ArcticZymes Technologies — Investor Presentation 2018

Apr 26, 2018

Q1 2018 Presentation

26.04.2018, Oslo

Agenda

• Highlights

• Beta-glucans

• Animal- and Consumer health
• Cancer
• Advanced wound care

• Enzymes

• Molecular and new markets
• Q1 Financials
• Outlook for 2018

Biotec in brief

A corporation with two independent versatile technology platforms who both benefit from underlying market growth

Beta-glucans

• A common unique technology platform with immune modulating products for improved outcome
• Woulgan proven to reactivate wound healing and with commercial progress in key markets
• An adjuvant in selective cancer treatments

Enzymes

• Fast growing business that is developing and selling unique enzymes for tommorows personalized healthcare:
• DNA sequencing
• Gene therapy
• Diagnostics

Highlights Q1 2018

• Q1 sales of MNOK 14.2 (18.2)
• EBITDA of MNOK -5.9 (-4.1)
• 300-patient study in UK confirmed Woulgan's resilient effectiveness
• ArcticZymes doubled SAN customers to more than 90
• Operating expenses continue to decrease with a shift in expense base from betaglucans to enzymes

Sales & Gross contribution

Beta-glucans

Activities for M-Glucan® and M-Gard®

Over 20 years experience with immune modulating beta-glucans

Animal health

• Sales experiences annual and seasonal fluctuations driven by demand for health feed within the aquaculture sector
• Managed to prolong contract with largest customer, but also lost a less significant bid indicating the margin pressure facing the feed manufactures

Consumer Health:

• Continous business relationsship with major US player
• Including orders received in Q2, ahead of last years business volume
• Actively working on expanding the customers base participating in fairs etc.
• Potential new customers perform stringent due-diligence as part of purchasing process. Q1 has seen a high level of activity in moving leads through "the sales funnel"

SBG® in current neuroblastoma vaccine trial

SBG® and Neuroblastoma

• High impact indication in children with a large unmet medical need (<50% survival in highrisk patients)
• Proof of concept study for use of SBG® as adjuvant in immunotherapy of cancer
• Data from trial to be presented at Advances in Neuroblastoma Research 2018 at 9-12 May in San Francisco
• A promising neuroblastoma treatment is likely to be considered under rare paediatric disease designation – giving a speedier approval process

Relapse-free survival (red) and overall survival (black) of the 15 study patients from the start of the vaccination (Kushner et al 2014, Clinical Cancer Research 20:1375-1382).

7

SBG® in immunotherapy of neuroblastoma

Clinical trial program of the bivalent ganglioside vaccine in combination with SBG® for high-risk neuroblastoma

2009 –	2013 –	2016 –	2019 –
2013	2016	2019	2021
Phase I Safety	Phase I/ II Efficacy	Phase II Efficacy	Phase II/III Efficacy
≥2nd remission patients	≥2nd remission patients	≥1st remission patients	Randomised Controlled Trial ≥1st remission patients
15 patients.	84 patients.	85 patients to be included.	Under planning
Results published in Clinical	Initial results to be presented at	About 70 included by end April
Cancer Res 2014	ANR18 in San Francisco May 2018.	2018.
	Efficacy in relapsed or refractory patient population	Commence initial approval process	Possible approval of combined treatment for relapsed neuroblastoma

Status Woulgan®

• Large-scale UK study shows unique positioning for Woulgan
• strong healing benefits
• user-friendly format
• Woulgan is mostly used in out-patient settings – salesforce coverage is key:
• Large number of call-points for salesforce.
• Lack of scale for a "one-product" company.
• Identifying additional partners for faster growth of franchise.

Activities in all markets

	UK	Nordics	Germany
Clinical	Strong results from 300 patient study Patients with ulcer-type wounds treated	Completed 2 manuscripts from Nordic case series
	with Woulgan show 62% healing rates versus 30% for standard care at 12 weeks	Submitted for publication in Q2 2018
	Manuscript submitted for publication in Q2
Market Access	Woulgan can be prescribed and reimbursed across UK where local policy permits its use.	Gained a listing for Woulgan in 5Klovern, effective from April	G-BA issued new directive for reimbursement of dressings. Starting April 2019 products with
			active healing claims, e.g. Woulgan will not be
	Sales team are working to add Woulgan onto local formularies so clinicians are allowed and guided to use Woulgan	Also won a listing in Kalmar to launch from May	reimbursed as dressings and will need Annex 5 listing to continue reimbursement.
			Planning to submit Annex V application.
Go-to-market	Dedicated sales team trained in January have 14 evaluations involving 218 patients		Sales for Woulgan from 3 new home care companies, one a major wound care provider is evaluating on 20 patients during Q2
	So far 84 patients are receiving treatment and
	22 have finished		Woulgan listed with HOZ MEDI WERK, 2nd largest home care wholesaler.

Research and Development: Woulgan Dry Layer

• Pilot plant established for testing different formulations for the manufacture of Woulgan® dry layer
• The gel-forming dry layer is aimed used on exuding and large wounds like venous leg ulcers and donor sites
• Priority to develop proprietary production methods that can be patent protected

ArcticZymes

Molecular and new markets

Commercial Updates

• Fluctuation of quarterly sales with largest customer will be different than previously following establishment of centralised facility. Anticipate normal level of sales in 2018
• New supply agreement with a UK molecular kit and diagnostic company who have integrated Cod UNG into multiple products (value several MNOK)
• Numerous customers have received the new IsoPolTM enzymes. Even supplied our 1st bulk custom order to a customer with very special requirements
• New formulations of Cod UNG and rSAP to be launched in Q2. Important to serve new prospects during the second half
• Establishing first foothold in China. Developing business with several Chinese companies who demand high quality enzymes for integration into their research and diagnostic products targeted for the global market

Biomanufacturing: Gene Therapy Business

Gene Repair

Busy quarter for SAN related customer activities:

• Doubled customer base with respect to gene therapy opportunities (90+ customers today)
• Majority of customers in early phase, purchasing small qualities on a frequent basis
• Several customers who were earlier adopters last year have entered the next phase to establish cGMP manufacturing
• Milestone reached: demonstrates SAN can be utilised in cGMP manufacturing setting
• Once customers lock down cGMP processes, larger volumes of SAN will be necessary to support the scales needed for virus manufacturing
• Getting a better understanding of sales cycle: takes 9-12 months from initial onset of testing SAN to locking it down into a cGMP process
• In 2018 expect many of the new SAN customers will have transitioned into cGMP phase

Innovation Update: ArcticZymes Proteinase

• Developing a new proteinase enzyme which represents a new class of enzyme

• Likely launch the enzyme in Q2 subject to finalising the manufacturing process

• Vast array of customers interested in AZ's proteinase - Including key accounts

• Door opener into liquid biopsy market: dominated by cancer and prenatal diagnostics (\$0.6Bil; 29% CAGR)
• Leverage more of value chain: new utility in isolation of genetic material from research and clinical samples
• Supported with new IPR = greater commercial value

Strengthening Sales Team

ArcticZymes is preparing to manage growth in its commercial team:

• Strengthen its business development team by hiring experienced sales professionals
• Currently hiring 1 USA and 2 EMEA based business developers
• Instrumental in boosting sales capabilities beyond today's level
• Immediate need to drive new business opportunities with rapidly growing SAN customer base (90+ customers)
• Expanded sales force will be critical in growing customer base and leverage a broader product range as AZ executes on its strategy

Q1 Financials

Speed of cash outflow as expected

Net cash position

First quarter changes in cash of -10.6 MNOK

• Investment in raw material inventory for consumer health products
• 13.2 (14.4) MNOK in short-term receivables
• 12.5 (16.9) MNOK in short-term payables

Cash balance of 20.0 MNOK end of Q1 2018

Q1 2018 Cash flow detailed

• Q1 2018 Cash flow from operations -10.5 MNOK

• Explained by change in working capital of

  • Receivables 1.2 MNOK
  • Payables -4.5 MNOK
  • Inventory -1.7 MNOK

• Q1 2018 Cash flow from investments -0.1 MNOK

• Investment of MNOK 0.1 in intangible assets

A "soft" start for 2018

0 2 000 4 000 6 000 8 000 10 000 ArcticZymes Woulgan Amounts in NOK 1.000' Segment Q1 Sales ArcticZymes MNOK 6.3 Animal & Consumer Health MNOK 7.4 Woulgan MNOK 0.5 Group MNOK 14.2

Biotec revenues per segment

20

Animal & Consumer Health

Q1 2017 Q2 2017 Q3 2017 Q4 2017 Q1 2018

Loss in Q1 characterised by soft sales

EBITDA

-8 000

-7 000 -6 000 -5 000 -4 000 -3 000 -2 000 -1 000 0 Q1 2017 Q2 2017 Q3 2017 Q4 2017 Q1 2018 Personell expenses Property, plant and equipment IT External services Marketing and sales License, patent and trademark Other operating expenses

Operating Expenses

Amounts in NOK 1.000'

Beta-Glucan performance

Beta-Glucans	Q1			YTD
(Amounts in NOK 1.000)	2018	2017	2018	2017
Sales revenues	7 905	9 348	7 905	9 348
Gross profit	3 633	3 465	3 633	3 465
Operating expenses	-8 294	-8 755	-8 294	-8 755
EBITDA	-4 062	-4 630	-4 062	-4 630

• Sales driven primarily by Animal Health but Consumer Health is becoming more important
• Reduced expenses on an quarterly basis
• Woulgan sales are at a steady state awaiting German reimbursement regulation and UK "introduction"
• EBITDA improved due to favourable product mix and cost control

ArcticZymes performance

Enzymes	Q1		YTD
(Amounts in NOK 1.000)	2018	2017	2018	2017
Sales revenues	6 337	8 850	6 337	8 850
Operating expenses	-7 915	-7 470	-7 915	-7 470
EBITDA	-667	2 595	-667	2 595

Sales

• Q1 2018 sales reduced by MNOK 2.5. This was as expected
• Operating expenses increased compared to Q1 2017 due to personnel and external services
• EBITDA reduced from Q1 2017 primarily due to lower sales
• Launch of new products within the SAN portfolio sees an increasing interest with more than 90 customers testing it out

Outlook 2018

Outlook 2018

• Overall sales growth versus 2017
• Significant reduction in cash consumption
• Review of Woulgan go-to-market model to ensure further growth
• AZ expects to grow the business organically while also looking for inorganic growth opportunities