Vistin Pharma — Interim / Quarterly Report 2016

Apr 28, 2016

VISTIN PHARMA ASA FIRST QUARTER 2016 RESULTS PUBLISHED 28 APRIL 2016

CONTENTS

Vistin Pharma in brief2
Overview 3
Financial review 6
Operational review6
Market developments 9

Risks and uncertainties 11
Outlook 11
Share information 12
Condensed Interim Financial Statements 13

Vistin Pharma in brief

Vistin Pharma is a Norwegian pharmaceutical company producing Active Pharmaceutical Ingredients (APIs) and solid dosage forms for the global pharmaceutical industry.

The Group was established in 2015 when Vistin Pharma AS, a wholly owned subsidiary of Vistin Pharma ASA, acquired the B2B business and tablet production assets from Weifa AS. Vistin Pharma also signed a five-year agreement with Weifa AS for the manufacture of its key pain relief brands, such as Paracet, Ibux and Paralgin forte. The transaction was completed on 1 June 2015. Vistin Pharma conducted an equity issue of about NOK 170 million to finance the acquisition and to secure working capital, and the shares of Vistin Pharma ASA were listed on Oslo Axess on 10 June 2015.

With more than 75 years of pharmaceutical industry experience, the Group has built significant capacity and expertise as an API and Solid Dosage Form provider to producers all over the world, and Vistin Pharma's APIs are marketed in more than 50 countries.

Vistin Pharma has key positions and growth potential in the international Metformin and Opioid markets, and a strong foundation for creating a highly efficient CMO business.

The Group has more than 140 employees and two manufacturing facilities in Kragerø, Norway. Both of the facilities are certified in accordance with current Good Manufacturing Practice (cGMP). The company's head office is located in Oslo, Norway.

Overview

First quarter highlights

• Metformin: All time high revenue, 100 percent of 2016 production capacity contracted
• Expansion feasibility study progressing according to plan
• Quality issue uncovered in Q1. Likely root cause identified and corrective measures being implemented
• Opioids: Increased revenue despite continued challenging market conditions
• Higher opioids tablet sales contributing to overall revenue increase of 46 percent
• Lower API prices compensated by favourable exchange rates
• CMO tablet manufacturing: Steady, profitable performer
• High sales volume, manufacturing costs on budget
• Significant EBITDA contributor (NOK 2.7 million)
• Strong financial performance
• Group EBITDA of NOK 11 million for the first quarter
• Cash balance at 31 March of NOK 68 million, and no interest-bearing debt

Key figures

Key financial information for Vistin Pharma ASA (business operations commenced 1 June 2015)

(NOK 1 000)
	Q1 2016	Q1 2015	FY 2015
Total revenue and income	103 226	-	227 892
EBITDA	11 030	-	27 883
Profit/(loss)	6 601	-	19 122
Earnings per share (NOK): diluted	0,39	-	1,12
Total Assets	264 331	1 000	259 008
Interest-bearing debt	-	-	-
Key figures per segment
(NOK 1 000)	Q1 2016	Q1 2015	FY 2015
Total revenue and income
B2B	72 812	-	150 327
CMO	30 414	-	68 898
HQ & other	-	-	8 667
Total revenue and income	103 226	-	227 892
EBITDA
B2B	8 786	-	18 907
CMO	2 775	-	4 423
HQ & other	(531)	-	4 553
EBITDA	11 030	-	27 883

The following information is provided for information purposes and presents the key financial figures for the B2B segment, as reported by Vistin Pharma ASA (from 1 June 2015), Weifa ASA (before 1 June 2015) and Weifa AS (before to 15 August 2014). No additional information is provided for the CMO segment, as this is a new segment following the acquisition of the tablet production assets from Weifa.

(NOK million)	Q1 2016	Q1 2015	FY 2015
Revenue	72,8	61,6	255,3
EBITDA	8,8	6,0	24,8

Historical quarterly performance by segment (as defined above):

B2B segment EBITDA (NOK million)

Note: The above figures are provided for information purposes and presents the key financial figures for the B2B segment, as reported by Vistin Pharma ASA (from 1 June 2015), Weifa ASA (before 1 June 2015) and Weifa AS (before 15 August 2014).

1Q14 2Q14 3Q14 4Q14 1Q15 2Q15 3Q15 4Q15 1Q16

CMO segment EBITDA (NOK million)

¹Q14 2Q14 3Q14 4Q14 1Q15 2Q15 3Q15 4Q15 1Q16

Financial review

Vistin Pharma ASA was established in February 2015, and the Group had no operating activities prior to Vistin Pharma AS' acquisition of the B2B business and tablet production assets from Weifa AS on 1 June 2015. Hence, most of the figures presented in the consolidated interim financial statements represent the financial result of the B2B and CMO business acquired from 1 June 2015.

Vistin Pharma ASA (Group)

Profit and loss first quarter 2016

Vistin Pharma had total revenue and other income of NOK 103.2 million in the first quarter 2016, and EBITDA came to NOK 11.0 million.

Depreciation and amortisation were NOK 0.9 million for the first quarter. Financial loss was NOK 1.3 million, principally reflecting realised foreign exchange gain of NOK 0.7 million and unrealised foreign exchange loss of 1.7 million.

Vistin Pharma had an income tax expense of NOK 2.2 million in the first quarter.

Net profit for the period was NOK 6.6 million, equal to earnings per share of NOK 0.39.

Cash Flow

Net cash flow from operating activities in the first quarter was positive NOK 10.3 million, mainly as a result of net profit before tax of NOK 8.8 million for the quarter, and a small reduction in working capital. Net cash flow

from investing activities was negative at NOK 4.7 million, relating to purchase of equipment. Net increase in cash and cash equivalents amounted to NOK 5.6 million for the period.

During the quarter, the Company's EUR currency exposure (cash inflow) for 2016 was hedged at an average rate of EUR/NOK 9.45.

Financial position

Vistin Pharma had total assets of NOK 264.3 million as of 31 March 2016. Cash and cash equivalents amounted to NOK 67.6 million.

Total equity at 31 March 2016 was NOK 190.5 million, corresponding to an equity ratio of 72.1 percent.

Vistin Pharma had no interest-bearing debt as of 31 March 2016.

The Board has proposed a dividend for 2015 of NOK 0.60 per share, to be approved by the annual general meeting to be held on 24 May 2016.

Operational review

Vistin Pharma's operations are divided into the following two segments: B2B (production and sale of active pharmaceutical ingredients) and CMO (contract manufacturing of finished dose tablets). The B2B segment has two major product groups; Metformin and Opioids. The CMO segment started operations on 1 June 2015 and has no comparable figures for periods prior to that. The segment currently only consists of the CMO agreement with Weifa AS. The operations in the B2B segment represent a continuation of activities previously carried out and reported in Weifa ASA. Since Vistin Pharma acquired this business on 1 June 2015, pro-form historical figures have been included for periods prior to that date to provide a better understanding of operational developments. However, these figures are based on data from Weifa ASA and reflect a different corporate structure and cost base, which means they are not directly comparable.

B2B

Vistin Pharma is a recognised supplier of Active Pharmaceutical Ingredients (APIs) and finished dosage forms (FDFs) to the global pharmaceutical industry. The B2B offering is based on two key product areas: metformin and opioids. Metformin is an API used in firstline treatment of type 2 diabetes. Opioids are used in pain treatment as well as in cough suppressants. The APIs are produced at Vistin Pharma's two manufacturing plants in Kragerø (Fikkjebakke and Gruveveien) in southern Norway. Vistin Pharma's B2B customers are international pharmaceutical companies.

Total revenue for the B2B segment in the first quarter was NOK 72.8 million, compared to NOK 61.6 million in the same quarter last year (reported as part of Weifa).

The increase in revenue for the quarter is principally explained by strong demand for metformin from new and existing customers, as well as favourable exchange rates. Higher volumes for opioids also contributed to the increase. Prices in USD for opioids API were down, but were compensated for by a stronger USD vs. NOK compared to last year. There is still a tough price pressure and fierce competition in the global market for these products.

Significant fluctuations are typically experienced in B2B sales volumes during the year. However, underlying growth in the B2B segment is strong. Part of the B2B revenues is recognised outside the metformin and opioids product areas and relates to such aspects as the sale of raw materials. This makes total B2B revenues higher than the sum of metformin and opioid business area revenues.

In order to improve business profitability, Vistin Pharma continuously seeks to achieve operational excellence, in part through capacity, quality and cost improvement programs. In addition, it focuses on business development and strategic partnership opportunities to continue growing the business.

Metformin

Revenue from metformin was 47.1 million for

the quarter, 8 per cent higher than the first quarter 2015 due to higher EUR prices and favourable EUR exchange rate.) Sales volume for metformin HCl and DC for the first quarter 2016 was 5.8 percent lower than in the first quarter last year

The revenue from the metformin business for the quarter was an all-time high, and as of 31 March 2016, Vistin Pharma had sales contracts covering 100 percent of its metformin production capacity in 2016.

During the first quarter, Vistin Pharma uncovered certain quality issues with Metformin HCI. Specifically, the Company has experienced some incidents where the n-butanol level in selected cartons have been found to be too high, mainly in the first and last cartons of the batch. However, in the affected batches, the average samples were all within Vistin Pharma's specifications. N-butanol is a solvent used in the production of metformin.

Vistin Pharma has carried out a thorough risk assessment, which has shown that the findings do not have any impact on the quality of the end-user product.

Vistin Pharma believes to have identified the root cause of these incidents and is in the process of implementing corrective measures. Until the issue has been fully resolved, an extended testing regime has been put in place to ensure that shipped products comply with Vistin Pharma's quality standards.

Currently, an estimated 130 metric tonnes of HCl, corresponding to approximately 4 per cent of the Company's annual metformin production, are affected. Out of the 130 metric tonnes, approximately 60 million tonnes were produced in the first quarter. The final financial results for 2015 and the financial results for the first quarter 2016 have been adjusted to provide for volumes expected to be returned. Vistin Pharma's net profit after tax for 2015 has been revised down by NOK 1.9 million, while the effect on the Company's net profit after tax for the first quarter of 2016 was NOK 2.2 million. Vistin Pharma does not expect any material impact from the incidents on the financial results for the full year 2016.

Vistin Pharma continues to find that the quality of its metformin products, its service and delivery performance are competitive advantages and drivers for increased sales, and the Group is experiencing a strong underlying growth. Key drivers are continued volume growth from existing multinational customers and successful market expansion in Japan.

Vistin Pharma provides some of the purest and most free-flowing metformin qualities. A freeflowing product is easier to process into tablets than an API which has hardened. The Group's plant at Fikkjebakke is dedicated to manufacturing metformin. It is approved by the US Food and Drug Administration (FDA), and Vistin Pharma is currently the only European company with a listed metformin Drug Master File (DMF) in the USA, another premium market, which is the focus of Vistin Pharma.

Vistin Pharma's metformin strategy is to become the dominant supplier of metformin API to customers in the premium product segments.

According to Vistin Pharma's estimates, the Group currently controls about eight percent of the global metformin market with its annual manufacturing capacity of 3,000 metric tonnes.

Vistin Pharma is in ongoing discussions with potential new customers globally for long-term supply agreements for both HCl and DC. To secure the necessary production capacity to meet the expected future demand, the Group initiated a feasibility study in the first quarter for a possible expansion of the Fikkjebakke site, which could double the current production capacity. The feasibility study is progressing according to plan, and is expected to be completed by the second quarter. Until a possible expansion is completed, the company is working on stretching the current 3,000 metric tonnes capacity by approximately 500 metric tonnes through an internal "capacity creep project", of which approximately 200- 300 metric tonnes should be available by the end 2016.

In April, The Norwegian Environment Agency approved a new permanent emission permit for Vistin Pharma's manufacturing plant at Fikkjebakke.

Opioids

Opioids revenue for the first quarter was NOK 25.9 million, compared to NOK 17.7 million in the first quarter of 2015. The increase in revenue compared to the first quarter last year is mainly explained by higher sales of codeine tablets, which more than offset a lower sales volume of Codeine API. Revenue from the sale of codeine tablets constituted approximately 43 percent of the Opioid revenue for the first quarter 2016, compared to approximately 6 percent in the same quarter last year. The company focus on forward integrating in the opioids value chain and the "powder to pill" strategy are showing positive effects.

There is still a considerable price pressure in the opioid market, as reported in previous quarters.

The plant in Gruveveien manufactures opioid APIs, as well as finished dose tablets. Vistin Pharma serves the global market for opioid APIs with two key products; codeine (used in strong painkillers and cough medicine) and pholcodine (used in cough medicine). It also produces finished dose painkiller combination tablets such as Paralgin forte (paracetamol plus codeine) for Weifa and codeine and codeine combination products for a B2B customer.

According to management estimates, Vistin Pharma has a global share of about seven percent of the codeine API market. About half of the global market is defined as closed markets with import restriction, which Vistin Pharma is currently unable to enter. These include among others USA, South Africa, France and Spain.

The production volume at the Gruveveien opioids synthesis plant was 5.0 metric tonnes for the first quarter 2016, compared to 7.3 metric tonnes in the same quarter last year.

CMO

The CMO tablet manufacturing business produces finished products through an agreement with Weifa, at the Gruveveien multipurpose tablet facility.

Vistin Pharma has a five-year agreement with Weifa AS for the manufacture of its key pain relief brands, such as Paracet, Ibux and Paralgin forte. This currently represents the Group's main CMO activity.

CMO tablet manufacturing was not established as a separate business area until 1 June 2015. However, the Vistin Pharma organisation has produced finished dose tablets for Weifa and other external customers for many years, when it was part of Weifa. The Group is therefore an experienced CMO. Revenue for this segment was NOK 30.4 million for the first quarter, and the corresponding EBITDA was NOK 2.8 million. The revenue and the EBITDA for the fourth quarter 2015 were NOK 33.9 million and NOK

Market developments

B2B

Metformin tablets are the most widely prescribed diabetes medication in the world. Type 2 diabetes, known as age, or lifestyle related, is a major global epidemic. According to the International Diabetes Federation (IDF), more than 387 million people are estimated to be living with this condition today. The number is expected to increase to 592 million by 2035. The metformin market is expected to grow by seven-eight percent per annum for many years to come. Global diabetes healthcare costs amounted to USD 612 billion in 2014, representing 11% of total healthcare costs worldwide in 2014. These costs are projected to exceed USD 627 billion by 2035. Closed to 5 million people died from diabetes last year.

The market is very competitive, with manufacturers mainly from India and China, and approximately 65 percent of the global metformin volume is currently produced in India. Many producers of metformin are operating multipurpose facilities, and there is an underlying unused capacity among the metformin producers that can absorb the growing demand for metformin. Vistin Pharma is focusing on customers in the "protected application" and "large account professional generics" market segments, and finds that customers in Europe, Japan and other developed economies value suppliers with short lead times, high quality products, agile operations and regularity of supply.

3.6 million respectively. The service level for the first quarter was 99 percent (customer orders delivered on time and in full).

The current production capacity is estimated to be approximately 650 million tablets. Vistin Pharma's target is to increase the current capacity by minimum 50 percent through an ongoing operational excellence program, which was initiated in 2015. The additional capacity will be filled through increased volume from existing and new CMO customers.

The global opioid sector is a protected market, tightly controlled by the International Narcotics Control Board (INCB). Several major markets

are also subject to import quotas. Growth in the use of opioids is stable worldwide and demand, measured by defined daily doses, has increased more than threefold over 20 years (corresponding to a compound annual growth rate (CAGR) of 6.5 percent). Emerging countries represent the biggest expansion potential, as rising wealth drives demand for pain medication. China and India are expected to be the fastest growing opioids markets by 2020.

According to INCB, global consumption of opioids for pain relief is unevenly distributed with the US, Western Europe and Oceania, representing only 17 percent of the global population, consuming 92 percent of the volume. Global manufacturing of codeine API has grown by about 6.4 percent annually to more than 400MT. About 70 percent of the volume is consumed as codeine, while roughly 20 percent is used to make other APIs.

According to the INCB, the global production of opiate raw materials rich in morphine exceeded global demand in 2015, resulting in high inventory levels. For 2016, producing countries have indicated that they plan to increase production, which is expected to increase inventory levels further, and thus could put additional downward pressure on opiate prices.

European opioid API suppliers are few in number. Vistin Pharma's main competitors have access to their own raw materials, and a small number of raw material producers control most of the global supply. Vistin Pharma is the largest independent company with both inhouse API and tablet manufacturing capabilities and competencies (forward integrated).

CMO

Vistin Pharma will seek to increase tablet manufacturing volumes, acting as an independent supplier of generic FDFs to the global generic and proprietary pharmaceutical industry by establishing itself as an FDF contract development and manufacturing organisation (CDMO) strategic partner. According to Mordor Intelligence LLP (Global Pharmaceutical Manufacturing Market), the global CMO market is estimated at USD 41 billion and is expected to grow at a CAGR of 10 – 11 percent by 2017. Key growth drivers are; outsourcing by companies that do not see supply chain as a core business area, margin pressure in both the innovative and generic pharma market, and pharma industry consolidation leading to post-merger cost saving initiatives.

The Group's focus on maintaining operational excellence to make the supply chain costcompetitive, expand product offerings, and grow volumes and customer base in order to capture additional economies of scale, continues.

Risks and uncertainties

Vistin Pharma is exposed, as a pharmaceutical manufacturing company, to several types of risks, where fluctuations in the price and availability of raw materials and the development in foreign exchange (USD and EUR) are among the most prominent. Risk management is therefore a priority area for the Group. The EUR currency exposure (cash inflow) for 2016 has been hedged at an average rate of EUR/NOK 9.45.

In addition, risk related to regulatory changes and environmental issues concerning emission levels and emission permits represent central risk factors for the Group.

The Group has currently only one customer, Weifa, in the CMO segment, and any material reduction in the sales of Weifa products produced by Vistin Pharma will have a negative impact on the financial results of the CMO segment.

For further information, please refer to chapter 2 of the prospectus dated 22 May 2015, available on the Group's website www.vistin.com.

Outlook

The metformin business is experiencing growing demand owing to the overall market developments, with a strong underlying growth for metformin globally, and as a result of Vistin Pharma's position as a premium producer. Vistin Pharma expects this trend to continue during 2016, however, the revenue growth will be limited by the Company's current production capacity.

Long-term drivers for the opioid market indicate an attractive future growth potential. In the short-term, however, an ongoing price pressure in the global opioid market will affect prices and volumes for Vistin Pharma. This will be partly offset by a long-term supply agreement with a raw-material producer, securing raw-materials at competitive prices.

The CMO business continues to perform according to plan, and Vistin Pharma foresees a stable, profitable performance throughout 2016.

The Group's strategy is to grow its business significantly going forward, through investments in internal capacity expansion, completion of an operational excellence programs, and through potential M&A opportunities. Any potential new investments will be financed through an optimised structure of debt and new equity.

Share information

The company had 17 054 935 issued shares on 19 April 2016. The 20 largest shareholders controlled 74 percent of the total number of outstanding shares.

Largest shareholders at 19 April 2016

NAME	SHAREHOLDING % SHARE
EUROCLEAR BANK S.A.	2 548 810	14,9%
STRATA MARINE & OFFSHORE	1 965 943	11,5%
STOREBRAND VEKST	1 060 106	6,2%
MP PENSJON	877 870	5,1%
SOLAN CAPITAL AS	787 482	4,6%
SKANDINAVISKE ENSKILDA	779 376	4,6%
FERNCLIFF LISTED DAI	582 282	3,4%
HOLBERG NORGE	573 349	3,4%
PENSJONSORDNINGEN FOR APOTEKVIRK	500 000	2,9%
PORTIA AS	450 000	2,6%
CIPRIANO AS	375 538	2,2%
DUKAT AS	375 000	2,2%
SPETALEN ØYSTEIN STRAY	323 650	1,9%
TVENGE TORSTEIN INGVALD	300 000	1,8%
SVENSKA HANDELSBANKEN	215 000	1,3%
STOREBRAND NORGE I	203 964	1,2%
NORDBY KJELL ERIK	200 000	1,2%
BORGEN INVEST	196 078	1,1%
GRANT INVEST AS	184 407	1,1%
VPF KLP AKSJENORGE	178 627	1,0%
Total 20 largest shareholders	12 677 482	74,3%
Other shareholders	4 377 453	25,7%
Total number of shares	17 054 935	100,0%

Consolidated Statement of Comprehensive Income

(NOK 1 000)	Q1 2016	Q1 2015	FY 2015
Revenue	103 101	-	218 367
Other income	125	-	9 525
Total revenue and income	103 226	-	227 892
Cost of materials	41 349	-	81 646
Payroll expenses	31 352	-	71 081
Other operating expenses	19 494	-	47 282
Depreciation, amortisation and impairment	891	-	1 568
Operating profit/(loss)	10 139	-	26 315
Finance income	-	-	444
Finance costs	1 337	-	544
Profit/(loss) before tax	8 802	-	26 215
Income tax expense	2 200	-	7 093
Profit/(loss) for the period	6 601	-	19 122
Total comprehensive income for the period	6 601	-	19 122
Earnings per share (NOK): basic	0,39	-	1,12
Earnings per share (NOK): diluted	0,39	-	1,12

Consolidated Statement of Financial Position

(NOK 1 000)	Note	31.03.2016	31.03.2015	31.12.2015
ASSETS
Non-current assets
Property, plant & equipment		45 123	-	41 331
Total non-current assets		45 123	-	41 331
Current assets
Inventory		94 088	-	92 712
Trade receivables		49 285	-	54 760
Other receivables		8 214	-	8 216
Cash & cash equivalents	6	67 621	1 000	61 989
Total current assets		219 209	1 000	217 677
Total Assets		264 331	1 000	259 008
EQUITY AND LIABILITIES
Equity
Share capital	4	17 055	1 000	17 055
Share premium		147 747	-	147 747
Retained earnings		25 723	-	19 122
Total equity		190 525	1 000	183 924
Non-current liabilities
Deferred tax liabilities		2 252	-	52
Other long-term liabilities		10 332	-	10 332
Total non-current liabilities		12 585	-	10 384
Current liabilities
Trade payables		27 937	-	28 190
Tax Payables		2 458	-	4 915
Other current liabilities		30 827	-	31 595
Total current liabilities		61 221	-	64 700
Total liabilities		73 806	-	75 084
Total Equity and Liabilities		264 331	1 000	259 008

Statement of Changes in Equity

	Share	Share	Retained
(NOK 1 000)	capital	premium		earnings Total equity
Equity as at 06.03.2015	1 000	-	-	1 000
Total comprehensive income			19 122	19 122
Issue of share capital
Rights- and employee offering, June	17 055	153 494	-	170 549
Share capital reduction, June	(1 000)	-	-	(1 000)
Share issue costs	-	(5 747)		(5 747)
Equity as at 31.12.2015	17 055	147 747	19 122	183 924
Equity as at 01.01.2016	17 055	147 747	19 122	183 924
Total comprehensive income			6 601	6 601
Equity as at 31.03.2016	17 055	147 747	25 723	190 525

Cash Flow Statement

(NOK 1 000)	Q1 2016	Q1 2015	FY 2015
Cash flow from operating activities
Net profit/(loss) before income tax	8 802	-	26 215
Income tax paid	(2 457)	-	-
Non-cash adjustment to reconcile profit before tax to cash flow:
Depreciation, amortisation and impairment	891	-	1 568
Unrealised foreign currency (gains)/losses	1 737	-	2 421
Changes in working capital:
Changes in trade receivables and trade creditors	5 222	-	(22 612)
Changes in inventory	(1 376)	-	(11 051)
Changes in other accruals	(3 816)	-	34 382
Finance (income)/expense	1 337	-	100
Net cash flow from operating activities	10 339	-	31 023
Cash flow from investing activities
Purchase of equipment	(4 683)	-	(11 840)
Acquisition of business	-	-	(120 000)
Interest received	-	-	130
Net cash flow from investing activities	(4 683)	-	(131 710)
Cash flow from financing activities
Proceeds from share issue	-	1 000	171 549
Transaction costs on the issue of shares	-	-	(7 873)
Repayment of capital	-	-	(1 000)
Interest paid	(24)		-
Net cash flow from financing activities	(24)	1 000	162 676
Net change in cash and cash equivalents	5 632	1 000	61 989
Cash and cash equivalents beginning period	61 989	-	-
Cash and cash equivalents end period	67 621	1 000	61 989

Notes to the Condensed Interim Financial Statement

1. Basis of presentation

The financial information is prepared in accordance with International Accounting Standard 34 "Interim Financial Reporting" ("IAS 34"), and according to the group accounting principles as described in this report. The figures are unaudited.

The Vistin Pharma ASA Group was established when the owner of Vistin Pharma ASA, Weifa ASA, established Vistin Pharma ASA as a fully owned subsidiary and sold the B2B business and tablet production assets of its subsidiary Weifa AS to Vistin Pharma AS, a subsidiary of Vistin Pharma ASA. The purchase of these assets were subject to the completion of an equity issue of NOK 170 million, which, when completed, resulted in a change of control over Vistin Pharma. The acquisition of these assets has thus been accounted for using the acquisition method.

Vistin Pharma ASA was subsequently listed on Oslo Axess under ticker VISTIN.

2. Summary of significant accounting policies

Consolidation principles

The Group's consolidated financial statements comprise Vistin Pharma ASA, and companies in which Vistin Pharma ASA has a controlling interest. A controlling interest is normally obtained when the Group owns more than 50% of the shares in the Group and can exercise control over the Group. Noncontrolling interest are included in the Group's equity.

The acquisition method is applied when accounting for business combinations. Companies which have been bought or sold during the year are included in the consolidated financial statements from the date when control is achieved and until the date when control ceases.

The acquirer's identifiable assets, liabilities and contingent liabilities that meet the conditions for recognition are recognised at their fair values at the acquisition date, except for non-current assets that are classified as held for sale and recognised at fair value less cost to sell, and deferred tax assets and liabilities which are recognised at nominal value.

Any Goodwill arising on acquisition is recognised as an asset measured at the excess of the sum of the consideration transferred, the fair value of any previously held equity interests and the amount of any non-controlling interests in the acquire over the net amounts of the identifiable assets acquired and the liabilities assumed. If, after reassessment, the Group's interest in the net fair value of the acquirer's identifiable assets, liabilities and contingent liabilities exceeds the total consideration of the business combination, the excess is recognised in the income statement immediately.

Segment reporting

The Board of Directors is the Group's chief decision-maker. Management has determined the operating segments based on the information received by the Board of Directors for the purpose of allocating resources and assessing performance.

Following the acquisition of the B2B Business and tablet production asset from Weifa AS the Group's main operation relates to two main business areas; CMO and B2B (Business-to-business). There are two main production segments within B2B; Metformin and Opioids, however these are partly shared operations with the same sale force and are not considered separate operating segments. The segments B2B and CMO thus comprise the basis for primary segments.

Segment performance is measured by operating profit before depreciation, amortization and impairment (EBITDA), as included in the internal management reports that are reviewed by management.

Foreign currency translation

The Group's presentation currency is NOK. This is also the parent Company's functional currency.

Foreign currency transactions are translated into the functional currency of the Group's entities using the exchange rates prevailing at the dates of the transactions. Foreign exchange gains and losses resulting from the settlement of such transactions are recognised in the consolidated statement of profit and loss. Monetary assets and liabilities are translated at the closing rate at the reporting date.

Sales of goods

The Group manufactures and sells a range of pharmaceutical products to other pharmaceutical companies and industrial markets. Revenue from the sale of goods is recognized when the significant risks and rewards of ownership of the goods have passed to the buyer, usually on delivery of goods and when there are no unfulfilled obligations that could affect the customer's acceptance of the products. Delivery is governed by the sales contacts, but usually occurs when the products have been shipped from the warehouse. However, in some instances, at the request of customers, goods are invoiced and held in the Group's warehouse, at the customers' risk, for shipment at a later date.

Balance sheet classification

The Group presents assets and liabilities in consolidated statement of financial position on current/non-current classification. An asset is current when it is expected to be realised or intended to sold or consumed in normal operating cycle, held primarily for the purpose of trading, expected to be realised within twelve months after the reporting period, or cash or cash equivalent unless restricted from being exchanged or used to settle a liability for at least twelve months after the reporting period. All other assets are classified as non-current. A liability is current when it is expected to settle in normal operating cycle, it is held for primarily for the purpose of trading, it is due to be settled within twelve months after the reporting period, or there is no unconditional right to defer the settlement of the liability for at least twelve months after the reporting period.

Property, plant and equipment

Land, buildings and fixtures comprise mainly production facilities in Kragerø, acquired from Weifa AS. The production facilities are used in production of pharmaceutical products sold by Vistin Pharma.

Other equipment is mainly made up of machines used in production, as well as office related equipment and vehicles.

Property, plant and equipment are stated at historical cost, less depreciation and/or impairment losses, if any. Such cost includes expenditures that are directly attributable to the acquisition of the items. Costs accrued for major replacements and upgrades to equipment are added to cost if it is probable that the costs will generate future economic benefits and if the costs can be reliably measured. All other repairs and maintenance are charged to the income statement when incurred.

Land is not depreciated. Depreciation on other assets is calculated on a straight-line method to allocate their cost to their residual values over their estimated useful lives as follows:

Buildings and fixtures: 20 - 25 years

Other equipment: 3 - 10 years

The residual values, useful lives and methods of depreciation of production and lab equipment and other equipment are reviewed at each financial year end and adjusted, if appropriate.

An asset's carrying amount is written down immediately to its recoverable amount if the asset's carrying amount is greater than its estimated recoverable amount. The recoverable amount is the higher of an asset's net sales value and its value in use.

An item of equipment and any significant part initially recognised is derecognised upon disposal or when no future economic benefits are expected from its use or disposal. Any gain or loss arising on de-recognition of the asset (calculated as the difference between the net disposal proceeds and the carrying amount of the asset) is included in the income statement when the asset is derecognised.

Financial assets

Classification

Financial assets within the scope of IAS 39 have been classified as financial assets at fair value through profit and loss or loans and receivables. The Group determines the classification of its financial assets at initial recognition. The Group's financial assets include cash and short-term deposits, and trade and other receivables.

The Group's financial assets have mainly been classified as loans and receivables. These are nonderivative financial assets with fixed or determinable payments that are not quoted in an active market. They are included in current assets, except for maturities greater than 12 months after the end of the reporting period. These are classified as non-current assets.

Financial assets at fair value through profit or loss would include financial assets held for trading. Financial assets are classified as held for trading if they are acquired for the purpose of selling or repurchasing in the short term. Assets in this category are classified as current assets if expected to be settled within 12 months, otherwise they are classified as non-current.

Recognition and measurement

All financial assets are initially recognised at fair value plus transaction costs, except financial assets carried at fair value through profit and loss. Financial assets carried at fair value through profit and loss are initially recognised at fair value, and transaction costs are expensed in the income statement.

Financial assets at fair value through profit and loss are subsequently carried at fair value. Loans and receivables are after initial measurement carried at amortised cost using the effective interest rate method, less impairment. The effective interest rate amortisation is included in finance income in the income statement. The losses arising from impairment are recognised in the income statement as finance cost for loans and in other operating expenses for receivables.

Impairment of financial assets

The Group assesses at the end of each reporting period whether there is objective evidence that a financial asset or Group of financial assets is impaired

For loans and receivables category, the amount of the loss is measured as the difference between the asset's carrying amount and the present value of estimated future cash flows discounted at the financial asset's original effective interest rate. The loss is recognised in the consolidated income statement

Derivative financial instruments

Derivatives are initially recognised at fair value on the date a derivative contract is entered into and are subsequently re-measured at their fair value. The method of recognising the resulting gain or loss depends on whether the derivative is designated as a hedging instrument, and if so, the nature of the item being hedged. Gains or losses on financial instruments not designated as a hedging instrument is recognised in the income statement. The Group has no financial instruments designated as hedging instruments for the current financial year.

Inventories

Inventories are stated at the lower of cost and net realisable value. Cost is determined using the first-in-first-out (FIFO) method. The cost of finished goods and work in progress comprises materials, direct labour, other direct costs and related production overheads (based on normal operating capacity). Net realisable value is the estimated selling price in the ordinary course of business, less variable selling expenses.

Trade receivables

Trade receivables are amounts due from customers for products sold in the ordinary course of business. If collection is expected in one year or less they are classified as current assets. If not, they are presented as non-current assets.

Trade receivables are recognised initially at fair value and subsequently measured at amortised cost using the effective interest method, less provision for impairment.

Cash and cash equivalents

Cash and cash equivalents include cash at banks and on hand, other short-term highly liquid investments with original maturities of three months or less and bank overdrafts. In the consolidated balance sheet, bank overdrafts are shown within borrowings in current liabilities.

Equity

Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of new shares or options are shown in equity as a deduction, net of tax, from the proceeds.

Financial liabilities - recognition and subsequent measurement

Financial liabilities within the scope of IAS 39 have been classified as financial liabilities measured at amortised cost using the effective interest method. The Group determines the classification of its financial liability at initial recognition. All financial liabilities are recognised initially at fair value and, in the case of loans and borrowings, net of direct attributable transactions costs. The Group's financial liabilities include trade and other payables, borrowings, and currency swap derivatives. Financial liabilities are derecognised when the obligation under the liability is discharged or cancelled or expire.

Trade payables

Trade payables are obligations to pay for goods or services that have been acquired in the ordinary course of business. Accounts payable are classified as current liabilities if payment is due within one year or less. If not, they are presented as non-current liabilities.

Trade payables are recognised initially at the original invoice amount, with the addition of any accrued interest.

Borrowings

Borrowings are recognised initially at fair value, net of transaction costs incurred. Borrowings are subsequently carried at amortised cost using the effective interest rate (EIR) method. Gains and losses are recognised in profit and loss when the liabilities are derecognised as well as through the EIR amortisation process. Amortised cost is calculated by taking into account any discount or premium and costs that are an integral part of the EIR method. The EIR amortisation is included as finance costs in the statement of comprehensive income.

Current and deferred income tax

Current income tax

Current income tax assets and liabilities for the current and prior periods are measured at the amount expected to be recovered from or paid to the taxation authorities. The tax rates and tax laws used to compute the amount are those that are enacted or substantively enacted by the balance sheet date.

Deferred income tax

Deferred income tax is provided using the liability method on temporary differences at the balance sheet date between the tax bases of assets and liabilities and their carrying amounts for financial reporting purposes.

Deferred income tax liabilities are recognised for all taxable temporary differences except where the deferred income tax liability arises from the initial recognition of goodwill or of an asset or liability in a transaction that is not a business combination and, at the time of the transaction, affects neither the accounting profit nor taxable profit or loss.

Unrecognised deferred tax assets are reassessed at each balance sheet date and are recognised to the extent that it has become probable that future taxable profit will allow the deferred tax asset to be recovered.

Deferred income tax assets and deferred income tax liabilities are offset, if a legally enforceable right exists to set off current tax assets against current income tax liabilities and the deferred income taxes relate to the same taxable entity and taxation authority.

Employee benefits

The Group has defined contribution plans for all employees. In addition they operate unfunded defined benefit plans for the CEO.

A defined contribution plan is a pension plan under which the Group pays fixed contributions to pension insurance plans. The Group has no legal or constructive obligations to pay further contributions in the fund does not hold sufficient assets to pay all employees the benefit relating to employee service in the current and prior periods. The contributions are recognised as employee benefit expense when they are due. Prepaid contributions are recognised as an asset to the extent that a cash refund or reduction in future payments is available.

Defined benefit plans typically defines an amount of pension benefit that an employee will receive on retirement, usually dependent on one or more factors such as age, years of service and compensation. The liability recognised in the balance sheet in respect of defined benefit pension plans is the present value of the defined benefit obligation at the end of the reporting period less

VISTIN PHARMA ASA – FIRST QUARTER REPORT 2016

the fair value of plan assets. As the Group operates an unfunded defined benefit plan, they have no plan assets. The pension obligation is funded through the Group's operations.

The defined benefit obligation is calculated annually by independent actuaries using the projected unit credit method.

The current service cost of the defined benefit plan, recognised in the income statement in employee benefit expense, reflects the increase in the defined benefit obligation resulting from employee service in the current year, benefit changes and curtailments and settlements.

Past-service costs are recognised immediately in income.

The interest cost is calculated by applying the discount rate to the balance of the defined benefit obligation. This cost is included in employee benefit expense in the income statement.

Actuarial gains and losses arising from experience adjustments and changes in actuarial assumptions are charged or credited to equity in other comprehensive income in the period in which they arise.

Provisions and contingent liabilities

Provisions are recognised when the Group has a present legal or constructive obligation as a result of past events, it is more likely than not that an outflow of resources will be required to settle the obligation and the amount can be reliably estimated. Provisions are measured at the present value of the expenditures expected to be required to settle the obligation using a pre-tax rate that reflects current market assessments of the time value of the money and the risks specific to the obligation.

If the effect of the time value of money is material, provisions are discounted using a current pretax rate that reflects, when appropriate, the risks specific to the liability. When discounting is used, the increase in the provision due to the passage of time is recognised as a finance cost.

Reimbursement of costs incurred

Under the terms of production, partnering and/or licensing agreements the Group may incur internal or external costs that should be paid by the partner, and payments received from a partner to reimburse these costs are not recorded as revenue, but off-set against the costs incurred.

Leases

Leases in which a significant portion of the risks and rewards of ownership are retained by the lessor are classified as operating leases. Payments made under operating leases (net of any incentives received from the lessor) are charged to the income statement on a straight-line-basis over the period of the lease.

Events after the balance sheet date

New information on the Group's positions at the balance sheet date is taken into account in the interim financial statements. Events after the balance sheet date that do not affect the Group's position at the balance sheet date, but which will affect the Group's position in the future, are stated if significant.

3. Segment reporting

(NOK 1 000)	Q1 2016	Q1 2015	FY 2015
Total revenue and income B2B	72 812	-	150 327
CMO	30 414	-	68 898
HQ & Other	-	-	8 667
Total revenue and income	103 226	-	227 892
EBITDA
B2B	8 786	-	18 907
CMO	2 775	-	4 423
HQ & Other	(531)	-	4 553
EBITDA	11 030	-	27 883
Operating assets
(NOK 1 000)	31.03.2016	31.03.2015	31.12.2015
B2B	146 570	-	150 092
CMO	37 994	-	34 936
HQ & Other	79 766	1 000	73 980
Total segments	264 331	1 000	259 008
Operating liabilities
(NOK 1 000)	31.03.2016	31.03.2015	31.12.2015
B2B	15 129	-	16 415
CMO	4	-	(115)
HQ & Other	53 963	-	53 817
Total segments	69 096	-	70 117
Reconciliation of assets
(NOK 1 000)	31.03.2016	31.03.2015	31.12.2015
Segment operating assets	264 331	1 000	259 008
Total operating assets	264 331	1 000	259 008
Reconciliation of liabilities
(NOK 1 000)	31.03.2016	31.03.2015	31.12.2015
Segment operating liabilities	69 096	-	70 117
Tax Payable	2 458	-	4 915
Deferred tax liabilities	2 252	-	52
Total operating liabilities	73 806	-	75 084

4. Share capital

Number of shares
	(NOK 1 000)
1 000	1 000
17 055	17 055
1 000	1 000
17 055	17 055
17 055	17 055
	(1 000)

5. Interest-bearing debt

Vistin Pharma ASA has no interest bearing debt as of 31 March 2016. The Group has a credit facility of NOK 25 million with Nordea Bank. No amount was drawn at 31 March 2016.

Cash and cash equivalents

(NOK 1 000)	31.03.2016	31.03.2015	31.12.2015
Cash at bank	67 621	1 000	61 989
Cash and cash equivalents	67 621	1 000	61 989

Cash at banks earns interest at floating rates based on daily bank deposit rates. At 31 March 2016 NOK -0.18 million (USD -0.02 million) and NOK 9.7 million (EUR 1.0 million) of the cash at bank was denominated in USD and EUR respectively.

The Group has a restricted bank account of NOK 3.0 million relating to employees withholding taxes. In addition, the Group has a guarantee provided by Nordea for the same of NOK 6.5 million.