Weifa – Third quarter 2014 Kjell Erik Nordby (CEO) and Gunnar Manum (CFO) 22 October 2014 1 Presentation outline Highlights I Business areas II Financial performance III Summary IV Appendix V 2 Highlights for the quarter Spin-off and listing of marine & offshore activities on Oslo Børs Acquisition of Weifa AS for NOK 1,127 million Raised gross proceeds of NOK 115.2 million through private placement Strong operational Q3 and further strengthening of position in Consumer health Two new consumer health product launches; Proxan and Weifa C No 1 OTC company year-to-date in the Norwegian pharmacy channel Metformin plant audited and approved by US Food and Drug Administration (FDA) in July Metformin Drug Master File approved by FDA and listed in the US as the only European supplier of metformin 3 Weifa AS key figures Q3 Revenue Margin and EBITDA NOK million NOK million 146 Revenue split 28 142 142 24 123 118 NOK xxx million 22 20 19 35% NOK 118 million 65% 20% 19% 17% 15% Q3 13 Q4 13 Q1 14 Q2 14 Q3 14 Q3 13 14% Q4 13 Q1 14 Q2 14 Q3 14 Consumer health B2B 4 Presentation outline Highlights I Business areas II Financial performance III Summary IV Appendix V 5 Consumer Health Strategic focus on four categories Weifa’s position Norwegian market OTC (non-prescription) Strong strategic position in four categories - 2013 market size NOK 1 066 million* Presence in pharmacy and mass market channels Rx (prescription) - OTC sales split 54% pharmacy and 46% mass market - 2013 market size NOK 567 million* OTX (vitamins, minerals, supplements and other “non-OTC” products) Pain #1 player Cough & cold *) Source: LMI/Farmastat. Measured in pharmacy purchasing price #1, 2 and 3 in certain segments Strong track record in Rx-to-OTC switches Products with exceptional brand recognition Nutra & oral health # 1 and 2 in niche segments Wound & sport #1 disinfection 6 Consumer Health Third quarter development No. 1 OTC company in Norway during the quarter, based on sales Increasing market share Market share development 84% 86% Launch of new Weifa C concept 73% - Intention of becoming the fastest growing player within the cough and cold category Launch of Proxan - Positioned as a non-prescription medicine for the treatment of menstrual pain - Further strengthening of Weifa’s position in the pain segment Paracet + Paracetduo (paracetamol) Aug 2013 Source: Farmastat and Nielsen 73% Ibux (NSAID) Aug 2014 7 Metformin business A high quality provider in first line treatment of diabetes 2 Weifa’s position Global metformin market The standard first line treatment for diabetes 2 Type 2 diabetes, has become a major global epidemic (8.3% of adults) Metformin market expected annual growth rate of 7-8% Estimated global growth in diabetes Million people Weifa provides among the purest and most freeflowing qualities of metformin in the global market Focus on customers demanding reliable supply and consistent high quality API - Willingness to pay premium prices Close to customer markets - Can reach to any market in Europe within 24 hours 592 EUR 22% NAC 37% Global market 2014 (Metformin HCl) 382 WP 46% SACA 60% SEA 71% MENA 96% AFR 109% 2013 Europe Western Pacific South East Asia Africa ~35 000MT Weifa ~8% 2035 North America and Caribbean Sounth and Central America Middle East and North Africa Source: IDF (International Diabetes Federation) Source: Weifa management estimate 8 Metformin business Third quarter development A state of the art fully automated production plant dedicated to metformin at Fikkjerbakke, Kragerø - Annual capacity of up to 3,100 tons FDA approved production facility - Re-inspected and approved in July 2014 Weifa’s metformin Drug Master File (DMF) approved by FDA in Q3 - Listed in the US as the only European supplier of metformin Production facility, Fikkjebakke 9 Opioids business Strong and efficient player in a controlled drugs environment Global opioids market Weifa’s position Opioids have several applications ‘From poppy to pill’ Regulated market with high barriers to entry Produces two types of opioids APIs Few raw material suppliers - Codeine (analgesics and cough syrup) - Pholcodine (cough syrup) Weifa’s competitors mainly based in regulated markets Also produces finished dose tablets Stable growth in the use of opioids Weifa’s customers are reputable international pharmaceutical companies Competitive edge form long standing relations with suppliers and customers Codeine market Weifa ~6% Source: Weifa management estimate Pholcodine market Weifa ~16% ~10MT ~400MT Source: Weifa management estimate 10 Opioids business Third quarter development High demand for Weifa’s opioids - Entire production capacity for 2014 sold out during the third quarter Recent longer-term deals with two major raw material suppliers has established a platform for growth in the opioids business Weifa ready to produce first commercial delivery of codeine tablets to leading pharmaceutical companies in the fourth quarter - Important milestone in “poppy to pill” strategy 11 Presentation outline Highlights I Business areas II Financial performance III Summary IV Appendix V 12 Weifa AS – profit & loss Revenue EBITDA NOK ‘000 NOK ‘000 123 317 Q3 2013 400 364 402 380 117 538 Q3 2014 21 954 20 229 YTD 13 YTD 14 Decrease related to the timing of large individual B2B sales Q3 2013 Q3 2014 73 951 66 818 YTD 13 YTD 14 Increase driven by strong result in Consumer health - Partly offset by strong sales in Consumer health 13 Weifa AS – segment performance Consumer health B2B Revenue and EBITDA Revenue and EBITDA NOK ‘000 NOK ‘000 76 830 225 808 224 529 177 851 52 388 167 356 70 921 40 708 21 926 47 609 15 655 57 583 7 532 20 009 16 368 YTD 13 YTD 14 28 Q3 2013 Q3 2014 YTD 13 YTD 14 Good development and sales for all consumer health products EBITDA improvement reflects cost improvements Q3 2013 Q3 2014 Decrease in both revenue and EBITDA mainly caused by timing of individual sales between quarters The underlying segment growth is strong 14 Weifa ASA - consolidated income statement (NOK '000) Q3 2014 Q3 2013 9M 2014 9M 2013 63 854 2 993 63 410 3 785 (30 036) (3 500) (37 756) (85 384) (336) (3 500) (8 056) (85 384) Profit/(loss) before tax (35 647) (3 067) (40 746) (83 653) Profit/(Loss) for the period 184 603 (3 067) 177 860 (83 653) Total revenue and income EBITDA EBITDA adjusted Weifa AS post acquisition is the primary contributor to revenues (15 August) EBITDA includes NOK 29.7 million which do not have any cash effect - Related to sale of inventory revalued as part of allocation of purchase price for Weifa AS Negative income tax expense of NOK 220.3 million relates mainly to the recognition of part of the tax losses carried forward in Weifa AS 15 Weifa ASA - sound financial position (NOK '000) 30.09.2014 30.09.2013 31.12.2013 Total Assets 1 717 009 71 671 212 676 Total equity 1 112 447 56 795 193 786 Total liabilities Total Equity and Liabilities Net interest bearing debt 604 562 14 876 18 890 1 717 009 71 671 212 676 223 064 (65 219) (94 029) Increase in assets reflects the acquisition of Weifa AS for NOK 1,127.2 million Cash and cash equivalents amounted to NOK 239.8 million at the end of the quarter Total borrowings NOK 462.8 million – net interest bearing debt of NOK 223 million Equity ratio of 64.8 percent Completed a private placement of NOK 115.2 million to fund strategic growth initiatives 16 Presentation outline Highlights I Business areas II Financial performance III Summary IV Appendix V 17 Summary Strong operational Q3 and further strengthening of position in Consumer Health Softer quarter for B2B due to timing of large contract sales Strengthened market position for flagship products Underlining position as number one player in the pain market through launch of Proxan Product launch of Weifa C to support strong ambition to become the fastest growing player within cough & cold Important FDA approvals for the metformin business emphasize position as a reliable supplier of first-line treatment of a high growth disease (diabetes2) Dose tablets contract in the UK demonstrates position ‘From poppy to pill’ in opioids Establishment of growth platform for opioids through two major long-term supply agreements CH - steady business with expected good performance going forward B2B – full year results expected to be in line with last year 18 Q&A 19 Presentation outline Highlights I Business areas II Financial performance III Summary IV Appendix V 20 Weifa ASA - consolidated cash flow (NOK '000) Q3 2014 Q3 2013 9M 2014 9M 2013 2013 Cash flow from operating activities (45 286) (21 922) (233 990) (140 027) (151 544) Cash flow from investing activities (1 062 866) 958 (1 141 664) 3 458 12 207 Cash flow from financing activities 1 272 337 - 1 421 893 (20 838) 10 787 Net change in cash and cash equivalents 164 185 (20 964) 46 239 (157 407) (128 550) Cash and cash equivalents end period (incl. discont. operations) 239 758 65 219 140 268 65 219 94 029 21 Terms and abbreviations API Active pharmaceutical ingredient B2B Business-to-business C&C CAGR Cough and cold Compounded annual growth rate CEP Certificate of Suitability to the European Pharmacopoeia CMO Contract manufacturing organisation COGS CPS Cost of Goods Sold Concentrate of poppy straw DCDA Dicyandiamide DMA Dimetylamin hydrochloride DMF EBIT Drug master file (document with complete information on an API) Earnings before interest and tax EBITDA Earnings before interest, tax, depreciation and amortisation FB Fikkjebakke - Metformin production facility in Kragerø, Norway FDA FTE U.S. Food and Drug Administration Full-time equivalent GDP Good Distribution Practice Generic (OTC) Term used for non-branded products Generic (Rx) GMP Copy of drug were the substance patent has expired Good Manufacturing Practice GP General practitioners GV Gruveveien - Dedicated tablets and opioids production facility in Kragerø, Norway JM Joint marketing LEAN Line extension Production practice with focus on creating value for customer New flavors, forms, colors, added ingredients, packaging size under an existing brand LMI The Association of the Pharmaceutical Industry in Norway MA Market authorisation Mass market MAT All retail outlets other than pharmacies (grocery, gas stations, kiosks, internet etc.) Moving annual total (last 12 months) Metformin DC Directly compressible Metformin, a granulated pre-tablet form Metformin HCl Metformin hydrochloride MT NSAID Metric ton Non-steroidal anti-inflammatory drugs Nutraceuticals Dietary food supplements, nutrition products, vitamins which is not registrated as drugs Opioids Collective term chemicals that work by binding to opioid receptors in the body OTC PPP Over-the-counter. Drugs available without a prescription Pharmacy purchasing price QA Quality assurance QC Quality control RX Rx-to-OTC switch Drugs that require a prescription OTC registering a drug product containing an API which previously has only been available as RX SKU Stock keeping unit SYA1 Opioids production facility (located at Gruveveien) SYA2 USP Metformin production facility (located at Fikkjebakke) Unique selling proposition YTD Year-to-date Ø27 Østensjøveien 27 - Weifa's head office in Oslo, Norway 22 Top 20 shareholders as of 17 October NAME SHAREHOLDING % share STRATA MARINE & OFFSHORE 163 047 697 10.3% FAMADAY TRADING INC 106 625 000 6.7% HOLTA LIFE SCIENCES 101 053 269 6.4% MP PENSJON 87 516 382 5.5% DEUTSCHE BANK AG 75 894 340 4.8% ARCTIC FUNDS PLC 61 002 869 3.8% SUNDT AS 36 400 000 2.3% VICAMA AS 36 000 000 2.3% FERNCLIFF LISTED DAI 35 899 808 2.3% VICTORIA INDIA FUND 31 410 783 2.0% GROSS MANAGEMENT AS 30 963 748 2.0% HOLBERG NORDEN 30 000 000 1.9% STOREBRAND NORGE I 29 294 553 1.8% KLP AKSJE NORGE 27 605 443 1.7% TOLUMA NORDEN AS 26 587 302 1.7% PORTIA AS 25 000 000 1.6% STOREBRAND OPTIMA 21 459 524 1.4% KOMMUNAL LANDSPENSJOSKASSE 21 049 131 1.3% HOLBERG NORGE 20 833 334 1.3% BORGEN INVESTMENT GROUP 20 000 000 1.3% Total 20 largest shareholders 987 643 183 62.2% Other shareholders 598 960 263 37.8% 1 586 603 446 100.0% Total number of shares 23
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