SpareBank 1 Markets acted as financial advisor to SoftOx Solutions in relation to the private placement of new shares conducted by the company in March 2024, and is acting as financial advisor to the company in relation to the subsequent offering of new shares which was announced in connection with the private placement.

SOFTX (COMMISSIONED RESEARCH)

Promising antimicrobial technology - further advancement dependent on sufficient funding

22/04/2024

Christian Nygaard

Phone: +47 24 13 36 65 Mobile: +47 45 40 33 22 E-mail: [email protected]

Trym Gulbrandsen

Phone: +47 24 14 74 18 Mobile: +47 90 36 81 50 E-mail: [email protected]

SpareBank 1 Markets

Phone: (+47) 24 14 74 18 Visit address:Olav Vs gate 5, 0161 Oslo Post address: PostBox 1398 Vika, 0114 Oslo

Investment highlights

SoftOx Inhalations Solutions aims to replace the use antibiotics with hypochlorous acid (HOCI) in the treatment of Ventilator-Associated Pneumonia (VAP). VAP is a respiratory infection that occurs during the intubation of patients by circumventing natural airway defenses, heightening the risk of bacterial infection. An estimated 130,000 patients in Europe and the US contract VAP yearly and there is currently no effective treatment on the market as resistant bacteria and biofilms limit the effect of antibiotics. SoftOx has managed to develop medical-grade stabilized HOCI that has showed strong antibiofilm activity against pathogens found in VAP. With proof-of-concept studies in animal respiratory infections the clinical success has a favorable probability. Phase 1 was completed in 2022 and proved the solution to be safe to inhale for humans. Phase 2 aims to demonstrate proof-of-concept in humans and could commence early 2025. However, the company requires funding of NOK50m to take the project through phase 2, and an additional NOK130m for phase 3. In Europe and the US, the estimated market size is NOK18bn. The company targets capturing a 10% market share within the initial 3 years of market approval, with additional growth opportunities stemming from high mortality rates and potential cost savings.

There is currently limited effective treatments for VAP as antimicrobial resistance and biofilms limits the effects of antibiotics. Antimicrobial resistance is a global concern, causing 1.2 million deaths in 2019 and listed by WHO as one of the top 10 global health threats. Patients contract VAP during ventilator intubation as it circumvents natural airway defenses, heightening the risk of bacterial infection. VAP raises mortality rates in ICUs and, according to SoftOx, intubated patients face a 10-30% risk of developing VAP and increases mortality rates of up to 50%. Studies show that in Europe and the US there is an estimated 70,000 and 60,000 cases each year, respectively, and leads to extra hospital costs of USD47k per patient in the US and USD30k per patient in the EU.
SoftOx has achieved medical-grade stabilized hypochlorous acid within the therapeutic window. Due to the inherent instability and high reactivity of chlorine-based solutions, most solutions today are unable to maintain a therapeutic level over time. SoftOx Inhalation Solution's HOCI strikes a balance between unacceptable toxicity and insufficient efficacy, with degradation being less than 5% over 2 years. SIS has proven to be effective against bacterial biofilms and respiratory pathogens. With proof-of-concept studies in animal respiratory infections the clinical success has a favorable probability with relatively low study costs. Phase 1 showed the solutions to be safe to inhale for humans, and Phase 2 aims to demonstrate proof-of concepts in humans. SIS is protected by over 90 patents ensuring patent protection for +15 years on vital applications, shielding them from competitors seeking approval for similar products. Should SIS reach market approval, the pathway is well defined. Since VAP is an infection contracted at hospital, the hospital is liable to cover the associated treatment costs without any reimbursement process. VAP comprises a large market with a cost reduction potential of NOK54bn.
Valuation thoughts: Assuming the company receives sufficient funding and reaches market approval, we estimate NOK1.8bn in revenues and NOK722m in net income by 2030, based a 10% market share and a 40% net income margin. Based on a Price-to-Earnings ratio of 12.5x discounted back to 2024 and equity issuances post-phase 2 of NOK230m in the range NOK0.5-1.5/share, this translates to a fair value of NOK0.53-0.69/share.

Investment case summary

Cutting-Edge Technology - SOFTX has pioneered a groundbreaking technology that stabilizes hypochlorous acid (HOCl) with acetic acid (CH3COOH). The stabilized hypochlorous acid can be used to eradicate or inactivate all relevant microorganisms. The core of SoftOx' value proposition is the stabilization of hypochlorous acid, maintaining its concentration within a therapeutic window, which is a balance between unacceptable toxicity and insufficient efficacy. This core technology is fortified by robust patent protection, with over 90 patents granted, leveraging insights from extensive research and development into the immune system's own production of HOCl.
Targeted Application Leveraging the many potential use-cases of stabilized hypochlorous acid, SoftOx has focused its efforts on enhancing treatment for Ventilator Associated Pneumonia (VAP), recognizing its profound impact on patient outcomes and healthcare costs. VAP presents a critical challenge in intensive care settings, affecting ventilated patients with compromised immune systems. By harnessing the antimicrobial properties of stabilized HOCl, SoftOx aims to address the underlying microbial causes of VAP, potentially revolutionizing current treatment paradigms (antibiotics).
Progress and Future Prospects - The company has successfully completed phase 1 trials, demonstrating the safety and feasibility of aerosolized stabilized hypochlorous acid in human subjects, with no reported Serious Adverse Events (SAEs). Additionally, preclinical studies have shown promising outcomes in the treatment and prevention of Influenza A infection in mice, providing proof of concept for further clinical exploration. Phase 2 trials, slated to commence in early 2025 pending the securing of NOK50m in financing, aim to evaluate the efficacy of SoftOx Inhalation Solution (SIS) in VAP patients, with anticipated enrollment of approximately 250 subjects. The successful execution of phase 2 studies is expected to pave the way for exit opportunities by 2026, potentially unlocking significant value for stakeholders.
Valuation thoughts – With 130k yearly patients in US & EU that develops VAP, high VAP excess mortality rates and additional costs associated VAP of around USD40k per patient, the market for the SoftOx technology solution is large. Under the assumption the total addressable market for SoftOx is 1/3 of hospital cost reductions, we arrive at a market size of around NOK18bn. Given a 10% market share in 2030, coupled with 40% project cash earnings margin and fair P/E of around 12.5x, we arrive at a potential SoftOx Inhalation solutions market cap of NOK9bn in 2030. In addition, the company expects further growth from increase in market share post-2030, which should imply a higher multiple than 12.5x. Given that the company issues NOK50m in equity related to phase 2 study, NOK130m related to phase 3 study to market approval and NOK100m in buffer capital at market approval (our own assumption), we find that there is around 22.2x potential upside in the stock until 2030.
If we 1) adjust for risk of success of the different phases until market approval based on previous infectious disease- and respiratory studies (18.2% success probability from start of phase 2 to market approval), 2) discount the 2030 cash flows to present with a 15% discount rate and 3) assume future equity issuances prices post-phase 2 study of between NOK0.5-1.5/share we find a fair share price between NOK0.53-0.69/share compared to last private placement of NOK0.2/share and current share price at NOK0.208/share.
Additional projects – The company technology of stabilized hypochlorous acid has, as stated above, many use cases. Within SoftOx Inhalation Solution company, there will also be an ongoing project for employing the technology for military purposes to counteract biological threats. The timeline of this project is that phase 1B is expected to commence in the middle of 2025 and completed in the middle of 2026. Thus, the project is lagging behind the VAP treatment project, but there are some interesting findings from the project: 1) Fully covered funding of phase 1: The budget is around NOK90m and is fully financed by the European Defense Fund and Norwegian MoD. All commercial rights still belongs to SoftOx solution. 2) Synergies: With these financial muscles one optimizes the SoftOx Inhalation Solution (SIS), which they have called SIS 2.0. They optimize and increase dosages and thus, the synergies from these expenditures to the VAP part of the business are expected to be large. 3) Large market potential: One expects to defeat any biological weapons with the technology, and thus the market potential is large. In NATO and partners, 1m soldiers can be in service within a few months, and SoftOx expects 3-years stockpiling within NATO + partners. Also, they see a possibility of a civilian spin-off for the civilian population (around 1bn people in NATO and partners) if a terror attack-or the next pandemic with a potential unknown virus occurs, it might also be relevant to stockpile for the civilian population. If successful, the product is expected to be sold directly to military forces.
Furthermore, SoftOx Skin and Wound Care will become an own privately held company that owners of SoftOx Inhalation Solutions will own before new funding in the company. The company will perform Phase 2 for SoftOx Wound and Skin Care chronic wounds the next 2-3 years, dependent on funding possibilities. The company states that estimated probability of success is statistically above 80%, and according to external valuation report, the value will increase up to NOK4bn after successful phase 2. However, the company needs approx. EUR10m to fund phase 2/3 of the project, and the board is considering a NOK10m funding round to fund planning of the new phase and explore the possibility of licensing out the skin and wound care business to industrial players.

1. Investment case

1. Company Overview
1. Market Overview
1. Financials
1. Valuation
1. Appendix
1. Disclaimer

The new SoftOx

Following the restructuring, SoftOx Solutions will be split into two companies

Public company: Will continue to be listed at Euronext growth.
VAP in focus: Focus on Proof of Concept in Ventilation Associated Pneumonia (VAP).
SoftOx Defense Solutions: SoftOx Inhalation Solutions will control 100% of the company. All commercial rights to EDF project belong to SoftOx Defense Solution AS.
Headquarters: New board and management will be established, with company headquarters in Copenhagen.
Funding: The company will seek funding of NOK50m to finance phase 2 study of VAP. The company has already initiated talks with potential investors who have expressed interest in investing in the company as soon as the company is free of debts and the crawl-out and company-split has taken place.

SoftOx Inhalation Solutions AS SoftOx Skin and Wound Care Solutions AS

Private company: The company will become a non-listed company continuing with the current board and management.
Wound care: Focus on Wound Care management.
Extraordinary dividend: Shareholders in SoftOx Solutions AS will receive shares in daughter company SoftOx Skin and Wound Care Solutions AS as extra ordinary dividend.
Funding: Company will seek funding of up to EUR10m to continue development of its wound care business. The board will also recommend a smaller share issue of up to NOK10m to fund the company through the planning of phase 2b/3 and explore the possibility of licensing out the Skin and Wound Care business to industrial players.

Sources and uses from the debt refinancing

When company is split up, SoftOx Inhalation Solution will finance phase 2 with a new NOK50m equity offering¹

No outstanding interest-bearing debt post-refinancing

…But we estimate the company will have a burn rate of ~NOK8m per quarter

Post refinancing, and given 2Q23-4Q23 cash burn, we find a burn rate of NOK9.5m

NOK25m cash post subsequent offering on 1Q24 numbers

per quarter – however, we estimate a burn rate going forward of NOK8m Post-refinancing, company will have no outstanding IBD

If the company only finance phase 2 with NOK50m at 0.2/share…

… the existing shareholders will still hold 71.5% of the company

Number of share development including phase 2 funding Ownership existing shareholders after phase 2 financing sensitivity

0.2 share issue price 0.15 share issue price 0.1 share issue price

SoftOx's antimicrobial technology

Reinforces the body's own ability to eradicate unwanted microbes

HOCI is naturally produced in the body

The technology is based on a synergistic combination effect between two chemical agents that are naturally produced in the human body, hypochlorous acid (HOCI) and acetic acid.
HOCl is produced by white blood cells during the body's immune response and acts as a potent oxidizing agent against microbial infections. It kills bacteria by penetrating bacterial cell membranes, causing intracellular damage and death.
Concentrations and combinations can easily be adjusted to fight different types of infections without inducing new resistance, which de-risk new R&D project's success of accept.

All products are based on the same technology SoftOx has solved medical grade stabilized HOCI

Due to the inherent instability and high reactivity of chlorinebased solutions, most solutions today are unable to maintain a therapeutic level over time.
SoftOx has managed to achieve medical-grade stabilized HOCl within the therapeutic window, achieving a balance between unacceptable toxicity and insufficient efficacy. The degradation is less than 5% over 2 years and increases reliability and shelf-life.

SoftOx Inhalation Solutions (SIS)

Aims to replace the use of antibiotics in treatment of VAP with Hypochlorous Acid (HOCI)

1. Patients need breathing help 2. Some patients develop VAP 3. HOCl could help cure VAP

The function of a ventilator is to help patients breathe by assisting the lungs to provide oxygen and remove CO² .
Many conditions can make mechanical ventilation of ICU patients necessary, including head injury, shock, severe pneumonia, acute respiratory distress syndrome (ARDS) and drug overdose
Respiratory failure can be lifethreatening, and ventilators are employed to help patients breathe.

VAP arises from ventilator use, circumventing natural airway defenses and heightening the risk of bacterial infection.
VAP raises mortality rates in ICUs and, according to SoftOx, intubated patients face a 10-30% risk of developing VAP with mortality rates of up to 50%.
VAP is difficult to cure as antimicrobial resistance and biofilms limits the effects of antibiotics.

SoftOx hypothesizes that SIS inactivates and kills bacteria, including resistant bacteria and bacteria in biofilms, in the upper and lower respiratory tract, and suggests potential improvements in patient outcomes.
The hypothesis is proven to be valid in mice. Moreover, results from Phase 1 trial proved that SIS was safe to inhale for humans and showed no signs of resistance developing.

Why focus on Ventilator-Associated Pneumonia?

A hospital acquired condition with no effective treatment and costs EU&US hospitals USD4bn yearly

Treatment: VAP has a high mortality rate and there are currently limited effective treatments on the market.
Administration: Patient group is well-defined and enrolled into ICU. The targeted delivery of SIS is through already present tubes that will be handled by health personnel without the need for any additional equipment.
Pathway to market: Since VAP is an infection contracted at hospital, the hospital is liable to cover the associated treatment costs without any reimbursement process. VAP comprises a large market with cost reduction potential of USD4bn.
Cost saving potential:

Yearly VAP cases

Pathway to market is short and well-defined SoftOx Inhalation Solution protected by patent family

Probability of success: SIS has proven to be highly effective against bacterial biofilms and respiratory pathogens. With proofof-concept studies in animal respiratory infections the clinical success has a favorable probability, and study costs are relatively low.
Patents: Protected by over 90 patents ensuring patent protection for +15 years on vital applications.
Competition: Competitors have not been able to a develop stabilized HOCI within the therapeutic range. Moreover, patent family shields competitors from seeking approval for similar products.

SIS preclinical efficacy studies supports high probability of success

SIS eradicates all relevant microorganisms and demonstrated proof of concept for treatment in mice

Pulmonary pathogens: P. aeruginosa and S. aureus are among the most common pathogens in VAP and often present as biofilms. SIS shows strong antibiofilm activity against such pathogens.
Influenza A in mice: Twice daily SIS-treatment resulted in a 90% reduction of viral titers on post-infections days 1 to 3 and demonstrated proof of concept.
Sendai virus in mice: SIS treatment prevents infection in mice after exposure and stops virus from spreading further.

Effective treatment of Influenza A in mice Prevents virus from spreading in mice

Key insights SIS tested against biofilms grown for 24h with 1h contact

Successful SIS Phase 1 trial

Showed the solution to be safe and tolerable to inhale for healthy individuals

Subjects: Conducted on 56 subjects randomized to receive SIS or placebo in a 3:1 ratio, where 42 received SIS and 14 placebo.
Inclusion criteria: The volunteers were healthy adults between the ages 18 and 55 with a BMI ranging from 18.5 to 30 kg/m² .
Exclusion criteria: Recent participation in other trials, blood donation, medical condition or drug sensitivity, user of concomitant medication, positive drugs of abuse test.

Eligibility Outcomes

Actual study start was October 8, 2021, and primary completion date April 13, 2022.
Demonstrated safety of up to 4 doses of 5 mL 100μg/mL SIS per day for five days, with no serious adverse effects.
Still, mild adverse effects were present in 27.9% of SIS recipients and 21.4% for placebo.
Design: Subjects were enrolled into one of three single dose groups or into one of four multiple dose groups.
Dosages: 1 st two multiple dose groups OD for 5 days. 2 nd two multiple dose groups BID for 4 days plus day 5 morning dose or QID for 4 days plus morning dose day 5 1 . Max SIS concentration was 100 ug/ml administrated four times daily.
Administration: SIS administered via a jet nebulizer and inhaled through a mask over a period of up to 15 minutes.

Design Dr Bjarnsholt, Chief Scientific Officer, receiving SIS²

SIS Phase 2 could commence early 2025

But is dependent on funding of NOK50m to sustain operations throughout the phase

Preparations: SoftOx is currently in discussions with hospitals in Denmark to kickstart phase 2 trial, with available slots slated for 2025. All essential documentation has been gathered to facilitate the Clinical Trial Application process, and regulatory approval is anticipated within 2-3 months following submission.
Funding: Phase 2 is not possible before funding is secured. Although discussions with hospital stakeholders suggest a possible early 2025 start, lack of funding will result in delays.
Cash: The company stipulates a requisite funding of NOK50m to sustain operations throughout Phase 2. However, the current quarterly cash burn post-refinancing is NOK10m. Unless cash burn is reduced, this translates to NOK80m in needs the next two years.

Lack of funding is a major concern High probability of Phase 2 success

The study will comprise 250 ICU patients diagnosed with VAP to assess the efficacy of SIS. 200 patients will receive the solution, while the remaining 50 patients will be administered a placebo.
Rigorous monitoring protocols will be implemented due to the critical condition of ICU patients, ensuring prompt identification of any serious adverse events.
Given that SoftOx receives the required funding, Phase 2 should be completed by the end of 2025. According to Chief Scientific Officer the probability of phase 2 success is at least 50%.

The company should have sufficient funding until 2Q26

With a quarterly cash burn of ~NOK8m

Company anticipates SIS approval faster than the industry average

SIS product category on lower end of duration relative to other Biotechnology R&D projects

Total duration is around 10 years for SIS product category

In Europe and the US, total VAP market amounts to NOK18bn

Based on a cost savings potential of NOK54bn where 1/3 is allocated to supplier

Hospital costs: Studies report 70,000 and 60,000 yearly cases of VAP in Europe and the US, respectively. Estimates show that it leads to extra costs of USD47k per patient in the US and USD30k per patient in the EU¹ .
Revenue potential: Common practice during the patent period for companies is to charge hospitals based on the cost reduction provided by the product. Typically, the industry standard ranges from 20-40%. Hence, revenue potential is based on assumption of charging 1/3 of the cost savings.

130k yearly VAP cases and NOK54bn in extra costs If SIS is approved, we assume a 10% market share by 2030

Patent protection: SIS is protected by its patent family from competitors getting approval of similar products.
20/80 rule: Generally, 20% of the largest companies account for 80% of the market. Assuming the 20% largest hospitals are similar in size, SIS would only need to penetrate a fraction of these hospitals to achieve substantial market presence.
Growth potential: The company expects continued growth beyond 2030, driven by both high mortality rates and significant cost savings potential. However, we believe a 10% market share is fair.

Market value potential SIS revenue potential

SIS income margin 40% as sole focus is providing hospitals

We use peers' EBITDA post-tax as benchmark given anticipated focus on expanding market shares and product use once approved, rather than further investments

Average EBITDA margin post-tax 2011-2023 Potential cash earnings

SIS margins should be higher than that of peers

Peers allocate significant R&D expenditure to new products in early stages, with low probability of success, leading to the recognition of these costs as opex.
Furthermore, SoftOx will sell their product directly to hospitals, which means that marketing costs will be low. The net income margin should thus align with the product margin.

Fair P/E of 12.5x on 2030 earnings with a 15% discount rate

Given that the project is successful

Fair P/E 12.5x as low capex reduces growth potential 15% discount rate after risk adjusting

Capex: If SIS enters the market, there is room for growth without further capex based on market share potential of 10% and the use of product as both treatment and prevention.
Growth: Given the assumption of no maintenance/growth capex needed, growth should align with inflation, and thus 14-15x seems like a fair multiple. However, growth variations affect multiples, and a reasonable range is [10,20], and as lower investments reduces the growth potential we argue for a more conservative valuation between P/E 10-15x.

Median P/E 2010-2023¹ Peers rNPV discount rates

Methodology: Utilizing the risk-adjusted NPV method involves the adjustment of NPV by incorporating corresponding probabilities. This method is widely used in valuing binary cases and is generally seen as a more precise estimate than adjusting for the risk of failure solely in the discount rate.
Discount rate: According to studies the rates for products in mid-stage development is 10-22%. Given the high probability of SIS not being unsuccessful, we argue that 15% is fitting.

There is a 18.2% likelihood of success from phase II to market approval according to study on clinical development success rates

SIS product category has high to median probability of transition relative to other Biotechnology R&D projects

Phase I to II Phase II to III

Phase III to NDA/BLA NDA/BLA to Approval

SoftOx believes that probability of phase 2 success is high

The probability is expected to be higher than what is generally seen across the market

21 Source: SB1M, SOFTX, Biotechnology Innovation Organization, Biomedtracker & Amplion: Clinical Development Success Rates, 2011-2020, February 2021

Shares outstanding development

If Phase 2 is successful, we assume SoftOx will be able to issue new shares far above current share price

Based on an issuance price of NOK1/share, the company would have a total of 1.108m shares outstanding

Fair value range of NOK0.53-0.69/share…

… when we assume different equity issuance prices between NOK0.5-1.5/share post-phase 2 study

Calculations 2024	NOKm	Assumptions
		Market size (NOKm)	18,040
Revenues	1,804	Market share	10 %
Net income	722	Net income margin	40 %
Equity value	9,020	Fair P/E multiple	12.5x
Risk adjusted	1,637	Probability of Phase 2 to approval	18.2 %
Discounted	708	Discount rate	15 %

Implied share price	0.64	Shares outstanding	1,108

Implied value given future equity issuances at NOK1/share Share price sensitivity

Comments

Under the assumption of a NOK130m issuance at NOK1/share following a successful phase 2 study and NOK100m issuance at NOK1/share after market approval (these equity issuances should differ in price due to differences in risk – but we employ the same price for simplicity), there would be 1,108m shares in the company.
With an equity value of NOK708m, this gives us a price of NOK0.64/share, or 3.2x the last private placement at NOK0.2/share.

Sensitivities

The company is highly sensitive to market share and probability of success in phase 2

Assumptions
Market size (NOKm)	18,040
Market share	10 %
Net income margin	40 %
Fair P/E multiple	12.5
Discount rate	15 %
Phase 2 equity funding need	50m
Equity funding neeed ex phase 2 funding	230m
Equity issuance price post phase 2 success	NOK1/share
Probaility of phase 2 transition	30 %
Probaility of phase 2 transition, SoftOx estimate	50 %
Probaility of phase 3 transition	65 %
Probability of phase NDA/BLA to approval	95 %
Probability of phase 2 to market approval	18 %

Assumptions Compared to last private placement, the stock seems attractive despite a scenario of additional funding need for completion of phase 2 at NOK0.2/share

Highly sensitive to market share assumption of 10% Given SoftOx estimate of +50% probability of phase 2 success, and no additional funding need above the estimated NOK50m, we find a 5.3x candidate

Sensitivities

Assumptions
Market size (NOKm)	18,040
Market share	10 %
Net income margin	40 %
Fair P/E multiple	12.5
Discount rate	15 %
Phase 2 equity funding need	50m
Equity funding neeed ex phase 2 funding	230m
Equity issuance price post phase 2 success	NOK1/share
Probaility of phase 2 transition	30 %
Probaility of phase 2 transition, SoftOx estimate	50 %
Probaility of phase 3 transition	65 %
Probability of phase NDA/BLA to approval	ਰੇਤ %
Probability of phase 2 to market approval	18 %

Discount rate sensitivity P/E Multiple sensitivity

Assumptions Post phase 2 success, we assume NOK130m in funding to come to market approval, and NOK100m in buffer funding post market approval

Scenario: SIS is owned by a sole proprietor post-phase 2…

… Using NOK230m of own funds to finance development, the expected value of SIS could be NOK3bn in 2026

2026 value of company given phase 2 study success Present value phase 2 risk sensitivity

Current market cap implies 10% success rate for phase 2

If SIS was owned by a sole proprietor post-phase 2 and invested NOK130m in 2026 plus a buffer of NOK100m in 2030, expected fair 2026 value after risk adjustments would be NOK3,019m, compared to a market cap of NOK176m (at 0.2/share post NOK50m equity issuance from external investor).
Studies indicate a phase 2 study success rate of 30% (average of infectious disease and respiratory), this implies a fair present value of NOK685m, compared to a market cap of NOK176m post NOK50m equity issuance at 0.2/share.
However, given SCO's belief in >50% probability, fair market value of the company can be above NOK1,091m. Current market cap at NOK176m implies a 10% probability of phase 2 success.

Scenario: SIS is owned by a sole proprietor post-phase 2…

… Using NOK230m of own funds to finance development, the expected value of SIS could be NOK3bn in 2026

Calculations & Assumptions

Calculations	NOKm	Assumptions 2030
		Market size (NOKm)	18,040
Revenues	1,804	Market share	10 %
Net income	722	Net income margin	40 %
Equity value	9,020	Fair P/E multiple	12.5x
Less buffer capital	8,920	Buffer capital	100
Discounted back to 2026	5,100	Discount rate	15 %
Less investment phase 3	4,970	Investment Phase 3	130
Fair value, risk adjusted	3,069	Market approval post phase 2	61.75 %
Expected value loss of Phase 3 investment	-50	Failure to meet approval	38.25 %
Fair value 2026	3,019
Discounted back to 2024	2,283
Risk adjusted	685	Probability of Phase 2 transition	30.0 %
Fair value 2024	୧୫୮

When adding the 4 different outcomes…

... the expected value yields a fair value of NOK635m, based on our assumptions

European Defense Fund project

Large market potential with a counteracting product to

biological threats EDF project phase 1 expected to be finalized in mid2026

The company technology of stabilized hypochlorous acid has many use cases. Within SoftOx Inhalation Solution company, there will also be an ongoing project for employing the technology for military purposes to counteract biological threats. The timeline of this project is that phase 1B is expected to commence in the middle of 2025 and completed in the middle of 2026. Thus, the project is lagging behind the VAP treatment project.

There are however some interesting findings from the project: 1) Fully covered funding of phase 1: The budget is around NOK90m and is fully financed by the European Defense Fund and Norwegian MoD. All commercial rights still belongs to SoftOx solution. 2) Synergies: With these financial muscles one optimizes the SoftOx Inhalation Solution (SIS), which they have called SIS 2.0. They optimize and increase dosages and thus, the synergies from these expenditures to the VAP part of the business are expected to be large. 3) Large market potential: One expects to be able to defeat any type of biological weapon with the technology, and thus the market potential is large. In NATO and partners, 1m soldiers can be in service within a few months, and SoftOx expects 3-years stockpiling within NATO + partners. Also, they see a possibility of a civilian spin-off for the civilian population (around 1bn people in NATO and partners) if a terror attack or the next pandemic with a potential unknown virus occurs, it might also be relevant to stockpile for the civilian population. If successful, the product is expected to be sold directly to military forces.

SoftOx Skin and Wound Care

New company seeks separate funding of EUR10m to continue its wound care business

Further development Exit strategy

The company has announced that they will seek separate funding of EUR10m to finance wound care development going forward.
In addition, the board has recommended a smaller issue of up to NOK10m to fund planning of SBE phase 2b/3 and explore the possibility of licensing out the skin and wound care business to industrial players.
2024-2025:
- SoftOx Biofilm Eradicator Phase 2/3.
- Outsource production first- and next-generation technology.
- Bring products to market through partners and distributors.
2026
- Distribution of SoftOx wound cleanser in EU and US.
- Sale or listing as separate unit.
By 2026 aims to exit wound care either through sale of applications, technology platform or seperate listing.
Primary reasons for not selling wound care now:
- International advisers: market value is too small
- Venture Capital: lack of plan for commercialization
- Industry: too little data

Turnover potential in the US¹

SoftOx Skin and Wound Care

SoftOx Biofilm Eradicator (SBE) is currently only area of development

Antimicrobial treatment for chronic wounds and is formulated to penetrate and kill microbes including biofilms in the wound bed.
Phase 1a and phase 1b showed that the solution is safe in humans. In phase 1b, 8 patients with venous leg ulcers wounds showed a 98% reduction in bacterial load after only 5 days of treatment, alongside dose-dependent wound healing.
With strong phase 1a/1b results, the company aims to advance directly to phase 3 for SBE, combining phase 2b and 3 in one study. The success probability is estimated at ~80%.

SBE: treatment for chronic wounds SWIS: rinsing product for acute wounds

Acute wounds are exposed areas on the skin which should heal itself if the area is clean. The current recommended treatment is saline with an 80% market share.
Due to clinical evidence of significant reduction in bacterial load and better wound healing in acute wounds the company aims to develop SWIS as the preferred wound cleansing product.
In 2023, FDA approval application for 510(k) clearance of SWIS as a medical device in the US market fell short of requirements, and work with SWIS is paused due to insufficient funding.

Wound healing SBE phase 1B Wound healing SWIS confirmative study