Pioneering Regenerative Medicines for Soft Tissue Injuries … · company with a focus on soft...

This report has been prepared by Cedrus Investments Ltd. PLEASE SEE IMPORTANT DISCLOSURES BEGINNING ON PAGE 50

April 3, 2018 Global Equity Research led by

Randy Hice, Chief Technical Officer [email protected]

Overweight

Recommendation Summary

x We are initiating coverage of Orthocell Limited (“Orthocell”) with an Overweight rating and a June 2019 price target of AUD1.66, representing an upside potential of about 444.3% from the closing price of AUD0.305 as of 29 March 2018. Orthocell is listed on the Australian Securities Exchange with the ticker OCC.

x Orthocell is an Australian‐based commercial‐stage regenerative medicine company with a focus on soft tissue injuries and musculoskeletal disorders. Both of its core technologies, namely collagen medical devices and cellular therapies, are beginning to gain market acceptance.

x CelGro® is a highly effective collagen scaffold medical device manufactured by Orthocell at its quality‐controlled, Good Manufacturing Practices (GMP)‐licensed facility in Western Australia, using its proprietary SMRTTM tissue engineering process, developed in conjunction with Professor Minghao Zheng and the University of Western Australia. CelGro® exhibits a number of qualities that make it ideal for use as a tissue reconstruction and repair device across multiple tissue types, including bone, tendon, nerve and cartilage.

x Clinical studies have shown that CelGro® is capable of enhancing tissue growth and repair in injuries, including augmenting the regeneration of a torn tendon in the rotator cuff of the shoulder, guiding bone regeneration within the jaw, and cartilage regeneration in the hip, while also assisting in the rejoining of severed or damaged peripheral nerves. In November 2017, Orthocell received market authorisation (CE mark) for CelGro® in the EU for dental bone and soft tissue regeneration applications, paving the way for regulatory approval for the same and additional indications in other key markets such as the U.S. and China.

x Orthocell’s cellular therapies, Ortho‐ATI® for tendon and Ortho‐ACI® for cartilage repairs, use the autologous implantation technology to treat the underlying causes of musculoskeletal and soft tissue disorders, restoring function and mobility to patients. This area of regenerative medicine is gaining traction due to the accumulation of supportive clinical data and regulatory approval. Moreover, Orthocell’s autologous cell therapies for tendon and cartilage regeneration are more cost‐effective than traditional therapies and the forthcoming competition as well.

x Orthocell is conducting a clinical trial of Ortho‐ATI®, with the objective of assessing the safety and effectiveness of Autologous Tenocyte Injection (Ortho‐ATI®) versus corticosteroid injection in the treatment of rotator cuff tendinopathy and tear. The trial is being undertaken in collaboration with DePuy Synthes Products, Inc., part of the Johnson & Johnson Medical Device Companies.

x Orthocell’s cellular therapy products are commercialization‐ready, with approval to treat patients in Australia, New Zealand, Hong Kong and Singapore. The company is progressing a regulatory application in the U.S., with other major markets such as Europe, Japan and China to follow. It is also looking to expand the reach of its products through global partnerships.

x We value Orthocell using a discounted cash flow methodology because we believe this best captures Orthocell’s growth, as it begins to execute on its commercialization strategies.

Orthocell: Pioneering Regenerative Medicines for Soft Tissue Injuries and Musculoskeletal Disorders

Price (29 Mar’18): AUD0.305 Target Price (Jun’19): AUD1.66 Fiscal Year Ends on June 30 Market Data (29 Mar’18):

52‐Wk High: AUD0.515 (12 Apr’17) 52‐Wk Low: AUD0.275 (25 Aug’17) 52‐Wk Range: AUD0.240 Market Cap: AUD33.5M Shares Outstanding: 110.0M Shares Floating: 67.7M Annual Dividend: N/A Dividend Yield: N/A

This report has been prepared by Cedrus Investments Ltd. x PLEASE SEE IMPORTANT DISCLOSURES BEGINNING ON PAGE 50

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Table of Contents I. INVESTMENT THESIS ................................................................................................................................... 3

II. COMPANY BACKGROUND .......................................................................................................................... 4

Recent Clinical Developments ............................................................................................................... 5

Orthocell’s Technology Portfolio ........................................................................................................... 6

Significant Market Opportunity ............................................................................................................. 7

III. COLLAGEN MEDICAL DEVICE PLATFORM – CELGRO® ................................................................................ 8

Characteristics of CelGro® vs. Competitors ......................................................................................... 11

Regulatory Approval ............................................................................................................................ 14

IV. CELL THERAPIES – ORTHO‐ATI® and ORTHO‐ACI® ................................................................................... 15

Framework of Biological Products ....................................................................................................... 15

Cellular Therapy Patent Position ......................................................................................................... 18

Cell Therapies – Ortho‐ATI® ................................................................................................................. 18

Cell Therapies – Ortho‐ACI® ................................................................................................................. 27

V. FINANCIALS ............................................................................................................................................... 31

Addressable Market and Forecast ....................................................................................................... 31

Revenue Forecast ................................................................................................................................. 35

Expense Forecast ................................................................................................................................. 39

VI. VALUATION .............................................................................................................................................. 41

VII. RECOMMENDATION ................................................................................................................................ 44

Share Performance and Trading Information ...................................................................................... 44

Shareholder Analysis ............................................................................................................................ 45

Our Recommendation .......................................................................................................................... 46

APPENDIX: Company Management and Board of Directors............................................................................. 47

Important Disclosures ....................................................................................................................................... 50


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I. INVESTMENT THESIS

x There is increasing interest among global healthcare companies for modern regenerative medicine, as evidenced by the recent all‐out acquisition of the privately‐owned US‐based tissue‐regeneration company Rotation Medical Inc., by the UK‐based Smith & Nephew (SNN) in October 2017 for US$125 million in cash up front and US$85 million contingent on achieving certain financial milestones for a total consideration of up to US$210 million. Rotation Medical is solely dedicated to treating rotator cuff tears through its FDA‐approved collagen scaffold, which is derived from bovine Achilles tendon. This transaction portrays the potential upside to Orthocell’s shares and value of its regenerative medicine portfolio.

x International health authorities are focusing on accelerating the introduction of regenerative medicine through accommodating policies. The U.S. Food and Drug Administration (FDA) has recently announced a comprehensive policy framework for the development and supervision of regenerative medicine products. The new framework intends to accelerate the development of and quicken the access to safe and effective regenerative medicine therapies for patients. We believe Orthocell is poised to be a major beneficiary of this move, as the company will have such products going through the regulatory approval process in the near and medium term.

x Orthocell has a clear commercialization strategy in place to drive initial sales of CelGro®. With the

CE mark obtained for dental bone and soft tissue regeneration procedures, Orthocell is in discussions with several potential Brand Ambassadors, Key Opinion Leaders and strategic commercial partners for product licensing and distribution in Europe and other key regions.

x Orthocell’s Autologous Tenocyte Implantation (Ortho‐ATI®) technique is the world’s first

commercialized ATI procedure. Moreover, Ortho‐ATI® has over five years of clinical data, demonstrating its long‐term structural durability and restoration in function. Over 400 patients have been treated with Ortho‐ATI® to date, providing the company with competitive advantages to explore and secure research and distribution agreements to maximize its global reach and business potential.

x The company is progressing towards obtaining reimbursement status for their Autologous

Chondrocyte Implantation (Ortho‐ACI®) product for cartilage repair and regeneration in Australia, which we believe will not only boost market adoption but also support or even accelerate the approval processes currently underway in multiple international jurisdictions.

x Orthocell’s experienced founders and management team have a successful track record in

developing, commercializing and monetizing cell therapy products. x Therapeutic Goods Administration (TGA)‐licensed and good manufacturing practices (GMP)‐

certified manufacturing capabilities in biological products underpin competitive advantages and are designed to scale easily so as to meet market demand.


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II. COMPANY BACKGROUND

Orthocell is an Australian‐based regenerative medicine company, focusing on improving mobility and regenerating soft tissue using its internally‐developed proprietary cellular technologies. The company was founded in 2006 by the current Managing Director, Mr. Paul Anderson, and Chief Scientific Officer, Professor Ming Hao Zheng, both of whom have accumulated extensive experience in developing and commercializing innovative regenerative therapies for the past two decades. Previously, the dual played key pivotal roles in establishing Verigen Australia, a company with a proprietary autologous chondrocyte implantation (ACI) product that was later acquired by Genzyme for US$50 million in 2005. Genzyme was subsequently acquired by Sanofi (SAN FP) in 2011 for US$20 billion. Mr. Anderson was credited for introducing the first‐generation of ACI treatments and establishing the manufacturing capabilities of Verigen Australia. With extensive experience and knowledge accumulated in establishing GMP‐licensed manufacturing facilities and commercializing regenerative therapies, Mr. Anderson and Professor Zheng have led the development and commercialization of Orthocell’s two autologous cell therapies, namely Ortho‐ATI® and Ortho‐ACI®, for the treatment of impaired tendons and cartilages, respectively. Orthocell has also developed CelGro®, a versatile, highly resorbable1 porcine collagen scaffold, for the repair and regeneration of various tissue types with the potential to revolutionize modern regenerative therapies. Building on a strong foundation of proprietary manufacturing processes and a comprehensive portfolio of intellectual property, Orthocell is accelerating towards commercialization of its technologies through strategies that include research and licensing partnerships, while generating meaningful clinical data and obtaining regulatory approvals to facilitate rapid market adoption. Exhibit 1: Orthocell’s Portfolio of Technologies

Technology Ortho‐ATI® Ortho‐ACI® CelGro®

Product/Procedure Autologous Tenocyte Implantation

Autologous Chondrocyte Implantation

Biological Reconstruction Scaffold

Current Application Tendon Injuries Cartilage Injuries Dental Barrier Membrane

and Soft Tissue Repair

Source: Orthocell, Cedrus Research

1 Can be broken down and assimilated back into the body


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Exhibit 2: Recent Clinical Developments

Year Recent Clinical Developments

2014 ¾ Commenced first human trial of CelGro® scaffold product, targeting the repair and regeneration of the tympanic membrane (ear drum between the outer and middle ear)

2015 ¾ July 2015 – Received a AUD0.5 million grant from the Australian government to further develop the world’s first laboratory‐grown tendon

¾ November 2015 – Presented initial positive safety and tolerability results for CelGro® in a pilot clinical study for bone defects around dental implants

¾ December 2015 – Obtained approval for a human clinical study, examining the safety and effectiveness of CelGro® to be used as an augment for the surgical repair of the rotator cuff tendons2

2016 ¾ May 2016 – Received human ethics approval to conduct clinical trials, using CelGro® for the treatment and augmentation of articular cartilage surgeries of the hip

¾ June 2016 – Released initial positive safety and tolerability results for the rotator cuff tendon clinical study, demonstrating that the scaffold was safe and had been well tolerated

2017 ¾ January 2017 – Orthocell, in collaboration with DePuy Synthes Products, Inc., part of the Johnson & Johnson Medical Device Companies, would conduct a clinical trial of Ortho‐ATI®. The objective of this study is to assess the safety and effectiveness of Autologous Tenocyte Injection (Ortho‐ATI®) compared to corticosteroid injection in the treatment of rotator cuff tendinopathy and tear.

¾ February 2017 – Commenced U.S. FDA application process for CelGro® collagen scaffold and obtained early successful results of CelGro® in nerve regeneration

¾ May 2017 – Approval obtained from the ethics committee for commencing Ortho‐ATI® tendon study with DePuy Synthes (J&J) for treatment of rotator cuff tendinopathy and tear and comparing the results with corticosteroid injection

¾ May 2017 – Obtained approval to include Ortho‐ACI® on the Australian Register of Therapeutic Goods (ARTG), paving the way for applying for the reimbursement status in Australia

¾ November 2017 – Obtained CE mark from the European health authorities, getting authorization to market and distribute CelGro® in the European Union (EU) for dental bone and soft tissue regeneration

¾ December 2017 – Orthocell commenced treatment of its 1,000th patient from its TGA‐licensed facility for the repair and regeneration of human tendon and cartilage

2018 ¾ January 2018 – Orthocell reported 50% patient treatment in the human nerve regeneration trial had been achieved for the collagen scaffold platform, CelGro®. The study showed that CelGro® is effective in guiding and promoting nerve regeneration in damaged peripheral nerves of the hand and upper limb

¾ January 2018 – Reported successful completions of a placement and the share purchase plan by eligible shareholders, collectively raising approximately AUD3 million.

¾ February 2018 – Positive pre‐clinical results were announced with CelGro® being used in anterior cruciate ligament (ACL) reconstruction, as a collagen rope could replace the need for autologous grafts and showed that the host’s ligament stem cells from the ACL stump are capable of ingrowth into the CelGro® rope.


2 A group of four tendons that stabilizes the shoulder joint. Each of these tendons attaches to a muscle that moves the shoulder in a specific direction


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Orthocell’s Technology Portfolio Orthocell’s technology portfolio consists of cell therapies and collagen medical devices. Exhibit 3: Overview of Orthocell’s Technology Portfolio

Technology CelGro® Ortho‐ATI® Ortho‐ACI®

Category Collagen Medical Devices for

soft tissue and bone regeneration

Cell Therapies for musculoskeletal injuries

Applicable Biological Component

Collagen – the most abundant protein in the body that surrounds soft tissues and

holds them together

Tendon – Connective tissue that binds muscle to bone

Cartilage – a firm yet slippery tissue that coats the ends of bones, acting as a protective

cushion between bones at joints

Method of Application

Collagen scaffold for repair of soft tissue injuries or

degeneration to be used in orthopedic and general surgical procedures

Tendon repair and regeneration therapy that utilizes a patient’s own

tenocytes3 that have been cultured and expanded in

number

Cartilage repair and regeneration therapy that utilizes a patient’s own

chondrocytes4 that have been cultured on CelGro®

Current Status

Received CE mark for dental bone and soft tissue

regeneration applications. To generate sales starting from

2018

Clinical trials in tendon, bone, nerve and cartilage are

ongoing

Seeking to attain regulatory approval in key markets.

Treating patients in Australia, New Zealand, Hong Kong and

Singapore

Treating patients in Australia, New Zealand, Hong Kong,

Singapore and China

Current Therapeutic Applications

Dental bone and soft tissue reconstruction

Epicondylitis5 (also known as tennis elbow), Achilles,

gluteal, Patellar6 and Rotator Cuff

Knee and ankle

Future Therapeutic Applications

Repair of cartilages, tendons, nerves, ligaments, hernia7, vaginal wall, and other general surgical repairs

Quadriceps8 and other load bearing tendons Knee and ankle


3 Fibroblast‐like differentiated cells that form the mature tendon 4 Cell that have secreted the matrix of cartilage and become embedded in it 5 A painful inflammation of tendons surrounding a protuberance above or on the condyle of a long bone, especially either of the two at the elbow end of the humerus 6 The small bone that is in the front of the knee 7 A condition in which part of an organ is displaced and protrudes through the wall of the cavity containing it 8 The large muscle at the front of the thigh, which is divided into four distinct portions and acts to extend the leg


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Orthocell also boasts an R&D pipeline that involves the integration of its existing technology portfolio. These initiatives include research collaborations between Orthocell and various international universities for “off‐the‐shelf” tissue‐specific growth factors9 and lab‐grown tendons, both of which are for musculoskeletal repairs and have shown promise in early‐stage development. Exhibit 4: Current Development Status of Orthocell’s Technology Portfolio

Source: Orthocell Significant Market Opportunity Biological products in development are increasingly focused on addressing the shortfalls of existing treatment options for musculoskeletal disorders and soft tissue injuries. This area of regenerative medicine, currently plagued by ineffective and symptom‐based therapies, offers tremendous opportunities for Orthocell to introduce its superior therapies capable of addressing the underlying causes of musculoskeletal disorders. Marketing approval obtained from EU for CelGro® to be used in dental bone and soft tissue regeneration applications opens up the dental barrier membrane market for Orthocell. Entering the EU market, where over approximately 700,000 units of resorbable dental barrier membranes are estimated to have been used in 201710, not only represents an opportunity for CelGro® to generate sales but also provides Orthocell with invaluable clinical data upon which the versatile collagen scaffold can leverage to facilitate approvals of its use in other indications.

9 Naturally occurring regulatory molecules, which bind to receptors on the cell surface. They stimulate cell and tissue function through influencing cell differentiation by changing their biochemical activity and cellular growth, and regulating their rate of proliferation 10 iData Research Inc.


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Meanwhile, there are significant untapped opportunities in the musculoskeletal disorder market where Orthocell has competitive edges over the competition especially in tendon‐related injuries. Being the sole‐provider of an autologous tenocyte implantation product currently, Orthocell is well positioned to capture considerable market share in providing treatment for tendon‐linked injuries, such as tennis elbow and rotator cuff tears with high incidence rates of 2,900 cases per 100,000 people11 and 2,000 cases per 100,000 people12, respectively; collectively, these injuries represent nearly 800,000 tendon‐related injury cases in Australia and over 10 million incidences in the U.S. alone in 2017. III. COLLAGEN MEDICAL DEVICE PLATFORM – CELGRO® Orthocell has developed CelGro®, a unique regenerative medicine scaffold, to augment soft tissue and bone regeneration. It is a high‐grade scaffold for versatile applications in bone, tendon, nerve and cartilage reconstruction and repair, with structurally superior attributes to competing products such as highly bio‐compatible, bio‐absorbable and mechanically strong. Exhibit 5: CelGro® – Collagen‐based Scaffold: Dehydrated Form (Left) and Hydrated Form (Right)

Source: Orthocell

Collagen scaffolds have been used in the medical industry for some time to facilitate the natural healing process in variety types of tissue, including skin, tendons, ligaments, muscles and other soft tissues. These “scaffolds” provide a 3‐dimentional matrix for cells to populate at the site of impairment, enhancing tissue regeneration. Collagen scaffolds are designed to mimic the extracellular matrix (ECM) that occurs naturally in humans. This engineered ECM guides the proliferation of surrounding cells to populate by offering them a scaffold. Collagen is the most abundant protein in the human body that gives strength to human tissue. As a natural material, it can be shaped into various porous structures to act as a scaffold upon which cells and tissues can grow naturally. Collagen scaffolds are usually sourced from cows (bovine) or pigs (porcine) for their bio‐compatibility with human tissue.

11 Medscape 12 Epidemiology of rotator cuff tendinopathy: a systemic review (2013). Chris Littlewood, Stephen May, Stephen Walters


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There are a number of collagen‐based (animal derived) and synthetic scaffolds on the market. However, existing scaffolds have shown limited ability to effectively guide tissue repair due to their species origin, collagen origin and manufacturing techniques. CelGro® Clinical Trials Currently, Orthocell is conducting clinical trials for 4 different tissue applications, including bone in dental procedures, torn tendons in the shoulder, nerve damage, and damaged cartilage in the hips. The versatility of CelGro® could also potentially allow it to expand into therapeutic use for damaged ligaments, a general‐purpose scaffold for surgical procedures, as well as female pelvic floor impairments. Exhibit 6: Orthocell’s CelGro® is Undergoing Clinical Trials for Various Applications

Source: Orthocell

The Orthocell Difference CelGro® is primarily composed of type 1 collagen13. Being one of the most abundant forms of collagen in the body, type 1 collagen allows CelGro® to be used for a vast number of soft tissue types, including tendons, skin, ligaments, fascia14, bones and corneas. The CelGro® product differs notably from conventional scaffolds, as most of them are made for a specific tissue and application. While most scaffolds are designed solely for structural strength, CelGro® maximizes not only strength, pliability and bio‐compatibility but also optimizes

13 Type 1, 2, and 3 collagen make up 80‐90% of all the collagen in the body. Type 1 and Type 3 are often found together in skin, tendons, bone, ligaments, dentin, interstitial tissues, muscle and blood vessels. Type 2 collagen is mostly found in cartilage and vitreous humor 14 A thin sheath of fibrous tissue enclosing a muscle or other organs


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degradation, resulting in strong and flexible scaffolding with no observed inflammatory side effects in clinical studies to date. CelGro® is manufactured by Orthocell in Western Australia, using their proprietary SMRT™ tissue engineering process that was developed by the company’s co‐founder, Professor Minghao Zheng, in conjunction with the University of Western Australia. With the raw materials sourced from Australian porcine material, this physical nature, coupled with the deployment of Orthocell’s proprietary SMRT™ tissue engineering in the manufacturing process, allows the production of the CelGro® scaffolding free of any foreign particles. This bio‐engineering process also enables CelGro® to be replaced gradually by the native soft tissues, as the body naturally resorbs the implant. CelGro® addresses the major drawbacks of modern scaffolds used in therapeutics. Collagen scaffolds used with human tissue must be not only bio‐compatible to induce tissue regeneration but also withstand normal daily wear and tear and degrade at a similar turnover rate as the surrounding tissue. If the degradation or resorption rate of the scaffolds differs from the turnover rate of the surrounding cells, it may actually hinder the natural healing process or cause an improper integration with existing cells, leaving the patient with a less‐than‐desirable recovery. Exhibit 7: Composition of CelGro®

1. Smooth layerDensely packed collagen

Passage of fluids

2. Rough layerLoosely arranged collagen

Applied facing the tissue defect

3. Tissue remodellingIntegration of cells

Guiding high quality tissue regeneration

Mimics Naturally Occurring

Extracellular Matrix (ECM) – Scaffold for cell growth

Source: Orthocell


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Characteristics of CelGro® vs. Competitors The source of collagen being used can vary across different scaffolds. The main sources include porcine skin, bovine tendons and human cadavers15. Without proper manufacturing techniques, all of these raw materials have the possibility of transmitting diseases, causing allergic reactions or pathogen contamination. In addition, batch‐to‐batch variability adds to concerns about using animal materials. Orthocell utilizes Australian porcine collagen and employs their proprietary manufacturing process to eliminate all foreign particles while also preserving the collagen structure of the natural source, which is crucial to its integration with the host’s tissues. Exhibit 8: Comparison of CelGro® with Competing Scaffolds

Attribute CelGro® Conventional Scaffolds

Biocompatibility x Utilizes high‐grade porcine collagen from

Australia – lowering risk of rejection x No cross‐linking or artificial additives

Some include the use of the following substances, which reduce biocompatibility: x Bovine/human/equine (horses) x Artificial additives

Biodegradability x Purified collagen scaffold is naturally

resorbed, as natural tissue regeneration takes place

x Some collagen scaffolds require surgical removal

x Certain collagen scaffolds degrade at different turnover rates at the implant site, leading to improper integration at the site

Mechanical Properties

x Versatile – not tissue specific x Pliable, strong, and conformable x Maintains structural integrity when in

contact with fluids x Can be used on its own or in combination

with cells, grafts or growth factors

x Current collagen scaffolds are tissue specific x Most collagen scaffolds rely mainly on

providing strength x May lose structural integrity when it is wet

Scaffold Architecture

x Porous bilayer structure that enhances tissue regeneration

x Preserves the native architecture of collagen

x Competitors mainly use a monolayer structure, which may not integrate well with naturally occurring collagen, resulting in a poorer integration

Manufacturing

x Proprietary SMRT™ manufacturing process assures all DNA and other tissue components removed from raw collagen material

x Strict good manufacturing practices (GMP) standards in place

x In general, the manufacturing process must meet industry GMP standards. However, certain products may include residual DNA or foreign substances, which may decrease compatibility

Source: Cedrus Research

15 A corpse


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Being primarily comprised of type 1 collagen, CelGro® has versatile applications, capable of being used in various tissues. In contrast, most other collagen scaffolds are designed for one single therapeutic area. For example, Geistlich’s Bio‐Gide® commands the dental scaffold market with over 50% of market share. Meanwhile, a wide range of scaffolds are used in other applications, usually depending on the physician’s preference. Exhibit 9: Various Collagen Scaffold Products

Product CelGro® Bio‐Gide® TissueMend® SpongeCol®

Therapeutic Area Versatile Oral Tendon N/A

Raw Material Porcine Porcine Bovine Bovine

Price Dental: AUD300‐400

Tendon: AUD2,000‐3,000 AUD400 N/A AUD400

Source: Cedrus Research, Orthocell, Geistlich, Stryker, Merck

CelGro® is a Platform Technology for Future Developments Besides being used in applications similar to other conventional collagen scaffolds, CelGro® also serves as a platform for developing future approaches regarding soft tissue repair, including ligament augment and/or replacement. CelGro® offers Orthocell the potential of expanding their offerings in therapeutics by using CelGro® as a carrier/delivery mechanism for tenocytes, chondrocytes and growth factors. In February 2018, Orthocell announced positive pre‐clinical results for using the CelGro® technology as an off‐the‐shelf collagen rope for the treatment of anterior cruciate ligament (ACL) injuries. The ligament stem cells from the host were capable of ingrowth into the CelGro® rope, potentially eliminating the need for autologous grafts usually taken from the patient’s hamstring tendon – the common surgical procedure for ACL reconstruction. Orthocell is also exploring new formulations of CelGro®, including a collagen powder, which could potentially be used as a bone void filler for dental or orthopedic regeneration procedures. Patent Protection Orthocell’s CelGro® has been granted five patent families. These patents cover the manufacturing process of CelGro® as well as its future applications, potentially protecting the technology platform until 2036.


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Exhibit 10: Patents of CelGro®

Patent # Overview Description Patent Protected Patent Pending

WO/2010/009511 A collagen scaffold for cell growth

Captures early methodology in

manufacturing the scaffold

China, New Zealand, Singapore Canada, Australia

WO/2013/185173 Method for

producing a collagen membrane

Captures the method of producing the

collagen membrane

Australia, China, Japan, New Zealand,

Singapore, U.S. Canada, Europe

WO/2008/128304 Tenocyte‐containing bioscaffolds

Captures the method of producing tenocytes and

implanting a seeded bioscaffold

Australia, Canada, China, New Zealand,

Singapore, U.S. Europe

WO/2016/054686

Collagen construct and method for producing the

collagen construct

‐ U.S.

Australia, Canada, China, Europe, Japan,

New Zealand, Singapore

WO/2016/054687 Suture‐less repair of soft tissue

Covers the use of CelGro® for the

suture‐less repair of soft tissue

Australia

Canada, China, Europe, Japan, New Zealand, Singapore,

U.S.

Source: Orthocell

Exhibit 11: CelGro®’s Application in Dental Implant (Left), Rotator Cuff Stabilization (Middle), and Nerve Repair (Right)

Source: Orthocell


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Regulatory Approval CelGro® is classified as a medical device in major jurisdictions. Since there are many collagen scaffolds on the market, CelGro® will need to exhibit, at least, similar efficacy levels to its competitors to obtain marketing approval. Orthocell has successfully obtained the European CE mark certificate for CelGro® to be used in dental implantation and soft tissue regeneration applications and filed a 510(k) application to the Food and Drug Administration in the U.S. for the same utilization. Currently the company is marketing the CelGro® platform for dental implantation applications in Europe, and is preparing for commercialization in the U.S. and Australia in FY2019 ending on 30 June 2019. CelGro®’s versatility is a key differentiator. Establishing its safety and efficacy profile and obtaining marketing approval in one indication pave the regulatory framework for obtaining approvals for other indications. Orthocell is planning to submit marketing applications for various indications in Australia, the EU and in the U.S., and is preparing an application in Japan later this year. Orthocell is also committed to developing the Chinese market through forging a domestic partnership. Since CelGro® is already marketed elsewhere, its registration process in China may be more straightforward than otherwise. Exhibit 12: CelGro®’s Regulatory Overview

Country Regulatory Body Classification Requirements

Estimated Time to Approval

Orthocell’s Current Status

Australia TGA/ARTG Class III Medical Device

Submission of Technical Dossier

< 18 months

ARTG application expected in 1Q 2018

EU EMA Class III Medical Device

Submission of Technical Dossier, audit with Medical Device Directive, obtain CE

marking (“European Conformity”)

< 6 months

Obtained CE mark in 4Q 2017 for dental bone and soft tissue

regeneration applications

U.S. FDA Class II Medical Device

510(k) approval application, Technical Dossier not

required

About 12 months

Application process commenced

Japan Japan Medical Data Center (JMDC)

Class IV Medical Device

Require a Japan‐based representative; might

require clinical trial data based on Japan Medical Device Nomenclature

(JMDN) code

N/A Preparing to submit in 2018

China

China Food and Drug

Administration (CFDA)

Class III Medical Device (both current and

new guidelines in effect from Aug 1, 2018)16

Route for medical devices already approved for

marketing abroad requires a technical dossier, clinical data, and a local Chinese

representative

N/A No regulatory filings yet. Looking for a local

Chinese partner

Source: Various health regulatory bodies, Cedrus Research

16 http://www.sda.gov.cn/WS01/CL0087/177089.html


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IV. CELL THERAPIES – ORTHO‐ATI® and ORTHO‐ACI® Orthocell’s cell therapies deploy stem cell technology to treat musculoskeletal disorders, which represent a range of injuries involving various components related to body movement, such as muscles, bones, cartilages, tendons, blood vessels, nerves and other soft tissues. Autologous implantation technology17 has been employed for orthopedic treatments in cartilages for over two decades, but Orthocell was the first company able to transition the technology to tendons, producing an autologous tenocyte implantation technique, with patent protection granted in the Asia Pacific and U.S. while awaiting protection to be granted in Europe. Procedurally, both Ortho‐ATI® and Ortho‐ACI® require a biopsy of a healthy tendon and cartilage, respectively. The biopsied tissue will initially be screened for the presence of healthy tenocytes for Ortho‐ATI® and chondrocytes for Ortho‐ACI®. The healthy cells will then undergo a cell‐culturing process in which the cells will rapidly grow in number. Orthocell utilizes a monolayer cell‐culturing technique (cells only grow side by side, not on top of each other) for the propagation18 of autologous tenocytes for Ortho‐ATI®, and autologous chondrocytes for Ortho‐ACI®. The company has been manufacturing these stem cells under the license issued by the Therapeutic Goods Administration (TGA) [license MI‐19052008‐LI‐002420‐11] since 2009 to perform Ortho‐ATI® and Ortho‐ACI® procedures. After the completion of the cultivation process, the healthy tenocytes and chondrocytes are injected or implanted into the patient’s respective impaired tendon and cartilage. Framework of Biological Products Therapeutic products composed of living cells present many complications. Appling Current Good Manufacturing Practices (cGMP) to the manufacture of biological drugs is not straightforward. These cell culture‐based procedures are more complex and difficult to manage than small‐molecule synthesis in pharmaceuticals. These products, due to their living biological nature, are unable to be fully characterized or defined in today’s healthcare environment, which was designed for small‐molecule manufacturing for the past century. These sophisticated challenges give rise to the sense that “the product is the process.” Manufacturers of living cells must ensure product‐quality attributes namely Purity, Potency and Identity (PPI). Because these attributes must be maintained throughout the manufacturing process for cells to be streamlined and scaled for commercialization, significant time and resources must be invested to validate PPI techniques before any such derived products can be marketed.

17 Biopsy of tissue/cells from the patient, undergo bioengineering, and implant the tissue/cells back into the same patient 18 The breeding of specimens of a plant or animal by natural processes from the parent stock


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Exhibit 13: Critical Quality Attributes to Cellular Characterization

Quality Attributes Purity Potency Identity

Desired Outcome

Cell‐therapy products are free of undesirable materials, including cell types, residual proteins, or agents used during the manufacturing

process

Biological product must readily carry out the relevant

biological function

The product must contain the intended cellular and non‐cellular components

Common Assays and

Techniques Used

Residual protein assays, ELISA (enzyme‐linked

immunosorbent assay)‐based tests19, multi‐targeted

fluorescence‐activated cell sorting20 (FACS) and gene

arrays

Bioactive cytokine levels released into the

supernatant of cultured cells, qualitative assay on cellular

morphology21, gene expression profiling

Cellular morphology, Flow cytometry, Polymerase Chain Reaction22 (PCR), miRNA

expression analysis

Source: Cedrus Research

Cultivation of stem cells requires a specific balance of growth factors and their concentrations at the correct time of exposure to produce the desired product. Non‐differentiated cells are highly sensitive to culturing‐agents during the manufacturing processes. Although these processes are well documented and used for both research and commercialization purposes, proprietary techniques and variations can provide further improvements to the final biological products. There are different, yet growing, sets of regulatory frameworks around biological products compared to those for chemically synthesized small‐molecule drugs. Biological product syntheses are highly sensitive, and often characterized by their manufacturing processes as opposed to their exceedingly complex molecular structures. Changes to manufacturing processes, equipment, or facilities could result in changes to the biological products themselves. In contrast, a chemically‐synthesized drug can easily be analyzed after its manufacturing process by established analytical and qualitative techniques because they consist of comparatively simple molecular structures. The Orthocell Difference The process of cultivation stem cells for both Ortho‐ATI® and Ortho‐ACI® involves a set of biomarkers expressed at a specific time and concentration. To ensure the cell‐culturing process produces a highly effective cell product, Orthocell has put in place various quantitative and qualitative validation techniques to manufacture their ATI and ACI products with a series of tests assessing the Purity, Potency and Identity (PPI) of the products.

19 Used to detect and measure antibodies in one’s blood. This test can be used to determine if one has antibodies related to certain infectious conditions 20 A specialized type of flow cytometry. It provides a method for sorting a heterogeneous mixture of biological cells into two or more containers, one cell at a time, based upon the specific light scattering and fluorescent characteristics of each cell 21 For identifying the shape, structure, form, and size of cells 22 A technique used in molecular biology to amplify a single copy or a few copies of a segment of DNA across several orders of magnitude, generating thousands to millions of copies of a particular DNA sequence


17

Exhibit 14: Key Biomarkers for Validation during Cell Culturing Process

Technology Ortho‐ATI® Ortho‐ACI®

Upstream Biomarker Indicators Scleraxis Sox9, Type II collagen

Downstream Biomarker Indicators Tenomodulin, Type I collagen Aggrecan, HAPLN1

Source: Orthocell

It is the adoption of these assay and validation techniques Orthocell has developed “in‐house” that yields a highly superior biological product. In addition, the commercialization and scaling of these require extensive knowledge and experience in cellular biology. Orthocell is undergoing Patent Cooperation Treaty (PCT) patent submission of its Purity, Potency and Identity (PPI) criteria in multiple jurisdictions. Exhibit 15: Ortho‐ATI® Purity, Potency and Identity (PPI) Validation Methodology

Source: Orthocell, Cedrus Research Exhibit 16: Ortho‐ACI® Purity, Potency and Identity (PPI) Validation Methodology



18

Cellular Therapy Patent Position In‐house procedures are more representative of Orthocell’s proprietary techniques, and the company’s cellular therapy portfolio has been granted three patents. Patent protection is becoming an increasingly important part of the development process, as the regulatory framework of biologics begins to be implemented gradually. With patent protection until 2030, Orthocell is preparing to file for patents on part of their proprietary cell culturing and validation techniques, potentially extending patent protection of their technology. Exhibit 17: Overview of Orthocell’s Patent Families on Cellular Therapies

Patent # Overview Description Patent Protected Patent Pending

WO/2007/106949 Tenocyte cell‐culturing method

Includes expansion/manufacture of tenocytes from the patient’s

biopsy

Australia, U.S., New Zealand,

Singapore, Hong Kong, China,

Canada

Europe

WO/2010/108237 Method of tissue repair

Ortho‐ACI® and the process of applying cells to the

scaffold

Australia, China, New Zealand, Singapore

Canada, Europe, U.S.

WO/2008/041909

A method of producing native

components, such as growth factors or extracellular matrix proteins, through cell culturing of tissue samples for tissue

repair

This patent application covers Orthocell’s ‘cell factory’, in which growth factors and extracellular

matrix proteins are produced from cultured cells and extracted for use as an allogeneic23 cell therapy

U.S. and Europe Australia, Canada, China

Source: Orthocell Cell Therapies – Ortho‐ATI® Tendon Impairment Tendons are tough bands of fibrous connective tissue that connect muscle to bone. They are made to withstand tension and support movement. Tendon damage usually occurs from the buildup of micro‐tears during day‐to‐day or strenuous activities, leading to a decrease in the number of healthy tendon cells. Gradual impairment mitigates the tendons’ ability from supporting a patient’s activities, leading to the need for medical attention. If uncared for, conditions of the tendons can deteriorate, resulting in a rupture, or in more severe cases, an instantaneous rupture can occur due to overwhelming strain from physical activity. In most cases, tendon impairment is characterized by loss of striation and organization of tenocytes, leading to empty “pockets” between tendon tissues. Although it is possible for tendons to heal naturally, the natural

23 Denoting, relating to, or involving tissues or cells that are genetically dissimilar and hence immunologically incompatible, although from individuals of the same species


19

healing process is lengthy because tendons do not have a direct blood supply and require a long‐period of partial immobilization. Tendon injuries are categorized into three grades, depending on the severity of the impairment. Grade II and III tears are usually characterized with injuries too severe for the tendon to heal itself, leading to degeneration. Exhibit 18: Categories of Tendon Injury

Source: Orthocell

Exhibit 19: Microscopic Slide showing Normal Tendon Strands (Left) and Torn Tendon Strands (Right)

Source: Orthocell

Grade I

• Tendons are inflamed, swollen or strained without any forms of tears

Grade II

• Magnetic resonance imaging (MRI) scans may show tearing of up to 50% of the muscle fibers, and partial retraction of muscle fibers

Grade III

• Tears refer to near 100% structural damage, with or without muscle retraction


20

Common Sites of Tendon Injury Tendon impairment or injury, known as tendinopathy24, can occur in any tendon in the body. Common sites of injury include various joints often used for manual labor activities. For athletes, tendon injuries are usually found in the rotator cuff (shoulder), lateral epicondylitis (also known as tennis elbow), gluteal tendon (buttocks), and the Achilles tendon (ankle). When an injury occurs, swelling, pain, or the feeling of disjointedness usually prevents the patient from continuing their activities. Exhibit 20: Common Tendon‐Injury Sites

Source: Orthocell

Current Treatment Treatment of acute tendonitis25 includes resting the injured area and, if necessary, pain relievers such as acetaminophen or nonsteroidal anti‐inflammatory drugs (NSAIDs) are taken to reduce pain and inflammation at the site of injury. During this period, a splint or brace is often worn at the injured site to minimize movement and allow natural healing of the tendon. In the case of a more severe injury, or if the patient does not get better from the natural healing process (the tendon is degenerative), a physician may prescribe physical therapy, platelet‐rich plasma26 (PRP) injection, or open surgery. The open surgical process includes sewing the two torn ends of the tendon together and then immobilizing the area to enhance natural healing. In both acute and more severe cases, pain‐killers are usually given as the first‐line of treatment because they are effective in addressing the pain arising from the injuries.

24 Refers to a disease of a tendon. The clinical presentation includes tenderness on palpation and pain, often when exercising or with movement 25 Inflammation of a tendon, most commonly from overuse but also from infection or rheumatic disease 26 A portion of the patient's own blood having a platelet concentration above baseline, to promote healing of injured tendons, ligaments, muscles, and joints


21

Ortho‐ATI® as the New Standard of Treatment Orthocell’s Autologous Tenocyte Implantation (ATI) technology uses the patient’s own healthy tendon cells to help regenerate the impaired tendons elsewhere in his/her own body. Initially, a biopsy of a healthy tendon (usually the patellar tendon27) is taken in a clinic. Then the sample is sent to an Orthocell‐regulated laboratory where tenocytes are isolated and then cultured to significantly increase the cell count. The cultivation process requires 4‐5 weeks to complete. After that the cultured tenocytes will be injected into the voids or tears of the impaired tendon of the patient, guided by ultrasound. ATI artificially restores the tenocyte cell population, providing relief from pain and helping long‐term structural tendon regeneration and the restoration of normal functions. It is important to note that the transfusion uses the patient’s own cells; hence, they are autologous and treatment rejection is highly unlikely. Exhibit 21: Ortho‐ATI® Treatment Procedure

Source: Isarklinikum, MPBio, Colorado Clinic

Orthocell has the sole rights for marketing an autologous tenocyte implantation (ATI) procedure and has treated 455 patients to date with Ortho‐ATI®. Clinical Studies Clinical success for tendon injuries is usually assessed by a series of qualitative and quantitative measurements. Pre‐ and post‐procedure measurements are taken to evaluate the efficacy of the procedure. An MRI is usually performed to qualitatively validate tendon regeneration has occurred at the implant site. Orthocell has conducted multiple clinical studies on their Ortho‐ATI® procedure. Each of Orthocell’s ATI clinical trials exhibited a recovery in function and structure. MRI images pre‐ and post‐Ortho‐ATI® procedure provided evidence of tendon regeneration at the site of implantation. Reduction of pain was reported at varying lengths of time post the Ortho‐ATI® procedure. The clinical parameters such as QuickDASH, UEFS, OHS, MDP, SF‐36 and VISA‐P are designed to validate a recovery to proper function post the Ortho‐ATI® procedure. We believe quantitative measures of such

27 Attaches the bottom of the kneecap (patella) to the top of the shinbone (tibia). It is actually a ligament that connects to two different bones, the patella and the tibia

The tissue sample is transported directly

to Orthocell’slaboratory

Tendons are isolated from the tissue sample, and then

cultured to significantly increase

cell count

In approximately 5 weeks, these cultured tenocytes are injected back into the patient at impaired sites

guided by ultrasound

Healthy tendon tissue is

arthroscopically harvested from knee

joint


22

parameters provide the best evidence of the procedure’s success. Thus, we derive our estimated average success rate of 90% from the following two major studies that assessed the patients’ restoration of function:

1) QuickDASH score improvement results in ATI‐001 trial of 91%, and

2) 88% of patients returning and participating in the Retrospective Study post‐Ortho‐ATI® treatment. Exhibit 22: Completed Ortho‐ATI® Clinical Trials

Study Name Description No. of Subjects

Implant Site Duration Assessment

Parameters

ATI‐001

Pilot study of Ortho‐ATI® in severe, chronic, resistant lateral

epicondylitis (also known as tennis elbow)

17 Elbow 60 months

MRI, QuickDASH, UEFS, VAS pain scale,

Grip strength

ATI‐002 Pilot study of Ortho‐ATI® in gluteal tendinopathy 12 Gluteal

tendon 24

months

MRI, VAS pain scale,

OHS, MDP, SF‐36

ATI‐CS001 Treatment for partial‐thickness

rotator cuff tear and tendinopathy in an elite athlete

1 Rotator cuff

12 months

MRI, QuickDASH, VAS pain scale, OSS

ATI‐CS002 Treatment resistant tendinopathy of the patellar tendon 1 Patellar

Tendon 10

months MRI

ATI‐CS003 Autologous tenocyte injection – a novel treatment for recalcitrant

patellar tendinopathy 1 Patellar

Tendon 9 months MRI, VISA‐P

Retrospective Study

Retrospective Study: Ortho‐ATI® for the treatment of compensating occupationally related lateral epicondylitis (tennis elbow)

25 Lateral Epicondyle Various

MRI, QuickDASH, UEFS

VAS pain scale, Grip strength

Source: Orthocell Notes: Oxford Shoulder Score (OSS): a patient‐based questionnaire to assess the outcome after a rotator cuff repair The QuickDASH and Upper Extremity Functional Scale (UEFS) tests are surveys completed by a patient to measure musculoskeletal impairment in one’s body, while the Oxford Hip Score (OHS), Merle d'Aubigne and Postel (MDP), 36‐item Short Form Survey (SF‐36), and Victorian Institute of Sport Assessment–Patella (VISA‐P) measure the lower body impairment The Visual Analogue Scale (VAS) pain scale is a survey based on the pain experienced by the patient Grip strength measures the increase in muscle strength post‐procedure compared to that pre‐procedure


23

Exhibit 23: Clinical Trial ATI‐001 (Tennis Elbow) Results Show Significant Recovery in Function and Reduction in Pain at 12 months (top) and Continue to Show a Sustained Recovery over 4.5 Years (bottom)

Source: Orthocell

Exhibit 24: MRI Images Pre‐Ortho‐ATI® Treatment (Left) and 10 Months Post‐Treatment (Right) of the Rotator Cuff (ATI‐CS001 Trial) Show Regeneration of Tendon Tissue

Source: Orthocell

Recovery of function at 12 months

post‐treatment

Patients continue to show a

sustained recovery 4.5 years after treatment


24

Ortho‐ATI® Provides a Highly Cost‐Effective Alternative to Current Treatment Options Exhibit 25: Current Treatment Options and Comparisons with Ortho‐ATI®

Procedure Used During Description Effectiveness Cost

Pain‐Killers (Non‐Invasive)

Mainly Inflammatory

Phase: Grade I

Used for minor tendonitis, and they only address pain arising from the injury

Useful for reducing pain, but does not address the underlying cause if

degeneration has occurred

AUD15‐75 per prescription of pain‐killers

Corticosteroid Injection

(Non‐Invasive)

Mainly Inflammatory

Phase: Grade I

Used for minor tendonitis, and it only deals with pain that arises from the injury

Highly efficient at reducing pain, but does not address the underlying cause if

degeneration has occurred, with potentially worsening

outcome long‐term

AUD130‐380 per injection

Physical Therapy

(Non‐Invasive)

Inflammatory or

Degeneration Phase:

Grade I, II or III

Therapist will provide certain exercises to increase blood flow to injured tendons.

Ultrasound or interferential current may be used to stimulate tendon healing

Mixed data to support its use, with less than 50% success rate. Also, effectiveness can

vary from therapist to therapist

AUD65‐450 per session

Platelet‐Rich Plasma [PRP] (Non‐Invasive)

Inflammatory or

Degeneration Phase:

Grade I, II

Concentrates the patient’s blood platelets and plasma and then injected back into the injured site. Platelets are

known for their healing capabilities

Mixed data to support its effectiveness. Very high

variability in success rates, averaging around 50‐60%

AUD635‐1,525 per injection (Usually

requires 2‐3 injections for recovery)

Tendon Repair Surgery (Invasive)

Degeneration Phase: Mainly Grade III

Involves the sewing of the torn tendon back together, usually for severe tears or

when non‐surgery procedures do not succeed

Varying success rates between 65% and 95%

AUD5,080‐25,400+

Ortho‐ATI® (Non‐Invasive)

Degeneration Phase: Mainly Grade II

Novel cell therapy that involves culturing the patient’s own healthy

tenocytes, which are then injected into the injured site to promote regeneration of

the injured tendon

Directly addresses the underlying pathology with

90%* success rate

AUD3,500 Æ 10,000

Source: Treatment of Tendinopathy: What Works, What Does Not, and What is on the Horizon (2008), Brett M. Andres, Scientific American Notes: Pricing depends on the location of a facility and the site of injury. Orthocell will most likely raise the price of their procedure as the company continues to add supporting data from their clinical studies *We derive the 90% success rate based on Orthocell’s existing clinical study data


25

Exhibit 26: Ortho‐ATI® is more Cost‐Effective than Modern Therapies

Source: Cedrus Research Notes: Pricing of each therapy shown in the above exhibit represents the mid‐point of its range We assume an average of 10 sessions for physical therapy and an average of 3 injections for platelet‐rich plasma Current price for Ortho‐ATI® is AUD3,500. We assume with additional clinical trials to be conducted, prices could be raised to AUD10,000. We have included a physician fee estimated at AUD5,000 to the average price depicted in the above exhibit Ortho‐ATI® Regulatory Approval Ortho‐ATI® therapy is classified as a biologic in most major jurisdictions. Orthocell believes that Ortho‐ATI® is the only Autologous Tenocyte Implantation therapy on the market targeting the regeneration of tendons, meaning there are no comparable procedures available on the market at the moment. Ortho‐ATI® is currently marketed in Australia, New Zealand, Hong Kong and Singapore. Orthocell has already submitted Ortho‐ATI® for listing on the Australian Register of Therapeutic Goods (ARTG), which would entitle the company to apply for a reimbursement status through the Pharmaceutical Benefits Scheme (PBS) in Australia. Meanwhile, Orthocell is preparing the submission of Ortho‐ATI® for marketing approval in the U.S., to be followed by Japan and the EU.

Pain Killers

Corticosteroid Injection

Physical Therapy

Platelet‐Rich PlasmaTendon Repair

Surgery

Ortho‐ATI

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

$0 $5,000 $10,000 $15,000 $20,000 $25,000

Proced

ure Success

Procedure Price (AUD)


26

Exhibit 27: Ortho‐ATI® Regulatory Approval Status in Major Markets

Country Regulatory Body Classification Requirements Estimated Time to Approval

Current Status

Australia ARTG Class III Biologics Submission of Technical Dossier < 2 Years

TGA Licensed. Technical Dossier for

ARTG approval submitted

EU

European Medicines Agency (EMA)/Committee

for Medicinal Products for Human Use (CHMP)

Advanced Therapy Medicinal

Products (ATMP)

Submission of Technical Dossier

Approximately 2 Years

Seeking approval through mutual recognition

agreements with Australia’s TGA

U.S.

FDA/Center for Biologics

Evaluation and Research (CBER)

Human Cells, Tissue, and Cellular and Tissue‐based

Products (HCT/Ps)

Investigational New Drug (IND) Application or

Biologics License Application (BLA)

1‐3 years Preparing for the IND meeting in early 2018

Japan

Ministry of Health, Labor and

Welfare‐Pharmaceuticals and Medical

Devices Agency (MHLW‐

PMDA)/OB

Cell/Tissue‐engineered

(manipulated) Products

Submission of Technical Dossiers,

or through an abridged system for regenerative

medicine

Can take up to 3 years

Preparing to submit the application for conditional approval

for abridged requirements

China

National Health Commission of the People’s

Republic of China and CFDA

N/A

Currently, there is no regulatory framework, but

the procedure can only be done in Level 3, Class A

hospitals, and the CFDA has the right to audit those hospitals and

safety of cellular products

N/A

Seeking local partners to bring Orthocell’s products to the Chinese market

Source: Various health regulatory bodies, Orthocell, Cedrus Research


27

Research Collaboration with DePuy Synthes Products, Inc., Part of the Johnson & Johnson Medical Device Companies Orthocell is currently enrolling patients for a clinical trial of Ortho‐ATI®. The objective of this study is to assess the safety and effectiveness of Autologous Tenocyte Injection (Ortho‐ATI®) compared to corticosteroid injection in the treatment of rotator cuff tendinopathy and tear. The trial is being undertaken in collaboration with DePuy Synthes Products, Inc., part of the Johnson & Johnson Medical Device Companies. Cell Therapies – Ortho‐ACI®

The founders of Orthocell have a long history with the development of the overall technology of ACI, pioneering the introduction of collagen scaffolds into ACI in 2002 when they were establishing the manufacturing facilities of ACI for Verigen Australia. Ortho‐ACI® is a 3rd‐generation ACI product today, highly customized for a patient in terms of the number of chondrocytes delivered and seeded onto a scaffold, allowing easier handling and implantation. Cartilage Injury Cartilage is a resilient yet smooth, elastic tissue that functions as a cushion between bones, and it promotes smooth movement to reduce friction and damage during movement. There are three types of cartilage: elastic cartilage, fibrocartilage, and hyaline cartilage. Elastic cartilage is dense in chondrocytes throughout the tissue, contributing to its elasticity. This form of cartilage is usually found in the auricle of the ear and the nose. Fibrocartilage has densely packed cartilage fibers that are arranged in a striated manner. They are mainly found between the intervertebral discs (spine). Hyaline cartilage, also known as articular cartilage, is the most commonly found form of cartilage that is situated at the end of joints. This is the smoothest form of cartilage, enabling frictionless movement. Articular cartilage does not have any blood vessels, nerves or lymph nodes. It consists of a dense extracellular matrix (ECM) with sparsely positioned specialized chondrocytes. The ECM is composed primarily of water, collagen and proteoglycans28. Causes of Cartilage Injury The causes of cartilage injury are similar to that of tendons. Physical trauma can cause tears and ruptures in cartilage tissue, leading to pain, swelling and stiffness in the impaired area.

28 A compound consisting of a protein bonded to glycosaminoglycan groups, present especially in connective tissue


28

Common Sites of Cartilage Injury The most common site of cartilage damage often involves the hyaline cartilage of the knees, although injuries frequently occur in the hips, ankles and elbows as well. These articular cartilage locations are approximately 2 to 4‐mm thick, and the level of the injury is categorized through MRI scans, which determine the grade of the impairment and the corresponding treatment approach. Exhibit 28: Common Knee Cartilage Injuries

Source: NHS Plymouth Hospitals, NeoCart

Exhibit 29: Grading of Cartilage Damage

Source: Radiopaedia, Cedrus Research Note: This exhibit shows the classification of impaired cartilage in the knee

Normal Bruised

Tears > 1cm2

Ulceration Exposed boneSwelling

Tears > 2cm2 Tears > 2cm2

>70% loss of effective cartilage


29

Current Treatment Standards Treatment standards mainly refer to impairment of articular cartilage because they are the prevalent form of cartilage injuries. The grade of the lesion29 determines the prognosis of the patient. Exhibit 30: Treatment Alternatives Depend on the Grade of the Lesion

Grade Treatment Options Description Cost per Procedure

I Rest and allow natural healing or arthroscopy

Arthroscopy is a minimally‐invasive surgical procedure in which a surgeon inserts a narrow tube attached to a fiber‐optic video camera through a small incision about the size of a buttonhole.

Miniature tools can be used to mend or trim the impaired cartilage

Arthroscopy: AUD3,180‐6,350+

II Bone Marrow Perforation (Microfracture)

Microfracture is a minimally‐invasive surgical procedure in which small perforations are made at the bone marrow nearest to the cartilage defect. Bone marrow cells will flow through the

perforations, replenish and heal the damaged cartilage AUD6,350‐63,520

III Bone Marrow Perforation

(Microfracture) See above

Joint Replacement See below AUD38,110‐190,590+ IV Joint Replacement

The damaged part of the joint is carved away and replaced with an artificial joint. The replacement can be partial or in full

depending on the injury

Source: Cedrus Research, The Washington Post, Northwest Orthopedic Specialists, Arthroscopy Association of North America Note: Pricing depends on both the fees charged by the physician and the site of the cartilage injury among other factors Autologous Chondrocyte Implantation (ACI) as a “New” Treatment Alternative Autologous Chondrocyte Implantation is a minimally‐invasive biomedical treatment that repairs damaged articular cartilage by replenishing it with healthy cartilage cells. ACI provides pain relief, and more importantly it addresses the underlying defect by providing regenerative properties to the deteriorating articular cartilage. Healthy chondrocytes are biopsied from the patient’s cartilage and cultured inside a laboratory. These cultured cells are then injected into the impaired joint to replace the damaged cells with the healthy ones. It is important to note that the transfusion uses the patient’s own cells; hence, they are autologous and treatment rejection is highly unlikely. ACI is applicable to grade III and IV cartilage impairment. ACI technology has been in existence for over two decades, but it had failed to gain traction among health authorities previously due to the lack of supportive clinical data. However, ACI is gradually gaining recognition, as companies continue to improve the ACI through the implementation of new cell‐culturing and implantation techniques, thus generating more compelling clinical data.

29 A region in an organ or tissue that has suffered damage through injury or disease


30

Currently, there are two methods of cartilage implantation owing to their biological structure. Since cartilage damage creates a void in its slippery surface, a collagen scaffold with cultured chondrocytes must be applied to the affected surface to deliver the therapy. Cultured chondrocytes can either be implanted onto a scaffold right before implantation, or they can be directly cultured on the scaffold during the cultivation stage. The U.S. Food and Drug Administration (FDA) has approved the former technique for a while, but has only recently permitted the latter one, with Vericel’s (VCEL) Matrix‐induced autologous chondrocyte implant (MACI) being the first approved. In the U.S. and the EU, there are over 8 Current Procedural Terminology (CPT) codes and 6 ICD‐10 diagnosis codes in place for patients receiving ACI to get reimbursed. Ortho‐ACI® vs. Competition The Ortho‐ACI® and Ortho‐ATI® procedures are similar, as both require the harvest of healthy cells from the patient. In Ortho‐ACI® treatment, healthy articular cartilage is harvested, usually from the knee, and then sent to an Orthocell‐regulated laboratory. Healthy chondrocytes are isolated from the sample and cultured within five weeks. At present, Ortho‐ACI® only entails implanting the chondrocytes onto a scaffold prior to the implantation procedure. Cartilage injuries in the knee represent over 90% of cases where cartilage repair are performed. As a result, we are focusing on such repair when analyzing the competitors of Ortho‐ACI®. Orthocell currently markets Ortho‐ACI® at a much lower cost relative to its closest comparables with similar levels of efficacy. Exhibit 31: Estimated Cost of Various Knee ACI Procedures

Knee Cartilage Procedure for Grade III/IV Lesions Originator Procedure Cost Product cost Total Cost

Microfracture (Standard treatment) ‐ AUD10,000 ‐ AUD10,000

MACI Vericel AUD14,000 AUD15,000 AUD29,000

NeoCart (Phase III) Histogenics AUD14,000 AUD19,000‐25,400 AUD33,000‐39,400

Ortho‐ACI® (Marketed) Orthocell AUD14,000 AUD6,500 Æ 10,000 AUD20,500 Æ 24,000

Source: Cedrus Estimates, Sportsmd

Regulatory Environment Ortho‐ACI® therapy is categorized as an enhancement to other autologous chondrocyte implantation therapies, which have a history of clinical and patient success stories. Consequently, it provides a distinct advantage to Orthocell, as it is unnecessary to conduct new clinical trials before applying for approval to market the Ortho‐ACI®. Ortho‐ACI® is currently marketed in Australia, New Zealand, Hong Kong, Singapore and China, with over 500 patients treated since its launch. At this moment, Orthocell is targeting the introduction of its ACI product to the U.S., Japan and Europe. Similar to Ortho‐ATI®, Ortho‐ACI® is also classified as a biologic in most jurisdictions, and Orthocell’s Ortho‐ACI® was granted a listing on the ARTG in May 2017, enabling the company to apply for the Pharmaceutical


31

Benefits Scheme (PBS), which entitles patients to receive reimbursement. This process can take up to 2 years. Future Developments – Cell Therapy Portfolio Tissue‐Specific Growth Factors Through international collaboration among Lund University (Sweden), University of Western Australia, Indian Institute of Technology Kanpur (India), and Orthocell, the group has developed and validated the use of cell factory‐derived tissue‐specific growth factors to augment the repair of bones, cartilages and tendons in multiple animal studies. These tissue‐specific growth factors, derived from Orthocell’s cell‐therapy technological platform, are targeted for patients experiencing musculoskeletal disorders with applications across many levels of deterioration. Laboratory‐Grown Musculoskeletal Tissues Orthocell, in conjunction with Griffith University (Australia), University of Western Australia, La Trobe University (Australia) and University of Auckland, is exploring the integration of its existing cell therapy and collagen scaffold technology platforms. This partnership focuses on the development and commercialization strategy of laboratory‐grown tendons and ligaments, and it has been supported by the reputable Australian Research Council (ARC) through a grant of AUD430,000 in July 2015. V. FINANCIALS Addressable Market and Forecast To estimate the addressable market size, we have assessed the applicability and limitations of Orthocell’s products. CelGro® We believe CelGro® will have a broad‐spectrum of applicability to a large number of tissue types within the human body. Orthocell has a strategic pathway in place for capitalizing on CelGro®’s business prospects, focusing on obtaining marketing approvals and generating supportive clinical data to facilitate market adoption. So far, CelGro® has only obtained Europe’s CE mark for its use in various dental bone and soft tissue regeneration procedures, meaning it has exhibited, at least, similar efficacy levels relative to competing scaffolds in this area of application, including the market leader – Geistlich’s Bio‐Gide. With the provision of the CE mark, Orthocell is positioned to enter the EU market, where an estimated 700,000 resorbable dental barrier membranes were used in 201730. This number is likely to rise steadily, as more dentists realize the therapeutic benefits of supplementing their procedures with a collagen scaffold, as well as the continual improvement in the ease of use. Orthocell is also expected to obtain regulatory approval in the U.S., Australian and New Zealand markets in FY2019.

30 Source: iData Research


32

Given the variety of collagen scaffolds used for dental implants are produced by a limited number of market leaders in the EU, we believe CelGro® will be able to capture some market share, considering its superior cost‐effectiveness. Meanwhile, Orthocell is progressing on an application in the U.S. for the same indication, which we expect to be approved by the coming FY2019; however, our current view is that the much more competitive market in the U.S. will slightly hinder CelGro®’s adoption. Even though we maintain a conservative approach in determining the market adoption of CelGro® in terms of dental implant applications, we note that a more rapid market adoption and penetration into new markets are possible if CelGro® exhibits clinically‐proven superiority over the competition. Other applicable indications for CelGro® include the injury incidence of rotator cuff tendinopathy, which ranges from 0.3% to 5.5%, and is positively correlated with age. We believe CelGro® will be applicable to instances where patients will require surgery for rotator cuff stabilization and other similar joint injuries. Clinical studies in various indications are underway, and we believe any forthcoming supportive clinical data could further validate and facilitate the use of CelGro®. At present, a diverse number of natural and synthetic collagen scaffolds are used for indications targeted by CelGro®. However, without the support of clinical data currently, we have yet to include in our forecast for the sales of CelGro® from other applications. Ortho‐ATI® Using the incidence rates based on various research articles and medical databases, we estimate the number of tendon injuries per annum in the target markets. Ortho‐ATI® is currently considered a post‐first‐line treatment intervention. Thus, we initially estimate the number of patients who have received unsuccessful treatments using first‐line conventional methods. These patients will then be considered if they are suitable for the Ortho‐ATI® procedure (determined by the severity of the tear), versus those patients suffering from more severe injuries that require mechanical stabilization or surgical intervention. Exhibit 32: Ortho‐ATI® Addressable Market Determination Methodology

Source: Cedrus Research, Internal Estimates, Research Article: Treatment of Tendinopathy: What Works, What Does Not, and What is on the Horizon (2008) Brett M. Andres, MD and George A.C. Murrell, MD, DPhil


33

Although Ortho‐ATI® has the potential of being assigned as a first‐line treatment, we believe this will be achieved only after accumulating sufficient positive clinical data over a longer time horizon. Hence, we did not incorporate this into our forecast. Exhibit 33: Estimated Addressable Population for Ortho‐ATI® by Country/Region (2018)

Tendonitis Injuries Rotator Cuff Achilles

Tendon Gluteal Tendon Lateral Epicondylitis Patellar Tendon

Incidence Rate (per 100,000

adults) 2,90031 3032 2033 2,00034 55035

Estimated Absolute Adult Incidence by Country (2018)Australia 467,640 4,838 3,225 322,510 88,690 New Zealand 88,884 919 613 61,299 16,857Hong Kong 152,545 1,578 1,052 105,204 28,931Singapore 119,685 1,238 825 82,542 22,699Europe 9,572,079 99,022 66,014 6,601,434 1,815,394U.S. 6,213,802 64,281 42,854 4,285,381 1,178,480Japan 2,180,401 22,556 15,037 1,503,725 413,524China 28,888,595 298,848 199,232 19,923,169 5,478,871

Proportion of Unsuccessful Treatments using Conventional Methods Dependent on IndicationUnsuccessful Proportion 4.5%36 35%37 20%38 10.5%39 10%40

Assuming approximately 80% of Unsuccessfully treated Patients are Suitable for Ortho‐ATI®Australia 16,835 1,355 516 27,531 7,095New Zealand 3,200 257 98 5,233 1,349Hong Kong 5,492 442 168 8,981 2,314Singapore 4,309 347 132 7,046 1,816Europe 344,595 27,726 10,562 563,531 145,232U.S. 223,697 17,999 6,857 365,822 94,278Japan 78,494 6,316 2,406 128,365 33,082China 1,039,989 83,677 31,877 1,700,741 438,310

Source: Cedrus Research, various research articles Note: We note that even though we have not included a revenue forecast for China, we believe the Chinese market represents a significant untapped opportunity for Orthocell

31 Epidemiology of rotator cuff tendinopathy: a systemic review (2013). Chris Littlewood, Stephen May, Stephen Walters 32 The epidemiology and trends in management of acute Achilles tendon ruptures in Ontario, Canada (2017) Sheth U, Wasserstein D, Jenkinson R, Moineddin R, Kreder H, Jaglal SB 33 American Academy of Orthopaedic Surgeons 34 Medscape 35 Patellar tendon: From tendinopathy to rupture (2015) Federica Rosso, Davide Edoardo Bonasia, Umberto Cottino, Federico Dettoni, Matteo Bruzzone, Roberto Rossi 36 Rotator cuff tear: physical examination and conservative treatment (2013). Eiji Itoi. 37 Achilles tendinopathy: some aspects of basic science and clinical management (2002). Kader D, Saxena A, et al. 38 A New Technique for Surgical Treatment of Proximal Hamstring Tendinopathy in a Triathlon Athlete (2016). Lincoln Paiva Costa, Antonio Augusto Guimaraes Barros, et al. 39 Lateral Elbow Tendinopathy, development of a pathophysiology‐based treatment algorithm (2016). Bhabra et al. 40 What is the clinical effectiveness and cost‐effectiveness of conservative interventions for tendinopathy? An overview of systemic reviews of clinical effectiveness and systematic review of economic evaluations (2015). Linda Long, Simon Briscoe, et al.


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Ortho‐ACI® Due to the long history of market approval of ACI and the amount of supporting clinical data available, we have assumed that Ortho‐ACI® can be offered as a first‐line therapy for patients with cartilage lesions. In most cases, articular cartilage damage is mainly found in the knee. Such a patient usually experiences knee pain before seeking a physician for diagnosis. Chondral lesions account for over 60% of these cases. Depending on the stage of the lesion, patients who meet the criteria (including presence of osteoarthritis, and lesion grade) for the Ortho‐ACI® procedure are considered as part of Orthocell’s addressable market, while other interventions exist for those who do not meet the relevant criteria. Exhibit 34: Ortho‐ACI® Addressable Market

Source: Cedrus Estimates


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Exhibit 35: Ortho‐ACI® Addressable Market Estimate by Country (2018)

Australia New Zealand Hong Kong Singapore Japan U.S. Europe China

0.5% of Population with Symptomatic Knee Pain41 Adults with Symptomatic Knee Pain

80,628 15,325 26,301 20,635 85,577 1,071,345 1,650,358 4,980,792

Proportion of Patients

Suitable for Ortho‐ACI®

6% (60% of these patients diagnosed with chondral lesions42, multiplied by 10% of whom are suitable for Ortho‐ACI®)

Ortho‐ACI® Addressable Market (2018)

4,838 919 1,578 1,238 5,135 64,281 99,022 298,848

Source: Cedrus Estimates Note: We note that although we have not included a revenue forecast for China, we believe the Chinese market represents a significant untapped opportunity for Orthocell

Revenue Forecast Due to the early stage of commercialization, we have made the following assumptions:

x We forecast ongoing sales of both Ortho‐ATI® and Ortho‐ACI® in Australia, New Zealand, Hong Kong and Singapore, to be followed by Japan, the U.S, and Europe. Orthocell has already recorded sales in Australia, New Zealand, Hong Kong and Singapore, and is progressing with regulatory approvals in Japan, the U.S, and Europe. We forecast Orthocell to obtain marketing approvals and achieve first sales in those countries for both Ortho‐ATI® and Ortho‐ACI® by fiscal year (FY) 2021.

x Orthocell will gradually increase the price of Ortho‐ATI® and Ortho‐ACI® as they incrementally generate favorable clinical trial data. Ortho‐ATI® is currently priced at AUD3,500 and Ortho‐ACI® at AUD6,500. We estimate both of these prices to steadily increase to AUD10,000 within our forecast period.

x We maintain a conservative approach in projecting sales of CelGro®: to be used as a barrier membrane for dental implant procedures only. By obtaining the CE mark for various dental bone and soft tissue regeneration procedures, CelGro® has exhibited, at least, similar efficacy compared to its competitors. Given the limited number of scaffold suppliers for this indication, we believe CelGro®’s superior cost‐effectiveness will enable it to capture some market share.

x We assign a market adoption rate based on our expectations of market acceptance.

o We believe the market adoption of both Orthocell’s ATI and ACI products in Australia and New Zealand (the latter has reciprocal health agreements with the former43) will be faster than that in Hong Kong and Singapore. It is because Hong Kong and Singapore have

41 Derived from Vericel (VCEL.N) data 42 Updating on Diagnosis and Treatment of Chondral Lesion of the Knee (2012). Filho Marcantonio Machado da Cunha Cavalcanti, Daniel Doca, et al. 43 New Zealand and Australia have a reciprocal health care agreement, which means that New Zealand citizens travelling to Australia are eligible for limited subsidized health services for medically necessary treatment


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harmonized healthcare systems with multiple international healthcare administrations, so we believe the competitive landscape in these two geographical markets will be more challenging. Projected trajectory of market adoption rates for the countries from which Orthocell will seek regulatory approvals (Japan, the U.S. and EU) follows our estimates for the Australian and New Zealand market.

� In our projections, we believe obtaining the reimbursement status will boost the sales of Orthocell’s cell‐therapy portfolio. We expect Orthocell’s cell‐therapy products to obtain such status by FY2020 ending 30 June 2020.

o Meanwhile, we project CelGro® to capture a relatively small, but meaningful portion of the EU dental membrane implant market going forward, considering Geistlich’s Bio‐Gide commands approximately half of that market in the EU.

� Orthocell is progressing on an application in the U.S. for the same indication and could obtain market approval as soon as FY2019. Given the more competitive market for this indication in the U.S., (Bio‐Gide® retains the lion’s share but only has approximately 25% of the market, compared to its 50% share in the EU market) we have included a relatively marginal sales forecast for CelGro® in the U.S. We have to note that any forthcoming positive clinical data could warrant an upward revision to our sales estimates.

� While we project CelGro® to enter the Australian and New Zealand markets in FY2019, our estimates for CelGro®’s market adoption rates are consistent with those for the European market.


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Exhibit 36: Revenue Forecast for Ortho‐ATI®, CelGro® (from Dental Implant Use) and Ortho‐ACI® in AUD. Fiscal Year Ends on June 30

Ortho‐ATI® Forecast FY2018 FY2019 FY2020 FY2021 FY2022 FY2023 FY2024 FY2025 FY2026 FY2027 FY2028Orthocell Addressable

Australia 53,332 53,697 54,083 54,426 54,817 55,232 55,632 56,002 56,385 56,724 57,044New Zealand 10,137 10,181 10,221 10,266 10,308 10,346 10,380 10,406 10,425 10,439 10,450Hong Kong 17,397 17,294 17,150 17,028 16,856 16,662 16,479 16,324 16,185 16,072 15,979Singapore 13,650 13,710 13,731 13,725 13,701 13,663 13,615 13,566 13,515 13,458 13,395Japan 248,664 246,517 244,499 242,843 241,282 239,776 238,239 236,612 235,112 233,459 231,658U.S. 708,652 710,185 711,669 712,345 713,249 714,189 714,868 715,173 715,392 715,253 715,037Europe 1,091,646 1,087,431 1,083,370 1,079,033 1,074,919 1,070,843 1,066,460 1,061,580 1,056,576 1,051,119 1,045,200China 3,294,595 3,283,567 3,274,111 3,267,240 3,261,993 3,257,414 3,251,893 3,244,238 3,235,122 3,223,995 3,210,384

Market Adoption RateAustralia 1.00% 2.00% 5.00% 6.00% 8.00% 10.00% 10.50% 11.03% 11.58% 12.16% 12.76%New Zealand 1.00% 2.00% 4.00% 6.00% 8.00% 10.00% 10.50% 11.03% 11.58% 12.16% 12.76%Hong Kong 0.50% 1.50% 3.00% 4.50% 6.00% 7.50% 7.88% 8.27% 8.68% 9.12% 9.57%Singapore 0.50% 1.50% 4.00% 4.50% 6.00% 7.50% 7.88% 8.27% 8.68% 9.12% 9.57%Japan 1.00% 2.00% 5.00% 8.00% 10.00% 10.50% 11.03% 11.58%U.S. 1.00% 2.00% 5.00% 8.00% 10.00% 10.50% 11.03% 11.58%Europe 1.00% 2.00% 5.00% 8.00% 10.00% 10.50% 11.03% 11.58%China

Orthocell TreatedAustralia 533 1,074 2,704 3,266 4,385 5,523 5,841 6,174 6,527 6,895 7,280New Zealand 101 204 409 616 825 1,035 1,090 1,147 1,207 1,269 1,334Hong Kong 87 259 515 766 1,011 1,250 1,298 1,350 1,405 1,465 1,530Singapore 68 206 549 618 822 1,025 1,072 1,122 1,173 1,227 1,282Japan 0 0 0 2,428 4,826 11,989 19,059 23,661 24,687 25,739 26,817U.S. 0 0 0 7,123 14,265 35,709 57,189 71,517 75,116 78,857 82,775Europe 0 0 0 10,790 21,498 53,542 85,317 106,158 110,941 115,886 120,995China 0 0 0 0 0 0 0 0 0 0 0

Cost Per Ortho‐ATI® Procedure $4,200 $5,040 $6,048 $7,258 $8,709 $10,000 $10,000 $10,000 $10,000 $10,000 $10,000

Total Revenue $3,317,659 $8,782,778 $25,260,980 $185,849,888 $414,836,682 $1,100,725,307 $1,708,665,142 $2,111,295,205 $2,210,561,728 $2,313,370,149 $2,420,127,110

CelGro® Forecast: Europe FY2018 FY2019 FY2020 FY2021 FY2022 FY2023 FY2024 FY2025 FY2026 FY2027 FY2028Addressable Market 740,327 786,849 837,009 891,021 948,937 1,010,618 1,076,308 1,146,269 1,220,776 1,300,126 1,384,635CelGro® Market Adoption Rate 0.30% 0.60% 1.50% 3.75% 6.75% 7.09% 7.44% 7.81% 8.20% 8.61% 9.05%CelGro® Units Used 2,221 4,721 12,555 33,413 64,053 71,628 80,098 89,569 100,161 112,005 125,249Revenue per Unit $400 $400 $407 $414 $421 $428 $436 $443 $451 $459 $467Revenue Generated $888,392 $1,888,438 $5,108,812 $13,831,085 $26,972,233 $30,682,755 $34,903,726 $39,705,368 $45,167,564 $51,381,183 $58,449,600Australia FY2018 FY2019 FY2020 FY2021 FY2022 FY2023 FY2024 FY2025 FY2026 FY2027 FY2028Addressable Market 44,400 44,844 45,292 45,745 46,203 46,665 47,131 47,603 48,079 48,559 49,045CelGro® Market Adoption Rate 0.60% 1.50% 3.75% 6.75% 7.09% 7.44% 7.81% 8.20% 8.61% 9.05%CelGro Units Used® 269 679 1,715 3,119 3,307 3,507 3,720 3,945 4,183 4,436Revenue per Unit $400 $407 $414 $421 $428 $436 $443 $451 $459 $467Revenue Generated $107,625 $276,448 $710,090 $1,313,244 $1,416,755 $1,528,425 $1,648,896 $1,778,863 $1,919,073 $2,070,336U.S. FY2018 FY2019 FY2020 FY2021 FY2022 FY2023 FY2024 FY2025 FY2026 FY2027 FY2028Addressable Market 592,572 597,320 602,105 606,656 611,240 615,859 620,514 625,203 628,329 631,471 634,628CelGro® Market Adoption Rate 0.30% 0.75% 1.88% 3.38% 3.54% 3.72% 3.91% 4.10% 4.31% 4.52%CelGro® Units Used 1,792 4,516 11,375 20,629 21,825 23,089 24,427 25,776 27,200 28,703Revenue per Unit $400 $407 $414 $421 $428 $436 $443 $451 $459 $467Revenue Generated $716,784 $1,837,521 $4,708,478 $8,686,830 $9,348,864 $10,061,353 $10,828,141 $11,623,791 $12,477,906 $13,394,780


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Note: Cost per Ortho‐ATI® procedure is estimated to increase 20% every year until it hits AUD10,000. Cost per Ortho‐ACI® procedure is projected to grow 10% annually until it reaches AUD10,000 Source: Cedrus’ Forecast

Ortho‐ACI® Forecast FY2018 FY2019 FY2020 FY2021 FY2022 FY2023 FY2024 FY2025 FY2026 FY2027 FY2028Orthocell Addressable

Australia 4,838 4,871 4,906 4,937 4,972 5,010 5,046 5,080 5,115 5,145 5,174New Zealand 919 924 927 931 935 938 942 944 946 947 948Hong Kong 1,578 1,569 1,556 1,545 1,529 1,511 1,495 1,481 1,468 1,458 1,449Singapore 1,238 1,244 1,246 1,245 1,243 1,239 1,235 1,231 1,226 1,221 1,215Japan 5,135 5,098 5,054 5,008 4,965 4,915 4,862 4,799 4,746 4,703 4,646U.S. 64,281 64,420 64,554 64,616 64,698 64,783 64,845 64,872 64,892 64,879 64,860Europe 99,022 98,639 98,271 97,877 97,504 97,134 96,737 96,294 95,840 95,345 94,808China 298,848 297,847 296,989 296,366 295,890 295,475 294,974 294,280 293,453 292,444 291,209

Market Adoption RateAustralia 2.00% 5.00% 10.00% 15.00% 21.21% 30.00% 30.00% 30.00% 30.00% 30.00% 30.00%New Zealand 2.00% 5.00% 10.00% 15.00% 21.21% 30.00% 30.00% 30.00% 30.00% 30.00% 30.00%Singapore 1.50% 3.00% 6.00% 12.00% 15.00% 18.00% 23.00% 25.00% 25.00% 25.00% 25.00%Hong Kong 1.50% 3.00% 6.00% 12.00% 15.00% 18.00% 23.00% 25.00% 25.00% 25.00% 25.00%Japan 1.00% 2.00% 5.00% 10.00% 15.00% 21.21% 30.00% 30.00%U.S. 1.00% 2.00% 5.00% 10.00% 15.00% 21.21% 30.00% 30.00%Europe 1.00% 2.00% 5.00% 10.00% 15.00% 21.21% 30.00% 30.00%China

Orthocell TreatedAustralia 97 244 491 741 1,055 1,503 1,514 1,524 1,534 1,544 1,552New Zealand 18 46 93 140 198 282 282 283 284 284 284Singapore 19 37 75 149 186 223 284 308 306 305 304Hong Kong 24 47 93 185 229 272 344 370 367 364 362Japan 0 0 0 50 99 246 486 720 1,007 1,411 1,394U.S. 0 0 0 646 1,294 3,239 6,484 9,731 13,766 19,464 19,458Europe 0 0 0 979 1,950 4,857 9,674 14,444 20,331 28,604 28,443China 0 0 0 0 0 0 0 0 0 0 0

Cost Per Ortho‐ACI®® Procedure $7,150 $7,865 $8,652 $9,517 $10,000 $10,000 $10,000 $10,000 $10,000 $10,000 $10,000

Total Revenue $1,125,306 $2,942,157 $6,500,430 $27,502,888 $50,122,520 $106,212,963 $190,685,070 $273,798,321 $375,949,063 $519,755,240 $517,970,530


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Exhibit 37: Ortho‐ATI® and Ortho‐ACI® Projected Revenue (Left) and Patients Treated (Right)

Source: Cedrus Forecast

Expenses Forecast In FY2017 ended 30 June 2017, Orthocell reported cost of goods sold (COGS) at 83% of revenue. We project a gradual decline in COGS as a percentage of revenue, as the company begins to scale its manufacturing capabilities. Specifically, we forecast COGS to remain around 75% of sales in fiscal year 2018 and gradually decrease to 25% of sales in the long run. Orthocell reported approximately AUD3.9 million in Research & Development (R&D) expenses for FY2017. We anticipate R&D expenses being sustained at higher levels in the near‐term, as the company continues to conduct clinical studies for CelGro® and potentially adding clinical data for Ortho‐ATI® and Ortho‐ACI®. In addition, Orthocell will most likely extend its R&D capabilities to areas such as lab‐grown tendons, new formulations, and allogeneic applications. We estimate R&D expenses for FY2018 to be roughly AUD4 million, or 75% of our FY2018 revenue forecast. In the longer run, we project this expenditure to drop significantly as a percentage of total revenue, following the acceleration in product sales, and will maintain at approximately mid‐ to high‐single‐digit percentage of its total revenue, in‐line with most major biotechnology companies. We estimate selling, general & administrative (SG&A) expenses to be in the 50‐53% range of revenue between FY2018 and FY2020, as Orthocell implements their commercialization strategies. This is consistent with the SG&A cost cycle of Vericel after it gained approval for the Matrix‐induced ACI (MACI) in the U.S. We also assume Orthocell’s SG&A to maintain slightly below 50% of its revenue throughout the remainder of our forecast period because this level of SG&A expenditure approximates the long‐term trend for the same spending at well‐established orthopedic medical device companies, such as Orthofix (OFIX) and NuVasive (NUVA). Due to Orthocell’s biologically‐based cell therapy products, we expect its capital expenditure (CAPEX) to reflect the company’s expansion into new markets. Orthocell’s cell‐therapy products require localized cell manufacturing facilities; therefore, we forecast CAPEX to be roughly 30‐45% of revenue in the near future,


40

given the company prepares to launch its products in major international markets. We then forecast a decrease of CAPEX to 8% of revenue in the long term. Cash and Liquidity Orthocell reported a net cash balance of about AUD4.9 million at the end of 2Q FY2018 ended 31 December 2017. Within our forecast period, we have included the 43.5% tax refund on R&D expenses to be received by the company through the incentive program offered by the Australian government applicable to companies with annual turnover below AUD20 million. By our projections, we believe the company will have a cash runway of approximately 12 months.


41

VI. VALUATION We value Orthocell using a discounted cash flow (DCF) methodology up to FY2028. We believe a DCF model is most appropriate because it best captures the value of Orthocell’s commercialization strategies while also taking into account the company’s proprietary technology. Valuation Assumptions: Weighted Average Cost of Capital (WACC) The company has a track record of raising capital through equity. We assume a target capital structure of 100% in equity and 0% in debt. We assume Australia’s risk‐free rate of 3%, a beta of 1.5 and a country risk premium of 7%, and an additional 4.5% pre‐commercialization risk premium in the major markets Orthocell is seeking to obtain approvals, to derive a WACC for Orthocell of 18%. Terminal Value (TV) To estimate terminal value, we assign a long‐term growth rate of 2% to Orthocell from FY2028 onwards. We believe continued increase in research and development expenditure in terms of absolute value in its pipeline could yield rewarding results. Moreover, we do not expect patent expiry to meaningfully erode Orthocell’s revenue, as it is derived from products using proprietary techniques predominately developed “in‐house”. We believe Orthocell’s unique techniques in cell cultivation together with its well‐established reputation in this field to be minimally impacted by loss of patent protection as opposed to chemical‐based pharmaceuticals. Orthocell may establish itself as a “brand name” in this therapeutic area, which we believe could further defend its market position in the long run.


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Exhibit 38: Discounted Cash Flow (DCF) Methodology (All Dollar Value in AUD)

Methodology:

x We calculate free cash flow using EBITDA minus taxes on EBT, changes in working capital, and capital expenditure. We also add the R&D tax refund from the Australian government until the company’s annual revenue exceeds the AUD20 million threshold, which is expected to happen by FY2020.

x We subtract the market value of all outstanding dilutive securities (options and warrants), which are determined using the Black‐Scholes formula, from the estimated total valuation before arriving at our fair value per share for Orthocell (see details below).

WACC Assumptions

Assuming 100% in Equity Risk‐free Rate 3.0%Beta 1.5Country Risk Premium 7.0%Pre‐commercialization Risk Premium 4.5%WACC 18.0%

Sensitivity Analysis Terminal Growth Rate

WAC

C

0.00% 1.00% 2.00% 3.00% 4.00% 14.00% $309,520,164 $331,140,508 $356,364,242 $386,174,110 $421,945,951 16.00% $224,627,682 $238,526,182 $254,410,182 $272,737,874 $294,120,181 18.00% $163,643,156 $172,909,952 $183,335,096 $195,150,260 $208,653,305 20.00% $118,784,564 $125,145,552 $132,213,318 $140,112,585 $148,999,260 22.00% $85,181,792 $89,653,462 $94,572,298 $100,008,907 $106,049,583

Terminal Value Calculation Ending Cash Flow (FY2028) $136,624,965 Long‐term Growth Rate 2.00%Terminal Value $870,984,155 Net Present Value (NPV) of Terminal Value $153,196,618

DCF Valuation Sum of NPV $30,138,478 NPV of Terminal Value $153,196,618 Total Valuation $183,335,096 Less: Value of Dilutive Securities $999,101Shares Outstanding 109,964,253

Value per Share $1.66

Source: Cedrus’ Forecast


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Exhibit 39: Discounted Cash Flow Methodology (All Dollar Value in AUD)

Source: Cedrus’ Forecast

FY Ends on June 30 FY2018 FY2019 FY2020 FY2021 FY2022 FY2023 FY2024 FY2025 FY2026 FY2027 FY2028Revenue Generated 5,331,357$ 14,437,781$ 38,984,191$ 232,602,430$ 501,931,509$ 1,248,386,644$ 1,945,843,715$ 2,437,275,931$ 2,645,081,008$ 2,898,903,552$ 3,012,012,356$ Cost of Goods Sold 3,998,518$ 8,662,669$ 19,492,095$ 104,671,093$ 200,772,604$ 436,935,326$ 583,753,114$ 609,318,983$ 661,270,252$ 724,725,888$ 753,003,089$ As a % of Revenue 75% 60% 50% 45% 40% 35% 30% 25% 25% 25% 25%

Gross Margin 1,332,839$ 5,775,112$ 19,492,095$ 127,931,336$ 301,158,906$ 811,451,319$ 1,362,090,600$ 1,827,956,948$ 1,983,810,756$ 2,174,177,664$ 2,259,009,267$ as a % of Revenue 25% 40% 50% 55% 60% 65% 70% 75% 75% 75% 75%

Selling, General and Admin. Expenses 2,665,679$ 7,652,024$ 19,881,937$ 113,975,191$ 245,946,440$ 599,225,589$ 934,004,983$ 1,169,892,447$ 1,269,638,884$ 1,420,462,740$ 1,475,886,055$ As a % of Revenue 50.00% 53.00% 51.00% 49.00% 49.00% 48.00% 48.00% 48.00% 48.00% 49.00% 49.00%

Research & Development 3,998,518$ 8,662,669$ 9,746,048$ 11,630,121$ 20,077,260$ 62,419,332$ 116,750,623$ 170,609,315$ 211,606,481$ 260,901,320$ 271,081,112$ As a % of Revenue 75.00% 60.00% 25.00% 5.00% 4.00% 5.00% 6.00% 7.00% 8.00% 9.00% 9.00%

EBITDA (5,331,357)$ (10,539,580)$ (10,135,890)$ 2,326,024$ 35,135,206$ 149,806,397$ 311,334,994$ 487,455,186$ 502,565,392$ 492,813,604$ 512,042,101$ EBITDA Margin ‐100.00% ‐73.00% ‐26.00% 1.00% 7.00% 12.00% 16.00% 20.00% 19.00% 17.00% 17.00%

Depreciation Costs 108,656$ 281,909$ 983,624$ 2,379,239$ 4,386,965$ 8,881,157$ 15,886,194$ 24,660,388$ 33,124,647$ 42,401,138$ 52,039,578$

Earnings Before Tax (5,440,013)$ (10,821,489)$ (11,119,514)$ (53,215)$ 30,748,241$ 140,925,240$ 295,448,800$ 462,794,799$ 469,440,745$ 450,412,466$ 460,002,523$ As a % of Revenue ‐102% ‐75% ‐29% 0% 6% 11% 15% 19% 18% 16% 15%

Taxes ‐$ ‐$ ‐$ ‐$ 8,609,507$ 39,459,067$ 82,725,664$ 129,582,544$ 131,443,409$ 126,115,490$ 128,800,706$ Earnings After Tax (5,440,013)$ (10,821,489)$ (11,119,514)$ (53,215)$ 22,138,733$ 101,466,173$ 212,723,136$ 333,212,255$ 337,997,336$ 324,296,975$ 331,201,816$ As a % of Revenue ‐102% ‐75% ‐29% 0% 4% 8% 11% 14% 13% 11% 11%

R&D Tax Refund 1,739,355$ 3,768,261$ ‐$ ‐$ ‐$ ‐$ ‐$ ‐$ ‐$ ‐$ ‐$

Investments Into CapitalWorking Capital 266,568$ 2,165,667$ 5,847,629$ 34,890,364$ 50,193,151$ 62,419,332$ 97,292,186$ 121,863,797$ 132,254,050$ 144,945,178$ 150,600,618$ As a % of Revenue 5% 15% 15% 15% 10% 5% 5% 5% 5% 5% 5%

Δ in Working Capital 1,478,927$ 1,899,099$ 3,681,961$ 29,042,736$ 15,302,787$ 12,226,181$ 34,872,854$ 24,571,611$ 10,390,254$ 12,691,127$ 5,655,440$ CAPEX 799,704$ 4,331,334$ 17,542,886$ 34,890,364$ 50,193,151$ 112,354,798$ 175,125,934$ 219,354,834$ 211,606,481$ 231,912,284$ 240,960,988$ As a % of Revenue 15% 30% 45% 15% 10% 9% 9% 9% 8% 8% 8%

Free Cash Flow (FCF) (5,870,632)$ (13,001,753)$ (31,360,737)$ (61,607,076)$ (38,970,239)$ (14,233,649)$ 18,610,543$ 113,946,198$ 149,125,249$ 122,094,702$ 136,624,965$ Year 0.5 1.5 2.5 3.5 4.5 5.5 6.5 7.5 8.5 9.5 10.5Discounted Free Cash Flow (5,404,355)$ (10,143,291)$ (20,733,912)$ (34,517,837)$ (18,503,933)$ (5,727,502)$ 6,346,379$ 32,929,473$ 36,521,964$ 25,340,650$ 24,030,842$ Sum of FCF 30,138,478$


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VII. RECOMMENDATION Share Performance and Trading Information Exhibit 40: Orthocell’s 3‐Year Share Price Performance vs S&P/ASX 200 Health Care Index

Source: Bloomberg, Cedrus Research

Exhibit 41: Orthocell’s 3‐Year Share Price Performance and Trading Volume

Source: Bloomberg, Cedrus Research

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Shareholder Analysis

The top shareholders of Orthocell include several asset management companies as well as the company’s directors, who collectively hold approximately 40% of Orthocell’s outstanding shares, while 50% of the shares are owned by 20 major institutional investors, with the remaining 10% held by retail investors. In total, Orthocell has approximately 3,500 individual shareholders. Exhibit 42: Orthocell’s Top Shareholders (as of February 2018)

Top Shareholders Holdings (%) Stone Ridge Ventures (Associated with Non‐executive Director) 9.26 Ming Hao Zheng – Co‐founder and Chief Scientific Officer 6.72 Paul Anderson – Co‐founder and Managing Director 6.35 Qi Xiao Zhou – Non‐executive Director 5.75 Australian Super – Superannuation and Pension Fund 4.20 Jia Xun Xu – Former director 4.70

Source: Orthocell

Dilutive Financial Instruments Orthocell has about 15.5 million outstanding options and warrants, the value of which have been evaluated using the Black‐Scholes’ model. We have deducted their market value from our valuation to determine our fair value per share for Orthocell. Exhibit 43: Outstanding Options and Warrants

Valuation of Dilutive Securities

Number of Dilutive Securities

Exercise Price (AUD) Date of Expiry Market Value (AUD)

Outstanding Options and Warrants

1,350,000 $0.560 2/26/2019 $ 28,238650,000 $0.624 10/12/2019 $ 23,465490,000 $0.648 12/13/2019 $ 18,925600,000 $0.550 12/13/2019 $ 30,20540,000 $0.594 3/22/2020 $ 2,107200,000 $0.510 6/19/2020 $ 14,372

12,122,237 $0.580 11/19/2020 $ 881,789 Total: 15,452,237 $ 999,101

Source: Orthocell


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Our Recommendation In our view, Orthocell has a unique market position in the therapeutic areas of soft tissue injuries and musculoskeletal disorders, due to its proprietary techniques in cell cultivation using stem cell technology. Although there are multiple players in the autologous chondrocyte implantation (ACI) market, Orthocell is the only company at this point to be able to transfer and commercialize the same technology for tendon regeneration and repair. This ATI technology has garnered interest from the multinational healthcare conglomerate Johnson & Johnson, which has forged a research collaboration with Orthocell. Orthocell is commercialization‐ready, with established manufacturing facilities for its cell therapy‐based products and increasing visibility to sell into international markets. Moreover, the company’s versatile collagen medical device, CelGro®, has obtained the CE mark in the EU for dental bone and soft tissue regeneration applications, enabling the company to begin capitalizing on its regenerative medicine technology. Going forward, Orthocell is looking to develop the potential of its technology portfolio, addressing the full‐spectrum of musculoskeletal disorders. Although there are always inherent risks associated with regulatory approvals of biological products, we believe Orthocell is well‐positioned to strategically accelerate the pace of its commercialization through obtaining the reimbursement status of its products initially in Australia and New Zealand before expanding the reach of its technology abroad with the help of local partners. We believe Orthocell should begin reaping economic benefits of its technology as soon as fiscal year 2018. Hence, we recommend investors to begin accumulating shares in the company to take advantage of the low valuation currently assigned by the market. Our fair value per share is AUD1.66, representing an upside potential of approximately 444.3%, versus the closing price of AUD0.305 on 29 March 2018. Potential Catalysts

x Market approvals could be secured sooner than anticipated in various geographical markets.

x Strategic partnership agreements could expedite product approvals and expand Orthocell’s product reach into various regions rapidly with significant cost savings, potentially providing Orthocell with sufficient cash for running its operations going forward.

x Positive clinical data, licensing and distribution agreements, and collaborations in research or other endeavors entail a de‐risked investment proposition.

Key Risks

x Clinical studies could be delayed or produce undesirable results.

x Orthocell has limited funding, with a cash runway of about 12 months, based on our projections.

x Challenges associated with obtaining regulatory approvals worldwide could significantly delay sales and impair sales growth.


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APPENDIX: Company Management and Board of Directors Company Management Paul Anderson Managing Director

Mr. Anderson has over 16 years of experience in the medical device and cellular therapeutic fields with expertise in bridging the gap between research and clinical practice in the development of emerging medical technologies. This encompasses applying the regulatory framework to the product and the accompanying ‘grey area’ interpretation, rebating pathways, marketing, sales, developing orthopaedic relationships, strategic and financial planning. Mr. Anderson has a strong track record with his previous board position with Verigen Australia Pty Ltd., a human cell therapies company. Professor M.H. Zheng Chief Scientific Officer

Professor Zheng is the inventor of the Orthocell technology, and he brings a strong track record of innovation. He completed his PhD in 1993, Doctor of Medicine (DM) in 1998 UWA, and he is a Fellow of the Royal College of Pathologists. Currently, Professor Zheng is the Director of Research in the Department of Orthopaedic Surgery, School of Surgery and Pathology, University of Western Australia. His research focus involves finding new ways of treatment for osteoporosis, osteoarthritis and tendon injuries using cutting‐edge cellular and molecular biology techniques. Nicole Telford Chief Financial Officer

Ms. Telford is a chartered accountant and has over 14 years of commercial experience in financial controller/group accountant roles. Ms. Telford’s background provides her with a broad range of experience, having achieved her professional qualifications whilst employed with Arthur Andersen in the audit division. She has commercial experience in financial and management reporting, office administration and staff management. Gregor Maier Sales and Marketing Director

Mr. Maier has over 14 years of experience within the pharmaceutical and surgical industries, having worked in the United Kingdom, Malaysia and South Africa before settling in Australia. He has a Marketing qualification from the Durban University of Technology and played international hockey for South Africa between 1995 and 2001. Having joined Orthocell in 2014, Mr. Maier brings a wealth of senior management experience to the company, following key management roles in Malaysia and South Africa. He has successfully overseen the launch of Ortho‐ATI® and Ortho‐ACI® into the Hong Kong, New Zealand and Singapore markets.


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Tim Kelaher National Sales and Marketing Manager

Mr. Kelaher has a Master of Business Administration (MBA) from Macquarie Graduate School of Management. He has a broad range of commercial experience in Medical Devices and previously worked at Beiersdorf, Stryker and Biomet in sales and marketing roles. Mr. Kelaher is a former Wallaby fullback and played in two Bledisloe Cup series against the All Blacks and played for the NSW Waratahs. Monique Cannon Regulatory Affairs and Compliance Manager

Ms. Cannon has a Bachelor of Science (Hons) from the University of Western Australia. Her background includes research in cellular development and differentiation, with significant experience in cell culture, which translated to a role in GMP‐compliant manufacture of an autologous cell‐based therapeutic product. Gaining several years of experience in coordination of qualification systems, quality system management and with significant regulatory experience (ISO, TGA, FDA), Ms. Cannon joined Orthocell in April 2007 and participates in new product development and regulatory compliance for products both nationally and internationally. Board of Directors

Paul Anderson Managing Director

See Above. Dr. Stewart James Washer Chairman

Dr. Washer has 20 years of CEO and Board experience in medical technology, biotechnology and agrifood companies. He is currently the Chairman of Cynata Therapeutics Ltd., (ASX: CYP) which is developing stem cell therapies, Chairman of Minomic International Ltd., which has an accurate non‐invasive test for prostate cancer, and Investment Director with Bioscience Managers. Dr. Washer was the CEO of Calzada Ltd. (ASX: CZD), the founding CEO of Phylogica Ltd. (ASX: PYC) and the CEO of Celentis where he managed the commercialisation of intellectual property from AgResearch in New Zealand with 650 scientists and $130 million revenues. He was Chairman of iSonea Ltd. (ASX: ISN), Resonance Health Ltd. (ASX: RHT) and Hatchtech Pty Ltd., a Director of iCeutica Pty Ltd., Immuron Ltd. (ASX: IMC) and AusBiotech Ltd. Dr. Washer was also a Senator with Murdoch University. Matt Callahan Board Member

Mr. Callahan is an experienced life sciences executive based in Philadelphia, the U.S. He is the founding CEO of iCeutica Inc. and a co‐inventor of some of the technologies that comprise the SoluMatrix Fine Particle Technology™ platform that iCeutica uses to develop new pharmaceuticals. iCeutica has developed two products to‐date that have received FDA approval, has 1 pending approval and 2 products in late‐stage


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development. Mr. Callahan has more than 18 years of legal, IP and investment management experience and is also a director of Glycan Bioscience LLC and founding CEO of Churchill Pharma. Mr. Callahan has worked as an investment director for two venture capital firms investing in life sciences, clean technology and other sectors and was the General Manager and General Counsel with Australian‐listed technology and licensing company ipernica (now Nearmap ASX: NEA), where he was responsible for the licensing programs that generated more than $120 million in revenue. Professor Lars Lidgren Board Member

M.D., Ph.D. Professor in Orthopedics at the University Hospital of Lund. Professor Lidgren leads a productive regenerative medicine research group at the University Hospital of Lund. The hospital is a member of the ISOC group of worldwide leading hospitals. Professor Lidgren is an honorary member and past president of several major societies. He initiated the worldwide Bone and Joint Decade 2000‐2010 and is a successful serial entrepreneur who founded the companies Scandimed (Biomet), Bone Support, AMeC and GWS in Sweden. Mr. Qi Xiao Zhou Board Member

Mr. Zhou has 15 years of experience within China as a senior business manager and executive. He has been General Manager of Shenzhen Lightning Digital Technology Co. Ltd. since 2001, focusing on the manufacture and distribution of Semiconductor/Integrated Circuit technology. Mr. Zhou has experience within the public markets in Hong Kong, China and Taiwan and brings to the Board a wealth of business management and business development experience within the Asian regions. In particular Mr. Zhou has broad connections and experience in the licensing of technologies into China and licensing into the Asian region.


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IMPORTANT DISCLOSURES

STOCK OWNERSHIP AND CONFLICT OF INTEREST DISCLOSURE

x Neither Randy Hice nor any member of the research team or their households is an owner of Orthocell Limited common shares.

Cedrus Investments Ltd. (“Cedrus”) does and seeks to do business with companies covered in research reports distributed by Cedrus, and Cedrus may or may not be an investor of the subject company and may have investment banking relationship with the subject company. As a result, investors should be aware that the firm may have a conflict of interest that could affect the objectivity of this report. Cedrus will identify such companies in the reports of the companies covered. Therefore, investors should consider this report as only a single factor in making their investment decision.

Cedrus will receive or has received compensation for investment banking services provided within the past 12 months from Orthocell Limited.

Cedrus will receive or has received within the past 12 months compensation from Orthocell Limited.

ANALYST CERTIFICATION

Randy Hice hereby certifies that the views expressed in this research report accurately reflect his personal views about the subject companies and their securities. He also certifies that he has not been, and will not be, receiving direct or indirect compensation in exchange for expressing the specific recommendations in this report.

For additional information, please send an e‐mail to [email protected]

For private circulation only. This report is prepared by Cedrus and is for informational purposes only and is not intended to be, nor should it be construed to be, an advertisement or an offer or a solicitation of an offer to buy or sell any securities. The information herein, or upon which opinions have been based, has been obtained from sources believed to be reliable, but no representations, express or implied, or guarantees, can be made as to their accuracy, timeliness or completeness. The information and opinions in this report are current as of the date of the report. We do not endeavor to update any changes to the information and opinions in this report. Unless otherwise stated, all views expressed herein (including estimates or forecasts) are solely those of our research department and subject to change without notice.

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This report does not take into account the specific investment objectives, financial situation, and the particular needs of any specific company that may receive it. Before acting on any information in this report, readers should consider whether it is suitable for their own particular circumstances and obtain professional advice related to their own investment needs and objectives. The value of securities mentioned in this report and income from them may go up or down, and investors may realize losses on any investments. Past performance is not a guide to future performance. Future terms are not guaranteed, and a loss of original capital may occur.

Neither the analysts responsible for this report nor any related household members are officers, directors, or advisory board members of any covered company. No one at a covered company is on the Board of Directors of Cedrus or its affiliates. The compensation for the analysts who prepare reports is determined exclusively by senior management. Analyst compensation is not based on investment banking revenues; however, compensation may relate to the revenues of Cedrus as a whole, of which investment banking, sales and trading are a part. Cedrus does engage in investment banking. Cedrus does trade securities on a principal basis; however, Cedrus’ research analysts are prohibited from owning securities they cover through Research Reports.

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