ArcticZymes Technologies — Investor Presentation 2018

Feb 1, 2018

Q4 2017 Presentation

01.02.2018, Oslo

Agenda

• Highlights

• BetaGlucans

• Animal- and Consumer health
• Neuroblastoma Vaccine Trial
• Advanced wound care

• Enzymes

• Molecular and new markets
• Q4 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 wounds and with commercial progress in key markets
• An adjuvant in selective cancer treatments

Enzymes

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

Highlights Q4 2017

• Q4 sales of NOK 17.7 mill (NOK 18.2 mill)
• EBITDA of NOK -7.2 mill (NOK -8.1 mill)
• Woulgan reimbursed in the UK from December 1st
• ArcticZymes launched two versions of the IsoPol™ Polymerase product

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.
• Activities on-going to broaden co-operation with business partners.

Consumer Health:

• First delivery to major US customer.
• Actively working on expanding the customer base.
• Potential new customers perform stringent duediligence as part of purchasing process.

SBG® in current neuroblastoma vaccine trial

• Small but high impact indication in children
• Will serve as a proof of concept for use of SBG® in immunotherapy of cancer
• The treatment regime has a possibility of becoming approved without a regular phase III trial
• Biotec is in discussion with MSKCC on alternative ways to commercialise the combined treatment. MSKCC has licenced the rights to the vaccine to a US company.

Patients under treatment

Status Woulgan®

• Clinical effects in user-friendly format- clear differentiation for Woulgan
• Progress with UK and Nordic market access (reimbursement, tenders and wholesaler listings).
• Woulgan is mainly used in out-patient settings – salesforce coverage is key:
• Large number of call-points for salesforce.
• Lack of scale for a "one-product" company.
• Review go-to-market model, to secure further growth of the franchise with less consumption of the company's financial resources.

Activities in all markets

	UK	Nordics	Germany
Clinical	Completed recruitment of 300 patient study. Multiple wound types, real world study.	Completed patient recruitment early in Q4. Majority of patient data collected from sites.
	Results written up in Q2 for publication after summer.	Analysis and manuscript for publication due in Q1 2018.
Market Access	NHS approved Woulgan for listing on UK Drug Tariff from December.	Listing grew to over 70% in Finnish tenders, Swedish tenders positive but not decision in Q4. Norway and Denmark still very low.	Upcoming changes in the reimbursement system creates uncertainty around reimbursement for "active" wound products.
	Appeal panel found that application demonstrated Woulgan is clinically effective and also cost effective.	Local wholesaler co-operations generating good numbers of leads in community sector.	Situation is being monitored to see, if an Annex V application is needed.
	Woulgan can be prescribed and reimbursed across UK where local policy permits its use.		Documentation for potential Annex V application planned in Q1.
Go-to-market	Hiring of a dedicated sales team in preparation for January launch.	Engaged wound industry expert to support our partner.	Ongoing delivery of trainings to wound expert nurses to support increasing and correct use of Woulgan.

Research and Development: Woulgan Dry Layer

• Woulgan® dry layer pilot plant is testing different formulations
• The gel-forming dry layer is well suited to more exuding and larger wounds
• Priority to develop proprietary production methods that can be patent protected

ArcticZymes

Molecular and new markets

Commercial Updates

• ArcticZymes main customer completes its consolidation efforts in transiting manufacturing to a centralized EU site
• Product sales resumed with the first shipments going out during the quarter
• Business is expected to return to the normal cadence during 2018

New Product Launches

• ArcticZymes expanded its IsoPol™ product line by launching 2 new polymerases: IsoPol™ SD⁺ and IsoPol™ BST⁺
• Each offers enhanced features purposely engineered into the enzymes based upon direct feedback from AZ's commercial customers and leading industrial players
• ArcticZymes will continue to expand the product line with the introduction of additional unique polymerase enzymes and synergistic support products
• Expanding the product line supports new technology development within In Vitro Diagnostics (IVD) and personalised medicine. Leading to increased accessibility for these technologies within the healthcare area

Enhancing Security of Supply

Security of Supply

Success in B2B is more than just the product:

• ✓ Robust and reproducible manufacturing
• ✓ Delivery on demand
• ✓ Scalable supply
• ✓ Traceability and relevant Quality Standard

Higher Quality Standard

Future proofing the business:

• ✓ Achieved ISO13485 accreditation during Q4
• ✓ ISO13485 Medical Devices
• ✓ Secures future business with diagnostic customers
• ✓ Value add towards customer

Q4 Financials

Cash-flow is in focus

Fourth quarter changes in cash of -2.5 MNOK

• Best quarter last 24 months. Reduced net cash outflow
• 14.4 MNOK in short-term receivables
• 16.9 MNOK in short-term payables

Cash balance of 30.6 MNOK end of 2017

Q4 Cash flow detailed

• Q4 2017 Cash flow from operations ~ 1.5 MNOK

• Explained by change in working capital of
• Receivables 4.5 MNOK
• Payables 1.8 MNOK
• Inventory -0.9 MNOK

• Q4 2017 Cash flow from investments ~ 1.1 MNOK

• Investments 1.1 MNOK in fixed assets

An average quarter for sales

19

Loss in Q4 characterized by extraordinary

EBITDA

Beta-Glucan performance

Beta-Glucans	Q4		YTD
(Amounts in NOK 1.000)	2017	2016	2017	2016
Sales revenues	8 911	11 430	35 051	43 190
Operating expenses	-8 468	-9 760	-34 812	-36 821
EBITDA	-4 930	-4 785	-18 990	-17 094

Sales

• Reduction in sales of animal heath products
• Q4 2017 expenses reduced compared to Q4 2016
• First delivery under the new M-Gard agreement to the US
• Woulgan sales growth in 2017 over 2016
• Gross Contribution is dependant on product sales. Animal Health is the segment with the lowest margin

ArcticZymes performance

Enzymes	Q4		YTD
(Amounts in NOK 1.000)	2017	2016	2017	2016
Sales revenues	8 757	6 785	31 628	28 714
Operating expenses	-8 432	-8 818	-29 856	-28 297
EBITDA	798	-1 384	5 209	3 847

Sales

• Q4 2017 sales are NOK 2.0 million improved compared to Q4 2016
• Expenses are marginally reduced from Q4 2016 to Q4 2017, generating an improved EBITDA
• Launch of new products within the SAN portfolio contributed with a trebling in sales for the portfolio compared to 2016. Continous growth in this portfolio is important for the 2020 goals

Outlook 2018

Outlook 2018

• 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