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. Progress in 2023 – A year focused on stability, growth and productivity By horizontal alignment the company focused on the 3 main pillars, stability, growth and productivity. We delivered on improving the revenue with 11%. AJV delivered their short-term commitment, while being equally focused on building a plan towards sustainable growth and profitability. We will continue to stabilize manufacturing and 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. 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, with a focus on achieving sustainable and profitable manufacturing output. One such opportunity lies in the further expansion of the BCG Vaccine for tuberculosis immunization and BCG Culture for the standard treatment of bladder cancer. These products hold compelling commercial potential, and obtaining additional market authorization coverage would significantly expand the addressable market. In addition, the polio business – previously dominated by sale to pan-national health organizations, is expected to benefit from opportunities and bulk sales and direct market authorizations in selected strategic countries and regions. Market overview Covid pandemic aside, 80% of the vaccine market is patent driven and dominated by five multinational pharmaceuticals, Pfizer Inc., Merck & Co., Inc., Sanofi, GlaxoSmithKline PLC, 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. It’s niche of generic products are well established and positioned with a portfolio of marketing authorizations and WHO prequalified status for 2 vaccines. Further room for strengthening and expansion for AJV is in planning and driven by the trending up of the overall vaccine market and additional opportunities with the BCG bladder cancer indication to leverage on a persisting global shortage. Vaccine sales in high income countries (“HICs”) is generally procured directly by government tendering, while vaccines sales to middle-income countries (“MICs”) are sold through a mix of procurement agencies (e.g. PAHO for Latin America), government, distributers and private insurers. Vaccines to low-income countries (“LICs”) are often sold through pooled international procurement agencies such as UNICEF and PAHO. AJV business is a mixture of all scenarios. Long lead-time for technical transfer and burdensome regulations are a barrier to biosimilar product replacement risks. The development of improved vaccines normally stretches over several years and requires large investment with significant probability of failure yielding clear visibility of the competitor landscape over the medium term. Over the past decades the generic vaccine market has been characterized by undersupply mainly due to big pharma companies focusing more on their new blockbusters. The current vaccine market offers a significant opportunity for AJV who hold a product portfolio of almost exclusively undersupplied vaccine products to make full use of unexploited capacity, be a supplier of bulk material and expand the non-vaccine indication while there is a significant pull from the global market. Financial Statements In 2023 revenues were DKK469m (2022: DKK 421m). Loss for the year DKK-243m (2022: DKK-268m) which was just below expectations for the year due to timing of sales from end 2023 to beginning of 2024. As of 31st December 2023, the Company had free cash and cash equivalents of DKK5m (2022: DKK 78 m). Income Statement Revenue Revenue for the period was DKK 469m (2022: DKK 421m). Revenue from vaccines sales was DKK 461m (2022: DKK 413m). Revenue other product sales and contract work amounted to DKK 7m (2022: DKK 8m). Cost of Sales Cost of sales total DKK 500m (2022: DKK 487m). For the year 2023, the cost increased due to higher production volume. Development Expenses The total research and development cost total 2023 DKK 17m (2022: DKK 9m) which relates to the other product development. Sales and distribution expenses and Administrative expenses The sale and administrative cost are in total DKK 164m (2022: DKK 151m). The cost for 2023 increased due to higher activities. Financial income and financial expenses Financial income was DKK 0,7 m (2022: DKK 0,1m). Income was primarily due to FX gains on working capital. Financial expenses amounted to DKK 37m (2022: DKK 42m) of which DKK 7m (2022: DKK 7m) was interest expense on loans and DKK 6m (2022: DKK 18m) due to FX loss and DKK 24m (2022: DKK 17m) was interest expenses related to lease liabilities. Other operating income Other income was DKK 5m (2022: DKK 4m). Other income is compensation from insurance and funding from the Bill & Melinda Gates Foundation of the IPV Alum development project. Tax on loss for the year Tax for the year was DKK -0.1m (2022: DKK 0.7m) corresponding to a tax rate under -1% (2022: under 1%) Liquidity and capital resources As of 31 December 2023, AJ Vaccines had free cash and cash equivalents of DKK 5m (2022: DKK 78m). Currency risk Currency risk include 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 exposure from fluctuations in USD is decreased because a significant part of the exposures relates to three USD denominated loans. These loans are not hedged. Balance Sheet The balance sheet total was DKK 1.590m as of 31 December 2023 (2022: DKK 1.534m). Assets The intangible assets are DKK 234m (2022: DKK 260 m). Tangible assets are DKK 676m (2022: DKK 655m). Additions for the year are primarily related to investments related in Lab Information Systems, manufacturing equipment and extension of IFRS 16 right-of-use assets. Inventories 31 December 2023 DKK 452m (2022: DKK 385m) of which finished goods amounted to DKK 53m (2022: DKK 37m) net of write-down. Receivables and prepayment 31 December 2023 DKK 220m (2022: DKK 139m) of which trade receivables amounted to DKK 116m (2022: DKK 57m). As of 31 December, 2023 cash and cash equivalents are DKK 5m (2022: DKK 78m) of which DKK 0m (2022: DKK 0,9m) is restricted cash related to funds received from The Bill and Melinda Gates Foundation. Equity After the transfer of the loss for the year and the capital contribution for the year the equity is DKK 1.020m (2022: DKK 995m). The reason for the net increase in equity is because of conversion of remaining loan balances to the immediate parent company as of 31 December 2023 to equity contribution to a total capital increase of DKK 267m. 2024 Outlook AJV expects to continue its trajectory of high organic growth and earnings improvement in 2024. The growth will be mainly driven by an increase in sales of core products like Picovax®, BCG Vaccine and BCG Culture by expanding to new counties. BCG Culture is driven by the treatment of non-muscle invasive bladder cancer. Due to planned capex and opex investments in 2024 the company is still on a journey to complete a full transformation of the business to a commercially orientated business with focus on increased output and profit maximization means that losses are still expected for 2024 and the year to come. Management estimates an improvement in EBIT in the range of DKK 50-80 million in 2024 versus EBIT 2023, due to normal business risks. Uncertainty relating to recognition and measurement In connection with the preparation of the financial statements. Management has made a number of 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 in excess of 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, specializes in developing and manufacturing innovative vaccines, diagnostics, and therapeutic solutions. The company's product 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 sourcing supplies to filling and packaging the final products for global distribution.