Vistin Pharma : Annual Report 2023

Directors' report for 2023

Operating performance

Vistin Pharma is a one of the leading suppliers of metformin, the gold standard treatment for type II diabetes.

Diabetes is one of the most serious diseases of this century. The number of diabetes II patients are by WHO expected to grow from approximately 500 million today to > 750 million in 20 years. About 10% of the world's population in the age group between 25 - 70 years are suffering from diabetes. Vistin Pharma is proud to play a major role in the world in treating this disease. We treat about 40 million diabetes patients annually with our metformin product. The global demand for metformin is expected to grow by approximately 23.000 MT to 85.000MT by 2028.

Vistin Pharma´s ambition is to strengthen its position as one of the leading global suppliers in the metformin market and take advantage of the expected growing market demand in the coming years.

Vistin Pharma believes that the quality of its metformin products, its advanced fully automated production facility, continuous focus and investment in sustainable operations,

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its service and delivery performance, strategic position in Europe and close proximity to its key premium customers are competitive advantages and drivers for increased sales and future growth.

Production volume in metric tons

6000

5280

5000
4000		3460	3630	3639
3044
3000
2000
1000
0
2019	2020	2021	2022	2023

Metformin capacity expansion project (MEP)

Vistin announced in April 2020 that the Board of Directors had approved a Metformin Capacity Expansion Project (MEP). The objective was to build a 2nd parallel production line and establish a total capacity of approximately 7000MT metformin HCl annually to take advantage of the growing need for metformin, to treat diabetes II patients and to supply existing and future customers increasing product demands. The new line was installed in 1H

2022 but was not fully operational before in

2023. The ramp-up program to achieve approximately 7000MT installed capacity has been a primary focus throughout the year. The manufacturing capacity by end 2023 is approximately 6000MT of metformin hydrochloride.

Strategy

Vistin is positioned as a premium supplier in the metformin market. To strengthen the position, Vistin is committed to invest in process and product quality development and take advantage of Best Available Techniques (BAT) in its production environment. Vistin has a separate department consisting of four highly competent engineers dedicated to work with process, productivity-, and quality improvements.

Vistin Pharma's long-term ESG vision is to have no negative impact on environment, people and local community by the Company's presence.

Vistin Pharma are proud of the sustainability achievements, the track record of deliverables and ongoing ESG focus and investments to further reduce the Company's carbon footprint. During the last years Vistin has invested more than 25 million NOK in different ESG projects to further reduce discharges from our manufacturing plant in Kragerø and continuous surveillance programs to measure any impact on the environment from our manufacturing activities. We are proud to say that we have found no traces of pollution or negative impact on the surroundings and local Kilfjord (ocean).

In 2024 we will finish our water recirculation project which will reduce the water consumption in the plant with approximately 80%. In addition, we have in 2023 implemented a cooling system to condense hydrocarbons. This is expected to reduce the emission of greenhouse gases with more than 95% compared to historical levels.

In December 2022 Vistin Pharma entered into a long-term renewable hydropower energy supply agreement with Statkraft (the largest European supplier of re-useable energy) on competitive terms lasting from January 2023 until 2032. We have experienced positive effect from this agreement in 2023 both with respect to energy cost, stability and long-term predictability.

High demand

The demand in the market for metformin is still high. The raw material prices have decreased

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during 2023 following the Covid-19 pandemic. The delivery situation of raw materials has been stable during 2023, however Vistin has chosen to keep certain elevated levels of safety stock of key raw materials to reduce the risk of temporary raw material shortages.

Vistin has during 2023 both renewed long term supply agreements with existing customers and signed supply agreements with new customers. The company is therefor well on track to fill the additional manufacturing volume from our expansion project going forward.

The company also has a strategic intent to become a European multiproduct Contract Development and Manufacturing Organization (CDMO) as part of its growth strategy.

Presentation of financial results for the group

Total revenue and other income for Vistin Pharma in 2023 amounted to MNOK 438.3 (MNOK 304.9). The revenue for both 2023 and 2022 relate exclusively to sales of metformin.

The operating profit for 2023 was MNOK 68.6 million (MNOK negative 6.1). Vistin had a net profit of MNOK 45.6 million (net loss MNOK 4.7 million). The net profit in 2023 is driven by a significant increase in sales volume, with production from two lines. The loss for 2022 was driven by a planned production stop in Q1 due to installation of a new production line and record high electricity prices.

Revenue & other income in MNOK

500

450	438
400
350	305
300	279
254

1. 228

50

2019 2020 2021 2022 2023

Liquidity, financial position and investments

2023 net cash flow from operating activities was positive with MNOK 90.6. Net cash flow from operating activities in same period of 2022 was negative with MNOK 10.5

Net cash flow from investing activities in 2023 was negative with MNOK 17.7, which represents capital expenditure and leasing repayments. Net cash flow from investing activities in the same period last year was negative with MNOK 64.3 (mainly MEP 2'nd manufacturing line investment).

Net cash flow from financing activities in 2023 was negative with MNOK 48.1, which mainly are related to down payment of the bank overdraft. Net cash flow from financing activities in the same period last year was positive with MNOK 40.5 (call on bank facility for MEP project).

Change in cash and cash equivalents YTD

2023 was positive with MNOK 24.8. In the same period last year, there was a net decrease in cash and cash equivalents of MNOK 34.3.

Vistin Pharma had total assets of MNOK 403.4 as of 31 December 2023 (MNOK 407.2). The company has a deferred tax asset of MNOK

14.6 (MNOK 28.6). Based on the financial forecasts for the company, the deferred tax asset is expected to be fully utilized, and thus the full amount has been included as carrying value in the balance sheet.

Equity by the end of December was MNOK 322.8. This equals an equity ratio of 81%.

The Financial Statements of Vistin Pharma ASA have been prepared in accordance with the International Financial Accounting Standards (IFRS®) as adopted by the EU and are valid on or after 1 January 2018.

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In accordance with the Norwegian accounting act § 3-3a, the Board of Directors confirm that the Financial Statements have been prepared under the assumption of going concern and that this assumption is valid based on the Group's budgets and financial projections.

Events after the balance sheet date

There have not been events subsequent to the closing date of 31 December 2023, that affects the financials or the Company's operational activities.

Additional dividend of NOK 0.75 per share approved and paid in January 2024.

The Board of Directors will propose for the AGM an ordinary dividend of total NOK 1 per share, to be paid partly with NOK 0.5 in June and NOK 0.5 in November

Vistin Pharma announced on the 4th of March 2024 an acquisition of a 15% share in CF Pharma Kft. CF Pharma is an API CDMO located in Budapest, Hungary. The transaction price consists of a base price and an earn-out- element, with an agreed cap of MEUR 1.6.

Organizational matters

Organization

At the end of 2023, the Group had 77 employees.

Board of Directors

At year end the board consisted of Øyvin A. Brøymer (chairman), Bettina Banoun, Kari Krogstad, Espen Marcussen, Øystein Stray Spetalen, Espen Lia Gregoriussen (employee representative) and Åse Musum (employee representative).

Long and successful growth track record

500

450

400

350

300

250

200

150

100

50

0

Revenues Vistin Metformin (MNOK)

438

305

279

254

228

201

176	171	177

142	150

	101	111
88

2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023

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Sustainability report

Corporate social responsibility (CSR), the environment and employees

Vistin Pharma aspires to achieve sustainable development by having a good balance between serving customer needs, financial results, value creation, sustainability, and CSR. The Board of Directors have the overall responsibility for aligning Vistin's strategy and sustainability considerations, while the day-today responsibility lies with the CEO, supported by the Leadership Team. The statement of corporate social responsibility required under Section 3-3c of the Norwegian Accounting Act follows below.

Corporate social responsibility

Vistin Pharma is committed to conduct its business in a manner that adheres to the highest industry standards within the pharmaceutical industry, and strictly in accordance with international and local laws and regulations. Vistin Pharma is a socially responsible company dedicated to promoting decent working and environmental conditions in the supply chains. Vistin Pharma has adopted the general principles of UN Global Compact with universally accepted principles for human rights, working conditions, environment, and anti-corruption. In pursuit of this the Group has developed a 'NO HARM VISION' consisting of:

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A vision to have no negative impact on environment, people, and local community by the Company's presence

A «green» and environmentally friendly pharmaceutical company with a "no harm" vision and "front runner" ambition

A goal to increase manufacturing capacity without increased environmental impact on water, air, and soil

ESG achievements and initiatives

Vistin Pharma has during the last years invested in, completed, and implemented several projects that significantly reduce the environmental footprint. Building on this success, Vistin Pharma has several ESG initiatives ongoing:

• Vistin continues to use only 100% hydro powered energy to minimize carbon footprint.
• Vistin is completing a project in 2024 with aim to reduce the water consumption in the plant by >80% through recycling, incl. reusing the hot water for heating.
• Vistin is working on a technology project where distillation will be fractionated into components that can be used as raw materials for other companies.
• Vistin has, since 2017, been part of a national program for surveillance of industrial impact on fjords and effluents. Surveillance program and ecotoxicology test confirm that Vistin do not impact the effluent negatively.
• Vistin has invested MNOK 10 in a cooling system to condense hydrocarbons. This has reduced the total emission to air with more than 95 % compared to historical levels.

The Company's manufacturing plant is located in Kragerø, Stuttlidalen 4, Sannidal, Norway, and its head office is located at Østensjøveien 27, Oslo, Norway. Vistin Pharma has dedicated considerable resources to identify, analyze, control and reduce the emission levels at its manufacturing plant. Vistin Pharma has established a system in which all process water is being collected and analyzed, and only discharged if the water quality is within approved levels. The system has been fully operational during 2023.

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Vistin has a strict surveillance regime when it comes to emission from the plant and is on a quarterly basis reporting status to the environmental department ('Miljødepartementet').

Vistin only use well know international freight providers for both inbound and outbound transportation. The freight suppliers also need to be an approved supplier according to the Company's internal guidelines which is based on Good Distribution Practice (GDP) and Supplier Code of Conduct. Vistin Pharma expects its suppliers and business partners to make efforts to ensure compliance to the above principles and national laws and regulations, and to ensure similar compliance by their sub- suppliers.

Vistin Pharma does not accept violation of laws against corruption, bribery, and fraud. Suppliers and business partners shall under no circumstance be involved in business practice which hinders free competition. Suppliers and business partners shall not offer Vistin Pharma employee's gifts or favorable conditions. Vistin Pharma seeks to form long term relationship with business partners, who share the values and focus on promoting decent working and environmental conditions in the supply chain. Vistin Pharma's Code of Conduct is built on Vistin Pharma's values and provides a framework for what the Group considers responsible conduct. The document has been approved by the Board of Directors, and applies to all employees, as well as to board members of Vistin Pharma, and can be found at www.vistin.com.