Arctic Bioscience — Earnings Release 2021

Feb 18, 2022

Arctic Bioscience Operational Update Q4 2021

Arctic Bioscience Operational Update Q4 2021

· Site feasibility for psoriasis phase IIb study with investigational medicinal

product HRO350 complete

· Project for new GMP manufacturing facility commenced

· Full year 2021 revenues at NOK 22 million, a 7% increase from NOK 20.6

million in 2020

· Full year adjusted EBITDA of NOK -27.3 million vs NOK -20.5 million in 2020

· Year-end cash position remains solid at NOK 225.6m

· Christer Valderhaug appointed new CEO

Arctic Bioscience is a biotech company founded on the unique benefits of herring

roe - with a pre-commercial pharmaceutical business and a commercial

nutraceutical business. Pharma and Nutra share a proprietary technology and IP

platform, including in-house R&D and value chain integration through a state-of

-the-art GMP manufacturing facility.

"The fourth quarter saw many positive developments for Arctic Bioscience,

particularly in pharma and technology. During the period, site feasibility has

been completed, with interest from a large number of sites in Europe for

participation in the phase IIb study for our drug candidate for treatment for

mild-to-moderate psoriasis. The building process commenced in November for our

new manufacturing facility in Ørsta, and we signed the formal contract with

Smerud Medical Research for developing our second drug candidate for extremely

premature infants. Nutraceutical sales were in line with our Q3 update.

Arctic Bioscience is a company like no other, using cutting edge technology to

turn immature herring roe into nutraceuticals and medicines for the future, and

is in an strong position to develop the company on all fronts," says CEO Ole

Arne Eiksund.

Pharmaceutical development

Arctic Bioscience is developing a novel, oral drug candidate (HRO350) for the

treatment of mild-to-moderate psoriasis. With approximately 90% psoriasis

patients suffering from mild-to-moderate disease, the addressable market is more

than 20 million patients in the USA and the EU-5 alone, corresponding to an

annual revenue opportunity of more than USD 1 billion for Arctic Bioscience.

A randomized phase IIb study is scheduled to start in 2022. During the fourth

quarter, approximately 80 centers in 5 European countries have been identified,

and site feasibility is complete. Sufficient number of patients are secured,

with enrollment scheduled for mid-2022.

In December 2021, Arctic Bioscience signed the formal agreement for the

collaboration with Smerud Medical Research for development of a novel drug

candidate for brain development in extremely premature infants, utilizing Arctic

Bioscience's R&D capabilities and patented technology.

Technology and R&D

As part of the company's strategy to retain proprietary know-how and IP and

secure control of the value chain, Arctic Bioscience is building a state-of-the

-art processing facility in Ørsta, Norway. The facility is expected to improve

gross margins and increase long-term company profitability.

The project is developing according to plan. Contracting requests have been

published and first tenders are expected in March 2022, constituting the

foundation for final conclusions on timeline and scope for the project.

Nutra

Arctic Bioscience's nutraceutical product is Romega®, an omega-3 food supplement

with a unique 3:1 ratio of DHA to EPA. DHA and EPA are present in their

phospholipid bound form which increases nutrient uptake. Due to its EPA content,

Romega has benefits for heart health, and its high composition of DHA is

especially important for brain and eye health, including prenatal development.

To capitalize on Romega's high content of DHA, a new B2C product, Romega Brain,

was launched in Norway H2 2021 and is expected to drive B2C sales in Norway

going forward.

Products are sold through B2C and B2B channels globally, and the Arctic

Bioscience has an established partnership with Kotler Marketing Group for

distribution in the Chinese market.

Kotler has initiated several marketing initiatives to broaden outreach for

Romega® products in China.

In addition, Kotler has initiated a nutraceutical intervention study to map

uptake of DHA with pregnant women.

Financials

+----------------------------+-------+--------------+

|Key Financials (NOK million)|Q4 2021|Full Year 2021|

+----------------------------+-------+--------------+

|Revenue |5.3 |22.0 |

+----------------------------+-------+--------------+

|Gross Profit |2.7 |7.1 |

+----------------------------+-------+--------------+

|EBITDA |(8.9) |(36.1) |

+----------------------------+-------+--------------+

|Adjustments ** |0 |(8.8) |

+----------------------------+-------+--------------+

|Adjusted Gross Profit |2.7 |7.7 |

+----------------------------+-------+--------------+

|Adjusted EBITDA |(8.9) |27.3 |

+----------------------------+-------+--------------+

|CAPEX |9.0 |35.4 |

+----------------------------+-------+--------------+

|Cash at End of Period |225.6 |225.6 |

+----------------------------+-------+--------------+

* Adjustments to operating expenses are

made for costs associated with the listing

on Euronext Growth as well as a non

-recurring cost related to change in

distributor

relationship in USA

Sales revenues during the fourth quarter amounted to NOK 5.3 million, with FY

revenue of NOK 22 million, somewhat below expectations.

Bulk sales were in line with forecast for Europe, but slightly below

expectations for the Americas. Sales of finished goods in China have progressed

in line with the intentions in the collaboration with Kotler. Restrictions

associated with the COVID pandemic continue to have an impact on the company's

ability to meet with clients, especially in the US. COVID-related delays at the

company's capsule producer have also slowed supply and thus  sales of European

and Chinese finished goods during Q4 2021, with part of these sales now

postponed to early 2022.  On the positive side, the company is taking advantage

of the recent reopening for travel and attending important international trade

shows, increasing the number of qualified customer leads for 2022.

Adjusted EBITDA for the quarter amounted to NOK -8.9 million, in line with

forecast, leaving FY adjusted EBITDA at NOK -27.3 million.

Total capital expenditures (CAPEX) amounted to NOK 9.0 million during the

quarter, mainly related to the phase IIb clinical development program. FY CAPEX

totals NOK 35.4 million.

Following the capital raise in February 2021, the company maintains a solid

financial position with liquidity to fund ongoing and planned projects through

2023. At the end of the fourth quarter, the company's cash and cash equivalents

amounted to NOK 225.6 million.

Subsequent events

In January, the company announced the appointment of Christer Valderhaug as new

CEO, succeeding Ole Arne Eiksund who has been managing the company since 2018.

Mr. Valderhaug will join Arctic Bioscience from his position as partner and head

of investments at the advisory firm Converto AS.

Bringing experience from capital markets and managing and advising growth

companies, Mr. Valderhaug will lead the next phase of the transition of Arctic

Bioscience, from a marine ingredients business to capture the strong growth and

value creation potential in nutraceutical and pharma applications. Mr.

Valderhaug will join the company 1 March 2022.

Also in January, CFO Danielle Glenn terminated her consulting agreement with

Arctic Bioscience to pursue business opportunities outside the company. The

search for a new permanent CFO has been initiated.

Outlook

Arctic Bioscience will continue to pursue its drug development programs in the

pharmaceutical business, and revenue growth and profitability within its

nutraceutical business.

Following the positive response from sites, the company will have access to

patients to initiate the phase II study for HRO350 mid-2022. Based on successful

completion of the study, the company plans to run a Phase III clinical trial in

collaboration with a commercial partner, with plans to apply for marketing

authorization from the European Medicines Agency (EMA) and the Food & Drug

Administration (FDA) thereafter.

The outlook for nutra in 2022 is strong with revenue expected to be in the range

of NOK 30-40 million and consolidated company EBITDA expected to be in the range

of NOK -30 to -40 million.

For more information, please contact

Harald Nordal

Chairman Arctic Bioscience

Phone: +47 908 59 397

Danielle Glenn

CFO Arctic Bioscience

Phone: +47 909 98 201

About Arctic Bioscience

Arctic Bioscience is a biotech company developing and commercializing

nutraceutical products based on herring roe oil. Herring roe oil contains lipids

that are essential to maintain cell membranes, contributing to normal

functioning of brain, heart, and vision. Nutraceuticals from Arctic Bioscience

are sold globally as bulk ingredients to other companies making dietary

supplements, and as finished goods under the Romega brand. The strategy is to

switch sales from bulk to finished goods and focus markets are USA and China.

The company is developing HRO350 - a novel investigational drug candidate with

herring roe as raw material. HRO350 is being developed for treatment of mild-to

-moderate psoriasis. This is a large patient group in need of new effective

medicines with beneficial safety profile. Arctic Bioscience is led by a team of

highly competent people with experience in developing marine oils and experience

from global pharmaceutical companies.