7 September 2020

VALUATIONLAB FINANCIAL ANALYSIS CASSIOPEA

FOCUS AREA: DIFFERENTIATED MEDICAL DERMATOLOGY DRUGS FOR TREATING VULGARIS, ALOPECIA, AND GENITAL WARTS KEY DATA SIX: MARKET CAPITALIZATION (CHF MN) 570 PRICE ON SEPTEMBER 04, 2020 53 ENTERPRISE VALUE (CHF MN) 561 RISK-ADJUSTED NPV PER SHARE (CHF)***** 91 NET CASH (30 JUNE 2020) (CHF MN) 8 UPSIDE/DOWNSIDE (%) 72% MONTHLY OPERATING EXPENSE (CHF MN) 1.3 RISK PROFILE SPECULATIVE CASH LIFE * INTO 2021 SUCCESS PROBABILITY LEAD R&D PROJECT 90% BREAK-EVEN (YEAR) 2022 EMPLOYEES 12 FOUNDED (YEAR) 2015 LISTED (YEAR) 2015

KEY PRODUCTS: STATUS MAJOR SHAREHOLDERS: (%) - WINLEVI (ACNE VULGARIS) APPROVED (US) - COSMO PHARMACEUTICALS N.V. 46.6 - BREEZULA (HAIR LOSS) PHASE IIB DR** COMPLETED - COSMO HOLDING SARL 7.5 - CB-06-01 (ACNE VULGARIS) POC*** COMPLETED - HERZ/LOGISTABLE GROUP 4.7 - CB-06-02 (GENITAL WARTS) POC*** COMPLETED - LLB SWISS INVESTMENT AG 3.8 - FREE FLOAT (EXCL. COSMO STAKES) 45.9 - AVERAGE DAILY VOLUME (30-DAY) 18'076

UPCOMING CATALYSTS: DATE ANALYST(S): BOB POOLER - M&A TRANSACTION OR FUND RAISE (E.G. NASDAQ) H2 2020 [email protected] - START PHASE III BREEZULA IN MEN (HAIR LOSS) H1 2021 +41 79 652 67 68 - PHASE II RESULTS BREEZULA IN WOMEN (HAIR LOSS) MID 2021 * INCLUDES EUR 6 MN UNDRAWN COSMO CREDIT FACILITY; ** DR = DOSE RANGING; *** POC = PROOF-OF-CONCEPT; **** BASED ON 11.7 MN FULLY DILUTED SHARES TO RAISE EUR ~45 MN FOR US COMMERCIALIZATION WINLEVI ESTIMATES AS OF 7 SEPTEMBER, 2020 SOURCE: VALUATIONLAB, CASSIOPEA On spot for US launch Winlevi first truly new acne drug approved in 40 years! Cassiopea is a specialty pharmaceutical company that develops dermatology prescription drugs for treating acne, alopecia (hair loss) and genital warts. Key products include: 1) Winlevi, a first-in-class topical receptor inhibitor approved in the US for acne vulgaris; 2) Breezula, a different topical formulation and 7.5x higher dosage strength of the active ingredient of Winlevi (clascoterone) that completed phase IIb trials in male alopecia; 3) CB-06-01, a topical antibiotic that completed phase IIa proof-of-concept (POC) trials in acne, and 4) CB-06-02, a low-toxicity immuno-modulator that completed POC trials in genital warts. Cassiopea plans to commercialize its key products in the US (preferably through a merger with a US specialist dermatology company that has a sales force and product in the market) and seek partners in other geographies. Net cash of EUR 8.5 mn (30 June 2020) and EUR 6 mn undrawn Cosmo credit line should extend cash life into early 2021. We conservatively assume Cassiopea to raise additional funds through a capital increase (e.g. NASDAQ listing) to commercialize Winlevi in the US and develop its other key products up to full development. We derive a sum-of-parts risk-adjusted (r)NPV of CHF 91 per share (conservatively assuming an ~8% dilution to raise EUR ~45 mn at the current share price). The risk profile is Speculative given the absence of revenues and the necessity to secure additional funding on a timely basis.

Key catalysts: • M&A transaction US derma player or capital increase (H2 2020): to fund the US commercialization of Winlevi and to fully develop the remaining pipeline projects. • Start phase III trial Breezula in male alopecia (H1 2021): this marks the second major indication of clascoterone moving into final phase III development. • Phase II results Breezula in female alopecia (mid 2021): positive POC results would almost double our peak sales potential for Breezula, now solely based on treating male hair loss. Additional phase III trials in women will be needed for approval.

Please see important research disclosures at the end of this document Page 1 of 45 VALUATIONLAB | [email protected] | Valuation Report | September 2020 7 September 2020

Recent Developments

Since our last Cassiopea Valuation Report in June 2020, Cassiopea has received its first ever approval for one of its dermatology products with the US approval of Winlevi for treating acne vulgaris at the end of August. This is a key catalyst for Cassiopea (and Cosmo) and marks the first approval of truly new acne treatment in nearly 40 years. Cassiopea preferably would merge or acquire a dermatology player in the US to launch Winlevi and its other pipeline projects in the future. Alternatively, the company could tap the financial markets to finance a US contract sales force to sell Winlevi. Thanks to the EUR 23.3 mn capital raise in June, and EUR 6 mn undrawn Cosmo credit line, the company has sufficient cash into early 2021 to secure the necessary funding at a significantly lower dilution than we previously anticipated. Our sum-of-parts risk-adjusted NPV for Cassiopea increases by 12% to CHF 91 per share, still providing considerable equity upside, however, at a substantial lower risk.

August 27 – Winlevi first truly new acne drug approved in the US in nearly 40 years The US approval of Winlevi is a key catalyst for Cassiopea (and Cosmo that has a 46.56% stake in Cassiopea) marking the first approval of a treatment with a new method of action for acne in nearly 40 years. Winlevi, is a novel topical anti-androgen originates from Cosmo.

Cassiopea plans to launch Winlevi in the US with a two-step approach: 1) Market Access launch (September 2020): the company will start a market access launch to timely secure pricing, reimbursement and formulary listing by the major healthcare providers in September 2020 2) Commercial Sales launch (March 2021): the commercial sales launch is expected to occur in March 2021 either by a commercialization partner or a paid-for contract sales organization.

Ideally, Cassiopea would like to acquire or merge with a specialist dermatology company with an established US sales infrastructure and dermatology product range to maximize the long-term value of Winlevi (and its other pipeline projects) in the lucrative US market. If unsuccessful, Cassiopea will establish its own US sales infrastructure though a contract sales organization of ~70 sales representatives. This is expected to be financed through the capital markets for instance by a US listing on NASDAQ.

July 29 – H1 2020 results in line; Breezula trial restarted after delay by Covid-19

H1 2020 results in a nutshell: H1 2020 H1 2019 Revenue: EUR 0 mn EUR 0 mn R&D: EUR -2.5 mn EUR -4.7 mn S, G&A: EUR -2.2 mn EUR -1.6 mn Operating result: EUR -4.7 mn EUR -6.3 mn Net result: EUR -5.3 mn EUR -6.5 mn Cash and cash equivalents: EUR 8.5 mn EUR 0.8 mn

Cassiopea reported H1 2020 results with no revenues and all costs in line leading to a net loss of EUR 5.3 mn. Cash increased to CHF 8.5 mn thanks to the EUR 23.3 mn capital increase in June, which now provides cash into 2021 sufficient to reach Cassiopea’s key

Please see important research disclosures at the end of this document Page 2 of 45 VALUATIONLAB | [email protected] | Valuation Report | September 2020 7 September 2020 inflection point, the US approval of Winlevi in acne at the end of August. The phase II trial of Breezula in women with alopecia (hair loss) re-started in June after a disruption caused by the Covid-19 pandemic. The phase III trial under SPA (Special Protocol Assessment) for Breezula in male alopecia was filed and the company expects to start the phase III trial in H1 2021.

June 23 – JAAD publication of Winlevi long-term safety trial “Study 27” in acne The positive safety data from the long-term extension trial “Study 27” of Winlevi in acne was published in the online issue of the Journal of the American Academy of Dermatology (JAAD), underling the excellent safety and tolerability of topical Winlevi in acne. The JAAD publication coincides with the acne awareness month in June and ensures a broad range of dermatology healthcare professionals globally have access to the positive safety data.

Please see important research disclosures at the end of this document Page 3 of 45 VALUATIONLAB | [email protected] | Valuation Report | September 2020 7 September 2020

Strategy & Cash Position

Italian specialty pharmaceutical company focused on medical dermatology drugs Cassiopea is an Italian specialty pharmaceutical company based in Lainate, Italy, focused on developing and commercializing innovative and differentiated medical dermatology prescription drugs for treating acne vulgaris, alopecia (hair loss) and genital wards. Cassiopea was established by Cosmo Pharmaceuticals (ticker: COPN) based on its demerged product portfolio of dermatology drugs, with the vision of building a leading pure- play, fully integrated dermatology company. Cassiopea was listed on the SIX Swiss Stock Exchange (ticker: SKIN) in July 2015. Cosmo retained a 45.4% stake in Cassiopea to benefit from the long-term upside potential of Cassiopea’s differentiated dermatology pipeline. This was increased to 46.56% after a EUR 23.3 mn capital increase in June 2020. Cassiopea has a lean organization of 12 employees who are managing the ongoing clinical trials and development programs. Cassiopea has additional access to an experienced and knowledgeable team in product development and manufacturing, under a Service Agreement with Cosmo, without the need to build an own expensive organization. In 2019, the company established the US subsidiary Cassiopea Inc. to prepare for the approval and commercialization of Winlevi. Ideally, Cassiopea would like to merge with or acquire a US specialist dermatology company with an established US sales infrastructure and dermatology offering to maximize the long-term value of Winlevi (and its other pipeline projects) in the lucrative US market. If unsuccessful, the company will establish its own US sales infrastructure by tapping the financial markets. Importantly, the expensive sales organization will not be recruited before US approval of Winlevi.

Key products target large market opportunities in acne, alopecia and genital warts Cassiopea has a diversified mid to late stage portfolio of four dermatology product candidates with novel mechanisms of action that are all new chemical entities (NCE’s) providing significant barriers to entry, including market exclusivity. Cassiopea’s products target sizeable market opportunities such as acne, alopecia and genital warts, affecting millions of people worldwide. Cassiopea’s key products include:

• Winlevi (clascoterone), a first-in-class topical inhibitor that penetrates the skin and helps prevent the cascade of events that lead to acne vulgaris. Winlevi successfully completed phase III development with very positive results reaching all primary and secondary endpoints, the strong base for US approval in August 2020. Winlevi will be launched in a two-step approach starting with a market access launch to timely secure pricing, reimbursement and formulary listing by the major healthcare providers in September 2020 followed by the commercial sales launch in March 2021. Winlevi has the potential to become the first topical anti-androgen on the market that treats acne with virtually no side effects. Oral anti- are available with proven , but use is limited by systemic side effects. We conservatively forecast EUR 400+ mn global peak sales with ~75% sales from the lucrative US market. • Breezula (clascoterone), a different formulation and 7.5x higher dosage strength of the same NCE as in Winlevi, for the treatment of androgenic alopecia (AGA), the most common type of hair loss. Breezula demonstrated statistically significant improvement in TAHC (Target Area Hair Count) and improvement for HGA (Hair Growth Assessment) after 6-months (interim) and 12-months treatment in a phase

Please see important research disclosures at the end of this document Page 4 of 45 VALUATIONLAB | [email protected] | Valuation Report | September 2020 7 September 2020 IIb dose ranging trial with excellent safety and tolerability. Phase III development in male alopecia is expected to start in H1 2021. Based on the positive phase IIb dose ranging trial results, the company started a phase IIb dose ranging trial in women in November 2019, a large untapped market opportunity where Merck & Co’s oral anti- androgen Propecia () cannot be used by women. Results in women are due by mid 2021. We conservatively forecast EUR 350+ mn peak sales in men alone. • CB-06-01, a topical antibiotic for the treatment of acne. CB-06-01 successfully completed POC and has shown very potent and selective activity in bacterial strains responsible for acne and that are resistant to some other antibiotics. Cassiopea expects to continue phase II clinical development in 2021 using an improved formulation that it is now developing. CB-06-01 is complementary to Winlevi treatment in acne. We forecast EUR 300 mn peak sales. • CB-06-02, a tellurium-based topical treatment for genital warts, demonstrated statistically significant successful clearance rates of externa genital warts in the per protocol patient group in a POC trial. The company plans to start a phase IIb dose ranging trial in 2021 on securing sufficient funds. We forecast EUR 100+ mn peak sales. CB-06-02 was included into our valuation based on the positive POC trial results in July 2018.

Large and attractive dermatology market that is longing for new treatment options According to VisionGain, the global medical dermatology market amounted to more than USD 22 bn in 2013, growing at a growth rate of around 7%.

Acne (USD 4.9 bn): Over the past couple of years, demand for acne treatments and medications surged at a remarkable pace. Persistence Market Research estimates that the global acne treatment market amounted to USD 4.9 bn in 2016 and is expected to reach USD 7.4 bn by the end of 2025 reflecting a CAGR of 4.6% over the forecast period (2017 – 2025). The inflammatory acne segment is the largest acne type segment in the global acne treatment market, which is estimated to amount to just over USD 3 bn in 2017 (~60% share of the total market) and more than USD 4.5 bn by 2025, expanding at a CAGR of 5% over the forecast period. Approximately 20% of the young population (aged below 13 years) suffers from moderate-to-severe acne issues. It is estimated that approximately 30-40 mn people suffer from acne in the US alone.

Alopecia (USD 2 bn): Statista estimates that the value of the hair loss treatment market worldwide amounted to USD 2 bn in 2010 and is expected to increase to around USD 2.8 bn by 2017. Global sales for alopecia treatments amounted to approximately USD 600 mn in 2013 according to EvaluatePharma. Most prescription drugs are no longer patent protected and have limited effectiveness or use is hampered by (systemic) side effects or cannot be used for women. In the US an estimated 35 mn men and 21 mn women experience hair loss.

Genital warts: Genital warts are among the most common sexually transmitted diseases. Human papillomavirus (HPV), the causative pathogen of genital warts, affects nearly 80 mn people in the US, and an estimated 14 mn new cases of the virus are reported each year, according to the US Centers for Disease Control and Prevention (CDC). Current treatment options for genital warts consist of ablative procedures that cut, burn or freeze the warts but do not address the underlying viral infection. Currently there are no approved oral or topical prescription drugs indicated for the treatment of genital warts with a direct anti-viral mechanism of action. Please see important research disclosures at the end of this document Page 5 of 45 VALUATIONLAB | [email protected] | Valuation Report | September 2020 7 September 2020 The overall lack of innovation in the research and development of new dermatology products resulted in a limited number of effective treatments in this area. For instance, the three mechanisms of action most commonly used to treat acne have been available for over 30 years. As a result, the few truly innovative therapies launched over the past few decades have resulted in significant sales. With relatively short clinical development timelines, development costs for dermatology drugs are relatively contained. The relatively low number of dermatologists (<14,000) in the US allow for a small and dedicated field force to commercialize and maximize the value of these drugs.

Strategy to become a fully integrated dermatology company Cassiopea’s goal is to become a fully integrated medical dermatology-focused specialty pharmaceutical company with novel, differentiated products for the treatment of skin diseases. The key components of Cassiopea’s strategy include:

• Launch Winlevi in a two-stepped approach to ensure a successful US launch To ensure a successful launch, Cassiopea will launch Winlevi in the US with a two- stepped approach that is planned to start with a Market Access launch in September 2020 to timely secure pricing, reimbursement and formulary listing by major healthcare providers followed by the Commercial Sales launch in March 2021. • Establish a US sales organization to market Winlevi and other pipeline projects Ideally, Cassiopea would like to merge with or acquire a US specialist dermatology company with an established US sales infrastructure and product offering to maximize the long-term value of Winlevi (and its other pipeline projects) in the lucrative US market. If unsuccessful, the company will establish its own US sales infrastructure by tapping the financial markets with for instance a US listing on NASDAQ to secure the necessary financing. Importantly, the expensive sales organization will not be recruited before US approval of Winlevi. Outside the US, the company will seek commercialization partners in return for upfront, regulatory and sales milestones and royalties on sales. Continue the development of the other mid stage product candidates Thanks to the EUR 23.3 mn capital increase in June 2020 and EUR 6 mn undrawn Cosmo credit line, Cassiopea has sufficient funds for continuing the phase IIb dose ranging trial of Breezula in women, prepare the phase III development of Breezula in male alopecia, and optimize an improved formulation of CB-06-01 for phase II development in acne. The funds to continue the company’s development plans in 2021 and beyond are expected to come from either the new US dermatology partner or the financial markets. We assume Cassiopea will out license the global rights of CB-06-02 on positive phase III trial results as obstetrician-gynecologists rather than dermatologists treat genital warts. • In-license and acquire new dermatology products Opportunistically Cassiopea could in-license clinical development stage products with demonstrable attractive profiles or even acquire in-market dermatology products to accelerate market entry or expand the portfolio of products marketed to dermatologists.

EUR 73.2 mn raised since inception Since inception, Cassiopea has raised EUR 73.2 mn. In June 2015, prior to the Cassiopea’s IPO (initial public offering), the company received a capital contribution of EUR 49.9 mn in cash from Cosmo and certain other shareholders. In July 2015, the shares of Cassiopea

Please see important research disclosures at the end of this document Page 6 of 45 VALUATIONLAB | [email protected] | Valuation Report | September 2020 7 September 2020 were successfully listed on the SIX Swiss Stock Exchange in a public offering with Cosmo retaining a 45.4% stake in Cassiopea. In June 2020, the company raised EUR 23.3 mn in a capital increase through a rights offering of 750,000 registered shares to existing shareholders at a subscription price of EUR 31 per share. The capital increase was needed to avoid negative equity, which is not allowed under Italian corporate law.

MONEY RAISED EUR MN PRE-IPO 49.9 IPO (INITIAL PUBLIC OFFERING) 0 PRIVATE PLACEMENTS 23.3 TOTAL RAISED 73.2 ESTIMATES AS OF 22 JUNE, 2020 SOURCE: VALUATIONLAB, CASSIOPEA

Our assumptions point to an additional funding need of approximately EUR 45 mn We believe the cash position of EUR 8.4 mn (30 June 2020) and the EUR 6 mn undrawn Cosmo credit line provides sufficient funds for Cassiopea’s clinical development plans into early 2021 to: 1) prepare for the US launch of Winlevi in acne; 2) prepare the phase III development of Breezula in male alopecia; 3) continue the phase IIb dose ranging trial of Breezula in female alopecia, 4) optimize the formulation and produce a new batch of API (active pharmaceutical ingredient) to be used as active substance for the new clinical batch of gel of CB-06-01 for treating acne. Beyond 2020, we calculate a net funding need of approximately EUR 45 mn until the company reaches profitability, which we expect in 2022. We expect an M&A transaction with a major US dermatology player or an US (e.g. NASDAQ) listing of Cassiopea to provide the additional funding to establish a US commercialization infrastructure for Winlevi and develop its other three key pipeline projects up to full development.

We assume Cassiopea will seek commercialization partners for Winlevi outside the US. Similar to Winlevi, the company plans to fully develop Breezula in alopecia and CB-06-01 in acne and commercialize these products in the US and out-license the ex-US rights. For CB- 06-02 we assume Cassiopea will out-license the global rights on completion of phase III development in genital warts to a (global) development and commercialization partner(s) in return for upfront, development and sales milestones and royalties on sales.

We conservatively assume Cassiopea to raise approximately EUR 45 mn through a capital increase in H2 2020 (e.g. US NASDAQ listing). The proceeds will be used to fund the US operations and fully develop Cassiopea’s other pipeline projects up to their next value inflection points. Based on the current share price, this would lead to an ~8% share dilution, which we conservatively account for in our per share forecasts.

Please see important research disclosures at the end of this document Page 7 of 45 VALUATIONLAB | [email protected] | Valuation Report | September 2020 7 September 2020 Life Cycle Positioning - Speculative We qualify the risk profile of Cassiopea as Speculative. Currently, the company has no product revenues and is expected to be loss making in the next few years. With limited cash life the company will need to timely conclude an M&A transaction with a US dermatology player or raise sufficient funds to build up an own specialist dermatology field force in the US, seek commercialization partners outside the US, and to develop its other key pipeline projects up to approval, before reaching profitability in 2022. (See “Important Research Disclosures” for our Risk Qualification).

LIFE CYCLE POSITIONING – SIX-LISTED BIOTECHNOLOGY COMPANIES

RESEARCH & DEVELOPMENT PHASE RETURN PHASE EXPIRY

SAFETY DOSE EFFICACY / APPROVAL

~ 100s BIO-SIMILARS ANIMALS ~10s ~ 100s – 1,000s PTS p<0.05 SALES CLINICAL

- GENERICS COSMO PRE PHASE I PHASE II PHASE III REGISTRATION BREAKEVEN 0 ADDEX MOLECULAR P. ~ 8-14 20 YEARS

CASSIOPEA BASILEA COSTS POLYPHOR SANTHERA

IDORSIA KUROS BIO.

OBSEVA NEWRON SUCCESS <5% ~10% 10% -45% 40% - 65% ~80% “STAR” “CASH COW” “MATURE” “DOG” ß RISK-ADJUSTED DISCOUNTED CASH FLOW à P/E >20x P/E ~10-15x P/E > 6-10x P/E ~ 15x

SOURCE: VALUATIONLAB

Please see important research disclosures at the end of this document Page 8 of 45 VALUATIONLAB | [email protected] | Valuation Report | September 2020 7 September 2020 Valuation Overview Sum-of-parts risk-adjusted NPV points to a fair value of CHF 91 per share We derive a sum-of-parts risk-adjusted (r)NPV of CHF 91 per share for Cassiopea, conservatively assuming an ~8% share dilution to raise EUR 45 mn, with cash of CHF 1 per share (30 June 2020) and overhead expenses of CHF 3 per share, assuming a WACC of 7% (reflecting the low Swiss interest environment). SUM OF PARTS PEAK SALES LAUNCH * UNADJUSTED SUCCESS RISK-ADJUSTED PERCENTAGE PRODUCT NAME INDICATION (EUR MN) YEAR NPV/SHARE * PROBABILITY NPV/SHARE* (CHF) OF TOTAL WINLEVI (TOPICAL ANTI-ANDROGEN) ACNE 424 2020 67 90% 60 64% BREEZULA (TOPICAL ANTI-ANDROGEN) ALOPECIA (HAIR LOSS, MEN) 373 2023 40 65% 26 28% CB-06-01 (TOPICAL ANTIBIOTIC) ACNE 308 >2025 28 20% 6 6% CB-06-02 GENITAL WARTS 116 >2025 8 20% 2 2% NET CASH POSITION (30 JUNE 2020) 8 1 1 1% TOTAL ASSETS 144 94 100% OVERHEAD EXPENSES -3 -3

NPV/SHARE (CHF) 141 91 SHARE PRICE ON SEPTEMBER 04, 2020 53 PERCENTAGE UPSIDE / (DOWNSIDE) 72% * PER SHARE DATA BASED ON 11.7 MN SHARES TO RAISE EUR ~45 MN TO FUND US SALES INFRASTRUCTURE AND LATE STAGE DEVELOPMENT PROGRAMS ESTIMATES AS OF 7 SEPTEMBER, 2020 SOURCE: VALUATIONLAB ESTIMATES Cassiopea’s key value drivers include:

Winlevi (acne) - rNPV of CHF 60 per share Following US approval in August 2020, Winlevi became the first-ever topical anti-androgen for treating acne, with good efficacy and an excellent safety and tolerability profile as seen in the positive phase III top line results. The US market access launch will start in September followed by the commercial sales launch in March 2021. We calculate a rNPV of CHF 60/share for Winlevi in acne with a conservative 90% success probability, the average of 100% (approved) in the US and 80% (filing) in the EU, with global peak sales conservatively amounting to EUR 424 mn.

Breezula (hair loss) - rNPV of CHF 26 per share Breezula is a different formulation and 7.5x higher dosage strength of the same NCE (clascoterone) as in Winlevi for the treatment of androgenic alopecia (AGA) the most common type of hair loss. Positive phase IIb dose ranging results were reported for Breezula in male alopecia. Based on these results, Cassiopea started a phase IIb dose ranging trial in women in November 2019 and plans to start phase III trials in men in H1 2021. We assume first launches for Breezula to occur in 2023 with peak sales of EUR 373 mn. We calculate a rNPV of CHF 26/share with a 65% (phase III) success probability with phase III trials expected to start in Q1 2021.

CB-06-01 (acne) - rNPV of CHF 6 per share CB-06-01 is a new topical antibiotic that is highly effective on bacteria implicated in acne, including strains resistant to other antibiotics. Successful POC was reported in 2016. Phase II clinical development will be continued with an improved formulation in 2021. We forecast first launches to occur in 2026 with peak sales amounting to EUR 308 mn. We calculate a rNPV of CHF 6/share with a 20% (POC) success probability.

CB-06-02 (genital warts) – risk-adjusted NPV of CHF 2 per share Based on the positive POC trial results reported in July 2018, Cassiopea plans to start a phase IIb dose ranging trial in 2021 on sufficient funding. We calculate a rNPV of CHF 2/share with a 20% (POC) success rate, EUR 116 mn peak sales and launch in >2025.

Please see important research disclosures at the end of this document Page 9 of 45 VALUATIONLAB | [email protected] | Valuation Report | September 2020 7 September 2020 Sensitivities that can influence our valuation

Development and regulatory risk: The key risk of Cassiopea’s investment case relates to the successful completion of the clinical development of the company’s four key pipeline projects. Our valuation of Cassiopea is currently based on Winlevi for acne with a conservative 90% success rate, the average of US 100% (approved) and EU 80% (filing), Breezula for alopecia with a 65% (phase III) success rate, and CB-06-01 for acne and CB- 06-02 for genital warts, both with a 20% (POC) success rate having completed phase IIa POC development.

Funding and partnering risk: With an estimated cash of EUR 8.4 mn (30 June 2020) and EUR 6 mn undrawn from the Cosmo credit line, Cassiopea does not have sufficient funds to fully develop its four key pipeline projects and build up an own US sales organization. The assumed US (NASDAQ) listing, following US approval of Winlevi in 2020, must provide sufficient funds for Cassiopea to fulfill its commercialization and development strategy. We assume proceeds of EUR 45 mn, leading to an ~8% share dilution based on the current share price. Preferably, Cassiopea would like to secure funding by merging with a dermatology player with an established US sales infrastructure and product offering.

Pricing and reimbursement: In the US pricing and reimbursement is typically quite straightforward. However, many acne and alopecia treatments are generically available or can be purchased over the counter in a drugstore. In the EU pricing and reimbursement occurs on a country-by-country basis following approval. This can lead to different pricing, reimbursement, and potential market delays than we forecast.

Partnering and commercialization: With no own sales force, Cassiopea may need to build up an own US dermatology sales force, which will depend on timely securing the necessary funds. Outside the US, the company will need commercialization partners and/or distributors. Upfront, development and sales milestones and royalties on sales could differ from our estimates with different timelines. Furthermore, the launched products must be successfully positioned and marketed against existing and upcoming treatments.

Patent and market exclusivity: Cassiopea built an extensive patent estate protecting its products against cheap generic competition, next to several market exclusivities. Medical use patents protect Winlevi and Breezula until 2022 (EU/ROW) and 2023 (US), while patents covering all crystalline forms provide protection until 2028 (EU/ROW) and 2030 (US). The use patent for CB-06-01 expires in 2023 (EU/ROW) and 2026 (US), while a US provisional application covering the topical composition in acne filed in 2015 extends protection potentially up to 2035. The use patent for CB-06-02 expires in 2025 (EU/ROW) and 2031 (US), while a US provisional application covering the topical composition filed in 2015 extends protection potentially up to 2035. In the EU all compounds will enjoy 10-years data exclusivity, and 5-years new chemical entity (NCE) exclusivity in the US.

External sourcing: Cassiopea does not have its own manufacturing facilities and is dependent on external sourcing to manufacture its products according to strict regulatory specifications. Cosmo with its state of the art GMP approved manufacturing facilities is expected to source product to Cassiopea. COGS could deviate from our projections.

Please see important research disclosures at the end of this document Page 10 of 45 VALUATIONLAB | [email protected] | Valuation Report | September 2020 7 September 2020 Catalysts

CATALYST TIMELINES IMPACT ON TIME LINE PRODUCT INDICATION MILESTONE COMMENT RNPV 2020 8 FEB FY 2019 RESULTS EXCELLENT COST CONTROL; CASH AT YEAR-END OF EUR 0.7 MN (EXCL. COSMO CREDIT LINE WHICH CAN BE INCREASED TO EUR 20 MN); FY 2020 OPEX GUIDED FOR EUR 15-17 MN; PLANNED CAPITAL INCREASE/FINANCING OF AROUND EUR 20 MN TO COMPLY TO ITALIAN LAW WHICH DOES NOT ALLOW NEGATIVE EQUITY; M&A DEAL WITH US DERMATOLOGY PLAYER SHORTLY AFTER US APPROVAL OF WINLEVI OR CAPITAL RAISE (E.G. NASDAQ-LISTING) TO FUND US SALES FORCE 29 APR AGM 2019 FINANCIAL STATEMENTS APPROVED; JAN DE VRIES (CHAIRMAN), OYVIND BJORDAL, PIERPAOLO GUZZO, MAURIZIO BALDASSARINI AND DIANA HARBORT (CEO) RE-ELECTED 28 MAY EGM PROPOSED CAPITAL INCREASE AND ESOP PROGRAM APPROVED 17 JUN CAPITAL INCREASE EUR 23.25 MN CAPITAL INCREASE COMPLETED; JUN BREEZULA ALOPECIA (HAIR LOSS) PHASE II TRIAL IN WOMEN RE-START ENROLMENT OF PHASE II BREEZULA TRIAL IN WOMEN WITH HAIR LOSS, WHICH WAS TEMPORARILY HALTED DUE TO THE COVID-19 PANDEMIC 23 JUN WINLEVI ACNE JAAD PUBLICATION POSITIVE RESULTS OF LONG-TERM SAFETY TRIAL OF WINLEVI IN ACNE ("STUDY 27") PUBLISHED IN JOURNAL OF THE AMERICAN ACADEMY OF DERMATOLOGY (JAAD) 29 JUL H1 2020 RESULTS ALL COSTS IN LINE; CASH (30 JUNE 2020) OF CHF 8.5 MN BOOSTED BY EUR 23.5 MN CAPITAL INCREASE IN JUNE, COSMO LOAN REPAID; ALL PROJECTS ON TRACK 27 AUG WINLEVI ACNE APPROVED IN THE US WINLEVI APPROVED IN THE US AS A FIRST-IN-CLASS TOPICAL ANDROGEN RECEPTOR INHIBITOR FOR THE TREATMENT ACNE VULGARIS IN PEOPLE 12 YEARS AND OLDER; TWO-STEPPED LAUNCH WILL BE PURSUED: 1) MARKET ACCESS LAUNCH IN SEPTEMBER FOLLOWED BY 2) COMMERCIAL LAUNCH IN MARCH 2021 THROUGH A PARTNER SALES FORCE (PREFERRED) OR CONTRACT SALES FORCE

SEP WINLEVI ACNE MARKET ACCESS LAUNCH LAUNCH US MARKET ACCESS PROGRAM TO SECURE PRICING, REIMBURSEMENT AND FORMULARY LISTING SEP BREEZULA ALOPECIA (HAIR LOSS) PHASE II TRIAL IN WOMEN COMPLETE ENROLMENT OF PHASE II TRIAL OF BREEZULA IN WOMEN WITH HAIR LOSS (DEPENDENT ON COVID-19 IMPACT) H2 M&A DEAL OR FUND RAISE M&A DEAL WITH A US SPECIALIST DERMATOLOGY COMPANY TO (E.G. NASDAQ-LISTING) COMMERCIALIZE WINLEVI OR A FUND RAISE (E.G. NASDAQ LISTING) FOR US LAUNCH WINLEVI WITH CONTRACT SALES FORCE NEXT TO FUNDING OTHER DEVELOPMENT PROGRAMS H2 BREEZULA ALOPECIA (HAIR LOSS) SPA PHASE III TRIAL IN MEN FINALIZE THE SPA (SPECIAL PROTOCOL ASSESSMENT) WITH THE FDA ON THE US PHASE III TRIAL PROGRAM FOR BREEZULA IN MEN

2021 H1 BREEZULA ALOPECIA (HAIR LOSS) START PHASE III START OF PIVOTAL PHASE III TRIAL IN MALE ALOPECIA MAR WINLEVI ACNE US LAUNCH US COMMERCIAL LAUNCH IN ACNE THROUGH A PARTNER SALES ORGANIZATION OR WITH A CONTRACT SALES ORGANIZATION OF ~75 SALES REPRESENTATIVES MID BREEZULA ALOPECIA (HAIR LOSS) PHASE II TRIAL IN WOMEN TOP LINE RESULTS OF PHASE IIB DOSE RANGING TRIAL IN 280 WOMEN WITH 6-MONTHS BREEZULA TREATMENT PERIOD IN GERMANY; DEPENDENT ON IMPACT COVID-19 PANDEMIC TBD WINLEVI ACNE EU FILING EU FILING OF WINLEVI IN ACNE TO BE DETERMINED; US LAUNCH HAS PRIORITY DUE TO LARGER MARKET POTENTIAL TBD CB-06-02 GENITAL WARTS (HPV) PHASE IIB TRIAL START PHASE IIB DOSE RANGING TRIAL AND FURTHER PRECLINICAL +CHF 1 WORK (E.G. TOXICOLOGY TRIALS) UPON SUFFICIENT FUNDING

TBD CB-06-01 ACNE PHASE IIB TRIAL START OF PHASE IIB DOSE RANGING TRIAL WITH NEW FORMULATION +CHF 4 (NEW IP EXPECTED) UPON SUFFICIENT FUNDING ESTIMATES AS OF 7 SEPTEMBER, 2020 SOURCE: VALUATIONLAB, CASSIOPEA

Key catalysts: • M&A transaction US derma player or capital increase (H2 2020): to fund the US commercialization of Winlevi and to fully develop the remaining pipeline projects. • Start phase III trial Breezula in male alopecia (H1 2021): this marks the second major indication of clascoterone moving into final phase III development. • Phase II results Breezula in female alopecia (mid 2021): positive POC results would almost double our peak sales potential for Breezula, now solely based on treating male hair loss. Additional phase III trials in women will be needed for approval.

Please see important research disclosures at the end of this document Page 11 of 45 VALUATIONLAB | [email protected] | Valuation Report | September 2020 7 September 2020 Technology & Pipeline

Attractive dermatology product pipeline stemming from Cosmo Pharmaceuticals Currently, Cassiopea is a clinical development company without a proprietary technology or discovery platform. The company is the result of the demerger of Cosmo Pharmaceutical’s dermatology product pipeline. Under a Service Agreement with Cosmo, Cosmo provides Cassiopea general administrative services, regulatory services and clinical lots manufacturing and lab testing services on demand equal to its own cost plus a 10% margin for a term of three years. Cosmo also provides the CSO and CFO services at no cost. As a result, Cassiopea does not need to build up an own expensive organization to develop its key clinical product up to approval.

Differentiated portfolio addressing acne, alopecia and genital warts PRODUCT PIPELINE LAUNCH PRODUCT DRUG CLASS INDICATION STATUS YEAR PARTNER PEAK SALES WINLEVI TOPICAL ANDROGEN ACNE VULGARIS APPROVED (US) 2021 US: CONTRACT SALES FORCE EUR 400+ MN RECEPTOR INHIBITOR EU/ROW: SEEK PARTNER(S) BREEZULA TOPICAL ANDROGEN ALOPECIA (HAIR LOSS) PHASE IIB DR 2023 US: CONTRACT SALES FORCE EUR 350+ MN RECEPTOR INHIBITOR COMPLETED EU/ROW: SEEK PARTNER(S) CB-06-01 TOPICAL ANTIBIOTIC ACNE VULGARIS PHASE IIA POC >2025 US: CONTRACT SALES FORCE EUR 300 MN COMPLETED EU/ROW: SEEK PARTNER(S) CB-06-02 INTEGRIN ACTIVATOR GENITAL WARTS (HPV) PHASE IIA POC >2025 US: SEEK PARTNER EUR 100+ MN COMPLETED EU/ROW: SEEK PARTNER(S) ESTIMATES AS OF 7 SEPTEMBER, 2020 SOURCE: VALUATIONLAB, CASSIOPEA

Winlevi (acne) and Breezula (alopecia) originate from Cosmo Cassiopea’s two most advanced clinical development projects, Winlevi for treating acne, and Breezula for treating alopecia, contain the same NCE (new chemical entity) and API (active pharmaceutical ingredient) clascoterone a novel anti-androgen that stems from Cosmo. In March 2012, Cosmo granted Medicis exclusive worldwide rights to Winlevi and Breezula. Following the acquisition of Medicis by Valeant Pharmaceuticals (now Bausch Health), Cosmo reacquired the global rights from Valeant in July 2014. Bausch Health has a right to first refusal in the event Cosmo (now Cassiopea) decides to license Winlevi or Breezula to a third party in the US or Canada.

CB-06-01 (acne) and CB-06-02 (genital warts) have been in-licensed by Cosmo In March 2014 Cosmo acquired the worldwide rights to all dermal applications of CB-06-02 (formerly AS 101), with the exception of alopecia, from the Israeli company BioMAS. Cosmo paid a license fee of USD 1 mn and will pay for all development costs. If CB-06-02 is approved, BioMAS is entitled to a high single-digit royalty on net sales when marketed directly by Cosmo (now Cassiopea). If sublicensed, BioMAS is entitled to a double-digit royalty out of the sub-license revenues. The worldwide rights to CB-06-01 (formerly NAI- acne) were acquired by Cosmo from the Italian company Naicons in February 2015. Cosmo paid a fee of EUR 150,000 and agreed to pay milestones in an aggregate amount in the single-digit Euro millions and will also pay a single-digit royalty on sales.

Ideally positioned to capitalize on new single-product fixed-combinations Cassiopea is ideally positioned to capitalize on next generation single-product fixed- combinations with its attractive product pipeline consisting of three novel NCE’s. Almost all of the recent market entries have been single-product fixed-combinations, such as Galderma’s Epiduo (adapalene and benzoyl peroxide combination) for treating acne with Please see important research disclosures at the end of this document Page 12 of 45 VALUATIONLAB | [email protected] | Valuation Report | September 2020 7 September 2020 sales of USD ~360 mn in 2014. For instance, Winlevi could be combined with Cassiopea’s own novel topical antibiotic CB-06-01, or with generic benzoyl peroxide, erythromycin or clindamycin. Such a next generation single-product fixed-combination has possible benefits in terms of efficacy, patient convenience and compliance, and pricing. Moreover, next generation combination products have the potential to extend the life cycle of Cassiopea’s NCE’s substantially beyond our current patent timelines with considerable upside to the company’s long-term potential. Additionally, Cassiopea could benefit from a line extension of Winlevi at a higher dosage strength formulation given the excellent safety profile and tolerability.

In the following sections we will provide an in-depth analysis and forecasts for Cassiopea’s key drivers that contribute to our valuation:

1) Winlevi (acne) approved in the US with peak sales of EUR 400+ mn (see page 14) 2) CB-06-01 (acne) completed phase IIa POC with peak sales of EUR 300 mn (see page 26) 3) Breezula (hair loss) in phase IIb (dose-ranging) with peak sales of EUR 350+ mn (see page 32)

Please see important research disclosures at the end of this document Page 13 of 45 VALUATIONLAB | [email protected] | Valuation Report | September 2020 7 September 2020 Forecasts & Sensitivity Analysis Winlevi (acne)

Product Analysis Winlevi peak sales of EUR 400+ mn - Risk-adjusted NPV of CHF 60 per share We forecast global peak sales of EUR 424 mn for Winlevi in acne assuming first market launches in March 2021, patent protection until 2030 (US) and 10 year data exclusivity until 2031 (EU/ROW), an annual treatment cost of between EUR 500 (US) and USD 250 (EU/ROW), and a market penetration in the target group peaking at ~25% in the US and ~10% in the EU/ROW. The US accounts for ~75% of global peak sales. Our risk-adjusted NPV amounts to CHF 705 mn, or CHF 60 per share, conservatively assuming commercialization in the US through a dermatology contract sales force incurring M&S costs (30%) and COGS (5%), while partnering outside the US receiving a 25% net royalty on EU/ROW sales with cumulative upfront and sales milestones of EUR 65 mn, a conservative 90% success probability, the average of US 100% (approved) and EU/ROW 80% (filing), and a WACC of 7% (for details see page 24).

First novel acne treatment to be approved in decades Winlevi is Cassiopea’s most advanced product with the potential to become the first-ever topical anti-androgen to be approved for acne based on a new mechanism of action (cortexolone-17) since almost forty years. Winlevi was approved for treating acne in the US in August 2020. The approval is based on the two positive pivotal phase III trials “Study 25” and “Study 26” and the long-term open-label phase III safety trial “Study 27”, where Winlevi demonstrated highly statistically significant improvements for all primary clinical endpoints including IGA (Investigator Global Assessment) score, non-inflammatory lesion counts and inflammatory lesion counts compared to placebo with a favorable safety profile. Cassiopea will launch Winlevi in the US in a two-step approach starting with a market access launch to timely secure pricing, reimbursement and formulary listing by major healthcare providers in September 2020 followed by the commercial sales launch in March 2021. Ideally, the company plans to either merge with or acquire a dermatology player with an established US sales infrastructure and product offering to sell Winlevi and its other pipeline projects or alternatively tap the financial markets to finance a US dermatology contract sales force for Winlevi.

USD 4.9 bn acne market limited to reformulations or combinations of old therapies Current acne treatments are mostly limited to reformulations or single-product fixed- combinations of NCE’s (new chemical entities) of which the last have been discovered in the mid 1990’s when the topical retinoids Differin (adapalene) and Tazorac (tazarotene) were approved. Nevertheless, Winlevi targets a USD 4.9 bn acne market opportunity, where branded prescription acne products average annual sales range between USD 250-400 mn. Major topical prescription acne drugs include Galderma’s Epiduo (adapalene & benzoyl peroxide combo drug) and Allergan’s Aczone (dapsone). Winlevi could become the first and only approved topical anti-androgen for acne based on the very positive phase III top line trial results announced in July 2018. However, without the systemic side effects that limits the use of existing oral alternatives and should be expansive to the existing acne market. Winlevi can also be used in combination with other acne treatments, including Cassiopea’s own novel antibiotic CB-06-01 in phase II development for acne. Moreover, the company could potentially develop a higher strength Winlevi formulation given the excellent safety Please see important research disclosures at the end of this document Page 14 of 45 VALUATIONLAB | [email protected] | Valuation Report | September 2020 7 September 2020 and tolerability. Development costs are relatively contained as dermatology drugs have relatively short clinical development timelines. Moreover, the US acne market is served by a relatively small number of dermatologists that allow for a small and dedicated sales force to commercialize Winlevi. The significant commercial potential of Winlevi could provide the basis for a highly profitable US dermatology franchise, next to significant upfront and commercial milestones and royalties on sales outside the US.

Aim to be first effective & safe anti-androgen for acne without systemic side effects Winlevi is a topical anti-androgen for the treatment of acne containing the novel NCE clascoterone (cortexolone-17α-proprionate), with strong local anti-androgen activity, discovered in Cosmo’s labs and fully developed in-house. Winlevi aims to be the first effective and safe topical anti-androgen without systemic side effects. Increased androgen activity by hormones such as and its derivative (DHT) lead to overproduction of oily sebum by the sebaceous glands, the origin of acne. Oral anti- androgens such as are available with proven efficacy, but use is limited by systemic side effects such as dizziness, headaches, diarrhea, and increased body hair growth, among others. Winlevi is a topically delivered small molecule that penetrates the skin to reach the androgen receptors of the with strong local anti-androgen activity. Winlevi acts on the overproduction of sebum that is at the top of the cascade of physiological events that lead to acne formation. It blocks the androgen hormones from the androgen receptors located at the sebaceous gland and hair follicle. This reduces the creation of the oily sebum that clogs the hair follicle with dead skin cells and the formation of comedones (blackheads and whiteheads), pimples, and deeper lumps (cysts or nodules) that occur on the face, neck, chest, back shoulders and upper arms. Consequently, the hair follicle is not clogged, preventing colonization and bacterial infection by P. acnes and subsequent inflammation. Once in the bloodstream, Winlevi metabolizes rapidly to cortexolone, a produced naturally by the body with negligible systemic anti- androgen activity and a known safety profile. Moreover, men and women can use Winlevi, which is not the case with other anti-androgen therapies.

Clinically superior and better tolerated than topical Retin-A (tretinion) Winlevi has shown statistically significant efficacy and an excellent safety and tolerability profile in acne during phase I/II development. The drug has completed four phase I safety trials in a total of 92 subjects. Three phase II trials have been performed in 477 patients with facial acne. The trials point to an excellent safety and tolerability profile and clinical superiority over topical retinoid Retin-A (). The pivotal phase III development program for Winlevi in acne was based on these outcomes and approved by the FDA under special protocol assessment (SPA) in July 2015. Enrollment in the US and EU was completed in February 2018 with positive top line results announced in July 2018 (“Study 25” and “Study 26”). In March 2019, phase III open label safety trial data confirmed the safety and tolerability of Winlevi in acne up to one year (“Study 27”).

PHASE I - excellent side effect profile and low plasma levels The four phase I safety trials in 84 healthy volunteers and 8 patients with acne demonstrated that Winlevi was well tolerated, showed no measurable serious side effects, permeated the skin, and was quantifiable in plasma at very low plasma levels (<1%) and undectable in plasma after 24-35 hours.

Please see important research disclosures at the end of this document Page 15 of 45 VALUATIONLAB | [email protected] | Valuation Report | September 2020 7 September 2020 PHASE II - clinical superiority and better tolerability than topical Retin-A Three phase II trials were completed, including two in the US and one in the EU, with a total of 477 patients with acne:

1. Phase IIa proof-of-concept (POC) trial: 72 adult patients with facial acne vulgaris were compared to Winlevi 1% , Retin-A 0.05% cream (tretinion) as active control, and placebo cream, and were treated for 8 weeks. Winlevi was statistically superior to placebo cream in all the endpoints dealing with acne lesion counts and ASI (Acne Severity Index) and numerically superior to Retin-A cream (see table below). WINLEVI PHASE IIA POC RESULTS

PLACEBO RETIN-A WINLEVI P-VALUE PARAMETER CREAM 0.05% CREAM 1% CREAM VS. PLACEBO (N=14) (N=30) (N=28) TOTAL LESION COUNT (TLC) - % REDUCTION VS. BASELINE AT WEEK 8 37.1 52.5 65.7 0.0017 - MEDIAN TIME (DAYS) TO REACH IMPROVEMENT 50% 58 57 43 0.0125 INFLAMMATORY LESION COUNT (ILC) - % REDUCTION VS. BASELINE AT WEEK 8 38.9 50.7 67.2 0.0134 - MEDIAN TIME (DAYS) TO REACH IMPROVEMENT 50% 58 44 36 0.0217 ACNE SEVERITY INDEX (ASI) - % REDUCTION VS. BASELINE AT WEEK 8 39.5 53 68.3 0.009 - MEDIAN TIME (DAYS) TO REACH IMPROVEMENT 50% 57 44 42 0.0134 INVESTIGATOR GLOBAL ASSESSMENT (IGA) - % OF SUCCESS * AT WEEK 8 7.1 11.5 22.2

* SUCCESS = PROPORTION OF SUBJECTS WITH IGA SCORE REDUCTIONS OF 2 POINTS WITH A FINAL VALUE NO MORE THAN 1 AT WEEK 8 SOURCE: VALUATIONLAB, CASSIOPEA 2. Phase IIb (dose ranging) trial: double-blind placebo-controlled trial where 363 patients with acne vulgaris were randomized to Winlevi cream 0.1% BID (twice daily); 0.5% BID; 1% BID; and 1% QD (once daily) versus placebo cream, with approximately 90 subjects per cohort over a 12-weeks treatment period. WINLEVI PHASE IIB DOSE-RANGING RESULTS ENDPOINTS ITT POPULATION WINLEVI BID 1.0% PLACEBO P-VALUE PRIMARY ENDPOINTS: INVESTIGATOR GLOBAL ASSESSMENT IMPROVEMENT 2-POINT IMPROVEMENT 17.1% 6.7% 0.0321 TOTAL LESION COUNT REDUCTION MEAN -35.7% -13.1% 0.0173 SECONDARY ENDPOINTS TOTAL INFLAMMATORY LESION COUNT REDUCTION MEAN -37.2% -27.0% 0.0384 TOTAL NON-INFLAMMATORY LESION COUNT REDUCTION MEAN -32.9% -16.1% 0.0178 SOURCE: VALUATIONLAB, CASSIOPEA In the ITT (intent-to-treat) population, Winlevi proved to be superior to placebo. There was a statistically significant difference in absolute change versus baseline of total lesion counts, inflammatory lesion counts, and non-inflammatory lesion counts among the treatment groups. The Winlevi 1% BID (twice daily) cohort had a statistically significant decrease (reflected by a p-value below 0.05) compared to placebo in all the lesions counts, including total, inflammatory and non-inflammatory lesions (see table above). Furthermore, Winlevi 1% BID (twice daily) had a greater proportion of subjects than placebo with at least a 2-points improvement (success) in the IGA (Investigator Global Assessment) score, that resulted in a statistically significant odds ratio comparison (2.89), the standard way to compare binary outcomes or treatment success.

Please see important research disclosures at the end of this document Page 16 of 45 VALUATIONLAB | [email protected] | Valuation Report | September 2020 7 September 2020 3. HPA/PK (hypothalamic-pituitary-adrenal/pharmacokinetic) trial: open-label trial evaluating adrenal suppression (HPA) and (PK) evaluation over two weeks treatment with Winlevi at maximum use dosages in 22 adolescents (age 12-18 years) and 20 adults (age > 18 years) with facial acne vulgaris. Patients younger than 18 years of age applied twice daily for two weeks 4 grams of Winlevi 1% cream per day, while the adult patients applied twice daily for two weeks 6 grams of Winlevi 1% cream per day. LSR (local skin reactions) similar to placebo

Source: valuationLAB, Cassiopea No clinically relevant safety issues were noted with both of the tested concentrations of Winlevi. Relative to baseline, no clinically relevant signs of the typical LSR’s (local skin reactions) generally associated with corticosteroid use were noted. In the HPA/PK trial only 3 out of 42 subjects, 1 adult (5%) and 2 adolescents (9.1%), demonstrated a slight abnormality in HPA axis response with modest post-stimulation serum cortisol levels. These abnormalities returned to normal limits within the first re-test 4 weeks after treatment.

Excellent safety and tolerability profile triggered exceptional safety waiver by FDA At the End-of-Phase II meeting in January 2015, the FDA granted Cassiopea a waiver for the typically mandatory systemic 2-years carcinogenicity trial. This was based on the positive safety data seen in the phase I and II trials, where even high application levels of Winlevi 1% cream merely resulted in low levels of systemic exposure, which returned to normal limits when discontinued. Cassiopea conducted a pediatric HPA/PK trial to evaluate safety in patients with acne aged 9 up to 12 years to align the safety evaluation with the phase III trial population, which starts at acne patients 9 of age and older.

US and EU pivotal phase III program under SPA enrolled >1,400 patients in 3 trials In July 2015, Cassiopea gained SPA (Special Protocol Assessment) for the phase III trial protocols for Winlevi in acne. Filing under SPA enables the FDA to provide input into the phase III study design and protocols and provides more visibility on the regulatory process because the scientific and regulatory requirements have already been agreed upon. This significantly reduces the regulatory risk.

PHASE III – Trial design and clinical endpoints replicate phase IIb dose ranging trial The phase III program consists of three trials, including two pivotal phase III trials, one in the US (“Study 25”) and one in the EU (“Study 26”), and one open label long-term safety trial (“Study 27”) where patients who have participated in the phase III trials are rolled over to evaluate long-term safety. The FDA requires at least 1,000 patients treated for safety evaluation. Please see important research disclosures at the end of this document Page 17 of 45 VALUATIONLAB | [email protected] | Valuation Report | September 2020 7 September 2020 Each pivotal phase III trial is a multicenter, double blind, placebo-controlled trial evaluating ~700 patients from 9 years of age and older with moderate to severe facial acne vulgaris (IGA grades 3 and 4) to be randomized to Winlevi 1% cream applied twice daily or placebo cream, for a treatment duration of 12 weeks. Therapeutics Inc. was selected as the CRO provider in the US and Innopharma S.r.l. for the EU.

Primary endpoints include: • Success rate in IGA score: proportion of subjects in each treatment group achieving success defined as clear (score 0) or almost clear (score 1) and at least a two-point reduction in IGA score at week 12 compared to baseline. • Change from baseline in non-inflammatory lesion counts: absolute change from baseline in non-inflammatory lesion counts in each treatment group at week 12. • Change from baseline in inflammatory lesion counts: absolute change from baseline in inflammatory lesion counts in each treatment group at week 12.

Secondary endpoints include: • Change from baseline in total lesion counts: absolute change from baseline in total lesion counts for each treatment group at week 12. • Percentage change from baseline in total lesion counts: percent change from baseline in total lesion counts for each treatment group at week 12. • Percentage change from baseline in non-inflammatory lesion counts: percent change from baseline in non-inflammatory lesion counts for each treatment group at week 12. • Percentage change from baseline in inflammatory lesion counts: percent change from baseline in inflammatory lesion counts for each treatment group at week 12.

Winlevi achieved all primary and secondary endpoints in both phase III acne trials In July 2018, Cassiopea announced positive phase III top line results for Winlevi in acne. As can be seen in the tables below, both pivotal phase III trials, the US “Study 25” and EU “Study 26”, were “on spot” (pun intended) with highly statistically significant results for Winlevi compared to placebo across all three primary endpoints as well as secondary endpoints, indicating a strong treatment effect. Importantly, no treatment-related serious side effects with Winlevi were seen in the phase III trials underlining the very clean safety profile seen in previous clinical trials.

All primary endpoints met with high statistical significance…. STUDY 25 (US PHASE III TRIAL; N=708) PRIMARY ENDPOINTS (AT WEEK 12) INTENT-TO-TREAT (ITT) POPULATION (N=708) PER PROTOCOL (PP) POPULATION (N=531) WINLEVI PLACEBO IMPROVEMENT WINLEVI PLACEBO IMPROVEMENT (2X DAILY) (2X DAILY) OVER PLACEBO P-VALUE (2X DAILY) (2X DAILY) OVER PLACEBO P-VALUE 1) SUCCESS RATE IN IGA* SCORE 16.1% 7.0% 130% 0.0008 20.4% 7.3% 179% <0.0001 (SUCCESS = CLEAR (SCORE O) OR ALMOST CLEAR (SCORE 1); AT LEAST TWO-POINT REDUCTION IGA SCORE)

2) CHANGE FROM BASELINE IN NON-INFLAMMATORY LESION COUNTS -19.4 -13.1 48% 0.0016 -20.0 -11.5 74% 0.0001 (ABSOLUTE CHANGE FROM BASELINE IN EACH TREATMENT GROUP) 3) CHANGE FROM BASELINE IN INFLAMMATORY LESION COUNTS -19.4 -15.5 25% 0.0029 -20.7 -16.1 29% 0.0005 (ABSOLUTE CHANGE FROM BASELINE IN EACH TREATMENT GROUP) * IGA = INVESTIGATOR ASSESSMENT SCORE SOURCE: CASSIOPEA, VALUATIONLAB As can be seen in the table above, “Study 25” demonstrated statistically significant higher improvements over placebo across all three co-primary endpoints in the ITT population (all patients who were enrolled in the trial) as well as the PP population (those patients who fully complied with the trial protocol).

Please see important research disclosures at the end of this document Page 18 of 45 VALUATIONLAB | [email protected] | Valuation Report | September 2020 7 September 2020

STUDY 26 (EU PHASE III TRIAL; N=732) PRIMARY ENDPOINTS (AT WEEK 12) INTENT-TO-TREAT (ITT) POPULATION (N=732) PER PROTOCOL (PP) POPULATION (N=560) WINLEVI PLACEBO IMPROVEMENT WINLEVI PLACEBO IMPROVEMENT (2X DAILY) (2X DAILY) OVER PLACEBO P-VALUE (2X DAILY) (2X DAILY) OVER PLACEBO P-VALUE 1) SUCCESS RATE IN IGA* SCORE 18.7% 4.7% 298% <0.0001 22.2% 5.5% 304% <0.0001 (SUCCESS = CLEAR (SCORE O) OR ALMOST CLEAR (SCORE 1); AT LEAST TWO-POINT REDUCTION IGA SCORE)

2) CHANGE FROM BASELINE IN NON-INFLAMMATORY LESION COUNTS -19.4 -10.9 78% <0.0001 -21.7 -11.6 87% <0.0001 (ABSOLUTE CHANGE FROM BASELINE IN EACH TREATMENT GROUP) 3) CHANGE FROM BASELINE IN INFLAMMATORY LESION COUNTS -20.0 -12.6 59% <0.0001 -21.5 -13.4 60% <0.0001 (ABSOLUTE CHANGE FROM BASELINE IN EACH TREATMENT GROUP) * IGA = INVESTIGATOR ASSESSMENT SCORE SOURCE: CASSIOPEA, VALUATIONLAB A similar, albeit more pronounced effect was seen in “Study 26”, where the placebo rates were generally lower than in “Study 25”.

…as well as all secondary endpoints in both phase III trials! STUDY 25 (US PHASE III TRIAL; N=708) SECONDARY ENDPOINTS (AT WEEK 12) INTENT-TO-TREAT (ITT) POPULATION (N=708) WINLEVI PLACEBO IMPROVEMENT (2X DAILY) (2X DAILY) OVER PLACEBO P-VALUE ABSOLUTE REDUCTION OF TOTAL LESION COUNTS -39.2 -28.9 36% 0.0002 PERCENTAGE REDUCTION OF TOTAL LESIONS COUNTS -37.1% -28.5% 30% 0.0016 PERCENTAGE REDUCTION OF NON-INFLAMMATORY LESION COUNTS -30.7% -21.9% 40% 0.0141 PERCENTAGE REDUCTION OF INFLAMMATORY LESION COUNTS -44.8% -36.6% 22% 0.0070 SOURCE: CASSIOPEA, VALUATIONLAB STUDY 26 (EU PHASE III TRIAL; N=732) SECONDARY ENDPOINTS (AT WEEK 12) INTENT-TO-TREAT (ITT) POPULATION (N=732) WINLEVI PLACEBO IMPROVEMENT (2X DAILY) (2X DAILY) OVER PLACEBO P-VALUE ABSOLUTE REDUCTION OF TOTAL LESION COUNTS -40.3 -23.7 70% <0.0001 PERCENTAGE REDUCTION OF TOTAL LESIONS COUNTS -37.7% -22.2% 70% <0.0001 PERCENTAGE REDUCTION OF NON-INFLAMMATORY LESION COUNTS -29.3% -15.8% 85% <0.0001 PERCENTAGE REDUCTION OF INFLAMMATORY LESION COUNTS -47.0% -29.8% 58% <0.0001 SOURCE: CASSIOPEA, VALUATIONLAB

Winlevi was safe and well tolerated with side effects similar to placebo In “Study 25”, the percentage of TEAE (Treatment-Emergent Adverse Effects) for the Winlevi group amounted to 11.3% (40 subjects with 56 TEAE) versus 11.5% (41 subjects with 52 TEAE) for placebo. The percentage of severe, moderate and mild TEAE for the Winlevi group was 0% (4% placebo), 21% (35% placebo), and 79% (62% placebo), respectively, with only one SAE (Serious Adverse Event) in the placebo group. Four subjects on Winlevi had 5 related AEs all (of them mild), compared to 9 with 11 for placebo; 2 of them, each with 1 AE continued treatment (application site pain, application site dryness), while 2 of them with 3 AEs withdrew from Winlevi treatment (application site hypersensitivity, oropharyngeal pain).

A similar safety and tolerability pattern were seen in “Study 26”. The percentage of TEAE for the Winlevi group amounted to 11.4% (42 subjects with 59 TEAE) versus 13.8% (50 subjects with 87 TEAE) for placebo. The percentage of severe, moderate and mild TEAE for the Winlevi group was 0% (1% placebo), 22% (24% placebo), and 78% (75% placebo), respectively, with only one SAE in the placebo group. Eight subjects on Winlevi had 9 related AEs all of them mild, compared to 13 with 15 for placebo; 7 of them were mild and 2 moderate (acne, peritonsillar abscess): 6 of them with 7 AEs (1 subject with 2 AEs) continued Winlevi treatment (headache, eye irritation, application site hypertrichosis, moderate acne, application site dryness + erythema (same subject), moderate peritonsillar

Please see important research disclosures at the end of this document Page 19 of 45 VALUATIONLAB | [email protected] | Valuation Report | September 2020 7 September 2020 abscess). Two of them with 2 AEs withdrew from Winlevi treatment (contact dermatitis, hair color change).

Open label long-term “Study 27” phase III safety trial confirms excellent tolerability In March 2019, positive results of from “Study 27”, the long-term open label phase III trial of Winlevi in acne were announced, which confirmed that the drug is well tolerated with an acceptable safety profile without systemic side effects. The safety data completes the final clinical data set necessary for inclusion in the NDA (new drug application) filing for US approval. In June 2020, coinciding with acne awareness month, the renowned Journal of the American Academy of Dermatology (JAAD) published the results of “Study 27” in its online issue underlining the excellent long-term safety of Winlevi, thereby ensuring a broad range of dermatology healthcare professionals globally have access to these important safety data.

The open label safety trial enrolled 609 patients who had completed 12 weeks treatment of Winlevi or placebo in both positive pivotal phase III trials “Study 25” and “Study 26”. Patients continued treatment for another 9 months of which 416 (safety population) received Winlevi for an overall period of at least 26 weeks and 123 subjects received Winlevi treatment for a total of 52 weeks.

• Key safety findings include: 18.1% reported TEAEs (treatment-emergent adverse events), where common cold (2.6%) and upper respiratory tract infection (1.3%) where most common, while other TEAEs had an incidence below 1%. No serious drug-related serious events occurred. • Continued efficacy was reported in the open label trial with the proportion of patients achieving treatment success defined as IGA (investigator global assessment) with at least a 2-step improvement resulting in 0 (clear) or 1 (almost clear) at week 52 was 56% and 62%, and 40% and 49% at week 40 for face and trunk, respectively.

Winlevi approved in the US in August 2020 with sales launch to occur in March 2021 In August 2020, Winlevi was approved as a first-in-class topical androgen receptor inhibitor for the treatment of acne vulgaris in people 12 years and older in the US based on the very positive two pivotal phase III trials, both meeting all three co-primary endpoints as set out in the SPA and the open label long-term safety trial “Study 27”. The US approval marks the first ever approval for Cassiopea and the first approval of a treatment with a new method of action (MOA) in acne in nearly 40 years. Winlevi will be launched in a two-step approach. In September 2020 the company will start with the market access launch to timely secure pricing, reimbursement and formulary listing by major healthcare providers, followed by a commercial sales launch in March 2021.

M&A with US derma player or hire contract sales force, seek partners outside the US To maximize the value of Winlevi and its other dermatology products, Cassiopea established a US subsidiary Cassiopea Inc. in 2019 to prepare for the commercialization of Winlevi in the lucrative US market. The team consists of a small team of executives with decades of dermatology experience. An extensive Medical Affairs program is rapidly increasing awareness of Winlevi’s new MOA and positive clinical data in the dermatology market. Cassiopea’s strategy is to balance investment pre and post US Winlevi approval to minimize risk, while being fully prepared to substantially scale up its sales infrastructure upon approval. The company is currently exploring M&A options with strong players in the US dermatology market to optimize commercialization and profitability before building an own Please see important research disclosures at the end of this document Page 20 of 45 VALUATIONLAB | [email protected] | Valuation Report | September 2020 7 September 2020 US specialist dermatology sales force. Cassiopea has identified areas of external or contract support instead of building the sales force internally. We conservatively assume Cassiopea will establish an own US dermatology sales force, funded by a capital increase in H2 2020, and seek partners outside the US in return for milestone payments and sales royalties.

Extensive market research conducted to successfully launch Winlevi in the US In 2019, Cassiopea conducted extensive market research based on Winlevi’s late stage product profile to successfully position and launch its acne therapy in the US.

Cassiopea’s US commercial approach is based on three pillars:

1. Clear positioning & differentiation: • Educate on androgen receptor inhibition in acne • Prepare for launch excellence 2. Targeted sales & marketing investment: • 2,600 primary targets (~28% of the acne market with good access coverage) • 5,600 secondary targets (~8% physician universe but 31% of acne market) 3. Achieve broad access coverage: • Develop value proposition around first-in-class mechanism of action (MOA) • Price for access • Maintain gross to net metrics

Winlevi clearly positioned & differentiated with 90% of physicians likely to prescribe The market research confirmed Winlevi can be positioned as a foundation for acne treatment. Winlevi has a clear differentiation as a first-in-class topical anti-androgen that targets the origin of acne. Of the 50 US physicians questioned in the IQVIA Primary Market Segmentation Research conducted in July to September 2019, almost all physicians agreed that there is a need for a topical treatment to target acne triggered by hormones, in particular if it can work for both male and female patients. Overall, physicians reported a high preference share driven primarily by Winlevi’s unique new mechanism of action (MOA). An overwhelming 90% of healthcare providers said they would be extremely likely to prescribe Winlevi for acne.

Targeted physician approach accounting for ~60% of acne prescriptions Based on the same IQVIA Primary Market Segmentation Research, Cassiopea identified primary and secondary target physicians to maximize and enhance its planned marketing and sales efforts upon US approval of Winlevi. The primary target is the so-called “Aggressive Treater”, approximately 2,600 physicians who are driven by achieving quick results that can be measured objectively and by selecting prescription treatments that address the patients’ root cause of acne. These innovators see more patients with high access plans and account for 28% of acne prescriptions. The secondary targets consist of 3,000 “Benefit/Safety-driven” and 2,600 “Tolerability-driven” early adopter physicians. The “Benefit/Safety-driven” physicians are motivated by having the “right” efficacy/safety risk tradeoff for different patients and see more patients with moderate access plans accounting for 16% of acne prescriptions. The top priority for “Tolerability-driven” physicians is the safety and tolerability of treatments enabling high patient compliance. These physicians see more patients with low access plans and are responsible for 15% of acne prescriptions.

Please see important research disclosures at the end of this document Page 21 of 45 VALUATIONLAB | [email protected] | Valuation Report | September 2020 7 September 2020 No change in how acne will be managed and WAC pricing corridor of USD 300 - 700 In 2019, Cassiopea commissioned two additional surveys conducted by Precisions Xtract Inc. including perception and coverage expectations based on in-depth interviews among 12 payers representing ~92 mn commercial lives in June, and price-access expectations among 10 payers representing ~79 mn lives in August. The first survey showed that there are no major changes to be expected in how acne will be managed by physicians and payers. Overall, acne is of moderate to low management priority due to perceived relatively lower spend in the category. In general, there is no perceived desire to change management approach in the next 12-18 months and/or will to treat acne as a medical condition. The first- in-class novel MOA of Winlevi to treat moderate to severe acne in a more safe and effective way is an important driver for payers along with the net cost. Regarding price-access expectations, branded acne WAC (Wholesale Acquisition Cost or the list price paid by the wholesaler) prices typically range between USD 350-850. Among payers an acceptable WAC price corridor was identified of between USD 300-700. Deep-discount rebates are expected near the top of this corridor. Winlevi is expected to be on non-preferred formulary tier similar to other acne brands (one step edits through generics) with ultimate access dependent on net price.

Incrementally expanding US footprint in dermatology upon product approvals According to IMS Heath the number of dermatologists in the US amounted to 13,847 in 2014. Roughly a quarter of dermatologists (3,624) worked in large practices with 6 or more physicians, which will be the prime target for Cassiopea’s dermatology sales force, next to high prescribers in smaller practices. In our view, approximately 60-80 sales representatives should provide sufficient coverage of dermatologists to launch Winlevi successfully in the US. On successful development of Breezula in alopecia, and CB-06-01 in acne, we expect a substantial expansion of the sales force to around 175 sales representatives. This is especially needed to maximize the potential of Breezula among high prescribing primary care physicians. However, we believe a larger portion of M&S expenditure will be spent on costly direct-to-consumer campaigns, on-line marketing and social media, patient awareness groups, physician and patient education and medical conferences among others, to build critical brand awareness in the highly competitive dermatology market. Outside the US the company will seek commercialization partners in return for upfront and commercialization milestones and royalties on net sales.

Global peak sales of EUR 400+ mn based on conservative assumptions To account for regional differences, we have split our detailed forecasts in two regions:

1. US (Winlevi commercialized through an own small dermatology field force) 2. EU/ROW (commercialization partners in return for milestones and sales royalties)

We conservatively excluded regions such as CEE and BRIC (Brazil, Russia, India, China) given the affordability of Winlevi for the general population in these regions.

Although we only present forecasts of Winlevi up to 2029, our forecast period for Winlevi runs until patent expiry in the US (2030) and EU/ROW (2032 – 10-year data exclusivity). Life cycle management, such as higher-dose Winlevi or branded single-product fixed- combinations of Winlevi and other acne classes, could expand Winlevi’s life cycle substantially beyond this period.

Please see important research disclosures at the end of this document Page 22 of 45 VALUATIONLAB | [email protected] | Valuation Report | September 2020 7 September 2020 1) US peak sales of EUR 300+ mn We conservatively estimate that 9.4% of the US population or 30 mn people have acne. Some estimates reach up to 40-50 mn people. Although Winlevi is likely to be approved for all grades of acne given its excellent safety and tolerability profile, we limit treatment to people with moderate to severe acne, which accounts for 20% of people with acne. Furthermore, we estimate that ~80% are on prescription drugs as most acne treatments are eligible for reimbursement. We assume now assume an annual cost of therapy of USD 500 based on the extensive market research recently conducted by Cassiopea, which identified a WAC pricing corridor of between USD 300-700 that should provide broad payer access. Previously, we applied an annual cost of USD 1,200 similar to the cost of other branded topical acne treatments such as Galderma’s Epiduo. Given the significantly lower treatment cost, we have increased our peak penetration in the target group reaching up to ~25% (from previously up to ~12%) with first launches to occur in March 2021. Although, many people will be motivated to continue treatment, as the symptoms of acne are visible and financially motivated by the co-payment cost, we conservatively assume a compliance rate of 45%, in line with compliance rates for long-term therapies. Based on the above, we forecast US peak sales to amount to EUR 314 mn or ~75% of global peak sales, underlining the importance of the US FDA approval.

We account for the costs of establishing of an own dermatology sales force in the US and high marketing expenses, conservatively amounting to 30% of sales in the long term, with average COGS of 5%. As Cassiopea’s IP is held in Italy, the company should benefit from the Italian patent box regime, which exempts 50% of licensing income from corporate tax. We conservatively assume a 20% tax rate (current Italian corporate tax rate is 34%).

2) EU/ROW peak sales of EUR 100+ mn Using the same 9.4% prevalence of acne in the EU/ROW, we calculate there are approximately 55 mn people with acne in this region. As in the US, we conservatively limit Winlevi use to people with moderate to severe acne and estimate that roughly 70% are on prescription treatment as most acne treatments are reimbursed. We assume first launches to occur in 2022 and peak penetration rates reaching up to ~10% given the magnitude of countries and a shorter patent life. Most acne treatments are reimbursed in Europe, often without a co-payment. However, treatment prices in this region are markedly lower than in the US. We conservatively assume an annual treatment cost per patient of EUR 250 or half of the US cost. We also assume a slightly lower patient compliance rate of 40% due to the lack of co-payment and financial motivation. Based on the above, we forecast peak sales in the EU/ROW to amount to EUR 114 mn.

We account for the remaining R&D costs (including post-marketing surveillance costs) for Winlevi in the next few years. We assume Cassiopea to sign on commercialization partner(s) on US approval of Winlevi with upfront and sales milestones amounting up to EUR 65 mn with net royalties on sales to amount to 25%.

See our detailed forecasts on the following page.

Please see important research disclosures at the end of this document Page 23 of 45 VALUATIONLAB | [email protected] | Valuation Report | September 2020 7 September 2020

Forecasts & Sensitivity Analysis

WINLEVI - FINANCIAL FORECASTS FOR ACNE VULGARIS

INDICATION TOPICAL TREATMENT FOR ACNE VULGARIS IN PEOPLE 12 YEARS AND OLDER DOSAGE 1% CREAM APPLIED TWICE A DAY ON SKIN FOR APPROXIMATELY A YEAR PRICING ANNUAL TREATMENT PRICE PER PATIENT IN: EU/ROW: EUR 250; US: USD 500 (BASED ON CASSIOPEA US MARKET RESEARCH ACCEPTABLE WAC PRICE OF USD 300-700/YEAR) STANDARD OF CARE PRESCRIPTION TREATMENTS INCLUDE BENZOYL PEROXIDE CREAM, TOPICAL RETINOIDS, ORAL RETINOIDS OR SINGLE-PRODUCT COMBINATIONS OF THESE DRUGS

UNIQUE SELLING POINT FIRST-IN-CLASS TOPICAL ANDROGEN RECEPTOR INHIBITOR FOR ACNE VULGARIS WITH NEGLIGIBLE SYSTEMIC BIOAVAILABILITY (EXCELLENT SAFETY & TOLERABILITY PROFILE)

7Ps ANALYSIS PATENT PROTECTED BY MEDICAL USE PATENT IN ACNE & ALOPECIA UNTIL 2022 (EU/ROW)/2023 (US) AND PATENT COVERING ALL CRYSTALLINE FORMS UNTIL 2028 (EU/ROW) AND 2030 (US) PHASE PHASE III STARTED 2015; POSITIVE TOP-LINE RESULTS ACROSS ALL PRIMARY ENDPOINTS JUL 2018; APPROVED IN US IN AUG 2020; US COMMERCIAL LAUNCH MARCH 2021 PATHWAY SPA APPROVED JUL 2015; 2 PIVOTAL TRIALS (US & EU) 700 PTS. EACH; SAFETY AT LEAST 1,000 PTS.: 1 LT OPEN LABEL SAFETY TRIAL: 300+ PTS. 6 MONTHS; 100 PTS. 12 MONTHS PATIENT CONVENIENT TOPICAL CREAM WITH GOOD EFFICACY LACKING THE SIDE EFFECTS OF SYSTEMIC ANTI-ANDROGENS (E.G. MOOD CHANGES, LOSS OF LIBIDO, MALE BREASTS) PHYSICIAN CONVENIENT AND EFFECTIVE TOPICAL ACNE TREATMENT LACKING TYPICAL ANTI-ANDROGEN SIDE EFFECTS SHOULD ENHANCE PATIENT COMPLIANCE PAYER SIGNIFICANT COST-SAVINGS DUE TO THE LACK OF TYPICAL ANTI-ANDROGEN SIDE EFFECTS PARTNER US: M&A TRANSACTION WITH US DERMA PLAYER OR HIRE US DERMA CONTRACT SALES FORCE; EU/ROW: OUT LICENSE IN RETURN FOR MILESTONES AND SALES ROYALTIES

REVENUE MODEL FILINGH1: LAUNCH EUROPE / REST OF WORLD - SOLD BY PARTNER(S) 2019E 2020E 2021E 2022E 2023E 2024E 2025E 2026E 2027E 2028E 2029E PERSONS WITH ACNE (MN) 58 59 61 62 63 64 66 67 68 70 71 GROWTH (%) 2% 2% 2% 2% 2% 2% 2% 2% 2% 2% 2% MODERATE TO SEVERE ACNE (%) 20% 20% 20% 20% 20% 20% 20% 20% 20% 20% 20% PERSONS WITH MODERATE TO SEVERE ACNE (MN) 12 12 12 12 13 13 13 13 14 14 14 ON PRESCRIPTION (%) 70% 70% 70% 70% 70% 70% 70% 70% 70% 70% 70% PERSONS WITH MODERATE TO SEVERE ACNE ON RX (MN) 8 8 8 9 9 9 9 9 10 10 10 PENETRATION (%) 0% 0% 0% 2% 5% 7% 9% 10% 10% 11% 11% PERSONS ON TREATMENT 0 0 0 129'697 396'872 584'725 779'933 889'124 954'638 1'022'417 1'092'526 COST OF THERAPY PER YEAR (EUR) 250 250 250 250 250 250 250 250 250 250 250 PATIENT COMPLIANCE (%) 40% 40% 40% 40% 40% 40% 40% 40% 40% 40% 40% SALES (EUR MN) - BOOKED BY PARTNER(S) 0 0 0 13 40 58 78 89 95 102 109 CHANGE (%) 206% 47% 33% 14% 7% 7% 7% ROYALTY (%) 25% 25% 25% 25% 25% 25% 25% 25% 25% 25% 25% ROYALTIES (EUR MN) 0 0 0 3 10 15 19 22 24 26 27 UPFRONT & MILESTONE PAYMENTS (EUR MN) 0 0 20 30 0 0 0 0 15 0 0 R&D COSTS (EUR MN) -2 -3 -2 -2 -2 -2 -2 0 0 0 0 PROFIT BEFORE TAX (EUR MN) -2 -3 18 32 8 13 18 22 39 26 27 TAX RATE (%) 0% 0% 0% 20% 20% 20% 20% 20% 20% 20% 20% TAXES (EUR MN) 0 0 0 -6 -2 -3 -4 -4 -8 -5 -5 PROFIT (EUR MN) -2 -3 18 25 7 10 14 18 31 20 22

UNITED STATES - SOLD BY CASSIOPEA SALES FORCE 2019E 2020E 2021E 2022E 2023E 2024E 2025E 2026E 2027E 2028E 2029E PERSONS WITH ACNE (MN) 32 33 34 34 35 36 36 37 38 39 39 GROWTH (%) 2% 2% 2% 2% 2% 2% 2% 2% 2% 2% 2% MODERATE TO SEVERE ACNE (%) 20% 20% 20% 20% 20% 20% 20% 20% 20% 20% 20% PERSONS WITH MODERATE TO SEVERE ACNE (MN) 6 7 7 7 7 7 7 7 8 8 8 ON PRESCRIPTION (%) 80% 80% 80% 80% 80% 80% 80% 80% 80% 80% 80% PERSONS WITH MODERATE TO SEVERE ACNE ON RX (MN) 5 5 5 5 6 6 6 6 6 6 6 PENETRATION (%) 0% 0% 3% 9% 14% 18% 21% 23% 24% 25% 25% PERSONS ON TREATMENT 0 0 161'624 494'570 784'718 1'029'102 1'224'631 1'368'088 1'456'121 1'516'186 1'578'071 COST OF THERAPY PER YEAR (EUR) 446 448 443 443 443 443 443 443 443 443 443 PATIENT COMPLIANCE (%) 45% 45% 45% 45% 45% 45% 45% 45% 45% 45% 45% SALES (EUR MN) - BOOKED BY CASSIOPEA 0 0 32 99 156 205 244 273 290 302 314 CHANGE (%) 206% 59% 31% 19% 12% 6% 4% 4% COGS (%) 15% 7% 5% 5% 5% 5% 5% 5% 5% COGS (EUR MN) 0 0 -5 -7 -8 -10 -12 -14 -15 -15 -16 M&S (%) #DIV/0! #DIV/0! 192% 67% 45% 40% 35% 30% 30% 30% 30% M&S COSTS (EUR MN) -3 -4 -62 -66 -71 -82 -85 -82 -87 -91 -94 PROFIT BEFORE TAX (USD MN) -3 -4 -35 25 78 113 146 177 189 196 204 TAX RATE (%) 0% 0% 0% 20% 20% 20% 20% 20% 20% 20% 20% TAXES (EUR MN) 0 0 0 -5 -16 -23 -29 -35 -38 -39 -41 PROFIT (EUR MN) -3 -4 -35 20 62 90 117 142 151 157 164

2019E 2020E 2021E 2022E 2023E 2024E 2025E 2026E 2027E 2028E 2029E GLOBAL SALES (EUR MN) 0 0 32 112 196 264 322 362 386 404 424 CHANGE (%) 246% 76% 34% 22% 12% 7% 5% 5%

GLOBAL PROFIT (EUR MN) -5 -7 -17 45 69 101 131 160 182 178 185 CHANGE (%) -19% 31% 152% -374% 51% 46% 31% 21% 14% -2% 4%

WACC (%) 7% NPV TOTAL PROFIT (CHF MN) 784 NUMBER OF SHARES (MN) 11.7 NPV PER SHARE (CHF) 67 SUCCESS PROBABILITY 90% AVERAGE OF US 100% (APPROVED) AND EU/ROW 80% (FILING) RISK ADJUSTED NPV PER SHARE (CHF) 60

SENSITIVITY ANALYSIS WACC (%) CHF / SHARE 5.5 6.0 6.5 7.0 7.5 8.0 8.5 100% 74 72 70 67 65 63 61 95% 71 68 66 64 62 60 58 90% 67 65 63 60 59 57 55 85% 63 61 59 57 56 54 52 SUCCESS PROBABILITY 80% 60 58 56 54 52 51 49 75% 56 54 52 50 49 47 46 70% 52 50 49 47 46 44 43 65% 48 47 45 44 42 41 40 60% 45 43 42 40 39 38 37 ESTIMATES AS OF 7 SEPTEMBER, 2020 SOURCE: VALUATIONLAB ESTIMATES

Please see important research disclosures at the end of this document Page 24 of 45 VALUATIONLAB | [email protected] | Valuation Report | September 2020 7 September 2020 Unique Selling Point First-ever approved topical anti-androgen for the treatment of acne based on a novel mechanism of action and NCE (clascoterone) in nearly 40 years. Winlevi blocks the overproduction of sebum, the origin of acne, thereby preventing the cascade of events that lead to acne. It has an excellent safety and tolerability profile, without the typical systemic side effects of existing oral anti-androgens and can be given in combination with other acne treatments to men and women.

7P's Analysis Patent: A granted medical use patent in acne protects Winlevi until 2022 (EU/ROW) and 2023 (US). Additionally, there is a granted patent covering all crystalline forms of the active pharmaceutical ingredient (API) clascoterone providing protection until at least 2028 (EU/ROW) and 2030 (US), which we assume in our forecasts. Winlevi and Breezula contain the same API clascoterone, albeit in different formulations and dose strengths.

Phase: Winlevi successfully completed phase I and II development where it demonstrated excellent safety and tolerability and statistical superiority versus Retin-A in IGA improvement and total lesion count reduction in patients with moderate to severe acne. In November 2015 a phase III development program under SPA (special protocol assessment) started in moderate to severe acne patients, including 2 pivotal trials (US & EU) with 700 patients each. Positive pivotal phase III top line results were reported in July 2018 followed by detailed data were all primary and secondary endpoints were met.

Pathway: Approved in the US for acne in August 2020. The FDA requires at least 1,000 patients treated for safety evaluation. Patients from both phase III trials (“Study 25” and “Study 26”) were enrolled in a single long-term open label safety trial (“Study 27”) of 300+ subjects treated for 6 months and 100 subjects treated for 12 months. US commercial sales launch to occur in March 2021.

Patient: Winlevi is convenient twice a day topical cream that is well tolerated without the side effects of oral anti-androgens (e.g. mood changes, loss of libido, male breasts) but with similar or improved efficacy, and can be used in men and women.

Physician: First topical anti-androgen with good efficacy but lacking the typical systemic side effects of current oral anti-androgens, which should boost patient compliance and overall treatment outcomes. Winlevi can be given in combination with other treatments to target as many pathogenic pathways of acne.

Payer: Higher patient compliance, better treatment outcomes and less side effects lead to substantially lower additional treatment costs next to costs to treat the psychological effects of acne.

Partner: In the US, we assume Cassiopea builds an own small specialist dermatology sales infrastructure to commercialize Winlevi and maximize its long-term value. This provides the foundation of a highly profitable dermatology franchise when other pipeline projects such as Breezula (alopecia) and CB-06-01 (acne) gain US approval. In H2 2020, Cassiopea is to close an M&A transaction with a US dermatology company or to raise capital to fund the US sales infrastructure. Outside the US, the company plans to seek partners or distributors in return for upfront and commercialization milestones and royalties on sales. Please see important research disclosures at the end of this document Page 25 of 45 VALUATIONLAB | [email protected] | Valuation Report | September 2020 7 September 2020 CB-06-01 (acne)

Product Analysis CB-06-01 peak sales of EUR 300 mn - rNPV of CHF 6 per share We forecast peak sales of EUR 307 mn for CB-06-01 in acne assuming first market launches in 2026, patent protection until 2035 (potentially extended by new IP for the improved formulation), a similar annual treatment cost per patient as with Winlevi of between EUR 250 (EU/ROW) and USD 500 (US), and a market penetration peaking between ~8% (EU/ROW) and ~16% (US) in the target group. Our rNPV amounts to CHF 66 mn, or CHF 6 per share, assuming CB-06-01 is commercialized by Cassiopea’s own dermatology field force the US. Outside the US the company receives upfront and sales milestones of up to EUR 25 mn and 25% royalties on net sales from partner(s), with a 20% (POC) success probability and a WACC of 7% (for details see page 28).

Complementary treatment to Winlevi and other acne drugs CB-06-01 is Cassiopea’s second compound after Winlevi in clinical development for the treatment of acne. The drug is a novel topical antibiotic based on an NCE (new chemical entity) and is in phase II development for the treatment of moderate to severe acne. CB-06- 01 blocks bacterial infection, one of the four root causes of acne, and appears to be highly effective on bacterial strains of P. acnes, the prominent bacteria implicated in acne. CB-06- 01 showed encouraging phase IIa POC results in subjects with moderate to severe acne. Cassiopea expects to start phase IIb dose ranging trials in 2021 with a new batch of API that has been produced with an optimized formulation to improve penetration and cosmetic appearance. CB-06-01 can be given in combination with Winlevi or other existing acne treatments to target as many pathogenic factors as possible. Cassiopea acquired worldwide rights to CB-06-01 (formerly NAI acne) from the Italian Naicons in early 2015.

Attractive preclinical profile targeting P. acnes with a low propensity to resistance CB-06-01 proved to be highly effective on bacterial strains of P. acnes, including strains resistant to some existing antibiotics, according to in vitro MIC (minimum inhibitory concentration) tests performed in the lab. P. acnes is the most prominent bacteria implicated in acne, which leads to infection and subsequent inflammation. Resistance profile NAI-acne (CB-06-01) vs. clindamycin vs. erythromycin

Source: valuationLAB, Cassiopea Antibiotic resistance to P. acnes is increasing making several existing topical antibiotics redundant in treating acne It is estimated that up to 70% of P. acnes strains are resistant against erythromycin, a commonly prescribed antibiotic. For instance, Emgel is a popular

Please see important research disclosures at the end of this document Page 26 of 45 VALUATIONLAB | [email protected] | Valuation Report | September 2020 7 September 2020 topical gel formulation of erythromycin that is available over the counter at the pharmacist or drugstore for treating acne. Most erythromycin-resistant bacteria are cross-resistant against clindamycin, another antibiotic that is commonly used against acne. Clindamycin is often prescribed for acne in single-product fixed-combinations with benzoyl peroxide (e.g. Sanofi’s BenzaClin or Stiefel’s Duac) or with tretinion (e.g. Valeant’s Ziana). Because CB- 0-6-01 is very specific and not active against non-disease-specific bacterial strains, the propensity to contribute to the development of general microbial resistance is very low.

Encouraging POC results justify further development of CB-06-01 In October 2016 Cassiopea announced encouraging top line results of a phase IIa POC trial of CB-06-01 in patients with moderate to severe acne. The POC trial was a double blind, placebo controlled trial where 90 patients were randomized to either CB-06-01 3% gel or vehicle (placebo), both applied twice a day over a 12 weeks treatment period. 86 subjects completed treatment. The aim of the trial was to evaluate the safety and efficacy and was the first trial of CB-06-01 in humans. The small POC trial was not designed for statistical significance, but to evaluate preliminary safety and efficacy of CB-06-01 in acne, and was the first trial of CB-06-01 in humans.

The POC trial met its pre-defined primary and secondary endpoints. In the primary endpoint CB-06-01 reduced the median ILC (inflammatory lesion count) within the FAS (full analysis set) population after 12 weeks of treatment by 66.2%, a median reduction of 9% greater than vehicle. This effect was confirmed in secondary endpoints. A median reduction of TLC (total lesion count) of 61.3% was achieved, 17.2% greater than vehicle in the FAS population. Furthermore, in the same population, 17.8% of subjects on CB-06-01 achieved a 2-point reduction in the IGA (investigator global assessment) score, indicating treatment success, compared to 6.7% on vehicle. The IGA score is an important endpoint in pivotal phase III trials and to gain regulatory approval. Importantly, no serious adverse events were reported and there were no increased LSR’s (local skin reactions) compared to vehicle.

Phase II development to continue in 2021, we assume first launches in 2026 Cassiopea will continue clinical development with an improved formulation and has produced a new GMP API batch for a new phase IIa POC trial expected to start 2021 with results in 2022. Assuming a similar development program as with Winlevi in acne, phase IIb dose ranging top line results could be available in 2023, followed by phase III top line results in 2025. Filing could occur in 2025 with approval approximately a year later and first launches expected in 2026.

EUR 200+ mn peak sales in the US Our assumptions for CB-06-01 are similar to Winlevi as they both target the same patient group. We forecast US peak sales to amount to EUR 215 mn based on the same pricing, patient compliance for CB-06-01, however, at slightly lower peak penetration rates of around 16%. Also, the cost structure for CB-06-01 is similar to Winlevi, except that Cassiopea owes Naicons royalties on sales, which we estimate at 5%.

EUR 90+ mn peak sales in the EU/ROW We forecast peak sales for CB-06-01 to amount to EUR 93 mn based on the same assumptions as for Winlevi in this region, however, with a slightly lower peak penetration rate of ~8%. Cassiopea will also owe Naicons 5% royalties on sales in the EU/ROW.

Please see important research disclosures at the end of this document Page 27 of 45 VALUATIONLAB | [email protected] | Valuation Report | September 2020 7 September 2020 Forecasts & Sensitivity Analysis

CB-06-01 - FINANCIAL FORECASTS FOR ACNE

INDICATION TOPICAL TREATMENT FOR ACNE VULGARIS DOSAGE 3% GEL APPLIED TWICE A DAY ON SKIN FOR APPROXIMATELY A YEAR PRICING ANNUAL TREATMENT PRICE PER PATIENT IN: EU/ROW: EUR 250; US: USD 500 (WE ASSUME SAME TREATMENT PRICE AS WITH WINLEVI) STANDARD OF CARE PRESCRIPTION TREATMENTS INCLUDE TOPICAL ANTIBIOTIC GELS (E.G. EPIDUO FORTE, ACANYA, ZIANA), TOPICAL & ORAL RETINOIDS

UNIQUE SELLING POINT INHIBITS BACTERIAL PROTEIN SYNTHESIS, AND IS ACTIVE ON BACTERIAL STRAINS RESISTANT TO OTHER CERTAIN OTHER ANTIBIOTICS, COMPLEMENTARY TO WINLEVI IN ACNE

7Ps ANALYSIS PATENT USE PATENT EXPIRES IN 2026 (US) & IN 2023 (EU/ROW); US TOPICAL COMPOSITION IN ACNE PROVIDES PROTECTION UNTIL 2035, NEW FORMULATION COULD EXTEND BEYOND 2035 PHASE PHASE IIA POC COMPLETED H2 2016 (90 SUBJECTS); NEW GMP BATCH WITH IMPROVED FORMULATION PRODUCED; START PHASE IIB DOSE RANGE TRIAL 2021 PATHWAY PHASE IIB DOSE RESPONSE TRIAL (~300 PTS.) START 2021; 2 PIVOTAL PHASE III TRIALS (US & EU) EACH ~500 PTS., 3 MONTHS TREATMENT RESULTS 2023; FILING 2024; LAUNCH 2025 PATIENT NEW TOPICAL ANTIBIOTIC TO TREAT ACNE THAT NO LONGER RESPONDS TO CURRENT TOPICAL ANTIBIOTICS WITHOUT SYSTEMIC SIDE EFFECTS PHYSICIAN NEW TOPICAL ANTIBIOTIC WITH HIGH SELECTIVITY AND POTENT ACTIVITY AGAINST P. ACNES, INCLUDING RESISTANT STRAINS, CAN BE GIVEN TOGETHER WITH WINLEVI PAYER COST-SAVINGS BY REPLACING CURRENT TOPICAL ANTIBIOTICS (E.G. CLINDAMYCIN, ERYTHROMYCIN) THAT HAVE BECOME INEFFECTIVE DUE TO BACTERIAL RESISTANCE PARTNER IN-LICENSED WORLDWIDE FROM ITALIAN COMPANY NAICONS IN 2015: CASSIOPEA PLANS TO COMMERCIALIZE IN US AND SEEK PARTNERS IN EU/ROW

REVENUE MODEL EUROPE / REST OF WORLD - SOLD BY PARTNER(S) 2019E 2020E 2021E 2022E 2023E 2024E 2025E 2026E 2027E 2028E 2029E NUMBER OF PATIENTS (MN) 58 59 61 62 63 64 66 67 68 70 71 GROWTH (%) 2% 2% 2% 2% 2% 2% 2% 2% 2% 2% 2% MODERATE TO SEVERE ACNE (%) 20% 20% 20% 20% 20% 20% 20% 20% 20% 20% 20% PERSONS WITH MODERATE TO SEVERE ACNE (MN) 12 12 12 12 13 13 13 13 14 14 14 ON PRESCRIPTION (%) 70% 70% 70% 70% 70% 70% 70% 70% 70% 70% 70% PERSONS WITH MODERATE TO SEVERE ACNE ON RX (MN) 8 8 8 9 9 9 9 9 10 10 10 PENETRATION (%) 0% 0% 0% 0% 0% 0% 0% 1% 4% 6% 8% PERSONS ON TREATMENT 0 0 0 0 0 0 0 93'592 381'855 584'239 744'904 COST OF THERAPY PER YEAR (EUR) 250 250 250 250 250 250 250 250 250 250 250 PATIENT COMPLIANCE (%) 40% 40% 40% 40% 40% 40% 40% 40% 40% 40% 40% SALES (EUR MN) - BOOKED BY PARTNER(S) 0 0 0 0 0 0 0 9 38 58 74 CHANGE (%) 308% 53% 28% ROYALTIES FROM PARTNER(S) (%) 25% 25% 25% 25% 25% 25% 25% 25% 25% 25% 25% ROYALTIES FROM PARTNER(S) (EUR MN) 0 0 0 0 0 0 0 2 10 15 19 ROYALTIES PAID TO NAICONS (%) 5% 5% 5% 5% 5% 5% 5% 5% 5% 5% 5% ROYALTIES PAID TO NAICONS (EUR MN) 0 0 0 0 0 0 0 0 -2 -3 -4 UPFRONT & MILESTONE PAYMENTS (EUR MN) 0 0 0 0 0 0 0 10 R&D COSTS (EUR MN) 0 0 -3 -4 -4 -4 -2 0 0 0 0 PROFIT BEFORE TAX (EUR MN) 0 0 -3 -4 -4 -4 -2 12 8 12 15 TAX RATE (%) 0% 0% 0% 20% 20% 20% 20% 20% 20% 20% 20% TAXES (EUR MN) 0 0 0 1 1 1 0 -2 -2 -2 -3 PROFIT (EUR MN) 0 0 -3 -3 -3 -3 -2 9 6 9 12 LAUNCH USE PATENT EXPIRY UNITED STATES - SOLD BY CASSIOPEA SALES FORCE 2019E 2020E 2021E 2022E 2023E 2024E 2025E 2026E 2027E 2028E 2029E PERSONS WITH ACNE (MN) 32 33 34 34 35 36 36 37 38 39 39 GROWTH (%) 2% 2% 2% 2% 2% 2% 2% 2% 2% 2% 2% MODERATE TO SEVERE ACNE (%) 20% 20% 20% 20% 20% 20% 20% 20% 20% 20% 20% PERSONS WITH MODERATE TO SEVERE ACNE (MN) 6 7 7 7 7 7 7 7 8 8 8 ON PRESCRIPTION (%) 80% 80% 80% 80% 80% 80% 80% 80% 80% 80% 80% PERSONS WITH MODERATE TO SEVERE ACNE ON RX (MN) 5 5 5 5 6 6 6 6 6 6 6 PENETRATION (%) 0% 0% 0% 0% 0% 0% 0% 2% 6% 9% 11% PERSONS ON TREATMENT 0 0 0 0 0 0 0 118'964 364'030 556'966 694'351 PATIENT COMPLIANCE (%) 45% 45% 45% 45% 45% 45% 45% 45% 45% 45% 45% COST OF THERAPY PER YEAR (EUR) 446 448 443 443 443 443 443 443 443 443 443 SALES (EUR MN) - BOOKED BY CASSIOPEA 0 0 0 0 0 0 0 24 73 111 138 CHANGE (%) 206% 53% 25% ROYALTIES PAID TO NAICONS (%) 5% 5% 5% 5% 5% 5% 5% 5% 5% 5% 5% ROYALTIES PAID TO NAICONS (EUR MN) 0 0 0 0 0 0 0 -1 -4 -6 -7 COGS (%) 5% 5% 5% 5% 5% 5% 5% 5% 5% 5% 5% COGS (EUR MN) 0 0 0 0 0 0 0 -1 -4 -6 -7 M&S (%) 0% 0% 0% 0% 0% 0% 84% 48% 35% 25% M&S COSTS (EUR MN) 0 0 0 0 0 0 -4 -18 -31 -39 -35 PROFIT BEFORE TAX (EUR MN) 0 0 0 0 0 0 -4 4 34 61 90 TAX RATE (%) 0% 0% 0% 20% 20% 20% 20% 20% 20% 20% 20% TAXES (EUR MN) 0 0 0 0 0 0 1 -1 -7 -12 -18 PROFIT (EUR MN) 0 0 0 0 0 0 -3 3 27 49 72

2019E 2020E 2021E 2022E 2023E 2024E 2025E 2026E 2027E 2028E 2029E GLOBAL SALES (EUR MN) 0 0 0 0 0 0 0 33 111 169 213 CHANGE (%) 235% 53% 26%

GLOBAL PROFIT (EUR MN) 0 0 -3 -3 -3 -3 -4 12 34 58 84 CHANGE (%) 7% 0% 0% 39% -380% 171% 73% 44%

WACC (%) 7% NPV TOTAL PROFIT (CHF MN) 328 NUMBER OF SHARES (MN) 11.7 NPV PER SHARE (CHF) 28 SUCCESS PROBABILITY 20% (PHASE IIA POC SUCCESS RATE) RISK ADJUSTED NPV PER SHARE (CHF) 6

SENSITIVITY ANALYSIS WACC (%) CHF / SHARE 5.5 6.0 6.5 7.0 7.5 8.0 8.5 60% 20 19 18 17 16 15 15 55% 18 17 16 16 15 14 13 50% 16 16 15 14 13 13 12 45% 15 14 13 13 12 11 11 SUCCESS PROBABILITY 40% 13 13 12 11 11 10 10 35% 12 11 10 10 9 9 8 30% 10 9 9 8 8 8 7 25% 8 8 7 7 7 6 6 20% 7 6 6 6 5 5 5 ESTIMATES AS OF 7 SEPTEMBER, 2020 SOURCE: VALUATIONLAB ESTIMATES

Please see important research disclosures at the end of this document Page 28 of 45 VALUATIONLAB | [email protected] | Valuation Report | September 2020 7 September 2020 Unique Selling Point CB-06-01 is a topical antibiotic with the potential to replace existing topical antibiotics used in the treatment of acne. CB-06-01 is based on an NCE (new chemical entity) that is highly effective on bacteria implicated in acne (P. acnes), including bacteria strains resistant to some other antibiotics. CB-06-01 can be given in combination with other acne treatments such as Winlevi.

7P's Analysis Patent: A granted medical use patent in acne protects CB-06-01 until 2023 (EU/ROW) and 2026 (US). A provisional application covering the topical composition was filed in the US in 2015. If granted, this patent should provide additional patent protection up until 2035, which we assume in our forecasts.

Phase: CB-06-01 successfully completed phase IIa POC development. Cassiopea will continue clinical development with an improved formulation and is currently producing a new GMP API batch to continue phase II clinical development in 2021.

Pathway: CB-06-01 will follow a similar regulatory pathway as Winlevi in acne, including a phase IIb dose ranging trial, two pivotal phase III trials and safety evaluation in sufficient patients for one year and 6 months, with a normal (~10-12 months) regulatory review. We conservatively expect first launches in 2026.

Patient: Convenient twice daily topical antibiotic with an excellent safety and tolerability profile that is effective against increasing resistant bacterial pathogens involved in acne.

Physician: Novel topical antibiotic with high selectivity and potent activity against P. acnes including resistant strains, where existing topical antibiotics are no longer effective. CB-06- 01 can be given in combination with other treatments to target as many pathogenic pathways of acne, including Winlevi.

Payer: With increasing bacterial resistance to existing (topical) antibiotics for acne, these antibiotics are no longer effective and basically obsolete. However, due to the lack of new effective antibiotics, they are still frequently used despite being totally cost ineffective.

Partner: In the US Cassiopea plans to maximize the value of CB-06-01 by using its own specialist dermatology sales force that it established for Winlevi and Breezula. The approval of CB-06-01 would provide a significant boost to Cassiopea’s cash flow and profitability. Outside the US, the company plans to seek partners or distributors in return for upfront and commercialization milestones and royalties on sales.

Please see important research disclosures at the end of this document Page 29 of 45 VALUATIONLAB | [email protected] | Valuation Report | September 2020 7 September 2020 Acne Market Over the past couple of years, demand for acne treatments and medications surged at a remarkable pace. Persistence Market Research estimates that the global acne treatment market amounted to USD 4.9 bn in 2016 and is expected to reach USD 7.4 bn by the end of 2025 reflecting a CAGR of 4.6% over the forecast period (2017 – 2025). The inflammatory acne segment is the largest acne type segment in the global acne treatment market, which is estimated at just over USD 3 bn, or around 60% share of the total market in 2017 and expected to increase to over USD 4.5 bn by 2025, expanding at a CAGR of 5% over the forecast period. Nevertheless, no new chemical entity has been launched since the mid 1990’s (e.g. topical retinoids Differin (adapalene) and Tazorac (tazarotene)). ACNE - KEY FACTS MARKET SIZE USD 4.9 BN IN 2016 AND EXPECTED TO GROW TO USD 7.4 BN BY THE END OF 2025 PREVALENCE AFFECTS: 9.4% OF POPULATION (~650 MN PEOPLE GLOBALLY); ~85% OF PEOPLE AGED 12-25 YEARS, 8% OF ADULTS AGED 25-34 YEARS, 3% OF ADULTS AGED 35-44 YEARS; MORE PREVALENT IN MEN THAN WOMEN; MORE PREVALENT IN WESTERN COUNTRIES INCIDENCE 85% OF ADOLESCENTS DEVELOP MILD ACNE; 15-20% HAVE CLINICAL ACNE RANGING FROM MILD TO SEVERE; AFFECTS 40-50 MN PEOPLE ANNUALLY IN THE US UNDERLYING CAUSE GENETICS IS THOUGHT TO BE THE PRIMARY CAUSE OF ACNE IN 80% OF CASES. DURING PUBERTY ACNE OFTEN OCCURS BY AN INCREASE IN HORMONES SUCH AS TESTOSTERONE. A FREQUENT FACTOR IS EXCESSIVE GROWTH OF THE BACTERIUM P. ACNES, WHICH IS NORMALLY PRESENT ON THE SKIN.

FOUR MAIN PROCESSES THAT LEAD TO THE FORMATION OF ACNE LESIONS: 1) SEBORRHEA: INCREASE OF OILY SEBUM PRODUCTION (INFLUENCED BY ANDROGENS) 2) OBSTRUCTION: EXCESSIVE DEPOSITION OF KERATIN (COMEDO FORMATION) 3) INFECTION: COLONIZATION OF THE FOLLICLE BY BACTERIA (PROPIONIBACTERIUM ACNES) 4) INFLAMMATION: LOCAL RELEASE OF PRO-INFLAMMATORY CHEMICALS IN THE SKIN SYMPTOMS - INCREASED SECRETION OF OILY SEBUM BY THE SEBACEOUS GLANDS IN THE SKIN - MICROCOMEDONES, COMEDONES, PAPULES, NODULES (LARGE PAPULES), PUSTULES - ACNE SCARS (LESIONS) CAUSED BY INFLAMMATION WITHIN THE DERMAL LAYER OF THE SKIN - POSTINFLAMMATORY HYPERPIGMENTATION (DARKENED MARK ON SKIN) DRUG CLASS (KEY BRANDS) - ORAL RETINOID (E.G. ACCUTANE) - TOPICAL RETINOID (E.G. TAZORAC, DIFFERIN) - ORAL ANTI-ANDROGEN (E.G. SPIRONOLACTONE, ACETATE, , BIRTH CONTROL PILLS) - TOPICAL ANTIBIOTIC (E.G. BENZAMYCIN, EMGEL, MINOCYCLINE, DAPSONE) - ORAL ANTIBIOTIC (SOLODYN) - BENZOYL PEROXIDE (EPIDUO, DUAC, BREVOXYL, BENZACLIN, TRIAZ) MAJOR PLAYERS (KEY BRANDS) - ROCHE (ACCUTANE) - VALEANT (SOLODYN) - ALLERGAN (TAZORAC, ACZONE) - GALDERMA (EPIDUO) - STIEFEL (DUAC) SOURCE: VALUATIONLAB, NIH, WHO, AAD, BRITISH J. OF DERM., WEBMD Acne, also known as acne vulgaris, is a long-term skin disease that occurs when hair follicles are clogged with dead skin cells and oil (sebum) from the skin. Acne is characterized by blackheads or whiteheads (comedones), pimples, oily skin, and possible scarring (acne lesions). It primarily affects areas of the skin with a relatively high number of oil (sebaceous) glands, including the face, upper part of the chest, and back. The resulting appearance can lead to anxiety, reduced self-esteem and, in extreme cases, depression or thoughts of suicide. Acne is a very common problem, particularly during puberty in teenagers, where 85% develop acne, but it can occur at later stages of life. Approximately 20% of teenagers suffer from moderate-to-severe acne. Acne is more prevalent in men than in women and more prevalent in Western countries. It affects ~650 mn people globally (~9.4% of population), making it the 8th most common disease worldwide.

Four main processes lead to the formation of acne lesions: 1. Seborrhea: increase of oily sebum production (influenced by androgens) 2. Obstruction: excessive deposition of keratin (comedo formation) 3. Infection: colonization of the hair follicle by the bacteria Propionibacterium acnes 4. Inflammation: local release of pro-inflammatory chemicals in the skin

Please see important research disclosures at the end of this document Page 30 of 45 VALUATIONLAB | [email protected] | Valuation Report | September 2020 7 September 2020 Genetics is thought to be the primary cause of acne in 80% of cases. During puberty, in both sexes, acne is often brought on by an increase in androgens (hormones) such as testosterone and its derivative dihydrotestosterone (DHT) that increase the production of oily sebum. This leads to the formation of a plug (microcomedone), which is driven primarily by excessive growth, reproduction and accumulation of skin cells in the hair follicle. The oily sebum causes the dead skin cells to stick together and block the hair follicle. A frequent factor is excessive growth of the bacterium Propionibacterium acnes (P. acnes), which is normally present on the skin, which also provokes skin inflammation by altering the fatty composition of oily sebum. The inflammatory cascade typically leads to the formation of inflammatory acne lesions, including papules, infected pustules, or nodules. If the inflammatory reaction is severe, the follicle can break into deeper layers of the skin and cause the formation of deep nodules.

The severity of acne can be classified as: • Mild: presence of comedones limited to the face with occasional inflammatory lesions (papular/pustular) • Moderate: a higher number of inflammatory papules and pustules occur on the face than in mild acne and are found on the trunk of the body • Severe: when nodules (painful bumps lying under the skin) are the characteristic facial acne lesions and involvement of the trunk is extensive

Current acne treatments limited to reformulations of existing chemical entities Many treatment options for acne are available, including lifestyle changes, medications, and medical procedures. Most treatments are based on reformulations or combinations of existing chemical entities with little innovation. Prescription treatments for acne include drugs that target the four main processes that lead to the formation of acne: 1) Seborrhea: drugs that target the blocking of the sebaceous gland (e.g. oral anti-androgens such as spironolactone, low dose oral , estrogens such a birth control pills, or isotretinoin; 2) Obstruction: drugs that normalize pattern of follicular keratinization (e.g. adapalene, isotretinoin, tazarotene, tretinion); 3) Infection: topical and oral antibiotics (e.g. benzoyl peroxide, minocycline); and 4) Inflammation: anti-inflammatory drugs (e.g. intra- lesional and oral corticosteroids, NSAIDS).

The American Academy of Dermatology guidelines recommend treatment should target as many pathogenic factors as possible. Treatment is dependent on the severity of acne and whether inflammation is involved. In mild acne, first treatment choice is a topical retinoid when no inflammation is involved or combined with a topical antimicrobial when there is inflammation. In moderate acne, an oral antibiotic is often added on top of the topical retinoid, sometimes combined with benzoyl peroxide. In case of nodules, oral isotretinoin can be given. In severe acne oral isotretinoin is first choice. Maintenance therapy consists of a topical retinoid in mild acne and a topical retinoid +/- benzoyl peroxide.

New market entrants expected to boost growth Promising late stage drugs in development for moderate to severe acne include, Paratek/Allergan’s Seysara (sarecycline), an oral narrow spectrum tetracycline-derived antibiotic (FDA approval October 2018); Foamix Pharmaceuticals’ AMZEEQ, a topical foam reformulation of minocycline, an existing oral antibiotic (FDA approval October 2019), and Cassiopea’s Winlevi, a novel anti-androgen called clascoterone (FDA approval August 2020), and CB-06-01, a novel topical antibiotic (phase II).

Please see important research disclosures at the end of this document Page 31 of 45 VALUATIONLAB | [email protected] | Valuation Report | September 2020 7 September 2020 Breezula (androgenic alopecia – hair loss)

Product Analysis Breezula peak sales of EUR 350+ mn - rNPV of CHF 26 per share We forecast peak sales of EUR 373 mn for Breezula in androgenic alopecia (AGA), the most common type of hair loss in men (and women), conservatively assuming first market launches in 2024, patent protection until 2028 (EU/ROW) and 2030 (US), an annual wholesale cost per patient of between EUR 350 (EU/ROW) and USD 1,200 (US), and a market penetration conservatively peaking at ~4-5% in the target population. In the US, Cassiopea plans to use the Winlevi specialist dermatology sales force to commercialize Breezula. We account for the M&S cost and COGS (10%). Our rNPV amounts to CHF 303 mn, or CHF 26 per share, assuming Cassiopea receives royalties on sales outside the US of 25% and upfront and sales milestones of EUR 55 mn, with a 65% (phase III) success probability and a WACC of 7% (for details see page 38).

First and only topical anti-androgen treatment for hair loss Breezula is a different formulation (anhydrous solution) and higher dosage strength (7.5x) of the same novel anti-androgen and NCE cortexelone-17α-propionate as used in Winlevi for acne. Breezula is a topical anhydrous solution applied twice a day to the scalp to reduce hair thinning and hair loss in patients with androgenic alopecia. This is the most common type of hair loss in men and women and is caused by high concentrations of the hormone DHT (dihydrotestosterone), hence, the name androgenic (hormonal) alopecia (hair loss). In the US alone, an estimated 35 mn men and 21 mn women experience hair loss. Despite the high incidence of alopecia, Merck & Co’s oral anti-androgen Propecia (finasteride) and Pfizer’s topical vasodilator Rogaine (minoxidil) are the only two approved prescription drugs for hair loss in the US. Both drugs are now widely available as generics, while Rogaine is also available over the counter (OTC). The value of the non-surgical hair loss market has an estimated value of USD 2.8 bn. Hair restoration is a more invasive but relatively common treatment for alopecia with an estimated value of USD 1.9 bn.

First and only topical anti-androgen treatment for men and women Breezula could become the first and only topical anti-androgen treatment for alopecia for men and women with the potential to be at least as effective as Propecia. However, without the systemic side effects such as sexual dysfunction that have hampered uptake of this oral anti-androgen, which can only be used by men. Global sales of Propecia peaked at USD 431 mn in 2009 despite these limitations. Breezula is currently undergoing a phase IIb dose- ranging clinical trial in men with mild to moderate alopecia. In July 2018, the company announced positive top line results of a (6-months) interim analysis of a phase IIb dose ranging trial, followed by positive 12-months top line results in April 2019. The company plans to start phase III development of Breezula in men in H1 2021 (dependent on final FDA discussions and Covid-19 pandemic). Cassiopea plans to sell Breezula in the US through its own specialist dermatology sales force established for Winlevi, and seek commercialization partners outside the US, in return for upfront and sales milestones and royalties on net sales.

Breezula blocks DHT, the root cause of hair loss, without systemic effects Androgenic alopecia is multifactorial and is caused by a combination of genetics and the effects of androgens such as the male hormone testosterone and its derivative Please see important research disclosures at the end of this document Page 32 of 45 VALUATIONLAB | [email protected] | Valuation Report | September 2020 7 September 2020 dihydrotestosterone (DHT). High concentrations of DHT at the hair follicle shorten the hair growth cycle. DHT causes overproduction of the oily substance sebum (also the cause of acne) that clogs the hair follicles on the scalp hampering growth of the hair shaft and leading to skin inflammation. As the hair follicles gradually shrink, they produce progressively smaller and thinner hairs until eventually they are no longer able to produce hair. In most cases these DHT-dependent effects are reversible as seen with Propecia that blocks 5- alpha-reductase, which converts free testosterone into DHT.

Breezula acts similar to Propecia in that it blocks the formation of DHT. Breezula also reduces the skin’s production of prostaglandin D2, a hormone-like compound, which in high levels can inhibit hair growth, too. However, because Breezula is a topical anti-androgen, it acts predominantly at the cutaneous level on the scalp. Once in the bloodstream, Breezula metabolizes rapidly to cortexolone, a corticosteroid produced naturally by the body with negligible systemic anti-androgen activity and a known safety profile. Breezula therefore does not interfere with the hormonal and androgenic profile of patients such as is the case with Propecia, an oral anti-androgen, with a wide range of sexual side effects such as erectile dysfunction and libido disorders. Moreover, Propecia is not approved in women because it can cause birth defects.

Although Breezula is given at a 7.5 times higher dosage strength of clascoterone than Winlevi, because the scalp is less permeable than facial skin, the systemic penetration of both products is basically the same. Therefore, Breezula should have a similar excellent safety and tolerability profile as seen with Winlevi and can be given both to men and women. This is a major competitive advantage over Propecia with the potential to expand its commercial opportunity substantially.

Positive phase IIb results prompt phase III in men and phase IIb in women Breezula has successfully completed phase I and phase IIa POC trials in persons with androgenic alopecia in over 180 men and women. In H1 2017 Cassiopea started a phase IIb dose-ranging trial in up to 400 men with mild to moderate androgenic alopecia treated with Breezula for 12 months with an interim analysis scheduled after 6 months. In July 2018, positive interim analysis (6-months) top line results followed by positive topline results in April 2019 after 12 months treatment with Breezula. Following these positive results, Cassiopea started a phase IIb dose ranging trial of Breezula in women with alopecia in November 2019 with results expected in Q1 2021. Phase III development of Breezula in male alopecia is expected to start in H1 2021 (dependent on final FDA discussions and Covid-19 pandemic).

PHASE I – good penetration of the scalp without systemic related side effects Cassiopea conducted a phase I trial in 18 subjects, 16 men and 2 women, with androgenic alopecia. A 50 milligram 5% solution of Breezula was applied twice daily to the scalp for 28 days. The results showed that Breezula: 1) penetrates the scalp and appears in the systemic circulation, with approximately 0.25% of the dosage penetrating beyond the skin to reach the circulatory system with only a diminutive 0.1 to 0.8 nanograms of the metabolite cortexolone detected per milliliter of blood plasma; 2) is well tolerated locally (LSR were mild and transient); 3) did not cause systemic related side effects; and 4) in men did not cause a decrease in cortisol and testosterone plasma levels.

Please see important research disclosures at the end of this document Page 33 of 45 VALUATIONLAB | [email protected] | Valuation Report | September 2020 7 September 2020 PHASE II - encouraging phase I/II POC results; positive phase IIb top line results

1) Phase I/II POC trial: Breezula was also tested in a phase I/IIa POC trial dividing 70 male and female patients with androgenic alopecia in four different treatment groups: 1) Breezula 5% gel; 2) Breezula 1% gel; 3) 1%, as an active control for men (a steroidal anti-androgen often used in men); and 4) 17α- 1% as a second active control for women (most frequently used treatment for women).

Breezula was applied to patients’ scalps in gel form in five weekly sessions of hydro- electrophoresis, each lasting 20 minutes. Hydro-electrophoresis is an established method of administering drugs for alopecia treatment by dermatologists. Electrodes attached to the scalp create an electrical current that opens local skin pores. This method was chosen to ensure that Breezula and the two active controls would deeply penetrate subjects’ scalp on the same basis. Note that final application of Breezula will involve a convenient twice-daily topical solution and not hydro-electrophoresis. BREEZULA PHASE I/IIA POC TRIAL PARAMETER BREEZULA 1% BREEZULA 5% CYPROTERONE AC. 1% 17α-ESTRADIOL 1% BASAL T1 * T2 ** BASAL T1 * T2 ** BASAL T1 * T2 ** BASAL T1 * T2 ** HAIR DIAMETER 0.41 0.73 0.88 0.66 0.74 0.91 0.51 0.61 0.74 0.53 0.65 0.73 (MM) PULL TESTS 3 1 1 3 1 1 3 2 2 3 1 1 (SCORE) WASH TEST 181 123 64 193 117 65 178 132 72 196 136 71 (NR. OF HAIRS) FOLLICULAR DENSITY 71 89 109 73 88 111 70 82 96 74 84 98 (NR./CM 2) SEBOMETRIC EVALUATION HIGH MEDIUM LOW HIGH MEDIUM LOW HIGH MEDIUM LOW HIGH HIGH HIGH (QUALITATIVE) SUBJECTS IMPROVED - 76 85 - 79 85 - 59 66 - 61 69 (%) * T1 = ONE WEEK AFTER TREATMENT COMPLETION; ** T2 = FOUR WEEKS AFTER TREATMENT COMPLETION SOURCE: VALUATIONLAB, CASSIOPEA As can be seen in the table above, Breezula in either dosage was effective in the four metrics used as endpoints for the trial: 1) hair shaft diameter increased; 2) pull test score declined; 3) follicular density improved; and sebaceous gland evaluation declined to low from high. The difference in activity between the Breezula 1% and 5% dosage was slight, and no local or systemic adverse effects were reported. Generally, Breezula produced better clinical results than the active controls.

2) Phase IIa POC trial: In another phase IIa POC trial Breezula was evaluated in men with androgenic alopecia with a mean age of 40 years (ranging between 20-50 years of age) in three treatment groups: 1) Breezula 5% solution; 2) Rogaine (minoxidil) 5% solution; and 3) vehicle (placebo) solution. Safety and efficacy were evaluated after twice daily application for up to 26 weeks. 95 men were enrolled of which 78 completed the treatment period and 73 were included in the PPP (per protocol population) efficacy analysis (5 men were excluded for compliance or protocol violations). The dropout rate is roughly similar across all arms and in line with other alopecia trials.

The co-primary endpoints included: 1. Changes from baseline in TAHC (target area hair count) in non-vellus hairs (thick terminal hairs) using digital image analysis at month 6 2. Patient satisfaction: the subject’s evaluation of treatment benefit via the HGA (hair growth assessment) questionnaire at month 6

Please see important research disclosures at the end of this document Page 34 of 45 VALUATIONLAB | [email protected] | Valuation Report | September 2020 7 September 2020

CHANGES FROM BASELINE IN NON-VELLUS TARGET AREA HAIR COUNT (TAHC) AT MONTH 6 BREEZULA 5% MINOXIDIL 5% VEHICLE P-VALUE (N=23) (N=25) (N=25) PER PROTOCOL 0.0971 MEAN 12.7 18.8 2.9 - MEDIAN 13.0 19.0 1.0 - STANDARD DEVIATION 32.94 23.67 18.08 - MINUMUM, MAXIMUM -66; 86 -31; 69 -26; 50 - PAIRED T-TEST P-VALUE 0.078 0.0006 0.4274 - SOURCE: VALUATIONLAB, CASSIOPEA Top line results of the POC trial indicate Breezula met both its two pre-defined co-primary efficacy endpoints. Given the patient sample size (~30 per group) the trial was not powered to show statistically superiority. As can be seen in the table above, Breezula showed evident clinical efficacy in increasing hair count. At month 6, Breezula’s TAHC mean change amounted to 12.7, approaching significance with a p-value of 0.078, compared to vehicle that was not effective (p=0.4274) with a mean change of 2.9. Minoxidil showed significance (p=0.0006) in increasing hair count at month 6 with a TAHC mean change of 18.8 compared to vehicle. The magnitude of efficacy for minoxidil (difference from vehicle ~16 TAHC) was slightly higher than for Breezula (difference ~10 TAHC), however, not likely significant considering variability of response in the small sample group. Breezula achieved a similar effect on TAHC as Propecia after only 6 months treatment. HAIR GROWTH ASSESSMENT (HGA) AT MONTH 6 BREEZULA 5% MINOXIDIL 5% VEHICLE P-VALUE (N=23) (N=25) (N=25) PER PROTOCOL 0.2213 +3 = GREATLY INCREASED 1 (4.3%) 0 (0.0%) 0 (0.0%) - +2 = MODERATELY INCREASED 3 (13.0%) 2 (8.0%) 2 (8.0%) - +1 = SLIGHTLY INCREASED 5 (21.7%) 7 (28.0%) 2 (8.0%) - 0 = NO CHANGE 8 (34.8%) 12 (48.0%) 11 (44.0%) - -1 = SLIGHTLY DECREASED 5 (21.7%) 1 (4.0%) 8 (32.0%) - -2 = MODERATELY DECREASED 1 (4.3%) 2 (8.0%) 2 (8.0%) - -3 = GREATLY DECREASED 0 (0.0%) 1 (4.0%) 0 (0.0%) - SOURCE: VALUATIONLAB, CASSIOPEA Breezula showed a positive patient satisfaction with higher HGA scores (39.1%) compared to placebo (16%), which was slightly higher than minoxidil (36%), as can be seen in the table above. This data correlates with the hair count outcomes with all treatment groups. LSR’s (local skin reactions) observed at baseline and during the treatment period for all treatment groups were mostly minimal or mild and decreased over time. Importantly, no significant systemic adverse events were reported. This underlines the excellent safety and tolerability profile of clascoterone, the active pharmaceutical ingredient in Breezula and Winlevi. Overall, the POC results indicate a favorable efficacy, safety and tolerability profile for Breezula in alopecia with the potential of showing greater and sustained efficacy over a longer treatment period than 6 months, however, without the systemic side effects seen in oral anti-androgens such as Propecia.

3) Phase IIb dose-ranging trial: In February 2017, Cassiopea received approval from the German regulator to start a single phase IIb dose-ranging trial of Breezula in men 18-55 years of age with mild to moderate androgenic alopecia in Germany. In December 2017 Cassiopea completed enrollment in 404 men who were randomized to 5 treatment arms (~80 subjects each), including: Breezula 2.5%, 5%, 7.5%, and vehicle BID (applied twice daily), and Breezula 7.5% QD (once daily). Subjects will be treated for a period of 12 months with an interim analysis at 6 months. The co-primary endpoints at month 12 are the same

Please see important research disclosures at the end of this document Page 35 of 45 VALUATIONLAB | [email protected] | Valuation Report | September 2020 7 September 2020 as in the POC trial and include; 1) TAHC (target area hair count); and 2) the subject’s evaluation of treatment benefit via the HGA (hair growth assessment) score.

Positive 6-months interim analysis reported in July 2018… Cassiopea reported positive 6-months interim results for its phase IIb dose ranging trial of Breezula in alopecia in July 2018. In its two co-primary efficacy endpoints, the interim analysis demonstrated statistically significant improvement in TAHC (Target Area Hair Count) and directional improvement for HGA (Hair Growth Assessment) after 6-months treatment of Breezula in 375 male subjects. The phase IIb 6-months interim efficacy results of Breezula in the high dose (7.5% twice daily) are already comparable to Merck & Co’s oral alopecia treatment Propecia (finasteride) after 12-months treatment. Breezula was well tolerated and no serious treatment-related side effects were seen. Propecia has a less favorable safety profile being a systemic (oral) anti-androgen compared to the topical application of Breezula and cannot be used by women.

BREEZULA PHASE IIB DOSE RANGING TRIAL INTERIM TOPLINE RESULTS (6-MONTHS) PER PROTOCOL POPULATION (N=375) BREEZULA 2.5% BID* BREEZULA 5% BID* BREEZULA 7.5% BID*BREEZULA 7.5% QD** VEHICLE CO-PRIMARY ENDPOINTS: 1) TAHC (TARGET AREA HAIR COUNT) MEAN CHANGE FROM BASELINE 13.0134 12.2109 20.7879 11.5182 -0.1114 P-VALUE (VS. BASELINE) <0.0001 <0.0001 <0.0001 <0.0001 0.9660 P-VALUE (VS. VEHICLE) 0.0003 0.0010 <0.0001 0.0017 2) HGA (HAIR GROWTH ASSESSMENT) FAVORABLE SCORE (+1, +2, +3) 56% 58% 62% 61% 49% * BID = BIS IN DIE (TWICE DAILY); **QD = QUAQUE DIE (ONCE DAILY) SOURCE: VALUATIONLAB, CASSIOPEA

…followed by positive 12-months phase IIb dose ranging trial results in April 2019 Breezula demonstrated positive results across 4 dose ranges (Breezula 2.5%, 5% and 7.5% twice daily and 7.5% once daily versus placebo twice daily) in the two co-primary endpoints, including: 1) TAHC (target area hair count) of one square centimeter at month 12 from baseline, and 2) HGA (hair growth assessment) score by a patient questionnaire at month 12 from baseline.

BREEZULA PHASE IIB DOSE RANGING TRIAL TOPLINE RESULTS (12-MONTHS) PER PROTOCOL POPULATION (N=344) BREEZULA 2.5% BID* BREEZULA 5% BID* BREEZULA 7.5% BID*BREEZULA 7.5% QD** VEHICLE CO-PRIMARY ENDPOINTS: 1) TAHC (TARGET AREA HAIR COUNT) MEAN CHANGES FROM VEHICLE 10.2 13.8 14.3 12.7 P-VALUE (VS. VEHICLE) 0.0087 0.0006 0.0003 0.0016 2) HGA (HAIR GROWTH ASSESSMENT) FAVORABLE SCORE (+1, +2, +3) 60.8% 60.0% 61.8% 56.1% 50.0% SECONDARY ENDPOINT: TAHW (TARGET AREA HAIR WIDTH) MEAN CHANGES FROM VEHICLE 521.1 615.0 762.5 658.8 P-VALUE (VS. VEHICLE) 0.0105 0.0034 0.0003 0.0018 * BID = BIS IN DIE (TWICE DAILY); **QD = QUAQUE DIE (ONCE DAILY) SOURCE: VALUATIONLAB, CASSIOPEA

• For the TAHC, statistically highly significant changes versus vehicle (placebo) were observed in all active groups with the highest change in the Breezula 7.5% twice daily (BID) group, which reached statistical significance at all timepoints already starting in the third month (first follow-up visit), while vehicle had a decrease in TAHC, representing the progression of hair loss when left untreated. • More patients in all active groups in the HGA score experienced an increase in hair growth compared to vehicle. The HGA represents the opinion of the patient on hair growth based on a questionnaire at regular time intervals. • Statistically significant changes in all active groups versus vehicle were also seen in TAHW (target area hair width), a secondary endpoint, with the highest change observed in the Breezula 7.5% twice daily group Please see important research disclosures at the end of this document Page 36 of 45 VALUATIONLAB | [email protected] | Valuation Report | September 2020 7 September 2020 Based on the positive phase IIb dose ranging trial, Cassiopea started a phase IIb dose ranging trial of Breezula in ~240 women suffering hair loss in Germany in November 2019. Hair loss in women is a large untapped market with an estimated 30 mn women suffering from alopecia in the US alone, and a key differentiator from Merck & Co’s Propecia (finasteride), which cannot be used by women.

Targeted development pathway until approval and launch In November 2019, Cassiopea had a successful End-of-Phase II meeting with the FDA where it discussed its phase III development plans for Breezula in treating male alopecia. Currently, Cassiopea is finalizing the SPA (Special Protocol Assessment) with the FDA on the phase III program with trials expected to start in H1 2021 (dependent on Covid-19 pandemic).

Assuming a similar phase III development program as Winlevi in acne (~1,400 patients, two pivotal phase III trials in the US and EU, 6 months treatment duration), we believe top line results could become available around Q1 2023. Assuming a normal (~10-12 months) review, approval and launch of Breezula in alopecia is expected to occur in 2024.

US peak sales of EUR 300 mn It is estimated that approximately 54 mn men and women suffer from androgenic alopecia in the US, which amounts to ~16% of the population. As alopecia treatment is typically not reimbursed by health insurers and has to be paid out of pocket by patients, we expect that a relatively low amount of people, we estimate 20%, are on prescription medication for alopecia. We assume a US launch in 2024 with a peak penetration of up to 6%. This may prove conservative if Breezula lives up to the attractive profile seen in the phase IIb dose ranging trials. We assume an annual treatment cost of USD 1,200 per person; similar to the cost of Merck & Co’s branded Propecia (finasteride). Applying a long-term patient compliance rate of 40% and patent protection until 2030, we forecast Breezula peak sales in the US to amount to EUR 303 mn. We account for the costs of Cassiopea’s own US dermatology field force and COGS of 10% and a 20% tax rate benefiting from the Italian patent box regime.

EU/ROW peak sales of EUR 50+ mn Applying the same ~16% prevalence rate, we estimate that around 93 mn men and women suffer from alopecia in the EU/ROW region. In this region, we believe an even lower percentage of people, we estimate 15%, are on prescription medication for alopecia. Here too, most alopecia prescription drugs are not reimbursed. Most prescription drugs In Europe are included on formularies and are fully reimbursed. Consequently, many people are not used to paying out of pocket for prescription drugs. Hence, we assume a low peak penetration rate of 3%, which together with a markedly lower annual treatment cost per patient of EUR 250, a slightly lower 35% patient compliance rate and patent protection until 2028 amounts to peak sales of EUR 81 mn for Breezula in the EU/ROW. We assume upfront and sales milestones from partners of up to EUR 55 mn and 25% royalties on sales.

See our detailed forecasts on the following page.

Please see important research disclosures at the end of this document Page 37 of 45 VALUATIONLAB | [email protected] | Valuation Report | September 2020 7 September 2020 Forecasts & Sensitivity Analysis

BREEZULA - FINANCIAL FORECASTS FOR MALE ALOPECIA

INDICATION ANDROGENIC ALOPECIA (MOST COMMON TYPE OF HAIR LOSS) IN MEN AND WOMEN DOSAGE 7.5% TOPICAL ANHYDROUS SOLUTION APPLIED TWICE A DAY ON SCALP; CHRONIC TREATMENT REQUIRED TO MAINTAIN THE EFFECT PRICING ANNUAL TREATMENT COST PER PATIENT IN: EU/ROW: EUR 350; US: USD 1,200 (SIMILAR TO MERCK & CO'S BRANDED PROPECIA) STANDARD OF CARE PRESCRIPTION (RX) DRUGS INCLUDE SYSTEMIC (TABLETS) PROPECIA (FINASTERIDE), AVODART (DUTASTERIDE), ; RX & OTC: TOPICAL ROGRAINE (MINOXIDIL)

UNIQUE SELLING POINT FIRST-IN-CLASS TOPICAL ANDROGEN RECEPTOR INHIBITOR FOR ALOPECIA WITH GOOD EFFICACY AND AN EXCELLENT SAFETY AND TOLERABITY PROFILE FOR MEN AND WOMEN

7Ps ANALYSIS PATENT PROTECTED BY MEDICAL USE PATENT IN ACNE & ALOPECIA UNTIL 2022 (EU/ROW)/2023 (US) AND PATENT COVERING ALL CRYSTALLINE FORMS UNTIL 2028 (EU/ROW) AND 2030 (US) PHASE PHASE IIB TRIAL STARTED 2017 (404 MALES 18-55 YEARS, 5 ARMS, 12 MONTHS TREATMENT), POSITIVE 6-MONTHS (INTERIM) AND 12-MONTHS RESULTS; START PHASE III H1 2021 PATHWAY 2 PIVOTAL PHASE III TRIALS (US & EU) EACH ~500 PTS.; SAFETY AT LEAST 1,000 PTS.: 1 LT OPEN LABEL SAFETY TRIAL: 300+ PTS. 6 MONTHS; 100 PTS. 12 MONTHS PATIENT POTENTIALLY IMPROVED EFFICACY OVER CURRENT TREATMENTS, LACKS SYSTEMIC EFFECTS, CAN ALSO BE GIVEN TO WOMEN (PROPECIA NOT INDICATED FOR WOMEN) PHYSICIAN NEW, WELL TOLERATED TREATMENT WITH NEW MECHANISM (TOPICAL ANTI-ANDROGEN) WITH POTENTIALLY IMPROVED EFFICACY THAN CURRENT TREATMENTS PAYER LIMITED IMPACT - MOST HAIR LOSS TREATMENTS ARE NOT REIMBURSED AND PAID OUT-OF-POCKET BY PATIENTS PARTNER US: SELL THROUGH SAME DERMATOLOGY SALES INFRASTRUCTURE FOR WINLEVI; EU/ROW: SEEK PARTNER(S) IN RETURN FOR MILESTONES & SALES ROYALTIES ON POSITIVE PHASE III

REVENUE MODEL P2B: Q4 P3 RESULTS FILING LAUNCH EUROPE / REST OF WORLD - SOLD BY PARTNER(S) 2018E 2019E 2020E 2021E 2022E 2023E 2024E 2025E 2026E 2027E 2028E 2029E PERSONS AFFECTED BY ALOPECIA (MN) 98 100 102 104 106 109 111 113 115 118 120 122 GROWTH (%) 2% 2% 2% 2% 2% 2% 2% 2% 2% 2% 2% 2% ON PRESCRIPTION (%) 15% 15% 15% 15% 15% 15% 15% 15% 15% 15% 15% 15% PERSONS ON PRESCRIPTION (MN) 14.7 15.0 15.3 15.7 16.0 16.3 16.6 16.9 17.3 17.6 18.0 18.3 PENETRATION (%) 0% 0% 0% 0% 0% 0% 0.3% 2% 3% 4% 3% 2% PERSONS ON TREATMENT 0 0 0 0 0 0 41'527 381'216 561'659 661'029 471'975 336'990 COST OF THERAPY PER YEAR (EUR) 350 350 350 350 350 350 350 350 350 350 350 350 PATIENT COMPLIANCE (%) 35% 35% 35% 35% 35% 35% 35% 35% 35% 35% 35% 35% SALES (EUR MN) - BOOKED BY PARTNER(S) 0 0 0 0 0 0 5 47 69 81 58 41 CHANGE (%) 818% 47% 18% -29% -29% ROYALTY (%) 25% 25% 25% 25% 25% 25% 25% 25% 25% 25% 25% 25% ROYALTIES (EUR MN) 0 0 0 0 0 0 1 12 17 20 14 10 UPFRONT & MILESTONE PAYMENTS (EUR MN) 0 0 0 0 15 0 30 0 10 R&D COSTS (EUR MN) -3 -2 -4 -11 -8 -4 -2 -2 0 0 0 0 PROFIT BEFORE TAX (EUR MN) -3 -2 -4 -11 7 -4 29 10 17 30 14 10 TAX RATE (%) 0% 0% 0% 0% 20% 20% 20% 20% 20% 20% 20% 20% TAXES (EUR MN) 0 0 0 0 -1 1 -6 -2 -3 -6 -3 -2 PROFIT (EUR MN) -3 -2 -4 -11 6 -3 23 8 14 24 12 8

UNITED STATES - SOLD BY CASSIOPEA SALES FORCE 2018E 2019E 2020E 2021E 2022E 2023E 2024E 2025E 2026E 2027E 2028E 2029E PERSONS AFFECTED BY ALOPECIA (MN) 55 56 57 58 59 60 62 63 64 65 67 68 GROWTH (%) 2% 2% 2% 2% 2% 2% 2% 2% 2% 2% 2% 2% ON PRESCRIPTION (%) 20% 20% 20% 20% 20% 20% 20% 20% 20% 20% 20% 20% PERSONS ON PRESCRIPTION (MN) 10.9 11.2 11.4 11.6 11.8 12.1 12.3 12.6 12.8 13.1 13.3 13.6 PENETRATION (%) 0% 0% 0% 0% 0% 0% 0.3% 3% 4% 5% 5% 5% PERSONS ON TREATMENT 0 0 0 0 0 0 30'791 345'474 544'593 686'187 699'911 713'909 COST OF THERAPY PER YEAR (EUR) 1'022 1'071 1'076 1'063 1'063 1'063 1'063 1'063 1'063 1'063 1'063 1'063 PATIENT COMPLIANCE (%) 40% 40% 40% 40% 40% 40% 40% 40% 40% 40% 40% 40% SALES (EUR MN) - BOOKED BY CASSIOPEA 0 0 0 0 0 0 13 147 231 292 298 303 CHANGE (%) 1022% 58% 26% 2% 2% COGS (%) 25% 20% 15% 15% 15% 15% COGS (EUR MN) 0 0 0 0 0 0 -3 -29 -35 -44 -45 -46 M&S (%) 0% 0% 0% 0% 0% 35% 30% 30% 30% 30% 30% M&S COSTS (EUR MN) 0 0 0 0 0 -4 -49 -44 -69 -88 -89 -91 PROFIT BEFORE TAX (EUR MN) 0 0 0 0 0 -4 -39 73 127 160 164 167 TAX RATE (%) 0% 0% 0% 0% 20% 20% 20% 20% 20% 20% 20% 20% TAXES (EUR MN) 0 0 0 0 0 1 8 -15 -25 -32 -33 -33 PROFIT (EUR MN) 0 0 0 0 0 -4 -31 59 102 128 131 134

2018E 2019E 2020E 2021E 2022E 2023E 2024E 2025E 2026E 2027E 2028E 2029E GLOBAL SALES (EUR MN) 0 0 0 0 0 0 18 194 300 373 355 345 CHANGE (%) 965% 55% 24% -5% -3%

GLOBAL PROFIT (EUR MN) -3 -2 -4 -11 6 -7 -8 66 116 153 142 142 CHANGE (%) 108% -33% 108% 175% -151% -220% 14% -964% 74% 32% -7% 0%

WACC (%) 7% NPV TOTAL PROFIT (CHF MN) 467 NUMBER OF SHARES (MN) 11.7 NPV PER SHARE (CHF) 40 SUCCESS PROBABILITY 65% (PHASE III SUCCESS PROBABILITY) RISK ADJUSTED NPV PER SHARE (CHF) 26

SENSITIVITY ANALYSIS WACC (%) CHF / SHARE 5.5 6.0 6.5 7.0 7.5 8.0 8.5 100% 45 43 42 40 39 37 36 95% 43 41 40 38 37 35 34 90% 41 39 38 36 35 33 32 85% 38 37 36 34 33 32 30 SUCCESS PROBABILITY 80% 36 35 33 32 31 30 29 75% 34 33 31 30 29 28 27 70% 32 30 29 28 27 26 25 65% 29 28 27 26 25 24 23 60% 27 26 25 24 23 22 21 ESTIMATES AS OF 7 SEPTEMBER, 2020 SOURCE: VALUATIONLAB ESTIMATES

Please see important research disclosures at the end of this document Page 38 of 45 VALUATIONLAB | [email protected] | Valuation Report | September 2020 7 September 2020 Unique Selling Point Potential to become the first and only topical anti-androgen approved for androgenic alopecia, the most common type of hair loss in men and women. Breezula reduces the high concentrations of dihydrotestosterone (DHT) that cause hair loss and lacks the systemic side effects of Merck & Co’s Propecia (finasteride), the only approved oral anti-androgen for alopecia. Breezula can be used in both men and women, while Propecia use is limited to men.

7P's Analysis Patent: A granted medical use patent in alopecia protects Breezula until 2022 (EU/ROW) and 2023 (US). Additionally, there is a granted patent covering all crystalline forms of the active pharmaceutical ingredient (API) clascoterone providing protection until at least 2028 (EU/ROW) and 2030 (US), which we assume in our forecasts. Breezula and Winlevi contain the same API (clascoterone), albeit in different formulations and dose strengths.

Phase: Breezula in currently in phase IIb (dose ranging) clinical development consisting of a single 12 months trial with an interim analysis after 6 months in men with mild to moderate androgenic alopecia. In July 2018 positive interim (6-months) phase IIb dose ranging topline results were reported followed by positive 12-months topline results in April 2019. Triggered by these results, a phase IIb dose ranging trial in women with alopecia started in November 2019 with results due mid 2021, potentially untapping a large market opportunity. In H1 2021, Cassiopea expects to start phase III development of Breezula in male alopecia (dependent on Covid-19 pandemic).

Pathway: To gain regulatory approval, two pivotal phase III trials will be needed. Depending on the results of the phase IIb trial, we assume a similar trial size and treatment duration and normal regulatory review (~10-12 months) for Breezula in alopecia as Winlevi for acne. Requirements for safety evaluation may be lower on successful safety evaluation of Winlevi in acne. We conservatively assume first launches in 2024.

Patient: Breezula is convenient twice-daily topical solution that is well tolerated without the side effects of the oral anti-androgen Propecia (e.g. mood changes, loss of libido, male breasts) but with similar or improved efficacy, and can be used both in men and women.

Physician: First topical anti-androgen with good efficacy but lacking the typical systemic side effects of Propecia, which should boost patient compliance for this chronic treatment and lead to long-lasting treatment outcomes. Breezula would be the first effective anti- androgen treatment that can also be given to women with alopecia.

Payer: Higher patient compliance, better treatment outcomes and less side effects lead to substantially lower additional treatment costs next to costs to treat the psychological effects of hair loss. Note that treatment is often not reimbursed and paid out of pocket.

Partner: In the US, we assume Cassiopea to commercialize and maximize the value of Breezula using the same specialist dermatology sales infrastructure it built up for Winlevi. The approval of Breezula would provide a significant boost to profitability. Outside the US, the company plans to seek partners or distributors in return for upfront and commercialization milestones and royalties on sales.

Please see important research disclosures at the end of this document Page 39 of 45 VALUATIONLAB | [email protected] | Valuation Report | September 2020 7 September 2020 Androgenic Alopecia Market Androgenic alopecia is the most common type of hair loss. In the US alone, an estimated 35 mn men and 21 mn women experience hair loss. Statista estimates that the value of the non-surgical alopecia treatment market worldwide amounted to USD 2 bn in 2010 and is expected to increase to around USD 2.8 bn by 2017. Hair restoration surgery is a more invasive but relatively common treatment for alopecia with an estimated value of USD 1.9 bn. Global sales for alopecia treatments amounted to approximately USD 600 mn in 2013 according to EvaluatePharma. Despite the very high incidence of alopecia, Merck & Co’s Propecia (finasteride) and Pfizer’s Rogaine (minoxidil) are the only two approved prescription drugs for hair loss in the US. GlaxoSmithKline’s Avodart (dutasteride), which belongs to the same class as Propecia, was only approved for alopecia in a few such as South Korea and Japan. The current size of the prescription market is of limited relevance as Propecia and Rogaine are widely available as generics, while Rogaine is also available over-the-counter. Moreover, both drugs have limited effectiveness (Rogaine) with use often hampered by (systemic) side effects or cannot be used by women (Propecia). ALOPECIA - KEY FACTS MARKET SIZE USD ~2 BN (NON-SURGICAL TREATMENTS); USD 1.9 BN (SURGICAL HAIR RESTORATION) PREVALENCE MN GLOBALLY, >50 MN US, >90 MN EU/ROW INCIDENCE AFFECTS ~16% OF POPULATION; INCREASES WITH AGE E.G. ~40% OF MEN HAVE HAIR LOSS BY AGE 35, 65% BY AGE 60, AND 80% BY AGE 80; AFFECTING UP TO 40% OF WOMEN UNDERLYING CAUSE HAIR LOSS IS MULTIFACTORIAL WITH EVIDENCE SUGGESTING IT MOST LIKELY FUNCTIONS BY A GENETIC PREDISPOSITION. THE PATHOPHYSIOLOGY IS PRIMARILY HORMONE-DRIVEN. ANDROGENS AND ANDROGEN RECEPTORS ARE THE INITIATING CAUSE OF ANDROGENIC ALOPECIA. ANDROGENS REGULATE SEBACEOUS GLANDS (OVERPRODUCTION LEADS TO ACNE), APOCRINE HAIR GROWTH AND LIBIDO. WITH AGE THEY STIMULATE FACIAL HAIR GROWTH BUT SUPPRESS IT AT THE TEMPLES AND SCALP VERTEX (REFERRED TO AS THE "ANDROGEN PARADOX") SYMPTOMS - CLASSIC MALE-: BEGINS ABOVE THE TEMPLES AND VERTEX OF THE SCALP, AS IT PROGRESSES A RIM OF HAIR AT THE SIDES AND REAR OF THE HEAD REMAINS - FEMALE-PATTERN HAIR LOSS: TYPICALLY CAUSES THINNING WITHOUT HAIRLINE RECESSION, FEMALE ANDROGENIC ALOPECIA RARELY LEADS TO TOTAL HAIR LOSS DRUG CLASS (KEY BRANDS) - 5-ALPHA REDUCTASE INHIBITORS: 1) FINASTERIDE (PROPECIA); 2) DUTASTERIDE (AVODART) - TOPICAL VASODILATOR: MINOXIDIL (ROGAINE) MAJOR PLAYERS (KEY BRANDS) - MERCK & CO (PROPECIA) - GLAXOSMITHKLINE (AVODART) - PFIZER (ROGAINE) SOURCE: VALUATIONLAB, NIH, WHO, MEDSCAPE, AM. ACAD. DERMATOLOGY, EJD, MEDLINE Classic male-pattern hair loss (MPHL) also known as androgenic alopecia (AGA) is the most common type of hair loss. It is characterized by progressive thinning of the scalp hair and a reduction in hair density and diameter. Classic MPHL presents with a typical pattern of bi- temporal and frontal recession of the hairline or scalp vertex thinning, which gradually extends to the back. As it progresses typically a rim of hair at the sides and rear of the head remains. The prevalence increases with age, from 30% for men in their 30s to 50% for men in their 50s. Similarly, female-pattern hair loss (FPHL) is the most common type of hair loss in women. It usually causes thinning without hairline recession and rarely leads to total hair loss. The incidence and prevalence of MPHL is dependent on age and race. Chinese, Japanese, and African American people are affected less than Caucasians. Its incidence increases by age. Prevalence values have variable ranges from 16–96%, depending on the age group and whether or not mild forms of MPHL are included. Prevalence values for female-pattern hair loss are comparable to male-pattern hair loss.

Norwood Hamilton Classification for men, Ludwig scale for women The severity of MPHL is based on the Norwood Hamilton Classification, which takes into account bi-temporal and scalp vertex hair loss. FPHL is evaluated based on the Ludwig scale, which ranges from I-III. These classification systems differ based on the fact that hair loss and thinning in men most commonly occurs in an orderly fashion and involves the

Please see important research disclosures at the end of this document Page 40 of 45 VALUATIONLAB | [email protected] | Valuation Report | September 2020 7 September 2020 temporal and vertex region; diffuse thinning and loss of density with a normal distribution and maintenance of the frontal hairline is often seen in women.

Androgens such as testosterone and dihydrotestosterone play a role in hair loss MPHL is multifactorial and is caused by a combination of genetics and the effects of androgens such as the male hormone testosterone and its derivative dihydrotestosterone (DHT). The cause in FPHL remains unclear. Androgens are important in male sexual development around birth and at puberty. They regulate e.g. sebaceous glands (overproduction of sebum leads to acne), pubic hair growth, and libido. With increasing age, androgens stimulate hair growth on the face, but can suppress it at the temples and scalp vertex, a condition that has been referred to as the “androgen paradox”. Men typically have higher 5-alpha-reductase, lower total testosterone, higher unbound/free testosterone, and higher free androgens, including DHT. 5-alpha-reductase converts free testosterone into DHT and is highest in the scalp and prostate gland. DHT is most commonly formed at the tissue level by 5α-reduction of testosterone.

Current treatment limited to two drugs with limited efficacy and side effects Prescription treatment of alopecia in the US and EU is limited to only two approved drugs: 1. Propecia was originally used in higher doses for the treatment of enlarged prostate (benign prostate hyperplasia) in adult men and subsequently approved for treating alopecia. Propecia works by blocking the formation of 5-alpha-reductase and thereby DHT in hair follicles at the top of the scalp. Propecia is a once daily prescription-only tablet. Full effects of daily use of Propecia can take three months or more to appear; stopping treatment leads to reversal of effect within 12 months. An FDA analysis of side effects revealed a wide range of sexual side effects (e.g. erectile dysfunction, libido disorders). These problems persisted for an average of 40 months after the men ceased treatment. Propecia is not approved in women because it can cause birth defects. GlaxoSmithKline’s Avodart (dutasteride) belongs to the same drug class. Global sales peaked at USD 450 mn prior to patent expiry in 2013. 2. Rogaine is a topical vasodilator that stimulates already-damaged hair follicles to produce normal hair. Rogaine works on hair follicles to reverse their shrinking process to stimulate new hair growth. The effects are most promising in younger people who are just beginning to show signs of balding or who have small bald patches. Rogaine is a solution that is applied to balding spots twice daily and must be continued indefinitely; hair loss will recur if treatment is stopped. More than 50% of users claim that it can thicken hair and slow hair loss, but it is not considered effective in men who already have extensive alopecia. Side effects appear to be minimal, but in some users the medication may cause skin irritation. The drug is approved for use in men and women and is also available over-the-counter at a pharmacy or drug store. Global sales peaked at USD 190 mn in 1996.

Lack of new market entrants despite high incidence of alopecia Despite the high incidence of alopecia, there are limited treatments expected to enter the market due to the lack of research in this area. Cassiopea’s Breezula (clascoterone) is most advanced completing phase IIb development (positive 6-months interim and 12-months results announced). JAK (Janus kinase) inhibitors such as Novartis’ Jakafi (ruxolitinib) and Pfizer’s Xeljanz (tofacitinib) have shown promising effects in small open-label trials in treating alopecia areata (spot baldness), a less common autoimmune hair loss disorder.

Please see important research disclosures at the end of this document Page 41 of 45 VALUATIONLAB | [email protected] | Valuation Report | September 2020 7 September 2020 Income Statement

CASSIOPEA SHARE PRICE (CHF) 53.00

IFRS

INCOME STATEMENT (EUR MN) 2019 2020E 2021E 2022E 2023E 2024E 2025E 2026E 2027E 2028E 2029E

PRODUCT SALES (INCL. PARTNER SALES) 0 0 32 112 196 282 540 747 945 1'023 1'090 CHANGE (%) 246% 76% 44% 92% 38% 26% 8% 6%

PRODUCT REVENUES (BOOKED BY CASSIOPEA - USA SALES) 0 0 32 99 156 218 391 528 654 711 756 CHANGE (%) 206% 59% 40% 79% 35% 24% 9% 6%

MILESTONES 0 0 20 45 30 40 30 10 25 0 0

NET ROYALTIES TO CASSIOPEA 0 0 0 3 10 16 36 51 64 66 69 CHANGE (%) 206% 60% 129% 41% 25% 3% 4%

OTHER INCOME 1 0 0 0 0 0 0 0 0 0 0

REVENUES (EXCL. PARTNER SALES) 1 0 52 147 196 274 457 589 744 777 825 CHANGE (%) -25% -85% 52205% 181% 34% 40% 67% 29% 26% 4% 6%

COGS 0 0 -5 -7 -8 -14 -42 -50 -62 -65 -68

GROSS PROFIT 1 0 47 140 189 261 416 540 682 712 757 CHANGE (%) -25% -85% 47374% 195% 35% 38% 60% 30% 26% 4% 6% MARGIN (%) 100.0% 100.0% 90.8% 95.3% 96.0% 95.1% 90.9% 91.6% 91.7% 91.6% 91.7%

R&D -8 -9 -20 -23 -18 -12 -12 -2 -2 -2 -2 CHANGE (%) -36% 14% 123% 13% -22% -34% 0% -82% 2% 2% 2%

S,G&A -4 -6 -65 -69 -78 -134 -136 -172 -209 -222 -223 CHANGE (%) 105% 44% 1063% 7% 13% 71% 2% 26% 21% 6% 1% AS % OF REVENUES 565% 5586% 124% 47% 40% 49% 30% 29% 28% 29% 27%

TOTAL OPERATING EXPENSES -11.754 -15 -90 -99 -104 -159 -189 -224 -273 -289 -293 CHANGE (%) -17% 24% 516% 10% 5% 53% 19% 18% 22% 6% 1%

EBIT -11 -14 -38 48 93 115 268 366 471 488 532 CHANGE (%) -16% 31% 159% -228% 93% 24% 133% 36% 29% 4% 9% MARGIN (%) -1613% ###### -72% 33% 47% 42% 59% 62% 63% 63% 64%

EBITDA -11 -14 -37 48 93 115 268 366 471 488 532 CHANGE (%) -16% 31% 160% -228% 93% 24% 133% 36% 29% 4% 9% MARGIN (%) -1605% ###### -72% 33% 47% 42% 59% 62% 63% 63% 64%

NET FINANCIAL INCOME / (EXPENSES) -1 -1 0 0 0 0 0 1 2 3 4

PROFIT BEFORE TAXES -12 -16 -37 48 93 115 268 367 473 491 536 CHANGE (%) -8% 36% 136% -228% 93% 24% 133% 37% 29% 4% 9%

TAXES 0 0 0 -11 -20 -24 -55 -74 -95 -99 -107 TAX RATE (%) 0% 0% 0% 22% 21% 21% 20% 20% 20% 20% 20%

NET PROFIT/(LOSS) -12 -16 -37 37 73 91 213 293 378 392 428 CHANGE (%) -8% 36% 136% -200% 95% 25% 134% 37% 29% 4% 9% MARGIN (%) -1706% ###### -72% 25% 37% 33% 47% 50% 51% 50% 52%

PROFIT/(LOSS) PER SHARE (IN EUR) -1.09 -1.48 -3.49 3.48 6.81 8.48 19.86 27.21 35.15 36.48 39.84 PROFIT/(LOSS) PER SHARE (IN CHF) -1.17 -1.59 -3.75 3.75 7.33 9.14 21.38 29.30 37.85 39.28 42.90 ESTIMATES AS OF 7 SEPTEMBER, 2020 SOURCE: VALUATIONLAB ESTIMATES

H1 2020 results in a nutshell: H1 2020 H1 2019 Revenue: EUR 0 mn EUR 0 mn R&D: EUR -2.5 mn EUR -4.7 mn S, G&A: EUR -2.2 mn EUR -1.6 mn Operating result: EUR -4.7 mn EUR -6.3 mn Net result: EUR -5.3 mn EUR -6.5 mn Cash and cash equivalents: EUR 8.5 mn EUR 0.8 mn

NOTE: We assume conservatively a corporate tax rate of 20% instead of the current 34% basic rate in Italy, thanks to the Italian patent box regime exempting half of income related to intellectual property held in Italy.

Please see important research disclosures at the end of this document Page 42 of 45 VALUATIONLAB | [email protected] | Valuation Report | September 2020 7 September 2020 Ratios | Balance Sheet | Cash Flow Statement

CASSIOPEA SHARE PRICE (CHF) 53.00

IFRS

RATIOS 2019 2020E 2021E 2022E 2023E 2024E 2025E 2026E 2027E 2028E 2029E P/E -33.3x -14.1x 14.1x 7.2x 5.8x 2.5x 1.8x 1.4x 1.3x 1.2x P/S 5291.1x 10.1x 3.6x 2.7x 1.9x 1.2x 0.9x 0.7x 0.7x 0.6x P/NAV 10.9x 62.5x 9.8x 3.7x 2.1x 1.0x 0.6x 0.4x 0.3x 0.2x EV/EBITDA -38.9x -15.0x 11.7x 6.1x 4.9x 2.1x 1.5x 1.2x 1.2x 1.1x

PER SHARE DATA (CHF) 2019 2020E 2021E 2022E 2023E 2024E 2025E 2026E 2027E 2028E 2029E EARNINGS -1.17 -1.59 -3.75 3.75 7.33 9.14 21.38 29.30 37.85 39.28 42.90 CHANGE (%) -9% 36% 136% -200% 95% 25% 134% 37% 29% 4% 9% CASH 0.07 4.54 0.54 5.11 14.15 25.45 52.05 88.54 135.69 184.60 238.01 CHANGE (%) -85% 6415% -88% 839% 177% 80% 105% 70% 53% 36% 29% DIVIDENDS 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 PAYOUT RATIO (%) 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% NET ASSET VALUE 0.37 4.85 0.85 5.41 14.45 25.75 52.36 88.84 135.99 184.91 238.32 CHANGE (%) -75% 1198% -83% 539% 167% 78% 103% 70% 53% 36% 29%

BALANCE SHEET (EUR MN) 2019 2020E 2021E 2022E 2023E 2024E 2025E 2026E 2027E 2028E 2029E NET LIQUID FUNDS 0.696 45 5 51 141 254 520 884 1'355 1'843 2'376

TOTAL ASSETS 16 61 21 66 157 269 535 899 1'370 1'858 2'392

TOTAL SHAREHOLDERS' EQUITY 4 48 8 54 144 257 523 887 1'358 1'846 2'379 TOTAL SHAREHOLDERS' EQUITY (CHF MN) 4.0 52.1 9.1 58.2 155.4 276.8 562.9 955.0 1461.9 1987.7 2561.9 - CHANGE IN % -74% 1198% -83% 539% 167% 78% 103% 70% 53% 36% 29% - RETURN ON EQUITY -314% -33% -443% 69% 51% 35% 41% 33% 28% 21% 18%

TOTAL EQUITY 4 48 8 54 144 257 523 887 1'358 1'846 2'379

FINANCIAL DEBT 0 0 0 0 0 0 0 0 0 0 1

EMPLOYEES 12 30 60 120 126 132 139 146 153 161 169 - CHANGE IN % 50% 150% 100% 100% 5% 5% 5% 5% 5% 5% 5%

CASH FLOW STATEMENT (EUR MN) 2019 2020E 2021E 2022E 2023E 2024E 2025E 2026E 2027E 2028E 2029E PROFIT / (LOSS) BEFORE TAXES -12 -16 -37 48 93 115 268 367 473 491 536 DEPRECIATION & AMORTIZATION 0.055 0.059 0.064 0.069 0.075 0.081 0.087 0.094 0.102 0.110 0.119 OTHER NON-CASH ITEMS 0 CASH FLOWS FROM OPERATING ACTIVITIES -11 -16 -37 48 93 115 268 367 473 491 536 CASH FLOWS FROM INVESTING ACTIVITIES -3 -3 -3 -3 -3 -3 -3 -3 -3 -3 -3 FREE CASH FLOW -14 -18 -40 46 90 113 266 364 471 488 533 CASH FLOWS FROM FINANCING ACTIVITIES 10 63 0 0 0 0 0 0 0 0 0 UNREALISED FX GAIN/(LOSSES) ON CASH & CASH EQ. 0 CHANGE IN LIQUID FUNDS -4 45 -40 46 90 113 266 364 471 488 533 ESTIMATES AS OF 7 SEPTEMBER, 2020 SOURCE: VALUATIONLAB ESTIMATES

NOTE: The cash position of EUR 8.5 mn (30 June 2020) and the EUR 6 mn undrawn Cosmo credit line provides cash into early 2021 sufficient to: 1) prepare for US launch of Winlevi in treating acne; 2) continue the phase IIb dose ranging trial of Breezula in women with alopecia; 3) prepare the phase III trial of Breezula in male alopecia; and 4) optimize the formulation and produce a new batch of API to be used as active substance for the new clinical batch of gel of CB-06-01 for treating acne.

Cassiopea completed a EUR 23.3 mn capital increase in June 2020 to replenish its equity as Italian law does not allow companies to operate with negative equity.

An M&A transaction with a US dermatology player or additional funding is needed to commercialize Winlevi through an own specialist field force in the US and develop the other three key pipeline projects up to full development. In H2 2020, we assume an M&A transaction or a US listing (e.g. NASDAQ) of Cassiopea to raise the necessary funds.

Please see important research disclosures at the end of this document Page 43 of 45 VALUATIONLAB | [email protected] | Valuation Report | September 2020 7 September 2020 APPENDIX Pharmaceutical life cycle To determine the value of a prescription (bio)pharmaceutical compound, it is critical to understand its life cycle. Fortunately, all compounds follow the same life cycle. The clock starts ticking after the compound is patented, providing 20 years of protection from generic competition. Market exclusivities can extend this protection period. Additional protection is provided by orphan drug status (10 years in EU, 7 years in US). The average Research & Development Phase takes 8-14 years, leading to an effective Return Phase of 6-12 years. The Development Phase has 3 distinct Phases, focused on safety (Phase I), dose (Phase II) and efficacy/clinical benefit (Phase III). The compound is filed for registration/approval at the FDA (US) or EMA (EU). The Return Phase is characterized by a star, cash cow, and mature phase. After patent expiry (or loss of market exclusivity) generic manufacturers may copycat the branded prescription drug, at significantly lower costs, leading to a sales and earnings implosion of the branded drug.

PHARMACEUTICAL LIFE CYCLE! RESEARCH & DEVELOPMENT PHASE! RETURN PHASE! EXPIRY! SAFETY! DOSE! EFFICACY / APPROVAL! SALES! ANIMALS! ~10s! ~ 100s! ~ 100s – 1,000s p<0.05! BIO-SIMILARS ! PTS! ! ! ! ! !

GENERICS! PHASEII PHASEI PRE-CLINICAL PHASEIII REGISTRATION BREAKEVEN! 0! ~ 10-14! 20! YEARS! COSTS!

SUCCESS <5%! ~10%! 10% -45%! 40% - 65%! ~80%! “STAR”! “CASH COW”! “MATURE”! “DOG”!

! RISK-ADJUSTED DISCOUNTED CASH FLOW " ! P/E >20x! P/E ~10-15x! P/E > 6-10x! P/E ~ 15x!

SOURCE: VALUATIONLAB! Success Probabilities & Royalties In our risk-adjusted NPV calculations, we use standardized success probabilities based on historical clinical success rates. The success rate increases as the project progresses through development. Sales and earnings forecasts are based on the clinical and competitive profile of the compound. The more advanced the compound is, the more accurate the forecasts become as the target market can be defined. We conservatively exclude projects that lack Phase IIa proof-of-concept data in our valuations. SUCCESS PROBABILITIES & ROYALTIES SUCCESS COSTS ROYALTIES DEVELOPMENT STAGE AIM WHAT / WHO PROBABILIT (USD MN) (%) PRE-CLINICAL SAFETY & PHARMACOLOGY DATA LAB TESTS / ANIMALS - NO HUMANS! < 5 3 PHASE I SCREENING FOR SAFETY HEALTHY VOLUNTEERS (10'S) 15 3 < 5 PHASE IIA PROOF-OF-CONCEPT PATIENTS WITH DISEASE (10'S) 30 PHASE II ESTABLISH THE TESTING PROTOCOL PATIENTS WITH DISEASE (100'S) 33 5 5-15 PHASE IIB OPTIMAL DOSAGE PATIENTS WITH DISEASE (100'S) 45 5-10 PHASE III EVALUATE OVERALL BENEFIT/RISK PATIENTS WITH DISEASE (1,000'S) 66 > 20 10-25 REGULATORY FILING DETERMINE PHYSICIAN LABELING CLINICAL BENEFIT ASSESSMENT 80 APPROVAL MARKETING AUTHORIZATION PHYSICIANS FREE TO PRESCRIBE 100 15-30 SOURCE: VALUATIONLAB,CLINICALTRIALS.GOV Please see important research disclosures at the end of this document Page 44 of 45 VALUATIONLAB | [email protected] | Valuation Report | September 2020 7 September 2020

Important Research Disclosures valuationLAB AG is an independent life science research boutique with no securities or banking services. The company does not hold any positions in the securities mentioned in this report.

Our financial analyses are based on the "Directives on the Independence of Financial Research" issued by the Swiss Bankers Association in January 2008.

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Achievement of the (risk-adjusted) Fair Value Recipients of this research report should seek financial advice regarding the appropriateness of investing in any security; financial instrument or strategy discussed in this report and should understand that future (risk-adjusted) fair values may not be realized. The (risk-adjusted) fair value estimate is based on a number of factors and assumptions. It should be noted that if any of these are inaccurate or are not achieved, it might be necessary to adjust the fair value. Investors should note that income from such securities or financial instruments or strategies, if any, may fluctuate and that each security’s price or value may rise or fall. Accordingly, investors may receive back less than originally invested. Foreign currency rates of exchange may adversely affect the value, price or income of any security or related investment mentioned in this research report. In addition, investors in securities such as ADRs, whose values are influenced by the currency of the underlying security, effectively assume currency risk. Fair values for stocks under coverage are calculated by submitting the analyst(s)’ financial projections to one or more of a variety of valuation approaches. These include “absolute” methodologies such as DCF and NPV modeling, as well as relative methodologies such as peer group and market valuation multiple comparisons.

Risk Qualification Speculative less than 1 year cash and breakeven beyond 1 year High Risk profitable within 2 years and 1 approved product/key indication (patent expiry > 5 years) Medium Risk profitable and/or sales from at least 2 marketed products/key indications (patent expiry > 5 years) Low Risk profitable and sales from >2 marketed products/key indications (patent expiry > 5 years)

Analyst Certification The research analyst(s) identified on the first page of this research report hereby attest that all of the views expressed in this report accurately reflect their personal views about any and all of the subject securities or issuers. In order to ensure the independence of our research analysts, and their immediate household, are expressly prohibited from owning any securities in the valuationLAB AG research universe, which belong to their sector(s). Neither the research analyst nor his/her immediate household serves as an Officer, Director or Advisory Board Member of Quintet Private Bank (Schweiz) AG or Cassiopea S.p.A.

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Please see important research disclosures at the end of this document Page 45 of 45 VALUATIONLAB | [email protected] | Valuation Report | September 2020