Arctic Bioscience — Investor Presentation 2022

Aug 25, 2022

Arctic Bioscience

Presentation of financial results First half year 2022

25 August 2022

Christer L. Valderhaug (CEO) Jone R. Slinning (CFO) Runhild Gammelsæter (Global Medical Director)

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. Company is aware and able to ascertain from the information published by that third party, no

to be inaccurate or misleading.

not to be construed as financial, legal, business, investment, tax or

Recipient acknowledges that it will

solely responsible for forming its own

Company, including the merits and risk involved. This Presentation is not an advertisement for the purposes

implementing the EU Prospectus

and does not contain the same

This Presentation is not a prospectus

level of information as a prospectus.

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

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

of applicable measures

Regulation.

other professional advice. By receiving this Presentation, the

facts have been omitted that would render the reproduced information

The contents of this Presentation are

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

A multitude of factors can cause actual results to differ significantly from any anticipated development

expressed or implied in this

businesses, changes in

factors.

Presentation, including among others, economic and market

and industries that are or will be major markets for Company's

conditions in the geographic areas

governmental regulations, interest

The information obtained from third

rates, fluctuations in currency exchange rates and such other

parties has been accurately reproduced and, as far as the

Presentation.

Developing and commercializing pharmaceutical and nutraceutical products based on unique bioactive marine compounds, utilizing proprietary technology and methodology

Intro and H1-2022 operational highlights

• H1-2022 operational review
• H1-2022 consolidated Group financial review

Business outlook Q&A

Agenda

Intro and H1-2022 operational highlights

Arctic Bioscience in brief

HRO 350 – a novel oral drug candidate for mild-tomoderate psoriasis. Strong scientific rationale and promising clinical effects demonstrated in pilot trial 01 02 03

Significant unmet medical

Cash generating and

in China

Robust ESG footprint Strong management team

growing global nutraceutical

strong partnership established

with broad experience within

the pharmaceutical and

nutraceutical industries

business with an especially

options in mild-to-moderate

need for new treatment

psoriasis. Large market

opportunity: USD 20bn+

market for moderate

psoriasis alone

Proprietary technology platform with control over value chain underpins both businesses 04 05 06

20 % y/y revenue growth

Positive sales prospects for H2-2022, including increased order intake from the Chinese market

Received positive opinion from EMA on Paediatric Investigational Plan

Outlines the Group's intention to investigate HRO350 for children with psoriasis

New and extended strategic partnership agreement with Kotler

Opens access to a larger part of the Chinese market, and includes potential collaboration within Pharma space in China

Financial results in line with expectations

Gross margin 27,6 % / EBITDA MNOK -14,4

H1-2022 highlights

Phase IIb clinical study on HRO350 in mild-to-moderate psoriasis largely on track 1st patient enrolled to clinical trial expected Q4-2022 (6 month inclusion period). 6-months data read out H2-2023

H1-2022 operational review

Operational review Nutra

• Continued growth with existing customers and gaining new customers in key markets
• 24 % y/y growth in B2B sales
• Increasing sales of finished products vs. bulk oil
• Participated in several trade conferences in Europe and USA during H1, which helped increase the pipeline for 2022
• COVID continued to impact ability to meet with customers, but the situation is improving
• The Romega brain product is developing well in the market – high Romega DHA content supports brain health
• B2C subscriber base is stable
• B2C-team strengthened with a new SVP for Sales & Marketing

Nutra performance on schedule for 2022

B2B B2C

• Academic seminars
• Professional salons
• KOL marketing
• Trade shows
• ROMEGA Prenatal, Eye Health and Brain Health deployed via e-commerce platforms, five supporting channels and three business partners
• Kotler has increased its headcount for the Arctic Bioscience partnership to more than 50, indicating substantial resources are invested in the long-term growth strategy

		Deployed products into various e-commerce platforms
	Product portfolio development and market positioning			8 6 6 7 9			- mhe care 北京美和眼科
	ROMEGA Prenatal Nutrient for healthy brain development	>	>	>	V	V
ROMES S.A. 10	ROMEGA Eye health Nutrient for eye Health	>	V		>		V
	ROMEGA Brain Health Nutrient for brain Health	V	V		>

Positive Nutra progress in China through the Kotler partnership

• 7 nutraceutical observational studies in prenatal, brain and eye health with data gathered here also expected to contribute to long-term growth in ROMEGA sales

• Most important study will recruit 200 pregnant women to observe the benefit of ROMEGA prenatal for pregnant women as well as the brain development of baby and is sponsored by Guangdong Women and Children's Hospital

E-COMMERCE CHANNELS OFFLINE MARKETING CHANNELS

• Due to global uncertainties, increased prices on materials and equipment, combined with extended delivery times, the Board of Directors of Arctic Bioscience in April decided to postpone the investment decision for the construction of a full-scale manufacturing facility

GMP manufacturing facility

• The Group has evaluated alternative solutions to secure capacity to manufacture materials for the planned phase III clinical trial. A final decision on next steps is expected during the second half of 2022
• Financial implication is that overall, 2022 capex for Arctic Bioscience will be significantly lower than anticipated

Operational review Pharma

Properties of investigational medicinal product HRO350

Proprietary extract of phospholipid esters from herring roe

HRO350 is a complex mixture of biologically important phospholipids

Herring roe is unusually rich in specific phospholipid esters, which are extracted and encapsulated for per-oral delivery

Composition of several lipid classes and their metabolites with immunoresolving properties

GMP production, oral soft capsules

Conducting cellular studies with Norwegian R&D institutions to further investigate mode-of-action in psoriasis

Core structure of phospholipid esters from herring roe

Example phospholipid: PC(22:6n3/16:0)

CONFIDENTIAL

21 million mild-to-moderate psoriasis patients in EU and US alone

Source: HRO350 Commercial Opportunity Assessment in Psoriasis, IQVIA report Notes: 1) Severity split based on figures from the UK, Germany, France, Italy and Spain

Developing HRO350 - a novel oral drug for mild-to-moderate psoriasis with significant market potential

There is a large proportion of patients who cannot be put on biologics and it is lot trickier and not so straight forward to put them on existing treatments. They need effective new topicals or orals."

– Clinical lecturer, Dermatology, UK

"We need cheaper options for moderate patients. We have majority of patients with PASI 5-10 but we do not want to give biologics to all and phototherapy is not feasible for everyone"

- Senior Physician, Department of Dermatology, Germany

Primary endpoint met in pilot clinical trial Improvement in Quality of Life

PASI: Psoriasis Area and Severity Index (0–72-point scale where < 10 is mild-moderate disease)

Primary endpoint: change in PASI vs placebo at week 26 Open Label Extension to week 65 showed effect is sustained and increases further over time

DLQI 6-10: Moderate effect on patient´s life

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. (Accepted, in press). Data on file (PASI>5.5 week 26-15 months). Pictures courtey of Dr. Tveit.

Milestone overview HRO350 drug development

HRO350 is an investigational medicinal product

2021	2022	2023	2024
GMP study drug production			Development of formulation for children
	Phase IIb clinical trial
Site feasibility	IMPD and CTA	Enrollment	Data read-outs	Publications
				Pharmacokinetic study
				Phase III clinical program

MAA: Marketing Authorization Application; IMPD: Investigational Medicinal Product Dossier; CTA: Clinical Trial Application; GMP: Good Manufacturing Practice

Plan as presented at listing and tasks on track, certain tasks took longer than expected

Key pharma focus: Keeping on track with phase IIb clinical trial

First half 2022

• Production of HRO350 Investigational Medicinal Product for the clinical trial
• Compiling documentation and writing Investigational Medicinal Product Dossier
• Preparing submission of Clinical Trial Application
• Preparing international GMP shipments to sites
• Agreed with EMA on Paediatric Investigation Plan for HRO350

Pharma Pipeline

Paediatric Investigation Plan (PIP) for HRO350 agreed with EMA

*The Paediatric Committee of the EMA provides opinions on the quality, safety and efficacy of a medicine for use in the paediatric population Reference: Augustin M, Glaeske G, Radtke MA, Christophers E, Reich K, Schäfer I. Epidemiology and comorbidity of psoriasis in children. Br J Dermatol. 2010 Mar;162(3):633-6. doi: 10.1111/j.1365-2133.2009.09593.x. Epub 2009 Nov 18. PMID: 19922529.

Component of the regulatory drug development journey for HRO350

Prerequisite for filing for marketing authorization (MA) for new medicines in Europe

Requirement before starting the phase IIb study in adults

High unmet medical need PIP agreed with the Paedatric Committee* of the EMA Q1 2022

1% of children under age 18 suffer from psoriasis

Limited treatment options

A future paediatric indication could increase patient population who could have benefit of HRO350

~15 million premature births annually worldwide1

~5% are extremely premature (< 28 weeks)2

Babies born this early do not have fully developed brains, and therefore a high risk of disability and complications

Novel drug candidate for brain development in extremely premature infants

Smerud cover cost of clinical program

Arctic Bioscience to cover cost of formulation development

Orphan designation to be sought

In parallel with HRO350 clinical program for psoriasis

High unmet medical need Collaboration with Smerud Medical Research International

Platform technology with potential beyond psoriasis

Properties of HRO350 may have relevance in inflammatory diseases

Phospholipid esters and metabolites Potential relevance in diseases associated with inflammatory pathologies

HRO350 contains active substances with the potential to affect inflammatory processes

H1-2022 consolidated group financial review

Key financial figures

Revenue up 20% y/y to 14,4 MNOK, with also positive sales prospects for H2-2022, including increased order intake from Chinese market

• Stable revenue development in B2C-segment in line with

• B2B revenue ex. China up 7,3 %

- expectations

• share going forward

• Revenue from the Chinese market has had a very positive development, and is expected to have an increasing relative

Increased gross margin of 27,6 % vs. 26,0 % first six months

• Experienced cost increases from our suppliers, especially related to sub-production costs and freight

Operating loss of -16.2 MNOK in line with expectations

• -

• Listing costs related to IPO included in H1-2021 figures

• Total OPEX in H1-2022 below budget, increased cost focus implemented during first half of 2022

TNOK H1-2022 H1-2021 Income statement

Total revenues	14 402	11 968
Cost of goods sold	10 431	8 862
Gross profit	3 971	3 106
Gross margin %	27,6 %	26,0 %
Employee benefits expenses	7 472	9 653
Depreciation and amortisation expenses	1 802	826
Other expenses	10 915	13 392
Operating profit (loss)	-16 218	-20 765
Finance income	1 593	1
Finance expenses	320	464
Net financial items	1 273	-463
Net profit (loss) for the period	-14 945	-21 228

Breakdown of Nutra revenue

REVENUE BY BUSINESS LINE REVENUE BY REGION

Strong cash position at end of period of 177,8 MNOK

Cash flow from operations -18,9 MNOK mainly driven by negative operating result and increases in current assets

Cash flow from investments -31,4 MNOK

• 24,5 MNOK for HRO350 phase IIb study
• 5,9 MNOK for GMP new factory facility (prelim. project)

Limited changes due to financing activities

• Share capital and share premium increased with a total of 0,75 MNOK due to exercise of share options first half of

2022

Cash flow statement

TNOK	H1-2022	H1-2021
Profit/loss before tax	-14 945	-21 228
Ordinary depreciation	1 802	826
Change in inventory	-4 274	-3 637
Change in AR	-2 827	3 938
Change in AP	-349	-5 378
Change in other accrual items	1 649	-2 649
Net cash flow from operating activities	-18 944	-28 129
Investments in tangible and intangible assets	-31 400	-22 589
Net cash flow from investment activities	-31 400	-22 589
Repayment of long-term liabilities	0	-541
Net change in bank overdraft	0	-4 618
Proceeds from equity	750	302 012
Net cash flow from financing activities	750	296 853
Net change in cash	-49 594	246 135
Cash at the start of the period (1.1)	227 362	12 600
Cash at the end of the period (30.6)	177 768	258 735

-

Solid financial position at end of period

Total assets 327,9 MNOK

• Fixed assets of 104,1 MNOK mainly comprised of intangible assets related to pharma R&D

• Current assets of 233,8 MNOK mainly comprised of 177,8 MNOK in cash and 32,8 MNOK in inventory

Total equity 306,4 MNOK, corresponding to a equity ratio

of 93,4 %

The Group has no long-term debt, and the level of total liabilities, 21,6 MNOK, has been stable during the first half of 2022

Financial position

TNOK		30.06.2022	31.12.2021
ASSETS
	Non-current assets:
	Intangible assets	81 697	58 548
	Property, plant and equipment	22 441	15 993
	Total non-current assets	104 138	74 541
	Current assets:
	Inventories	32 800	28 526
	Accounts receivable	10 532	7 705
	Other current assets	2 681	3 341
	Cash	177 768	227 362
	Total current assets	223 781	266 934
	TOTAL ASSETS	327 919	341 475
EQUITY & LIABILITIES
	Equity: Share capital	2 438	2 430
	Share premium reserve	303 921	318 124
	Total equity	306 359	320 554
	Short-term liabilities:
	Liabilities to financial institutions	0	4
	Accounts payable	8 011	8 360
	Public duty payables	1 619	2 422
	Other current liabilities	11 930	10 135
	Total short-term liabilities	21 560	20 921
	TOTAL EQUITY & LIABILITIES	327 919	341 475

-

Business outlook

• Submit Clinical Trial Application (CTA) in Q3-2022
• First patients to be enrolled in phase IIb clinical study on HRO350 in Q4-2022 with a 6 month inclusion period
• Continue research collaboration with Smerud on new drug candidate for brain development in extremely premature children

• Process regarding commercial partner will start and run concurrently with the clinical trial of HRO350

• Materialize on positive sales prospects and received order intake for H2-2022

• Enter new geographies for B2B, including South America and further access to APAC regions
• Intensify participation at customer/clients events, post Covid
• Continue to benefit from the relationship with Kotler on sales & marketing activities and regulatory approvals in China
• Continue to establish GMP manufacturing of materials for the planned phase III clinical trial according to timeline in previously disclosed plans
• Decision and action to be taken regarding a down-scaled production facility solution
• Continue with product development for Nutra

H2-2022 objectives

PHARMA NUTRA TECHNOLOGY / R&D

H2-2022 financial guidance

Overall budget for phase IIb study in line with earlier guiding. Major value creating milestone expected with the 6 month data read out H2- 2023

HRO350 phase IIb study fully funded

ABS continues to invest in operations. Year-end cash position will be dependent on decisions on alternative investments regarding production facilities, and the progress in the Pharma projects

Cash position year-end will be strong

Positive sales prospects and received order intake for H2-2022 indicates a y/y revenue growth for 2022 in the range of 60 – 70 %

y/y revenue growth higher than earlier guiding

Increased COGS will partly be balanced by cost focus on other opex. New hires will increase personnel expenses compared to H1-2022

FY EBITDA around -35 to -30 MNOK

Contact

CEO - Christer L. Valderhaug: christer@arctic-bioscience.com

CFO - Jone R. Slinning jone@arctic-bioscience.com

Medical Director - Runhild Gammelsæter: runhild@arctic-bioscience.com

Subscribe to news

www.arctic-bioscience.com/investors/home