Epigenomics AG — Interim / Quarterly Report 2021

Nov 10, 2021

epigenomics

SAVING LIVES THROUGH BLOOD-BASED CANCER DETECTION

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EPIGENOMICS 9M 2021
INTERIM STATEMENT
2

QUARTERLY DEVELOPMENT OF KEY FIGURES (UNAUDITED)

• according to the financial reporting -

in EUR thousand except where indicated

	Q3 2020	Q4 2020	Q1 2021	Q2 2021	Q3 2021
Statement of Profit or Loss
Revenue	219	301	106	117	5,799
Gross profit	176	271	83	91	5,755
EBIT	-2,741	-2,564	-1,174	-2,310	2,850
EBITDA	-2,611	-2,433	-941	-2,232	2,904
EBITDA before share-based payment costs	-2,430	-2,372	-985	-2,179	2,954
Net loss for the period	-2,754	-2,577	-1,201	-2,327	2,836
Balance Sheet (at the respective reporting date)
Non-current assets	1,466	1,328	1,101	1,028	984
Current assets	7,364	5,469	8,398	8,662	26,027
Non-current liabilities	563	496	474	452	429
Current liabilities	2,723	2,437	2,546	2,877	2,348
Equity	5,544	3,864	6,479	6,361	24,234
Equity ratio (in %)	62.8	56.8	68.,2	65.6	89.7
Total assets	8,830	6,797	9,499	9,690	27,011
Statement of Cash Flows
Cash flow from operating activities	-1,983	-2,072	-2,397	-1,826	625
Cash flow from investing activities	2	-5	996	-3	-8
Cash flow from financing activities	-96	-72	5,267	1,247	15,603
Net cash flow	-2,077	-2,149	3,866	-582	16,220
Cash consumption	1,981	2,077	2,386	1,829	-617
Cash and cash equivalents at the end of the period	5,735	3,566	7,446	6,949	23,555
Stock¹
Weighted average number of shares issued	5,891,230	5,891,230	5,891,230	11,166,381	12,232,303
Earnings per share (basic, in EUR)	-0.47	-0.43	-0.20	-0.21	0.23
Share price at the end of the period (in EUR)	19.60	3.40	2.32	1.27	1.20
Number of employees at the end of the period	38	37	32	31	30

¹ Due to the capital reduction carried out in the previous year at a ratio of 8:1, the previous year's figures stated here have been adjusted where necessary for reasons of comparability.

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EPIGENOMICS 9M 2021
INTERIM STATEMENT
3

INTERIM STATEMENT ON FINANCIAL RESULTS FOR 9M 2021

CONTENT

• Consolidated Statement of Profit or Loss and Other Comprehensive Income ... 4
• Operating Result (EBIT) and EBITDA ... 5
• Consolidated Balance Sheet ... 5
• Consolidated Statement of Cash Flows ... 7
• Consolidated Statement of Changes in Equity ... 9
• Financial Results Q3 and 9M 2021 ... 10
• Opportunities and Risks ... 12
• Report on Post-Reporting Day Events ... 14
• Outlook ... 14

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EPIGENOMICS 9M 2021
INTERIM STATEMENT
4

CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME

FOR THE PERIOD FROM JANUARY 1 TO JUNE 30 (UNAUDITED)

EUR thousand	Q3 2021	Q3 2020	9M 2021	9M 2020
Revenue	5,799	219	6,022	541
Cost of sales	-44	-43	-92	-114
Gross profit	5,755	176	5,930	427
Gross margin (in %)	99,2	80,4	98,5	78,9
Other income	667	508	2,229	1,272
Research and development costs	-681	-658	-2,226	-3,412
Selling, general and administrative costs	-2,789	-1,540	-5,809	-5,442
Other expenses	-102	-1,227	-757	-1,908
Operating result/Earnings before interest and taxes (EBIT)	2,850	-2,741	-633	-9,063
Interest income	1	4	4	16
Interest expenses	-10	-13	-34	-43
Other financial result	0	0	-16	0
Net loss for the period before taxes on income	2,841	-2,750	-679	-9,090
Taxes on income	-5	-4	-12	-19
Net loss for the period	2,836	-2,754	-691	-9,109
Items that may be reclassified subsequently to profit or loss:
Exchange rate differences from the conversion of foreign entities	-377	748	-1,005	726
Fair value adjustment of financial instruments measured at fair value through other comprehensive income	0	52	39	25
Other comprehensive income for the period	-377	800	-966	751
Total comprehensive income for the period	2,459	-1,954	-1,657	-8,358
Earnings per share (basic, in EUR)¹	0.23	-0.47	-0.07	-1.59
Earnings per share (diluted, in EUR)	0.16	n/a	n/a	n/a

¹ Due to the capital reduction carried out in the previous year at a ratio of 8:1, the previous year's figures stated here have been adjusted where necessary for reasons of comparability.

The earnings per share (basic and diluted) are calculated by dividing the Group's net loss for the period by the weighted-average number of shares issued and admitted to trading in the respective period. The outstanding stock options and convertible notes issued by the Company are anti-dilutive according to IAS 33.41 and 33.43. Therefore, the earnings per share (diluted) equal the earnings per share (basic) for the nine-month period. In Q3 2021, the weighted-average number of shares issued was 12,232,303 and 17,861,767 diluted (Q3 2020: 5,891,230). In the first nine months 2021, the weighted-average number of shares issued was 9,763,305 (9M 2020: 5,741,140).

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EPIGENOMICS 9M 2021
INTERIM STATEMENT

OPERATING RESULT (EBIT) AND EBITDA

EUR thousand	Q3 2021	Q3 2020	9M 2021	9M 2020
Operating Result (EBIT)/Earnings before interest and taxes	2,850	-2,741	-633	-9,063
Amortization and depreciation	54	130	365	403
EBIT before amortization and depreciation (EBITDA)	2,904	-2,611	-268	-8,660
Share-based payment costs	50	181	59	570
EBITDA before share-based payment costs	2,954	-2,430	-209	-8,090

CONSOLIDATED BALANCE SHEET

AS OF SEPTEMBER 30 (UNAUDITED)

ASSETS EUR thousand	Sept 30, 2021	Dec 31, 2020
Non-current assets
Intangible assets	64	144
Property, plant and equipment	920	1,184
Total non-current assets	984	1,328
Current assets
Inventories	273	122
Trade receivables	1,769	251
Marketable securities	0	961
Cash and cash equivalents	23,555	3,566
Other current assets	430	569
Total current assets	26,027	5,469
Total assets	27,011	6,797

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EPIGENOMICS 9M 2021
INTERIM STATEMENT
6

EQUITY AND LIABILITIES EUR thousand	Sept 30, 2021	Dec 31, 2020
Equity
Subscribed capital	12,232	5,891
Capital reserve	103,105	87,419
Retained earnings	-90,732	-79,046
Net loss for the period	-691	-11,686
Other comprehensive income	320	1,286
Total equity	24,234	3,864
Non-current liabilities
Lease liabilities	393	460
Provisions	36	36
Total non-current liabilities	429	496
Current liabilities
Trade payables	849	629
Lease liabilities	127	223
Deferred income	92	80
Other liabilities	723	627
Provisions	557	878
Total current liabilities	2,348	2,437
Total liabilities	27,011	6,797

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EPIGENOMICS 9M 2021
INTERIM STATEMENT
7

FOR THE PERIOD FROM JANUARY 1 TO SEPTEMBER 30 (UNAUDITED)

CONSOLIDATED CASH FLOW STATEMENT

EUR thousand	9M 2021	9M 2020
Cash and cash equivalents at the beginning of the period	3,566	10,155
Operating activities
Net loss for the period	-691	-9,109
Adjustments for:
Share-based payment expenses	59	570
Amortization of intangible assets	285	146
Depreciation of property, plant and equipment	80	257
Foreign currency exchange results	-831	0
Financial income	-27	-16
Financial expenses	73	44
Taxes	12	19
Operating result before changes in operating assets and liabilities	-1,040	-8,089
Changes in operating assets and liabilities:
Inventories	-150	115
Trade receivables	-1,520	2
Other assets	142	246
Non-current and current provisions	-328	357
Trade payables and other liabilities	-703	-192
Deferred income	13	80
Tax paid	-13	-18
Cash flow from operating activities	-3,599	-7,499

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EPIGENOMICS 9M 2021
INTERIM STATEMENT
8

EUR thousand	9M 2021	9M 2020
Investing activities
Payments to acquire intangible assets	0	-11
Payments to acquire property, plant and equipment	-8	-6
Payments from the sale of securities	984	0
Interest received	9	24
Cash flow from investing activities	985	7
Financing activities
Proceeds from the issue of new shares	2,168	3,998
Payments for the issue of new shares	-79	-754
Payments from the issue of convertible bonds	22,000	0
Payments for the issue of convertible bonds	-1,786	0
Payments for leases	-185	-190
Cash flow from financing activities	22,118	3,054
Net cash flow	19,504	-4,438
Currency translation effects	485	18
Cash and cash equivalents at the end of the period	23,555	5,735

At the reporting date, EUR 84 thousand of cash and cash equivalents included restricted cash.

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EPIGENOMICS 9M 2021
INTERIM STATEMENT
9

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

AS OF SEPTEMBER 30 (UNAUDITED)

EUR thousand	Subscribed capital	Capital reserve	Retained earnings	Net loss for the period	Other comprehensive income	Group equity
December 31, 2019	43,528	69,251	-85,807	-17,020	-323	9,629
Total comprehensive income	0	0	0	-9,109	751	-8,358
Transfer of net loss for the year 2019 to retained earnings	0	0	-17,020	17,020	0	0
Costs for the creation of new shares	0	-295	0	0	0	-295
Capital increase without subscription rights	3,602	0	0	0	0	3,602
Premium from the capital increase without subscription rights	0	396	0	0	0	396
Share-based payment expenses	0	570	0	0	0	570
September 30, 2020	47,130	69,922	-102,827	-9,109	428	5,544
December 31, 2020	5,891	87,419	-79,046	-11,686	1,286	3,864
Total comprehensive income	0	0	0	-691	-966	-1,657
Transfer of net loss for the year 2020 to retained earnings	0	0	-11,686	11,686	0	0
Capital increase with subscription rights	1,971	0	0	0	0	1,971
Premium from the capital increase with subscription rights	0	197	0	0	0	197
Costs for the creation new shares	0	-80	0	0	0	-80
Issue of convertible bonds	0	22,000	0	0	0	22,000
Costs for the issue of convertible bonds	0	-2,120	0	0	0	-2,120
Conversion of convertible bonds	4,370	-4,370	0	0	0	0
Share-based payment expenses	0	59	0	0	0	59
September 30, 2021	12,232	103,105	-90,732	-691	320	24,234

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EPIGENOMICS 9M 2021
INTERIM STATEMENT
10

FINANCIALS Q3 AND 9M 2021

RESULTS OF OPERATIONS

In the third quarter of 2021, we recorded revenues of EUR 5,799 thousand (Q3 2020: EUR 219 thousand). This included revenue from the sale of large parts of our blood sample database (the "biobank") in the amount of EUR 5,675 thousand. In the first nine months of 2021, total revenue increased to EUR 6,022 thousand compared to EUR 541 thousand in the nine-month period of 2020. Product revenue fell from EUR 160 thousand in the third quarter of 2020 to EUR 119 thousand in the third quarter of 2021. In the nine-month period, they decreased by 27% - from EUR 453 thousand to EUR 330 thousand. As a consequence of the Covid-19 pandemic and the lack of reimbursement decisions by the health insurance system, the U.S. business remained at a low level.

Cost of sales was EUR 44 thousand in Q3 2021 (Q3 2020: EUR 43 thousand) and EUR 92 thousand in the first nine months of 2021 (9M 2020: EUR 114 thousand). Our gross margin increased from 80% in Q3 2020 to 99% in the same period of 2021. In 9M 2021, the gross margin increased from 79% to 99%, mainly due to the very low cost of sales on the sale of the biobank.

Other income of EUR 667 thousand in Q3 2021 (Q3 2020: EUR 508 thousand) was mainly due to foreign exchange gains from currency translation.

R&D costs increased slightly from EUR 658 thousand in Q3 2020 to EUR 681 thousand in Q3 2021. In the nine-month period, R&D costs showed a decrease of EUR 1,186 thousand from EUR 3,412 thousand in the previous year to EUR 2,226 thousand in the reporting period. After almost all clinical studies came to a standstill in the previous year due to Covid-19, patient enrollment in the studies we are currently continuing is picking up again. This is especially true for our post-approval study for Epi proColon. R&D-related expenses for internal projects were also noticeably reduced due to the short time work at the Berlin site, which did not end until mid-September 2021.

Our selling and administrative expenses increased to EUR 2,789 thousand in Q3 2021 from EUR 1,540 thousand in the same period in 2020. In the first nine months, selling and administrative expenses increased by EUR 367 thousand from EUR 5,442 thousand in the previous year to EUR 5,809 thousand in the reporting period. This was due to the costs for initiating the contract for the sale of the biobank and the success fee due for the investment bank engaged for this purpose.

Other expenses of EUR 102 thousand in Q3 2021 (Q3 2020: EUR 1,227 thousand) were exclusively attributable to exchange rate losses from currency translation.

Overall, our operating costs increased slightly to EUR 3.6 million in Q3 2021 compared to EUR 3.5 million in the same period of the previous year for the reasons mentioned above. On a nine-month comparison, total operating costs decreased from EUR 10.9 million in the first nine months of 2020 to EUR 8.9 million in the same period of the reporting year.

In Q3 2021, a net profit of EUR 2.8 million was generated (Q3 2020: EUR -2.8 million), reducing the net loss in the nine-month period 2021 to EUR 0.7 million (9M 2020: EUR 9.1 million). Earnings per share were positive for the first time ever in Q3 2021 at EUR 0.23 (Q3 2020: EUR -0.47). At EUR 0.07, the net loss per share for the first nine months of 2021 was significantly lower than in the same period of the previous year (9M 2020: EUR 1.59). In addition to the significant improvement in earnings, this sharp decline in the net loss was also due to the capital measures carried out in 2021 and the resulting increase in the number of shares.¹

¹ For reasons of comparability, the previous year's figures for earnings per share were adjusted here due to the capital reduction by means of a consolidation of shares at a ratio of 8:1 towards the end of 2020.

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EPIGENOMICS 9M 2021
INTERIM STATEMENT
11

FINANCIAL POSITION AND CASH FLOW

In the first nine months of 2021, the cash outflow from operating activities decreased by EUR 3,900 thousand from EUR 7,499 thousand (9M 2020) to EUR 3,599 thousand due to the significant year-on-year improvement of EUR 8,430 thousand in the operating result before depreciation, amortization and share-based payments in the reporting period. This included cash inflows from the sale of large parts of biobank in the amount of EUR 4,048 thousand on the one hand, but also non-cash foreign currency effects of EUR 831 thousand and changes in current assets of EUR 3,154 thousand lower than in the same period of the previous year.

Compared with the cash inflow from investing activities of EUR 7 thousand in the first nine months of 2020 was opposed by a cash inflow of EUR 985 thousand in the reporting period. Of this amount, EUR 984 thousand resulted from the sale of marketable securities.

The cash inflow from financing activities amounted to EUR 22,118 thousand in the first nine months of 2021, compared with a cash inflow of EUR 3,054 thousand in the same period of the previous year. This was due to the issue of convertible bonds in the first and third quarters of 2021 and the capital increase through the issue of new shares in the second quarter. Payments for leases are included in financing cash flow in the amount of EUR 185 thousand (9M 2020: EUR 190 thousand).

Our net cash flow for the first nine months of 2021 was EUR 19,504 thousand (9M 2020: EUR -4,438 thousand).

Cash and cash equivalents decreased to EUR -3,598 thousand in the first nine months of 2021 compared to EUR 7,492 thousand in the same period of the previous year.

Cash and cash equivalents amounted to EUR 23,555 thousand as of the reporting date (December 31, 2020: EUR 3,566 thousand).

NET ASSET POSITION

As of the reporting date, non-current assets decreased from EUR 1.3 million as of December 31, 2020 to EUR 1.0 million due to the continued very restrained investment activity. Current assets increased from EUR 5.5 million at the beginning of the reporting period to EUR 26.0 million as of September 30, 2021, mainly as a result of cash inflows from the issue of convertible bonds and the capital increase. This was offset by the utilization of cash and cash equivalents for operating activities. The securities position previously held was completely liquidated in the first quarter of 2021.

Total equity increased by EUR 20.4 million to EUR 24.2 million as of the reporting date (December 31, 2020: EUR 3.9 million). The net loss for the period of EUR 691 thousand was more than offset by the aforementioned financing measures. The equity ratio increased significantly to 89.7% as of the reporting date (December 31, 2020: 56.8%).

Compared with the closing balance sheet as of December 31, 2020, non-current liabilities decreased to EUR 429 thousand as of September 30, 2021 (December 31, 2020: EUR 496 thousand). This mainly includes liabilities from rental and lease agreements in the amount of EUR 393 thousand.

Current liabilities declined from EUR 2.4 million as of December 31, 2020 to EUR 2.3 million as of September 30, 2021.

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EPIGENOMICS 9M 2021
INTERIM STATEMENT
12

OPPORTUNITIES AND RISKS

The opportunities and risks to which the business activities of our Company are exposed are described in detail in the Group management report, which we published together with the consolidated financial statements for 2020. In addition, we refer to the prospectus for the admission to trading of the new shares from the convertible bond issued in the reporting period, which we published on August 24, 2021. Both documents are available on our website (www.epigenomics.com).

SHAREHOLDINGS OF THE MEMBERS OF THE BOARDS OF EPIGENOMICS AG

Number as of September 30, 2021	Shares	Stock Options	Convertible Notes
Greg Hamilton (CEO)	2,656	86,445	0
Albert Weber (EVP Finance)	12	47,500	0
Total Executive Board	2,668	133,945	0
Heino von Prondzynski (Chairman)	166,260	0	0
Alexander Link (Deputy Chairman)	11,490	0	50
Dr. Helge Lubenow	2,193	0	0
Franz Thomas Walt	2,437	0	0
Total Supervisory Board	182,380	0	50

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EPIGENOMICS 9M 2021
INTERIM STATEMENT
13

TRANSACTIONS WITH RELATED PARTIES

In an ad hoc news release on June 11, 2021, we had announced that we have entered on the same day into an agreement with our shareholder Deutsche Balaton Aktiengesellschaft ("Balaton"), under which Balaton was obligated to underwrite a mandatory convertible bond to be issued by the Company in an aggregate principal amount of up to EUR 18,150,000.00 by exercising its subscription rights and by acquiring notes which have not been subscribed by the shareholders in the subscription offer ("back-stop agreement"). In addition, we had announced that Balaton was indirectly controlled by Mr. Wilhelm K. T. Zours according to the voting rights announcement published on May 27, 2021. According to the same voting rights announcement, Mr. Wilhelm K. T. Zours then indirectly controlled 23.02% of the Company's voting rights via Balaton and other companies directly and indirectly controlled by him. On this basis, the Company assumed as a precautionary measure that Mr. Wilhelm K. T. Zours, and thus also Balaton, are related parties of the Company pursuant to Section 111a (1) sentence 2 of the German Stock Corporation Act.

Pursuant to the back-stop agreement, we were obliged to offer the notes not subscribed by the other shareholders to Balaton for purchase. In return for its obligations to exercise its subscription right and to acquire the notes not subscribed by the other shareholders, Balaton was further entitled to a commission in the amount of 3.5% of the maximum total subscription price of EUR 18,150,000.00, i.e. in the amount of EUR 635,250.00. The Company was entitled to terminate the back-stop agreement with Balaton or, subject to certain conditions, to reduce the commission payable to Balaton if a third party offered to enter into the obligation with the Company to purchase the notes not subscribed by the remaining shareholders at a lower commission.

The Executive Board assessed the terms of the back-stop agreement as appropriate. The Supervisory Board approved the conclusion of the back-stop agreement on June 11, 2021. In an ad hoc release on August 20, 2021, we announced that we reduced the aggregate principal amount of the intended mandatory convertible bond to EUR 16,500,000 and the conversion price per share to EUR 1.10. In connection with the adjustment of the terms of the mandatory convertible bond the Company has on the same day also entered into an amendment agreement to the backstop agreement with Balaton. The amendment agreement reflected the changes to the terms of the mandatory convertible bond. Accordingly, the obligation of Balaton to acquire all notes under the mandatory convertible bond was reduced to EUR 16,500,000.00. In compensation, Balaton has agreed to invest, subject to certain conditions, the balance between the initial aggregate principal amount of the mandatory convertible bond of EUR 18,150,000.00 and the reduced aggregate principal amount of EUR 16,500,000.00, i.e. EUR 1,650,000.00, in future issuances of shares, convertible bonds, bonds with warrants or participation rights by the Company. This obligation will lapse upon the end of 2023. The commission that Balaton was entitled to thus was reduced to EUR 536,250.

On September 13, 2021, we announced that the placement of the subordinated non-interest-bearing mandatory convertible bond. The maximum volume of the mandatory convertible bond was successfully placed in the aggregate principal amount of EUR 16,500,000.00. In connection with the back-stop agreement, Balaton has subscribed for notes in the aggregate principal amount of EUR 2,717,800.00.

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EPIGENOMICS 9M 2021
INTERIM STATEMENT
14

REPORT ON POST-REPORTING DATE EVENTS

On October 7, 2021, and thus after the end of the reporting period, we published that that Executive Vice President Finance Albert Weber will resign from his position as member of the Executive Board of Epigenomics AG as of December 31, 2021, to pursue other interests. Albert Weber will remain available to the Company in an advisory capacity until June 30, 2022. The Company has initiated the search for his successor.

After the end of the reporting period, a further conversion window opened from October 1 to 14, 2021, for the holders of notes from the two convertible bonds we issued in the first and third quarters of the current year. This resulted in 75,354 new shares from conversions of the 2021/2024 mandatory convertible bond and 3,232,080 new shares from conversions of the 2021/2027 mandatory convertible bond, bringing the total number of shares and voting rights in the Company to 15,539,737 at the time of publication of this quarterly statement.

OUTLOOK

As a result of the sale of our biobank to New Horizon Health Limited, we updated our revenue and earnings guidance for the full year 2021 on August 17, 2021:

• Revenue 2021: EUR 6.0 million (previously: EUR 0.4 million to EUR 1.0 million).
• EBITDA before share-based payment 2021: EUR -3.0 million to -4.0 million (previously: EUR -7.0 million to EUR -9.0 million)
• Cash consumption 2021: EUR 3.5 million to EUR 4.5 million (previously: EUR 7.0 million to EUR 9.0 million)

For EBITDA before share-based payment, it cannot be ruled out that the lower end of the range of EUR -3.0 million may even be undercut at the year-end due to the further development of the EUR/USD exchange rate (and the associated exchange rate gains already generated). However, due to the lack of predictability of the exchange rate development until the end of the year, we currently refrain from changing the outlook.

This interim statement was approved and cleared for publication by the Executive Board of the Company on November 10, 2021.

Berlin, November 10, 2021

The Executive Board

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EPIGENOMICS 9M 2021
INTERIM STATEMENT
15

DISCLAIMER

This publication expressly or implicitly contains certain forward-looking statements concerning Epigenomics AG and its business. Such statements involve certain known and unknown risks, uncertainties and other factors which could cause the actual results, financial condition, performance or achievements of Epigenomics AG to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. Epigenomics AG is providing this statement as of this date and does not undertake to update any forward-looking statements contained herein as a result of new information, future events or otherwise.

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EPIGENOMICS 9M 2021
INTERIM STATEMENT
16

FINANCIAL CALENDAR

Report on fiscal year 2021 ... Friday, March 25, 2022
Annual General Shareholders' Meeting 2022 ... Wednesday, June 15, 2022

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CONTACT

Epigenomics AG
Geneststrasse 5
10829 Berlin, Germany
Phone: +49 30 24345-0
Fax: +49 30 24345-555
contact@epigenomics.com

Investor IR.on AG
Frederic Hilke
Phone: +49 221 9140 970
ir@epigenomics.com

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