Investor Presentation Stock Code 1789.HK 03.2020 1 Overview - - PowerPoint PPT Presentation

Investor Presentation

Stock Code：1789.HK 03.2020

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Contents

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Overview Business Review Financial Review Strategic Objectives Appendix Q&A Session

Overview

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• Introduce 3D-printing technology to

joint implants

• Hip Revision series

AK Hip product is identified as a National-level key new product

• A3 Knee System
• Revision Knee System - ACCK

3D ACT Physician – Technician Interaction Platform “PTIP”

• Obtained first NMPA registration certificate for 3D
• printed acetabula cup;
• Authorized to set up Beijing Engineering

Technology R&D Center for 3D Printing Application in Orthopedics;

• Obtained NPMA registration certificate for ceramic

to HXLPE

• Obtained two NMPA registration certificates for 3D-

printed spinal products;

• Received the national special funds of the 13th

five-year plan;

• Set up ITI Medical (Changzhou facility)
• Won the First Prize of Beijing Science and Technology

Award;

• Full acquisition of JRI;
• A3 knee joint system clearance by FDA;

Start

Founded in Beijing The First A-series Hip The first product - AK Knee M-series Hip JPX Knee Listed on Hong Kong Stock Exchange

Overview

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• Changzhou Facilities (ITI

Medical) commenced into

• peration
• 3D printed artificial pelvis

system launched

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At a Glance

＞30%

Compound growth rate over a decade

• No. 1

7.5% 9.3% 12.2%

2017 2018 2019

Number of covered hospitals

6000+

Market share among all joint brands in terms of volume

18.3%

Market share among all joint brands in terms of value Domestic brand with the most certificates in joints

51 NMPA

Domestic brand with the most patents in joints

299

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At a Glance

The largest 3D-printing center for metal

• rthopedic implants in

the Asia-Pacific region China's first joint product clearance by FDA: A3 knee system CNAS Mechanics laboratory Postdoctoral Workstation collaborative with Peking University The first to file 3D-printed customized prosthesis; 5 3D-printed customized medical devices filed (Joint, thoracolumbar fusion, cervical fusion)

Customized

Obtained CE marks for

• 3D printed cages
• Hip system
• Knee system

Revenue Structure

Hip implants Knee implants 3D-printing products Others

Knee System

24.8%

Hip System （Non 3D printing）

58.8%

3D-printed Products

13.3%

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Our Portfolio

Others 3.1% Cages Cups Artificial Vertebral Body Artificial Pelvis System

Business Review

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AK Beijing

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32 Class Ⅲ/ 3 calss II ITI

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Utility Model Patents

228

PCT

2 69

JRI

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Class Ⅲ 2 NMPA class Ⅲ/ 10 CE Authorized Authorized Authorized

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R&D

R&D Achievements

Invention Patents

1010

Coating 3D Printing

Bone Interface Fixation

HA Ti

Porous trabecular structure

Advanced technology with the comparable level of MNC

C-XLPE C-C

Surface Friction

High-end

Global advanced coating technology:

• Vacuum plasma sprayed HA coatings；
• Vacuum plasma sprayed Ti coatings；

Improve the roughness, porosity and biological activity of the implant surface . The first 3D-printed metal orthopedic implants approved by NMPA and commercialized in China； The porous trabecular structure solves the problem of bone ingrown; 3D-printed augment system provides a solution to large acetabular bone defects; Propound the theory of acetabular revision. Friction interfaces of C-C and C-XLPE; Synchronized technology with MNC.

R&D: TECHNOLOGIES

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Rich product lines and ability of dealing with complicated diseases

Provide products for knee/ hip/ spine/bone tumor and personalized surgical tools; Provide services with digital technology to solve

• rthopedic clinical problems;

Provide full solutions - from primary to complex, from revision to bone tumor reconstruction The 3D-printed customized thoracic spine produced by the Company was implanted successfully during an operation at Peking University Third Hospital on 9 January 2020.

R&D: TECHNOLOGIES

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PTIP

R&D: TECHNOLOGIES

One-stop 3D ACT PTIP

CT or MRI scanning 3D imaging and modeling Surgical simulation and planning Precision implants and surgeries

Pre-surgery selected implants Personalized instruments

Input as the database on the PTIP

→ → → → → → →

Developed 3D ACT PTIP, which provides personalized 3D ACT solutions to the surgeons and patients. As of December 31 , 2019, the platform has served 964 hospitals (142 more than in 2018), 590 of which are Class III hospitals. 4,741 cases have been designed.

Product Name Application Features Expected Launch Date

3D Printed

3D around the hip reconstruction implants Bone destruction and defect reconstruction around hip joint Patient matched customization,3D printed Q2 2020 3D pelvic sacrum implants Reconstruction of pelvic sacrum, nail-rod combination Patient matched customization,3D printed Q2 2020 3D cervical spine Trauma, tumor destruction, cervical spine reconstruction Patient matched customization,3D printed Q3 2020 3D hemipelvis revision system Pelvic tumor defect reconstruction and structural support Customized,3D printed Q2 2020 3D cervical lamina implant system Cervical spondylosis, Spinal canal enlargement Customized,3D printed Q3 2020 3D Thoracolumbar spine Multi-stage thoracolumbar reconstruction Customized,3D printed Q3 2020 3D Knee joint reconstruction implants Bone destruction and defect reconstruction around the knee joint Customized,3D printed Q4 2020 3D Long limb bone implants For severe trauma, tumor bone destruction, defect reconstruction Customized,3D printed Q4 2020 3D patellofemoral implants For patellofemoral compartment disease, early treatment of knee joint disease Customized,3D printed 2023

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Product pipelines I

R&D

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Product Name Application Features Expected Launch Date

3D Printed

3D printed self-stabilizing cervical interbody cage Cervical spine fusion, low notch 3D printed, standardized Q2 2020 TMK knee implants system Severe bone defect of knee joint, complicated primary surgery and revision 3D printed, standardized Q4 2020 Knee joint bone defect support system Suitable for focal knee bone defects 3D printed, standardized Q4 2020 3D printed shoulder joint implants Suitable for shoulder joint replacement 3D printed, standardized 2026 Lumbar fusion cage For lumbosacral fusion 2nd generation 3D technology, 3D + bio-compound, standardized 2024 Cervical spine fusion device For cervical interbody fusion 2nd generation 3D technology, 3D + bio-compound, standardized 2024

Joints

Cone Biostem System Primary and revision hip replacement surgery Proximal biological fixation, distal anti- rotational stabilization Q2 2020 ABM anatomical revision handle system For revision hip replacement surgery Anatomical design, biological fixation Q2 2020 Femoral fixation system Suitable for revision hip replacement surgery Upgrade of traditional products Q2 2020 Biological acetabular system Suitable for initial hip replacement surgery Titanium plasma biological coating. One cup, multi-lined combined design Q3 2020

R&D

Product pipelines II

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Product Name Application Features Expected Launch Date

Joints

Biological femoral stem system For initial hip replacement surgery Titanium plasma biological coating; Bone retention anti-rotational design Q4 2020 Bone cement femoral stem system Suitable for initial hip replacement surgery Can be used with ceramic ball heads; Bone retention anti- rotational design 2021 Dual-coated Bio-type Femoral Stem Hip replacement Titanium + HA coating 2021 Unicompartmental Knee Unilateral compartment knee replacement surgery Unicompartmental knee replacement; retain more bone, less trauma, and faster recovery 2023 Bi-dynamic acetabular system Suitable for initial hip replacement surgery Double biological coating, Anti-

• xidation and wear-resistant,

double action system, the elderly, easy dislocation 2024 Embedded surface knee prosthesis Local osteonecrosis and cartilage repair Minimally invasive, retain more bone, early treatment 2025 New Surface Hip Prosthesis Hip disease patients with high active demand Bone preservation, young patients’ International cooperation 2025

Spines

Anterior cervical internal fixation plate system Anterior cervical spine fusion，and assist cervical stabilization Upgrade of traditional products Q1 2020 Spinal fixation system Chest, waist and / or sacral posterior spinal fixation to assist spinal stabilization Upgrade of traditional products Q2 2020

R&D

Product pipelines III

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Product Name Application Features Expected Launch Date

Biomater

• ial

Osteonecrosis support system Focal osteonecrosis of femoral head and knee joint 3D printing+ bio-compound 2024 Nano artificial bone Bioactive bone filling material in combination with support material Nano-sized, absorbable particles 2024 Injectable artificial bone Combination of bioactive bone filling and support material Nano-scale, absorbable, injectable 2024

Oral- cavity

Artificial bone meal Combination of bioactive bone filling and support material Absorbable; particles 2021 Implant Tooth root implant Acid etching technology,

• sseointegration effect

2021

Others

PITI One surgeon, one engineer Precision preoperative planning Q3 2020 Hip, knee and spine pelvis database system platform Personalized, customized platform Big data, rapid respond Q4 2020 Surgical intelligent equipment system Precision surgery Precise positioning and precise installation International cooperation 2022

R&D

Product pipelines IV

AK Medical plans to launch 36 new products in 2020 - 2025, including standardized and customized 3D- printed products and 3D-printed knee replacement implants, joint implants and spinal implants.

MEX GT PR EC PRY ARG DOM VEN PER MLI CMR KEN RSA GHA BFA SDN MDG SAU UKR MDA TR KOR MYS PHL IDN PAK FJI AUS JRI Sheffield, UK ITI Medical Changzhou, CHINA AK Medical Beijing, CHINA

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Sales

Covering 6,000+ hospitals in China, Class III: 1720, Salesmen: 244, Sales to 30+ countries and regions

AK-JRI International Collaborative Study Tour in the UK

• 8 British hospitals undertook training and

teaching, held 11 training sessions, and 147 doctors received training

• Annual conference Pathways, promote Chinese

doctors to participate in international academic exchanges, make more Chinese surgeons heard, and share Chinese ideas and technical experience

Young surgeons from primary hospitals cultivation program

• Domestic KOL as instructors to hold Online

Clinical Training Program with practice and theories

• Online Clinical Training Program taking

advantages of network, make fruitful academic communication platform

• AK Institute-Artificial Joint Online Clinical

Training Program has been held more than 50 times successfully, covering 19 domestic KOLs and 160 hospitals and 25 provinces

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Marketing

International Preceptors of Surgeon

• IPS has completed 15 road shows in China, visited

18 provinces in China, covering 83 hospitals across the country, 6 international professors invited, and more than 3,000 orthopedic physicians.

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Production Capacity

AK Medical ITI Medical JRI City Beijing, China Changzhou, China Sheffield, U.K. Capacity 2020/Kits 100,000-120,000 80,000-100,000 60,000 Industrial grade 3D Printing Machine 10 4

Financial Review

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105,376 144,936 266,992 263,790 408,881 643,251 372,700 600,562 926,705

2017 2018 2019 Revenue, GP, NI NI GP Revenue

RMB/000

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Our Performance

Strong Business Growth Outlook, Steady and Sustainable Profitability

54.3% 57.3% 84.2% 61.1% 55.0% 37.5%

105,376 144,936 254,149 263,790 408,881 643,251 372,700 600,562 926,705

2017 2018 2019 Revenue, GP, NI（excl. non-operating income） NI（excl. non-operation income） GP Revenue

RMB/000

61.1% 55.0% 37.5% 54.3% 57.3% 75.4%

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Our Performance

High growth of portfolio led by 3D-printed products

33,444 69,945 123,433 101,667 145,098 229,728 215,305 351,958 544,418

2017 2018 2019 Breakdown Revenue 3D printing products Knee implants Hip implants

RMB/000

54.7% 58.3% 76.5% 63.5% 42.7% 109.1%

58.7% 24.8% 13.3% 3.1%

% of 3D-printed Revenue

Hip system Knee system 3D-printed products Others

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Our Performance

Well-established Cost & Expense Control System, Sound Business Performance

108,910 191,681 283,454 70.8% 68.1% 69.4%

• 100,000

2017 2018 2019 COGS

COGS GPM RMB/000 56,222 74,125 92,203 15.10% 12.30% 9.90%

• 10.00%
• 5.00%

2017 2018 2019 G&A Expenses G&A Expenses G&A margin

RMB/000 50,397 122,877 175,334 13.5% 20.5% 18.9%

• 100,000

2017 2018 2019 Selling Expenses Selling Expenses Selling margin

RMB/000 34,963 45,595 80,527 9.4% 7.6% 8.7%

• 100,000

2017 2018 2019 R&D Expenses R&D Expenses R&D margin

RMB/000

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Our Performance

Highly Efficient Operation, Steady Cash Flow

259 241 255 2017 2018 2019 Inventory Turnover Days 81 72 81 2017 2018 2019 A/R turnover Days 116,652 127,992 146,088 2017 2018 2019 Net Cash Generated from Operating Activities

RMB/000

Financial Highlights

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In thousand RMB FY 2019 FY 2018 YoY Total Revenue 926,705 600,562 54.3% Hip replacement implants 544,418 351,958 54.7% Knees replacement implants 229,728 145,098 58.3% 3D-printed products 123,433 69,945 76.5% Gross Profit 643,251 408,881 57.3% Operating Profit 266,992 144,936 84.2% Net Profit Attributable to equity holders 0.26 RMB 0.14 RMB 85.7% EPS 926,705 600,562 54.3% In thousand RMB FY 2019 FY 2018 YoY Total Revenue 926,705 600,562 54.3% China 799,611 513,130 55.8% Other Countries 127,094 87,432 45.4%

Our Performance

Strategic Objectives

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1 2 3

LED by 3D Printing Domestic Creative Leader in Orthopedic Expand Comprehensive Business Lines

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Our Strategies

Appendix

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2.4 4.1 6.3 5.0% 6.1% 6.9% 0.0% 2.0% 4.0% 6.0% 8.0% 2 4 6 8 10 2011 2015 2020E Healthcare Expenditure % of GDP

China's total healthcare expenditure Orthopedic implants in China (surgery volume)

◼ China's total healthcare expenditure from 2011 to 2015 grew the fastest among the 12 countries with the largest GDP in the world ◼ On a per capita healthcare expenditure basis, China’s healthcare industry is still underdeveloped compared to that of developed countries ◼ China had a per capita total healthcare expenditure of only RMB2,981 in 2015, a considerably lower level vs. developed countries ◼ The general orthopedic implant market consists of three major segments: orthopedic joint implants, spine replacement implants and trauma implants ◼ The orthopedic joint implant market grew the fastest among the three segments

RMB: Trillion

823 1,883

693 1,333 1,712 2,585 2,614 4,101

1,000 2,000 3,000 4,000 5,000 2015 2019 2024E Joints Spines Trauma

4,122

China Orthopedic Implant Market China Healthcare Services Market

7,338

Appendix I

Fast-growing Orthopedic Implant Market in China

CAGR

CAGR 2015-2019 CAGR 2019-2024E Total 14.2% 15.8% Trauma 12.7% 11.9% Spines 15.4% 18.5% Joints 18.5% 25.7%

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Appendix II

Strong Fundamentals Support Future Growth

▪ The aging trend of population ▪ Lifestyle changes have also pushed up the incidence of

• rthopaedic diseases

▪ With the increase of

• rthopedic surgeons and

hospitals, the accessibility of

• rthopaedic surgery is

continuously improving ▪ Lower surgery costs and higher disposable income have further increased affordability ▪ Compared with other countries, the rate of

• rthopaedic implantation in

China is still low 290 320 2017 2021E

2900 4293

2016 2020E

0.7 2.5 2.5 3.2 5

China U.K. U.S. France Germany

Chinese over 60 years old Prevalence rate of orthopedics diseases Cases of orthopedic surgery in China

0.4 1.6 3.3 3.4 4.9

China U.K. U.S. France Germany

1880 3518 5738

2011 2016 2021E

36100 49400 2011 2015

21% 23%

18% 11% 23% 13%

Spines 2013/2020EJoints 2013/2020E

4538 6371 8824 2011 2016 2021E

Spinal implant surgery per thousand patients

joint replacement surgery per thousand patients

• Avr. 3.3
• Avr. 3.3

Qualified orthopedics doctors in China Per capita disposable income of China's urban population (USD) per capita disposable income of China’s rural population （USD)

Surgical penetration Ability to Pay Implantation Rate Morbidity

AK Medical Holdings Limited Stock Code: 1789.HK

Address: Room 1201, Tianyuan Xiangtai Building, No.5, Anding Road, Chaoyang District, Beijing Phone: +86 10 57297605 Email: ir@ak-medical.net Website: AK Medical IR

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Q&A Session