INTERIM REPORT Q3 AND 9M 2014

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INTERIM REPORT Q3 AND 9M 2014 THIRD QUARTER HIGHLIGHTS International market evaluation for Woulgan Biogel by Smith & Nephew continues at several sites in UK and Germany Woulgan Biogel survey ongoing

1 INTERIM REPORT Q3 AND 9M 2014 THIRD QUARTER HIGHLIGHTS International market evaluation for Woulgan Biogel by Smith & Nephew continues at several sites in UK and Germany Woulgan Biogel survey ongoing in Norway shows positive results ArcticZymes awarded Biology Supplier of the Year by Thermo Fisher Scientific Strengthened organization with two new senior management hires NOK million Q Q M M 2013 Enzymes Beta-glucans Sales revenues Enzymes Beta-glucans EBITDA Profit before tax The segment figures reflect that all costs are allocated to the two operating units OUTLOOK Expect the Smith & Nephew market evaluation study to be completed by the end of Q Continued increase in revenues for beta-glucans in Q4 compared to Q3 2014, due to strong market in feed ingredients ArcticZymes revenues in Q4 is expected in line with revenues Q

2 Beta-Glucans FINANCIAL REVIEW, BETA-GLUCANS NOK million Q Q M M 2013 Sales Revenue Cost of goods sold Gross profit Other income Personnel expenses Other operating expenses EBITDA Depreciation & Amortization EBIT All corporate costs have been allocated Biotec BetaGlucans sales more than doubled compared to the third quarter 2013, primarily reflecting sales of feed ingredient beta-glucans to the aquaculture market. Also, limited sale of Woulgan Biogel has contributed to this increase. Sales revenue amounted to NOK 6.2 million in the third quarter 2014, compared to NOK 1.7 million in the third quarter The increase in Cost of goods sold reflects the sales increase of feed ingredient products with lower margin. The increase in Personnel expenses are primarily accruals and none recurring items. EBITDA for the quarter was a loss of NOK 3.9 million compared to a loss of NOK 4.3 million in the same period last year. The market evaluation study carried out by Smith & Nephew is continuing at several sites in UK and Germany. Unfortunately, the study has been delayed which is often the case in such studies. Originally, the study became delayed due to the delayed CE mark. However, the enrollment into the study has also taken more time than expected as study centres recruited for the initial timeline dropped out and new centres had to be sought after CE mark was obtained. The study is now expected to be completed by the end of first quarter Biotec Betaglucans will continue its communication with Smith & Nephew to clarify the basis for a long term agreement while the study is being completed. Biotec BetaGlucans is running a survey among Norwegian healthcare professionals (HCP) that are currently testing out Woulgan Biogel in clinical settings. So far about 40 patients, the majority of which are treated for chronic and hard to heal wounds, have been reported. The results are promising as the preponderance of the patient cases is showing positive progressions and HCPs satisfaction is high. When completed, the survey will be presented to HCPs and opinion leaders at selected wound management conferences. Articles on Woulgan Biogel have been published in the journal Sår, which is distributed to HCPs specializing in wound treatment in Denmark and Norway, as well as in the Norwegian podiatrists magazine Fotterapeuten. Theses editorials contribute to the increased awareness of Woulgan Biogel. Woulgan Biogel is classified as an advanced medical device under class III, rule 13 under the EU Directive for Medical Devices. This is an advanced classification for medical devices with secondary, ancillary medicinal effects, and will enable Biotec BetaGlucans to claim the secondary, ancillary medicinal effects of its proprietary soluble beta-glucan (SBG) in its labelling and marketing. From a market perspective, this may offer extended market opportunities compared to existing products 2

3 available on the market. Biotec BetaGlucans will initially address diabetic ulcers, leg ulcers, pressure ulcers, and burns, although the product is also approved for use on other wounds like post-surgery wounds, trauma wounds, and abrasions. In late August, Biotec Betaglucans received patent protection for Woulgan Biogel directed towards a method of applying a preparation of a water-soluble branched beta-(1,3) glucan on to a subject suffering from many alternative forms of ulcers, thus covering the general concept behind Woulgan Biogel. The patent also provides protection of potential follow-up products containing soluble betaglucans from yeast. Biotec BetaGlucans supply of beta-glucans to fish and shrimp aquaculture is progressing better than anticipated. In the third quarter, a US-patent was issued to Memorial Sloan-Kettering Cancer Center (MSKCC) in New York which covers the inventive treatment of several types of cancers using a combination of a large variety of monoclonal antibodies and (1,3) beta-glucan. This patent is the result of an ongoing co-operation with MSKCC where Biotec BetaGlucans holds an exclusive license to the patent. Enzymes - ArcticZymes FINANCIAL REVIEW, ENZYMES NOK million Q Q M M 2013 Sales Revenue Cost of goods sold Gross profit Other income Personnel expenses Other operating expenses EBITDA Depreciation and Amortization EBIT All corporate costs have been allocated Sales revenue in ArcticZymes amounted to NOK 3.4 million in the third quarter 2014, down from NOK 4.7 million in the same quarter last year. The lower revenue in the quarter reflects lower sales to large OEM customers and is expected to continue in the fourth quarter. Other income mainly relates to research grants, which declined to NOK 1.0 million from NOK 1.1 million in the third quarter last year. Operating expenses has increased to NOK 2.4 million versus NOK 1.9 million in the same period last year. EBITDA was reduced to a loss of NOK 2.2 million in the third quarter 2014, compared to a marginal loss of NOK 0.1 million in the third quarter ArcticZymes continues to broaden its base of OEM customers in the kits and reagents market. In the third quarter 2014 the company was present at Analytica in Shanghai where contacts with some of the most important Chinese companies were established. The opportunity in China is significant, as there are more than 300 diagnostic organizations and a significant number of academic research institutes that employ molecular techniques in the laboratories routine workflow. 3

4 The most relevant products for the Chinese market relates to the Next Generation Sequencing and Molecular Diagnostic market segments. On October 15, 2014 ArcticZymes received the Biological Supplier of the Year award by Thermo Fisher Scientific, the world leader in life science with more than employees. The award is a result of ArcticZymes long-term strategy to develop a strong partnership with key OEM customers. ArcticZymes started the three-year program NextZyme sponsored by Norwegian Research council during the third quarter. Biotec Pharmacon Group Figures Overall EBITDA was NOK -6.0 million in the third quarter 2014, a reduction from NOK -4.4 million in the same period last year, whereas EBIT was reduced to NOK -6.7 million from NOK -5.0 million in the third quarter The reductions are mainly explained by change in product mix to products with lower gross margin. Net financial income amounted to NOK 0.5 million, generating a loss before tax of NOK 6.2 million compared to a loss of NOK 4.8 million in the third quarter For the first 9 months of 2014, sales revenues amounted to NOK 23.0 million. The EBITDA was a loss of NOK 15.4 million, and the EBIT was a loss of NOK 17.3 million. Net financial income was NOK 1.1 million, generating a loss before tax of NOK 16.2 million for the first 9 months. The company recognized no income tax the first 9 months of The group had 35 employees at the end of the third quarter, compared to 33 employees at the end of third quarter Balance Sheet, Cash Flow and Shareholder matters Total equity amounted to NOK million compared to NOK 48.8 in the same period last year and NOK 42.5 million at the end of Biotec Pharmacon ASA raised gross proceeds of NOK 78 million in April through a fully subscribed private placement of NOK 3.9 million shares at NOK 20 per share. The issue corresponded to 9.9 percent of the total number of shares outstanding, with proceeds primarily to be used for the commercialization of Woulgan Biogel. Total number of outstanding shares was 43,508,373 at the end of the third quarter. The current number of outstanding employee share options is 773,800. Total assets were NOK million at the end of third quarter 2014, up from NOK 53.8 million at the end of The company has no interest-bearing debt. Net cash flow from operating activities was NOK -4.1 million in the third quarter 2014 and NOK million in the first 9 months. The operating cash flow reflects reduced working capital of NOK 1.2 million in the third quarter and an increase of NOK 8.6 million in the first 9 months, due both to increased receivables and lower payables. Net cash flow from investing activities was NOK 0.8 million in the third quarter and NOK -1.4 million in the first 9 months. Net cash flow from financing activities was NOK 1.0 million in the third quarter and NOK 76.9 million in the first 9 months. Changes in cash and cash equivalents were NOK -2.3 million in the third quarter and NOK 53.0 million in the first 9 months. This generated a cash balance of NOK 86.7 million at the end of the quarter, compared to NOK 33.7 million at the end of

5 Organization ArcticZymes has strengthened the organization by hiring of Jethro Holter as new Managing Director of ArcticZymes. Holter holds a PhD. in molecular biology from University of Cardiff and will start from January 1 st Børge Sørvoll started as new CFO on October 1 st. Risk factors Biotec Pharmacon s business is exposed to a number of different risk factors that may affect parts or all of the company s activities. There are no substantial changes in the risk factors compared to the descriptions in Annual Report for

Financial statement 3rd quarter 2014 INCOME STATEMENT - GROUP Q3 Jan-Sept (Amounts in NOK 1.

6 Financial statement 3rd quarter 2014 INCOME STATEMENT - GROUP Q3 Jan-Sept (Amounts in NOK exept EPS) Sales revenues Cost of goods sold Personell expenses Depreciation and amortisation expenses Other income Other expenses Operating profit Finanical income, net Profit before tax Tax Profit after tax for the period Basic EPS (profit for the period) -0,14-0,14-0,39-0,47 Diluted EPS (profit for the period) -0,14-0,14-0,39-0,47 EXTENDED INCOME STATEMENT - GROUP Q3 Jan-Sept (Amounts in NOK 1.000) Profit after tax for the period Other comprehensive income: - Currency translation effect Total comprehensive income BALANCE SHEET - GROUP (Amounts in NOK 1.000) Non-current assets Machinery and equipment Intangible assets Pension Scheme Fund Financial assets Total non-current assets Current assets Inventories Trade receivables and other receivables Cash and cash equivalents Total current assets Total assets Equity Share capital Share premium capital Other equity Minority interests Total equity Current liabilities 6

7 CASH FLOW ANALYSIS - GROUP Q3 Jan-Sept (Amounts in NOK 1.000) Cash flow from operating activities: Profit after tax Adjustment: Amortization Depreciation stocks for sale Employee stock options Currency conversion differences Prior period adjustments Changes in working capital Inventory Account receivables and other receivables Payables and other current liabilities Net cash flow from operating activities Cash flow from investing activities: Net purchase of fixed assets less investment grants Invested in intangible assets Sale of fixed assets Change in long term receivables Net cash flow from investing activities Cash flow from financing activities: Cashflow from Private placement Net cash flow from financing activities Changes in cash and cash equivalents Cash and cash equivalents at the beginning of period Cash and cash equivalents at end of period

8 Notes to the interim accounts for 3rd quarter 2014 Note 1 - Basis of preparation of financial statements These financial statements are the unaudited interim consolidated financial statements (hereafter the Interim Financial Statements ) of Biotec Pharmacon ASA and its subsidiaries (hereafter the Group ) for the period ended September Th Interim Financial Statements are prepared in accordance with the International Accounting Standard 34 (IAS 34). These Interim Financial Statements should be read in conjunction with the Consolidated Financial Statements for the year ended December (hereafter the Annual Financial Statements ), as they provide an update of previously reported information. The accounting policies used in the Interim Financial Statements are consistent with those used in the Annual Financial Statements. The presentation of the Interim Financial Statements is consistent with the Annual Financial Statements. Where necessary, the comparatives have been reclassified or extended from the previously reported Interim Financial Statements to t a into account any presentational changes made in the Annual Financial Statements or in these Interim Financial Statements. The Group does not experience significant seasonal or cyclical variations in total sales during the financial year. Income tax expense or benefit is recognized based upon the best estimate of the weighted average income tax rate expected for the full financial year. Deferred tax asset is accounted at NOK 0 in the balance sheet. The Group has adopted IFRS 13 "Fair Value Measurement" for the period started January Note 2 - Analysis of operating revenue and -expenses, segment information Income and expenses in the parent company are allocated to both segments according to a predefined key. Q3 Jan-Sep (Amounts in NOK 1.000) Sales revenue: Beta-Glucans Enzymes Group operating revenue Other income: Beta-Glucans Enzymes Group other income Operating expenses: Beta-Glucans Enzymes Group operating expenses before depreciation Operating profit (EBITDA): Beta-Glucans Enzymes Group operating profit - EBITDA Depreciation: Beta-Glucans Enzymes Group depreciation Operating profit (EBIT): Beta-Glucans Enzymes Group operating profit - EBIT Oslo, 4 November 2014 Board of Directors of Biotec Pharmacon ASA 8

INTERIM REPORT 1 st QUARTER 2012

INTERIM REPORT 1 st QUARTER 2012 ENZYMES ArcticZymes Revenue still low primarily due to continued stock-reduction of SAP at Affymetrix Further broadening of the customer base for both the SAP and Cod UNG