SoftOx Valuation Guidance

Human Wound & Infection Technology

27 February 2023

Abbreviations

AMR	Antimicrobial resistance
BV	Book Value
CF	Cash Flow
CMO	Contract manufacturing organization
Company	SoftOx
DCF	Discounted Cash Flows
EBITDA	Earnings Before Interest and Taxes, Depreciation and Amortization
EV	Enterprise Value
FDA	(The United States) Federal Drug Administration
GMP	Good manufacturing practice
HOCI	Hypochlorous acid
KWC	KWC AS
LBO	Leveraged buyout
Market Cap	Market Capitalization
Mkt.	Market
MNOK	Million Norwegian Kroner
NIBD	Net Interest -bearing Debt
OPEX	Operating expenses
P&L	Profit & loss
SWIS	SoftOx Wound Irrigation Solution
SPBM	SpareBank 1 Markets
SBE	SoftOx Biofilm Eradicator
VLU	Venous leg ulcers
RCT	Randomised Control Study
R&D	Research & development

CONTENTS

1. Mandate and Scope of Work	Page 4
2. Summary Valuation Guidance	Page 6
3. About SoftOx	Page 18
4. About SoftOx' Wound Care Solutions	Page 24
5. Valuation Methodology and Assumptions	Page 33
6. Valuation Guidance SoftOx Wound Care technology	Page 42
7. SoftOx' Value Dilemma	Page 52
8. Information Sources And Bibliography	Page 56

Mandate and Scope of work

Mandate and Scope of Work –Wound Care Segment

Background

SoftOx (the "Company") is a Scandinavian medical technology and biotechnology company listed on the Euronext Growth Market. Given the traded market value of the company, Management is reconsidering its strategy for funding development and commercialisation of its two near term business segments, specifically Wound Care and Respiratory Infectious Disease.

In order to facilitate these strategic considerations, Management wishes to obtain independent guidance and advice from KWC on the current and potential value of each of these two business segments.

In the first instance, management has asked KWC to consider the Wound Care segment and applications.

Scope of work

In this report, KWC has reviewed and analysed SoftOx technology and position relative to the Wound Care market in developing valuation guidance for 100% of the Wound Care segment on a stand-alone basis ("Valuation Guidance").

We have applied generally accepted valuation methodologies together with the results of our business reviews and market research in providing this valuation guidance for the Wound Care segment.

The nature and maturity of the Company technology, the strategic options available for commercialisation and the nature of the industry can result in a wide variety of outcomes. Our work has sought to identify and focus on the most likely outcomes, with reference to industry benchmarks and practices and the relative strengths and weaknesses of the SoftOx technology.

Information

Our work is based on information from SoftOx and discussions with SoftOx Management, publicly available information, information we have collected from our external databases, as well as our own analyses and experience.

Scope limitations

Our work does not comprise any due diligence or other verification of the received documentation or Management estimates. Thus, our work does not provide any assurance as to the accuracy or quality of the information that we have received.

Tax

KWC has not considered tax related matters arising from any legal restructuring or organization in establishing a stand-alone business segment.

Other

This report is designed for informational purposes only, to be used in connection with initial discussions with potential advisers and professional investors in the SoftOx Wound Care segment.

Disclaimer

This report is not an invitation to invest in SoftOx or the Wound Care segment and should not be used for this purpose or relied upon in this connection. Advisers and investors must undertake their own investigations and due diligence in this connection.

Any other or external use of this report requires KWC's prior written consent.

Oslo, 27 February 2023

Simen Weiby

Nigel Wilson

Summary Valuation Guidance

Wound Care and Infection Technology

Summary Valuation Guidance – MNOK 1700 - 2500

Current Fair Value Guidance

The Fair Value of the SoftOx Wound Care technology (SBE and implied embedded value for SWIS) is very sensitive to key assumptions.

Key Variables

In particular, probability of obtaining regulatory approval (FDA), royalty rate to be received for the technology and degree of success in commercialisation in the US and Europe until patent protection begins to expire are all critical assumptions.

We have therefore considered a number of scenarios based on industry benchmarking and the unique qualities associated with this technology to provide guidance as to current Fair Value. These are summarised in the graphic and table of key assumptions opposite.

Conclusion

On a judgmental and prudent basis we have concluded that the current Fair Value is in the range:

MNOK 1700 – 2500, mid point MNOK 2100

We have also assessed the reasonableness of our conclusion by reference to the implication of current traded multiples and transaction multiples on expected future earnings.

Significant Upside Potential

The exceptional value proposition of the SWIS / SBE technology is expected to generate much higher average royalty rates (12%) compared to an industry average of 7.3%*. This is supported by initial indications from potential partners.

The industry average probability of obtaining FDA approval following completion of successful phase 1 is 23% and 60% following phase 2. SBE technology has qualities that suggest a higher probability. SBE is well positioned for a successful outcome of phase 2 trials and we have assumed a current probability of FDA approval of 40% in our guidance.

Summary of Fair Value Guidance

MNOK

Summary Valuation Guidance - Sensitivity analysis

Fair Value is very sensitive to certain key variables

Explanations

The Valuation Guidance is based on a number of DCF scenarios related to probability of FDA approval, royalty rates for technology, business development and WACC.

Set out in the tables opposite are certain sensitivity analyses for Fair Value:

1. Probability of FDA approval combined with a) an industry average royalty rate of 7.3% and b) an estimated average royalty rate of 12% for SWIS / SBE for a weighted business case (2/3 Base Case and 1/3 High Case) at different levels of WACC.
1. Assuming our estimated and implied probability of FDA approval of 40% for different levels of royalty rates and WACC.

Our Valuation Guidance mid-point is MNOK 2100 which can be identified at various levels in the sensitivity analysis

Comments

We have generally aimed to establish reasonably prudent assumptions in arriving at our Valuation Guidance of MNOK 1700-2500 and a mid point of MNOK 2100.
At this level we believe that there is considerable upside potential in the average royalty rate and risk-weighted business development scenario assuming strong results from FDA approval / commercial evaluation that confirms key value drivers:
Safety and efficacy
Cost of production and shelf life
Ease of application
Robustness of patent protection over time

MNOK

30%	40%	50%	60%	70%
1,220	1,690	2,160	2,640	3,110
1,350	1,860	2,380	2,890	3,410
1,490	2,050	2,620	3,180	3,740
1,650	2,260	2,880	3,500	4,120
1,820	2,500	3,170	3,850	4,530
				Probability of SBE FDA approval (royalty rate 12%)

			Probability of SBE FDA approval (royalty rate 7.3%)
	23%	30%	40%	50%	60%	70%
17.0 %	460	660	940	1,230	1,520	1,800
16.0%	520	740	1,050	1,360	1,670	1,990
15.0%	580	820	1,160	1,500	1,850	2,190
14.0 %	650	920	1,290	1,660	2.040	2,410
13.0%	730	1,020	1,430	1,840	2,250	2,660

					Royalty rate
		5.0%	7.3%	10.0%	12.0%	16.0%	20.0%
	17.0%	580	940	1,370	1,690	2,320	2,960
	16.0%	650	1,050	1,520	1,860	2,550	3,250
WACC	15.0%	730	1,160	1,670	2,050	2,810	3,570
	14.0%	810	1,290	1,850	2,260	3,090	3,920
	13.0%	910	1,430	2,040	2,500	3,410	4,310

Absence of competing technologies Note that as value milestones are achieved going forward the level of WACC related to company specific risk will be reduced

Valuation Guidance – Base case – Moderate Success

DCF Analysis assuming FDA approval and access to US and EU markets

	MNOK

	2023E	2024E	2025E	2026E	2027E	2028E	2029E	2030E	2031E	2032E	2033E	2034E	2035E	2036E
Total yearly cohort size US, in millions					2.4	2.4	2.4	2.4	2.4	2.4	2.4	2.4	2.4	2.4
Total yearly cohort size Europe, in millions							2.4	2.4	2.4	2.4	2.4	2.4	2.4	2.4
Market share US chronic wound healing					2%	5%	10%	15%	20%	25%	30%	35%	35%	35%
Market share Europe chronic wound healing							2%	5%	10%	15%	20%	25%	30%	35%
# units sold US, SBE, in millions					0.05	0.12	0.24	0.36	0.48	0.60	0.72	0.84	0.84	0.84
# units sold EU, SBE, in millions					0.00	0.00	0.05	0.12	0.24	0.36	0.48	0.60	0.72	0.84
Price per unit SBE US and Europe, in NOK					25,394	25,902	26,420	26,948	27,487	28,037	28,598	29,170	29,753	30,348
SoftOx' royalty rate (percentage of SBE sales)					12.0%	12.0%	12.0%	12.0%	12.0%	12.0%	12.0%	12.0%	12.0%	12.0%
Total Sales US					146	372	758	1,160	1,577	2,011	2,461	2,929	2,987	3,047
Total Sales Europe					$\mathbf 0$	$\Omega$	152	387	788	1,206	1,641	2,092	2,560	3,047
Partner funding			305	305
Total Sales SoftOx			305	305	146	372	909	1,546	2,365	3,217	4,102	5,021	5,548	6,094
Sales growth						155%	145%	70%	53%	36%	27%	22%	10%	10%

Personnel expenses	$-40$	$-40$	$-104$	$-104$	$-35$	$-58$	$-112$	$-176$	$-259$	$-345$	$-434$	$-527$	$-580$	$-635$
Other operating expenses	$-77$	$-77$	$-201$	$-201$	$-5$	$-5$	-5	-5	$-6$	$-6$	$-6$	$-6$	-6	$-7$
Depreciation and amortisation	$-2$	$-2$	$-2$	$-2$	$-2$	$\mathbf 0$	0	$\mathbf 0$	$\Omega$	$\Omega$	$\mathbf 0$	$\mathbf 0$	0	$\mathbf 0$
EBIT	$-119$	$-119$	$-2$	$-2$	105	309	792	1,364	2,101	2,866	3,662	4,488	4,961	5,452
EBIT-margin					72%	83%	87%	88%	89%	89%	89%	89%	89%	89%

Depreciation and amortisation	$\overline{2}$	$\overline{2}$	$\overline{2}$	$\overline{2}$	$\overline{2}$	0	0	0	0	0	$\mathbf 0$	0	$\mathbf 0$	0
EBITDA	$-117$	$-117$	$\mathbf{0}$	$\mathbf{0}$	106	309	792	1,364	2,101	2,866	3,662	4,488	4,961	5,452
Tax	$\Omega$	0	$\Omega$	0	$\Omega$	$-27$	$-174$	$-300$	$-462$	$-631$	$-806$	$-987$	$-1,091$	$-1,199$
CAPEX	$\Omega$	0	0	0	$\mathbf{0}$	$\overline{0}$	0	0	$\mathbf 0$	$\mathbf 0$	$\mathbf 0$	0	$\mathbf 0$	$\mathbf 0$
Changes in working capital	$\Omega$	$\Omega$	0	$\mathbf 0$	15	$-23$	$-54$	$-64$	$-82$	$-85$	$-88$	$-92$	$-53$	$-55$
Free cash flow	$-117$	$-117$	$\bf{0}$	$\mathbf{0}$	121	259	564	1,000	1,557	2,151	2,768	3,409	3,817	4,198
Discounted cash flow	$-109$	$-95$	$\mathbf{0}$	$\mathbf{0}$	64	120	227	351	475	570	638	683	665	636

Present value explicit period	4.200
Present value terminal part	0
Enterprise value	4 200
Net interest bearing debt	0
Equity value	4 200

Key Assumptions – Base Case

• Phase 3 trials funded by industry partners

FDA approval (end of 2026) and subsequent EU approval (end of 2028)
Commercial ramp-up over 10 years (Gains Act protection) in the US. EU lags by 2 years
Peak market share of 35% in all markets
No further value development of technology platform and gradual patent erosion over time – no terminal value calculated
Average royalty rate all markets 12%
Scalable business model (technology company) with core management team included in personnel cost

Valuation Guidance – High case – Substantial Success

DCF Analysis assuming FDA approval and access to US and EU markets MNOK

	2023E	2024E	2025E	2026E	2027E	2028E	2029E	2030E	2031E	2032E	2033E	2034E	2035E	2036E
Total yearly cohort size US, in millions					2.4	2.4	2.4	2.4	2.4	2.4	2.4	2.4	2.4	2.4
Total yearly cohort size Europe, in millions							2.4	2.4	2.4	2.4	2.4	2.4	2.4	2.4
Market share US chronic wound healing					5%	10%	20%	30%	40%	45%	50%	55%	60%	60%
Market share Europe chronic wound healing							5%	10%	20%	30%	40%	45%	50%	55%
# units sold US, SBE, in millions					0.12	0.24	0.48	0.72	0.96	1.08	1.20	1.31	1.43	1.43
# units sold EU, SBE, in millions							0.12	0.24	0.48	0.72	0.96	1.08	1.20	1.31
Price per unit SBE US and Europe, in NOK					25,394	25,902	26,420	26,948	27,487	28,037	28,598	29,170	29,753	30,348
SoftOx' royalty rate (percentage of SBE sales)					12.0%	12.0%	12.0%	12.0%	12.0%	12.0%	12.0%	12.0%	12.0%	12.0%
Total Sales US					364	743	1,516	2,319	3,154	3,619	4,102	4,602	5,121	5,223
Total Sales Europe					$\Omega$	$\mathbf{0}$	379	773	1,577	2,413	3,281	3,765	4,267	4,788
Partner funding			305	305
Total Sales SoftOx			305	305	364	743	1,895	3,092	4,731	6,032	7,383	8,368	9,388	10,011
Sales growth						104%	155%	63%	53%	27%	22%	13%	12%	7%

Personnel expenses	$-40$	$-40$	$-104$	$-104$	$-56$	$-95$	$-211$	$-331$	$-496$	$-626$	$-762$	$-861$	$-964$	$-1,027$
Other operating expenses	$-77$	$-77$	$-201$	$-201$	$-10$	$-10$	$-11$	$-11$	$-11$	$-12$	$-12$	$-12$	$-13$	$-13$
Depreciation and amortisation	$-2$	$-2$	$-2$	$-2$	$-2$	$\mathbf 0$	0	$\mathbf 0$	0	$\mathbf 0$	$\mathbf 0$	0	$\mathbf 0$	0
EBIT	$-119$	$-119$	$-2$	$-2$	296	638	1,673	2,750	4,224	5,394	6,609	7,494	8,412	8,971
EBIT-margin					81%	86%	88%	89%	89%	89%	90%	90%	90%	90%

Depreciation and amortisation	$\overline{2}$	$\overline{2}$	$\overline{2}$	$\overline{2}$	2	$\Omega$	0	0	0	$\mathbf 0$	0	0	$\mathbf 0$	0
EBITDA	$-117$	$-117$	0	0	298	638	1,673	2,750	4,224	5,394	6,609	7,494	8,412	8,971
Tax	0	0	0	0	$-1$	$-140$	$-368$	$-605$	$-929$	$-1,187$	$-1,454$	$-1,649$	$-1,851$	$-1,974$
CAPEX	0	0	0	0	$\mathbf 0$	$\mathbf 0$	$\mathbf 0$	$\overline{0}$	0	$\mathbf 0$	$\mathbf 0$	$\mathbf 0$	$\mathbf 0$	0
Changes in working capital	$\Omega$	0	0	0	$-36$	$-38$	$-115$	$-120$	$-164$	$-130$	$-135$	$-98$	$-102$	$-62$
Free cash flow	$-117$	$-117$	0	0	260	460	1,190	2,025	3,131	4,077	5,020	5,747	6,459	6,935

Discounted cash flow	$-109$	-95	0	0	139	213	480	710	954	1,081	1,157	1,152	1,126	1,051

Present value explicit period	7 900
Present value terminal part	O
Enterprise value	7 900
Net interest bearing debt	O
Equity value	7 900

Key Assumptions – High Case

• Phase 3 trials funded by industry partners

FDA approval (end of 2026) and subsequent EU approval (end of) 2028
Commercial ramp-up over 10 years (Gains Act protection) in the US. EU lags by 2 years
Peak market share of 60% in US and 55% in Europe
No further value development of technology platform and gradual patent erosion over time – no terminal value calculated
Average royalty rate all markets 12%
Scalable business model (technology company) with core management team included in personnel cost

Summary Valuation Guidance – Reasonable?

As tests of reasonableness we have considered how capital markets would value future cash flows based on the Base and High Case scenarios.
Assuming that 2029 would represent an established commercial operation with US and European regulatory approvals and established positive cashflows from license / royalty income of MNOK ~434 (Source DCF analyses reflecting a risk weighted value of MNOK 2100).
An EV/EBITDA peer group analysis indicates a traded multiple of 16.6x and an implied valuation today of MNOK 2900.
An EV/EBITDA Private Equity LBO analysis indicates a multiple of 13x and an implied value of MNOK 2300.

Primary Valuation method	Fair Value (MNOK)
DCF - risk-weighted scenarios	2.100
Supporting methodologies / tests of reasonableness
EV/EBITDA LBO median multiple (NPV DCF 2029E)	2.300
EV/EBITDA median market multiple (NPV DCF 2029E)	2.900

Other Approaches to Valuation – Tests of Reasonableness Other Value References – Implied return on capital invested

SoftOx is a patented technology platform which has cost around MNOK 260 to develop over the past 10 years.
A separate technical valuation for demerger purposes (February 2023) indicated that SBE / SWIS technology represents 65% of total value.
We estimate SBE / SWIS technology has a Fair Value today of MNOK 1700 -2500, mid point 2100.
As a reference, total capital invested to date in SBE is implicitly around MNOK 150 which implies an EV/Capital Invested multiple of approximately 14x over a span of 10 years (assuming MNOK 2 100 Fair Value).
Assuming linear deployment of capital this implies an average annual return on capital invested of ~45%. An exact IRR calculation has not been made due to information limitations.

Other Value References – SpareBank 1 Markets Valuation

SpareBank 1 Markets («SPBM») conducted a valuation review of SoftOx in June 2022 prior to completion of Phase 1 trials for SBE which was a major de-risking event, and also prior to de-risking development for SWIS.
Successful SBE Phase 1 trials based on industry averages increase probability of FDA approval from 6% to 23% and implicitly Fair Value accordingly.
SPBM concluded on a Fair Value for SBE / SWIS of around MNOK 400 which would have increased to MNOK 938.
It should be noted that SPBM assumed a different business model.

The above value reflections indicate that the Fair Value Guidance is not unreasonable.

SoftOx Chronology – Wound Care technology

Significant Value Milestones and clear route to FDA approval and commercialisation

History

SoftOx Solutions AS is an Oslo based MedTech and BioTech company established in 2012 and listed on the Euronext Growth market in 2018.
The company has developed a technological platform with innovative, patented, and effective infection control solutions for disinfection, wound care (SBE / SWIS) and respiratory tract applications.
The patent portfolio comprises more than 70 patents with a defined remaining time horizon for core patents ranging from 2037-2042.

Way forward

The key value milestones going forward are illustrated below.
The commercial value of SBE depends on FDA approval and its proven safety and efficacy, production cost, ease of application, shelf life, degree of patent production and emergence of competing technologies.
SBE is enroute for Phase 2 trials which will be a major value milestone and reduce commercial risks significantly.
Phase 2 trials are being designed for speed to FDA approval.

Value Milestones – historical chronology and plan to FDA approval

Value Creation and De-Risking Milestones

KWC estimated Fair Value is based on the current stage of SBE development and the risk weighted probability of future milestones being achieved.
Fair Value will increase as milestones are achieved and commercial value is de-risked. Successful Phase 2 trials will potential triple the Fair Value of SBE compared to status on completion of phase 1.
Given the large end-markets, exceptional value proposition and current lack of viable competing products, FDA approval will be the critical value milestone.
The choice of business model for commercialisation will also have a significant impact on commercial value.
SoftOx is planning on remaining a technology business (receiving various types of financial support and or fees / royalties for production, marketing, sales and distribution licensed to third party partners). This will increase speed to scale and reduce risks at the same time revenues will be shared with partners.

Key factors in determining level of value creation

Safety
Efficacy
Cost of production
Ease of application
Shelf life
Erosion of patent protection
Absence or not of competing technologies

Conservative approach to Fair Value Guidance

Commercial Development Scenarios Summary of Commercial Scenarios

• The DCF valuation input reflects the probability (risk) weighted average of three realistic commercial development scenarios (Low, Base and High) for SBE (see opposite).

Low Case = Failure in Phase 2 and business activities are terminated

Base Case = FDA approval and Moderate Commercial Success

High Case = FDA approval and Substantial Commercial Success
These scenarios represent the SoftOx specific (unsystematic) risk pertaining to the business case for Wound Care.
The probabilities assigned to the scenarios are set with reference to historical industry and market observations.

Business Model

The above commercial scenarios are based on a business model whereby SoftOx licenses the IP for Wound Care to a new entity through a demerger.
This new entity will be funded by SoftOx and new investors in order to complete clinical trials, obtain FDA approval and finance commercial rampup.
The commercial model will be based on a technology license and outsourcing of production, marketing, distribution and sales through third party partners.
The value of the technology assuming FDA approval will be a function of margins that can be achieved in the value chain from technology to end product to consumers. This will be driven by the value proposition compared to alternative treatments.
Margins will be a function of many factors but include production cost, ease of application, shelf life and level of patent protection and competitive position relative to alternative treatments over time.

	Low case	Base case	High case
Probability of outcome	60%	27%	13%
Peak market share	0%	35%	60%
Royalty rate	0%	12.0%	12.0%
Equity value in scenario (MNOK)	0	4,200	7.900

Conservative assumptions in Fair Value Guidance

Fair Value Guidance is based on the following assumptions:
Industry average probability of FDA approval in the light of technological characteristics.
10 year patent protection and no terminal value or value as a generic solution. The protection assumptions is based on the US GAINS Act*.
Average royalty rate of 12% in the light of exceptional value proposition based on written indication from potential global partners.
Only the US and European market for Wound Care are considered.
Market ramp-up reaches peak market share after 10 years.
SoftOx is seeking FDA approval for venous sore treatment which represents a high initial hurdle in terms of "proof in practice" but automatically opens up many other areas for human application and accelerated ramp-up of commercial applications. This also reduces regulatory hurdles in other jurisdictions e.g. EU.
The Wound Care market extends beyond a wide range of treatment application in humans to similar applications in animal welfare.
We have not assigned specific values to SWIS which may provide additional cash flows but whose real significance is supporting the SBE value road map.
For practical purposes, we have assumed that equity value equals enterprise value as this will be a newly established entity.

The above represents the basis for our Fair Value conclusion.

Significant upside potential to Fair Value Guidance

Upside potential compared to Industry Benchmarks

Regulatory approval

We have used industry benchmarks in developing our valuation guidance. The SoftOx Wound Care technology has many qualities (safety and efficacy) reflected in Phase 1 results that suggest that the probability of regulatory approval is higher than observed industry norms.
The critical nature of wound care in patient recovery and wellbeing, the healthcare costs and lack of effective treatments can accelerate regulatory approval – SBE can be fast tracked for FDA approval.
In addition the technology is currently progressing from an extensive Phase 1 and into the Phase 2 process which is partly resolved earlier.

Value Proposition and higher royalty rates

Exceptional value proposition creates competition in partnering pre- and post regulatory approval, reducing risk and investment exposure.
Exceptional value proposition allows for greater royalty returns to SoftOx. Indications of 20% received for the simpler / inferior SWIS technology can indicate grater potential for SBE. We have assumed 12% reflecting an average from the 20% indicated above down to a 7% industry average.

Patent protection – estimated life

Technology has a longer life before current patent protection is eroded or competing technologies arise. Assumed 12 year life – could be 19 years.
Depending on partner portfolio there may still be significant residual value post patent protection through established branding.

Upside potential compared to other key assumptions

Commercial value

Commercial value assuming regulatory approval is largely a function of value proposition, size of market, business model, level of patent protection (time and scope), go to market strategy and success in execution.
Given the observed anti-bacterial qualities the commercial value is likely to expand going forward.

Business Model

We have assumed a business model whereby SoftOx is a technology developer and supplier and that production, marketing, sales and distribution is outsourced to the existing global pharmaceutical industry eco-system, effectively de-risking commercialisation.
This business model provides speed to scale through partnering with the industry eco-system.
We have not specifically looked at the potential of SWIS to generate short term cash flows and contribute to funding needs or other advantage. This is an additional opportunity to be evaluated by management.

Addressable market

Global market potential is growing and is greater than US (35%) / European (35%) assumptions in human wound care. We have made no assumptions for the remaining 30% of the global market
Other applications e.g. animal / veterinary wound care are not addressed.

The SoftOx technology and probable development scenarios demonstrate qualities which provide significant upside potential to Valuation Guidance in the form of greater nominal returns and or lower risk.

SoftOx share observations – Reflection of value?

Current Market Capitalization – Implied Value MNOK 100

SoftOx was listed on the Euronext market in 2018 and has experienced relatively volatile pricing which has not reflected the value milestones achieved since then (from NOK 33 per share to a top of NOK 112 in May 2020 and a sinking trend since that time to the current NOK 15 per share).
This development reflects both general systemic issues for the Euronext Growth market and specifically for SoftOx as a pre-revenue company with funding constraints and no peer group or active analytical coverage.
SBE / SWIS implied share (65%) of current market capitalization of MNOK 160 is only MNOK 104 – reflects "The Euronext Trap"

Last share issue pricing – Implied Value MNOK 360

The last share capital issue in SoftOx was a private placement of MNOK 50 at NOK 55 per share in December 2021 which valued the entire Company at around MNOK 550, again prior to major value milestones.
Based on a demerger ratio of 65 / 35 this would imply a value for SBE / SWIS of MNOK 360.

Highest Historical Share Price – Implied value MNOK 700

• All time high share price of NOK 112 in May 2020 implies a value for SBE / SWIS of around MNOK 700.

Last Analyst Estimates (SPBM) – Implied Value MNOK 300

SPBM issued an analysis of SoftOx in June 2022, prior to achievement of key value milestones (SBE Phase 1 results in September 2022 and developments within other segments e.g. Grant from European Defence Fund in July 2022 for respiratory applications).
The headline conclusions were:
"A target share price of NOK 45 which is equivalent to a market capitalization of approximately MNOK 450"
"Huge potential offset by future investment needs and partnering uncertainty"
SBE / SWIS 65% share of total target value is around MNOK 300.

Historical / current capital market references for SoftOx and implied value of SBE from MNOK 100-700 do not reflect positive value milestones and have very limited relevance / value in determining current Fair Value for SBE / SWIS technology.

SoftOx share - Implied Probability of Success

Current market capitalization implies that there is only a 6% probability of success!

Based on the assumption that the equity market values the Wound Care business as being 65% of SoftOx' market capitalization (given that invested capital split between Wound Care and Respiratory to date).
A total market capitalization of ca. MNOK 155*, implies a Wound Care equity value of MNOK ~100.
Based on our DCF models, we have derived the implicit probability of the scenarios unfolding given that the total equity value shall be MNOK 100. Please see table to the right which shows the probability of failure that produce a market cap of MNOK 100.
The remaining assumptions are in accordance with our weighted DCF model; 40% probability of FDA approval, 12% royalty rate, 15% WACC and 2/3 chance of Base case & 1/3 chance of High Case in the event of approval.

What probability of success is implied in the share price? Probabilities that reflect a market capitalization of MNOK 100

EQUITY VALUE IN MNOK

Probability of	Low case	Base case	High case	Equity value Wound Care
Equity market's implicit assigned probability of SUCCESS	94%	4%	2.2%	100

Market capitalization does not reflect the actual status of clinical readiness for SWIS / SBE technologies.

About SoftOx

SoftOx Technology addresses a huge global problem

A Scandinavian MedTech and BioTech company focusing on prevention and eradication of serious infections

SoftOx has developed a non-toxic antiseptic technology designed to address some of the world's greatest health challenges:

Emergence of 1 antimicrobial resistance (AMR)	• According to the World Health Organization, AMR is a major threat to global health. New forms of resistance are emerging and can spread with remarkable speed between continents.
Biofilm infections 2 in chronic wounds	There is growing evidence of the presence of biofilms in non-healing, chronic wounds and their adverse role in wound • healing.
3 Spread of viruses	Deadly viral outbreaks are expected in the future. There is an unmet need for effective and well-tolerated virucidal • solutions to aid for infection prevention and control.
	The scope of this valuation exercise is limited to 2 Although SoftOx has its primary focus on human health, it has parallel applications for animals and livestock.
	The Wound Care issue: • Non-healing chronic wounds present a significant public health burden*. • More than 6.5 million patients in the US are annually affected by chronic wounds. This corresponds to USD 25 billion annually in treatment. • With rising obesity and increased life expectancy the need for a treatment of chronic wounds is increasing. • Effective FDA approved treatments for chronic wounds are lacking. There exists more than 800 products authorized by the FDA for management of wounds, however they are not indented for treatment. The scope of the issue is the same in Europe. •

Strong Product Pipeline and Patents… …..Good progress in clinical development programs

The graphic below shows SoftOx' business segments and the development phase of the products.

SoftOx has 77 patents pending worldwide and 72 patents have been granted, in total 149 applications. The patents address formulations, production, storage, route of administration, methods and devices. The technology currently enables two years shelf life in active substance and it avoids build up of unacceptable impurities. The core patents expire in the period 2037-2042.

ABOUT SOFTOX

SoftOx' Business Model as Technology Provider

Business Model facilitates speed to scale and mitigates commercialisation risk

SoftOx' financial history - A Development Company

R&D has historically largely been expensed

Consolidated Group P&L 2018-2022

TNOK

Comments

Total invested capital MNOK 260m of which Wound Care share is approx. MNOK 200 and SBE directly MNOK 150. I.e., a substantial amount has been invested in the technology platform.
Current cash burn rate of approximately MNOK 20 25 per quarter.
The company is equity financed except for convertible loans from existing shareholders, totalling MNOK 40 (per 31.12.2022). We have considered these convertible shareholder loans to be equity.
R&D has largely been expensed reflecting a prudent accounting practice adopted by management.

Consolidated Group Balance sheet 2018-2022

TNOK

	2018	2019	2020	2021	2022
Total Current Assets	7419	81 660	46733	65855	14 697

Production Assets	327	242	3 9 0 9	3 4 9 4	3891
Deferred Tax Assets	12 3 0 5	18 135	30 5 27	51 347	51 318
Other Intangible Assets	3 3 4 3	4928	6 1 4 3	7370	7927
Total non-current assets	15975	23 304	40 578	62 211	63 136
Total Assets	23 393	104 965	87311	128 066	77833

Total Current Liabilities	8985	18 3 8 2	11093	17979	20762
Other long-term Debt	0	114	0	350	41 065
Total long-term liabilities	0	114	0	350	41 065

Share capital	76	155	167	207	207
Share premium reserve	17771	89 713	76 052	175 034	109 530
Total Retained Earnings	$-3438$	$-3.399$	0	$-65504$	$-93731$
Total Equity	14 409	86 469	76 219	109 737	16 006
Total Equity and Liabilities	23 393	104 965	87311	128 066	77833

Ownership structure Top 20 shareholders

Shareholders	%	# Shares
Kristian Almas (member of Nomination Committee)	14.2%	1,468,687
Nordnet AB (publ)	10.0%	1,034,286
Geir Hermod Almas (Chairman)	8.3%	862,002
Hermod Farms As	7.3%	755,029
Pro AS	3.4%	351,657
Gh Holding AS	3.1%	320,629
George Emil Aubert	2.2%	227,542
Danske Bank A/S	2.0%	206,857
Claus Seeberg	2.0%	202,870
Gemallo As	1.6%	165,485
Almhaug Bolig AS	1.5%	155,143
Lars Johan Frigstad	1.4%	144,800
Jan Helge Johnsen	1.1%	113,771
WI-01 Holding As	1.1%	113,771
Falck Frås AS	1.0%	103,428
Rocha Invest AS	1.0%	103,428
Nordiske Renholdsproukter As	0.9%	93,085
Sonja og Emil Auberts legat	0.9%	93,085
Olav Jarlsby (Independent Non-Executive Director)	0.2%	24,100
Melvin Teigen	0.2%	16,000
Sum	63.4%	6,555,655

Comments to Shareholder Structure and Capital History

Largest shareholders to a large extent represented by Founders, Management, Board members and related parties, where portfolio turnover typically is very low.
There is limited representation from deep pocket institutional investors.
Trading is largely confined to the free float of small retail shareholders.
SoftOx has raised a total of NOK 250 million, of which NOK 50 million was raised before the IPO (Initial Public Offering) at an average price of NOK 13 per share. After the IPO, SoftOx have had the following placements:
21/12/2018: NOK 15 million Private Placement with support from new and existing shareholders. Private Placement consists of 680 000 new shares, each at a subscription price of NOK 22.
12/12/2019: SoftOx has completed Private Placement, raising gross proceeds of approximately NOK 75 million through issuance of 3,125,000 new shares (the "New Shares") at a price of NOK 24 per share. Private Placement received support from both new and existing shareholders.
16/12/2020: SoftOx has completed a Private Placement, raising gross proceed of approximately NOK 50 million through issuance of 909,090 new shares, at a price per Offer Share of NOK 55. The Private Placement consists of two separate tranches: one tranche with 500,000 Offer Shares ("Tranche 1") and a second tranche with 409,090 Offer Shares ("Tranche 2").
15/12/2021: SoftOx has completed a Private Placement, raising gross proceed of approximately NOK 50 million through issuance of 915 000 new shares, at a price per offer share of NOK 55. In relation to the Private Placement, Almhaug Bolig AS has exercised its right to convert NOK 10 million of its short-term unsecured interest-free loan, with a principal amount of NOK 15 million, into new shares in the Company at a conversion price of NOK 38.55 per share in accordance with the loan agreement between the Company and Almhaug Bolig AS dated 13 October 2021.

About SoftOx' Wound Care Solutions

SoftOx Biofilm Eradicator (SBE) SoftOx Wound Irrigation Solution (SWIS)

SoftOx Chronology – Wound Care technology

Significant value milestones and clear route to FDA approval and commercialisation

History

SoftOx Solutions AS is an Oslo based MedTech and BioTech company established in 2012 and listed on the Euronext Growth market in 2018.
The company has developed a technological platform with innovative, patented, and effective infection control solutions for disinfection, wound care (SBE / SWIS) and respiratory tract applications.
The patent portfolio comprises more than 70 patents with a defined remaining time horizon ranging for core patents from 2037-2042.

Way forward

The key value milestones going forward are illustrated below.
The commercial value of SBE depends on FDA approval and its proven safety and efficacy, production cost, ease of application, shelf life, degree of patent production and emergence of competing technologies.
SBE is en route for Phase 2 trials which will be a major value milestone and reduce commercial risks significantly.
Phase 2 trials are being designed for speed to FDA approval.

Value Milestones – historical chronology and plan to FDA approval

SoftOx Wound Care Technology - Unique Qualities

Simple Chemistry Unique Qualities

SoftOx is able to produce stable HOCI formulations at levels similar to those found endogenously in the body. The company is currently working on clinically & commercially viable formulations with at least 3 years shelf-life

SoftOx Wound Care Technology - Unique Qualities

Stabilised HOCI formulations within the therapeutic window

Illustration of relationship between HOCl concentration, and desirable and undesirable clinical effects

SoftOx Wound Care Technology – Current Products

Two Products from the same Technology Platform covering a broad range of potential applications

Different HOCI concentrations offer possibility to design products for different purposes and wound conditions from preventive to active treatment

Status SWIS: Application for FDA approval submitted

Excellent wound healing and safety profile demonstrated – proof of technical concept

SWIS-01: BurianEA, et al. Int J Low ExtremWounds. 2021 doi: 10.1177/15347346211015656. SWIS-02: Burian EA, et al. Acta Derm Venereol . 2022 doi 10.2340/actadv.v102.1624

Status SBE: Very strong results from Phase 1 trials

SBE results to date and approach to phase 2 trials indicate 90% probability of Phase 2 success (mgt. est.)

The issue and current situation

Large and growing unmet need for early treatment of biofilm infections to promote wound closure confirmed.
Today's recommended solutions do not remove all bacteria, are becoming less effective and ultimately can include surgical removal of the infection.
SoftOx' focus on venous leg ulcers (VLU) treatment aims to become the first line treatment for infection in wounds, with a commercially viable product. The unique formulation with PH 4.3 secures 2 years shelf life at room temperature.
Early proof of concept shows very positive indicatiosn: Dose response on wound healing and reduction in microbial burden*. FDA and payers have thus indicated initiatives to secure fast track approval and adoption**. SoftOx aims for market approval in 2026 and SBE sales in the US from 2027.
SoftOx currently has a partnership with MTEC US Navy which finances parts of the clinical studies. All remaining R&D and OPEX spend is assumed to be covered by future capital raises and partner financing.

Total addressable market & opportunities

Early proof of concept covering VLU (clinical model done) and surgical wounds (split skin model to be used) combined represent 62% of the total US wound care cost, estimated at BUSD 100 yearly***. Of the two, VLU is the core focus area for SoftOx SBE, and comprises 37% of the total cost. Separate studies must be expected to be required for other indications.
The wound care costs are expected to grow at a CAGR of 6% in the 22'-28' period****.
SBE to be classified as a drug, which means patients and healthcare clinics pay little or nothing themselves, making users relatively price insensitive.

SBE: – Phase 2 trial to commence in H2 2023

SBE results to date and approach to phase 2 trials indicate 90% probability of Phase 2 success (mgt. est.)

Phase 1 main takeaways: > 99 % reduction in bacterial bioburden 1)

Y-axis us a logarithmic scale,

meaning that moving from one horizontal line to the next is a 10x move

Compared to «best in class» the study observes a significantly larger bacterial reduction

Phase 1 trials main takeaways

✓ Product safe and well tolerated
✓ SBE formulations reduce the absolute number of bacteria (bacterial burden) in the wound compared with pre-dose (baseline) by more than 99% which is remarkably good. Note that the y-axis in the graphic is logarithmic, meaning that movement from one horizontal line to the next is a 10x move.
✓ A dose dependant reduction in wound size was observed in multiple dose treatment

Information on planned Phase 2 trials

Brief description

Blind, randomised, PC, 2 arm: SBE vs. Normal Sterile Saline.
Patients with chronic ulcers of lower extremities (VLU).
Total population size: 100
Treatment regime: Once daily, 3 times per week for 4 weeks

End points

• Microbial determination, reduction of bacterial burden, clinical evaluation of wound, percentage wound closure, renewed epithelialisation and (S)AE.

Location, timeline and funding

Conducted at 8 US centres.
Expected study timeline: December 2023 June 2024.
Co-funded by US Medical Technology Enterprise Consortium

SBE: Other Aspects of Value Proposition

Most antibiotics do not work on chronic wounds

bed, kills bacteria and removes infection At clinically relevant levels, antibiotics can induce resistant biofilms cluster of bacteria protecting bacteria from immune system and antibiotics.
Due to poor blood circulation, antibiotics do not even reach the infection.
Due to dormant bacteria, the doses needed to be an effective treatment become toxic.

Using antibiotics on biofilm infections does not work SoftOx "Biofilm Eradicator" expected to penetrate the wound

Development of biofilms in wounds encapsulates the wound and fends off both the body's own immune systems and antibiotics.

Great need for a solution treating bacterial biofilm infections in combination with wound closure – current treatments only partly remove infections. The SBE showed these abilities in the Phase I study.

Valuation Methodology and Assumptions

Valuation Objectives and Choice of Methodology

Objectives

The objective of this valuation exercise is to establish a Fair Value for the SoftOx Wound Care Technology.
Fair Value should correspond to the price that an independent and willing buyer and an independent and willing seller, both being knowledgeable and acting freely, would negotiate and agree upon.

Choice of Valuation Methodology

General

As SoftOx is a publicly traded company we would normally have considered the relevance of the current market capitalization as a starting point for Valuation Guidance. However, the current share pricing has significant flaws which undermine this measure as a relevant value observation in determining Fair Value of SBE / SWIS.
The early stage and unique aspects of this business case with significant levels of conditionality dictate use of a DCF scenario analysis as the primary source of Valuation Guidance. This is supplemented by other measures as tests of reasonableness.

DCF analyses

The Valuation Guidance is based on a discounted cash flow model (DCF) for SBE as a technology company where the value chain from production to sales is licensed / outsourced to third parties in return for a royalty fee.
The DCF input is based on three commercial development scenarios (Low, Base and High) for SBE. These scenarios represent the entity specific (unsystematic) risk pertaining to the business case.
The probability of each scenario is considered with reference to industry benchmarks and adjustment for SoftOx specific factors.

Reasonableness tests

• We have also considered transaction and traded market multiples for pharmaceutical companies as a test of reasonableness of the DCF model conclusions.

Contradictory information

• We have also considered the Valuation Guidance in the light of the enormous deviation to current market capitalization for SoftOx on the Euronext Growth Market and the MNOK 150 of capital invested since 2008 in this technology segment (HOCI).

Main Valuation Method: DCF Scenario Analysis

FAIR VALUE	• The Fair Value of an enterprise corresponds to the price that an independent and willing buyer and an independent and willing seller, both being knowledgeable and acting freely, would negotiate and agree upon. • There are a number of theoretical models and methods that are normally used to prepare value estimates, which typically form the basis for sellers' and buyers' negotiations. In a well-functioning market, the methods should theoretically give the same result. • This is often not the case in practice and is illustrated in this case.
KWC APPROACH	• We have based our valuation of SoftOx Wound Care technology on management's estimates and a scenario weighted discounted cash flow model (DCF). We have estimated the cost of capital based on a relevant peer group analysis and own judgement. • In order to assess the reasonableness of the DCF-valuation, we have considered a multiple valuation, based on trading multiples of listed peers and transaction multiples in private equity leveraged buyouts (LBO). We have assumed that the value of SWIS (Medical Device) is embedded in the SBE (Drug) evaluation and we have assigned zero • specific value to SWIS. The reasons for this is based on management's focus on SBE and the fact that the main value potential lies within SBE. However, SWIS can probably be used on a tactical level to enhance the credibility and go to market value of SBE.
DISCOUNTED CASH FLOW MODEL (DCF)	• DCF, discounting future free cash flows (to equity and debt holders), is the theoretically most correct method for valuing a business. The cash flows are discounted by a required rate of return reflecting the risk of the business. • Additionally, DCF makes most sense providing best case specific valuation guidance – range from base case to high case values assuming various probabilities of regulatory approval. • In our Valuation Guidance we have not included a terminal value, as is customary in DCF-analyses. Hence, the valuation is based on the explicit forecast period only – which matches a prudent evaluation of the maturity of the core patents. Post patent expiry, there is additional uncertianty with respect to both pricing and volumes achieved. This could be seen as a • further risk adjustment of the future cash flows from the wound care operations.

HIGH CASE BASE CASE LOW CASE	• We have established three scenarios; High, Base and Low, where low represents failure of Phase 2 trials and no net commercial value. Base and High Case represent moderate to Substantial commercial success assuming FDA approval of SBE as a drug. • The DCF variables and assumptions in these scenarios are largely based on SoftOx management input, other relevant sources and KWC's own judgement. • The scenarios are assigned probabilities and are weighted accordingly in our valuation. As this will be a newly established entity NIBD is kept constant at zero in all scenarios and implicitly Enterprise Value = Equity Value.

Key Assumptions - Summary

SoftOx obtains the necessary funding to complete Phase 2 and Phase 3 clinical studies for SoftOx Biofilm Eradicator (SBE) and obtains FDA approval.
That the universal commercial rights to the technology are separable from the general SoftOx technology platform.
The business assets, primarily IPR are carved out on a debt free / cash fee basis where EV = Equity Value.
The remaining commercial life of the SBE technology is conservatively estimated to be 10 years reflecting a conservative estimate of the remaining life of key patents following FDA approval.
SoftOx Wound Irrigation Solutions (SWIS) is classified as a medical device and an important "market ready proof of concept" for SBE. Depending on the production, sales and distribution rights negotiated, cashflows accruing to the Wound Care segment would be re-invested to reduce the impact on dilutive funding for SBE development.
For the purposes of this Valuation Guidance the market under specific consideration is treatment of venous sores in the US market. Assuming successful approval as a registered drug in the US., the market can be assumed to be infinite.
We have a applied a cost of capital (WACC) of 15% as an expression of normal industrial risk in arriving at net present value of estimated cashflows.

Key assumptions – For each Value Guidance Measure

Key Assumptions	Risk-weighted Phase 1	Phase 2 SUCCESS	Base case		Market High case multiple
Probability of FDA approval	23%	60%	100%	100%	40%	40%
Risk-weighted commercial mix	2/3 Base and $1/3$ High	2/3 Base and $1/3$ High	$1/1$ Base	$1/1$ High	2/3 Base and $1/3$ High	2/3 Base and $1/3$ High
Peak market penetration	35-60%	35-60%	35%	60%	35-60%	35-60%
Royalty rate "SoftOx"	12%	12%	12%	12%	12%	12%
Royalty rate industry	7.3%	7.3%	7.3%	7.3%	7.3%	7.3%
WACC	15%	15%	15%	15%	15%	15%

Key assumptions - general FDA approval benchmarks

The graph summarizes industry success rates for individual phases of the drug development process (2011-2020), by category.
These are based on transactions in Source: Biomedtracker database*
All probabilities are contingent on the success of the previous trial/phase.
We have applied the Infection specific trial data consistently in our DCF modelling, although there are grounds to suggest a higher probability of success for SBE.

Royalty Rates – Best Proxy for SoftOx Revenue Model

Industry benchmarks (7.3%) versus SoftOx estimates (12%+)

Background and approach to Revenue Model

• SoftOx' business model will be sale / licensing of the patented technology platform for various applications and therefore production, marketing, sales and distribution will be outsourced to partners, revenues will therefore largely take the form of license fees / royalties.

Specific royalty rates applied in DCF analysis

There are well established and reliable databases available for royalty rates in various industries. One of the most reputable databases is IPSCIO's industry summary of "market level" royalty rates.
This database indicates that the average royalty rate (% of sales) for the pharmaceuticals and biotechnology sectors was 7.3% in 2021* (See graphic). It is important to emphasise that these are average observations (4,781 observations) and the 1 quartile to 3 quartile range is 2.5% - 8.8% reflecting a skewed distribution.
In our DCF analyses we have assumed two benchmarks:
a) An industry benchmark royalty rate of 7.3%
b) A specific estimated royalty rate for SoftOx of 12%
The specific SoftOx royalty rate reflects the exceptional value proposition presented by SWIS / SBE that allows for greater royalty returns to SoftOx. This is based on written indications provided by potential partners.
Written indications received for the simpler / inferior SWIS technology are at the 20% level and can indicate greater potential for SBE.
We have assumed 12% reflecting an average from the 20% indicated above down to a 7% industry average after 10 years of commercial revenues in the US and the erosion of patent protection.

Overview of royalty rates (% of sales) across industries 2021

Explanation of DCF assumptions & input (1/3)

Base Case and High Case assumptions

	Assumptions that are identical in the Base and High case (and for the Low case pre-commercialisation)
COHORT SIZE – ADRESSABLE MARKET	• Across our scenarios, we apply a cohort size of 2.4 million (per year) for the US and Europe. This number is based on the US population above 18 years of age and the annual VLU incidence rate for this demographic group, based on MedValue's data*. • For simplicity, we use the same market size figure for Europe (and that SoftOx expands to Europe with a two year lag to the US, and then at the same ramp-up pace). • In order to be prudent, we assume zero growth in the cohort size throughout the explicit time period in all our scenarios. VLU incidents only is a conservative element, given the fact that SBE should show very good healing properties on surgical wounds and other • chronic wounds as well. Further, an FDA drug approval and subsequently approval in Europe would pave the way for similar approvals in the rest of the world, which in turn would increase the addressable market further (although not included in this valuation).
PRODUCT PRICE	• In our model, we apply the price corresponding to the treatment cost of the best currently available Wound treatment method. • The clinical trials showed much better healing properties for SBE, hence we have assumed that willingness to pay is at least the same for SBE. • We use the same product price in the US and Europe. • We apply a long term USD/NOK and EUR/NOK exchange rate of 10, to be conservative and prudent.
FIXED ASSETS, INTANGIBLES, DEPRECIATION & AMORTIZATION	• By the end of 2022, SoftOx had production assets and other intangible assets totalling MNOK 11.8 (book value). Based on the demerger value ratio of 65% of assets attributable to Wound Care and 35% attributable to Inhalation Solutions, we allocate MNOK 7.7 to Wound Care. • We depreciate these existing fixed assets on a linear basis (over 5 years). • For simplicity we assume that all future investments are expensed (i.e. no capitalization).
TAX	• Per Q3 2021, SoftOx tax loss carried forward amounted to ca. MNOK 51. Based on the demerger value ratio of 65% attributable to Wound Care and 35% attributable to Inhalation Solutions, we attribute 65% of the tax loss carried forward to Wound-operations. • We apply the Norwegian corporate tax rate of 22%.
CAPEX	We have not included any CAPEX in our model. The required investments in R&D and product development the 2023E-2026E period are all • expensed and thus reflected in the operating cost lines.
WORKING CAPITAL	• We have assumed 10% working capital/sales. This is based on typical expectations of the timing of payments from the distributor of SBE to SoftOx. In the contemplated business model, the distributor will probably take delivery of SBE directly from the CMO, hence accounts payable will be zero.

Explanation of DCF assumptions & input (2/3)

The assumptions below constitute the key differences between the three cash flow scenarios

	Low case	Base case	High case
MARKET SHARE	0% • In this scenario, • SBE fails in Phase 2 trials and all business activities are effectively terminated.	• Good Phase 3 results however not outstanding. Gaining traction initially thus proves difficult until distributor Sales efforts are stepped up. Then the US / EU market share grows relatively quickly and steadily from 2028 till 2034 before it stabilises at 35%. • Even though the product is regarded superior, it is not straightforward to increase the market share further as competition responds by e.g. lowering its prices significantly or because the distributor shifts its focus on other products generating higher ROIs and NPVs.	• Outstanding Phase 3 results and broad-based positive publicity together with clever marketing efforts leads to quick (but gradual) market share gains. • US market share topping at 60% in 2035 and remains so until end of the explicit period. • EU market share peaks at 55% due to time lag effect • Market share stops at 55-60% in our model as generic alternatives will enter the market i.e. competition reacts aggressively.
SOFTOX' SHARE OF SBE's REVENUE STREAM	• 0% • No sales in this scenario	• 12% throughout the forecast period in our Fair Value assessment. The figure is based on 20% royalty rate initially, gradually falling to the industry median* towards the end of the forecast period. • The initial level of 20% royalty is based on negotiated level in a firm contract with a distributor of SWIS. • 7.3% royalty throughout our model in our industry benchmark values.	• 12% throughout the forecast period in our Fair Value assessment. The figure is based on 20% royalty rate initially, gradually falling to the industry median* towards the end of the forecast period. • The initial level of 20% royalty is based on negotiated level in a firm contract with a distributor of SWIS. • 7.3% royalty throughout our model in our industry benchmark values.
PROBABILITY OF SCENARIO BEING REALIZED**	• 60% in our Fair Value Guidance conclusion	Our Fair Value is based on 40% probability of FDA • approval**. • Given Phase 2 success, Base Case and High case are the two possible outcomes. In this scenario, we have set the probability of Base Case to 2/3 and High Case to the remaining 1/3.	Our Fair Value is based on 40% probability of FDA • approval**. • Given Phase 2 success, Base Case and High case are the two possible outcomes. In this scenario, we have set the probability of Base Case to 2/3 and High Case to the remaining 1/3.

The combined probability that a pharmaceutical product within the infection space goes from a successful Phase 1 stage to successful Phase 3 outcome and regulatory approval is 23% (statistics from 2011-2020**). Based on the results from SBE Phase 1 trial and design of Phase 2, we apply a higher probability (40%) in our Fair Value assessment.

Explanation of DCF assumptions & input (3/3)

in Base and High case)

The assumptions below constitute the key differences between the three cash flow scenarios

	Low case	Base case	High case
PERSONNEL EXPENSES	• We have split SoftOx' total estimated funding need to bring SBE through Phase 2 (2023-2024) between «Personnel expenses» and «Other operating expenses». The relative allocation between personnel expenses and other opex is based on the historical relative shares of Sales over the '18-'22 period. • No further personnel expenses as business activities are terminated due to poor Phase 2 results.	• Similar methodology and figures as for Low case in the 2023E-2024E period. • For 2025E-2026E, total cost is based on the company's estimated funding need, and the allocation to personnel and other opex is identical as for 2023E-2024E. From 2027E and throughout the forecast period • (2036E) personnel expenses are modelled as consisting of two components: fixed and variable expenses. • The fixed expenses are based on an assumption of 13 employees with an MNOK 1.5 average cost. These salaries are expected to grow by 3% annually over the forecast period. The head count of 13 is based on input from SoftOx management. • The variable salaries are linked to Sales (10% of Sales) and represents bonuses, additional recruiting, etc. which we expect if SBE succeeds and generate significant volumes and margins.	• Similar methodology and assumptions as Base and Low case for the 2023E-2026E period. • Similar amount of fixed personnel expenses as for Base case. This results in some operating leverage vs. Base case. Similar variable salaries as % of total Sales (10% • of Sales), equivalent to Base case reasoning.
OTHER OPERATING EXPENSES	See Personnel • expenses.	• Additionally, we have discretionarily added MNOK 5 in annual cost, covering other OPEX such as e.g. travel expenses and legal advice. • These costs are expected to grow by 3% annually.	• Additionally, we have discretionarily added MNOK 10 in annual cost, covering other OPEX such as e.g. travel expenses and legal advice (such costs assumed to be higher than in the Base case due to e.g. execution of higher volumes and potential challenges to the IP rights). • These costs are expected to grow by 3% annually.
		Partner and or new investors assumed to fund Phase 3 and FDA approval cost (i.e. Personnel expenses and other opex

~MNOK 850 required to complete FDA Approval

Management estimates of funding requirement February 2023

2023-2024

Phase 2 and other costs in the 2023-2024E period, SoftOx needs total capital of MNOK 234.
In terms of the holding cost, we have assumed that net ~50% is applicable to the Wound Care segment.
SoftOx estimates a total funding need of MNOK 610 to cover Phase 3 and FDA approval related cost and other SG&A in 2024 -2025.

2025 -2026

For Phase 3 and FDA approval related cost, SoftOx intends to either
a) Partner with e.g. a pharmaceutical company which can finance this in return for commercialisation rights.
b) Obtain new equity from investors. This would increase the royalty rate to be received by SoftOx post commercialisation (all else being equal).

• Explanatory note on certain funding items

SoftOx 2 nd generation is the conversion of SoftOx 1 st generation (current product) into a two-component solution, which will have improved stability properties and the ability to provide higher concentrations. The new product will therefore have a better value proposition than the 1st generation. The chemical solution is already designed and patent protected. SBE has also proven its stability. Clinical evaluation needs to be done and GMP production needs to be established, accounting for MNOK 67 of costs.
FTEs DK are employees working with the clinical and product development of the project, located in Copenhagen.
US sales and plant includes sales representatives, supporting distributors and working towards key opinion leaders in the US.

Funding needs in the short to medium term Wound Care Estimated Funding Need - Overview















through investors	Funded by SoftOx monetization of SWIS and or new	Assumed to be funded by partners and / or investors

Valuation Guidance SoftOx Wound Care technology

Summary Valuation Guidance – MNOK 1700 - 2500

Current Fair Value Guidance

The Fair Value of the SoftOx Wound Care technology (SBE and implied embedded value for SWIS) is very sensitive to key assumptions.

Key Variables

Conclusion

On a judgmental and prudent basis we have concluded that the current Fair Value is in the range:

MNOK 1700 – 2500, mid point MNOK 2100

We have also assessed the reasonableness of our conclusion by reference to the implication of current traded multiples and transaction multiples on expected future earnings.

Significant Upside Potential

Summary of Fair Value Guidance

MNOK

Summary Valuation Guidance - Sensitivity analysis

Fair Value is very sensitive to certain key variables

Explanations

The Valuation Guidance is based on a number of DCF scenarios related to probability of FDA approval, royalty rates for technology, business development and WACC.

Set out in the tables opposite are certain sensitivity analyses for Fair Value:

1. Probability of FDA approval combined with a) an industry average royalty rate of 7.3% and b) an estimated average royalty rate of 12% for SWIS / SBE for a weighted business case (2/3 Base Case and 1/3 High Case) at different levels of WACC.
1. Assuming our estimated and implied probability of FDA approval of 40% for different levels of royalty rates and WACC.

Our Valuation Guidance mid-point is MNOK 2100 which can be identified at various levels in the sensitivity analysis

Comments

We have generally aimed to establish reasonably prudent assumptions in arriving at our Valuation Guidance of MNOK 1700-2500 and a mid point of MNOK 2100.
At this level we believe that there is considerable upside potential in the average royalty rate and risk-weighted business development scenario assuming strong results from FDA approval / commercial evaluation that confirms key value drivers:
Safety and efficacy
Cost of production and shelf life
Ease of application
Robustness of patent protection over time

MNOK

		Probability of SBE FDA approval (royalty rate 12 %)
		23%	30%	40%	50%	60%	70%
	17.0%	890	1,220	1,690	2,160	2,640	3,110
	16.0%	980	1,350	1,860	2,380	2,890	3,410
WACC	15.0%	1,090	1,490	2,050	2,620	3,180	3,740
	14.0%	1,210	1,650	2,260	2,880	3,500	4,120
	13.0%	1,350	1,820	2,500	3,170	3,850	4,530


	23%	30%	40%	50%	60%	70%
17.0%	460	660	940	1,230	1,520	1,800
16.0%	520	740	1,050	1,360	1,670	1,990
15.0%	580	820	1,160	1,500	1.850	2,190
14.0%	650	920	1,290	1,660	2.040	2,410
13.0%	730	1,020	1,430	1,840	2,250	2,660

				Royalty rate
		5.0%	7.3%	10.0%	12.0%	16.0%	20.0%
	17.0%	580	940	1.370	1,690	2,320	2,960
	16.0%	650	1,050	1.520	1,860	2,550	3,250
WACC	15.0%	730	1.160	1,670	2,050	2,810	3,570
	14.0%	810	1,290	1,850	2,260	3.090	3,920
	13.0%	910	1,430	2,040	2,500	3,410	4,310

Absence of competing technologies Note that as value milestones are achieved going forward the level of WACC related to company specific risk will be reduced

Valuation Guidance – Base case – Moderate Success

DCF Analysis assuming FDA approval and access to US and EU markets

	2023E	2024E	2025E	2026E	2027E	2028E	2029E	2030E	2031E	2032E	2033E	2034E	2035E	2036E
Total yearly cohort size US, in millions					2.4	2.4	2.4	2.4	2.4	2.4	2.4	2.4	2.4	2.4
Total yearly cohort size Europe, in millions							2.4	2.4	2.4	2.4	2.4	2.4	2.4	2.4
Market share US chronic wound healing					2%	5%	10%	15%	20%	25%	30%	35%	35%	35%
Market share Europe chronic wound healing							2%	5%	10%	15%	20%	25%	30%	35%
# units sold US, SBE, in millions					0.05	0.12	0.24	0.36	0.48	0.60	0.72	0.84	0.84	0.84
# units sold EU, SBE, in millions					0.00	0.00	0.05	0.12	0.24	0.36	0.48	0.60	0.72	0.84
Price per unit SBE US and Europe, in NOK					25,394	25,902	26,420	26,948	27,487	28,037	28,598	29,170	29,753	30,348
SoftOx' royalty rate (percentage of SBE sales)					12.0%	12.0%	12.0%	12.0%	12.0%	12.0%	12.0%	12.0%	12.0%	12.0%
Total Sales US					146	372	758	1,160	1,577	2,011	2,461	2,929	2,987	3,047
Total Sales Europe					$\Omega$	0	152	387	788	1,206	1,641	2,092	2,560	3,047
Partner funding			305	305
Total Sales SoftOx			305	305	146	372	909	1,546	2,365	3,217	4,102	5,021	5,548	6,094
Sales growth						155%	145%	70%	53%	36%	27%	22%	10%	10%

Personnel expenses	$-40$	$-40$	$-104$	$-104$	$-35$	$-58$	$-112$	$-176$	$-259$	$-345$	$-434$	$-527$	$-580$	$-635$
Other operating expenses	$-77$	$-77$	$-201$	$-201$	$-5$	$-5$	-5	$-5$	$-6$	$-6$	$-6$	$-6$	$-6$	$-7$
Depreciation and amortisation	$-2$	$-2$	$-2$	$-2$	$-2$	$\mathbf 0$	$\mathbf 0$	$\mathbf 0$	0	$\mathbf{0}$	$\Omega$	$\mathbf{0}$	$\mathbf 0$	$\mathbf{0}$
EBIT	$-119$	$-119$	$-2$	$-2$	105	309	792	1,364	2,101	2,866	3,662	4,488	4,961	5,452
EBIT-margin					72%	83%	87%	88%	89%	89%	89%	89%	89%	89%

Depreciation and amortisation	$\overline{2}$	$\overline{2}$	$\overline{2}$	$\overline{2}$	2	$\Omega$	0	$\mathbf 0$	0	$\mathbf{0}$	$\mathbf 0$	0	$\mathbf 0$	0
EBITDA	$-117$	$-117$	0	$\mathbf 0$	106	309	792	1,364	2,101	2,866	3,662	4,488	4,961	5,452
Tax	0	0	0	0	$\Omega$	$-27$	$-174$	$-300$	$-462$	$-631$	$-806$	$-987$	$-1,091$	$-1,199$
CAPEX	0	$\mathbf 0$	0	0	$\mathbf{0}$	$\Omega$	0	$\mathbf 0$	$\mathbf 0$	$\mathbf{0}$	$\mathbf 0$	0	$\mathbf 0$	$\mathbf{0}$
Changes in working capital	$\Omega$	0	0	0	15	$-23$	$-54$	$-64$	$-82$	$-85$	$-88$	$-92$	$-53$	$-55$
Free cash flow	$-117$	$-117$	0	0	121	259	564	1,000	1,557	2,151	2,768	3,409	3,817	4,198

Discounted cash flow	$-109$	$-95$	0	0	64	120	227	351	475	570	638	683	665	636

Present value explicit period	4.200
Present value terminal part	0
Enterprise value	4 200
Net interest bearing debt	$\Omega$
Equity value	4 200

Key Assumptions – Base Case

• Phase 3 trials funded by industry partners

FDA approval (end of) 2026 and subsequent EU approval (end of) 2028
Commercial ramp-up over 10 years (Gains Act protection) in the US. EU lags by 2 years
Peak market share of 35% in all markets
No further value development of technology platform and gradual patent erosion over time – No terminal value calculated
Average royalty rate all markets 12%
Scalable business model (technology company) with core management team included in personnel cost

MNOK

Valuation Guidance – High case – Substantial Success

DCF Analysis assuming FDA approval and access to US and EU markets MNOK

	2023E	2024E	2025E	2026E	2027E	2028E	2029E	2030E	2031E	2032E	2033E	2034E	2035E	2036E
Total yearly cohort size US, in millions					2.4	2.4	2.4	2.4	2.4	2.4	2.4	2.4	2.4	2.4
Total yearly cohort size Europe, in millions							2.4	2.4	2.4	2.4	2.4	2.4	2.4	2.4
Market share US chronic wound healing					5%	10%	20%	30%	40%	45%	50%	55%	60%	60%
Market share Europe chronic wound healing							5%	10%	20%	30%	40%	45%	50%	55%
# units sold US, SBE, in millions					0.12	0.24	0.48	0.72	0.96	1.08	1.20	1.31	1.43	1.43
# units sold EU, SBE, in millions							0.12	0.24	0.48	0.72	0.96	1.08	1.20	1.31
Price per unit SBE US and Europe, in NOK					25,394	25,902	26,420	26,948	27,487	28,037	28,598	29,170	29,753	30,348
SoftOx' royalty rate (percentage of SBE sales)					12.0%	12.0%	12.0%	12.0%	12.0%	12.0%	12.0%	12.0%	12.0%	12.0%
Total Sales US					364	743	1,516	2,319	3,154	3,619	4,102	4,602	5,121	5,223
Total Sales Europe					$\Omega$	$\Omega$	379	773	1,577	2,413	3,281	3,765	4,267	4,788
Partner funding			305	305
Total Sales SoftOx			305	305	364	743	1,895	3,092	4,731	6,032	7,383	8,368	9,388	10,011
Sales growth						104%	155%	63%	53%	27%	22%	13%	12%	7%

Personnel expenses	$-40$	$-40$	$-104$	$-104$	$-56$	$-95$	$-211$	$-331$	$-496$	$-626$	$-762$	$-861$	$-964$	$-1,027$
Other operating expenses	$-77$	$-77$	$-201$	$-201$	$-10$	$-10$	$-11$	$-11$	$-11$	$-12$	$-12$	$-12$	$-13$	$-13$
Depreciation and amortisation	$-2$	$-2$	$-2$	$-2$	$-2$	0	0	$\mathbf 0$	0	$\mathbf 0$	$\mathbf 0$	$\mathbf 0$	$\mathbf 0$	$\mathbf 0$
EBIT	$-119$	$-119$	$-2$	$-2$	296	638	1,673	2,750	4,224	5,394	6,609	7,494	8,412	8,971
EBIT-margin					81%	86%	88%	89%	89%	89%	90%	90%	90%	90%

Depreciation and amortisation	2	$\overline{2}$	$\overline{2}$	$\overline{2}$	$\overline{2}$	$\Omega$	0	0	0	$\mathbf 0$	0	0	$\mathsf 0$	$\mathbf 0$
EBITDA	$-117$	$-117$	0	0	298	638	1,673	2,750	4,224	5,394	6,609	7,494	8,412	8,971
Tax	0	0	0	0	$-1$	$-140$	$-368$	$-605$	$-929$	$-1,187$	$-1,454$	$-1,649$	$-1,851$	$-1,974$
CAPEX	0	0	0	0	$\mathbf 0$	$\mathbf 0$	$\mathbf 0$	$\mathbf 0$	0	$\mathbf{0}$	0	0	$\mathbf 0$	$\mathbf 0$
Changes in working capital		0	0	0	$-36$	$-38$	$-115$	$-120$	$-164$	$-130$	$-135$	$-98$	$-102$	$-62$
Free cash flow	$-117$	$-117$	0	0	260	460	1,190	2,025	3,131	4,077	5,020	5,747	6,459	6.935

Discounted cash flow	$-109$	-95	0	0	139	213	480	710	954	1,081	1,157	1,152	1,126	1,051

Present value explicit period	7 900
Present value terminal part	O
Enterprise value	7 900
Net interest bearing debt	ŋ
Equity value	7 900

Key Assumptions – High Case

• Phase 3 trials funded by industry partners

FDA approval (end of) and subsequent EU approval (end of 2028)
Commercial ramp-up over 10 years (Gains Act protection) in the US. EU lags by 2 years
Peak market share of 60% in US and 55% in Europe

• No further value development of technology platform and gradual patent erosion over time – No terminal value calculated

Average royalty rate all markets 12%
Scalable business model (technology company) with core management team included in personnel cost

Valuation – Low case – Phase 2 Failure

DCF assuming termination following Phase 2 trials

MNOK

	2023E	2024E	2025E	2026E	2027E	2028E	2029E	2030E	2031E	2032E	2033E	2034E	2035E	2036E
Total yearly cohort size, in millions Total yearly cohort size Europe, in millions					2.4	2.4	2.4	2.4	2.4	2.4	2.4	2.4	2.4	2.4
Market share US chronic wound healing					0%	0%	0%	0%	0%	0%	0%	0%	0%	0%
Market share Europe chronic wound healing					0%	0%	0%	0%	0%	0%	0%	0%	0%	0%
# units sold US, SBE, in millions					$\Omega$	$\Omega$	$\Omega$	$\Omega$	$\Omega$	$\Omega$	$\Omega$	0	0	0
# units sold EU, SBE, in millions					$\Omega$	$\Omega$	$\Omega$	0	$\Omega$	$\Omega$	$\Omega$	$\mathbf 0$	0	$\mathbf 0$
Price per unit SBE US and Europe, in NOK					25,394	25,902	26,420	26,948	27,487	28,037	28,598	29,170	29,753	30,348
SoftOx' royalty rate (percentage of SBE sales)					0%	0%	0%	0%	0%	0%	0%	0%	0%	0%

Partner funding			0	0
Total Sales SoftOx			0	$\mathbf 0$	0	$\bf{0}$	0	$\mathbf{0}$	$\bf{0}$	$\mathbf{0}$	$\mathbf{0}$	$\bf{0}$	$\mathbf{0}$	0
Sales growth

Personnel expenses	$-40$	$-40$	0	0	0	$\mathbf 0$	0	$\mathbf{0}$	$\Omega$	$\mathbf{0}$	$\mathbf 0$	0	0	$\mathbf{0}$
Other operating expenses	$-77$	$-77$	0	$\mathbf 0$	$\mathbf 0$	$\Omega$	0	$\mathbf 0$	$\Omega$	$\Omega$	$\mathbf 0$	0	$\mathbf 0$	0
Depreciation and amortisation	$-2$	$-2$	0	0	$\mathbf{0}$	$\Omega$	0	$\mathbf{0}$	$\Omega$	$\Omega$	$\Omega$	0	$\mathbf 0$	$\mathbf 0$
EBIT	$-119$	$-119$	0	$\mathbf 0$	0	$\mathbf 0$	0	$\mathbf{0}$	$\mathbf{0}$	$\mathbf{0}$	$\mathbf 0$	0	$\mathbf 0$	$\mathbf 0$
EBIT-margin					0%	0%	0%	0%	0%	0%	0%	0%	0%	0%

Depreciation and amortisation	1.5	1.5	0.0	0.0	0	0	0	0	0	0	$\mathbf 0$	0	$\mathbf 0$	0
EBITDA	$-117$	$-117$	0	0	0	0	0	$\bf{0}$	$\Omega$	$\Omega$	$\mathbf 0$	0	$\mathbf 0$	0
Tax	0	0	0	0	0	$\Omega$	0	$\Omega$	$\Omega$	$\Omega$	$\Omega$	0	$\mathbf 0$	0
CAPEX	O	0	$\Omega$	$\Omega$	$\Omega$	0	0	$\Omega$	$\Omega$		$\Omega$	0	$\mathbf 0$	0
Changes in working capital		0	0	0	$\mathbf 0$	0	0	$\Omega$	$\Omega$	0	$\mathbf 0$	0	0	0
Free cash flow	$-117$	$-117$	0	0	0	0	0	$\Omega$	0	0	$\Omega$	0	$\mathbf{0}$	0

Equity value	n
Net interest bearing debt	O
Enterprise value	$-204$
Present value terminal part	O
Present value explicit period	-204

Equity value set to zero in this scenario given the fact that equity values can't be negative (market capitalization)

Key assumptions – Low Case

This scenario implies that SoftOx goes through Phase 2 trials where results are insufficient to proceed with additional studies.
Consequently, SBE is deemed worthless and all business operations related to SBE are terminated.

Risk-Adjusted DCF - Fair Value MNOK 2 100

Implicit DCF - reflecting Mid-point Valuation Guidance Current probability of FDA approval (40%) and weighted Base case (2/3) / High Case (1/3)

Risk-weighted cash flows

MNOK

	2023E	2024E	2025E	2026E	2027E	2028E	2029E	2030E	2031E	2032E	2033E	2034E	2035E	2036E

Total Sales US	0	0	0	0	87	198	404	618	841	1019	1 2 0 3	1 3 9 5	1479	1509
Total Sales Europe	0	$\mathbf{0}$	$\Omega$	$\mathbf 0$	$\mathbf 0$	$\mathbf 0$	91	206	421	643	875	1060	1 2 5 2	1451
Partner funding	0	$\mathbf 0$	122	122
Total Sales	0	$\bf{0}$	122	122	87	198	495	825	1 2 6 2	1662	2078	2454	2731	2960
Sales growth				0%	$-28%$	127%	150%	67%	53%	32%	25%	18%	11%	8%

Personnel expenses	$-40$	$-40$	$-41$	$-41$	$-17$	$-28$	$-58$	$-91$	$-135$	$-175$	$-217$	$-255$	$-283$	$-306$
Other operating expenses	$-77$	$-77$	$-81$	$-81$	$-3$	$-3$	$-3$	$-3$	$-3$	$-3$	$-3$	$-3$	$-3$	$-3$
Depreciation and amortisation	$-2$	$-2$	$-1$	$-1$	$-1$	0	0	0	0	0	0	0	0	0
EBIT	$-119$	$-119$	$-1$	$-1$	67	167	434	730	1 1 2 3	1484	1858	2 1 9 6	2 4 4 5	2650
EBIT-margin	0%	0%	$-1%$	$-1%$	77%	84%	88%	89%	89%	89%	89%	89%	90%	90%

Depreciation and amortisation	$\overline{2}$	$\overline{2}$	1	1		$\mathbf 0$	$\mathbf 0$	$\mathbf 0$	$\mathbf 0$	$\mathbf 0$	$\mathbf{0}$	$\mathbf 0$	0	$\mathbf 0$
EBITDA	$-117$	$-117$	0	0	68	167	434	730	1 1 2 3	1484	1858	2 1 9 6	2 4 4 5	2650
Tax	0	$\mathbf 0$	0	0	-0	$-26$	$-96$	$-161$	$-247$	$-326$	$-409$	$-483$	$-538$	$-583$
CAPEX	$\Omega$	$\mathbf 0$	0	0	0	$\mathbf 0$	$\mathbf 0$	$\mathbf 0$	0	$\mathbf 0$	$\mathbf 0$	0	0	$\Omega$
Changes in working capital	$\Omega$	$\mathbf{0}$	0	0	$-1$	$-11$	$-30$	$-33$	$-44$	$-40$	$-42$	$-38$	$-28$	$-23$
Free cash flow	$-117$	$-117$	$\mathbf 0$	0	67	130	309	537	833	1 1 1 7	1407	1675	1879	2044

Discounted cash flow	$-109$	$-95$	0	0	36	60	125	188	254	296	324	336	328	310

Present value explicit period	2050
Present value terminal part	0
Enterprise value	2050
Net interest bearing debt	0
Equity value (approximation, actual 2050, rounded to 2100))	2 100

Implicit Assumptions – Valuation Guidance – Mid Point

All numbers in the risk-adjusted DCF model above are weighted according to the probability of each outcome; Low, Base and High case (60 %, 27 % and 13 %, respectively) as observed in industry benchmarks.
For 2023E-2024E, the cost and hence cash flows are identical in all three scenarios. (The Low case scenario implies that SoftOx fails in the Phase 2 trial).
SoftOx finances the R&D for Phase 2 (2023-2024E). The Phase 3 study through to regulatory approval (2025E-2026E) is assumed financed by partner(s) in return for commercialisation rights and or investors.

Weighted average cost of capital (WACC)

We apply a WACC of 15 % - venture capital "industry" proxy

A

B
C
D
E
F

G

Pre-tax risk free interest rate

The Norwegian 10-year treasury yield as at 17.02.2023 of 3.2 % has been applied as a risk-free nominal interest rate metric*. The yield is adjusted down by 0.2pp in order to approximate a normalised risk free rate of 3 %.

Market risk premium

The market risk premium is the difference between the equity market's expected return and the riskfree interest rate. Hence, this premium represents the expected excess return of stocks beyond the risk-free interest rate. We apply 5.0 %, which is in line with market practice and PWC's yearly survey**.

Beta and financial leverage

We have calculated the beta based on listed, comparable companies (see peer Group) and Damodaran industry statistics (50/50 blend of Drugs (Biotechnology) and Healthcare Products). This produces an asset beta of slightly below 1 based on the median of the methods. We have assumed an equity financing of 100 % for the Company.

Company specific risk premium

We have applied a company specific premium of 7 % based on the following factors: The Company's size, the value relies on successful development of a single technology, and there is regulatory significant risk involved.

Risk premium interest-bearing debt

This metric is not considered given our assumption of 100 % equity financing.

Tax

We have applied the Norwegian corporate tax rate of 22 %.

Debt/equity ratio

We have assumed zero debt financing given SoftOx inability to service debt due to limited Sales and negative operating cash flow at this stage of the company development.

Peer group and transaction multiples

The peer group and deal multiple valuations and explanations support reasonableness of DCF.
The listed peer group multiple and PE LBO deal multiple valuation are MOK 2 900 and 2 300, respectively, based on 40% probability of FDA approval.
Both set of values are based on the following methodology:
The projected risk-weighted 2029 EBITDA.
EV/EBITDA LTM multiple of 16.6x and 13x, respectively.
The values are discounted back to today by the WACC (i.e. cost of equity) of 15 %.
We have used the 2029 EBITDA for the following reasons:
This is the third full year of Sales. At this point, SBE is commercially validated and the Company produces significant positive cash flow, i.e. the investment case is sufficiently de-risked. This increases comparability with the peer group. Additionally, the expected EBITDA growth is still appealing. That makes an LBO deal structure viable.

Valuations support reasonableness of DCF Listed peer group multiple and LBO deal median multiple* MARKET CAP IN MNOK

	EV/EBITDA LTM	Market Cap
AstraZeneca PLC	15.1x	2,020,196
Bioventix PLC	22.3x	2,639
CONMED Corporation	20.4x	29,168
DexCom, Inc.	88.3x	413,336
Diversey Holdings, Ltd.	12.0x	19,671
Ecolab Inc.	18.2x	440,671
Johnson & Johnson	13.0x	4,269,406
McKesson Corporation	13.3x	536,544
Pfizer Inc.	5.7x	2,476,993
STERIS plc	18.0x	205,991
Median	16.6x	427,003

Average LBO EV/EBITDA LTM purchase price multiple**

SpareBank 1 Markets valuation of SoftOx

Evaluation and key takeaways

SPBM methodology and valuation conclusion Key Assumptions SBE

June 2022, SPBM published a valuation of SoftOx, concluding with a total equity value of MNOK 465 (NOK 45 per share) and a Neutral recommendation (share price was around that level at the time).
The valuation included all three product categories of SoftOx Solutions; 1) Disinfectants, 2) Wound (SWIS and SBE) and 3) Inhalation.
However these separate valuations, which combined amounted to MNOK 2 832 in equity value, did not correspond to the MNOK 465 conclusion, for to the following reasons:
In the MNOK 2 832 conclusion, SPBM relied on a 22% combined weighted probability of success for all three business segments combined.
In the MNOK 465 conclusion, SPBM applied a 6% combined weighted probability of success.
The valuation of the specific platforms was based on the following methodology:
SPBM produced net income estimates for the 2022E-2030E period.
The 2030E net income estimate was multiplied by the industry median P/E multiple of 17x.
The 2030E equity was discounted back to 2022 by a WACC (i.e. cost of equity given 100 % equity financing) of 16 %.
In the detailed valuation totalling MNOK 2 832, the value of the Wound care platform was estimated to MNOK 400, of which the SWIS segment and the SBE segment accounted for respectfully MNOK 260 and MNOK 140 of the value. The applied probabilities of success were 67% and 6%, respectively.
SPBM conducted the valuation review prior to completion of Phase 1 trials for SBE which was a major de-risking event, and also prior to de-risking development for SWIS.
Based on the SBE phase 1 success and de-risking development for SWIS, the probability of success has respectfully increased to 22.8 % and 92.9 %. This would have implied a value of SBE of MNOK 578, and a value of SWIS of MNOK 369 i.e. MNOK 938 in total, based on the remaining SB1 assumptions (all else equal).

Total addressable market	• Total global wound market estimated to USD 10bn in 2017, where the US account for 34.5 % of the global market.
Market share	Assumed a 5 % market share. •
SoftOx net income margin	• 10 % margin in 2030.
Success rate	• 6 % probability of success from phase 1 to market approval.
R&D investments	MNOK 150 in total. •
WACC	• 16 %, in line with a typical biotech industry level.
P/E	• Historical industry average P/E of 17x (medical device median P/E from 2018).

Note that SPBM assumed a different business model for SoftOx than is assumed in the KWC valuation exercise.

SoftOx' Value Dilemma

Euronext Growth listing

Euronext Growth probably destroying value?

Illustrative demonstration of contradiction in value measures - milestones versus share price

Euronext Growth does not reflect Fair Value – Why?

The following factors are all aspects that contribute to the observed lack of value recognition

SoftOx share - Implied Probability of Success

Current capitalization implies that there is only a 6% probability of success!

Based on the assumption that the equity market values the Wound Care business as being 65% of SoftOx' market capitalization (given that invested capital split between Wound Care and Respiratory to date).
A total market capitalization of ca. MNOK 155*, implies a Wound care equity value of MNOK ~100.
Based on our DCF models, we have derived the implicit probability of the scenarios unfolding given that the total equity value shall be MNOK 100. Please see table to the right which shows the probability of failure that produce a market cap of MNOK 100.
The remaining assumptions are in accordance with our weighted DCF model; 40% probability of FDA approval, 12% royalty rate, 15% WACC and 2/3 chance of Base case & 1/3 chance of High Case in the event of approval.

What probability of success is implied in the share price? Probabilities that reflect a market capitalization of MNOK 100 EQUITY VALUE IN MNOK

Probability of	Low case	Base case	High case	Equity value Wound Care
Equity market's implicit assigned probability of success	94%	4%	2.2%	100

Market capitalization does not reflect the state of clinical readiness for SWIS / SBE technologies

Information Sources and Bibliography

APPENDICES

Bibliography

Sources

An Economic Evaluation of the Impact, Cost, and Medicare Policy Implications of Chronic Nonhealing Wounds, Samuel R. Nussbaum, MD et al. 2018 Biotechnology Innovation Organization, Pharma Intelligence Informa and Quantitative Life Sciences, 2011-2020 February 2021. Clinical Study Report: SBE-01. Data on file. General information on Phase 1: https://www.clinicaltrials.gov/ct2/show/study/NCT05710094 FDA Wound Healing Scientific Workshop, Key Themes and Preliminary Lessons Learned (May 20, 2022) IPSCIO reports: Royalty Rate Industry Summary 2021 MedValue (powered by Radboudumc) and Excite International decision analytic model constructed for SoftOx specifically Norges Bank https://www.norges-bank.no/tema/Statistikk/statsrenter/generiske-statsrenter/ PitchBook Industry Research Healthcare Services Report, PE Trends and investment strategies, Q3 2022 Launch report PWC https://www.pwc.no/no/publikasjoner/risikopremien.html SpareBank 1 Markets, Company, Research and Markets: Advanced Wound Care Market Size, Verified Market Research. SPGlobal Capital IQ SWIS-01: BurianEA, et al. Int J Low ExtremWounds. 2021 doi: 10.1177/15347346211015656. SWIS-02: Burian EA, et al. Acta Derm Venereol . 2022 doi 10.2340/actadv.v102.1624 US Gains Act: https://www.fda.gov/drugs/development-approval-process-drugs/frequently-asked-questions-patents-and-exclusivity#howlongpatentterm Verma, K. D, et al. (2022). Food and Drug Administration perspective...Wound repair and regeneration 30 (3), 299 302. https://doi.org/10.1111/wrr.13008

APPENDICES

Bibliography

Company presentations Board meeting presentation, 13.12.2022 Capital Markets Day presentation 17.11.2021 DNB Health Care Conference presentation 15.12.2022 SS0331 SoftOx Investor Deck Wound Care Investor presentation , January 2023

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SoftOx Solutions AS — Investor Presentation 2024

3747_rns_2024-01-08_620ae8b3-970a-4734-8fe0-5964c1abfaab.pdf

SoftOx Valuation Guidance

Abbreviations

Table of contents

Mandate and Scope of work

Mandate and Scope of Work –Wound Care Segment

Background

Scope of work

Information

Scope limitations

Tax

Other

Disclaimer

Summary Valuation Guidance

Summary Valuation Guidance – MNOK 1700 - 2500

Current Fair Value Guidance

Key Variables

Conclusion

MNOK 1700 – 2500, mid point MNOK 2100

Significant Upside Potential

Summary of Fair Value Guidance

Summary Valuation Guidance - Sensitivity analysis

Fair Value is very sensitive to certain key variables

Explanations

Comments

Valuation Guidance – Base case – Moderate Success

Key Assumptions – Base Case

Valuation Guidance – High case – Substantial Success

Key Assumptions – High Case

Summary Valuation Guidance – Reasonable?

Other Approaches to Valuation – Tests of Reasonableness Other Value References – Implied return on capital invested

Other Value References – SpareBank 1 Markets Valuation

SoftOx Chronology – Wound Care technology

History

Way forward

Value Milestones – historical chronology and plan to FDA approval

Value Creation and De-Risking Milestones

Key factors in determining level of value creation

Conservative approach to Fair Value Guidance

Commercial Development Scenarios Summary of Commercial Scenarios

Business Model

Conservative assumptions in Fair Value Guidance

The above represents the basis for our Fair Value conclusion.

Significant upside potential to Fair Value Guidance

Upside potential compared to Industry Benchmarks

Regulatory approval

Value Proposition and higher royalty rates

Patent protection – estimated life

Upside potential compared to other key assumptions

Commercial value

Business Model

Addressable market

SoftOx share observations – Reflection of value?

Current Market Capitalization – Implied Value MNOK 100

Last share issue pricing – Implied Value MNOK 360

Highest Historical Share Price – Implied value MNOK 700

Last Analyst Estimates (SPBM) – Implied Value MNOK 300

SoftOx share - Implied Probability of Success

What probability of success is implied in the share price? Probabilities that reflect a market capitalization of MNOK 100

EQUITY VALUE IN MNOK

About SoftOx

SoftOx Technology addresses a huge global problem

SoftOx has developed a non-toxic antiseptic technology designed to address some of the world's greatest health challenges:

Strong Product Pipeline and Patents… …..Good progress in clinical development programs

SoftOx' Business Model as Technology Provider

SoftOx' financial history - A Development Company

Consolidated Group P&L 2018-2022

Comments

Consolidated Group Balance sheet 2018-2022

Ownership structure Top 20 shareholders

Comments to Shareholder Structure and Capital History

About SoftOx' Wound Care Solutions

SoftOx Chronology – Wound Care technology

History

Way forward

Value Milestones – historical chronology and plan to FDA approval

SoftOx Wound Care Technology - Unique Qualities

Simple Chemistry Unique Qualities

SoftOx Solutions AS Investor Presentation 2024