During the first quarter of 2023, the foundation was laid for exciting future opportunities with new customers in the Nutra business. In addition, Arctic Bioscience has continued to deliver on important milestones related to the pharmaceutical development program. Approval of the HeROPA clinical trial by Medicines Authorities in five European countries demonstrates international endorsement and the high quality of our drug development plan. This has considerably reduced the implementation risk for our pharmaceutical development program.

"The first quarter of this year has been important and very positive for Arctic Bioscience. The approvals we received from the Medicines Authorities in European countries for our HeROPA study underpins the substantial and impressive work conducted by the Arctic Bioscience team in Norway," says CEO Christer L. Valderhaug.

Update on the HeROPA clinical trial - a phase IIb clinical trial for mild-to-moderate psoriasis:

Until now, forty clinics are active in the five countries participating in the HeROPA clinical trial. The first patient was included end of January 2023 in UK. Recruitment is competitive between clinics and will be complete when 519 patients are included. More clinics are being activated on an ongoing basis.

Clinical Trial Application (CTA) processes and some aspects of global logistical operations have taken longer than expected. Arctic Bioscience have implemented additional measures to ensure timely recruitment of patients. More clinics have shown interest in joining the trial, and these are being enlisted for participation. The clinics are using their patient lists for recruitment, and the larger sites in central European countries have thousands of patients with psoriasis who may be eligible for inclusion. Recruitment is expected to proceed at speed throughout summer and into the fall.

Update on our sustainable marine nutraceutical supplement business:

The nutraceutical business had a positive development in sales volume in the quarter compared to the first quarter of last year. Several new B2B customers with strong brands in their respective markets have launched products with ROMEGA[â] in USA and Europe. In the Asian markets we continue to see strong marketing efforts and increasing interest for our products. Currently there are more than 40 nutra brands containing ROMEGA[â] being marketed and sold globally.

The acquisition of the company Arctic Algae, which was announced in February this year, opens for future commercial opportunities in both the Nutra and Pharma segments.

Financials

• Revenues from sales: NOK 7,8 million
• Gross profit: NOK 1,2 million
• Gross margin: 15 %
• EBITDA: NOK -12,1 million
• Capex (gross): NOK 4,5 million
• Cash end period: NOK 130,6 million

Sales revenues amounted to NOK 7,8 million in Q1 2023, a growth of 39 % compared to the same period in 2022. Of the total sales revenues, 56 % were related to the B2B Europe ex. Norway segment, and 18 % to the Asian segment.

The gross margin in Q1 2023 was affected by the product mix of goods sold and especially influenced by the development in exchange rates during the quarter. The effect of a strongly weakened krone on the gross margin during the quarter is calculated to approx. 10 percentage points. The negative gross margin effect in Q1 is potentially a timing issue, as it may be offset by increased sales volume in foreign currencies going forward, given a continued weak krone situation.

EBITDA in the quarter amounted to NOK -12,1 million. The weak gross profit in the quarter pulls the EBITDA down somewhat compared to the budgeted figures. Salary expenses and other operating costs were lower than budgeted for this quarter, which balances total EBITDA compared to the budget. 

Gross capital expenditures (capex) amounted to NOK 4,5 million in the quarter, mainly related to the pharmaceutical development program. During the quarter, Arctic Bioscience has received NOK 4,8 million in public grants, which, in accordance with the company's accounting principles, are netted in the balance sheet upon payment. These public grants have thus made a positive contribution to the total liquidity position throughout the quarter.

The acquisition of Arctic Algae AS in Q1 2023 was carried out without a liquidity effect for the group. Final settlement between the parties takes place by converting debt into equity. The transaction itself was formally completed on March 29[th] 2023.

The liquidity position is still strong, with a total cash balance of NOK 130,6 million. The cash position also include the cash balance of Arctic Algae AS as of end Q1 2023.

Subsequent events

On April 21[st] 2023, the annual general meeting adopted a capital increase as part of the finalization of the acquisition of the company Arctic Algae AS from Ronja Capital II AS. Debt incurred in connection with the acquisition of the company was converted into shares in Arctic Bioscience AS. Total converted debt amounted to NOK 16,3 million, which was converted into 943 833 shares at a price of NOK 17,27 per share. After registration of the capital increase, Ronja Capital II AS will own 12,17 % of Arctic Bioscience.

Outlook

To ensure effective and timely recruitment in the HeROPA clinical trial, Arctic Bioscience is working on activating clinics according to plan. In addition, several new clinics have shown interest in joining the trial, and these are also being enlisted for participation. The company is working diligently on the competitive recruitment of 519 patients. The first data read-out will be six months after completion of recruitment (last patient first visit, LPFV).

The order intake in the Nutra business for 2023 is promising both from existing customers (recurring business) and new customers. Our commercial partnership in the Chinese market continues to develop positively and we experience continued strong growth.

This information is subject to the disclosure requirements pursuant to section 5-12 of the Norwegian Securities Trading Act.