Arctic Bioscience — Investor Presentation 2021

Aug 26, 2021

1

Arctic Bioscience AS

First half year 2021 results

26th August 2021

Presenters: Ole Arne Eiksund (CEO) Danielle Glenn (CFO)

Disclaimer

Matters discussed in this Presentation may constitute or include forward-looking statements. Forward-looking statements are statements that are not historical facts and may include, without limitation, any statements preceded by, followed by or including words such as "aims", "anticipates", "believes", "can have", "continues", "could", "estimates", "expects", "intends", "likely", "may", "plans", "forecasts", "projects", "should", "target" "will", "would" and words or expressions of similar meaning or the negative thereof. These forward-looking statements reflect the Company's beliefs, intentions and current expectations concerning, among other things, the Company's results of operations, financial condition, liquidity, prospects, growth and strategies. Forward-looking statements involve known and unknown risks and uncertainties because they relate to events and depend on circumstances that may or may not occur in the future. The forward-looking statements in this Presentation are based upon various assumptions, many of which are based, in turn, upon further assumptions that may not be accurate or technically correct, and their methodology may be forward-looking and speculative.

An investment in the Company's shares should be considered as a high-risk investment. Several factors could cause the actual results, performance or achievements of the Company to be materially different from any future results, performance or achievement that may be expressed or implied by statements and information in this Presentation.

A multitude of factors can cause actual results to differ significantly from any anticipated development expressed or implied in this Presentation, including among others, economic and market conditions in the geographic areas and industries that are or will be major markets for Company's businesses, changes in governmental regulations, interest rates, fluctuations in currency exchange rates and such other factors.

The information obtained from third parties has been accurately reproduced and, as far as the Company is aware and able to ascertain from the information published by that third party, no facts have been omitted that would render the reproduced information to be inaccurate or misleading.

The contents of this Presentation are not to be construed as financial, legal, business, investment, tax or other professional advice. By receiving this Presentation, the Recipient acknowledges that it will be solely responsible for its own assessment of the Company, the market and the market position of the Company and that it will conduct its own analysis and is solely responsible for forming its own opinion of the potential future performance of the Company's business. In making an investment decision, the Recipient must rely on its own examination of the Company, including the merits and risk involved. This Presentation is not an advertisement for the purposes of applicable measures implementing the EU Prospectus Regulation.

This Presentation is not a prospectus and does not contain the same level of information as a prospectus.

• Introduction and highlights
• Arctic Bioscience in brief
• Operational review
• Financial review
• The way forward – goals and strategic priorities
• Q&A

H1 2021 highlights - On track in all business areas

On track for phase IIb clinical study on HRO350

in mild-to-moderate psoriasis to start H1 2022

258.7 MNOK Cash on hand 30 June 2021

150 tons

Production capacity confirmed in basic design phase for new state-of-the-art manufacturing facility to be live in H2 2023

Arctic Bioscience in brief

This is Arctic Bioscience

Two unique businesses built upon a proprietary technology and IP platform

PASI: Psoriasis Area and Severity Index. GMP: Good Manufacturing Practice

References: Tveit KS, Brokstad KA, Berge RK, Sæbø PC, Hallaråker H, Brekke S, Meland N, Bjørndal B. A Randomized, Double-blind, Placebo-controlled Clinical Study to Investigate the efficacy of Herring Roe Oil for treatment of Psoriasis. Acta Derm Venereol. 2020 May 28;100(10):adv00154. doi: 10.2340/00015555-3507. PMID: 32378724; Tveit KS et al. Long Term Efficacy and Safety of Herring Roe Oil in the Treatment of Psoriasis, a 39-week Open-label Extension Study. International Journal of Clinical and Experimental Medical Sciences. Vol. 7, No. 1, 2021, pp. 13-20. doi: 10.11648/j.ijcems.20210701.13. 1) Pictures courtesy of Dr. Tveit. Note: For sources, references and addition context recipients of this presentation are referred to the Company Presentation March 2021 found on Arctic Bioscience website, https://arcticbioscience.com/investors/reports-presentations/

Effect on mild to moderate psoriasis demonstrated in pilot clinical trial1. Large unmet medical need for oral, safe, costeffective drug in a \$20 billion + market

Premium, differentiated Omega-3 products produced and distributed via B2C and B2B channels. Benefits for brain, heart, skin health, prenatal, sports nutrition.

Knowledge platform and specialized know-how of bioactive marine compounds. State-of-the-art manufacturing facility will significantly improve gross margins.

PHARMA

NUTRA

TECHNOLOGY / R&D

The drug candidate HRO350 will be produced according to GMP

Potential for a first-in-class therapeutic treatment for a global population with few existing treatment alternatives

Pharma: a unique opportunity in mild-to-moderate psoriasis

Randomized, double-blind placebo controlled clinical trial showed statistically significant improvement in mild to moderate psoriasis compared to placebo

- Trial: Randomized, placebo-controlled pilot clinical trial in patients with mild to moderate psoriasis (Psoriasis Area Severity Index, PASI <10)

• Results: Clinical signals of efficacy combined with beneficial safety profile

Clinical trial in 64 patients with mild to moderate psoriasis

PASI: Psoriasis Area and Severity Index. GMP: Good Manufacturing Practice

References: Tveit KS, Brokstad KA, Berge RK, Sæbø PC, Hallaråker H, Brekke S, Meland N, Bjørndal B. A Randomized, Double-blind, Placebo-controlled Clinical Study to Investigate the efficacy of Herring Roe Oil for treatment of Psoriasis. Acta Derm Venereol. 2020 May 28;100(10):adv00154. doi: 10.2340/00015555-3507. PMID: 32378724; Tveit KS et al. Long Term Efficacy and Safety of Herring Roe Oil in the Treatment of Psoriasis, a 39-week Open-label Extension Study. International Journal of Clinical and Experimental Medical Sciences. Vol. 7, No. 1, 2021, pp. 13-20. doi: 10.11648/j.ijcems.20210701.13. 1) Pictures courtesy of Dr. Tveit. Note: For sources, references and addition context recipients of this presentation are referred to the Company Presentation March 2021 found on Arctic Bioscience website, https://arcticbioscience.com/investors/reports-presentations/

Greatest efficacy seen in subjects with moderate psoriasis, efficacy is sustained and increases over time

• Primary end-point: Change in mean Psoriasis Area Severity Index (PASI) at week 26
• Statistically significant improvement in mean PASI with HRO versus placebo at week 26. Overall PASI reduction of 38% at week 26
• Greatest PASI reduction at week 26 observed in subjects with moderate psoriasis. Subjects with baseline PASI >5.5 showed average reduction of -2.4 PASI score

PASI: Psoriasis Area and Severity Index. GMP: Good Manufacturing Practice

References: Tveit KS, Brokstad KA, Berge RK, Sæbø PC, Hallaråker H, Brekke S, Meland N, Bjørndal B. A Randomized, Double-blind, Placebo-controlled Clinical Study to Investigate the efficacy of Herring Roe Oil for treatment of Psoriasis. Acta Derm Venereol. 2020 May 28;100(10):adv00154. doi: 10.2340/00015555-3507. PMID: 32378724; Tveit KS et al. Long Term Efficacy and Safety of Herring Roe Oil in the Treatment of Psoriasis, a 39-week Open-label Extension Study. International Journal of Clinical and Experimental Medical Sciences. Vol. 7, No. 1, 2021, pp. 13-20. doi: 10.11648/j.ijcems.20210701.13. 1) Data on file (PASI>5.5 week 26-15 months). Note: For sources, references and addition context recipients of this presentation are referred to the Company Presentation March 2021 found on Arctic Bioscience website,https://arctic-bioscience.com/investors/reports-presentations/

All patients had PSGA scores ≥2 and ≤4 at inclusion 40% of patients achieved clear-or-almost clear skin after 65

• weeks
• score

After 65 weeks no patient had a PSGA score higher than 3 In total, 46.6% of patients had a reduction in their PSGA

Unmet medical need in mild-to-moderate psoriasis

PASI: Psoriasis Area and Severity Index

Note: For sources, references and addition context recipients of this presentation are referred to the Company Presentation March 2021 found on Arctic Bioscience website, https://arctic-bioscience.com/investors/reportspresentations/

	Oral
Active substance	No other product with active product ingredient
Psoriasis indication	Mild to moderate disease
Severity at inclusion	Few treatment options for non-severe disease
Efficacy level	Efficacy in mild to moderate disease demonstrated in pilot clinical trial
Quality of life	Improvement in quality of life demonstrated in pilot clinical trial
Safety profile	Well tolerated in pilot clinical trial
Monitoring	50% of competitive products require monitoring – unlikely needed for HRO350

HRO350 scores well against competitors

Further significant upside revenue potential in the market for mild psoriasis

USD 20bn+ market opportunity in moderate psoriasis alone

Note: For sources, references and addition context recipients of this presentation are referred to the Company Presentation March 2021 found on Arctic Bioscience website,https://arctic-bioscience.com/investors/reports-presentations/

Nutra: Romega –premium Omega-3 products extracted, produced and distributed via both B2C and B2B channels

	Key highlights

Key highlights Key performance indicators (2021)

Cash generating business with significant revenue traction

Vast global omega-3 market set for further growth
International go-to-market strategy, with key partnerships already secured
B2C and B2B channels as well as distribution partners
Model partnership with Kotler in China validates market potential and strategy

Successful launch in China through Kotler partnership

China – an ideal target market for Romega

Developed strong relationship with Kotler for efficient market entry and sales growth

Foundation for long-term export success story set – strategic partnership model to be replicated

Technology / R&D: proprietary technology platform and value chain integration provide sustainable competitive advantage

Significant gross margin improvement

Building state-of-the-art GMP manufacturing facility, enabling company to retain proprietary product know-how, IP and control of value chain1

Note: For sources, references and addition context recipients of this presentation are referred to the Company Presentation March 2021 found on Arctic Bioscience website, https://arctic-bioscience.com/investors/reportspresentations/

Operational review

• On track with planned phase IIb clinical study on HRO350 in mild- to-moderate psoriasis (the HeROPA study)
• Site feasibility is ongoing for the planned phase IIb, to be completed Q4 2021
• Collaboration with Smerud Medical Research to develop new drug candidate for normal brain development in extremely premature infants.
• Awarded a grant of 4.8m NOK from The Research Council of Norway to conduct cellular research on the mechanism of action for HRO350

• Basic design phase for new manufacturing facility completed in June, construction to begin in September.
• Manufacturing facility to be completed in H2 2023 at a total cost of ∼200 MNOK (funded 65% bank loans, 6% grants), leading to 150 metric tons of capacity for both nutra and pharma products.
• Expected improvement in gross margin of 20%+ from 2024 with resulting substantial increase in long- term company profitability.

Technology / R&D

Nutra: B2B and B2C

• Continued growth with existing US, European and APAC customers in bulk oil sales.
• 29% y/y growth in sales of higher margin bulk capsules in Europe
• Largest single Romega order in the history of the company of 3.4m NOK to US customer

Increased the Romega subscriber base by 70% versus H1 2020.

Customer acquisition costs decreased, while organic conversion rate increased compared to paid conversions.

Return on ad spend increased by 50% in H1

• 2021.

B2B B2C

• Product portfolio expanded and deployed into multiple e-commerce channels
• Nutritional supplement study initiated titled "Effects of phospholipid DHA (herring caviar oil) supplementation on maternal and fetal DHA status in Gestational Diabetes Mellitus (GDM): A clinical study"

Off-Line Marketing Activities

• Academic seminars
• Professional salons
• KOL marketing
• Trade shows

Nutra: China

Financial review

Financial development in key metrics H1 2021 indicate improvement in most areas versus H1 2020

300 MNOK in gross proceeds from successful private placement and IPO on Euronext Growth

Broad Long-Term Investor Base

Cornerstone Principal Management New Investors

New International Investors

Giving Arctic Bioscience the ability to complete the phase IIb drug development

Enabling construction of manufacturing facility leading to significant increase in gross margins and long-term profitability

- program

• capabilities
• key personnel

Strengthening the company's growth

Improving capabilities to attract and retain

Profit and Loss

	First Half		Year
Note	2021	2020	2020
Sales revenue	11 968 256	7 918 734	20 496 969
Other operating income	0	48 058	96116
Total revenue	11 968 256	7 966 792	20 593 085
Cost of Sales	8 607 635	5 171 455	14 519 051
Gross Profit	3 360 621	2 795 337	6 074 034
Salaries and personnel cost	9 739 972	6393 241	10815 502
Sales and marketing	1 733 348	527 042	3 834 834
Other Opex	12 652 886	5996996	13 098 421
Operating profit (loss) (EBIT)	-20 765 584	-10 121 942	-21 674 724
Depreciation	-825 695	-588 251	-1 191 952
EBITDA	-19 939 889	-9 533 691	-20 482 772
Finance income	6980 215	609 389	1 203 983
Finance expense	7 443 230	617 660	2119919
Net financial items	-463 014	-8 271	-915 935
Profit (loss) before fax	-21 228 599	-10 130 213	-22 590 659
Income tax expense	0	0	0
Profit (loss) for the period	-21 228 599	-10 130 213	-22 590 659
Basic earnings per share®	0,87	0,79 -	1,75

H1 2021 revenue up 50% y/y to 12.0 MNOK, slightly above forecast

Strong sales growth in B2B (+106% y/y)

Gross margin 28% and adjusted gross margin 33% in H1 2021

Higher share of B2B revenue in H1 2021 vs 2020 resulted in slightly lower gross margin

EBITDA -19.9 MNOK and adjusted EBITDA -11.2 MNOK, better than company forecast

Personnel cost higher in H1 2021 vs. H1 2020 due to increased headcount in accordance with growth plan Sales & marketing expenditures higher vs H1 2020 in accordance with growth plan

Non-recurring costs totalled 8.8 MNOK, 8.1 MNOK

-

• related to IPO

Breakdown of Nutra revenue

Level of free liquidity was strong at NOK 258.7

MNOK

Cash flow from operations -28.1 MNOK

-

Includes non-recurring costs of 8.8 MNOK Small increase in inventory and other provisions and small decline in working capital

Cash flow from investments -22.6 MNOK slightly lower than planned

-

4.0 MNOK for factory basic design phase 17.0 MNOK for HRO350 1.6 MNOK investment in other intangible assets

Strong positive cash flow from financing of 296.9 MNOK

Net proceeds from IPO of 282.0 MNOK Additional equity funding of 20.0 MNOK 5.1 MNOK in repayment of overdraft facility and long-term

-

• loans

Cash flow statement

		First half		Year
	Note	2021	2020	2020
Operating result		-19 939 889	-9 533 691	-20 482 772
Depreciations		-825 695	-588 251	-1 191 952
Currency gain / loss		-336 507	258 134	-424 692
Net financial items		-126 508	-266 405	-491 244
Income before tax		-21 228 598	-10 130 213	-22 590 659
Depreciations		825 695	588 251	1 191 952
Changes in inventory		-3 637 063	-7 724 385	-8781 137
Changes in accounts receivables		3937 776	-147 394	624713
Changes in accounts payables		-5 378 112	-4 033 474	3 464 590
Other provisions		-2 647 545	3015847	4 195 663
Net cash from operations		-28 127 847	-18 431 368	-21 894878
Investment in intangible assets		-18 623 606	-1 239 799	-9990 596
Investment in other fixed assets		-3 965 867		-3 441 695
Net cash from investing		-22 589 473	-1 239 799	-13 432 291
Change in overdraft		-4617 630	7 434 105	1 879 863
Repayment of loans		-540 867	-270 433	-582 933
Change in equity	3	302011 925		22 637 784
Net cash from financing		296 853 428	7 163 671	23 934 714
Net change in cash and cash equivalents		246 136 108	-12 507 496	-11 392 456
Cash and cash equivalents at the beginning of the period		12 600 108	23 992 564	23 992 564
Cash and cash equivalents at the end of the period		258736216	11 485 068	12 600 108

Strong financial position at end of period

Total equity of 344.7 MNOK

Total liabilities of 20.4 MNOK

6.0 MNOK in long-term debt 14.4 MNOK in short term liabilities.

Equity ratio of 94%

Total fixed assets 62.3 MNOK

Mainly related to the pharmaceutical development of HRO350, comprising both works carried out by the CRO and capitalized personnel costs

Current assets 302.8 MNOK

258.7 MNOK in cash 29.9 MNOK in inventories 14.2 MNOK in accounts receivable and other shortterm receivables.

Financial position

	First half			Year
	Note	2021	2020	2020
Fixed assets: Intangible assets		52 123 220	28 747 239	34 207 089
Tangible assets		9 428 811	3870 792	5 462 944
Operating movable property, furniture, tools, other		781 091	-837 477	899 311
Total fixed assets		62 333 122	31 780 554	40 569 344
Current assets:
Inventories		29 929 110	25 933 108	26 246 067
Accounts receivable		7 366 128	12 159 489	11 007 081
Prepaid expenses, accrued income		4 078 824	271 449	330 045
Short term receivable		2737 767	O	2 447 091
Bank deposits		258 735 016	11 486 656	12 600 108
Total current assets		302 846 844	49 850 702	52 630 391
TOTAL ASSETS		365 179 966	81 631 256	93 199 735
Total equity	3	344 722 767	53 761 869	63 939 207
Long-term liabilities:
Other long-term debt		6034717	9 688 084	6 575 584
Total long-term liabilities		6 034 717	9 688 084	6 575 584
Short-term liabilities
Short-term debt		O	7 434 105	1 879 863
Accounts payable		4 552 832	2 432 880	9 930 944
Other current short-term debt		10 298 523	7 910 487	9 141 045
Other short-term liabilities		9 869 651	8314320	10 874 138
Total short term liabilities		14 422 483	18 181 304	22 684 945
Total liabilities		20 457 200	27 869 387	29 260 528
TOTAL EQUITY AND LIABILITIES		365 179 966	81 631 256	93 199 735

Note: For sources, references and addition context recipients of this presentation are referred to the Company Presentation March 2021 found on Arctic Bioscience website,https://arctic-bioscience.com/investors/reports-presentations/

The way forward – goals and strategic priorities

Strategy outlook

• Complete site feasibility in Q4 2021 as planned with contracts in place at selected sites.
• Initiate a research collaboration to develop a new drug candidate based on phospholipid esters from herring roe for extremely premature infants.

• Delivery of clinical study material intermediate to the CMO for production of the HRO350 capsules that will be used in clinical phase IIb study.

• Romega Brain launch. Romega has engaged spokesperson and leading brain health researcher, Ole Petter Hjelle in a long-term partnership to assist the brand in the launch of its Romega Brain Supplement. Romega Brain will be launched simultaneously in Norway and in China (by Kotler Marketing Group).

• Enter new geographies including Brazil, Australia and Singapore. A VP Sales North America was hired in August 2021 to drive sales and lead generation.
• Participate in the Supply Side West trade show in October.

Construction work related to the building of the factory at the company's premises in Ørsta to start. Continue with product development for Nutra. Pharma Nutra Technology / R&D

Large-scale Phase IIb study to drive pharma forward

To investigate efficacy, safety and dose of drug candidate HRO350 versus placebo

Initiating large randomized Phase IIb study in H1 2022 in patients with mild-to-

Given successful Phase IIb study the company plans to initiate a Phase III study,

Milestones overview for Phase IIb clinical trial

Milestone overview HRO350 drug development in mild-tomoderate psoriasis

TOTAL

2021	2022	2023	2024
Study drug production (35 MNOK)
	Phase IIb clinical trial (75 MNOK)
Site feasibility	Enrollment	Data read-out	Publications
				Pharmacokinetic study (4 MNOK)
				(150 MNOK)

HRO350 is an investigational medicinal product MAA: Marketing Authorization Application

Roadmap to 1000 tons of pharmaceutical and nutraceutical production capacity

Indicate a substantial return on invested equity

Mid to long-term financial targets – Nutraceutical business

Strategic partnerships will focus on B2B2C sales of finished goods and white label products

B2C / subscription based revenues expected to 'step' midterm and comprise a steady share of revenues thereafter Focus on US, Scandinavia and selected European markets

Metric	Mid-term	Long-term	Comments
Revenue growth per annum	>40%	Gradual decrease towards ~20%	categories (B2C and B2B) and protein
Gross margin	In the area of ~60%	Gradual increase towards 70%+
B2C subscription revenues (share of total Nutra revenues)	Step increase to ~30%	Similar to end mid-term levels
B2B Finished Goods sales (share of total B2B revenues)	In the area of ~50%	Continued gradual increase to 70%	goods and white label products
International focus (share of total Nutra revenues)	70%+	Continued gradual increase towards 80%	 Introduce and upsell new products

Highest growth expected in high margin finished product categories (B2C and B2B) and protein Strategic sales and marketing partnerships in APAC and US Normalised growth long-term when scale is established

Improvement driven by investment in new factory, benefits of scale and mix change towards higher margin products

Increased focus on the USA and APAC as the fastest growing and least price sensitive markets for nutraceuticals Introduce and upsell new products

40%+ y/y revenue growth

First half revenue slightly above expectations and second half always forecast stronger due to seasonality in B2B orders. Strong H2 growth expected in B2C and China.

Adjusted EBITDA margin -70 to -95%

Important hires to be made in Pharma, Technology and Nutra in H2 while sales & marketing expenditures expected to increase versus H1

Investment in HRO350 of 40 to 50 MNOK

Site feasibility and delivery of clinical study material intermediate to the CMO to be completed in H2 2021

On track in all business areas

Significant unmet medical need for new treatment options in mild-to-moderate psoriasis

HRO 350 – Strong scientific rationale and promising clinical effects demonstrated in pilot trial

Cash generating and growing nutraceutical business

Proprietary technology platform with control over value chain underpins both businesses

Robust ESG footprint

Strong management team with broad experience within the pharmaceutical and nutraceutical industries

Contact

CEO Ole Arne Eiksund: olearne@arctic-bioscience.com CFO and Head of IR Danielle Glenn: danielle@arctic-bioscience.com

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