Mainstay Medical International : Announces 2019 Half Year Financial Results

Press Release

Mainstay Medical Provides Company Update and

Reports 2019 Half Year Financial Results

• ReActiv8 Pre-Market Approval (PMA) application submitted to U.S. FDA in August 2019; acceptance for FDA review expected October 2019
• European commercial validation efforts continue to progress
• Successful completion of financing transactions providing approximately $28 million of cash runway extension

Dublin - Ireland, 20 September 2019 - Mainstay Medical International plc ("Mainstay" or the "Company", Euronext Paris: MSTY.PA and Euronext Growth of Euronext Dublin: MSTY.IE), a medical device company focused on bringing to market ReActiv8®, an implantable neurostimulation system to treat disabling Chronic Low Back Pain, today provides a company update and reports its financial results for the half year ended 30 June 2019.

Jason Hannon, CEO of Mainstay, said: "We continue to make significant progress on our key corporate objectives of pursuing regulatory approval in the U.S. and advancing the commercial validation effort in Germany and other select European markets. I am pleased to report that we submitted the pre-market approval (PMA) application for ReActiv8 to the U.S. Food and Drug Administration (FDA) in August. Pending the FDA's acceptance of the PMA for review, anticipated in October 2019, we expect a decision regarding approval around the end of 2020. We also continue to make progress working with key physician partners in Germany who are incorporating ReActiv8 into their practices in order to validate commercial adoption, refine patient selection strategies and follow ongoing patient progress."

Business Update

• In August 2019, Mainstay submitted the PMA application to the FDA based upon the totality of its clinical data for ReActiv8. Pending acceptance of the submission by the FDA, anticipated in October 2019, a decision regarding approval is expected around the end of 2020. The pivotal clinical trial upon which the PMA submission was based is the 204-patientReActiv8-B clinical study. A summary of the clinical trial results is as follows:
  o The primary efficacy endpoint of the study was a comparison of responder rates between the treatment and control groups as measured on the visual analog scale (VAS) of pain, with responders defined as having a 30% or greater improvement on this measure between baseline and 120 days after randomization, without any increase in pain medication and/or muscle relaxants taken in the two weeks prior to the primary endpoint assessment visit. In the treatment group the responder rate at 120 days was 57%, compared to 47% in the control group, resulting in a difference that is not statistically significant.
  o The protocol included a pre-specified analysis of the primary endpoint data examining the cumulative proportion of responders, which is a comparison of ranks and inherently preserves information over a dichotomized endpoint, thereby improving statistical power. In that analysis, a statistically significant difference between the treatment and control groups was demonstrated, with the treatment group showing a higher proportion of responders across all threshold levels.
  o The protocol also included a pre-specified analysis of the primary endpoint where Mainstay adjusted for patients who increased their pain medications for reasons unrelated to their back pain. In that analysis, the responder rate at 120 days in the treatment group was 61%, compared

Press Release

to 47% in the control group, resulting in a difference that is statistically significant.

• • Statistically significant differences on a number of key secondary endpoints and supplemental analyses were observed in the treatment group as compared to the control group at 120 days, including reduction from baseline in pain as measured by both mean reduction in VAS and percent of pain relief (PPR), change from baseline in disability measured by the Oswestry Disability Index (ODI), change from baseline in quality of life measured by the European Quality of Life Score on Five Dimensions (EQ-5D), subject global impression of change (SGIC), clinician global impression of change (CGI) and patient treatment satisfaction as measured by the treatment satisfaction questionnaire (TSQ).
  • Improvements in the percentage of patients reporting pain reduction continued beyond the 120- day assessment through one year for both groups. The percentage of the 160 patients in the treatment and control groups that had completed the one-year assessment having a 30% or greater reduction in low back pain VAS at that assessment without a significant increase in pain medication was 66%. These data are subject to change as the remaining patients reach the one- year assessment.
  • The protocol permitted patients to adjust their back pain medication usage after the 120-day assessment point. At one year, 49% of the 61 patients in both groups combined who were on opioids at baseline had discontinued or decreased their use of opioids. These results are subject to change as the remaining patients reach the one-year assessment.
  • The incidence and type of adverse events (AEs), including serious AEs, compares favorably to that of spinal cord stimulator devices, with no unanticipated AEs related to the device, procedure or stimulation.
• In Germany, Mainstay's initial European market, the Company's re-focusing of its commercial validation efforts was undertaken throughout 2018. Mainstay is now solely dedicated to building a small number of reference sites where high volumes of patients are treated with ReActiv8, allowing the Company to gather associated clinical data, refine patient selection processes for commercial markets, and gain the learnings needed to accelerate commercial launch in future markets.

Financial Update

• Since the beginning of 2019, Mainstay has conducted financing activities that have resulted in approximately $28 million of cash runway extension:
  o On 29 July 2019, Mainstay completed financing transactions consisting of the issuance of 4,649,775 new ordinary shares at a purchase price of €3.00 per share and the drawdown of €3.0 million in additional debt from the Company's existing lender, IPF Partners, resulting in aggregate gross proceeds of €16.9 million (US$18.9 million).
  o On 18 April 2019, Mainstay and its subsidiary, Mainstay Medical Limited, entered into an amendment to their agreement with IPF Partners relating to the existing debt facility. Pursuant to the amendment:
• • The repayment schedule for the three existing tranches drawn under the debt facility was amended such that no principal or interest will be repaid until 2021, with the principal and accrued interest to be amortized over the period from January 1, 2021 through September 30, 2023.
  • A new tranche of €3.0 million (approximately $3.34 million) was made available to Mainstay, which was drawn down by Mainstay on 29 July 2019. The repayment schedule for the new tranche will be the same as the amended repayment schedule for the three existing tranches.
  • The interest rate for all tranches will be 8% per annum, with interest accruing but capitalized prior to January 1, 2021. The interest rates previously applicable to the initial three tranches ranged from 10.5% to 12.5%.

Press Release

• • The 5% repayment fee applicable to each existing tranche was eliminated.
  • All principal and accrued interest from all tranches will automatically convert into ordinary shares of the Company at a price per share of €8 upon the earlier of (a) FDA approval of Mainstay's PMA application for ReActiv8, (b) the date by which at least 900,000 ordinary shares of the Company are publicly sold on-market by non-affiliates of Mainstay since April 2019 at a price per share of at least €8, or (c) IPF Partners' election to undertake such conversion, in each case unless the Company elects to satisfy such obligation in whole or in part in cash.
  • The minimum cash covenant was amended so that Mainstay is required to hold cash at least equal to its projected cash expenditures for operations and debt repayment for the next three months, and the covenant relating to the achievement of commercial milestones was eliminated.
  • Mainstay issued to IPF Partners warrants to purchase 1.5 million of its ordinary shares at a price per share of €6 at any time prior to the 6th anniversary of the amendment date.
• Revenue during the six-month period ended 30 June 2019 was $0.6 million ($0.36 million in 1H18).
• Operating expenses for the six-month period ended 30 June 2019 were $9.5 million ($15.8 million in 1H18). The decrease was driven primarily by reduced costs relating to activities for the ReActiv-8 B clinical trial following the completion of all implants, as well as a decrease in payroll related costs following a reduction in headcount within 2019.
• Cash on hand as at 30 June 2019 was $5.8 million (31 December 2018: $29.7 million). Cash on hand at 31 July 2019 was $23.5 million.

Details of ReActiv8-B Clinical Trial

The ReActiv8-B clinical trial is an international, multi-center, prospective, randomized, active sham-controlled, blinded trial with one-waycross-over, conducted under an IDE from the FDA. A total of 204 patients with chronic low back pain refractory to physical therapy were implanted with ReActiv8 at leading clinical sites in the U.S., Europe and Australia and randomized 1:1 to therapy or control. In the treatment group, the ReActiv8 pulse generator was programmed to deliver electrical stimulation expected to elicit episodic contractions of the multifidus muscle. In the control group, the ReActiv8 device was programmed to provide a low level of electrical stimulation. Following assessment of the primary endpoint at 120 days, patients in the control group crossed- over to receive levels of electrical stimulation similar to those in the treatment group. The FDA's review of the PMA may result in the FDA not agreeing with Mainstay's interpretation of its clinical data, including whether statistical significance was achieved for one or more endpoints.

Investor Conference Call

Jason Hannon, Chief Executive Officer, and Matthew Onaitis, Chief Financial Officer, will host a conference call and Q&A for analysts and investors at 13:00 BST (08:00 EDT, 14:00 CEST) on 20 September 2019. The call will be conducted in English and a replay will be available for 30 days. Dial-in details for the call are:

Europe: +44 333 300 0804

Ireland: +353 1 431 1252

France: +33 170750711

Germany: +49 6913803430

USA: +1 6319131422

Participant PIN: 34020721#

- End

This announcement contains inside information within the meaning of the EU Market Abuse Regulation 596/2014.

About Mainstay

Mainstay is a medical device company focused on commercializing an innovative implantable restorative neurostimulation system, ReActiv8®, for people with disabling Chronic Low Back Pain (CLBP). The Company is headquartered in Dublin, Ireland. It has subsidiaries operating in Ireland, the United States, Australia, Germany and the Netherlands, and is listed on regulated market of the Euronext Paris (MSTY.PA) and the Euronext Growth market of Euronext Dublin (MSTY.IE).

About Chronic Low Back Pain

One of the root causes of CLBP is impaired control by the nervous system of the muscles that dynamically stabilize the spine. ReActiv8 is designed to electrically stimulate the nerves responsible for contracting these muscles to improve dynamic spine stability, allowing the body to recover from CLBP.

People with CLBP usually have a greatly reduced quality of life and score significantly higher on scales for pain, disability, depression, anxiety and sleep disorders. Their pain and disability can persist despite the best available medical treatments, and only a small percentage of cases result from an identified pathological condition or anatomical defect that may be correctable with spine surgery. Their ability to work or be productive is seriously affected by the condition and the resulting days lost from work, disability benefits and health resource utilization put a significant burden on individuals, families, communities, industry and governments.

Further information can be found at www.mainstay-medical.com

CAUTION - in the United States, ReActiv8 is limited by federal law to investigational use only.

PR and IR Enquiries:

LifeSci Advisors, LLC

Brian Ritchie

Tel: + 1 (212) 915-2578

Email: britchie@lifesciadvisors.com

FTI Consulting (for Ireland)

Jonathan Neilan or Patrick Berkery

Tel. : +353 1 765 0886

Email: mainstay@fticonsulting.com

Euronext Growth Advisers:

Davy

Fergal Meegan or Barry Murphy

Tel: +353 1 679 6363

Email: fergal.meegan@davy.ie or barry.murphy2@davy.ie

Forward looking statements

This announcement includes statements that are, or may be deemed to be, forward looking statements. These forward looking statements can be identified by the use of forward looking terminology, including the terms "anticipates", "believes", "estimates", "expects", "intends", "may", "plans", "projects", "should", "will", or "explore" or, in each case, their negative or other variations or comparable terminology, or by discussions of strategy, plans, objectives, goals, future events or intentions. These forward looking statements include all matters that are not historical facts. They appear throughout this announcement and include, but are not limited to, statements regarding the Company's intentions, beliefs or current expectations concerning, among other things, the FDA's review of the Company's PMA application for ReActiv8, the clinical data relating to ReActiv8, the potential for the FDA to approve ReActiv8 for marketing in the United States, the Company's expected cash runway and the Company's results of operations, financial position, prospects, financing strategies, expectations for product design and development, regulatory applications and approvals, reimbursement arrangements, costs of sales and market penetration and other commercial performance.

By their nature, forward looking statements involve risk and uncertainty because they relate to future events and circumstances. Forward looking statements are not guarantees of future performance, and the actual results of the Company's operations, the development of its main product, and the markets and the industry in which the Company operates may differ materially from those described in, or suggested by, the forward looking statements contained in this announcement. In addition, even if the Company's results of operations, financial position and growth, and the development of its main product and the markets and the industry in which the Company operates are consistent with the forward looking statements contained in this announcement, those results or developments may not be indicative of results or developments in subsequent periods. A number of factors could cause results and developments of the

Company to differ materially from those expressed or implied by the forward looking statements, including, without limitation, the final outcome of the Company's ReActiv8-B clinical trial, the outcome of the Company's interactions with the FDA on the PMA application for ReActiv8, the successful launch and commercialization of ReActiv8, general economic and business conditions, global medical device market conditions, industry trends, competition, changes in law or regulation, changes in taxation regimes, the availability and cost of capital, the time required to commence and complete clinical trials, the time and process required to obtain regulatory approvals, currency fluctuations, changes in its business strategy, and political and economic uncertainty. The forward-looking statements herein speak only at the date of this announcement.

This is an excerpt of the original content. To continue reading it, access the original document here.