CHEPLAPHARM Arzneimittel GmbH Greifswald

Operating and Financial Review for

the period ended 31 March 2020

The purpose of this Operating and Financial Review is to show the development of the financial results of the operating business for the three months period ended March 31, 2020 in comparison to the three months period ended March 31, 2019.

The following discussion should be read in conjunction with the information contained in our interim condensed consolidated financial statements for the three months period ended March 31, 2020 including the notes thereto.

The figures in this review are presented in Euro. The amounts are in millions of Euros (EUR m). All amounts are rounded using standard commercial principles. In some cases, adding single values to the total values may therefore lead to differences. Due to rounding differences, figures in tables and cross- references may differ slightly from the actual figures (units of currency, percentages, etc.).

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Table of Content

1. Key Figures ...... 4 2. Business Overview ...... 4 Summary ...... 4 Our Strengths ...... 6 Our Strategy ...... 9 3. Product Portfolio ...... 11 4. Key Factors Affecting Results of Operations and Financial Condition ...... 13 Acquired Products during the LTM period ...... 13 5. Results of Operations ...... 14 Revenue ...... 14 Other Operating Income ...... 15 Cost of materials and Gross Profit ...... 15 Personnel expenses ...... 16 Amortization, depreciation and impairments ...... 16 Other operating expenses ...... 16 Net finance costs ...... 16 Tax on income ...... 17 Earnings after income taxes ...... 17 6. Financial Condition, Liquidity and Capital Resources ...... 18 7. Adjusted LTM EBITDA and Net Leverage ...... 19 8. Cash Flow Statement ...... 20 9. Status of Marketing Authorizations Transfer ...... 21 10. Employees ...... 21 11. Critical Accounting Policies and Significant Accounting Estimates ...... 21 12. Recent Developments ...... 21 Corona (SARS-COV-2 / COVID-19) ...... 21

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1. Key Figures

Three months ended March 31 2020 2019 Change

Total net revenue 174.0 107.0 63%

Gross Profit 114.8 78.8 46%

Gross Profit ratio 66% 74% -8%

EBITDA 79.3 63.5 25%

EBITDA ratio 46% 59% -23%

LTM EBITDA 296.6 N/A N/A

Cash flows from operating activities 60.7 39.7 53%

Cash flows from investing activities -0.2 -224.1 -100%

Cash flows from financing activities 61.4 145.4 -58%

Net Financial Indebtedness 1,269.8 915.2 39%

Adjusted EBITDA 375.3 N/A N/A

Leverage Ratio 3.38x N/A N/A

2. Business Overview

Summary

We are a leading specialty pharmaceuticals company headquartered in Greifswald, Germany, with an international footprint and a broad portfolio of more than 90 products across more than ten therapeutic areas, including , oncology and infectious diseases. We focus on acquiring well established, off-patent, branded legacy and niche originator pharmaceutical products with predictable cash flows from large pharmaceutical companies. Pharmaceutical companies regularly seek to repel these products to reduce the complexity of their product portfolio and because these products no longer fit their business model, even if still profitable. They seek reliable and experienced buyers, such as us, to repel these products given that maintaining market supply is paramount to mitigate potential

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reputational risk. We have a strong track record of ensuring uninterrupted supply and are typically able to generate additional value from these well-established, off-patent branded legacy and niche originator products by reducing complexity and costs throughout the value chain. We achieve that due to our lean setup, including outsourced manufacturing, as well as through our outsourced global distribution capabilities. Since our inception in 1998, we have established relationships with more than ten different pharmaceutical companies by acquiring their products. We believe that our track record of successful acquisitions and our proven ability to integrate new products into our business in a timely and seamless manner make us a preferred partner for many large pharmaceutical companies, such as AstraZeneca, Bristol-Myers Squibb and Roche.

We operate a lean business model focused on (i) selecting and acquiring suitable off-patent, branded niche or legacy originator products or product portfolios that fit our disciplined acquisition criteria, (ii) managing the transfer of the required approvals to market them across various countries and (iii) integrating them into our established value chain of contract manufacturing organizations (‘‘CMOs’’) and distributors. With no own manufacturing facilities or sales force, our asset light business model typically enables us to reduce production as well as sales and marketing costs by outsourcing production and distribution of our products to third parties. Our large network of CMOs allows us to choose the partner which is able to offer the lowest production costs and best quality for a specific product or pharmaceutical form. In addition, we may be able to achieve economies of scale and negotiate favorable terms with CMOs by bundling the production of various products with the same CMO.

We distribute our products in more than 120 countries across six continents, predominantly through our extensive network of distribution partners, with many of whom we have long-standing relationships. Not maintaining our own distribution capabilities in the majority of countries we operate in, allows us to choose local distribution partners who we believe are best suited for a specific product and to focus on the most efficient distribution channel. At the same time, we may be able to realize efficiencies by bundling the distribution of various products with the same distribution partner.

Given our business model and the off-patent status of our products, we do not develop products and have no research and development (‘‘R&D’’) activities of our own. Therefore, we are not exposed to the significant risks and upfront investments that are associated with the development of new pharmaceutical products. In addition, given that our products have typically been on the market and off- patent for a prolonged time, there is a very limited need to invest in product improvements, line extensions or similar measures.

As a result of this diversification, we are not dependent on a single product or geography. Our products are used by a diverse customer base including consumers, doctors, pharmacies, hospitals, mail-order companies, buying groups, wholesalers and other service providers in the healthcare market, as well as public or private health insurance organizations. We estimate that our primary customer groups are physicians, hospitals and patients paying for their products ‘out-of-pocket’. Our products typically also benefit from a loyal customer base which has used or prescribed the product for many years and, therefore, is less likely to switch to a different product. We believe that these ‘‘pull factors’’ are particularly characteristic of prescription drugs, sales of which represented approximately 94% of our sales with approximately 5% being generated from the sale of OTC products. Finally, competition for our products is often limited or well-known. Our products have typically been off-patent for several

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years and the competitive landscape has settled by the time we acquire the products. This is because generic products are typically launched immediately after patent protection for the originator product expired. Accordingly, the sales decline for an originator product is most severe immediately following expiry of patent protection and hence, by the time we acquire a branded originator product, the risk of new products entering the market is relatively low, driven by non-compelling economics for new entrants given the niche or legacy nature of the sub-segment of the pharmaceutical industry in which we operate.

Our business has grown significantly in recent years. We have increased our revenues and EBITDA before non-recurring items from €132.5 million and €69.7 million, respectively, for the year ended March 31, 2016 to €524.8 million and €277.6 million, respectively, for the twelve months ended December 2019.

We believe that the future growth of our business is supported by a number of favorable long-term trends. We expect that there will continue to be attractive acquisition candidates available to us as a result of large pharmaceutical companies reducing the complexity of their portfolio and focusing on newer patented products. This expectation is underpinned by a substantial proportion of currently marketed pharmaceutical products The patent protection for these products will expire by 2024, a trend expected to continue in later years, as ‘‘blockbuster’’ and other drugs lose patent protection, as well as the continuing trend toward mergers & acquisitions in the pharmaceutical industry. We expect a realignment of product portfolios as a result of this trend. At the same time, we expect that the broader pharmaceutical industry will continue to grow in the future as a result of rising medical needs driven by a growing and ageing population, as well as the availability of new and innovative products addressing previously unmet medical needs, the expansion in the awareness and availability of healthcare and increasing national income in emerging markets.

Our Strengths

Our strength is a differentiated and low-risk business model given proven and mature products with a stable competitive environment and an established customer base.

We focus on acquiring original, well established, off-patent branded legacy and niche originator pharmaceutical products which have been on the market for many years and for which patent protection expired several years ago. We believe such products offer attractive opportunities with limited risk, given the long prescription track record, well understood side effects and lower litigation risk. Such products are also characterized by stable customer bases and visibility on revenue streams, long phase-out periods and a strong ‘‘pull effect’’ (i.e., limited to no marketing required as brands are well established and have a high degree of loyalty or familiarity with the prescriber or end user). We believe that these factors also reduce the risk of new competitors entering the market for our products, given the non-compelling economics for a new entrant, as the competitive landscape has settled and introducing a new product would entail significant costs.

Our product portfolio comprises well established, off-patent branded ‘‘legacy’’ originator products and ‘‘niche’’ originator products, each representing approximately half of our sales for the three months ended March 31, 2020. Niche products benefit from limited or no competition due to the overall limited market size and scale constraints for generic companies and are unlikely to be replaced by new

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treatment alternatives. Legacy products are frequently higher volume drugs covering broader market segments and diseases, face more competition from generic products, as compared to the competition faced by niche products, given larger market size and earnings potential, but benefit from a strong ‘‘pull effect’’ due to the long track record in the market as the originator product. Our products are also predominantly prescription drugs and we believe that the ‘‘pull effect’’ is more prevalent for prescription drugs.

Given our products’ long time in market and safety history, combined with sticky customer bases, high brand awareness and long phase-out periods, such branded niche and legacy originator products generate more predictable revenue and cash flows compared to new pharmaceutical products, while having limited drug-specific downside risks, such as litigation. As we do not engage in R&D, we are neither exposed to R&D risk nor to the upfront investments associated with R&D activities.

We are in a leading position in most relevant markets and a preferred partner for global pharmaceutical companies with the ability to execute and integrate complex product acquisitions.

With our extensive track record of acquisitions, our ability to swiftly negotiate and execute acquisitions and a global distribution partner network, our knowledge of regulatory and pharmacovigilance matters. We believe we are a preferred partner for leading global pharmaceutical companies seeking to divest off-patent pharmaceutical products. Since 2003, when we were acquired by the Braun family and joined by our current Chief Executive Officer and Chief Scientific Officer, we have established relationships with more than ten different pharmaceutical companies by acquiring their products, including AstraZeneca, GlaxoSmithKline, , Teva, Roche and Bristol-Myers Squibb. We believe that we have particularly strong relationships with Roche and, more recently, AstraZeneca as we have acquired multiple products or products bundles from each of them during the last years.

These relationships are further strengthened by our ability to swiftly negotiate and execute acquisitions due to fast decision-making processes, our dedicated team of experts and our long track record. We follow a disciplined, standardized and a proven acquisition process with strict acquisition criteria. Given our lean structures and the fact that our Chief Executive Officer and Chief Scientific Officer are also our shareholders, we are in a position to evaluate and agree acquisition opportunities quickly. Large pharmaceutical companies are increasingly focused on divesting product bundles—across product types, therapeutic areas and geographies—instead of single product divestments. We believe that we are one of only a few companies with the knowhow and experience necessary to execute such complex product portfolio acquisitions in a timely and efficient manner. In addition, our global distribution network helps to ensure ongoing product availability in existing markets, which is a central decision- making factor for sellers seeking to minimize reputational risk from stock-out situations.

Due to these relationships and our track record of acquisitions, we believe we have been able to acquire products with strong positions in relatively large markets. In particular we acquired Xenical (2016), Dilatrend (2017), Atacand (2019), Lexotan (2020). We estimate to have market shares in the countries in which we distribute the relevant product of approximately 33%, 40%, 20% and 56%, respectively in

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the territory in which we market the respective product.

Ability to integrate new products into global network and create value

With over 90 acquisitions spanning a time period of more than 20 years, we have an extensive track record of integrating acquired products into our network thereby optimizing product potential and contribution margins. We have a large team of scientific and regulatory experts, which we have continued to expand in recent years in line with our growth. As of December 31, 2019, over 60% of our fulltime equivalent employees were active in our core functions regulatory, pharmacovigilance and quality control. This team of inhouse experts manages the transfer of required marketing authorizations in a timely manner and enables us to integrate newly acquired products into our existing network of CMOs and distributors efficiently. We believe that this track record, combined with our strong in-house capabilities in critical core areas, make it relatively difficult for new entrants to replicate our business model.

We generate additional value from newly acquired products through a number of key levers, typically including reduced overhead costs (such as sales and marketing expenses) and complexity (for example through centralized marketing authorization management), lower production costs (by outsourcing production to CMOs), optimized manufacturing arrangements and active pricing strategies. Product cost optimization through outsourced production by CMOs and, in turn, reduced production costs is the most important value lever and typically accounts for most of the cost savings we are able to achieve. Our distribution platform comprises global partners with distribution capabilities in more than 120 countries, which allows us to ensure product availability across existing markets. We are also able to realize additional potential from our products by choosing a distributor who is best suited for a given product or bundling the distribution of several products with the same distributor.

Asset light business model with limited capital expenditure requirements and strong cash flow generation

We operate an asset light business model characterized by no own manufacturing operations and no involvement in R&D activities. In addition, we outsource a significant portion of our distribution to third parties under long-term contracts, which allows us to maintain a low fixed cost base with limited capital expenditure requirements beyond investments in selective acquisitions of new products.

The combination of our low fixed cost base and limited capital expenditure requirements support a scalable business model and high EBITDA margins and cash conversion rates. In the financial years ended December 31, 2016, 2017, 2019 and 2020, our EBITDA margin amounted to 53%, 56%, 58% and 53%, respectively.

We also believe that our business model is scalable and able to generate significant economies of scale. The complexity of integrating and managing new products is primarily driven by the number of marketing authorizations that are required to be transferred in each country that the product is sold in and the need to ensure uninterrupted supply rather than the sales volume of the acquired product. Our expertise, experience and knowhow in the transfer of marketing authorizations as well as our existing global distribution network therefore allows us to efficiently integrate new products at relatively low

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additional fixed costs. Since 2016, we have successfully transferred approximately 559 different marketing authorizations.

Highly qualified and committed management team with excellent track record

Our senior management team has been instrumental in the success of our buy-and-build strategy, with a track record of more than 90 successful acquisitions with a cumulative acquisition value exceeding €1.8 billion since the acquisition of Cheplapharm by the Braun family in 2003. Our senior management team is supported by dedicated managers who have significant experience in regulatory and pharmacovigilance affairs and a team of highly-qualified personnel, approximately 55% with an academic degree.

We are also a family-owned company and benefit from the long-term commitment of our shareholder, the Braun family, which include our Chief Executive Officer, Sebastian Braun, and Chief Scientific Officer, Bianca Juha, who have consistently supported our growth through the reinvestment of retained earnings in the business in lieu of dividends. They are complemented by our Chief Operating Officer, Edeltraud Lafer, who has nearly 30 years of experience in the pharmaceutical industry, and our Chief Financial Officer, Jens Rothstein, who has served in that role since 2012.

Our Strategy

Pursue selective growth opportunities through disciplined acquisitions and continue to strengthen our existing integration platform

We intend to continue to grow our business through disciplined and selective acquisitions of well established, off-patent branded niche and legacy originator pharmaceutical products in line with our time- tested acquisition strategy. As a result of upcoming patent expiries for a considerable amount of products, we expect to continue to find ample opportunities for acquisitions of new products in the medium term. We will continue to leverage our regulatory and pharmacovigilance expertise to identify new products with predictable revenues as well as limited risks and competition. In addition, we remain focused on products with potential for production cost optimization and contribution margin improvement.

Our acquisition strategy is based on stringent investment-criteria.

In line with our expected growth, we plan to continue to enhance our product integration capabilities, in particular by expanding our regulatory, pharmacovigilance and quality control functions. In order to manage our expected growth more efficiently, we intend to outsource certain functions for which third parties are better suited or utilize freelance work, as deemed appropriate.

Further strengthen market position and remain a partner of choice to leading pharmaceutical companies for the acquisition of off-patent, branded legacy and niche originator products

We seek to maintain and strengthen our relationships with the leading global pharmaceutical companies as we focus on expanding our market position as a leading specialty pharmaceutical company. We believe our longstanding experience and proven track record in the industry, together with our extensive global distribution network, make us a preferred partner to pharmaceutical companies seeking to divest well-

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established, off-patent branded legacy or niche originator products. We aim to further strengthen those relationships by maintaining our global distribution channels to ensure continued product availability in existing markets.

In addition, our background as a family-owned business with flat hierarchies and fast decision-making processes provides us with a competitive advantage when bidding for products and we intend to leverage this advantage further going forward. Moreover, we will continue to build on our expertise and track record in marketing authorization transfers across the world to become the clear partner of choice for pharmaceutical companies focused on a global divestment of bundles of products rather than individual products. By strengthening our relationships with the leading global pharmaceutical companies, we believe we will be able to ensure a continuous, strong acquisition pipeline of potential product candidates and further improve our global market position.

Maintain a prudent financial policy based on high cash conversion rates and supported by our shareholders long-term commitment

We intend to maintain a prudent financial policy based on high cash conversion rates and selective acquisitions and supported by the long-term commitment of our shareholders. We target a ratio of EBITDA after non-recurring items to Net Financial Indebtedness of 3.75x to 4.25x. We believe that our high Cash Conversion Rate, combined with the discretionary nature of our acquisition activities, would allow us to de- lever the Group swiftly, if these leverage ratios would temporarily be exceeded.

Our financial policy is further underpinned by the long-term commitments of our shareholders. Since its acquisition by the Braun family in 2003, the Company has never paid a dividend to its shareholders and we currently do not expect to pay dividends for the foreseeable future. We aim to maintain adequate liquidity at all times through our Revolving Credit Facility and significantly cash generative business model.

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3. Product Portfolio

We have a diversified product portfolio covering a range of therapeutic areas and indications, with a focus on selected pharmaceutical brands and niche products. We marketed more than 100 products with more than 1,460 SKUs under approximately 763 marketing authorizations as of March 31, 2020.

The breadth of our product portfolio helps to limit our dependence on the success of any individual therapeutic area or product. In the three months ended March 31, 2020, sales of our top ten products, accounted for 65% of our total revenues. The following graph shows revenue by product for the three months ended March 31, 2020:

for the three months Ended March 31, 2020 (in EURm) (in %) Revenue by TOP 10 products Xenical® 17.9 10% Atacand® 17.0 10% Lexotan® 14.5 8% Losec® 13.4 8% Seroquel® ROW 12.0 7% Dilatrend® 8.8 5% Profact® 7.9 5% Konakion® 7.7 4% Suprefact® 6.9 4% Fungizone® 6.8 4% All other products 61.1 35% Total revenue 174.0 100%

Our geographic diversity limits the exposure to price reductions for individual products in a specific market. We have a broad geographical footprint, with the majority of our revenues being generated in Europe, followed by Asia. Sales are well diversified within Europe and Asia.

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Our product portfolio is well diversified across a range of therapeutic areas. The primary therapeutic areas (and indications) of our product portfolio are: cardiology (cardiovascular diseases), obesity (adiposity), infection medicine, (hepatobiliary disorders), (retinal vascular disorder), oncology (malignant diseases), haematology (vitamin K deficiency bleeding), (alcohol withdrawal), emergency medicine (antidote) and sleeping disorders (insomnia).

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4. Key Factors Affecting Results of Operations and Financial Condition

Acquired Products during the LTM period

In September 2019, we agreed to acquire various marketing authorizations of Losec, including in the therapeutic area digestive disorders, from AstraZeneca for an aggregate purchase price of €223 million. The acquisition includes marketing authorizations in certain European countries. Closing of the acquisition occurred on September 30, 2019. However, AstraZeneca has agreed to fully service Losec for two years following closing. Transfer of the relevant marketing authorizations and the integration of Losec into our manufacturing and distribution network is therefore not expected to commence prior to two years after closing. The acquisition of the product portfolio from was financed from cash-in-hand as well as a drawdown under the Revolving Credit Facility.

In June 2019, we agreed to acquire a portfolio of four products (the ‘‘Gold Portfolio’’), included in the therapeutic area mental & sleeping disorders, from Sanofi for an aggregate purchase price of €66.5 million. The acquisition includes marketing authorizations in certain European countries, Argentina, Canada, Japan and South Africa. Closing of the acquisition occurred on October 30, 2019 and we are in the process of integrating the new products into our product portfolio. The acquisition of the product portfolio from Sanofi was financed from cash-in-hand as well as a drawdown under the Revolving Credit Facility.

In October and November 2019, respectively, we entered into two agreements to acquire Seroquel, a product used to treat various mental disorders, from AstraZeneca for an aggregate purchase price of USD 213 million plus sales-contingent payments of up to USD 67 million until 2026. The acquisitions include marketing authorizations for Seroquel in the United States, Europe, Canada and Russia. Closing of the acquisitions occurred in September 2019. However, AstraZeneca has agreed to fully service Seroquel for three years following closing. Transfer of the relevant marketing authorizations and the integration of Seroquel into our manufacturing and distribution network is therefore not expected to commence prior to three years after closing. The acquisition of Seroquel was financed from cash-in-hand as well as a drawdown under the USD 124 million Bridge Facility entering November 2019.

In September 2019, we agreed to acquire the marketing authorization and related trademarks for Lexotan, one of our existing products, in Japan. The acquisition of Lexotan Japan was financed from cash-in-hand.

The following provides an overview of the EBITDA contribution of each acquired product during the last three months period Ended March 31, 2020.

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Contribution to Adjusted EBITDA for the three months Ended March 31, 2019 (in EURm) Project name Closing date

Losec® September 30, 2019 25.1 Gold Portfolio October 30, 2019 8.5 Seroquel® December 2/13, 2019 41.4 Lexotan® JPN December 16, 2019 3.7 Total contribution 78.7

5. Results of Operations

The following table sets forth amounts from our income statement along with the percentage change for the three months period ended March 31, 2020 compared to the three months period ended March 31, 2019. All figures are in EUR million, as reported.

Three months ended March 31 2020 2019 Change (in EURm) (in EURm) (%)

Revenue 174.0 107.0 63% Change in inventories -5.8 7.7 >-100% Other operating income 0.2 0.4 -63% Operating income 168.4 115.1 46% Cost of materials -53.5 -36.3 47% Personnel expenses -5.5 -4.1 34% Amortisation, depreciation and impairments -49.7 -35.9 39% Other operating expenses -30.0 -11.3 >-100% Result of operating activities 29.6 27.6 7% Net income from investments -1.3 0.4 >-100% Interest income affiliated companies 0.0 0.0 N/A Interest income 21.6 0.0 >100% Interest expenses -16.5 -22.1 -25% Net finance costs -3.8 21.6 >-100% Earnings before income taxes 33.4 6.0 >100% Taxes on income -11.3 -2.3 >100% Earnings after income taxes 22.1 3.6 >100%

Revenue

The following table provides a breakdown of our revenue for the three months ended March 31, 2020, compared to the three months ended March 31, 2019.

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Three months ended March 31 2020 2019 Change (in EURm) (in %) (in EURm) (in %) (%)

Operational revenue 94.7 54% 50.5 47% 88% TSA-related revenue 79.2 46% 56.5 53% 40% Royalties 0.0 0% 0.0 0% N/A Total revenue 174.0 100% 107.0 100% 63%

Total revenue for the three months ended March 31, 2020 was €174.0 million, an increase of €67.0 million or 63%, as compared to €107.0 million for the three months ended March 31, 2019.

Operational revenue was €94.7 million for the three months ended March 31, 2020, an increase of €44.2 million or 88%, as compared to €50.5 million for the three months ended March 31, 2019. This increase was mainly due to various transfers of marketing authorizations and the recent acquired products during the last twelve-months period.

TSA-related revenue was €79.2 million for the three months ended March 31, 2020, an increase of €22.7 million or 40%, as compared to €56.5 million for the three months ended March 31, 2019. This increase was mainly due to the recent acquired products during the last twelve-months period.

Other Operating Income

Other operating income was €0.2 million for the three months ended March 31, 2020, a decrease of €0.3 million or 63%, as compared to €0.4 million for the three months ended March 31, 2019.

Cost of materials and Gross Profit

The following table provides a breakdown of our cost of sales for the three months ended March 31, 2020, compared to the three months ended March 31, 2019.

Three months ended March 31 2020 2019 Change (in EURm) (in EURm) (%)

Procurement of goods and contract manufacturing 15.5 21.1 -27% Services provided by third parties 35.6 14.7 >100% Freight charger 0.3 -0.3 >100% Other 2.1 0.8 >100% Total cost of materials 53.5 36.3 47%

Total cost of materials was €53.5 million (31% of revenue) for the three months ended March 31, 2020, an increase of €17.2 million or 47%, compared to €36.3 million (34% of revenue) for the three months ended March 31, 2019. The increase was primarily due to an increase in services provided by third parties from €14.7 million for the three months ended March 31, 2019 to €35.6 million for the three * 15

months ended March 31, 2020, which is directly connected with the acquisition of further products and therewith connected with an increase in revenue.

Personnel expenses

Personal costs were €5.5 million for the three months ended March 31, 2020, an increase of €1.4 million or 34%, as compared to €4.1 million for the three months ended March 31, 2019.

The increase was primarily due to increase in salaries and wages, from €3,4 million for the three months ended March 31, 2019 to €4.6 million for the three months ended March 31, 2020, as well as increases in social security costs resulting from the increase in headcount from 281 as of March 31, 2019 to 347 as of March 31, 2020 to support the regulatory and pharmacovigilance functions for our new products.

Amortization, depreciation and impairments

Amortization, depreciation and impairments were € 49.7 million for the three months ended March 31, 2020, an increase of €13.8 million or 39%, as compared to €35.9 million for the three months ended March 31, 2019. The increase was primarily due to the acquisitions of Losec and Seroquel (from AstraZeneca), and the Gold Portfolio (from Sanofi), for which the marketing authorizations and trademarks were capitalized as part of the transactions, as well as the revenue contributions of our acquisitions during financial year 2020. No impairment was recorded during financial year 2020.

Other operating expenses

Other operating expenses were €30.0 million or the three months ended March 31, 2020, an increase of €18.7 million or 39%, as compared to €11.3 million for the three months ended March 31, 2019.

The increase was primarily due to higher selling, distribution and license costs, resulting from our additional acquisitions of products. The increase was also due, in part, to increases in our scientific costs (e.g. cost of drug safety and quality assurance) related to the expansion of our product portfolio as well as the corresponding increase in the number of products under TSA arrangements.

Net finance costs

Net income from investments was €-1.3 million for the three months ended March 31, 2020, a decrease of €1.8 million as compared to the net income from investments of €0.4 million for the three months ended March 31, 2019. This decrease was mainly due to impairments on securities.

Net interest income was €21.6 million for the three months ended March 31, 2020, an increase of €21.6 million as compared to the net interest costs of €0.0 million for the three months ended March 31, 2019. The increase was mainly due to a one-off revaluation gain of financial liabilities.

Financial expenses were €16.5 million for the three months ended March 31, 2020, a decrease of €5.6 million as compared to €22.1 million for the three months ended March 31, 2019. The decrease is due to lower interest rates.

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Tax on income

Income tax expenses were €11.3 million for the three months ended March 31, 2020, an increase of €9.0 million as compared to €2.3 million expenses for the three months ended March 31, 2019. This increase was mainly due to higher municipal trade and corporate income tax expenses as well as deferred tax expenses mainly resulting from the revaluation of useful live of the intangible assets.

Earnings after income taxes

As a result of the developments described above, net profit for the period was €22.1 million for the three months ended March 31, 2020, compared to a net profit of €3.6 million for the three months ended March 31, 2019.

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6. Financial Condition, Liquidity and Capital Resources

As of March 31, 2020, and of March 31, 2019, the gross financial debt, the cash balance as well as the undrawn Revolving Credit Facility were as follows:

As of March As of March 31, 2020 31, 2019

Gross financial debt (including accrued transaction costs) 1,421.0 965.9 thereof bond 495.4 - thereof term loans 928.7 817.9 thereof revolving credit facility - 3.7 148.2 thereof all other 0.6 - 0.1 Securities 3.4 4.5 Bank balances and cash-in-hand 147.8 46.3 Net debt 1,269.8 915.2 Undrawn Revolving Credit Facility 310.0 160.0

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7. Adjusted LTM EBITDA and Net Leverage

Adjusted LTM EBITDA for the last three months ended March 31, 2020 was €375.3 million leading to the net debt leverage ratio of 3.38x.

for the three months Ended March 31, 2020 (in EURm) Revenue 174.0 Change in inventories -5.8 Other operating income 0.2 Cost of materials -53.5 Personnel expenses -5.5 Other operating expenses -30.0 EBITDA 79.3

EBITDA Q4 2019 91.7 EBITDA Q3 2019* 62.8 EBITDA Q2 2019* 62.8

LTM EBITDA 296.6

Contribution of the recently acquired products (LTM) 78.7

Adjusted EBITDA 375.3

Net Financial Indebtedness 1,269.8 Ratio of Net Financial Indebtedness to Adjusted EBITDA 3.38x

* Actuals based on IFRS are not available for Q2-19 and Q3-19. We use EBITDA of audited full financial year 2019 (€280.7m).

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8. Cash Flow Statement

The following table shows the cash flow statement for the three months period ended March 31, 2020 and 2019.

Cash flows from operating activities increased from €39.7 million for the three months ended March 31, 2019 to €60.7 million for the three months ended March 31, 2020. The increase is driven by a higher overall profit.

Cash flows used in investing activities decreased from €224.1 million for the three months ended March 31, 2019 to €-0.2 million for the three months ended March 31, 2020. The higher investment spending in the three months ended March 31, 2019 was mainly due to the completion of two acquisitions and the payments of the purchase prices of around € 223.4 million.

Cash flows from financing activities decreased from €145.4 million for the three months ended March 31, 2019 to €61.4 million for the three months ended March 31, 2020.

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9. Status of Marketing Authorizations Transfer

27 transfers of Marketing Authorizations have been processes in the three months ended March 31, 2020 according to plan.

Based on the agreed asset purchase agreements with Astra Zeneca, the transfer of Marketing Authorizations for the project Atacand would likely start by end of 2020. Transfer of the marketing authorizations of project Seroquel is not expected to commence prior to 2023.

The whole transfer process per product can take on average between 0.5 years and 3 years, depending on the individual authorities in each country.

10. Employees

As of March 31, 2020, Cheplapharm employed a workforce of 347 people, an increase of 23% compared to the previous year.

Three months ended March 31 2020 2019 Change

Regulatory 69 20% 64 18% 8% Chemistry, Manufacturing and Controls 26 7% 21 6% 24% Pharmacovigilance 65 19% 50 14% 30% Quality 51 15% 39 11% 31% Supply Chain 38 11% 30 9% 27% Global Sales 41 12% 31 9% 32% Finance & Law 18 5% 13 4% 38% IT 13 4% 10 3% 30% All other 26 7% 23 7% 13% Total headcount 347 100% 281 81% 23%

11. Critical Accounting Policies and Significant Accounting Estimates

Please refer to notes to our consolidated financial statements for a detailed description.

12. Recent Developments

Corona (SARS-COV-2 / COVID-19)

Despite the worldwide spreading of the pandemic we do not see any threat of the business model or of the current results. Nevertheless, we are not fully unaffected by the consequences. The following facts are (as particularity) to be considered at CHEPLAPHARM:

So far, we have not seen any impacts on the revenue or earnings.

* 21

We have no considerable suppliers in Asia, neither in China, nor in India.

Although many CMOs (Contract Manufacturing Organisations) of CHEPLAPHARM are resident in Italy and France, we are currently not aware of any negative impacts on our procurement.

Depending on the complexity of the product, CHEPLAPHARM always keeps stock for balancing supply and production delays. These inventories cover a period of about three to six months, depending on the product.

Only with regard to the logistics, we are aware of temporary changes, since the border controls that are now performed at many countries result in delays.

Thanks to the lean business model and the strict technical orientation, we were able to rapidly react and could send 60 to 70% of our employees to work at home within one week, aiming to avoid infections amongst the employees and workers.

In order to inform inform our stakeholders early and comprehensively, we established a weekly bulletin, dealing with the risks of the supply chain in times of Corona.

Being due to the long-term financing of CHEPLAPHARM by means of the high yield bond issued in 2020 and the Term Loan B, also short-term distortions on the financial markets being due to the Corona crisis do not affect CHEPLAPHARM. Like the securities of many other companies, also the high yield bond of CHEPLAPHARM lost value, but without any impact on the issuer.

Shareholders and the finance team of CHEPLAPHARM unanimously resolved to invest only so many funds in new acquisitions in the year 2020 as are available from already granted credit facilities and from the free cash flow. We will consciously avoid burdens through prices that are not in line with the markets.

Greifswald, 10th of June 2020

CHEPLAPHARM Arzneimittel GmbH

Jens Rothstein, CFO

* 22 [Hier eingeben] [Hier eingeben]

CHEPLAPHARM Arzneimittel GmbH, Greifswald/Germany Condensed Balance Sheet as at 31 March 2020

Liabilities 31.03.2020 31.03.2019 kEUR kEUR

Equity Share capital 25 25 Net Profit brought forward 145.141 105.934 Net Profit brought forward 22.062 3.636

Total Equity 167.228 109.595

Non-current liabilities Loan affiliated companies 0 0 Mezzanine capital 0 0 Other finanicial debts 1.420.659 965.236 Loans granted by affiliated companies 30.129 32.129 Deferred tax liabilities 50.315 31.725 Other non financial liabilities 16.161 13.985 Total non-current liabilities 1.517.264 1.043.075

Current liabilties Other financial debts 350 673 Trade payables 58.554 49.938 Contract liabilities 0 0 Liabilities to ffiliated companies 0 280 Income tax liabilities 24.567 12.842 Other liabilities 21.843 6.278 Total current liabilities 105.315 70.011

Total equity and liabilities 1.789.808 1.222.682

[Hier eingeben] [Hier eingeben]

Assets 31.03.2020 31.03.2019 kEUR kEUR

Non-current assets Intangible assets 1.306.381 961.979 Property, plant, and equipment 16.747 10.013 Other financial assets 9.163 659 Deferred tax assets 2.773 0 Other non current assets 0 6 Total non-current assets 1.335.064 972.657

Current assets Inventories 112.973 81.614 Trade receivables 178.572 107.788 Receivables from affiliated companies 2.337 5.375 Income tax assets 0 0 Other current assets 9.695 4.502 Securities 3.357 4.454 Bank balances and cash assets 147.809 46.290 Total current assets 454.744 250.024

Total assets 1.789.808 1.222.682

[Hier eingeben] [Hier eingeben]

CHEPAPAHRM Arzneimittel GmbH, Greifswald Condensed Income Statement for the Period from 1 January to 31 March 2020

01.01.2020- 01.01.2019- Notes 31.03.2020 31.03.2019

kEUR kEUR

Revenue 1 173.977 107.012

Change in inventories -5.766 7.732 Other operating 2 152 406 income

Operating income 168.364 115.149 Cost of materials 3 53.545 36.306 Personnel expenses 4 5.548 4.127 Amortisation, depreciation and impairments 5 49.699 35.851 Other operating expenses 6 29.951 11.264

Result of operating activities 29.621 27.601

Net income from investments 7 1.345 -417 Interest income affiliated companies 0 0 Interest income 8 -21.565 0 Interest expenses 8 16.461 22.064

Net finance cost -3.758 21.647

Earnings before income taxes 33.379 5.954

Taxes on income 9 11.317 2.319

Earnings after income taxes 22.062 3.636

[Hier eingeben] [Hier eingeben]

CHEPLAPHARM Arzneimittel GmbH, Greifswald Condensed Statement of Comprehensive Income

for the Period from 1 January to 31 March 2020

01.01.2020- 01.01.2019- 31.03.2020 31.03.2019 kEUR kEUR

Earnings after income taxes (= consolidated net profit) 22.083 3.636

Items that may be reclassified to statement of profit and loss:

Translation differences Other comprehensive income 0 0

Total of net profit for the period and other comprehensive income (= total comprehensive income) 22.083 3.636

[Hier eingeben] [Hier eingeben]

CHEPLAPHARM Arzneimittel GmbH, Greifswald Condensed Statement of Cash Flows For the period from 1 January 2020 to 31 March 2020

01.01.2020- 01.01.2019- 31.03.2020 31.03.2019 kEUR kEUR

Cashflow from operating activities 60.709 39.719

Cashflow from investing activities -193 -224.073

Cashflow from financing activities 61.418 145.352

Net change in cash funds 121.935 -39.002

Cash funds at the beginning of the period 25.874 85.292

Cash funds at the end of the period 147.809 46.290

[Hier eingeben] [Hier eingeben]

CHEPLAPHARM Arzneimittel GmbH, Greifswald Condensed Statement of Changes in Equity as at 31 March 2020

Share Net profit/ Other loss Net All figures in kEUR Capita comprehensive Equity brought profit/loss l Forward Income kEUR kEUR kEUR kEUR kEUR Balance as at 1-Jan-2017 25 50.479 18.052 0 68.557

Reclassified 18.052 -18.052 0 Consolidated net profit for the 28.741 28.741 year

Balance as at 31-Dec-2017 25 68.532 28.741 0 97.297

Balance as at 31-Dec-2017 25 68.532 28.741 0 97.297

Adjustment -184 IFRS 9 -184

Balance as at 1-Jan-2018 25 68.348 28.741 0 97.113

Reclassified 28.741 -28.741 0 Consolidated net profit for the 9.296 year 9.296

Balance as at 31-Dec-2018 25 97.088 9.296 0 106.409

Balance as at 1-Jan-2019 25 97.088 9.296 0 106.409

Reclassified 9.296 -9.296 0

Allocation to reserves -4.191 -4.191 Consolidated net profit for the 52.036 52.036 year

Balance as at 31-Dec-2019 25 102.194 52.036 0 154.255

Balance as at 1-Jan-2020 25 102.194 52.036 0 154.255

Reclassified 52.036 -52.036 0 Consolidated net profit for the 22.062 22.062 year [Hier eingeben] [Hier eingeben]

Balance as at 31-Mar-2020 25 154.230 22.062 0 176.317

[Hier eingeben] [Hier eingeben]

General Information

CHEPLAPHARM Arzneimittel GmbH, headquartered in Greifswald, Ziegelhof 24, is the parent company of the CHEPLAPHARM Group and a limited liability company under German law. The company is registered in the Commercial Register of the Local Court of Stralsund under the number B 5896.

CHEPLAPHARM Arzneimittel GmbH (hereinafter also referred to as CHEPLAPHARM, CHEPLAPHARM Group or Group) was founded in Freiburg in 1998 and relocated its headquarters to Mesekenhagen in 2003. CHEPLAPHARM’s management as well as its headquarters have been in the Hanseatic city of Greifswald since October 2018.

The CHEPLAPHARM Group’s business operations mainly consist of the worldwide distribution of ‘‘Specialty Pharma’’, which includes branded pharmaceuticals, nutritional supplements, medical devices and cosmetics. The range comprises primarily prescription medicines for cardiology, emergency medicine, haematology, addiction medicine and as well as over-the-counter medicines, care and medical devices.

The interim financial statement as of March 31, 2020 are prepared unsolicited in accordance with the International Financial Reporting Standards (IFRS) of the International Accounting Standards Board (IASB), considering the interpretations of the International Financial Reporting Interpretations Committee (IFRS IC) as they are to be applied in the European Union (EU), and the supplementary provisions of Section 315e (1) HGB.

The interim condensed consolidated financial statements are prepared in accordance with IAS 34 Interim Financial Reporting. These interim condensed consolidated financial statements do not include all the information and disclosures required in the annual consolidated financial statements and should be read in conjunction with the Cheplapharm Arzneimittel GmbH’s annual Consolidated financial statements as of 31 December 2019.

In the condensed consolidated interim financial statements as at 31 March 2020, the accounting and valuation principles and the consolidation principles applied in the consolidated financial statements as at 31 December 2019, continued unchanged.1

1 The International Accounting Standards (IAS) and the International Financial Reporting Standards (IFRS) are referred to as IFRS, as are the interpretations of the Standards Interpretation Committee (SIC) and the interpretations of the International Financial Reporting Interpretation Committee (IFRS IC) as IFRIC [Hier eingeben] [Hier eingeben]

Application of new IFRS und Amendments The following list of new standards and interpretations, which first applicable since 1st January 2020 in the EU, were applied.

Regulation Title Published in Application obligation as of

Adjustment of references for the new Framework Framework Concept Mar 2018 01.01.2020 of IFRS

IAS 1 / IAS 8 Standardisation of essentiality Oct 2018 01.01.2020

Amendments to the definition of business IFRS 3 Oct 2018 01.01.2020 operations

IFRS9 / IAS 39 / IFRS 7 Interest rate of benchmark reform Sep 2019 01.01.2020

Initial application obligation of IFRS 17 related to IFRS 17 May 2017 01.01.2021 insurance contracts

Presentation of liabilities in the financial IAS 1 Jan 2020 01.01.2022 statements

The application of the new or revised IFRS standards and interpretations had no significant impact on the presentation of the net assets, financial position and income statement in the consolidated interim financial statements of CHEPLAPHARM.

Accounting and valuation methods The accounting and valuation methods are applied consistently to all financial years presented in the financial statements. Expenses and income that usually accrue at the end of a financial year have been periodized for interim reporting purposes.

The carrying amounts of the financial instruments reported in the consolidated balance sheet correspond to their fair values. The securities as well as non-current and current receivables and liabilities from derivative financial instruments are valued at fair value.

The derivative financial instruments are exclusively interest-rate-related transactions and OTC products, i.e. non-exchange-traded products. The derivative financial instruments are valued at their market values determined by banks. These are values based on internal risk models, which are determined using recognized mathematical methods. The carrying amounts of derivatives correspond to the market values.

As at 31 December 2019 and as at 31 March 2020, the fair values of the derivatives are derived from observable market data and are therefore attributable to hierarchy level 2. The securities are valued at the stock exchange price and are therefore attributable to hierarchy level 1.

All other financial assets are held by CHEPLAPHARM to collect the contractual cash flows, which are [Hier eingeben] [Hier eingeben]

solely repayments and interest payments on the outstanding nominal capital. As a result, these financial assets are measured at amortized cost in accordance with IFRS 9. Compared to the consolidated financial statements as at 31 December 2019, no changes were made to the consolidated interim financial statements.

Income tax expense was calculated based on the results of the companies included and the current tax rate as the best estimate. Deferred taxes on temporary differences and loss carry forwards were valued at the applicable deferred tax rates.

The interim consolidated financial statements were neither audited in accordance with section 317 HGB nor subjected to a review.

Significant Events and Transactions

- Acquisition of Cymevene Brazil (450 kEUR) + due diligences,

The Intangible assets are amortized between two and eight years. Due to the acquisitions in 2019, depreciation increased by TEUR 13.869 to TEUR 49.699 compared to the first quarter of 2019.

Interest income is impacted by a gain (kEUR 19.254) from the revaluation of financial liabilities. The revaluation is associated to a change of the effective interest rate of the Term Loan B, which resulted in a decrease of this liability (note: the changes to the Term Loan B were not deemed a substantive modification in accordance with IFRS.).

The hedge of the interim financing resulted in interest income of kEUR 2.096.

The result from ordinary business activities amounted to TEUR 34.810 and thus increased by kEUR 18.043.

Significant transactions with related parties

Related persons are the managing directors, their family members as well as the shareholder Braun Beteiligungs GmbH and its shareholders.

As at the reporting date, in addition to outstanding receivables from and payable to affiliated persons, at the prevailing market interest rates, there are no other significant transactions with related persons.

Distributions to shareholders

There were no distributions to the shareholders.

Seasonality

The business of CHEPLAPHARM is not subject to any significant seasonal influences.

Selected Notes to the Condensed Consolidated Income Statement [Hier eingeben] [Hier eingeben]

1. Revenue

01.01.2020- 01.01.2019-

31.03.2020 31.03.2019

kEUR kEUR

Revenue non-EU country 44.131 47.995

Revenue EU 114.403 53.098

Revenue Germany 15.631 6.131

Other revenue -188 -212

173.977 107.012

01.01.2020- 01.01.2019-

31.03.2020 31.03.2019 kEUR kEUR

Mental and Sleeping Disorders 38.696 14.895

Cardiology 30.909 39.143

Oncology 25.812 9.719

Gastroenterology 23.411 8.362

Adiposity 17.882 8.695

Infection Medicine 14.135 13.307

Haematology 7.812 4.046

Ophthalmology 5.278 5.449

Urology 3.729 527

Gynecology 2.353 0

Emergency Medicine 1.917 1.958

Other 2.033 910

[Hier eingeben] [Hier eingeben]

173.977 107.012

01.01.2020- 01.01.2019-

31.03.2020 31.03.2019

kEUR kEUR

Europa ex Germany 126.525 81.692

Asia and Oceania 24.123 10.202

Germany 15.627 5.152

Northern Americq 4.120 6.559

Latin America and Caribbean 2.360 1.394

Africa 1.222 1.011

173,977 107,012

2. Other Operating Income

The other operating income includes the following positions:

01.01.2020- 01.01.2019-

31.03.2020 31.03.2019

kEUR kEUR

Gain on disposal of intangible assets 6 0

Income from derecognized liabilities 146 0

Exchange gains 0 405

152 406

[Hier eingeben] [Hier eingeben]

3. Cost of Materials Cost of materials consists of the following items:

01.01.2020- 01.01.2019-

31.03.2020 31.03.2019 kEUR kEUR

Procurement of goods and contract manufacturing 15.495 21.121 Services provided by third parties 35.621 14.704 Freight charges 293 -290 Other 2.145 821

53.545 36.306

4. Staff Costs Staff costs are classified as follows:

01.01.2020- 01.01.2019-

31.03.2020 31.03.2019

kEUR kEUR

Wages and salaries 4605 3.429

Social security costs 773 578

Other staff costs 169 120

5.548 4.127

5. Amortization, Depreciation and Impairments

Amortization, depreciation and impairments consists of the following items:

01.01.2020- 01.01.2019-

31.03.2020 31.03.2019

kEUR kEUR

Amortization and impairments of intangible assets 49.459 35.682 [Hier eingeben] [Hier eingeben]

Depreciation of property, plant and equipment 240 169

49.699 35.851

6. Other Operating Expenses Other operating expenses relate to the following items:

01.01.2020- 01.01.2019-

31.03.2020 31.03.2019

kEUR kEUR

Distribution and delivery costs 7.162 3.963

Cost of drug safety, licenses, and quality assurance 8.029 4.481

Net exchange gain 2.696 0

Sundry 10.612 2.820

28.499 11.264

7. Income from Investments

The net income from securities in the reporting period relates to write-offs due to the general situation in markets around the world. In the comparison period the net income was related to write-ups of securities.

[Hier eingeben] [Hier eingeben]

8. Net Interest Expense Net interest expense consists of the following items:

01.01.2020- 01.01.2019-

31.03.2020 31.03.2019

kEUR kEUR

Interest income 21.540 0

Interest expenses

Interest paid on bank loans -15.821 -11.784

Interest paid on loans granted by related parties -221 -226

Loss on derivative financial instruments -415 -10.054

Tax interest . 4

-16.461 -22.064

3.733 -22.064

9. Income Tax Income taxes consist of the following items:

01.01.2020- 01.01.2019-

31.03.2020 31.03.2019

kEUR kEUR

Deferred taxes 8.763 -1.942

Corporate income tax current year 980 1.971

Municipal trade tax current year 1.532 2.290

Municipal trade tax prior years 37 0

Foreign income tax 5 0

11.317 2.319

[Hier eingeben] [Hier eingeben]

Greifswald, DD. Month 2020

CHEPLAPHARM Arzneimittel GmbH

Sebastian Braun Bianca Juha Edeltraud Lafer

Jens Rothstein