Vistin Pharma – Corporate Presentation
October 2016
Content
Introduction to Vistin Pharma
Operational and financial update
Summary & outlook
Appendix
Snapshot Vistin at a glance
Summary Presence in c.40 countries
Established in June 2015, when the company was spun off from Weifa and listed on the Oslo Axess stock exchange Norway Leading producer of active ingredients (API) and finished products for diabetes medicine (metformin) and opiates for use in pain relief and cough medicine Vietnam Japan Overview Philippines Significant contract manufacturer (CMO) of solid dosage form (tablets) products Singapore Established client portfolio comprising mix of Big Pharma and leading generics players Long and successful track record with production of codeine API since 1950 and production of metformin since 1969 Headquarters
Headquarters Oslo, Norway Sales by geography (2015A)1
Financials Revenue: NOK 213m Other 15%
(YTD Q2’16) EBITDA: NOK 24m Japan 5% Norway 31%
Metformin (B2B): The company manufactures about 8% of the global consumption of metformin API, the active ingredient in the first-line treatment of diabetes UK 10% Business Opioids (B2B): two key products, codeine phosphate (used in analgesics and cough syrup) and pholcodine areas (used in cough syrup) Germany 11% Swizterland Algeria 17% CMO: Agreement with Weifa, the largest OTC player in Norway, for the production of Weifa’s key pain relief 11% brands
Sales by product type (2015A)2,3 Key
geographies
FDF Metformin Employees c.155 39% API 44% Two manufacturing facilities in Kragerø, Norway
− Dedicated metformin plant approved by all significant international bodies including the U.S. Food and Opioids Manufacturing Drug Administration (FDA) API 17% − Finished Dose Forms (FDF) and opioids APIs manufacturing site approved by the European Medicines Agency (EMA)
Notes 1 Revenue figures for 2015 consist of B2B segment for Weifa to 31 May, B2B segment for Vistin from 1 June, and annualised revenue for CMO segment 2 Includes Weifa contract. 3. Excludes sale of raw materials
Vistin’s key milestones Long and successful track record of producing high quality APIs and FDFs
Vistin’s evolution
Weifa Vistin Pharma
1940: 1952: 1969: 1986: 2014: 2015: Weiders First Launch of Production Codeine Vistin Pharma Farmasoytiske production metformin API start of Ibux tablets added established as a A/S founded by facility opened to the product separate company Olaf Weider in Kragerø portfolio (Gruveveien)
1940 - 2014 2015 2016
1960: 2002: 2016: 1950: Production 1977: New FDA-approved 2014: Announcement of Production start of Production metformin facility Weifa AS significant expansion start of Paralgin start of opened in Kragero acquired by in capacity at codeine API Forte Paracet (Fikkjebakke) Aqualis ASA metformin plant in Kragerø
Content
Introduction to Vistin Pharma
Operational and financial update
Summary & outlook
Appendix
Vistin – a leading producer of high quality metformin First line treatment for type 2 diabetes
Fully integrated metformin supplier One of the few European manufacturers of metformin HCl
Producer of three different types of metformin products: Leading independent producer Global manufacturing capacity (MT) globally with 4th largest capacity Metformin HCl (bulk API, “fine, dry powder”) Vistin Pharma Metformin DC (“directly compressible”, a granulated pretablet form) One of only two Western 8% European manufacturers of Metformin tablets (FDF, ready for consumption) metformin HCl and the only one of metformin DC Vertically integrated manufacturer active throughout the entire value chain across API and FDF ~40,000MT
Long and established history having been involved in the production of metformin API since 1969
Positioned as a premium producer in a low cost competitive market 1,2 Sales to leading international pharmaceutical companies Strong track record of growth Attractive contract model based on long-term strategic partnerships Revenue, NOKm with key customers 2011-2015 CAGR 13% State-of-the-art plant in Kragerø with expansion potential Certified by all significant international regulatory bodies 176 156 Currently the only company with a listed metformin Drug Master File 149 (DMF) in the USA and Japan 108 116 102 Strategically positioned with close proximity to key customers Excellent customer support with short lead times
Delivery time less than 24 hours Competitive edge over Asian producers 2011 2012 2013 2014 2015 6M 2016 Provision of customised products and services Notes 1 Revenue figures for 2011 – 2014 and for 2015 to 31 May are for Weifa 2 Includes sale of raw materials 10
Diabetes - a global epidemic Type 2 diabetes is one of the greatest challenges to healthcare systems around the world – and metformin is expected to maintain its position as the gold standard treatment in the foreseeable future
Estimated global growth in diabetes
387 million people live with Growth 82% 86% 65% 51% 47% 28% 33% 53% diabetes – Type 2 diabetes represents c.90% – Estimate that 46% are undiagnosed 592
Global healthcare costs related to treating diabetes amounted to $612bn in 2014 – Represented 11% of total healthcare costs worldwide 387 – Projected to exceed $627 billion by 2035
Cause of death of c.5m people in 2014 202 Estimated to increase by 53% from 2014 to 2035 137 – Largest growth in developing 123 economies 68 74 69 50 52 – Africa and the Middle East are 42 37 38 39 expected to almost double by 2035 23 25
Africa Middle East & SEA Sounth and Western N. America & Europe World N. Africa Central Pacific Caribbean America
2014 2035 Number of people living with diabetes Source International Diabetes Federation, IDF Diabetes Atlas, sixth edition, 2014
Significant upside from additional capacity expansion Vistin plans to capitalise on strong demand in its metformin business by doubling the capacity at its plant in Kragerø
Summary
Significant long term growth in the metformin market and increased demand from Vistin’s customers – Forecast volumes expected to exceed future capacity in 2018 post the capacity increase programme (3,500MT) Background – Vistin’s target premium market is currently estimated to approx 13,000MT and growing
The addition of a new 3,000 MT line at Fikkjebakke (Kragerø) will enable Vistin to meet this growth in demand
Action taken to Detailed feasibility study conducted date Business case and investment proposal approved by Board
The new production line is expected to become fully operational by 2019
Total capex estimated to be NOK 120m to be spent over 2017-18, financed Expected impact through existing cash, cash generation and loans
Based on the forecasted capacity utilization, the project is expected to provide a positive EBITDA contribution in its first year of operations
Current status Detailed engineering and project start commenced in September 2016
Vistin – a major opioids “powder-to-pill” supplier The company supplies c.6% of the global market for codeine API, a very commonly used medicinal opioid
Overview Leading independent manufacturer of opioids
Vistin produces two APIs in the opioid sector Codeine market Pholcodine market
– Codeine (used in analgesics and cough syrup) Vistin Pharma ~6% Vistin Pharma ~17% – Pholcodine (used in cough syrup)
Vistin is the world’s largest independent manufacturer of codeine phosphate API ~400MT ~12MT
Only independent API supplier producing FDF for third parties
One third of opioid APIs produced are converted to tablets
First commercial sales in 2014 Track record of revenue growtht1
Annual volume of c.270m tablets Revenue, NOKm 2011-2015 CAGR 9% Swift licence procedures and established relationships with regulators 82 81 ensure Vistin is able to deliver short lead times to its clients 75 71 – Typically receives export licences within 24 hours 58 50 Attractive collaborator for raw material companies
The company has successfully negotiated a long-term strategic collaboration with a leading Narcotic Raw Material (NRM) supplier at attractive terms 2011 2012 2013 2014 2015 6M 2016
Notes 1 Revenue figures for 2011 – 2014 and for 2015 to 31 May are for Weifa
20
Opioids market overview A protected market with high entry barriers
Key features of the opioids market Strong growth in global opioids consumption
1Strong growth in global opioids consumption A protected business owing to tight controls by the 14 International Narcotics Control Board (INCB) and the practice of import quotas in several major markets Protected market – About half of the global markets are closed 12
– Domestic monopolies mainly controlled by local players
10 2 High entry barriers due to tight controls / regulations
Difficult for low cost country competitors to enter the High barriers 8 regulated opioids API business to entry Market dominated by producers located in Western
countries 6 Billions of S.DDD of Billions
3 Increasing wealth in emerging markets drives higher Increased expectations for medication, especially in China and India 4 market demand Most of the growth in opioid consumption comes from emerging countries 2
4 Ageing population and rising prevalence of diseases -
Growth – Defined Daily Doses have increased more than 3 times in
2011 1997
driven by 1995
1994 1996 1999
2013 1998
20 years (6.5% CAGR) 2012
2001 2010
2007
2005
2003
2002
2004 2006 2009 2008 developing 2000 countries North America dominates the global market for opioids Opiates Synthetic opioids Opioids S.DDD = Sold Defined Daily Doses Asia expected to account for majority of future growth Source INCB, Narcotic Drugs 2014
Vistin – A leading CMO tablet manufacturer Current annual production of c.750 million tablets with potential to expand capacity
Significant tablet manufacturer Summary of Weifa contract
Manufacture of tablets relating to opioids and metformin business and reported as part of B2B segment CMO agreement with Weifa for the production of:
- Five-year supply agreement for codeine tablets for UK customer resulting in - All tablets produced by Weifa’s Consumer segment volumes of approximately 270m tablets per annum Overview (including key pain relief brands) - Certain 3rd party products to which Weifa has the - Manufacture of metformin tablets exclusive right to sell in certain territories Tablet manufacturing plant at Kragerø, Norway
- GMP/GDP Certificate and Manufacturing License authorized by Norwegian Medicines Agency with the latest inspection in August 2015 2016B: c.450m tablets 5 year agreement with Weifa for the production of its key pain relief brands Production Production at the company’s plant in Gruveveien, Kragerø
Evolution of long-term customer partnership model in FDFs
First term duration of five years 2016 - Preferred CMO Duration 2017 Option to extend for another two years at the discretion of Long term contract to manufacture the FDF Weifa
2018 - Fee-for-service CDMO 2020 Preferred CMO with higher customer switching costs Financials 2016B revenues: c.NOK 119m Partnered CDMO Exclusive CMO contract + profit share 2020 - 2025 Co-development alliance Key products Captures 50% of the value through fees and milestones
State of the art manufacturing facilities Well invested plants with potential for further expansion
Fikkjebakke manufacturing site Gruveveien manufacturing site
Fikkjebakke is dedicated to the production of metformin HCl and metformin DC Gruveveien produces Solid Dosage Forms (SDF) and opioids API's
Operation since 2002 Operation since 1950
Site area (m2) 12,253 Site area (m2) 10,979
Staff (May 2016) 44 Staff (May 2016) 89
Capacity (MT) 3,100 Capacity FDF (m tablets) 750 Approvals cGMP Opioids APIs (MT) 32 FDA Approvals cGMP
Main dosage form Metformin HCl API Main dosage form Codeine phosphate API Metformin DC Granulate Pholcodine API Tablets
Key initiatives Key initiatives
1 Capacity increase program to stretch current capacity to 3,500MT Tablet capacity increase through increasing efficiency & ongoing with limited investment required based on Seven Step Creep programme of operational excellence Programme 1 Production capacity increased in 1H 2016 by 15% to c.750m tablets 2 New production line - metformin production capacity to be doubled 2 Plan to increase capacity by another 50% without material cost (+3,000MT) by 2019 increases (to c.1,200m tablets) – Feasibility study completed and final investment case approved by Opioids API the Board 3 Capacity increase program - opioids API capacity expansion from 32MT to 45MT with limited investment required
Financial overview Strong financial growth profile with significant potential upside through capacity expansion
Revenue evolution (2011–1H2016 NOKm)1
376
118
242 229 213 199
170 61
258 229 242 199 170 152
2011 2012 2013 2014 2015 6M 2016
B2B CMO
Notes 1 Revenue figures for 2011 – 2014 are for B2B segment for Weifa, and for 2015 consist of B2B segment for Weifa to 31 May, B2B segment for Vistin from 1 June, and annualised revenue for CMO segment
Content
Introduction to Vistin Pharma
Operational and financial update
Summary & outlook
Appendix
Key investment highlights Leading producer of high quality APIs and Solid Dosage Forms
1 Leading Producer: Amongst Top 5 producers of metformin HCl globally and largest 7 independent producer of Codeine 2 Phosphate High Quality Reputation: Strong Leadership: Leading reputation as producer of Experienced management team high quality APIs with strong track with a strong track record record of customer delivery
6 3
Advanced Manufacturing Attractive Market Dynamics: Facilities: Established position in growing State of the art and dedicated metformin market and highly manufacturing facilities with regulated opioid market potential for further expansion
5 4
Sustained Revenue Growth: Diverse Client Portfolio: Strong growth profile with double Established client base digit revenue growth in the last 5 comprising mix of Big Pharma years and leading generics players
Summary & outlook
Metformin: Strong performance and bright outlook Continued strong growth expected Doubled capacity from 2019 NOK 120 million investment to be financed through existing cash reserves, cash flow generation and debt
Opioids: Long-term drivers indicating attractive future growth potential Price pressure due to oversupply of raw material in the market Market improvements expected in 2017
CMO: Stable development Efficiency program expected to result in minimum 50% additional capacity available (with limited investments) Focus on future cost reductions to grow tablet volumes in a competitive market
Vistin Pharma well positioned for continued profitable growth
Content
Introduction to Vistin Pharma
Operational and financial update
Summary & outlook
Appendix
Consolidated income statement as of 30 June 20161 (figures for 2015 reflect Vistin Pharma’s business operations from 1 June 2015)
(NOK 1 000) Q2 2016 Q2 2015 YTD2016 YTD2015 FY 2015
Total revenue and income 109 667 31 370 212 893 31 370 227 892
EBITDA 12 608 2 862 23 639 2 862 27 883
Depreciation, amortisation and impairment (1 000) (181) (1 891) (181) (1 568)
Net finance income/(expense) 1 490 225 153 225 (100)
Profit/(loss) before tax 13 098 2 906 21 900 2 906 26 215
Profit/(loss) 9 824 2 122 16 425 2 122 19 122
Note: 1. Vistin Pharma ASA was established in February 2015, and the Group had no operating activities prior to Vistin Pharma AS’ acquisition of the B2B business and tablet production assets from Weifa AS on 1 June 2015. Hence, most of the figures presented in the consolidated financial statements for the full year 2015 represent the financial result of the B2B and CMO business acquired from 1 June 2015. There are no comparable historical numbers.
Financial position as of 30 June 2016
(NOK 1 000) 30.06.2016 30.06.2015 31.12.2015
Property, plant & equipment 46 275 33 275 41 331 Inventory 86 156 91 015 92 712 Trade receivables 64 240 33 197 54 760 Cash & cash equivalents 55 710 44 558 61 989 Other 7 630 19 372 8 216 Total Assets 260 011 221 417 259 008
Total equity 190 116 167 004 183 924 Total liabilities 69 895 54 413 75 084 Total Equity and Liabilities 260 011 221 417 259 008
Net interest bearing debt - - -
Experienced management team Highly experienced management team with a strong industry track record
Name Role Experience
Previous experience includes several years in top management positions at Alpharma, Chief Executive Kjell-Erik Nordby a leading international generic pharmaceutical company Officer Holds a Master's degree in Pharmacy and Master's degree in Business Administration
Previously CFO at Aqualis for 7 years, and prior to that he worked 8 years as a Gunnar Manum Chief Financial Officer senior advisor at Handelsbanken Corporate Finance Holds a MCom in Finance and Accounting from the University of New South Wales, Sydney
Previously SVP Operations, Tech. and Supply chain at REC Solar ASA and prior to that held Erik Løkke Øwre VP Operations several senior management positions at Elkem, where he was employed for almost 20 years Holds a Master of Management from BI Norwegian Business School
Previously spent 20 years at Pronova BioPharma, where she held several Hilde Merete Næss VP QA management positions within Quality Assurance Holds a Master of Science in Chemistry and a Master of Management
Experienced executive manager within the biotechnology and pharmaceutical industry
Valborg Godal Vold VP Sales & Marketing Holds a BA in Biomedical Laboratory Science and an Executive Master in Business & Administration
Previous experience includes 5 years at Jordan, 9 years at Hydro and 4 years at Liesl Hellstrand VP HR & Organisation Volvo Car Corporation Holds a BSc in Human Resource Development and Labour Relations
7
Top 20 shareholders as of 30 September 2016
NAME SHAREHOLDING % SHARE EUROCLEAR BANK S.A. 2 548 810 14,9% STRATA MARINE & OFFSHORE* 1 965 943 11,5% STOREBRAND VEKST 1 395 460 8,2% MP PENSJON PK 877 870 5,1% SOLAN CAPITAL AS 787 482 4,6% SKANDINAVISKE ENSKILDA 779 352 4,6% FERNCLIFF LISTED DAI* 582 282 3,4% HOLBERG NORGE 573 349 3,4% PENSJONSORDNINGEN FOR APOTEKVIRKSOMHET 500 000 2,9% DUKAT AS 455 000 2,7% CIPRIANO AS* 375 538 2,2% SPETALEN ØYSTEIN STRAY* 323 650 1,9% TVENGE TORSTEIN INGVALD 300 000 1,8% SVENSKA HANDELSBANKEN 240 000 1,4% NORDBY KJELL ERIK** 200 000 1,2% BORGEN INVESTMENT GRUPPEN 196 078 1,1% PORTIA AS 185 000 1,1% GRANT INVEST AS 184 407 1,1% STATOIL PENSJON 166 138 1,0% MALISE AS 151 750 0,9% Total 20 largest shareholders 12 960 156 76,0% Other shareholders 4 094 779 24,0% Total number of shares 17 054 935 100,0% * Board members of Vistin Pharma, or companies controlled by Board members ** Executive management
Disclaimer
. This Presentation has been produced by Vistin Pharma ASA (the “Company” or “Vistin Pharma ”) solely for use at the presentation to investors and other stake holders and may not be reproduced or redistributed, in whole or in part, to any other person. This presentation has not been reviewed or registered with any public authority or stock exchange, and may not be reproduced or redistributed, in whole or in part, to any other person. To the best of the knowledge of the Company, the information contained in this Presentation is in all material respect in accordance with the facts as of the date hereof, and contains no material omissions likely to affect its importance. However, no representation or warranty (express or implied) is made as to, and no reliance should be placed on, any information, including projections, estimates, targets and opinions, contained herein, and no liability whatsoever is accepted as to any errors, omissions or misstatements contained herein, and, accordingly, neither the Company nor any of its subsidiary companies or any such person’s officers or employees accepts any liability whatsoever arising directly or indirectly from the use of this Presentation. This Presentation contains information obtained from third parties. Such information has been accurately reproduced and, as far as the Company is aware and able to ascertain from the information published by that third party, no facts have been omitted that would render the reproduced information to be inaccurate or misleading. . This Presentation contains certain forward-looking statements relating to the business, financial performance and results of the Company and/or the industry in which it operates. Forward-looking statements concern future circumstances and results and other statements that are not historical facts, sometimes identified by the words “believes”, expects”, “predicts”, “intends”, “projects”, “plans”, “estimates”, “aims”, “foresees”, “anticipates”, “targets”, and similar expressions. The forward-looking statements contained in this Presentation, including assumptions, opinions and views of the Company or cited from third party sources are solely opinions and forecasts which are subject to risks, uncertainties and other factors that may cause actual events to differ materially from any anticipated development. None of the Company or any of its parent or subsidiary undertakings or any such person’s officers or employees provides any assurance that the assumptions underlying such forward-looking statements are free from errors nor does any of them accept any responsibility for the future accuracy of the opinions expressed in this Presentation or the actual occurrence of the forecasted developments. The Company assumes no obligation, except as required by law, to update any forward- looking statements or to conform these forward-looking statements to our actual results. . AN INVESTMENT IN THE COMPANY INVOLVES RISK, AND SEVERAL FACTORS COULD CAUSE THE ACTUAL RESULTS, PERFORMANCE OR ACHIEVEMENTS OF THE COMPANY TO BE MATERIALLY DIFFERENT FROM ANY FUTURE RESULTS, PERFORMANCE OR ACHIEVEMENTS THAT MAY BE EXPRESSED OR IMPLIED BY STATEMENTS AND INFORMATION IN THIS PRESENTATION, INCLUDING, AMONG OTHERS, RISKS OR UNCERTAINTIES ASSOCIATED WITH THE COMPANY’S BUSINESS, SEGMENTS, DEVELOPMENT, GROWTH MANAGEMENT, FINANCING, MARKET ACCEPTANCE AND RELATIONS WITH CUSTOMERS, AND, MORE GENERALLY, GENERAL ECONOMIC AND BUSINESS CONDITIONS, CHANGES IN DOMESTIC AND FOREIGN LAWS AND REGULATIONS, TAXES, CHANGES IN COMPETITION AND PRICING ENVIRONMENTS, FLUCTUATIONS IN CURRENCY EXCHANGE RATES AND INTEREST RATES AND OTHER FACTORS. . SHOULD ONE OR MORE OF THESE RISKS OR UNCERTAINTIES MATERIALISE, OR SHOULD UNDERLYING ASSUMPTIONS PROVE INCORRECT, ACTUAL RESULTS MAY VARY MATERIALLY FROM THOSE DESCRIBED IN THIS PRESENTATION. THE COMPANY DOES NOT INTEND, AND DOES NOT ASSUME ANY OBLIGATION, TO UPDATE OR CORRECT THE INFORMATION INCLUDED IN THIS PRESENTATION. . By attending or receiving this Presentation you acknowledge that you will be solely responsible for your own assessment of the market and the market position of the Company and that you will conduct your own analysis and be solely responsible for forming your own view of the potential future performance of the Company’s business. This Presentation does not constitute an offer to sell or a solicitation of an offer to buy any securities in any jurisdiction to any person to whom it is unlawful to make such an offer or solicitation in such jurisdiction.