Admedus : FY17 Full Year Results Announcement

ASX Market Announcements Australian Securities Exchange Limited 10th Floor, 20 Bond Street

SYDNEY NSW 2000

• Full year sales of $22.3M were up 58% on prior year, $1.3M above the full year forecast of $21M
• Gross margin was expanded by 12% points to 48%
• Operating expenses (SG&A) were reduced by $8.4M or 25%
• Loss after tax was $12.7M, a decrease of 50%
• Net operating cash outflows were down by 43% to $12.5M
• Cash flow neutral in quarter 3, a historical first
• Year-end cash position of $11.3M
• Successful rights issue and share placement raised $17.1M net
• Secured 100% ownership of the ADAPT® tissue engineering process
• VascuCel® and CardioCel® Neo introduced in US following FDA clearance
• CardioCel® 3D received FDA clearance
• CardioCel® approved for sale in United Arab Emirates and Saudi Arabia

Coming out of the successful strategic review (Code Red), Admedus sales grew strongly, with revenue up 58% for the full year to $22.3M. Driven by the Company's aggressive strategy to accelerate growth, build our product portfolio and bring new products to market more quickly, all businesses and regions contributed to the improving results. Fiscal year revenues came in $1.3M (6%) above the full year target of $21M.

Sales for the ADAPT® portfolio of products for the full year were $6.9M, up 30% on the prior year, whilst the infusion business in Australia and New Zealand contributed $15.5M in total sales for the year, up 74% on the prior year.

Gross profit for the year of $10.7M was up 110% on prior year based on revenues that were up 58%. Growing ADAPT® volumes and continuing improvements in our manufacturing process and operations was the key driver of the 12% point improvement in gross margin to 48%. ADAPT® sales contributed $3.6M (64%) of the improved gross profit as margins improved from 19% to 67% driven by scale benefits from relatively low incremental unit costs.

Infusion sales contributed $2.0M (36%) of the gross profit improvement with gross margins contracting from 47% to 40% driven by the relatively high proportion of capital sales under the new Royal Adelaide Hospital (nRAH) contract.

Selling, general and administration (SG&A) expenses (total expenses excluding depreciation, amortisation and finance costs) of $25.0M were reduced by $8.4M (25%) on prior year despite the inclusion of approximately $1.5M in net "exceptional" costs relating to the implementation of the Company's restructure and related re-organisation costs, partially offset by a write-back of share based payments related thereto (non-AIFRS measure). All operating expense groups were significantly reduced following the implementation of the recommendations from the Company's strategic review.

Other income, which includes grants and federal government R&D refunds, was down $1.3M (28%) on the prior period driven by lower R&D spending in the prior period. Assuming the Company's revenues continue to grow from current levels, they will exceed the threshold levels for R&D cash refunds going forward, with the expectation that refunds will no longer be receivable for years past the current year.

As a result of the growing revenues, improved product margins and reduced expenses, partially offset by the lower R&D refunds, Group EBITDA loss for the year was $10.8M, a reduction of $12.8M (54%) compared to the prior year. When excluding the "exceptionals", as discussed above, Group EBITDA loss (non-AIFRS measure) for the year was $9.3M consistent with recent guidance that this would be at the top end of the range of $6-10M.

With incremental depreciation and amortisation charges for the year of $0.4M, the loss from ordinary activities after tax was $12.7M, approximately half the loss incurred in the prior year.

The closing cash for the period was $11.3M, up from $8.8M, following the successful completion of the share placement and rights issue that raised $17.1M, net of expenses. Net operating cash outflows of $12.5M were down $9.5M (43%) driven by the higher margins on higher sales and lower operating costs, partially offset by lower R&D refunds and higher working capital investment of $1.9M.

Net working capital increased by $1.9M to $6.1M from the previous year driven by increasing sales activity, increased product complexity and the delay in the implementation of the nRAH contract that has resulted in higher levels of inventory ahead of the contract commencing operation, as discussed below.

ADAPT®, our clinically superior regenerative tissue technology, grew strongly and achieved revenues of $6.9M, up 30% on prior year, driven primarily by continued strong sales of the Company's products in its existing global markets with all regions growing and contributing to strong full year result. In addition to the solid sales performance, the increasing volumes - together with manufacturing improvements and scale benefits - helped drive a 48% point improvement in gross margins to 67% for the year. This combination of increased sales and expanding margins drove gross profits up by $3.6M (368%) as scale benefits, due to relatively low directly variable costs (primarily direct materials), took effect continuing the trend seen at the half year.

As noted, all regions contributed to the excellent results, with North American sales up 35% (40% in constant currency) on the prior year. Europe grew modestly, up 9% (15% in constant currency) following a refocus on core markets there following the Company's strategic review. Emerging Markets were up 170%, albeit from a low base, driven primarily by sales to the MENA region following granting of sales approval to United Arab Emirates. Sales in its other open markets such as Singapore, Hong Kong and Malaysia grew strongly, up 55% on the prior year. The hoped-for TGA approval in Australia - which has positive flow-on effects to a number of markets in Asia, including Philippines, Thailand, Taiwan and Vietnam - is now anticipated mid-2018. Both the European and Emerging Market regions are expected to benefit from the Company's expanded product portfolio once new product approvals flow through as well as increased penetration and market expansion over coming periods.

The profitable Infusion business in Australia and New Zealand continued to perform exceptionally well with full year revenues of $15.5M, up 74%, driven in large part by the implementation of the nRAH contract and the associated capital sales ($4.6M for the year). The underlying non-contract business performed above expectations with sales growth of

+20% on the prior year, setting a number of monthly sales records (+$1.0M excluding capital sales) during the second half, that helped overcome lost sales due to the delayed opening of nRAH. The adverse change in gross margins to 40% from 47% was primarily as a result of the relatively high proportion of capital sales under the nRAH contract. The South Australian government has confirmed that nRAH is set to open in the first week of September. We are well progressed on our implementation and ready to fully support the operations once the hospital becomes operational and to start the ongoing supply of consumables.

Last year Admedus Immunotherapies (AI) continued to progress its core technologies. During the period, AI received the final results from the Herpes Simplex 2 (HSV-2) Phase IIa study, which showed a level of activity in people infected with HSV-2. The board of AI are currently assessing its options in terms of next steps with this program.

In addition, AI has continued to progress its Human Papillomavirus (HPV) programs. The HPV DNA vaccine targeting HPV related head and neck cancer is progressing towards its initial clinical study looking at its safety in people with HPV related cancer as well as secondary markers around activity. In addition, the team has continued to progress the collaboration with Translate Bio (formerly RaNA Therapeutics) on RNA vaccines targeting HPV and related cancers.