ArcticZymes Technologies — Interim / Quarterly Report 2014

Apr 30, 2014

First Quarter 2014

30 April 2014

Svein W. F. Lien – CEO

Agenda

• Highlights
• Q1 financials
• Beta-Glucans
• – advanced wound care
• Enzymes
• – molecular testing
• Summary and Outlook

Highlights

BetaGlucans	Enzymes
Obtained CE-marking for Woulgan® • Biogel	• Increasing end-user sales but lower rSAP shipments to OEM partners

• Started market evaluation process with Smith & Nephew
• Launched Woulgan® Biogel on web shop

• Signed beta-glucan supply agreement with Nutreco Skretting, marking re-entry into the animal health market

• rSAP shipments to OEM partners

• Gaining traction with several new OEM partners
• Expecting broader adoption of the enzyme portfolio in the second half of 2014

Financials

• Highlights
• Q1 financials
• Beta-Glucans
• – advanced wound care
• Enzymes
• – molecular testing
• Summary and Outlook

Financial Highlights

NOK million	Q1 2014		Q1 2013		2013
Enzymes	3.2		4.5		15.8
Beta-Glucans	0.9		1.4		6.3
Sales revenues		4.1		5.9		22.1
Enzymes	-1.5		-1.0		-2.6
Beta-Glucans	-5.6		-5.1		-18.9
EBITDA		-7.1		-6.1		-21.5
Profit before tax		-7.6		-6.6		-22.9

Cash Flow and Cash Position

(Amounts in NOK 1.000)	Q1 2014	Q1 2013	2013
Operating activities	-10.6	-7.4	-17.4
Investing activities	-1.9	-0.3	-1.6
Financing activities	0.7	43.2	43.2
Changes in cash and cash equivalents	-11.9	35.5	24.3
Cash and cash equivalents at the beginning	33.7	9.4	9.4
of period
Cash and cash equivalents at end of period	21.8	44.9	33.7

• Strengthened cash balance and equity through share issue raising NOK 78 million at NOK 20 per share

Biotec BetaGlucans

• Highlights
• Q1 financials
• Beta-Glucans
• – advanced wound care
• Enzymes
• – molecular testing
• Summary and Outlook

Biotec BetaGlucans

Segment numbers

NOK million	Q1 2014	Q1 2013	2013
Sales Revenue	0.9	1.4	6.3
Other income	0.0	0.3	1.2
Operating expenses	-6.5	-6.8	-26.4
EBITDA	-5.6	-5.1	-26.5
Depreciation & Amortization	-0.4	-0.3	-1.3
EBIT	-6.0	-5.4	-20.2

Obtained CE-marking of Woulgan

• Major milestone achieved in April, with the CE-marking of Woulgan® Biogel
• Approved by DNV Nemko Presafe with the UK Medicines and Healthcare products Regulatory Authority (MHRA) as Competent Medicinal Authority
• Classified as a medical device in Class III, rule 13 under the EU Directive for Medical Devices
• Advanced classification for medical devices with secondary, ancillary medicinal effects – all claims accepted
• Main initial indications will be diabetic ulcers, leg ulcers, pressure ulcers and burns
• Product also approved for other wounds such as post-surgery wounds, trauma wounds, lacerations and abrasions

Woulgan® has shown clear beneficial effects of SBG

• SBG effect in healing of diabetic foot ulcers covered in article published in the 2014 Journal of Diabetes
• Advanced classification opens unique opportunities for a gel 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.»

collaboration

• Addressing a large market in need of new and cost-effective wound healing solutions
• Running a market evaluation trial with Smith & Nephew
• Establishing end-user efficiency in routine clinical setting
• Forming commercial strategy
• Clarifying the basis for long-term partnership

The European market opportunity Market estimate of annual number of wounds

Population Europe	571 million
# of Diabetic Foot Ulcer	2.0 million
# of Leg Ulcers	0.9 million
# of Pressure Ulcers	5.0 million
# of burns	1.0 million
Total # of wounds Europe	≈ 9.0 million

Europe represents approximately 1/3 of the total available wound market

Model for calculation:

Push / Pull strategy is key to succeed with distribution of advanced products:

Push = Distribution Partner(s)	Pull = Marketing/ Testing/Opinion leaders
We should not take short term actions that may destroy the larger opportunities	User and opinion leader support can never be wrong = short term focus
Large market opportunities will	Also test sales to get market

Woulgan® claims and market

Market Segments:	Paid by:
Hospitals and Wound Clinics	Dependent on country but normally funded by Budget
Primary Care	Reimbursement = National application and process
OTC/Individuals	Reimbursement and individuals

Web-shop sales creates interest

• Launched web-shop on 8 April
• Sales statistics per 29 April:
• Number of tubes: 3096
• Revenue (excl. VAT): NOK 152'

Supply agreement with Skretting

• Signed preferred supplier agreement with leading aquaculture feed producer Skretting AS
• Supplying beta-glucans for fish and shrimp

• Marks a re-entry into the animal health market

• Highlights

• Q1 financials
• Beta-Glucans
• – advanced wound care
• Enzymes
• – molecular testing

Summary and Outlook

ArcticZymes Segment numbers

NOK million	Q1 2014	Q1 2013	2013
Sales Revenue	3.2	4.5	15.8
Other income	1.2	1.1	5.1
Operating expenses	-5.9	-6.6	-23.5
EBITDA	-1.5	-1.0	-2.6
Depreciation & Amortization	-0.2	-0.3	-1.1
EBIT	-1.7	-1.2	-3.7

Revenue development

• Fluctuating rSAP sales to key OEM – lower volumes in Q1'14
• Higher end-user sales vs. both Q1'13 and Q4'13
• Sales through direct sales channels, outbound marketing campaigns and web-shop grew 25% vs Q1'13

Broadening the distribution

• Broadened the base of OEM customers with agreements with global leaders like GE Healthcare Life Sciences and New England Biolabs over the past years
• Continuing to add regional distribution partners
• Signed agreements with several new partners in Q1'14, including:
• Q-Bio
• Kem-En-Tec
• Elisabeth Pharma
• Techtum
• Commercial OEM opportunities increasing for both the Cod-UNG enzyme and the Dnase portfolio in the tier 2 segment

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

• Own R&D focusing on new ready-touse enzyme kits and functionalized enzymes

• Highlights

• Q1 financials
• Beta-Glucans
• – advanced wound care
• Enzymes
• – molecular testing
• Summary and Outlook

Outlook

Biotec BetaGlucans:

• Reviewing commercial strategy for Woulgan® Biogel in market evaluation trial with Smith & Nephew – limited launch outside of the trial
• Other beta-glucan sales set to increase with Nutreco Skretting feed agreement commencing in mid-2014

ArcticZymes:

• Gaining traction with more OEM partners within enzymes, and expecting broader adoption of the enzyme portfolio going forward

Questions?

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