AJ Vaccines A/S

Ledelsesberetning

Management Review Our vision is becoming more relevant AJV vision is "Together we keep the world safe." This powerful statement embodies our commitment to creating a world free from serious diseases, generation after generation, life by life. This vision profoundly influences all aspects of what we do, ensuring that every initiative undertaken supports the overarching goal of protecting and preserving lives. 2024 – A Challenging Year 2024 results were significantly below expectations, with revenue and earnings below budget, primarily due to delays in key product sales. The positive highlights were the Tetanus restart project executed to plan. Positive dialog established with FDA on BCG culture. By horizontal alignment the company focused on achieving the improved manufacturing volumes and productivity for BCG. We will continue to grow our core business, and we expect to make progress on each of our potential growth initiatives to safeguard and accelerate AJV’s short- and long-term value potential. 2024 is negatively impacted by an impairment of DKK565m as a consequence of the decision to phase out Picovax business. The impairment is split on intangible and tangible assets with DKK 496m and on inventory with DKK 69m. As mentioned in the outlook, the decision was made in response to unfavorable market conditions and significant financial challenges associated with Polio vaccine business. Strategy The company's immediate focus is on achieving continuous growth and improving profitability. Management has identified significant opportunities for growth by transforming AJV into a performance and commercially focused business. One such opportunity lies in the further expansion of BCG Culture for the standard treatment of non-muscle invasive bladder cancer. BCG Culture holds compelling commercial potential, and obtaining additional market authorization coverage would significantly expand the addressable market. In addition, the management has decided to discontinue the polio business over the next three years with bulk production stop in early 2025, while still fulfilling our supply commitments for the next two years. Market overview AJ Vaccines operates on several different pharmaceutical product markets. Both the vaccine market for its classic vaccines; BCG Vaccine (Tuberculosis), Picovax (Polio) and Tetanus Diphtheria (Td), as well as Tuberculosis testing market for AJV Tuberculin test (TB test), and the market for bladder cancer treatment where AJV offers the Vesiculture (BCG Culture) product for treatment of non-muscle invasive bladder cancer. Vaccine Market: 80% of the vaccine market is patent driven and dominated by five multinational pharmaceuticals, Pfizer., Merck & Co., Sanofi, GlaxoSmithKline, and Johnson & Johnson. The most significant production volumes however are supplied by vaccine dedicated companies, the largest of which located in countries where cost of manufacturing is more competitive like India (i.e., Serum Institute of India) and China (i.e., Sinovac, Sinopharm). AJV is not in competition with these big market players but rather complementing where the market needs exist. AJV niche of generic products are well established and positioned with a portfolio of marketing authorizations and WHO prequalified status for 2 vaccines. AJV sells BCG Vaccine (Tuberculosis), Picovax (Polio) and Tetanus Diphtheria vaccine (Td ) globally via local distributors network and often via tender business processes. Tuberculosis testing market: AJV produces, distributes and sells AJV Tuberculin (Mantoux TB test) in several global markets. The Tuberculosis testing market has experienced in recent years a volume increase in actual numbers of diagnostic tests performed. This growth is amongst other things driven by increases in Tuberculosis incidents globally. Increased travel activity by the world population is amongst other things the reason behind the increase (airborne transmission from person to person), however the introduction of the IGRA TB test (blood sample based) in combination with national guidelines to increase TB testing has facilitated an increasing TB test volume market. Recently Sanofi has made an exit of the Mantoux TB test market and withdrawn their test from the market. This is providing more opportunities for AJV Tuberculin TB test. Bladder Cancer Market: AJV produces, distributes and sells Vesiculture on the Bladder Cancer Market. Vesiculture is BCG Culture product and is recommended globally as a first line treatment for patients diagnosed with non-muscle invasive bladder cancer. The volume market for bladder cancer is increasing with, e.g. 80.000 new bladder cancer patients yearly diagnosed in the USA. Same trend is reported in Europe and Rest of World International markets, eg. China. The Bladder Cancer Market is dominated by Tice (BCG Culture from Merck), however Merck is not able to manufacture enough treatments, thus there is a shortage of treatment in several markets, e.g. USA. 2-3 years ago, this shortage was also seen in Europe. However, the German based company Medac, BCG culture manufactured by - SSI India, has launched in Europe and is currently market leader. AJV sees with Vesiculture major opportunities for sales growth in the bladder cancer market, both in Europe, USA and International Markets. Financial Statements In 2024 revenues were DKK 413m (2023: DKK 469m). Loss for the year DKK -807m (2023: DKK DKK-243m). Revenue was just below expectations for the year due to (timing of sales from end 2024 to beginning of 2025). EBIT was below expectation for the year due to the IPV impairment. As of 31st December 2024, the Company had free cash and cash equivalents of DKK8m (2023: DKK 5m). Income Statement Revenue Revenue for the period was DKK 413m (2023: DKK 469m). Revenue from vaccines sales was DKK 406m (2023: DKK 461m). Revenue from other product sales and contract work amounted to DKK 7m (2023: DKK 7m). Cost of Sales Cost of sales total DKK 1.000m (2023: DKK 500m). For the year 2024, the cost increase is due to IPV impairment. Development Expenses The total research and development cost are in 2024 DKK 22m (2023: DKK 17m) which relates to the other product development and product improvement activities. Sales and distribution expenses and administrative expenses The sales and administrative costs are in total DKK 140m (2023: DKK 146m). The cost for 2024 decreased due to lower activities and fewer employees. Financial income and financial expenses Financial income was DKK 0,5m (2023: DKK 0,7m). Income was primarily due to FX gains on working capital. Financial expenses amounted to DKK 41m (2023: DKK 37m) of which DKK 8m (2023: DKK 7m) was interest expense on loans and DKK 14m (2023: DKK 6m) due to FX loss and DKK 20m (2023: DKK 24m) was interest expenses related to lease liabilities. Other operating income Other income was DKK 0,3m (2023: DKK 5m). Other income is smaller amounts related to deferred income releases. Tax on loss for the year Tax for the year was DKK 0 (2023: DKK -0.1m) corresponding to a tax rate 0% (2023: under -1%) Liquidity and capital resources As of 31 December 2024, AJ Vaccines had free cash and cash equivalents of DKK 8m (2023: DKK 5m). Currency risk Currency risk includes the risk arising from sales contracts being denominated in currencies other than Danish kroner. Contracts are primarily in DKK. USD and EUR. meaning that other currencies do not represent significant currency risks. The AR exposure from fluctuations in USD is decreased because a significant part of the exposure relates to three USD denominated loans. These loans are not hedged. Balance Sheet The balance sheet total is DKK 1.089m as of 31 December 2024 (2023: DKK 1.587m). Assets The intangible assets are DKK 89m (2023: DKK 234m). Tangible assets are DKK 289m (2023: DKK 676m). Additions for the year are primarily related to investment related to SAP/4Hana, Lab Information Systems, manufacturing equipment. Impairment on assets for the year is in total DKK -496m. Inventories 31 December 2024 DKK 532m (2023: DKK 452m) of which finished goods amounted to DKK 31 m (2023: DKK 53m) net of write-down. Increase in inventory before impairment relates to an improvement of yield outputs from production. Receivables and prepayment 31 December 2024 DKK 170m (2023: DKK 220m) of which trade receivables amounted to DKK 47m (2023: DKK 116m). As of 31 December 2024 cash and cash equivalents are DKK 8m (2023: DKK 5m). Equity After the transfer of the loss for the year and the capital contribution for the year the equity is DKK 502m (2023: DKK 1.020m). The reason for the net decrease in equity is related to equity contribution of DKK 289m and impairment on assets and inventory of DKK 569m. 2025 Outlook On January 29 2025 the company announced the decision to phase out its Polio (Picovax) production as part of its strategy to ensure a sustainable and competitive future. This decision was made in response to unfavorable market conditions and significant financial challenges associated with Polio vaccine production. The polio business has been a financial burden for AJ Vaccines for several years, with annual losses ranging between DKK 110–140 million. The market is characterized by excess capacity, intensified international competition, and declining prices, making it difficult to sustain profitable production. A gradual phase-out will ensure a responsible transition, by 2027 while honoring existing supply agreements. This approach will ensure a stable supply to customers and partners during the phase-out period. The decision also allows for a reallocation of resources toward high-value products and markets with greater growth potential. Although this decision will result in redundancies, it is necessary to eliminate recurring financial losses and establish a solid foundation for future growth. Focus on the Future. The phase-out of Polio is an important part of AJ Vaccines’ development towards becoming a broadly based healthcare company. Moving forward, the company will focus on high-value products, including tuberculosis products (BCG Vaccine and Tuberculin), treatment of non-muscle invasive bladder cancer (BCG Culture), and immunization against Diphtheria and Tetanus (dT Vaccine), which are expected to drive growth in the coming years. During the next years, we aim to secure an alternative utilization of our polio facility, which is based on the widely used VERO-Cell technology. Management estimates to improve the poor 2024 sales performance with organic growth in 2025 of 15%-20%, and an improvement in EBIT versus 2024 due to the IPV shut-down impairment. EBIT improvement will be in the range of DKK 575-585 million in 2025 versus EBIT in 2024. The Company is still in a turnaround phase and funding from the owners is still required. Uncertainty relating to recognition and measurement. In connection with the preparation of the financial statements. Management has made several estimates and assumptions concerning carrying amounts. Management has made the following accounting judgments which significantly affect the amounts recognized in the financial statements. • Impairment of assets • Inventories. including impairment and production overheads The carrying amounts of plant and equipment carried at cost or amortized costs are tested annually to determine whether there are indications of any impairment more than that expressed in normal depreciation. If that is the case the asset is written down to the recoverable amount, which is the higher of its fair value less costs to sell and its value in use. Impairment losses on property, plant and equipment are recognized under the same line items as depreciation of the assets.

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Key activities AJ Vaccines A/S (“AJV”), a biopharmaceutical company, specialized in developing and manufacturing innovative vaccines, diagnostics, and innovative therapeutic products. The company's portfolio includes stand-alone and combination vaccines for polio, tuberculosis control, and treatment for non-muscle invasive bladder cancer. AJV is involved in the entire manufacturing process, from producing bulk to filling and packaging the final products for global distribution.