2023 has been an eventful year for Arctic Bioscience, culminating in a significant milestone in January 2024, when the HeROPA clinical trial with 519 patients was fully recruited. In addition, our cellular studies project on Mode of Action of HRO350 was completed in December 2023. The key objectives of this project were to gain a deeper understanding of the cellular mechanisms and structural characteristics of HRO350. Arctic Bioscience plan to publish the results related to the study during H1 2024 and onwards. The project has produced data on the effects of HRO350 related to skin cells, advanced skin cell models and human immune cells, including cell specific signaling molecules and psoriasis markers, as well as analysis of components of HRO350 including mediators that are involved in resolving inflammation.

During 2023, Arctic Bioscience has attended several pharma and biotech conferences presenting the company and our assets and held meetings with a number of potential commercial and development partners.

"With the recruitment in place, the HeROPA clinical trial is now moving forward towards the 6 months data read-out, which will mark a substantial milestone for Arctic Bioscience. On the commercial side, we will continue our positive dialogues with pharma companies regarding potential partnership deals for HRO350", says CEO Christer L. Valderhaug.

The nutraceutical business performed well in the first half of the year with strong sales growth compared to 2022, but the last part of the year was affected by changes in customer's delivery plans as well as manufacturing delays at the end of the year. In the last couple of years, the nutraceutical business has evolved well. Particularly in Asia, where Arctic Bioscience has experienced a strong sales growth and where end-customer sales doubled in 2023, being reflected in the 2024-revenues for Arctic Bioscience. We have also experienced a positive sales development in Norway, with more than 20 % annual growth.

"Together with our partner in China, we have built a strong and effective platform for marketing and sales in the Chinese consumer market. We believe this partnership has a massive potential in the coming years. Through our global B2B business, we onboarded several promising customers in North America, Europe and Asia in 2023, which are expected to generate future recurring sales revenues for Arctic Bioscience.", ends Christer L. Valderhaug.

Financials

• Revenues from sales: NOK 9,9 million (NOK 10,6 million)
• Gross profit: NOK 1,7 million (NOK 4,7 million)
• Gross margin: 17,1 % (44,9 %)
• Adjusted EBITDA: NOK -9,9 million (NOK -8,8 million)

Comparable figures for Q4 2022 in brackets. The consolidated figures for Q4 2023 includes effects from the acquired company Arctic Algae AS.

• Revenues from sales: NOK 33,8 million (NOK 34,3 million)
• Gross profit: NOK 9,8 million (NOK 11,6 million)
• Gross margin: 29 % (34 %)
• Adjusted EBITDA: NOK -38,6 million (NOK -31,0 million)
• Available liquidity end period: NOK 109,6 million (NOK 144,2 million)

Comparable figures as of the end 2022 in brackets. The 2023 figures are unaudited. The consolidated figures as of end 2023 includes effects from Arctic Algae AS from Q2 2023.

Sales revenues amounted to NOK 9,9 million in Q4 2023, a decline of 6,6 % compared to the same period in 2022. In the last months of 2023, we experienced that some of our largest customers moved their delivery plans into 2024, which impacted our revenue development in 2023. Total revenues from sales in 2023 amounted to NOK 33,8 million, ending 1,5 % below total revenues in 2022. The European market ex. Norway represented the largest market share in 2023 with 37 %. The Asian marked had the second largest market share with 29 %.

Gross margin was reduced to 17,1 % in Q4 2023, compared to 44,9 % for the same period in 2022. The main explanation for this change is related to the mix of sold products. As a larger part of deliveries of finished goods has been moved into 2024, the gross margin is affected, also for the year in total which showed a gross margin of 29 % compared to 34 % in 2022.

Adjusted EBITDA ended at NOK -38,6 million, compared to NOK -31,0 million in 2022. This is in line with our expectations, and according to earlier guided range. Full year adjusted EBITDA 2023 is distributed with NOK -19,2 million to the nutraceutical segment, NOK -16,9 million to the pharmaceutical segment, and NOK -2,5 million to subsidiaries.  

The liquidity position at the end of 2023 amounts to NOK 109,6 million, which includes an unused credit facility of NOK 30 million.

Debt funding of NOK 65 million secured to finance an inhouse manufacturing line

The full-scale manufacturing facility project was set on hold at the beginning of 2022 due to global unrest, rising material prices and the need to re-adapt the size of the facility to future needs. Since then, we have explored alternative inhouse manufacturing solutions which are better adapted to future operations and demands. Based on a concept development project, the company is moving forward with a GMP manufacturing line that will secure the production volumes in the years to come, both for our pharmaceutical and nutraceutical operations.

As part of the concept development project, funding solutions have been negotiated. In February 2024 an agreement with the company's primary bank and with Innovation Norway was reached, securing debt funding to the project of NOK 65 million. In addition, soft funding of NOK 3 million has been granted. The next phase in the project is estimated to commence in Q4 2024 depending on timing of other key processes and projects.

Outlook

With all needed patients now recruited into the HeROPA clinical trial, we expect the read-out of the 6 months primary end points in H2 2024. This read-out will lay the foundation for a clinical phase III study and subsequent commercialization of our HRO350 candidate. We continue pursuing potential commercial partnerships for HRO350, processes which will have strong focus in the forthcoming periods.

When Arctic Bioscience was listed on Euronext Growth in 2021, it was stated that one of the main reasons for both the capital increase and the listing was to fund the HRO350 phase IIb study. This study is now well underway. At end of 2023 the financial position is satisfying. Arctic Bioscience has constant focus on ensuring a satisfactory capitalization to secure progress in the ongoing projects. In 2024 the company will work with various financing alternatives to secure the future funding of the company's activities post the 6 months data readout.

Going forward we see positive prospects for our nutraceutical business, both with regards to building our customer base and by introducing new products into the markets. We are aiming for solid sales growth in the coming years and forecast a break-even contribution from the nutraceutical business by end of 2025.

Webcast

Arctic Bioscience will host a webcast and Q&A session to present the results today at 11:00 CET. The presentation can be accessed through the company's website, or with the following link:

https://channel.royalcast.com/landingpage/hegnarmedia/20240301_1/

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