ArcticZymes Technologies — Investor Presentation 2014

Jan 23, 2014

Presentation Nordnet

23rd January 2014

Svein W. F. Lien – CEO

Agenda

• Highlights
• Q3 and 9M financials
• Beta-glucans
• – advanced wound care
• Enzymes
• – molecular testing
• Summary and Outlook

Highlights by Q3

Beta-glucans

• MHRA confirms the classification of Woulgan® Biogel as a class III medical device under rule 13
• Awaiting CE-marking; in communication with Presafe/MHRA about last outstanding issues
• Product launch and market evaluation process with Smith & Nephew to start upon CE-marking

• Gaining traction with the large OEM accounts with Cod UNG, dsDNase, and SAN enzymes

Enzymes

• Seeking to sign more enzyme supply agreements with global leaders in molecular biology
• Strengthening the business development function in the US
• Continuing development of userfriendly enzyme kits

Financials

• Highlights
• Q3 and 9M financials
• Beta-glucans
• – advanced wound care
• Enzymes
• – molecular testing
• Summary and Outlook

Financial Highlights

NOK million	Q3 2013		Q3 2012		9M 2013		9M 2012		2012
Enzymes	4.7		1.9		11.9		8.4		12.8
Beta-glucans	1.7		2.1		4.9		7.0		8.7
Sales revenues		6.3		4.0		16.8		15.4		21.5
Enzymes	-0.1		-3.2		-2.1		-6.5		-7.8
Beta-glucans	-4.3		-3.2		-13.1		-9.7		-14.8
EBITDA		-4.4		-6.4		-15.2		-16.2		-22.6
Profit before tax		-5.0		-7.0		-16.9		-17.8		-24.3

Cash Flow and Cash Position

	Q3		9M
(Amounts in NOK 1.000)	2013	2012	2013	2012
Operating activities	-6,765	-6,683	-16,488	-20,864
Investing activities	-51	-508	-690	-2,694
Financing activities	0	-33	43,259	-33
Changes in cash and cash equivalents	-6,816	-7,224	26,081	-23,591
Cash and cash equivalents at the beginning of period	42,276	19,708	9,379	36,075
Cash and cash equivalents at end of period	35,460	12,484	35,460	12,484

Beta-glucans – Biotec BetaGlucans

• Highlights
• Q3 and 9M financials
• Beta-glucans
• – advanced wound care
• Enzymes
• – molecular testing
• Summary and Outlook

MHRA confirms classification of Woulgan® Biogel

• The UK Medicines and Healthcare products Regulatory Authority (MHRA) confirms classification of Woulgan® Biogel as a class III Medical Device under rule 13
• Advanced classification unique for a gel in the wound market
• Enables Biotec BetaGlucans to claim medical effects in labelling and marketing
• CE-marking will be issued by Presafe as the Notified Body; the parties are in communication about the last outstanding issues
• The importance of class III rule 13 is the claims…..

Woulgan® Biogel: Principal label claims

• Woulgan® Biogel has high water content and the formulation makes the gel effective in assisting the debridement and desloughing process in dry necrotic wounds. It is able to rehydrate necrotic tissue, enhancing the natural autolysis processes in wound healing.
• Woulgan® Biogel formulation increases the moisture within the wound through water donation, whilst maintaining a moist wound environment for optimal wound healing and preventing desiccation.
• The high viscosity and thixotropic properties of the Woulgan® Biogel formulation allows the gel to be easily applied and remains in place. It also reduces the risk of leakage and maceration to the surrounding skin, while maintaining a barrier function and a moist environment.
• Woulgan® Biogel is an aqueous gel which gives a cooling and soothing sense for the patient.
• Woulgan® Biogel is biocompatible and safe to use.

Woulgan® Biogel: Ancillary action label claims

• In experimental wound healing studies, using diabetic mice, Woulgan® Biogel has demonstrated its ability to be significantly more efficacious in wound healing than a gel without SBG or an occlusive secondary dressing alone.
• Woulgan® Biogel can support the natural wound healing process within the wound bed.
• Woulgan® Biogel also exercises its biological effects in terms of increased wound contraction as one of the hallmarks combined with allowing increased influx of phagocytic cells to the wound bed.
• In-vitro studies have shown that the SBG content in Woulgan® Biogel modulates the immunological system by activating macrophages and other phagocytic cells having specific cell receptors for SBG.
• Attracting and stimulating phagocytic cells in the wound has a potential for reducing the risk for contamination and microbial infection in the wound bed through the body's own defense mechanisms.
• A gel containing 2% SBG has been employed in several clinical trials, and has demonstrated its ability to aid in inducing improved and more rapid wound healing of ulcers in diabetes patients as well being safe and well tolerated.

Obtained ISO 13485 certification and validated production processes

• Certified for development, production and sales of soluble beta-glucans
• Manufactured three real-scale validation batches, to be used in a planned trial and evaluation period

collaboration

• Market evaluation trials commencing upon receipt of the CE-mark
• Evaluation in limited number of centres across Europe
• Seeking to establish end-user efficacy in routine clinical setting
• Smith & Nephew holds exclusive, non-transferable/sublicenseable technology rights until end of trials
• Trial preparations and other collaboration activities are developing as planned

Targeting a mass market in wounds

• Partner Smith & Nephew shares the vision of making Woulgan® Biogel a mass product
• Large market in need of new and cost-effective wound healing solutions

• First indications; Diabetic ulcers, leg ulcers, pressure ulcer and burns

Our goal is to make Woulgan® Biogel a cost effective and high volume advanced wound care product

Promising feedback from early users

• The overall composition of Woulgan® Biogel, the choice and concentration of hydrogel components and the concentration of the beta-glucan component SBG is based on years of research and a number of studies
• Many have tested the product and we have received strong positive feedback from initial users making us convinced about the positive effect of the product

The phase II study and subsequent animal models showed quite rapid response which will support the market penetration

Journal of Diabetes Investigation publishing Study of SBG, the medicinal ingredient in Woulgan® Biogel

The European market opportunity Market estimate of annual number of wounds

Population	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
Europe is about 30% - dependent on definitions	50% of world market,

• Highlights
• Q3 and 9M financials
• Beta-glucans
• – advanced wound care
• Enzymes
• – molecular testing

Summary and Outlook

Revenue development

• Gaining traction with new OEM partners
• New England Biolabs
• GE Healthcare
• Particular interest for Cod UNG, dsDnase and SAN enzymes
• Generally increasing awareness among both diagnostic and research companies ⁰

Strengthening business development

• Strengthening the US business development organization
• Hired Andrew Ward as US Business Development Manager in Boston
• Ensuring execution of the commercial strategy in North America
• Continued focused on the top-end of three distinct customer segments:
• 1. Tier 1 Key Accounts; Large multi-national companies with scope and scale to integrate ArcticZymes products and key components in branded kits
• 2. Tier 2 Accounts; Direct sales towards clients with geographical strength and/or channel ownership
• 3. End-user segment execution; primarily a low-cost pull strategy serving to develop brand online web-shop

Status sales and customer relations:

• We are now in communication with almost all of the larger companies in this industry
• Our products are quite unique and generate enthusiasm
• The lead times for these processes can be quite long so we need a mix between these larger more strategic accounts and smaller accounts
• We have therefore also started to appoint distributors for own labelled products and continue the development of kits and kit components
• All to ensure a healthy mix of short- and long term growth

R&D focus on user-friendly enzyme kits

• Continuing to develop ready-to-use enzyme kits
• Launched PCR decontamination kit in March 2013
• Launched Heat&Run® gDNA removal kit in August 2012
• Grants from the Norwegian Research Council support development of further kits to meet demands and requests from both OEM customers and researchers

• A number of new enzymes and kit components in the pipeline to expand existing market position

• Highlights

• Q3 and 9M financials
• Beta-glucans
• – advanced wound care
• Enzymes
• – molecular testing
• Summary and Outlook

Summary and Outlook

• Awaiting final decision of CE-marking of Woulgan® Biogel following very positive confirmation of the classification as a class III, rule 13 medical device:
• Presafe have confirmed they have finalized their part
• MHRA has very few outstanding issues left
• Product launch and market evaluation process with Smith & Nephew to start upon CE-marking – pre-work started
• Seeking to expand the enzyme business by signing more supply agreements in both the diagnostic and research markets
• Continuing development of novel user-friendly enzyme kits

Questions?

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