DEVA HOLDING A.Ş.

01.01.2022 - 30.09.2022 PERIOD

ACTIVITY REPORT OF THE BOARD OF DIRECTORS

DEVA HOLDING IN BRIEF

Established in 1958, DEVA Holding is among the well-established pharmaceutical manufacturers in Turkey. With the main area of operations including manufacturing and marketing medicinal products for human use and raw materials, DEVA Holding also manufactures veterinary medicines, eau de Cologne, and medical ampoules.

The majority of shares in DEVA Holding was acquired in 2006 by funds managed by GEM Global Equities Management S.A., an international fund management company, and EastPharma Ltd. was established to assume management.

DEVA Holding is pacing rapidly toward its goal of being the first choice by offering innovative and unique products with a high-quality experience by creating giant pharmaceutical brands in areas where it competes, in order to make healthy living accessible to everyone around the world. With the new therapies it offers, DEVA Holding makes difference by expanding its product diversity every year.

Currently, DEVA Holding has approximately 600 products in its portfolio, including medical devices, spanning 14 therapy areas, ranging from oncology to cardiology and from the respiratory system to ophthalmology.

With progressively expanding regional growth and export operations, DEVA Holding is the holder of 925 product licences in 63 countries, including the USA, Switzerland and Germany. Founded under the brand name of Devatis in Germany and then in Switzerland, the company received registration approval in 2018 and having been established in the USA under the same name, accelerated its activities.

DEVA Holding focuses on research and development to improve Access to medicines for patients who need them, and all of its manufacturing facilities are certified compliant with the European GMP (Good Manufacturing Practice). In addition, Kartepe manufacturing facility is certified compliant with the US FDA (Food and Drug Administration). DEVA Holding currently exports pharmaceuticals and pharmaceutical raw materials to more than 50 countries.

DEVA Holding develops high added value, innovative new forms and products with its highly-competent staff of experts trained in their areas and experienced in R&D in its full-fledged laboratories and manufacturing areas equipped with state-of-the-art technology at its award-winning DEVARGE Center.

With its manufacturing capabilities, DEVA Holding has become the domestic corporation with the most comprehensive production capabilities in Turkey. Undertaking manufacturing operations at facilities in Çerkezköy and Kartepe, DEVA Holding holds an annual output capacity of 578 million units of medicines. While producing for public health, DEVA Holding also adopts the understanding of sustainability for the effective and efficient use of resources, and considers environmental sensitivities in its activities. DEVA Holding manages human rights, occupational health and safety, energy efficiency and waste with great care, and continues its activities with the awareness of leaving a more livable world to future generations with its employees who possesses environmental awareness.

Continuing to work for a healthy and sustainable future, DEVA Holding also supports social responsibility projects, especially in the fields of education, public health and the environment.

Contact Details

Address : Halkalı Merkez Mah. Basın Ekspres Cad. No.1 Küçükçekmece-İSTANBUL
Phone : 0212-692 92 92
Fax : 0212-697 02 08
Website : www.deva.com.tr
E-Mail address : [email protected]

Trade Registry Information of the Company

Trade Register : Istanbul Commerce Registry Office
Register No. : 70061

MISSION AND VISION

Our Mission

We exist to offer innovative and diversified products with high quality experience with a view to everybody being able to reach healthy life at global scale.

Our Vision

To be the first choice in fields in which we compete by creating giant pharmaceutical brands.

BOARD OF DIRECTORS

Name and Surname	Title	Mission Time
Philipp Daniel Haas	Chairman of the Board -Executive Member	01.04.2022 – 01.04.2025
Mesut Çetin	Vice Chairman of the Board of Directors – Executive Member	01.04.2022 – 01.04.2025
Ayşecik Haas	Board Member-Non-Executive Member	01.04.2022 – 01.04.2025
Eşref Güneş Ufuk	Board Member-Independent Member	01.04.2022 – 01.04.2025
Sengül Soytaş	Board Member-Independent Member	01.04.2022 – 01.04.2025

Duties and Authorizations of the Members of the Board of Directors

Members of the Board of Directors possess the duties and authorities specified in the relevant articles of the Turkish Code of Commerce and the Company's Articles of Association.

THE AMENDMENTS MADE IN THE ARTICLES OF ASSOCIATION WITHIN THE PERIOD AND THEIR RATIONALE

No changes were made to the articles of association during the period.

REGARDING PARTNERSHIP:

Changes in the Capital Status of the Partnership within the Period

No changes were made within the period.

Development of Stock Prices during the Period

In 01.01.2022 - 30.09.2022 period, 1 lot of shares of DEVA Holding traded at Borsa Istanbul (BİST) was traded at 26,00 TL as the lowest value and at 40,50 TL as the highest value.

CAPITAL AND SHAREHOLDING STRUCTURE

The Company's:
Registered Capital Cap : 500.000.000,00 TL
Issued Capital : 200.019.287,78 TL

Shareholding Structure (30.09.2022)

Corporate Name	Share Amount TL	Rate of Share %
EastPharma S.A.R.L	164.424.760	82,2
Shares held by public	35.594.528	17,8
Nominal capital	200.019.288	100,0

FINANCIAL INDICATORS

Primary financial and operational indicators (TL)

	30.09.2022	31.12.2021
Total assets	7.543.583.059	5.079.931.877
Total liabilities	3.989.844.708	2.352.155.032
Total equity	3.553.738.351	2.727.776.845
	01.01.2022-30.09.2022	01.01.2021-30.09.2021
Sales revenue (net)	3.054.735.012	1.589.434.474
Operating profit	1.180.559.995	657.714.349
Net profit	983.950.573	542.484.058

Basic rations (%)

	30.09.2022	31.12.2021
Current ratio	1,41	2,07
Liquidity ratio	0,91	1,47
Precision ratio	0,51	0,80
Liabilities/Assets total (Financial leverage rate	0,53	0,46
Equity/debt ratio	0,89	1,16
	01.01.2022-30.09.2022	01.01.2021-30.09.2021
---	---	---
Gross profit margin	0,52	0,57
Net profit margin (sales profitability)	0,32	0,34
Equity profit margin (equity profitability)	0,37	0,35

SALES FOR THE PERIOD 01.01.2022 – 30.09.2022

According to IQVIA data (retail+hospital); a total amount of 2.057,75 mn units of drugs which worth TRY (*) 81,66 bn were sold in the Turkish Pharmaceutical Market in first 9 months of 2022. Compared to the same period of the previous year, the market grew by 13,02% in terms of unit and 70,94% in terms of TL.

In first 9 months of 2022; the unit sales segmentations(ATC1) can be seen in below graphics. The leader segmentation in Turkish market and DEVA Holding according to IQVIA is Alimentary T.& Metabolism in unit and TL sales terms.

DEVA HOLDING'S IQVIA SALES RESULTS FOR THE FIRST 9 MONTHS OF 2022

In the first 9 months of 2022, DEVA Holding sold 100,94 million units of IQVIA on a box basis (Free Market + Hospital) at a rate of 10,28% compared to the same period of the previous year, and IQVIA sales of TL 2.104,00 million on a TL basis, compared to the previous year's sales, achieved a growth of 65,42% compared to the same period.

In the first 9 months of 2022, DEVA Holding ranked 3rd with a market share of 4,9% on a unit basis, and ranked 6th with a market share of 2,6% in TL terms.

In first 9 months of 2022, DEVA is among the top 100 products of the Turkish pharmaceutical market on a box basis, respectively as Devit D3, Amoklavin, Dikloron, Tilcotil, Dodex and in TL basis Rivetime and Amoklavin.

In first 9 months of 2022, half of the turnover (%51) of DEVA Holding is coming from 13 different products. These are Rivetime, Amoklavin, Devit D3, Dikloron, Candexil Plus, Dodex, Madopar, Tribeksol, Dilatrend, Depores X, Azitro, Cefaks and Biteral'in order to highest to lowest in TL sales.

The leader segmentation in Turkish market according to IQVIA is Alimentary T.& Metabolism on box basis terms and in DEVA Holding, the Systemic Anti-Infectives is the leader segmentation in TL sales terms.

The segment (ATC1) distribution of sales by box and TL is as follows:

DEVA Holding Unit Sales %

DEVA Holding TRY Sales %

Source: IQVIA Free + Hospital Dataview
(**) "Free Goods" are not included to TL value due to the change of the calculation method by Turkey IQVIA.

DEVA Holding sold 27,2 million units of products worth 183,9 million TL to the State Supply Office in the relevant period, and these sales are not included in the IQVIA data.

In addition, exports amounted to 475,7 million TL, corresponding to 29,8 million USD, in the relevant period.

RISK MANAGEMENT AND INTERNAL CONTROL MECHANISM

The risk management activities of our company are performed under the coordination of Risk Management Committee. Risk Management Committee evaluates the information from the Credit Committee and Internal Audit within the framework of Corporate Risk Management, and prepares and the results of the evaluation and any action plans to mitigate risks and presents them to the Board of Directors.

The credit committee sets the credit limits to be allocated to customers in product purchases and the bases for the securities to be received. It uses the partnership structure, immovable properties, financial status, and intelligence activities about the region in setting limits and securities. It is aimed to keep the security rates on desired levels and minimize doubtful receivable risks by continuous management of customers' open accounts.

Internal Audit Management audits the compliance of the activities carried out by the company with international auditing principles and generally accepted management standards, company's articles of association as well as written policies and practices. Internal Audit Management evaluates all units in terms of management within the framework of the audit plan, and presents audit results to the Risk Management Committee and the Committee Responsible for Audits on a regular basis.

In 2022, internal audit activities were carried out for the company's operations, the risk reports from all units were evaluated, and the findings and recommendations for improvement were presented to the Board of Directors.

Investments

For the period of 01.01.2022 - 30.09.2022 to DEVA Holding and Group companies; A total of 626.954.559 TL investments were made, 297.230.956 TL in total for the Administration Building, Factory, Machinery-Installation and Fixtures, and 329.723.603 TL for R&D, Licensing and Licenses.

The Group, which has the R&D Center Certificate, is provided with tax and SGK discounts for all projects working within the scope of the R&D Center, in addition to the cash supports provided for the R&D projects approved by Tübitak. A maximum of 60% of the total amount of expenditures evaluated and approved by TÜBITAK is paid as cash support.

The Group has 2 ongoing research and development projects approved by TÜBITAK. Total incentive research and development expenses incurred in 2022 related with these projects amounted to 264.559.017.

In the relevant period; for DEVA Kartepe facilities, 24.908.846 TL was spent under the incentive certificate 501317 received on 30.10.2018, 238.780.735 TL was spent under the 525422 incentive certificate received for Çerkezköy facilities. 5.631 TL was spent within the scope of the incentive certificate numbered 136611, which was received for Çerkezköy facilities on 7.04.2018.

The expenses within the scope of research incentive are exempt from value added tax and custom tax, and have different advantages in scope of other tax.

THE NATURE AND AMOUNT OF THE FINANCING SOURCES AND ISSUED CAPITAL MARKET INSTRUMENTS OF THE ORGANIZATION

The financing sources of our company consist of equity capital, the funds arising from its operations and short- and long-term debts from money and capital markets.

Within the scope of the Issuance Certificate approved by the Capital Markets Board's decision dated 16.04.2020 and numbered 25/520, a floating-rate bond with a nominal value of 100 million TL with 729 days maturity and coupon payment every 3 months, was issued and the sale of the bonds was completed as of April 13, 2021. The interest on the bond is calculated by adding 200 basis points to the BİST TLREF index yield.

Furthermore, within the scope of the Issuance Certificate, approved by the Capital Markets Board's decision dated 15.09.2022 and numbered 50/1354, the sale of coupons and principal payment bonds with nominal value of 150 million TL, maturity of 364 days and annual interest of %32, was completed on October 6, 2022.

INFORMATION ON THE SUBSIDIARIES AND RELATED COMPANIES

Subsidiaries

DEVA Holding holds 100% stake in Devatis Ltd, which was established in New Zealand in order to sell and distribute its products abroad, Devatis GmbH, established in Germany, Devatis AG, established in Switzerland, Devatis Inc., established in America, Devatis de Mexico, S. De Rl. De.Cv established in Mexico, Devatis Pty Ltd established in Australia, and Devatis Canada, Inc., established in Canada.

Other Related Companies

Operating in field of production and marketing of medicinal products for human use, active pharmaceutical ingredients and veterinary drugs and having its registered office in Luxembourg, Eastpharma S.a.r.l. is the major shareholder of DEVA Holding with a share of 82,20%. Eastpharma S.a.r.l. is also the major shareholder of Saba İlaç San. ve Tic. A.Ş. operating in pharmaceutical industry in Turkey with a share of 99,99%.

Information on Commercial Relations with Subsidiaries and Related Companies

EastPharma Sarl has transferred, on a time-limited basis, the rights in 9 products in which it holds the license and right to sale, to DEVA Holding through agreements with the Roche company operating in the pharmaceutical industry. Also in this period, the marketing of the products in question continued, and Eastpharma gained royalty revenue from DEVA Holding Sarl through the sales of these products in Turkey.

Saba İlaç purchases contract service from DEVA Holding. In this context, Saba products are produced and stored by DEVA Holding as subcontractors. DEVA Holding provides R&D service to Saba at its R&D Center, whereby it carries out studies on Saba products and performs pilot production. In addition, Saba company purchases financial, administrative and marketing/promotional services from DEVA Holding. The overseas sales of Saba drugs are also partially made by DEVA Holding.

ADMINISTRATIVE ACTIVITIES

Philipp Daniel Haas - (CEO)

Mesut Çetin - (CFO)

Doğan Varinlioğlu - Deputy General Manager of Turkey and International Markets

Rıza Yıldız – Financial Reporting and Accounting Director

Hartwig Andreas Steckel - R&D and International Markets Technical Licensing Director

Tijen Kavlak – Business Unit Director

İrfan Çinkaya – Biotechnology Director
Aytaç Aysuna Erden - Legal Affairs Director
Elçin Güner- Business Unit Director
Eray Kurt – Site Director
Gökhan Kaba – Procurement Director
Gülcan Gümüş – Human Resources & Development Director
Metin Ercan – Site Director
Murat Akıncı – Medical Business Unit Director
Murat Aksoy – Production Planning & Logistics Director
Refiye Adıyaman – Quality Operations Director
Sibel Yılmaz – Site Director

Financial Benefits Provided to the Members of the Board of Directors and Senior Managers

The sum of the salaries and similar short and long-term benefits provided to the Members of the Board of Directors and Senior Executives during the period is 99.670.211 TL.

Committees Established within the Board of Directors

1) Supervisory Committee

Eşref Güneş Ufuk Chairman (Independent Member of the Board of Directors)
Sengül Soytaş Member (Independent Member of the Board of Directors)

2) Corporate Governance Committee

Eşref Güneş Ufuk Chairman (Independent Member of the Board of Directors)
Sengül Soytaş Member (Independent Member of the Board of Directors)
Mesut Çetin Member (Executive Member of the Board of Directors)

3) Committee for Early Detection of Risks

Collective Agreement Practices

No Collective Agreement with employees exists.

Right and benefits provided to the personnel and laborers

In addition to their wages, according to the requirements and necessities of their duties, lunch, clothing, personnel transportation service, holiday allowance, child and education support, food, fuel, marriage aid, family allowance were provided to our employees and life insurance and optional group health insurance practices were continued and Complementary Health Insurance practice has been provided.

Severance pay liability

The severance pay liability of DEVA Holding for 01.01.2022 - 30.09.2022 period was 75.048.865 TL, and provisions were made for the entire amount in accordance with the related legislation.

Information on the donations made within the period

Donations and aid amounting to 1.422.757 TL were provided to various organizations and associations during the period between 01.01.2022 and 30.09.2022.

Cases filed against the company

The cases filed against our company include miscellaneous business cases and cases regarding tax penalties. Detailed information on the subject is provided in the footnote 18.

Audits Carried Out within the Period

No audit was conducted in our company during the period of 01.01.2022 - 30.09.2022.

ASSESSMENT OF RISKS AND ADMINISTRATIVE BODY

Early Risk Detection Committee was formed to detect the risks that may compromise the existence early, growth and continuation of our company, to implement the necessary measures against the risks detected, and to perform studies to manage risks.

Financial Risks:

The operating capital need of our company is met by its shareholders' equity, short- and long-term bank loans in Turkish Lira and foreign currencies, and debt instruments. The increases in exchange rates and interests as a result of possibility of negative market conditions increase the financing costs of the company. Thus, due to economic and geopolitical developments both in the World and in our country, it is expected that the fluctuations in exchange rates and interest rates will adversely affect our profitability. For the purpose of managing the interest risks the company is exposed to, the gains and losses to occur in case of potential changes in interests are measured using sensitivity analyses on the basis of credit portfolio and cash flow projections. In addition, efforts are made to keep the floating rate loans among the total loans at a reasonable rate. Derivative products may be used for protection against exchange risks that may result from both bank loans in foreign currencies and purchases in foreign currencies.

Credit Risk of Customers:

The distribution and payment terms of trade receivables are of great importance in terms of risk management. The company tries to decrease receivable risk by performing its transactions only with credible parties, and wherever possible, obtaining securities. While transactions are carried out without any security with Group A customers, securities are requested from Group B and Group C customers such as bank letters of guarantee or collaterals. To minimize the credit risks the company is exposed to, the financial statuses, credit limits and securities of customers are monitored on a regular basis by the Credit Committee.

Strategic Risks:

The drug pricing policy set/to be set by the Ministry of Health (increase in institution discount rates and/or reduction in reference prices, non-revision of the reference exchange rate) may have negative effects on the industry, and consequently on our company. We try to overcome these negative effects by means of new markets, increasing product range, new sales policies, and effectively managed cost-limiting policies.

Operational Risks:

Operational risks are related with events affecting activities such as earthquakes, fire, and environmental accidents and smooth functioning of business processes. Insurable risks are revised on an annual basis and excluded by being insured.

The explanations regarding the developments that significantly affected the Company's activities in this period are presented above. For other information, you can access the Annual Report of 2021 at www.deva.com.tr