ArcticZymes Technologies — Interim / Quarterly Report 2014

Aug 13, 2014

Second Quarter 2014

13 August 2014

Svein W. F. Lien – CEO

Agenda

• Highlights
• Q2 financials
• Beta-Glucans
• – advanced wound care
• Enzymes
• – molecular testing
• Summary and Outlook

Highlights

Beta-Glucans

• Woulgan® Biogel receiving positive product feedback from users
• International market evaluation trial with Smith & Nephew is progressing
• Started deliveries under betaglucan supply agreement with Nutreco Skretting
• Doubled revenues from Q2'13

• Sharply higher deliveries to main OEM partners

Enzymes

• Continuing to broaden OEM client portfolio
• More than doubled revenues from Q2'13
• Positive operating profit

Expect overall revenue growth going forward

Financials

• Highlights
• Q2 and H1 financials
• Beta-Glucans
• – advanced wound care
• Enzymes
• – molecular testing
• Summary and Outlook

Financial Highlights

NOK million	Q2 2014		Q2 2013		H1 2014			H1 2013		2013
Enzymes	5.4		2.7		8.7		7.2		15.8
Beta-Glucans	3.9		1.8		4.7		3.2		6.3
Sales revenues		9.3		4.6		13.4		10.5		22.1
Enzymes	1.0		-1.0		-0.5		-2.0		-2.6
Beta-Glucans	-3.4		-3.7		-8.9		-8.8		-18.9
EBITDA		-2.3		-4.7		-9.4		-10.8		-21.5
Profit before tax		-2.5		-4.9		-10.0		-11.5		-22.9

* The segment figures reflect that all costs are allocated to the two operating units

Cash Flow and Cash Position

(Amounts in NOK 1.000)	Q2 2014	Q2 2013	H1 2014	H1 2013	2013
Operating activities	-7.7	-2.4	-18.3	-9.7	-17.4
Investing activities	-0.3	-0.3	-2.2	-0.6	-1.6
Financing activities	75.2	0.1	75.9	43.3	43.2
Changes in cash and cash equivalents	67.2	-2.6	55.3	32.9	24.3
Cash and cash equivalents at the beginning of period	21.8	44.9	33.7	9.4	9.4
Cash and cash equivalents at end of period	89.0	42.3	89.0	42.3	33.7

• Strengthened cash balance and equity through share issue raising gross proceeds of NOK 78 million at NOK 20 per share in April

Biotec BetaGlucans

• Highlights
• Q2 and H1 financials
• Beta-Glucans
• – advanced wound care
• Enzymes
• – molecular testing
• Summary and Outlook

Biotec BetaGlucans

Segment numbers

NOK million	Q2 2014	Q2 2013	H1 2014	H1 2013	2013
Sales Revenue	3.9	1.8	4.7	3.2	6.3
Other income	0.0	0.5	0.0	0.8	1.2
Operating expenses	-7.2	-6.0	-13.7	-12.9	-26.4
EBITDA	-3.4	-3.7	-8.9	-8.8	-26.5
Depreciation & Amortization	-0.4	-0.3	-0.8	-0.6	-1.3
EBIT	-3.8	-4.0	-9.7	-9.4	-20.2

* The segment figures reflect that all costs are allocated to the two operating units

• Sales revenue increase reflecting start of deliveries to Nutreco Skretting for aquaculture feed, and the limited launch of Woulgan® Biogel

Receiving positive product feedback on Woulgan® Biogel

• Shipped10,000 tubes since obtaining CEmark, including website sales and test samples
• Distributed test samples to 15 health institutions in Norway, and approximately 100 other health care professionals and key opinion leaders
• International market evaluation trial with Smith & Nephew is progressing
• Expecting results from use in routine clinical settings in UK and Germany during 2H'14
• Will clarify commercial strategy and potential long-term partnership

Male patient with venous leg ulcers. Treatment with Woulgan Biogel for 3 times a week for 1, 5 months. The patient refused wearing compression and healing haltered after initial response. He continued with Woulgan any way and ulcers continued to improve over the next 4,5 months

"I have tried Woulgan Biogel on eczema on my hand. Visible improvement after one week, the eczema is gone, only some small wounds left." Nurse

"I have struggled with chronic wounds on the palm of my hand and fingers for 2 years. After one week treatment this has greatly improved. Fantastic. This is a product that's becoming a "must have" for me."

"I have tried Woulgan Biogel on dry skin/rash on my leg. Improvement was observed after 2-3 days"

Studies show clear beneficial effects of SBG in Woulgan® Biogel

• The positive effect of SBG in healing of diabetic foot ulcers was covered in the 2014 Journal of Diabetes
• Classification as advanced medical device opens unique opportunities for Woulgan® versus other gels in the wound market

Zykova et al 2014;

«Macrophage stimulating agent soluble yeast b-1,3/1,6-glucan as a topical treatment of diabetic foot and leg ulcers: A randomized,double blind, placebo-controlled phase II study.»

Broad indication area -large wound healing market opportunity

• The European market counts ~9 million wounds in the initial indication areas

Diabetic ulcers, leg ulcers, pressure ulcers, burns

• Approved also for other major wound areas

Post-surgery wounds, trauma wounds, lacerations, and abrasions

Europe represents ~1/3 of the total available global wound market

Woulgan® Biogel market approach

Pros and cons of partnership options

Supply agreement with Skretting

• Started deliveries of betaglucans for fish and shrimp feed to leading aquaculture company Skretting AS
• Marks a re-entry into the animal health market
• Expected to increase revenues and operating profits in the second half of the year

Granted US beta-glucan cancer patent

• US patent issued to Memorial Sloan-Kettering Cancer Center (MSKCC) with Biotec Pharmacon as exclusive licensee
• Covers inventive treatment of several types of cancer using combination of monoclocal antibodies and (1,3) betaglucan

• Result of ongoing cooperation between MSKCC and Biotec

• Highlights

• Q2 and H1 financials
• Beta-Glucans
• – advanced wound care
• Enzymes
• – molecular testing

Summary and Outlook

ArcticZymes Segment numbers

NOK million	Q2 2014	Q2 2013	H1 2014	H1 2013	2013
Sales Revenue	5.4	2.7	8.7	7.2	15.8
Other income	1.0	1.5	2.2	2.7	5.1
Operating expenses	-5.4	-5.3	-11.3	-11.9	-23.5
EBITDA	1.0	-1.0	-0.5	-2.0	-2.6
Depreciation & Amortization	-0.2	-0.3	-0.5	-0.5	-1.1
EBIT	0.8	-1.3	-0.9	-2.5	-3.7

• Increased deliveries of rSAP to the main OEM customers as well as higher sales of Cod-UNG and other enzymes
• Growing end-user sales

Revenue development

• Fluctuating rSAP sales to key OEM – low volumes in Q1'14 but high in Q2'14
• Increasing end-user awareness and steady growth in end-user sales

Broadening the distribution

• Broadened the base of OEM customers with agreements with global leaders like GE Healthcare Life Sciences, New England Biolabs and Amresco (VWR) over the past years
• Continuing to add regional distribution partners
• Signed agreements with several new regional distribution partners in H1'14
• Exploring Asia: Participating in Analytica Shanghai in September

R&D update

• Working to broaden the product offering of marine enzymes
• Participating in the NextZyme project starting in the third quarter 2014
• Have received NOK 4 million grant from the Norwegian Research Council

• Also focusing on new ready-to-use enzyme kits and functionalized enzymes

• Highlights

• Q2 and H1 financials
• Beta-Glucans
• – advanced wound care
• Enzymes
• – molecular testing
• Summary and Outlook

Outlook

• Market evaluation for Woulgan® Biogel will determine commercial strategy – expected to be finalized during the second half of the year
• Continue to expand operation both in beta-glucans and enzymes
• Expect overall revenue growth going forward

Questions?

Svein W. F. Lien Mob: +4792289323 Email: sl@biotec.no www.biotec.no