stabilized non-animal hyaluronic acid.
BUSINESS CONCEPT
Enabling Individual Beauty
”After using the new needle, I never want to use ordinary needles again! I really like how easily the product flows through the needle.”
Dr Tracy Mountford, Medical Director, Cosmetic Skin Clinic, UK, one of the first doctors to have used the Thin Wall Needle.
09 2009 IN BRIEF
The focusing on the Esthetics product area continued during 2009. The Lidocaine products have become a much asked for addition to the Restylane® family and the launch of the Restylane Vital™ concept, with the prize-winning injector, was successful. During 2009 Restylane also became the first injectable non-animal hyaluronic acid product on the Chinese market.
Macrolane™ continues to arouse great interest and during 2009 the product was launched in several new markets all around the world. All of Q-Med’s hospital healthcare products are now sold and marketed via global partners. The work on product development continued during 2009 and the beginning of 2010 saw the launch of a new needle design, amongst other things.
Two new Restylane products
with lidocaine The two new products Restylane® Lidocaine and Restylane Perlane™ Lidocaine which were launched in May 2009 became popular additions to the Restylane product portfolio.
Read more on page 12 Thin Wall Needle – new needle design
At the beginning of January 2010 Q-Med introduced the new 29G Thin Wall Needle, developed exclusively for Q-Med within the esthetics area. The new needle has a greater inner diameter compared with ordinary needles, which facilitates injection and minimizes dis- comfort for the patient.
Read more on page 12
Success for new injection pen
In January 2009 Q-Med launched a completely new type of injection device:
Restylane® Injector. The injector simpli- fies the rejuvenation treatment of sen- sitive skin on the neck, face, décolletage and hands, and won the prestigious Red Dot Design Award – one of the world’s most well known design prizes.
Read more on page 12
Restylane Injector won the prestigious Red Dot Design Award – one of the world’s most well-known design prizes.
4 2009 IN BRIEF Q-MED ANNUAL REPORT 2009
Thin Wall Regular Wall
The new Thin Wall Needle, with a design that gives it a greater inner diameter compared with traditional needles.
The new injector with Restylane Vital.
An earlier version won the Red Dot Design Award.
Hanna Krenander Laboratory Engineer
Restylane in China
Restylane® obtained registration approval in China at the beginning of 2009 and after a launch symposium in June, Restylane began to be sold in China as the first inject- able non-animal hyaluronic acid product.
Read more on page 12 Solesta on the way to
sales approval in USA In December Q-Med announced that the Solesta™ study for the treatment of patients with fecal incontinence had achieved both of its main objectives. Q-Med and Oceana Therapeutics now intend to submit a Premarket Approval (PMA) application to the FDA (U.S. Food and Drug Administration) during the first quarter of 2010.
Read more on page 19
Global agreements with Oceana Therapeutics
Q-Med AB and Oceana Therapeutics, based in the US, entered into global agreements regarding commercialization rights to Deflux® and Solesta. Q-Med received the first payment of 60 MUSD from Oceana Therapeutics in June 2009.
Read more on page 19
The FDA requests more
information on Durolane The FDA’s advisory committee requested further information in order to be able to recommend Premarket Approval (PMA) of Durolane™. Q-Med is now working together with its partner Smith & Nephew to produce the information required for approval.
Read more on page 19
How have you launched Restylane in China?
“When we obtained registration approval in January 2009 we began sales on a modest scale in May. It was only after a successful launch seminar in Peking in June 2009 that sales really took off. Since then we have been working intensively on training doctors in China. We have turned to well reputed professional doctors and dermatologists. During the autumn we have had around 80 training sessions in several large cities.”
How has it been received?
“The response has been very positive and the mass media have written many articles.
Previously mainly permanent implants and surgery have been used. Restylane is a new trend in China that is associated with safety and high quality. At the end of 2009 we now have sales of Restylane to over 100 hospitals all over China.”
Luni Chen
General Manager China
Q-Med – seventh best Nordic company in climate questions in 2009
In 2009 Q-Med was chosen as the seventh best Nordic com- pany in climate questions by The Carbon Disclosure Project (CDP) in competition with the 200 largest companies listed on the Nordic stock exchanges. Q-Med came top of the hos- pital healthcare companies.
Read more on page 25
Q-MED ANNUAL REPORT 2009 2009 IN BRIEF 5
INTERVIEW WITH LUNI CHEN General Manager China
REVENUES PER GEOGRAPHIC AREA SHARE OF
Q-MED’S REVENUES Q-MED’S SUBSIDIARIES AND DISTRIBUTORS
The Q-Med Group today has approximately 650 co-workers in 20 countries, with 385 at the company’s head office and production facility in Uppsala.
Bengt Ågerup CEO and founder Place of work: Corporate
Europe, 54%
Rest of the world, 5%
Asia, 23%
Latin America, 3%
North America, 15%
Esthetics, 86%
Hospital Healthcare, 14%
P
It has been nice to have a year without conflicts. There is nothing like being able to focus on the business. I really like my job but realize that it is better to step down in time and not like Warren Buffet, “five years after my death”.
The financial crisis has led us to being cautious in our forecasts as no one could know its long-term effects. We now stand finan- cially strong and can plan for growth in the long term. Our cus- tomers noticed a slight dip in the number of new consumers but otherwise everything was as usual. In a greater perspective we can thankfully note that the world’s leaders have taken their respon- sibility for the global economy. There is reason for us to view the future optimistically, even if it is too early to sound the all clear.
The global consumer segmentation that we are carrying out at the moment confirms that appearance matters and that there is a great need for minimally invasive esthetic treatment methods.
Why do people not make greater use of these methods? The answer is simple: many people do not know or only have a vague perception of what a treatment with our products is and can give.
There is a great challenge here for us to find the right forum to communicate about our products.
We also need to be more visible and are evaluating a shop concept where consumers can gain more information and help in order to make their own decisions about treatment alternatives and where the treatment is best performed.
When we now present our new Restylane® Skincare, which will be part of the complete treatment cycle, it is no surprise that NASHA™ is involved here as well.
Viewed in the longer term we are now working on protein- based pharmaceuticals, which are generally considered to be the therapeutic base of the future. It is too early to disclose what this work actually involves and the projects are so far exploratory and do not require any major resources. All hospital healthcare products have now been successfully licenced out. Our partners appreciate our support and we want to create good conditions for their development on the market.
We had high hopes of getting Durolane™ approved on the American market with the aid of a positive study. The FDA, supported by its expert committee, also considered it confirmed that the product was not dangerous, but wanted further evidence of effect. Preparations are now ongoing to start what we hope will be a final study with a good effect. A little later in the year we were delighted that our product for fecal incontinence (Solesta™) lived up to the authorities’ requirements. There now remains the compilation of data and possibly an expert committee meeting as well before the product can be approved and launched. But it is not only patents and products that give us a strong position in the market. We have continually launched new products and new product concepts hand in hand with our customers. Together we have developed new methods and trained new customers. This has led to us having some of the market’s strongest trademarks and a stable reputation. All too many companies rest on their laurels after this phase and overestimate their position, something that Q-Med does not intend to do. Instead we will continue our innovative product development, make our organization more effective and in the future focus even more on selling processes and market strategy work.
Q-Med has a special position in its field, with a number of leading and respected brands. With fantastically loyal and competent personnel we are now preparing for an exciting future, a future where I see my role as more strategic. I therefore extend a warm welcome to our new CEO – a new force focused on the market and sales.
Uppsala, March 2010
Bengt Ågerup President and CEO
Q-MED ANNUAL REPORT 2009 PRESIDENT’S STATEMENT 7
PRESIDENT’S STATEMENT
0 100 200 300 400 500 600 700 800
2009 2008 2007 2006
2005 0
10 20 30 40 50 60
%
112
300 371 50
738
Operating margin, % 0
200 0 400 600 1000 800 MSEK1400 1200
2005 2006 2007 2008 2009 976
1304 1318 1272 1364
REVENUES OPERATING INCOME AND
OPERATING MARGIN
KEY RATIOS
2009 2008 Figures in MSEK
1364 1272 Revenues
84 82 Gross margin, %
738 50 Operating income
54 4 Operating margin, %
755 62 Income after financial items 685 33 Net income for the year 657 665 Number of employees at year-end
87 75 Equity/assets ratio, % 6.89 0.34 Earnings per share, SEK
19.65 12.88 Shareholders’ equity per share, SEK
Q-Med is a medical device company that develops, manufactures,
O
markets and sells high quality medical implants for esthetic and medical use. The majority of the products are based on the company’s patented NASHA™ technology for the production of stabilized non-animal hyaluronic acid. The Group today has 650 co-workers in 20 countries, with 385 people at the company’s head office and production facility in Uppsala. Q-Med is listed in the Mid Cap segment of NASDAQ OMX Nordic and had revenues of 1,364 MSEK during 2009.
Overall strategies and success factors
Q-Med will continue to develop and document products which are primarily based on the NASHA technology and its applications. The company’s core business consists of injectable products for esthetic treatments of the skin, face and body. Q-Med will continue its com- munication with its customers, who mainly consist of dermatologists, plastic surgeons and esthetic physicians. In the future there will also be an increased focus on consumer communication in order to increase knowledge of Q-Med’s brands and strengthen demand for the products.
Q-Med involves both customers and consumers in product development at an early stage. When the product portfolio is broadened, this is done through in-house development and strategic partnerships. The products will be sold both through the company’s own channels and selected partners and distributors. In its business Q-Med will take responsibility for protecting the environment and the surroundings and strive for sustainable development. Strong commitment from the co-workers, a good working environment, development opportunities and competent leadership are other important success factors.
Objectives and outcome in 2009 within the Esthetics product area
Within the Esthetics product area, the Macrolane™ brand was established during the year as the leading product within the body shaping area. Macrolane is still alone in its niche and the product was launched in a number of markets, including in the Middle East and Asia. Restylane® was the first hyaluronic acid based filler to be introduced in China and the new Restylane Vital™ concept for the improvement of the quality of the skin was launched in Europe, Asia and several other markets.
Q-Med has continued the work of broadening the product portfolio and at the beginning of 2010 is launching a new cosmetic series of creams within the Restylane family. The series consists of six new products containing NASHA gel. Q-Med is thereby increasing its service to the customers through effective cosmetic treatments.
The development work to broaden the product portfolio within a number of other areas is also continuing.
Esthetic sales 2009
Sales in Europe increased by 8 percent compared with the previous year.
Deliveries to Medicis, Q-Med’s partner in North America, in- creased by 5 percent compared with the previous year.
Sales to Asia increased by 24 percent during the year. Several markets in Asia continue to develop positively, even if the financial crisis has curbed the development of sales. The development of sales in China has been positive and the organization is gradually being built up.
Objectives and outcome in 2009 within the Hospital Healthcare product area
The overriding objective within the Hospital Healthcare product area during 2009 was to find new forms for sales and marketing of the products Deflux® and Solesta™. Through a transaction during the second quarter of 2009, Oceana Therapeutics, with companies in the USA and Ireland, acquired the exclusive rights to globally market, sell and distribute Deflux and Solesta. The deal also comprises other products intended for the treatment of urological and gastroentero- logical conditions. Q-Med will continue to develop and produce the products included in the collaboration. The transaction gave Q-Med an initial payment of 517 MSEK in total in June 2009. This sum corresponded to a purchase sum for Q-Med Scandinavia, Inc., the subsidiary that was divested within the framework of the agreements, and to payment for Oceana Therapeutics’ share of certain study costs.
In December 2009 Q-Med AB and Oceana Therapeutics an- nounced that the study for treatment of patients with fecal inconti- nence, which is to be used for product registration in the USA, had achieved both of its main objectives. Q-Med and Oceana Therapeu- tics intend to submit a Premarket Approval (PMA) application based on the results of the study to the FDA (the U.S. Food and Drug Administration) during the first quarter of 2010.
Sales of goods and royalties amounted during the period January to December 2009 to 212 (235) MSEK, of which royalties were 27 (17) MSEK. Operating income for the period January to December 2009 was 554 (-19) MSEK. Income for the period was affected positively by the one-time revenue from Oceana Therapeutics of 485 MSEK.
Sales of Deflux during the period January to December 2009 amounted to 148 (179) MSEK. The reduced sales revenue during the fourth quarter of 2009 compared with 2008 is due to the lower sales prices that Q-Med receives by selling to Oceana Therapeutics, but this is compensated by the fact that Q-Med is now phasing out its selling expenses, so that operating income has increased.
Sales of Durolane™ are made via Q-Med’s partner Smith &
Nephew. Revenues from sales of Durolane during the period January to December 2009 amounted to 35 (30) MSEK and royalty revenues to 18 (17) MSEK.
OBJECTIVES AND STRATEGIES
8 OBJECTIVES AND STR ATEGIES Q-MED ANNUAL REPORT 2009
Objectives and activities 2010
The overriding objective within the Esthetics product area is to con- tinue to grow in line with the market and strengthen the company’s leading position in established markets, and also to develop new mar- kets, primarily in Asia and Latin America. In addition to continuing to work on broadening the product portfolio, the work in 2010 will focus on:
• Continuing to establish the Macrolane™ brand as the leading product within the area of body shaping and launching the prod- uct in new markets
• Continuing to establish the product portfolio, with Restylane Vital™ as the leading form of treatment for long-term rejuvenation of the skin
• Launching a new series of creams under the Restylane® brand name.
The overriding objective within the Hospital Healthcare product area is to:
• In collaboration with our partner Oceana Therapeutics, get Solesta™ approved for sales in the USA
• In collaboration with our partner Smith & Nephew, perform a follow-up study on Durolane in order to obtain Premarket Approval in the USA.
Global consumer segmentation
During 2010, Q-Med will complete a global consumer segmentation, a strategic tool for continued growth. Using qualitative and quantita- tive studies, an analysis is being done of our present and potential consumers’ underlying needs, drivers and barriers when it comes to appearance and beauty.
A clear global pattern emerges in the material, and our new research has found that we relate to our appearance relatively similarly in different parts of the world. At the same time, the markets’ different degrees of maturity, and the cultural differences between them, affect how individuals choose to address these universal needs. This knowledge will be used to identify clear and distinct target groups, and provide a consumer driven focus for our ongoing product innovation and communication activities..
The segmentation will guide Q-Med in its continued work on positioning its products in the market. We can already note that Restylane has specific competitive advantages that attract consumers and that there are new interesting and growing segments in all markets.
Sabina Rasiwala Hägglund Head of Strategic Planning Place of work: Strategic Marketing
Malin Bernhardsson Adm. QA Coordinator Place of work: Quality Assurance
REVENUES OPERATING INCOME AND
OPERATING MARGIN
2009 2008
1 152 1 037 Revenues 252 172 Operating income 22 17 Gross margin, %
KEY RATIOS
0 100 200 300 400 500 600
2009 2008 2007 2006
2005 0
10 20 30 40 50 60
%
241 380
533
172 252
Operating margin, %
0 200
2005 2006 2007 2008 2009 400
600 800 1000 1200 MSEK
713
951 1073 1037 1152
N
The demand for esthetic non-surgical treatments has consider- ably increased during the past decade all over the world. One of the driving forces behind this increase is the ability to carry out safe, effective and natural esthetic treatment with the least possible discomfort. Q-Med’s injectable esthetic products are called dermal fillers. Of the non-surgical treatments, these der- mal fillers are today the third most common form of treatment in the Western world. Acceptance for esthetic treatments is increasing and new target groups are discovering the products.
The trend within esthetic treatments is moving towards a ho- listic view, where different products are combined. The focus is shifting from treating individual wrinkles and folds towards carrying out treatments comprising the whole face with rela- tively simple, non-invasive methods.
Sales and income for the year
Sales within the Esthetics product area amounted to 1,152 (1,037) MSEK during 2009. Operating income was 252 (172) MSEK and the operating margin was 22 (17) percent. Sales in Europe in- creased by 8 percent during the period January to December. Sales of Restylane® products with lidocaine developed very well and the products were well received. Sales to Medicis, Q-Med’s partner in North America, increased by 5 percent compared with the previous year. Sales to Latin America were unchanged compared with the previous year. Sales increased in Asia by 24 percent. The launch of Restylane in China and the opening of a new training center in Hong Kong are some of the activities in Asia.
Several markets in Asia continued to develop well even though the financial crisis curbed the development of sales. Sales to other parts of the world increased by 9 percent for the period January to December 2009 compared with the same period the previous year.
Australia and New Zealand are examples of markets in the rest of the world where the development of sales was positive.
Non-surgical treatments growing the most Esthetic treatments can be divided into surgical and non-surgical procedures. The three most common non-surgical beauty proce- dures according to ASAPS (The American Society for Aesthetic Plastic Surgery) are: treatment with botulinum toxin, which blocks impulses from nerves to, for example, facial muscles, the filling out of wrinkles and lips with hyaluronic acid based products (for example Restylane), and hair removal using laser. The three most common surgical treatments are, according to the same source, liposuction, breast augmentation and eyelid operations.
During the past decade the interest in non-surgical treatments has grown significantly. Between the years 1997 and 2008, the number of surgical procedures in the USA increased by 81 percent, while the number of non-surgical procedures increased by 654 per- cent, according to ASAPS. During 2008 over 10 million cosmetic treatments were carried out in the USA and of these 83 percent were non-surgical treatments.
Market and development of the market
The number of competing products has increased in recent years and today there are almost 100 different dermal fillers on the market. Around half of them are based on hyaluronic acid. Global sales of dermal fillers amounted to approximately 759 million USD during 2009, according to Medical Insight Inc. The market is consolidating and is probably developing towards a few major players who can offer a broad product portfolio. During the year a number of competitors withdrew their products from the market.
Collagen as a base for dermal fillers, for example, seems to be on its way out of the market. The NASHA™ technology, Q-Med’s patented method for stabilized non-animal hyaluronic acid, is still unsurpassed with regard to product properties and clinical studies.
It can be mentioned by way of example that Restylane is used as gold standard in FDA (U.S. Food and Drug Administration) studies which serve as a basis for product registration. Q-Med’s market share in Europe is estimated to amount to between 40 and 60 percent, depending on the country. In the North America, where marketing and sales are done via Q-Med’s partner Medicis, market observers estimate that the market share is approximately 40 percent. In Asia Q-Med’s market share is assessed to be approximately 50 percent.
Q-MED ANNUAL REPORT 2009 ESTHETICS PRODUCT AREA 11
ESTHETICS PRODUCT AREA
Natural
”Q-Med’s esthetic injectable products
Restylane, Restylane Vital and
Macrolane focus primarily on three
areas of treatment: the face, the skin
and the body.”
Restylane® is an internationally leading product family for esthetic beauty treatments. The products are used for smoothing out wrinkles and lines, for filling out and shaping lips, defining facial contours and improving the quality of the skin. Restylane is the world’s most documented hyaluronic acid product for esthetic use and has been on the market for more than 13 years. Over 11 million Restylane treatments have been carried out all over the world.
More new markets and continued
product development During 2009 a number of new products and product
improvements were successfully launched, amongst other things two versions of the prizewinning Restylane® Injector, Restylane with lidocaine and a new needle produced exclusively for the whole product portfolio. Furthermore, Restylane became the first injectable hyaluronic acid product for esthetic use in China.
In January 2009 Q-Med obtained registration approval for Restylane in China. After the launch seminar in June 2009 Q-Med arranged a large number of training sessions for doctors.
The number of hospitals offering Restylane treatments in China has steadily increased, and at the end of 2009 around 100 hospitals offered treatments with Restylane.
Restylane® Lidocaine and Restylane Perlane™ Lidocaine, which were introduced at the beginning of 2009, became a much asked for addition to the product portfolio. Lidocaine is an effective local anesthetic and 90 percent of the patients thought that treatment with Restylane Perlane Lidocaine was pleasanter compared with an injection without lidocaine. Registration of the lidocaine products continued during the year all around the world.
BEFORE AFTER
12 ESTHETICS PRODUCT AREA REST YL ANE Q-MED ANNUAL REPORT 2009
”It’s still me, but I look fresher and more rested. Now that I am rid of the deep wrinkles between my nose and mouth I feel more like myself.”
Elisabeth, 46
The new 29G Thin Wall Needle, which is produced exclusively for Q-Med within the esthetics area, was launched in January 2010.
The needle has a thinner wall and thereby a greater inner diameter compared with ordinary needles, and this facilitates injection as the gel moves through the needle more easily. A unique needle bevel design also minimizes patient discomfort as the needle causes minimal trauma in the tissue.
The innovative Restylane® Injector, which was launched for the first time in January 2009 for the product Restylane Vital™ Light not only won the prestigious Red Dot Design Award – one of the world’s most well known design prizes – but also has been well received on the market. The injector was successfully launched during the year in Europe and parts of Asia. At the end of 2009
Q-Med obtained CE approval for a newer version of the injector, now with Restylane Vital™. Restylane Injector facilitates treatment for the user and makes it a pleasanter experience for the patient.
Injection speed has also doubled through use of the Thin Wall Needle in the new injector.
Restylane Vital™ was approved in October for sales in South Korea, one of the most important markets in Asia. The Restylane Vital products continue to grow on the Russian market, where Restylane Vital Light and Restylane Injector were also registered in October.
Ola Holmgren Manager IT Operations Place of work: Engineering SHARE OF Q-MED’S REVENUES REVENUES PER GEOGRAPHIC AREA
Esthetics, 86%
Europe, 57%
Rest of the world, 6%
Asia, 26%
Latin America, 4%
North America, 7%
Natural substance with long duration in the body Restylane® is a crystal-clear gel that is injected in small quantities in the skin using a thin, fine needle. The treatment is carried out by trained specialists, above all dermatologists, plastic surgeons and esthetic physicians. The Restylane gel consists of a minimally modified hyaluronic acid that is similar to the hyaluronic acid that is naturally found in the body. The contents can almost be described as sugar and water and Restylane is slowly broken down in a natural way in the body. A newly published clinical study shows that the effect of a Restylane treatment together with an additional follow-up treatment can last up to as long as 18 months.
When Restylane was launched in 1996 it was the first injectable non-animal hyaluronic acid product for esthetic use. Restylane quickly became popular and was in demand not only in Europe but also all over the world. Q-Med has constantly had close collaboration with its customers, who mainly consist of plastic surgeons, dermatologists and esthetic physicians. Training at both a general and an advanced level for customers and comprehensive clinical studies have led to great customer loyalty. Product development has been based on continuous analysis of the market’s needs. Restylane was the first injectable hyaluronic acid based product for esthetic use to be approved in the USA by the FDA, the U.S. Food and Drug Administration. The demand for non-surgical esthetic treatments has increased significantly since the launch of Restylane. According to ASAPS, The American Society for Aesthetic Plastic Surgery, the number of non-surgical esthetic procedures increased by 654 percent between the years 1997 and 2008.
Skin rejuvenation – yet another concept where Q-Med is first
As we age, the skin’s properties change. Collagen and elastic fibres are broken down. The concentration and function of the body’s own hyaluronic acid change. This makes the skin rougher, dryer and less elastic. The skin not only visibly ages in the form of wrinkles and folds in the face, but also in areas such as the back of the hands, the décolletage and throat. These are areas that have been difficult to treat previously with good results.
Small treatments that make a big difference When Q-Med introduced Restylane Vital™ and Restylane Vital™
Light, two hyaluronic acid products for long-term rejuvenation of the skin, it was a completely new and long-awaited concept for treatment of the quality of the skin. By adding hyaluronic acid in the form of several small injections, the skin’s moisture balance, elasticity and structure are improved and the skin becomes firmer.
This has been shown in a number of clinical studies. The area of use for the Restylane Vital series is broad and today the products are also used for rejuvenating the lips, acne treatment and in com- bination with, for example, peeling or laser treatment.
A market leader with a broad product portfolio Restylane is the leading brand within its category in the global beauty market. All products have been developed using Q-Med’s patented NASHA™ technology. Restylane has great volume- creating capacity and a long duration in the skin and gives natural results. Restylane has been shown to have an unsurpassed, clini- cally proven safety profile and effect in a large number of scientific studies. The product portfolio consists of seven different products where the gel is adapted to give the best results depending on the area of use.
• Restylane®/Restylane® Lidocaine: correction of moderate wrinkles and lines, “worry lines”.
• Restylane Perlane™/Restylane Perlane™ Lidocaine: treatment of deeper lines, for example around the mouth
• Restylane Touch™: used for thinner lines, for example in the area around the eyes.
• Restylane SubQ™ is also used to define the contours of the face and to recreate lost volume.
• Restylane Lipp™: used to define and fill out lips.
• Restylane Vital™ : used to improve and recreate the quality of the skin in older sun-damaged skin.
• Restylane Vital™ Light: used to improve and recreate the quality of the skin in younger skin and in areas with thin and sensitive skin such as the throat, décolletage and hands.
Prospects for 2010
During 2010 Q-Med will continue to introduce Restylane®
Injector and the new needles, focusing on increased consumer communication and geographic spread. The lidocaine products will be introduced in several new markets and the unceasing work on an optimized product portfolio continues. Q-Med will also launch a new supplementary series of cosmetic creams under the Restylane brand name during 2010.
14 ESTHETICS PRODUCT AREA REST YL ANE Q-MED ANNUAL REPORT 2009
”Restylane – natural beauty from within”
Frown lines Worry lines Crow’s feet Lip line Smoker’s lines Smile lines
Sad mouth corners Lip enhancement
Tired eyes
Cheek augmentation Facial contouring Nasolabial folds
INTERVIEW WITH DR SALTI
You have used Restylane Vital since the product was launched three years ago. What are the product’s most important properties?
– The most important properties of Restylane Vital™ are definitely the improvement of the skin’s structure and ap- pearance. Many of my patients want to have skin that looks healthy and vital and they love Restylane Vital because the treatment is so simple and the convalescence time minimal.
Interestingly enough my use of laser has decreased, espe- cially now that I can combine Restylane Vital and Restylane Vital™ Light to achieve maximum improvement of the quality of the skin.
It is also a good treatment for the throat and décolletage areas, which have previously been difficult to treat. I have begun to use Restylane Vital more and more in the upper part of the face, for example the forehead. I also use the product to treat the small lines around the ear that many patients dislike as it looks as if they have had a facelift.
Dr. Giovanni Salti – Medlight Clinic, Italy.
Dr. Salti specializes in non-surgical cosmetic treatments, for example laser, chemical peels, botulinum toxin and dermal fillers.
Dr. Salti has used Restylane® for more than ten years and was one of the authors in the first clinical study on Restylane. Dr. Salti has also lectured in Q-Med’s injection technique training courses both at a basic and an advanced level.
Before treatment with Restylane Vital.
After treatment with Restylane Vital.
Macrolane™ VRF is the first series of products on the market that makes it possible to shape the body without surgery. When Macrolane is inject- ed, the gel can enlarge breasts, create volume and
smooth out defects on the body. The advantages of the treatment are immediate and long-lasting, without being permanent. The hyaluronic acid in Macrolane is similar to that of the body and is therefore broken down naturally.
“Treating with Macrolane is a fantastic method, because it’s simple and safe.”
Dr. Fatemi, S-Ethic Clinic Germany.
Deeper knowledge and great interest in new markets
Macrolane™ VRF is the first series of products on the market for body shaping that create volume and smooth out defects on the body simply, safely and naturally. The product was approved for sales in Europe at the end of 2007 and is based on Q-Med’s patented technology, NASHA™. After the launch work in 2008, Macrolane further broadened its clinical documentation during 2009 and was launched in a number of new markets, amongst others in the Middle East and Asia. Randomized clinical studies on the breasts and buttocks, an investigation in Europe includ- ing 310 patients, publication in the scientific journal Aesthetic Plastic Surgery and presentations at several international sci- entific congresses in Europe and Asia are some of the activities during the year. Q-Med has a tradition of close and high quality collaboration with its customers, where further training, clinical documentation and joint business development are important components. A considerable part of the marketing work for Macrolane is thus to offer advanced training for both new and experienced customers. During 2009 several expert group meet- ings were arranged and over 88 specialists attended an expert meeting that was held in October. Both mass media and profes- sional interest in Macrolane is great and the product is often mentioned as a natural alternative to permanent implants.
First series of products for natural body shaping Macrolane is used both reconstructively and esthetically and is de- signed for body shaping of, for example, the buttocks and calves, defects that have arisen in connection with liposuction or injuries, and breast augmentation. There are two versions of Macrolane:
Macrolane™ VRF20, which is used on areas of the body where there is less tissue cover, and Macrolane™ VRF30, which is used where there is more tissue cover. The advantages of the treatment are immediate and long-lasting without being permanent. Follow- up treatment is recommended 9-12 months after the first treat- ment in order to retain the desired result. Normally approximately 50 percent of the original volume is injected in the follow-up treatment. When injecting Macrolane a small incision is made in the skin under local anesthetic and the gel is injected deep under the skin. In the treatment of breasts, a small or moderate increase in volume can be created in order to achieve shape and fullness exactly in the area that the customer desires. Several scientific studies have shown that Macrolane has a clinically proven effect and is safe to use. As the treatment is non-permanent, it can be
adapted as the body changes after breastfeeding or natural aging.
The recovery time is short, but after treatment of the breasts it may be advisable to wear a supportive bra and not subject the bust to pressure during the first few weeks.
Alternative to body’s own fat
Previously the body’s own fat was the only alternative to various permanent implants for body shaping. However, the body’s own fat involves large interventions under anesthesia, where it is first necessary to suck out the fat from other parts of the body and on another occasion do the actual enhancement. This is both a time-consuming and painful method, and the results are difficult to assess. Furthermore, many people do not have the volume of fat that is required. Macrolane enables smaller and simpler treatments with a tissue-friendly product.
Prospects for 2010
Q-Med assesses that there continues to be great interest in non- surgical treatment alternatives and has a positive view of the opportunities for Macrolane to grow in existing markets during 2010. Registration and launches in new markets in the world together with continuing clinical documentation and training of users are the main focus for 2010.
Q-MED ANNUAL REPORT 2009 ESTHETICS PRODUCT AREA MACROL ANE 17
BEFORE AFTER
“I’m really pleased. The shape is the
important thing. Just imagine being able to wear any clothes you want, especially in the summer.”
Woman of 37 after Macrolane treatment.
REVENUES PER GEOGRAPHIC AREA SHARE OF Q-MED’S REVENUES
The Hospital Healthcare product area consists of the products Deflux® for the treatment of a malformation of the urinary bladder in children, Durolane™ for the treatment of osteoarthritis of the knee and hip, and Solesta™ for the treatment of fecal incontinence.
OPERATING INCOME SALES AND ROYALTIES
Hospital Healthcare, 14% Europe, 36%
Latin America, 1%
Asia, 2%
Rest of the world, 0,5%
North America, 61%
2005 2006 2007 2008 2009 0
50 100 150 200 250 300 350 MSEK400
263 353
245 235 212
2009
MSEK
-100 0 100 200 300 400 500 600
2005 2006 2007 2008 2009 -66
24
-69 -19 554
2009
N
From the very beginning Q-Med has developed hospital health- care products based on the NASHA™ technology. Several prod- ucts have been first on the market and revolutionized treatment of, amongst other things, fecal incontinence and vesicoureteral reflux. For a number of years Q-Med has sought partners for sales and marketing of the hospital healthcare products. A strategic collaboration was established as early as 2006 with the company Smith & Nephew for the product Durolane™. In 2009 Q-Med also established collaboration with Oceana Therapeutics regarding the products Deflux® and Solesta™. Marketing, sales and distribution of all hospital healthcare products is thus now handled by external partners.
During the second quarter of 2009 a transaction was carried out whereby Oceana Therapeutics acquired 100 percent of the shares in Q-Med Scandinavia Inc. Through the transaction Oceana Therapeutics obtained exclusive rights to globally commercialize the products Deflux and Solesta. The deal also comprised other products intended for the treatment of urological and gastroenterological conditions. Q-Med will continue to develop and manufacture all products included in the agreements. Q-Med received the first payment of 60 MUSD from Oceana Therapeutics in June 2009.
Sales and income for the year
Sales of goods and royalties for the Hospital Healthcare product area amounted to 212 (235) MSEK during 2009, of which royalties were 27 (17) MSEK. The improvement in operating income for 2009, 554 (-19) MSEK, is primarily due to the above-mentioned global agreements with Oceana Therapeutics and to the changes in the business that were carried out in connection with the decision to terminate production and sales of the product Zuidex™.
Deflux – world-leading niche product
Around one percent of all children are born with VUR – a mal- formation of the urinary bladder, with leakage of urine from the urinary bladder into the kidneys. The condition can give severe infections of the urinary tract and even irreparable kidney damage.
VUR can be cured by injecting Deflux into the wall of the urinary bladder, thus stopping the leakage of urine. Deflux was the first hya- luronic acid based product for the treatment of VUR and replaced less attractive alternatives such as Teflon. The largest single market for Deflux is the USA. In Europe the product is sold in more than ten countries, with Germany as the largest market. Sales of Deflux amounted to 148 (179) MSEK during the year.
Durolane – Premarket Approval in the USA the next milestone
Sales of Durolane amounted to 35 (30) MSEK during 2009. Royalty revenues amounted to 18 (17) MSEK during the year, an increase of 6 percent.
Durolane is used in the treatment of osteoarthritis and is injected into the knee or hip joint to reduce pain and increase mobility.
Sales, marketing and development of Durolane are done via strategic collaboration with Q-Med’s partner, Smith & Nephew, who carry the costs for clinical development, registration work and global commercialization. Q-Med’s revenues for Durolane consist of sales revenues and royalty payments. There are also the remaining one-time payments of up to 60 MUSD which can fall due if certain conditions are met. Of this sum 10 MUSD was paid when the agreement was entered into in 2006. Durolane is today sold in 20 countries and has been used by more than 350,000 patients all over the world. The work of registering Durolane in the American market is ongoing. When the FDA’s advisory committee met in August 2009, they requested further information in order to be able to recommend Premarket Approval of Durolane and that work is now ongoing.
Solesta – application for Premarket Approval in the USA
Solesta is a product for effective treatment of fecal incontinence.
Fecal incontinence is the lost ability to control gases and feces, for example. Around two percent of the population suffers from the problem, above all women due to damage incurred in connection with childbirth. The product was approved for sales in Europe at the end of 2006.
During 2009 the first part of a study was successfully completed that will form the basis of the application for product registration in the USA. The study achieved the objectives that had been set.
More than 200 patients in thirteen different clinics in the USA and Europe participated in the study. Sales of Solesta amounted to 1 MSEK during the year.
Prospects for 2010
In collaboration with its partners, Q-Med will continue to develop competitive hospital products for global commercialization.
The work on registering Durolane in the American market is ongoing.
Together with Oceana Therapeutics, Q-Med intends to apply for product registration and Premarket Approval (PMA) of Solesta in the USA during the first quarter of 2010.
Q-MED ANNUAL REPORT 2009 HOSPITAL HEALTHCARE PRODUCT AREA 19
HOSPITAL HEALTHCARE PRODUCT AREA
New partners and
improved profitability
T
Perhaps it is just where research, medical knowledge and business sense meet that is the source of Q-Med’s strength.
This meeting point is not self-evident or even without friction.
But it has created an inner dynamic that has resulted in several pioneering patents.
”Thinking is the hardest work there is.”
Henry Ford, 1863-1947
Innovations for the future
Q-Med has always been careful to have a good innovative climate and over the years the company has constantly broken new ground with its products. Resources for research and development have been prioritized and in 2009 231 MSEK was invested in research and development, which corresponds to 17 (20) percent of the turnover. The investments also include clinical trials, quality assurance and the registration of products.
Research and development is primarily based on the NASHA™
technology and its applications. New formulations, packages, sterilization methods and chemical and microbiological analytical methods are developed here.
Q-Med’s research and development revolves around three main themes;
• Improvement and support of existing products
• New pioneering products and devices
• New patents
The work on analyzing and describing the NASHA platform’s unique qualities continued during 2009. There the previously established cooperation with the Swedish University of
Agricultural Sciences has generated valuable knowledge. Work on the product side includes a study carried out together with Smith
& Nephew, which shows that Durolane™ has a far superior half- life time in the knee compared with competing products.
20 RESEARCH AND DEVELOPMENT Q-MED ANNUAL REPORT 2009
Patricia Dalence Packaging Design Engineer
The innovative climate
RESEARCH AND DEVELOPMENT
INTERVIEW WITH PATRICIA DALENCE
“The new Thin Wall Needle was developed in close collabora- tion between Q-Med and the company Terumo. When we launched the needle during 2009 in the USA we were almost taken by surprise by the extremely positive feedback. How can a needle have such an effect? Some doctors are now saying that using another product is out of the question now that they have tried the needle. It is interesting how such a “small” detail as a needle can have such a great impact. We have then used the practical results from the USA in our marketing. I have gone and met customers in Sweden and Europe. The needle has had a really positive reception there as well. The most common comments are that it goes into the skin more easily and that the patient experiences less pain. It is extra positive that we now have the sole rights to the needle in the esthetics area.”
Patent strategy
As part of the increased focus on the esthetics area, Q-Med evaluated both its own and competitors’ patent portfolios during 2009. Q-Med also continued to develop its own patent portfolio within the esthetics area. The protection for Q-Med’s main products within esthetics – Restylane® and Macolane™ – consists of the patent family for NASHA™ together with the collective know-how with regard to the application of the technology.
Q-Med’s patent protection for the NASHA technology is valid at the most up until December 2017 (Restylane in the USA). There are also a number of supplementary patents around this basic patent family, amongst other things for different unique injection devices.
Hanna Krenander Laboratory Engineer Media.
Place of work: Quality Control Chemical Laboratory Thin Wall
Regular Wall
The new Thin Wall Needle, which is manufactured exclusively for Q-Med. The needle was first launched in the USA and is now available for customers in Europe.
N
22 RESEARCH AND DEVELOPMENT Q-MED ANNUAL REPORT 2009
After more than ten years on the market, no one has yet managed to copy or surpass the NASHA™ gel’s unique properties as a natural, safe and versatile hyaluronic acid product. NASHA combines minimal modification with a long duration in the body and has created completely new treatment alternatives for millions of people all over the world.
Hyaluronic acid is one of the few substances that are identical in all living organisms. It is a polysaccharide, a natural sugar, and exists in all the body’s organs. Hyaluronic acid is produced by the cells in the human body, where it fills many important functions.
It facilitates the cell-division process, makes the skin elastic and lubricates the joints. Hyaluronic acid also has the ability to bind great quantities of water. The properties of natural hyaluronic acid have been much sought after for many years within medical and esthetic applications. But the body’s own hyaluronic acid is broken down quickly and must be newly produced constantly. When Q-Med patented the NASHA technology new opportunities therefore opened up. Using the NASHA technology the natural properties of hyaluronic acid can be retained and combined with a long duration in the body. The NASHA process is flexible and from the same base technology Q-Med can produce gels that are adapted to different areas of use, tissues and needs.
”No one has managed to
manufacture gels of hyaluronic acid with the same ability as the NASHA gels”
Unique properties
None of Q-Med’s competitors have managed to manufacture gels of hyaluronic acid with the same ability as the NASHA gels. The least modified competing products are still considerably more chemically changed than the NASHA gels. Competing products are either not as viscous as the NASHA gels, which means that they cannot build and retain volume in the same way, or they are considerably more chemically changed. A great deal of chemical modification means that the material differs to the same extent from natural hyaluronic acid and this may mean that these gels are experienced as substances that are foreign to the body, thus making them less biocompatible.
NASHA
™– A unique gel
RESEARCH AND DEVELOPMENT
ADVANTAGES OF NASHA NATURAL
The NASHA gel is stabilized and is not modified more than necessary (less than 1 percent). The gel is experienced as endogenous, with good biocompatibility (tissue friendliness).
NASHA gel is broken down naturally in the body.
VERSATILE
NASHA gels are produced using the same base technology, but can be adapted for different applications, tissues and needs.
LONG EFFECT
NASHA gel can have a clinical effect of up to 18 months if follow-up treatment is given within six months.
LOW RISK
NASHA gel is non-animal. Unlike gels with animal hyaluronic acid, there is therefore no risk of transmission of infectious sub- stances. NASHA gel is pure and fulfils all the demands made of medical device products, including authority requirements in those countries where the product is approved.
BEST DOCUMENTATION
There is good clinical evidence for NASHA gels, with more than 60 publications containing more than a dozen randomized controlled studies and more than 11 million treatments all over the world. No other hyaluronic acid product on the market today has such comprehensive documentation.
