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Commissioned research 20 August 2018

Marketing material commissioned by Moberg Pharma

Moberg Pharma Healthcare | Sweden

Key data

Absolute and relative performance

Source: FactSet and Bloomberg

Valuation approach

Source: Nordea estimates

Breaking the catch-22 of onychomycosis treatment Solid base business with catalyst potential Moberg Pharma is a speciality pharma company operating three leading flagship brands in the over-the-counter (OTC) market, with an emphasis on onychomycosis (nail fungus) and skin treatments. Its commercial operations are largely conducted in the US, where ~90% of total sales were generated in 2017. In addition, it has two late-stage drug candidates, including a next-generation nail fungus treatment (MOB-015) and a novel treatment for pain caused by oral mucositis (BUPI). Streamlining starting to shine through Over the past two years, Moberg has been on a transformational journey to streamline and balance its OTC portfolio. Following six separate transactions, it has created a high-margin portfolio of leading niche brands. Its efforts are now starting to bear fruit, with its key brands growing by 19-24% y/y during H1 2018. Profitability has also started to trend upward, with an adjusted LTM EBITDA margin of 21% in Q2 2018 (up from 16% in Q2 2017). This is still below its long-term target of 25%, indicating further potential once the pipeline comes into play, which we believe will be margin-accretive. Pipeline optionality coming into play Onychomycosis, or nail fungus, is a condition that affects around 10% of the population. To date, patients are trapped in a catch-22 situation, as the harmless topical treatments have limited efficacy and the more effective oral drugs come with the risk of severe side effects. Moberg’s crown jewel, MOB-015 (currently in ph III trials), aims to bridge that gap. Based on a discount of 50-60%, from a list price of USD 1,700 per package, the company estimates annual peak sales of MOB-015 of USD 170-300m in the US alone. Valuation Based on a SOTP DCF approach, we derive a fair value of SEK 65-83 per share. We value the current business at SEK 40 per share, while we value the pipeline at SEK 25-43 per share. We value MOB-015, the major pipeline asset, at SEK 23-39 per share, based on a probability of launch of 40%-60% and peak global market sales of USD 274m.

Nordea Markets - Analysts Dan Johansson Analyst

Carl Mellerby Analyst

Hans Mähler Director

Source: Company data and Nordea estimates

Country SwedenBloomberg MOB SSReuters MBPH.STShare price 51.8Free float 57%Market cap (m) SEK 913Website www.mobergpharma.seNext report date 06 November 2018

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-1M -6M -12M YTDAbsolute 36% 105% 35% 87%Relative 33% 99% 27% 82%

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SUMMARY TABLE - KEY FIGURESSEKm 2013 2014 2015 2016 2017 2018E 2019E 2020ENet sales 157 200 286 334 439 430 465 484- growth 27.2% 42.7% 17.1% 31.3% -2.0% 7.9% 4.2%EBIT -14 17 35 62 51 54 56 68- margin -8.9% 8.6% 12.3% 18.6% 11.6% 12.5% 12.1% 14.1%EPS -0.97 0.95 1.78 2.25 0.64 0.65 0.76 1.30- growth n.m. 86% 27% -72% 3% 16% 72%DPS n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a.P/E n.m. 39.8 37.2 25.3 42.8 79.4 68.4 39.9EV/EBIT n.m. 25.4 25.4 21.3 18.5 26.1 25.2 20.1EV/Sales 2.3 2.2 3.1 4.0 2.2 3.3 3.0 2.8RoE 4.9% 7.8% 7.1% 2.0% 2.1% 2.4% 3.9% 5.0%Div. yield n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a.FCF yield -0.9% 3.3% -1.4% -85.0% 7.2% -1.3% -1.1% 4.1%ND/EBITDA n.m. -1.8x -0.9x 6.5x 5.3x 5.3x 5.2x 4.2x

20 August 2018 Moberg Pharma

Marketing material commissioned by Moberg Pharma 2

Table of contents Factors to consider when investing in Moberg Pharma .................................................................. 3

Valuation ........................................................................................................................................ 6

Company overview ......................................................................................................................... 9

Product mix .................................................................................................................................. 15

Pipeline assets .............................................................................................................................. 22

Management, board of directors and shareholders ...................................................................... 29

Market overview: Onychomycosis ................................................................................................ 33

Market overview: Oral mucositis (OM) ......................................................................................... 37

Market overview: Liquid bandages ............................................................................................... 41

Market overview: Pain relief sprays .............................................................................................. 42

Historical financials ...................................................................................................................... 43

Estimates ...................................................................................................................................... 51

Detailed estimates ........................................................................................................................ 57

Risk factors ................................................................................................................................... 58

Reported numbers and forecasts.................................................................................................. 60

Glossary ........................................................................................................................................ 63



Factors to consider when investing in Moberg Pharma An investment in Moberg Pharma offers exposure to leading niche products in the OTC healthcare segment, with an emphasis on topical treatments in the US. In addition, we find that it offers exposure to two late-stage drug candidates: a next-generation nail fungus treatment (MOB-015) and a novel treatment for pain due to oral mucositis (BUPI), which is a serious complication of cancer treatment. The sales potential of the pipeline products greatly surpasses the company’s current revenue base.

We identify a number of key themes describing the investment case in Moberg Pharma

A full description of the main risk factors we find relevant for Moberg Pharma is provided on page 58

We consider the following factors to be pivotal when evaluating an investment in Moberg Pharma:

• The company holds a strong portfolio of OTC healthcare products, consisting of market-leading brands, with a particular focus on the US market.

• Recent strategic transactions have resulted in a synergistic and more balanced portfolio with high margins. Enhanced sales and marketing outcomes have led to double-digit organic growth in recent quarters.

• The company holds a pipeline of two late-stage drug candidates, MOB-015 and BUPI. MOB-015 is a patented anti-fungus nail treatment and BUPI is a pain relief lozenge for oral mucositis, which is a severe side effect of cancer treatment.

The key risk factors related to an investment in Moberg Pharma, in our view, are:

• MOB-015 and BUPI are dependent on their clinical trials. Failure to achieve successful phase III results could affect the prospects of commercialisation, and limit the earnings potential.

• The company has an outstanding bond of SEK ~600m, which carries Stibor + 6% and is set to mature on 29 January 2021. If the company is unable to refinance the bond, it might be forced to sell assets under pressured terms.

• Moberg Pharma is dependent on its existing distribution agreements with large retail chains, particularly in the US. If the agreements were to become less favourable, revenues could be significantly impacted.

Strategic efforts are now starting to bear fruit

Strategic transactions have created a synergistic portfolio Moberg Pharma’s product portfolio is a result of several recent transactions that have resulted in a synergistic product mix with high margins (gross margin of 71-78%). The strategic efforts have been ongoing for the past two years, but are now starting to bear fruit. The company sees the greatest potential in the US market, which is already the primary contributor to group sales (~90%). In our view, rolling 12-month revenue and organic growth figures for the US operations are solid in an otherwise slow-growing segment.

US CORE BRANDS: ROLLING 12-MONTH REVENUE

Source: Company data and Nordea

US CORE BRANDS: ORGANIC GROWTH


102 104 104 106 122

78 87 87 88 94

95 96 103

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Kerasal Nail - US New Skin Dermoplast

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Kerasal Nail - US New Skin Dermoplast



Additional distribution was quickly secured for the new products

Part of the successful integration of the newly acquired products (New Skin and Dermoplast) can be attributed to the company’s established sales model in the US, which includes around 30,000 retail stores. For instance, after the acquisition of New Skin, Moberg Pharma secured additional distribution of New Skin via 3,900 Walmart stores and more than 1,500 Walgreen stores. Similarly, shortly after the product rights for Dermoplast were acquired, the distribution of the product was expanded to 7,500 CVS locations and 3,500 Walmart locations. In turn, the new brands quickly generated significant revenue, each contributing 20-25% to group sales.

NEW SKIN REVENUE, Q3 2016 – Q2 2018


DERMOPLAST REVENUE, Q1 2017 – Q2 2018

Source: Company data and Nordea Sales model will continue to benefit the current product portfolio… …and potential future product acquisitions

In the long term, we expect that the company will continue to leverage its sales model to propel growth and profitability. Even though we do not expect any new acquisitions in the short term, we believe that if Moberg Pharma expands its product portfolio a few years down the road, these products will benefit from similar distribution gains as New Skin and Dermoplast.

Moberg is positioned at the centre of onychomycosis treatment

MOB-015 is aimed to bridge the cure rate gap between topical and oral treatments

Breaking the catch-22 of onychomycosis treatment Onychomycosis (nail fungus) is a condition that affects around 10% of the general population. In turn, Moberg Pharma is positioned at the centre of onychomycosis treatment by holding the product rights for a leading topical OTC product, Kerasal Nail (contributed stable revenues of around SEK 150- 160m between 2015 and 2017), and a promising late-stage drug candidate, MOB-015.

To date, onychomycosis patients are trapped in a catch-22 situation, as the harmless topical treatments have limited efficacy (cure rates <18%), and the more effective oral drugs (cure rates <54%) carry risks of systemic side effects, such as liver damage. Supported by encouraging phase II results, MOB-015 aims to bridge the gap between the two alternatives. The goal is to achieve cure rates of between 20% and 30%, thereby breaking the catch-22 situation by providing an effective treatment with limited side effects.

CURRENT RX ALTERNATIVES IN THE US VERSUS MOB-015’S TARGET

Source: Seminars in Cutaneous Medicines and Surgery, company data and Nordea

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Dermoplast revenue % of total revenue

Application Treatment FDA approval Complete cure rate

Topical Ciclopirox 1999 5,5 - 8,5%Topical Tavaborole (Kerydin) 2014 7-9%Topical Efinaconazole (Jublia) 2014 15-18%Topical Target for MOB-015 N/A 20-30%Oral Terbinafine 1996 38-54%Oral Itraconazole 1995 14-26%Oral Fluconazole Off-label 37-48%



In 2017, around 4.5 million prescriptions for treating onychomycosis were written. Given the company´s expectation of a 2017-22 CAGR of 3%, this number should reach around 5 million in 2022. If successful, Moberg Pharma expects to capture a market share of 5.0-7.5%. Based on a discount of 50-60% from a list price of USD 1,700 per package, the company estimates annual peak sales of MOB-015 to reach USD 170-300m in the US alone and USD 250-500m on a global scale.

US TRx COUNT, ONYCHOMYCOSIS TREATMENTS

Source: Bloomberg and Nordea estimates

MOBERG PHARMA’S MOB-015 US SALES ESTIMATES


Company’s annual sales estimate for BUPI raised to USD 100-200m

Additional potential in supportive cancer care Alongside MOB-015, Moberg Pharma’s pipeline also holds a product for supportive care for cancer treatment patients, called BUPI. It is a pain relief lozenge (bupivacaine) intended for mouth pain and ulcers (oral mucositis, OM). According to LifeSci Capital, the addressable market opportunity for a bupivacaine lozenge is estimated at USD 205-615m in the US.

In turn, Moberg Pharma estimates the annual sales of BUPI will reach USD 100-200m globally, which is an increase on its original estimate of USD 50-100m following the optimistic view of physicians reflected in a recent survey conducted by LifeSci Capital. The company’s estimates are based on the assumption that BUPI will be successfully commercialised for OM and at least one other indication.

Experienced management Moberg Pharma has an experienced management team led by the CEO and founder Peter Wolpert. His previous roles include co-founder of Ibility AB, CEO at Athera Biotechnologies and a strategy consultant at McKinsey & Co.

The chairman of the board is Thomas Eklund, who has extensive experience of senior executive positions in the pharmaceuticals industry, and as CEO and Head of Europe for Investor Growth Capital AB. He is currently also chairman of the board at Caliditas Therapeutics AB and Itrim Holding AB, and a board member of several other companies.

Our overall impression is that Moberg Pharma’s executive management team possesses the relevant experience and expertise to propel the company towards achieving its strategic goals. In our view, the recent move to consolidate the sales and marketing capacity by appointing Jeff Vernimb to lead both direct and distributor sales demonstrates the company’s ambition to realise the full potential of its commercial operations.

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USDm 70% 60% 50% 40% 30%

2.5% 64 85 106 128 149

5.0% 128 170 213 255 298

7.5% 191 255 319 383 446

10.0% 255 340 425 510 595

15.0% 383 510 638 765 893

Gross-to-net discount

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Valuation Based on SOTP DCF approach, where we value Moberg’s current business and its pipeline projects separately, we derive a value of SEK 65-83 per share. This valuation interval is based on an equity value per share of SEK 40, for the current product portfolio, which is derived by using a WACC of 9.5%. We value the pipeline to SEK 25-43 per share based on variations in likelihood of successful outcome in the ongoing clinical trials. The lion share of the pipeline value is attributed to the crown jewel MOB-015, a next-generation topical formulation of terbinafine for the treatment of onychomycosis

We derive a fair equity value of SEK 65-83 per share for Moberg Pharma

Valuation highlights We rely on a fundamental SOTP DCF framework to derive an equity valuation range of SEK 65 – 83 per share. In our view, a fundamental DCF model is the most appropriate method for estimating the value of the company, since a multiples approach does not fully incorporate the future expected cash flows from pipeline projects, which are expected beyond 2022. Finding relevant peers are also difficult due to very specific niche the company operates in. Estimates for the pipeline projects are probability-weighted to capture the inherent development risks that exist. Our valuation does not incorporate any potential value creation from future acquisitions and divestments of product rights.

VALUATION OVERVIEW, SEK PER SHARE


We use a SOTP DCF approach to value Moberg’s current product portfolio and pipeline projects

DCF valuation One of the most common ways to value the attractiveness of an investment opportunity is the discounted cash flow (DCF) method. A DCF model discounts all available cash flows for equity, bond and non-equity holders at the weighted average cost of capital (WACC). In other words, WACC represents a blended cost of capital for all invested capital in the company. In fundamental terms, a DCF framework is built on three parts:

• Discounting the company’s free cash flow at WACC

• Identifying the value of debt and other non-equity claims on the enterprise value

• Deducting all claims to determine the value of the common equity. The fair value per share is then simply calculated by dividing the equity value by the number of outstanding shares.

A DCF valuation is commonly considered among academics and practitioners to be the best way to capture the underlying fundamental drivers of a company such as cost of capital, growth rates, reinvestment rates, etc. If applied correctly, it represents the best way to approximate the true intrinsic value of a company. A key advantage

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of a DCF framework compared with other valuation methodologies is that it also focuses on streams of cash rather than accounting earnings. Its main disadvantage is its relative sensitivity to changes in input values.

We apply a WACC of 9.5%

WACC and current business We use a WACC of 9.5% to derive our fair value of Moberg Pharma’s current business. Our assumptions are outlined below.

WACC ASSUMPTIONS

Source: Nordea estimates Based on these assumptions, we derive a fair value of SEK 40 per share for Moberg Pharma excluding the pipeline projects.

DCF VALUE EXCLUDING PIPELINE ASSETS


Moberg’s fair value appears to be more sensitive to assumed deviations in WACC

DCF sensitivity: current portfolio To test the robustness of our DCF valuation on the current portfolio, we perform a sensitivity analysis with varying assumptions for sales growth, EBIT margin and WACC. We note that the assumed deviations in WACC have a significant impact on the calculated fair value.

WACC VS EBIT MARGIN


WACC VS SALES GROWTH


Risk-free interest rate 1.5%Market risk premium 5.5%Beta debt 0.9Forward looking equity beta 1.7Cost of equity 10.9%Cost of debt 5.0%Tax-rate used in WACC 22.5%Equity weight 80.0%WACC 9.5%

DCF value Value Per shareNPV FCFF 1,131 64(Net debt) -472 -27Market value of associates 0 0(Market value of minorities) 0 0Surplus values 0 0(Market value preference shares) 0 0Share based adjustments 0 0Other adjustments 0 0Time value 44 3DCF Value 703 40

7.5% 8.5% 10.5% 11.5%+2.0pp 60 50 43 36 31+1.0pp 58 48 41 35 30

55 47 40 34 29-+1.0pp 52 45 38 33 28-+2.0pp 50 43 37 32 27

EBIT margin change

WACC

7.5% 8.5% 10.5% 11.5%+2.0pp 59 49 42 36 30+1.0pp 57 48 41 35 30

55 47 40 34 29-+1.0pp 53 45 39 33 28-+2.0pp 52 44 38 33 28

Sales growth change

WACC



WACC VS EBIT MARGIN


Pipeline valuation Based on the main assumptions of a probability of success of 40-60% and peak global market sales (non-risk-adjusted) of USD 274m in 2027, we derive a value of SEK 23-39 per share for MOB-015.

In regards to Moberg’s second pipeline product, BUPI, we also use a probability of launch of 40-60% and derive a value of SEK 2-4 per share. Our main assumptions are that a partner covers trial costs, which are compensated with lower royalties. We derive peak global market sales of USD 50m for the product. This equates to a total pipeline value of SEK 25-43 per share. For a full description of our pipeline assumptions, please refer to estimates section.

Ph III results for MOB-015 in the US is the main valuation trigger We expect that the recruitment for the ph III study of MOB-015 will be finalised in the before year end. Given that the recruitment is currently progressing according to plan, we expect that a completed recruitment will have limited effect on the share. Moreover, we also expect that Moberg Pharma will announce a potential partnership (or alternative plan) for BUPI within the next year. In turn, this could provide some valuable clarity. The main valuation trigger, however, lies in the first ph III study results for MOB-015, which is expected in H2 2019. We believe that a positive outcome would be a major event for the company, whereas a disappointment risks hollowing the majority of the future earnings potential of the pipeline. In addition, we expect that the ph III results in Europe will be of less importance as the outcome will likely mirror that of the US study.

UPCOMING VALUATION TRIGGERS

Source: Moberg Pharma and Nordea estimates

-2.0pp -1.0pp 1.0pp 2.0pp+2.0pp 40 41 43 44 45+1.0pp 39 40 41 42 44

38 39 40 41 42-+1.0pp 37 37 38 39 40-+2.0pp 36 36 37 38 38

Sales growth change

EBIT margin change

Event ExpectedRecruitment of MOB-015 phase III study completed in Europe H2 2018Partner announcement for BUPI 2018-2019Phase III study for MOB-015 finalised in the US (main trigger) H2 2019Phase III study for MOB-015 finalised in the Europe H1 2020



Company overview Moberg Pharma is a rapidly growing Stockholm-based consumer healthcare and pharmaceutical company that commercialises proprietary, acquired and licensed products for skin conditions (primarily nail fungus) and pain management on the global market. Its commercial operations are largely conducted in the US, where ~90% of total sales were generated in 2017. The company has three flagship brands, each with a leading position in its niche. Complementing its evolving and streamlined product mix is a pipeline of late-stage drug candidates, which the company estimates to possess significantly larger sales potential than the current portfolio. The company’s growth is driven by organic sales, acquisitions/in-licensing of new products and commercialisation of development projects.

Three major brands are the primary contributors to the top line

Two successful brand acquisitions in 2016

More than skin deep With a product mix consisting of established brands in attractive niches with a focus on topical treatments, Moberg Pharma’s commercial operations have been growing. Sales have doubled in the last three years, largely driven by three market-leading brands for nail fungus, liquid bandages and topical pain relief. The brands are:

• Kerasal Nail (Emtrix, Zanmira or Nalox in many markets outside the US), with clinically-proven efficacy for the treatment of nails affected by nail fungus;

• New Skin, a waterproof liquid bandage also used to prevent blisters (acquired in July 2016); and,

• Dermoplast, an anaesthetic pain-relieving antibacterial spray (acquired in December 2016).

THREE FLAGSHIP BRANDS

Source: Moberg Pharma



Kerasal Nail is the main contributor to revenue Frequent acquisitions and divestments of products

Kerasal Nail is the company’s main product in terms of revenue, followed by the newly acquired Dermoplast and New Skin. In 2017, they accounted for 35%, 22% and 20% of sales, respectively. In addition, Moberg Pharma has been highly active in acquiring and divesting product rights in recent years. In 2017, the company divested Fiber Choice, which had been acquired the year before. Moreover, in February 2018, the company entered into an agreement to divest Balmex, which was acquired in 2015.

REVENUE SPLIT BY PRODUCT, 2017


The US is Moberg Pharma’s largest market; its operations are run by a local sales and marketing subsidiary

Around 90% of Moberg Pharma’s revenue was generated in the US market in 2017, where operations are managed directly by the company’s subsidiary, Moberg Pharma North America LLC, based in the state of New Jersey. US sales are organised through direct sales, and the products are sold in more than 30,000 stores including major retailers (eg Walmart and Target) and chain drugstores (eg CVS and Walgreens); they are also available for purchase online, mainly through Amazon.

In Europe and the rest of the world, Moberg Pharma collaborates with around 10 distributors, thereby covering 30 markets that are expected to generate 5-10% of the group’s total revenues in 2018. The most significant markets include the Nordics, some EU countries as well as parts of Asia. In addition, the company is now also pursuing direct sales outside of the US and has launched a pilot programme in the UK.

REVENUE SPLIT BY REGION, 2017


REVENUE SPLIT BY CHANNEL, 2017


Kerasal Nail 35%

Dermoplast 22%

New Skin20%

Other7%

Balmex (divested in 2018)7%

Divested9%

US 90%

Europe 5%

RoW5%

Direct sales 90%

Via distributors

10%



MOB-015 is the most anticipated pipeline drug

The most effective treatment for nail fungus is by oral administration…

…but it is associated with risks of systemic side effects

Oral pain relief for cancer patients

Assets in late-stage development Moberg Pharma has developed a clinical pipeline of late-stage drug candidates: MOB-015 (onychomycosis, commonly known as nail fungus; ph III studies are ongoing) and BUPI (pain relief for oral mucositis; ph III preparations are ongoing).

MOB-015 is considered by the company to be the most promising pipeline asset. It is envisioned as the next-generation topical treatment of nail fungus, targeting both the OTC and prescription markets.

To date, topical treatments of onychomycosis are ineffective compared with the oral equivalent. While oral treatments are more effective, they are also associated with serious side effects, such as heart and liver failure, according to a study published in Seminars in Cutaneous Medicine and Surgery (SCMS). We will elaborate on this challenge in the section Pipeline Assets, as Moberg Pharma believes MOB-015 could prove to be the solution to it.

BUPI is a oral pain relief lozenge based on the widely-used anaesthetic (numbing) agent bupivacaine. It was developed as a novel treatment for pain due to oral mucositis (OM), a serious complication of cancer treatment. While a number of interventions are available to treat OM pain, there remains a lack of well-supported therapies,1 and recent research on the treatment of OM pain in head and neck cancer patients points to the need for an effective treatment that can be easily deployed in clinics. Promising ph II results indicate strong potential for BUPI, which we elaborate on in the Pipeline Assets section.

SNAPSHOT OF MOB-015 AND BUPI

Source: Company data and Nordea Moberg Pharma has built on the research of late Swedish dermatologist Dr Sven Moberg

Deep roots in dermatology The company was previously known as Moberg Derma when it was founded in 2006 by Peter Wolpert and Marie Moberg at the Karolinska Institute in Sweden. Initially specialising in treatment of skin diseases, the company has since branched out into additional areas.

1 Tatiana Hadjieva et al Treatment of oral mucositis pain following radiation therapy for head-and-neck cancer using a bioadhesive barrier-forming lipid solution https://www.ncbi.nlm.nih.gov/pmc/articles/PMC4008777/

Item MOB-015 BUPI

Segment

Nail fungus- Topical terbinafine- Target profile: Rapid visible improvement and shorter treatment time (vs other topical medications)

Pain relief for oral mucositis- Lozenge with bupivacaine- Target profile: Better and longer pain relief vs existing products

Status

Phase III ongoing- Two phase III studies in North America and Europe ongoing- Primary endpoint: complete clinical cure of big toe nail and negative fungal tests after 52 weeks

Partnering and preparations for ph III ongoing- Partnering discussions ongoing, in addition to current partner Cadila Pharmaceuticals- Advisory meetings held with agencies in Sweden and Germany

Patents

Patent protection until 2032- Patent granted in large markets, includingUS, EU and Japan- Patents include new topical formulations of allylamines (including terbinafine), and treatment methods for nail fungus using the new formulations

Patent protection until 2032- Patents granted in EU, Canada and US- Patents include lozenges and other formulations with a local anesthetic, including bupivacaine, for the mouth or throat and for treatment of oral mucositis in cancer patients.

Phase II data

Leading data for severely infected nails- 54% mycological cure at 60 weeks- 100% negative culture at 60 weeks- 1000x more terbinafine in nail vs oral administration- 40x more terbinafine in nail bed vs oral administration

Significantly better pain relief vs Standard of care- Primary endpoint: 31% less pain in the BUPI group vs Standard of care (maximum VAS value in the mouth/throat, p = 0.0032)- In mouth: 50% less pain in the BUPI group (p = 0.0002)

Company est. annual sales potential USD 250-500m USD 100-200m



Founded by Peter Wolpert, current CEO, and Marie Moberg


Kerasal Nail® hit the shelves in 2010 and was an instant success

Went public in May 2011

Actively seeking attractive acquisition targets

Kerasal Nail, one of the company’s first products, was launched in the Nordic market in 2010. According to the Moberg Pharma, it quickly became a key player in the regional market and overtook the previous market leader, Loceryl, by the end of the same year. The successful launch of Kerasal Nail and the phase II clinical trial of MOB-015 during 2010-11 marked the company’s transition from a product development company to a growth company with a strong focus on sales.

In May 2011, the company debuted on the NASDAQ OMX Nordic Exchange Stockholm. The following year, it acquired Alterna LLC and thereby established a direct marketing and sales channel of its own in North America. Moberg Derma changed its name in 2013 and has been known under the current moniker since.

Moberg Pharma has actively sought attractive products on the market that can be revitalised, relaunched or sold in the wider market as part of its efforts to drive growth via acquisitions. Notably, it has made a number of acquisitions of product rights since 2016, including liquid bandage New Skin and pain relief spray Dermoplast, which have each contributed a growing share of sales since then.

Successful acquisitions and integrations of products, coupled with divestments of non-core brands (Jointflex, Fergon, Vanquish, PediaCare, FiberChoice and Balmex) helped to free up resources for larger brands. This resulted in a more streamlined product mix led by three flagship brands – Kerasal Nail, New Skin, and Dermoplast – with each being a market leader in its own niche segment.



MILESTONES IN THE COMPANY’S HISTORY

Source: Company and Nordea

Sales and marketing presence in the US and the UK…

…distributors and business partners cover sales in other regions

New global consumer health unit to consolidate sales resources

Flexible sales model Moberg Pharma’s business model includes proprietary sales and marketing in North America (subsidiary) and the UK (sales to podiatrists and patient), and sales through partnership with distributors in other parts of the world. This holistic approach provides flexibility in commercialisation of development projects, as the company can opt for the best route to market for each individual project.

In November 2017, a global consumer health unit was set up to manage both direct and distributor sales amid the reorganisation of sales and marketing operations with a view to better serving the company’s increased focus on the North American market (currently accounting for most of the group’s revenue), and with a view to maximising global synergies.

Moberg Pharma’s portfolio of OTC products means that brand building through consumer marketing on television and via other media outlets is essential. Products are marketed to patients, pharmacies and physicians, with the marketing mix and target groups varying among countries depending on the degree to which patients make over-the-counter treatment decisions independent of their doctors.


Eyeing a 25% EBITDA margin in the long run

Looking ahead The commercial success of Kerasal Nail since 2011 has caused Moberg Pharma to transition from a product development company to a growth company with a strong focus on marketing and sales. Moberg Pharma’s long-term goal is to achieve an EBITDA margin of 25% with healthy growth, and the company considers organic growth of strategic brands, value-accretive acquisitions and commercialisation of development projects to be the stepping stones to this goal.

Dr Sven Moberg's research on skin diseases yielded two patents and a portfolio of developed products and product candidates 1985-2001Moberg Derma was founded and acquired a patent and project portfolio based on Dr Moberg's research 2006Clinical study of K101 for nail fungus showed positive results 2008The first distribution agreement for sales of Kerasal Nail in the Nordics was entered into with Antula Healthcare AB 2009Kerasal Nail was launched in the Nordics; clinical ph II trial for MOB-015 started 2010IPO on NASDAQ Stockholm 2011Acquired Alterna LLC and established own sales channel in the US, where Kerasal Nail continued to gain traction 2012Company name changed to Moberg Pharma 2013Positive data for MOB-015 ph II study 2014Acquired Balmex from Chattem (Sanofi) 2015Acquired new brands from Prestige Brands in the US including New Skin and Dermoplast; divested four brands 2016Start of ph III study for MOB-015; positive data from BUPI ph II study 2016Ph III study for MOB-015 underway in North America and Europe; patent protection for BUPI was received in Canada and EU 2017Clinical study showed Kerasal Nail led to visible improvement of condition after one week of treatment 2017Favourable ruling from US National Advertising Division in a case against main competitor 2018

Direct sales

Sales through distributors

Moberg Pharma Partners

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Patent Clinical development Registration

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Patent Clinical development

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Resources are now centred on key brands and North America

Company has high expectations of MOB-015

Weighing acquisitions against pipeline assets

Specifically, the focus in the next two years will be to realise the full potential of the streamlined portfolio and to demonstrate the underlying value of the pipeline. Actions taken so far include a reshuffling of the commercial operations in 2017 in terms of product mix and geographical focus to concentrate resources on core products, and thus better reflect the company’s increased focus on the North American market. For MOB-015, the company looks to finalise the ph III studies as planned and begin the process of registering the drug. Operating cash flow will be invested mainly in ongoing studies. In addition, the company will focus on the phase III study preparations for BUPI.

While the long-term acquisition strategy will remain focused on company and product targets that are of value to commercialisation of the pipeline, management notes that it would like to see the value of its pipeline reflected in the firm’s valuation before any major acquisitions are pursued.



Product mix In line with its strategy to focus on the profitable larger brands, Moberg Pharma made a number of product transactions in 2016 and 2017 that resulted in a more streamlined product mix. The current product portfolio includes three flagship names: Kerasal Nail (Emtrix Zanmira or Nalox in many markets outside of the US), a topical treatment for nail fungus; New Skin, the leading brand for liquid dressings in the US; and Dermoplast, a pain relieving spray for both household and hospital use. These accounted for 77% of Moberg Pharma’s revenue in 2017. Besides the three main brands, the company also sells Domeboro, (treatment for skin irritations and rashes) and Kerasal Intensive Foot Repair (softens cracked heals and dry skin).

Kerasal Nail is Moberg Pharma’s main product

Nail fungus affects around 10% of the population

New target group will be basis for a test launch in 2018

Kerasal Nail: Improves appearance of nails damaged by fungus Kerasal Nail was launched in 2010 and represents more than one-third of Moberg Pharma´s revenue. It is a patented, clinically proven OTC treatment to improve the appearance of nails damaged by fungus with a market-leading position in the US, according the company. Outside of the US, the product is sold under the names Emtrix, Nalox/Naloc and Zanmira Nail.

According to the company, clinical study data shows that most users start to see improvements within one week from using Kerasal Nail, although a minimum of eight weeks of use is recommended. Furthermore, depending on the severity of the condition, three to six months might be needed to achieve full effect. Moberg Pharma notes that the quick, visible improvements demonstrate performance that far surpasses its competitors.

In addition to the treatment of nail fungus, Kerasal Nail can also be used for nail psoriasis. The broader condition of psoriasis is a chronic skin disease that affects 2-3% of the global population. About half of these patients also suffer from nail psoriasis. Until recently, there has been no OTC treatment for nail psoriasis. However, a clinical study in 2017 showed that the condition had visible improvement after eight weeks of treatment of Kerasal Nail. This is a potential new target group for Moberg Pharma, and the encouraging results will be the basis for a test launch in 2018.

Kerasal Nail remains a main driver amid product mix diversification

Main driver of group sales As the lead product in the portfolio, Kerasal Nail contributes a significant share of total sales. Broader diversification was accomplished through the recent acquisitions of New Skin and Dermoplast. These products started to generate revenue as of Q3 2016 and Q1 2017 respectively, which in turn reduced Kerasal Nail’s share of total revenue. Sales in 2017 of Kerasal Nail totalled SEK ~154.2m, representing ~35% of total sales. Organic growth figures for Kerasal Nail have been reported from Q3 2017. These figures have been volatile, with -21%, 50%, 15% and 20% recorded for Q3 2017, Q4 2017, Q1 2018 and Q2 2018, respectively. For 2017, organic growth was 2%. Sales of Kerasal Nail follow a seasonal pattern with peak sales in the lead-up to the summer season, as is reflected in the Q2 results. The seasonality is a natural result of the nature of the product, as nail fungus conditions garner particular attention when outdoor activities start.



KERASAL NAIL : REVENUE, Q1 2015 – Q2 2018

Soruce: Company data and Nordea

Direct sales and sales to distributions

Reduced dependence on Kerasal Nail

Sales follow a seasonal pattern and peak in Q2

In the US and UK, Kerasal Nail is sold through Moberg Pharma’s own marketing organisation. The US is the largest market, where Kerasal Nail is sold through 30,000 retailers, as well as online, primarily through Amazon. In addition, Kerasal Nail is sold in around 30 other markets, primarily in the Nordics, some EU countries as well as parts of Asia.

Direct sales in the US have been strong and the performance in the UK is promising, according to the company. On the contrary, distributor sales in the EU and Asia have been weak. In particular, management highlights that a promising test launch in Japan was followed by lower-than-expected sales growth, partly explained by restrictive local marketing regulations.

The company started to report distribution channel figures as of Q3 2017, including results for the prior year. Based on these, the proportion of direct sales for Kerasal Nail has ranged between 46% and 90% since Q3 2016. For full-year 2017, the average was 67%.

KERASAL NAIL: REVENUE BY DISTRIBUTION CHANNEL


US market leader with 28% market share… …but market share figures are becoming less relevant

Market leader in the US Kerasal Nail enjoys a leading position in the US and has successfully grown its reported market share in recent years, reaching 28% in 2017, according to Moberg Pharma. However, the company has noticed increased competition in the OTC nail fungus market. Moreover, there is growing competition from private label sales at major retailers, which in turn is not reflected in market data. As a consequence, we expect market share data will become less relevant over time.

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KERASAL NAIL: MARKET SHARE


Successful re-branding programme boosted sales Favourable outcome from National Advertising Division Test launch on nail psoriasis in 2018

Strategic milestones In 2016, a successful re-branding programme was executed for Kerasal Nail, including a new product design and TV commercials. According to the company, this boosted sales and delivered a record market share in the US of 27% in 2016. The market share expanded additionally in 2017-18, reaching 32.1% in Q2 2018, according to the company.

In January 2018, Moberg Pharma received a favourable outcome from the National Advertising Division (NAD) in the US on a challenge against one of its main competitors, Fungi-Nail. The ruling found Fungi-Nail’s branding to be deceptive and recommended that it discontinue its packaging and advertising. Moberg Pharma expects that this will benefit Kerasal Nail ahead.

In 2018, a test launch will be carried out on nail psoriasis patients in the US and the UK. If successful, this could become a new potential target group for Kerasal Nail.

Furthermore, distributor sales of Kerasal Nail will focus on markets where revenue is significant, such as the EU and certain markets in Asia. However, in China, Kerasal Nail has been discontinued while the company awaits results on MOB-015. In addition, Moberg Pharma plans to increase the digital presence of all of its brands.

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An established brand in the US OTC market

An innovative first aid solution

New Skin: Waterproof liquid bandage Moberg Pharma acquired New Skin, an established brand in the US from Prestige Brands Inc, for around USD 30m. New Skin has since become one of Moberg Pharma’s three flagship brands and has helped the company build a more diversified product mix.

A liquid bandage that can be sprayed or brushed on, New Skin works as a first aid antiseptic that kills germs and dries rapidly to form a clear protective cover. It can be used on cuts and scrapes or to prevent blisters, and is particularly useful for hard-to-cover areas and active users. The product comes in bottle (liquid) with a brush applicator (for small affected areas) or in spray can (for larger affected areas).

NEW SKIN AS A LIQUID


NEW SKIN AS A SPRAY


Robust sales after takeover

Represented around 20% of 2017 revenue

Robust post-takeover performance New Skin is primarily sold in chain drug stores and mass retailers in the US (the same sales channels as Kerasal Nail). This helped facilitate a successful integration of the product into the company’s portfolio by the end of the same year as the transaction. Currently, New Skin is available in the US and Canada in around 26,000 stores. It is also sold online through Amazon.

2017 sales of the product totalled SEK 86.6m, representing close to 20% of group revenue only a year after being acquired by Moberg Pharma. This is due to integration and repositioning of the product ahead of the 2017 peak season, according to the company. Q1 2018 and Q2 2018 recorded y/y sales growth of ~7% and 26% respectively, while Q4 2017 saw a slight y/y decrease of ~1%. However, FX-adjusted growth came in at 7%, 17% and 29% for Q4 2017, Q1 2018 and Q2 2018, respectively. Similar to Kerasal Nail, these sales show seasonality and peak in the warmer months of the year when outdoor activities are more frequent.



NEW SKIN: REVENUE


Moreover, New Skin has been continuously top-ranked in terms of market share since 2008, including 2017 when Moberg Pharma acquired the brand from Prestige Brands.

NEW SKIN: US HISTORICAL RANKING

Source: Prestige Brands, Moberg Pharma and Nordea

Top liquid bandage brand in the US

Market leader poised to expand According to Moberg Pharma, New Skin is the top OTC liquid bandage brand in the US and claims around 75% share in that segment. Furthermore, management believes there is a good chance for the product to gain market share from the much larger segment of conventional bandages given that its liquid, waterproof and antiseptic attributes may appeal to consumers with an active lifestyle.

POTENTIAL BENEFITS OF NEW SKIN VS ADHESIVE BANDAGES

Source: Company and Nordea

Potential to capture share from conventional market

On the product website of New Skin, images of physical work are prominently displayed, projecting the product’s claimed superiority over conventional bandages in scenarios, such as auto repair or gardening, where conventional adhesive bandages typically fail to perform. As such, we see New Skin’s potential to capture share from the conventional segment.

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New Skin Conventional adhesive bandages

Flexible for hard-to-cover areas Difficult to apply to some areas, eg between fingers

Waterproof Gauze pad absorbs water

Stays put Move around, particularly during exercise

Barely noticeable Exterior surface gets dirty

Ideal for active people Fall off owing to sweat or hot weather

Keeps out dirt and bacteria while performing work Get dirty and come off during manual labour



Replicating the success of TV campaigns in digital channels

Strategic milestones In January 2017, the company secured additional distribution for the New Skin spray, and the product started to hit the shelves of 3,900 Walmart stores and over 1,500 Walgreens stores in March 2017.

In 2017, after its ad campaign titled “Mr. Cut” was aired on national television ahead of high season, sales volumes rose by 39% versus the comparative period, while full-year retail sales increased by 18%. In light of this, the campaign will also go live in digital media in 2018 as the company seeks to ramp up the marketing campaign. Moreover, the company plans to enhance the product’s e-commerce presence.

Given the product’s strong seasonality in spring and summer, and an increasingly larger share of total sales, the company expects the seasonal pattern of the portfolio to become more pronounced.

Acquired on 30 December 2016

For household use, as well as hospital use for childbirth and surgery patients

Dermoplast: A pain relief spray Dermoplast was acquired on 30 December 2016 and is therefore the most recent addition to Moberg Pharma’s product portfolio. The price of the acquisition was USD 47.6m.

The Dermoplast brand includes two products: a spray indicated for relief of pain and itching, and a first aid spray used for prevention of infections and relief of pain. Both are based on the pain-relieving ingredient benzocaine. The brand is targeted towards general household use and hospital use for pain and itch resulting from surgery or childbirth. According to Moberg Pharma, Dermoplast is the largest of around 10 different pain relief sprays sold by US retailers.

Sales through retailers and hospitals

Organic growth of ~31% in Q2 2018

Hospital inventory buildup held back initial growth after the acquisition, but this has now been depleted

Supported by retail and hospital sales Dermoplast is sold at around 25,000 retail stores, including Walmart, CVS and Walgreens, which account for around 40% of the product’s revenues. The remaining 60% comes from sales to hospitals.

After the acquisition, Dermoplast was quickly integrated into Moberg Pharma and became a significant contributor to revenue in the first quarter. Since then, reported sales figures have remained stable, reaching SEK 33.2m in Q2 2018, which is an increase of ~28% from Q2 2017. Even though last quarter was negatively impacted by FX, organic sales growth reached an impressive ~31%.

Despite successful integration, the initial total sales growth was lower than expected, according to Moberg Pharma. The company attributes this to an inventory buildup for hospitals prior to Moberg Pharma acquiring the brand, which has now been depleted. Moreover, in Q1 2018, Moberg Pharma stated that both hospital and retail sales are trending according to plan.

DERMOPLAST: REVENUE


DERMOPLAST: REVENUE SPLIT


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Dermoplast was previously owned by Prestige Brands. Under Prestige Brands’ management, the product ranked between fourth and second place between 2008 and 2016, in terms of market share. Since Moberg Pharma acquired the product rights, Dermoplast has become the largest pain relief spray in the retail market, according to the company.

DERMOPLAST: US HISTORICAL RANKING

Source: Prestige Brands, Moberg Pharma and Nordea

Successful integration

Extensive marketing campaign in 2018

Strategic milestones In the beginning of 2017, Dermoplast was successfully integrated into the operations of Moberg Pharma. For example, in January, the distribution of Dermoplast was expanded to 7,500 CVS and 3,500 Walmart locations. In 2018, Moberg Pharma is launching an extensive branding campaign targeting both consumers and hospitals. The growth plan will follow a similar methodology to that of New Skin and Kerasal Nail, and includes an increased presence in digital channels.

2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

3 2 3 3 3 3 4 3 2 1



Pipeline assets Moberg Pharma has two drug projects in late stages of clinical development. MOB-015 is a topical treatment for nail fungus using a proven antifungal substance currently only available for oral administration and often associated with severe side effects. Its phase III studies are progressing, with patient enrolment completed in the US, and expected to be finalised in 2018 in Europe. BUPI aims to tap into a large unmet demand for pain relief for oral mucositis. Preparation for the phase III study is underway following positive phase II results. Moberg Pharma expects both candidates to become market leaders and estimates annual sales of USD 250-500m for MOB-015 and USD 100-200m for BUPI.

MOB-015 is Moberg Pharma’s flagship pipeline asset Compared to MOB-015, oral treatments cause serious side effects Patented until 2032

MOB-015: Nail fungus topical treatment MOB-015 is Moberg Pharma’s flagship pipeline asset. It is a patented topical antifungal substance targeting both OTC and prescription markets around the world. The patent is valid until 2032 in most major markets including the US, EU and Japan.

To date, oral medication is the most effective treatment for nail fungus. However, these drugs carry the risk of serious side effects, such as liver damage. Through MOB-015, Moberg Pharma aims to bridge the cure-rate gap between the existing topical and oral treatments. MOB-015 is based on terbinafine, the same medication that is in many of the oral treatments, but as a topical treatment, it does not cause the same side effects. The goal is to reach a complete cure rate of between 20% and 30%, surpassing the main competitor in the segment, Jublia, which exhibited a complete cure rate of 15-18% in phase III studies.

CURRENT RX ALTERNATIVES IN THE US AND MOB-015’S TARGET


54% of phase II patients exhibited mycological cure

Ph II study: the risk of liver damage is negligible with MOB-015

Development milestones The development of MOB-015 started to take shape during 2013-14 when the ph II study was completed. This study comprised 25 patients with severe nail fungus (60% of the nail on average). The patients were treated for 12 months and followed up for a total of 15 months. Twenty-four patients completed the study, of which 13 (54%) exhibited mycological cure (defined as negative microscopy and negative fungal culture after 15 months from the start of treatment). All patients exhibited a negative fungal culture during the same period.

Moreover, biopsies confirmed high levels of terbinafine in the nail and nail bed, while the risk of liver damage was considered to be negligible, as the plasma levels were a thousand times lower than with oral treatments. All in all, the ph II results exceeded the company’s expectations.


Topical Ciclopirox (Penlac) 1999 5,5 - 8,5%Topical Tavaborole (Kerydin) 2014 7-9%Topical Efinaconazole (Jublia)* 2014 15-18%Topical Target for MOB-015 N/A 20-30%Oral Terbinafine (Lamisil) 1996 38-54%Oral Itraconazole 1995 14-26%Oral Fluconazole Off-label 37-48%



MOB-015 PHASE II STUDY: LEVELS OF TERBINAFINE

Soruce: Company data and Nordea Ph III expected to be completed in 2019

Total R&D expenditure will be around USD 25m

The ph III studies were initiated in Q2 2015 and Moberg Pharma believes the process will be completed in 2019. Specifically, the recruitment in North America was finalised as of Q2 2018, whereas the recruitment in Europe is expected to be finalised in the second half of 2018. When the recruitment is finalised, top-line results are expected to be delivered after 15 months. Eight hundred patients are enrolled in the ph III programme.

Moberg Pharma has stated that the total R&D expenditure for MOB-015 will be around USD 25m and expects to complete the phase III studies without further external financing.

The focus in the coming couple of years is to complete both studies, obtain convincing ph III results, sign agreements with commercialisation partners and begin the registration process.

MOB-015: DEVELOPMENT MILESTONES


Company market estimates and outlook Moberg Pharma expects the sales potential of MOB-015 to be around USD 250-500m annually, with the biggest potential being the US market. For the US, these estimates are based on a total number of prescriptions of 5 million in 2022, a market share of 5.0-7.5% and a discount of 50-60% from a list price of USD 1,700 per package, resulting in revenue potential of USD 170-300m. For the market segments Japan/Canada and EU/rest of the world, the company estimates that each has a revenue potential of USD 100-200m. However, the underlying assumptions for these estimates are not provided. In total, Moberg Pharma estimates the revenue potential of MOB-015 to be USD 250-500m, which is substantially greater than Moberg Pharma’s current revenue base.

Tissue Amount terbinafine (ug/g) Compared to oral treatmentNail 1610 (median) 1000x higher than oralNail bed 45 (median) 40x higher than oralPlasma 0,0015 (max) 1000x lower than oral

2009-2013 2014 2015 2016 2017 2018E

- Negative results in ph II trial, which initiated the creation of an improved formulation.

- Postive ph II interim results for the imporved formulation.

- Positive ph II data.

- 54% of patients exhbited mycological cure after 15 months.

- Patent received in the US and the EU.

- Entered develop.agreement with Colep.

- Patent recieved in other territories .

- Ph III applicationsapproved.

- Patient recruitment for ph III starts.

- Ph. III studies advanced, but with delays.

- PreviousCRO replacedby TFS.

- Patient recruitment completed in the US.

- Top-line results expected 15 months after recruitment completion



MOBERG PHARMA´S MOB-015 US SALES ESTIMATES


Competitors

The available prescription treatments for onychomycosis are in general supplied by large pharmaceutical companies. We have identified a number of companies that supply the most common prescription topical and oral treatments today.

Abbott Laboratories is a multinational healthcare company with around 99,000 employees. Abbott is headquartered is the US and its portfolio consists of a broad range of generic pharmaceuticals, medical devices, diagnostics and nutrition products. Abbott Laboratories supplies an onychomycosis treatment based on itraconazole.

Anacor Pharmaceuticals is a biopharmaceutical company, focusing on discovering, developing and commercialising novel small-molecule therapeutics. It has around 110 employees. Anacor is headquartered in the US and was the developer of Kerydin. Galderma is the medical solution business within Nestlé Skin Health, which provides prescription drugs and aesthetics solutions. Galderma provides an onychomycosis treatment based on amorolfine, known as Loceryl.

Kaken Pharmaceutical is a speciality pharmaceutical company with around 1,400 employees. Kaken is headquartered in Japan and develops and commercialises novel pharmaceuticals and medical devices in the fields of orthopaedics, dermatology and surgery. Kaken Pharmaceutical supplies an onychomycosis treatment based on efinaconazole (Jublia).

Novartis is a multinational pharmaceutical company with around 118,000 employees. Novartis is headquartered in Switzerland and its portfolio consists of innovative medicine, cost-saving generics and biosimilar pharmaceuticals. Novartis supplies an onychomycosis treatment based on terbinafine.

Sandoz is a multinational generic pharmaceuticals and biosimilar company. It is a subsidiary of Novartis and headquartered in Germany. The portfolio covers all major therapeutic areas. Sandoz supplies an onychomycosis treatment based on tavaborole (Kerydin).

Sanofi is a multinational pharmaceutical company with around 110,000 employees. It is headquartered in France and develops, manufactures and markets primarily in the prescription market, although it develops some OTC products. Sanofi supplies an onychomycosis treatment based on ciclopirox.

Valeant Pharmaceuticals International is a multinational specialty pharmaceutical and medical device company with more than 18,000 employees. Headquartered in Canada, Valeant develops, manufactures and markets a broad range of branded, generic and branded generic pharmaceuticals, OTC products and medical devices, which are marketed directly or indirectly in more than 100 countries. Valeant produces onychomycosis treatments based on ciclopirox and efinaconazole (Jublia).

USDm 70% 60% 50% 40% 30%

2.5% 64 85 106 128 149

5.0% 128 170 213 255 298

7.5% 191 255 319 383 446

10.0% 255 340 425 510 595

15.0% 383 510 638 765 893


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SELECTED COMPETITORS

Source: Nordea

Competitors in late-stage development of alternative treatments

Apart from the existing products, a number of pharmaceutical companies are currently in ph II and ph III studies for treatments of onychomycosis. We have identified three companies with pipeline assets that could potentially be commercialised in the coming years.

Almirall is a pharmaceutical company with headquarters in Spain. The company currently provides onychomycosis treatments based on ciclopirox, but it is also in phase III studies for a new treatment called P3058. The disclosed information on this project is limited, but it is a topical treatment based on terbinafine, similar to MOB-015. However, as a consequence of an R&D pipeline review, studies were terminated in the US and will only be carried out in Europe.

NovaBiotics is a biotechnology company with headquarters in the US. The company is currently in phase II studies for an onychomycosis treatment, called Novexatin (NP213). Novexatin is a topical treatment that in ph I and ph II demonstrated effective treatments after one month of daily application, which is significantly shorter than currently available treatments. In 2013, NovaBiotics entered into an agreement with Taro Pharmaceuticals for the continued clinical development, manufacturing and marketing of Novexatin. Results are expected in 2018. Novan is a clinical-stage biotechnology company focusing on dermatological and oncovirus-mediated diseases. The company has completed a ph II study for an onychomycosis and tinea pedis (athlete’s foot) treatment called SB208, with a strong focus on tinea pedis. The treatment turned out to be effective for this condition, but it remains to be seen if it is also effective in treating onychomycosis.


Company ProductAbbott Laboratories ItraconazoleAnacor Pharmaceuticals Tavaborole (Kerydin)Galderma / Nestlé Skin Health LocerylKaken Pharmaceutical Efinaconazole (Jublia)Novartis Terbinafine (Lamisil)Sandoz Tavaborole (Kerydin)Sanofi Ciclopirox (Penlac)Valeant Pharmaceuticals International Ciclopirox (Penlac) & Efinaconazole (Jublia)

COMPETITORS PHASE II / PHASE III PROJECTS

Company Product Phase I Phase II Phase III

Almirall

NovaBiotics

Novan SB208

Novexatin

P3058



OM is a very common and debilitating complication of cancer treatment

An innovative formulation of proven substance bupivacaine

BUPI: Pain reliever for oral mucositis Besides MOB-015, Moberg Pharma’s pipeline holds a product for supportive care for cancer treatment patients, called BUPI. It is a pain relief lozenge (bupivacaine) intended for mouth pain and ulcers (oral mucositis, OM), which are severe side effects of cancer treatments, such as radiation therapy to the head and neck.

The incidence of OM can lead to disruption of patients’ cancer treatment and affects their quality of life. Dental health may be affected, for instance, and speech and self-esteem may be reduced as a result, further compromising patients’ responses to treatment. OM is also a frequent complication of bone marrow transplantation.

Bupivacaine is a well-known local anaesthetic drug (numbing medicine), which is on the WHO’s List of Essential Medicines. However, it is currently only given by injection for other indications. Besides being in a lozenge formulation, BUPI also has a target profile of better and longer pain relief than the current standard of care.

Ph II study: statistically significant reduction in pain

Patented in the EU, Canada and the US

Indian regulator recommended rejecting the application

Uncertainty in India does not spill over to key markets

Development milestones In 2016, Moberg Pharma reported positive results from ph II clinical trials of BUPI for OM in patients with cancer in the head and neck. In 2017, the ph II results were published in the journal Pain Reports, showing a statistically significant reduction in pain in the oral cavity (mouth and pharynx) compared with standard treatment: 31% reduction in the oral cavity and 50% excluding the pharynx, ie in the mouth.

In October 2016, an EU patent was issued for BUPI. In 2017, the drug received a patent in Canada (until 2032), and in Q1 2018 it received a patent in the US that is valid until 2032.

After summer 2017, the ph III application was submitted by Moberg Pharma’s partner in India, Cadila Pharmaceuticals. However, an advisory panel to the Indian regulator recommended rejecting the study due to concerns of potential overdosing. As of Q2 2018, preparations for ph III remain underway as the company is in dialogue with Cadila Pharmaceuticals to address the concerns of Indian regulators. It is also evaluating strategic avenues to advance BUPI.

However, the company does not expect the overhang in India to have negative implications for the major markets of the US, Canada, Europe and Japan, as dispensing in pharmacies is regulated and controlled by each market. Therefore, the estimated market potential of BUPI remains intact.

BUPI: DEVELOPMENT MILESTONES


2014 2015 2016 2017 2018

- Acquired the assets and global rights to BUPI from Danish company Oracain II Aps.

- Ph II study commenced in Denmark

- Received Eurostars grant for further development of BUPI

- Positive ph II results reported.

- Agreement with Cadila Pharma. for ph III study and regional commercialisation.

- EU patent received

- Received patent protection in Canada.

- Application for ph III programme submitted and met with overdose concern by Indian regulator

- Annual sales potential revised up to USD 100-200m.

- Continued dialogue to address Indian regulator concern



Patents were granted in the majority of key markets

Estimated annual sales upgraded to USD 100-200m

Company market estimates and outlook According to Moberg Pharma, 80% patients receiving radiotherapy to treat head and neck cancers suffer from OM; almost all patients undergoing bone marrow transplantations and a large percentage of those undergoing chemotherapy are afflicted. This is confirmed by a study published by the Oncology Nursing Society of the US2, which states the incidence rate of OM across populations of patients with cancer as follows:

• Radiation therapy for head and neck cancers: nearly 100% incidence

• Hematopoietic stem cell transplantation: 80% incidence

• Standard-dose chemotherapy: 40% incidence

As pointed out previously, the US, Canada, Europe and Japan are considered by the company as the most important markets for BUPI. In the US alone, OM affects about 400,000 patients annually, interrupting their cancer treatment and resulting in a significant impact on patients’ quality of life and hefty hospital care bills. Moberg Pharma believes BUPI can tap into such a large, unmet medical need.

The original estimated annual sales of BUPI were USD 50-100m, assuming successful commercialisation for OM and at least one other indication. Considering the results of a physician survey conducted by LifeSci Capital that indicated 99% respondents who treat OM prefer a clinical treatment with bupivacaine lozenge (BUPI)3, the company has revised its estimate upward to USD 100-200m in Q1 2018.

Competitors According to the management protocol for OM recommended by the Task Force on Prevention and Management of Mucositis Cancer Care, under the National Comprehensive Cancer Network (NCCN), a non-profit alliance of leading cancer centres in the US, topical anaesthetics and mouthwashes are recommended for mild to moderate OM pain.

STEPWISE APPROACH TO ORAL MUCOSITIS PAIN

Source: NCCN Task Force Report and Nordea

2 Oral mucositis. (2010). In C.G. Brown (Ed.), A guide to oncology symptom management (pp. 333–345). Pittsburgh, PA: Oncology Nursing Society. 3 LifeSci Capital, Oral Mucositis Market Insights – Based on Findings from a Physician Survey, February 28, 2018

Oral mucositis pain

Topical anaesthetics and/or mouthwashes Systemic analgesics

Bland rinsesMild pain

Moderate pain

Severepain



Among the topical treatment options that are currently being marketed are:

Episil (Camurus) is an oral liquid for the management of OM pain. It forms a bioadhesive film in the mouth and provides fast pain relief. The product is claimed to significantly relieve pain within five minutes and for up to eight hours.

Gelclair (Helsinn) is a gel barrier (coating agent) prescription product that works by creating a protective film in the mouth. It provides a mechanical action for the management and relief of pain. Global sales amounted to USD 2.09m in 2017 and are projected to grow by 17% to USD 2.45m in 2018, according to Evaluate Ltd.

MuGard (AMAG Pharmaceuticals) is a mucoadhesive oral wound rinse that forms a protective layer over the oral mucosa, providing soothing relief. It is also indicated for all types of oral wounds besides the management of OM. MuGard recorded USD 741,000 in sales in 2017. The product is also a mucosal coating agent.

Caphosol (EUSA Pharma) is a supersaturated calcium phosphate rinse with a high concentration of electrolytes. This solution may help relieve mucositis and mucositis-induced pain by restoring the natural electrolyte and pH balance of human saliva and lubricating mucosal tissues of the mouth, tongue and oropharynx4

More than two-thirds of nurses rated existing OM interventions as only minimally effective

Additionally, studies by the NCCN concluded that even though preventive strategies and oral hygiene are crucial, the focus of treatment should be palliation of pain or discomfort5. In addition, a survey conducted during the 32nd Annual Oncology Nursing Society Congress in 2007 revealed that 67% of surveyed nurses rated the primary management strategies, ie magic mouthwash, oral pain medications and sucralfate, for OM pain as only minimally effective. (Susan D Bruce et al). This again strengthens the case for BUPI as a potentially safer and more effective topical pain treatment, in our view.

Magic mouthwash was identified by more than three-quarters of respondents as their front-line approach for OM pain

SURVEY: PRODUCTS USED IN OM PAIN CONTROL

Source: Susan D Bruce, Annette Quinn US Oncological Disease, 2007;1(1):86-91

4 https://www.cancer.gov/publications/dictionaries/cancer-drug/def/supersaturated-calcium-phosphate-rinse 5 Mucositis in Cancer Patients: A Review https://www.uspharmacist.com/article/mucositis-in-cancer-patients-a-review

Route OM pain interventions (Sample size: 558) First-line(%) Second-line (%)

Topical Magic mouthw ash 77 7

Topical/Oral Sucralfate (Carafate) 22 20

Topical Fluoride rinses 8 9

Topical Barrier agents (Gelclair) 17 11

Topical Electrolyte rinces (Caphosol) 3 8

Oral Pain medication 37 24

Parenteral Pain medication 16 17

Other 10 2



Management, board of directors and shareholders

Executive management and board of directors Moberg Pharma has an experienced management team led by CEO and founder Peter Wolpert. His previous experience includes being co-founder of Ibility AB, CEO at Athera Biotechnologies and strategy consultant at McKinsey & Co.

Chairman of the board Thomas Eklund has extensive experience, including senior executive positions in the pharmaceuticals industry and as CEO & Head of Europe for Investor Growth Capital AB. He is currently also chairman of the board for Caliditas Therapeutics AB and Itrim Holding AB, as well as board member of several other companies.

Our overall impression is that Moberg Pharma’s executive management possesses the relevant experience and expertise to drive the company towards its strategic goals. The recent move to consolidate the sales and marketing capacity by appointing Jeff Vernimb to head up both direct and distributor sales demonstrates the company’s ambition to bring the potential of its commercial operations into full play.



EXECUTIVE MANAGEMENT

Source: Moberg Pharma and Nordea

Peter Wolpert Kjell Rensfeldt (will retire) Anna Ljung

Position Position PositionCEO and founder VP Research and Development and

Chief Medical OfficerCFO

Other appointments Other appointments Other appointmentsBoard member MedUniverse AB - Board member of Saniona AB

Background Background BackgroundHas worked for the company since 2006. Peter Wolpert has more than 15 years' experience as a CEO, strategy consultant and entrepreneur, and is chairman of the board of Viscogel AB. He was a co-founder of Accuro Immunology, Ibility and Viscogel, CEO of Athera Biotechnologies and a strategy consultant at McKinsey & Co.

Has worked for the company since 2007. Kjell Rensfeldt has ten years' industrial experience of leading positions within Biogen Idec and Q-Med. Dr Rensfeldt also has ten years' clinical experience and has undergone specialist training in urology.

Kjell Rensfeldt will retire during H2 but remain Senior Advisor to the company. Shaw Sorooshian will be replacing Rensfeldt in the managment team.

Has worked for the company since 2006. Anna Ljung has served as the CFO of Athera Biotechnologies AB and Lipopetide AB, and worked as an independent consultant in the field of technology licensing. She is also a board member of Saniona AB.

No. of shares No. of shares No. of shares 435,399 shares and 180,000 employee stock options

10,000 shares and 145,000 employee stock options


Jeff Vernimb Torbjörn Wärnheim Mark Beveridge

Position Position Position

VP Global Consumer HealthDirector Pharmaceutical Innovation andDevelopment Vice President Finance , B.Com, GradDipCA

Other appointments Other appointments Other appointmentsBoard member of CHPA - -

Background Background BackgroundHas worked for the company since 2014. Jeff Vernimb has headed Moberg Pharma´s North American operation since joining company and was appointed Vice President, Global Consumer Health in late 2017 to assume added responsability for global OTC marketing and sales. Previous experience includes senior level sales, marketing and Rx-to-OTC switch roles in both large and smaller entrepreneurial consumer healthcare companies including Pfizer, Novartis, Dynova Labs and Insight Pharmaceuticals.

Has worked for the company since 2013. Prior to his position with Moberg, Torbjörn Wärnheim was Vice President R&D at Fresenius Kabi. In addition to this he has held senior level positions at ACO HUD and Pharmacia & Upjohn among others. Torbjörn Wärnheim has a broad experience of pharmaceutical development of Rx- and OTC-products, and is associate professor at Royal Institute of Technology (KTH), Stockholm, with a research background within surface chemistry and physical chemistry of lipids.

Has worked for the company since 2015. Mark Beveridge has more than 15 years professional experience in providing accounting and assurance services, primarily with Crowe Horwath and Visma Services, and worked as an independent consultant in financial management, transaction services and strategic system implementations.

No. of shares No. of shares No. of shares 5,500 shares and 170, 000 employee stock options





BOARD OF DIRECTORS

Source: Moberg Pharma and Nordea

Thomas Eklund Sara Brandt Geert Cauwenbergh

Position Position Position

Chairman of the Board Board member Board member

Other appointments Other appointments Other appointmentsChairman of the board of Caliditas Theraputics and Itrim AB, and board member of Boule Diagnostics AB, Biotage AB, Neoventa Medical AB, Memira AB, Rodebjer Form AB.

Managing Director Sweden and VP Nordic for Berner, a B2B company within the Construction and Automotive industry. Chairman of Toxintelligence and Board member of ClearOn

Managing Partner of Phases123 LLC (U.S.), CEO and Board member of RXi Pharmaceuticals Corp (U.S) and boardmember of Cutanea Life Sciences (private-USA).

Background Background BackgroundMember since 2015. Thomas Eklund has extensive experiences from the pharmaceutical where he has had leading positions as CEO & Head of Europe in Investor Growth Capital AB. He has also been Investment Director in Alfred Berg ABN AMRO Capital Investment AB and Vice President in Handelsbanken Markets.

Member since 2017. Sara Brandt has extensive experience from marketing and sales of FMCG and Healthcare products. She has held executive positions at Unilever (Nordic), Coca-Cola (Sweden) and Cederroth/Orkla (Nordic).She was formerly a Board member of the Association of Swedish Advertisers, Gärdin & Pärsson, DLF and KTF.

Member since 2012. Dr. Cauwenbergh has extensive experiences from the pharmaceutical industry and has deep knowledge of and has focused on product development and marketing of dermatology products in Europe and the U.S. In the past he has served as the Chairman and CEO of Barrier Therapeutics (U.S.) and has held leading positions at Johnson & Johnson in the U.S.

No. of shares No. of shares No. of shares

99,208 shares - -

Anna Malm Bernsten Mattias Klintemar

Position Position

Board member Board member

Other appointments Other appointmentsChairman of the board for Medivir AB and Björn Axén AB, and board member at Cellavision AB, Probi AB and Pågengruppen AB

Chairman of the board at Dilaforn and board member at Oatly, Phoniro and Axelar as well as chairman of the nomination committee of Lightlab, Pharmanest and Cellimpact.

Background BackgroundBoard member since 2018. Anna Malm Bernsten works as a consultant within business development and management through her own company. She is the previous group CEO of Carmeda AB, and has also had leading positions within international marketing and sales at, amongst others, Pharmacia, ASSA ABLOY and GE Healthcare.

Member since 2015. Mattias Klintemar represents Östersjöstiftelsen and has extensive experiences from leadership roles within the finance and technology sector, e.g.as CEO at Morphic Technologies AB, CFO at Hexaformer and senior corporate finance associate at ABG Sundal Collier and auditor at Arthur Andersen.

No. of shares No. of shares

- 3,000 shares



Shareholders Östersjöstiftelsen (the Foundation for Baltic and East European Studies), founded by the Swedish government to support research and doctoral studies as well as academic infrastructure, is the largest shareholder in Moberg Pharma. The second largest shareholder is Zimbrane Holding BV, followed by Avanza Pension, which represents thousands of primarily Swedish retail investors (including company CEO Peter Wolpert).

SHAREHOLDER STRUCTURE AS OF JUNE 29, 2018


Shareholders Number of shares CapitalÖSTERSJÖSTIFTELSEN 2 274 179 12.9%ZIMBRINE HOLDING BV 1 762 849 10.0%FÖRSÄKRINGSAKTIEBOLAGET, AVANZA PENSION* 1741 774 9.8%CUSTODY ACCOUNT FOR THE EXCLUSIVE 1 650 000 9.3%NORDNET PENSIONSFÖRSÄKRING AB 782 331 4.4%SOCIETE GENERALE 683 312 3.9%LUNDMARK, SVEN ANDERS 320 000 1.8%EUROCLEAR BANK S.A/N.V, W8-IMY 317 943 1.8%JP MORGAN SECURITIES LLC, W9 304 000 1.7%LINDBÄRG, ERIK 285 130 1.6%MOBERG PHARMA AB (held in trust) 263 000 1.5%FÖRSÄKRINGS AB SKANDIA 247 713 1.4%SYNSKADADES STIFTELSE 172 201 1.0%ML, PIERCE, FENNER & SMITH INC 147 414 0.8%HL-FAMILY OY 134 500 0.8%GAMLA LIVFÖRSÄKRINGSAKTIEBOLAGET 124 597 0.7%NORMAN, CARL ERIK 121 000 0.7%DANICA PENSION 106 411 0.6%SEB LIFE INTERNATIONAL 104 000 0.6%TVÅ GENERATIONER MAGNUSSON AB 100 000 0.6%Other shareholders 6 061 408 34.2%

- * Includes 435 399 shares owned by Peter Wolpert, CEO, through an endowment insurance policy



Market overview: Onychomycosis About 10-12% of the general population is affected by onychomycosis; however, only ~15% of those affected are actually treated. The low rate is due to the lack of effective treatments with limited side effects. While oral treatments have exhibited relatively high efficacy, they also risk causing liver and heart failure. The reverse is true for the existing topical treatments: they do not cause any notable side effects but have limited efficacy. Through MOB-015, Moberg Pharma aims to break this catch-22.

Onychomycosis affects around 10-12% of the general population The elderly population run a higher risk of nail fungus About 35m Americans get onychomycosis… … but only 5m are treated Diabetes and other medical conditions increase the risk

Onychomycosis According to a recent study on onychomycosis published by Seminars in Cutaneous Medicine and Surgery (SCMS), around 10-12% of the general population is affected by onychomycosis, more commonly referred to as nail fungus. A paper published in the American Academy of Family Physicians makes similar estimates and adds that it is more common among the elderly population. Specifically, it is estimated that about 20% of those aged over 60 and 50% of those over 70 suffer from the condition. Moreover, in 2014 Valeant Pharmaceuticals estimated that about 35 million Americans were affected by onychomycosis but that only about 5 million (15%) are actually treated. The low proportion of treated patients is explained by the lack of effective treatments with limited side effects. Naturally, this means a significant unmet need and that the addressable market is substantially larger than is currently reflected in sales data.

The study from SCMS also concludes that there is not sufficient epidemiological data on nail fungus, but researchers have identified a number of factors that increase the risk of onychomycosis. Most notably, the condition is more common in hot and humid regions than cold and dry climes. Environmental risks include pools, gyms and spas. Additionally, certain medical conditions, such as diabetes, psoriasis, peripheral vascular disease, tinea pedis, and diseases that adversely affect immune function, also increase the risk, with the highest risk associated with diabetes.

OTC drugs have limited efficacy

Onychomycosis has historically received little medical attention

Oral drugs are the most efficient, but brings serious side effects

The catch-22 of nail fungus treatment To date, there is no over-the-counter drug that can completely cure onychomycosis. Complete cures are possible with prescription drugs, but it should be noted that practitioners differentiate between clinical cure, mycotic cure and complete cure. Mycotic cure means that no organism is identified on microscopy and culture. Clinical cure refers to an improvement in the appearance of the nail, often defined as a normal appearance in 80-100% of the nail. Complete cure is when mycotic cure and clinical cure are both achieved.

Onychomycosis has historically received little medical attention beyond the cosmetic appearance of nails, the study from SCMS claims. This changed in 1996 when terbinafine, an oral treatment that is still the most commonly used drug for onychomycosis, was introduced. Not long after that, the first topical treatment, called ciclopirox, was approved by the US’s FDA. More than a decade later, a couple of additional topical alternatives were launched: Jublia (efinaconazole) and Kerydin (tavaborole).

The treatments available today differ significantly in terms of effectiveness, with oral prescription drugs being more efficacious than topical treatments. However, when dermatologists select the anti-fungal agent to treat onychomycosis, they must consider a number of factors in addition to efficacy, including side-effect profiles and drug interactions.



Oral terbinafine is the most common treatment for onychomycosis Terbinafine achieved complete cure rates of 49%-54%

Oral itraconazole achieved complete cure rates of 23%-26%

Oral fluconazole achieved complete cure rates of 37-48% Topical ciclopirox achieved complete cure rates of 5.5%-8.5% Topical Jublia achieved complete cure rates of 20%-50% Topical Kerydin achieved complete cure rates of 7-9% Goal is for MOB-015 to reach complete cure rates of 20-30% in ph III

As a result, the most efficient treatments are not always preferred, since they can bring serious side effects, such as liver and heart failure. We identify six prescription treatments for onychomycosis: terbinafine, itraconazole, fluconazole, ciclopirox, efinaconazole and tavaborole.

Prescription drug Terbinafine is currently the most common treatment for onychomycosis. In fact, terbinafine is the active ingredient in MOB-015. MOB-015 differs, however, from today’s treatment, as it is administered topically.

In ph III studies, oral terbinafine demonstrated a 38% complete cure rate for oral dosages of 250 mg/day when taken daily for 12 weeks. Pulsed dosages (ie one week of daily treatment followed by three weeks off) demonstrated higher rates at 49% and 54% for three- and four-pulse regimens, respectively. It should be noted, however, that pulsed dosing of terbinafine is not approved by the FDA in the US.

Itraconazole is an oral treatment that in ph III studies demonstrated a complete cure rate of 12% for oral dosages of 200mg/day for 12 weeks. Pulsed dosages demonstrated higher rates, specifically at 23% and 26% for three- and four-pulse regimens, respectively. Similar to terbinafine, pulsed dosage is not approved by the US FDA but is nevertheless frequently prescribed.

Fluconazole is an oral treatment that differs from terbinafine and itraconazole as each dosage lasts longer, and so it requires fewer doses. In ph III studies, a single weekly dosage of 150 mg/week and 450 mg/week demonstrated complete cure rates of 37% and 48%, respectively. It should be noted that fluconazole is not approved by the FDA for treatment of onychomycosis, although it is commonly used.

Ciclopirox (ciclopirox 8% solution) is a topical treatment with anti-fungal, anti-bacterial and anti-inflammatory effects, to be applied daily for 48 weeks. In ph III studies, ciclopirox demonstrated complete cure rates of 5.5-8.5% for nails when the area affected was between 20% and 60%.

Jublia ‒ Efinaconazole (efinaconazole 10% solution) is a topical treatment with low surface tension that draws the medication around the nail. Like ciclopirox it is meant to be applied daily for 48 weeks to achieve full effect. In ph III studies, efinaconazole demonstrated complete cure rates of 15-18% for nails with between 20% and 50%.of the area affected.

Kerydin ‒ Tavaborole (tavaborole 10% solution) is a topical treatment based on a new class of antifungal agent, boron. Boron targets protein synthesis, and studies have shown that tavaborole rapidly penetrates through the nail plate and into the nail bed. In ph III studies, tavaborole demonstrated complete cure rates of 7-9% for nails with an affected area between 20% and 60%. Moberg Pharma’s ambition is for MOB-015 to become the most efficient topical treatment, overtaking efinaconazole, known under the tradename Jublia. As such, the company aims to further bridge the efficacy gap between existing oral and topical treatments. Specifically, its goal is to achieve complete cure rates of 20-30% in ph III.

CURRENT TX ALTERNATIVES IN THE US AND MOB-015 TARGET

Source: Seminars in Cutaneous Medicines and Surgery, company data and Nordea


Topical Ciclopirox 1999 5,5 - 8,5%Topical Tavaborole (Kerydin) 2014 7-9%Topical Efinaconazole (Jublia) 2014 15-18%Topical Target for MOB-015 N/A 20-30%Oral Terbinafine 1996 38-54%Oral Itraconazole 1995 14-26%Oral Fluconazole Off-label 37-48%



Newcomers to the market Jublia and Kerydin were initially well received but lost momentum soon after launch. The strong start of Jublia can be attributed to heavy marketing whereas the following decline is sales is explained by issues that forced Valeant to cut ties with its key distributor. On the contrary, the generic alternatives have exhibited more stable progression, growing at a CAGR of ~1% between 2013 and 2017.


Source: Bloomberg and Nordea


Source : Bloomberg and Nordea

US NRx COUNT, ONYCHOMYCOSIS TREATMENTS

Source: Bloomberg and Nordea

US NRx COUNT, ONYCHOMYCOSIS TREATMENTS


WEEKLY US TRx COUNT, JUBLIA AND KERYDIN


The aim for MOB-015 is to overtake Jublia as the most effective topical treatment Since Jublia was introduced in 2014; it has generated a total of USD 600m of sales in the US.

Overtaking Jublia When Jublia was launched in 2014, it became the most efficient topical treatment for onychomycosis, far surpassing the cure rates of competing topical drugs. Between 2014 and 2017, Jublia generated an estimated USD~600m in US sales, of which the best performing year to date was 2015, when sales reached USD ~336m. This performance can be attributed to heavy marketing. For example, in late 2014 Valeant ran combined print, digital and television ads, including a 30-second slot on the Super Bowl XLIX broadcast. Since launch, sales of Jublia have dropped significantly, falling to USD ~73m in 2017. This should be compared to Valeant’s estimation of peak annual sales at USD ~300-800m.

0

0.5

1

1.5

2

2.5

3

3.5

2009 2010 2011 2012 2013 2014 2015 2016 2017

TRx

Cou

nt m

illio

n

Jublia Kerydin Ciclopirox Terbinafine Itraconazole

0

1

2

3

4

5

6

2009 2010 2011 2012 2013 2014 2015 2016 2017

TRx

Cou

nt m

illio

n

Generics Jublia Kerydin

0

0.5

1

1.5

2

2009 2010 2011 2012 2013 2014 2015 2016 2017

NR

x C

ount

mill

ion

Jublia Kerydin Ciclopirox Terbinafine Itraconazole

0

0.5

1

1.5

2

2.5

3

3.5

2009 2010 2011 2012 2013 2014 2015 2016 2017

NR

x C

ount

mill

ion

Generics Jublia Kerydin

0

5

10

15

20

25

WEe

kly T

Rx c

ount

(th

ousa

nds)

Jublia Kerydin



Jublia is more successful in Japan

In contrast to the rise and fall of Jublia in the US, Kaken Pharmaceuticals, the supplier of Jublia in Japan, has managed to maintain growing sales figures, reaching USD ~200m in 2017.

JUBLIA: ANNUAL REVENUE SINCE LAUNCH

Source : Evaluate pharma and Nordea

In addition, according to Bloomberg data, the total prescription value of Jublia in the US peaked in 2016 at USD ~724m. Dividing the prescription value by the total number of prescriptions, we estimate a gross price of USD ~1,000 in 2017.

JUBLIA, US: TOTAL PRESCRIPTION VALUE


JUBLIA, US: GROSS PRICE (ESTIMATE)

Source : Bloomberg and Nordea estimates

Sales figures for Jublia should be compared with Moberg Pharma’s estimated peak sales figures of USD 170-300m in the US and USD 250-500m worldwide. Remember that Moberg Pharma’s estimates for the US are based on 5m prescriptions in 2022 (CAGR ~ 3%), a market share of 5.0-7.5% and a discount of 50-60% on a list price of USD 1,700 per package.

MOBERG PHARMA´S MOB-015 US SALES ESTIMATES

Source : Company data and Nordea

69

336

121 7363

166

200200

0

100

200

300

400

500

600

2014 2015 2016 2017

USD

m

US sales (Valeant Pharma.) Japan sales (Kaken Pharma.)

72

675 724

462

- 100 200 300 400 500 600 700 800

2014 2015 2016 2017

US

Dm

Total prescription value

537 709

984 1,024

-

200

400

600

800

1,000

1,200

2014 2015 2016 2017

US

D

Gross price

USDm 70% 60% 50% 40% 30%

2.5% 64 85 106 128 149

5.0% 128 170 213 255 298

7.5% 191 255 319 383 446

10.0% 255 340 425 510 595

15.0% 383 510 638 765 893


Mar

ket s

hare

, trx



Market overview: Oral mucositis (OM) Among all the treatment side effects that cancer patients face, oral mucositis (OM) ranks as one of the most distressing. However, research and surveys have shown that many physicians and oncology nurses are dissatisfied with existing OM treatments, with the mainstay for pain control, opioids, being limited in use due not only to side effects but also the ongoing fight against the opioid epidemic. Moberg Pharma’s BUPI appears to be a novel therapy that delivers superior pain reduction relative to standard treatment while reducing opioid usage and the associated side effects.

OM is a common and painful side effect of cancer therapies

Therapies damage healthy cells as well

OM has a ripple effect on patients’ quality of life

Mouth sores are common with cancer treatment The oral mucosa –the “skin” inside the mouth that covers most of the oral cavity apart from the teeth ‒ is a common site for collateral damage from cancer therapies such as chemotherapy and radiation. One of the unfortunate consequences of such treatments is the development of painful mouth sores, known as oral mucositis.

These cancer therapies effectively target rapidly dividing cancer cells, but they also wreak havoc with healthy cells that rapidly turn over, such as the oral mucosa. A complicated series of biological events are triggered, ultimately breaking down the mucosa and resulting in the forming of painful ulcerations. While the severity can vary greatly among patients, OM can significantly affect nutritional status, speech, comfort, treatment compliance and the general quality of a patient’s life.

Affecting 400,000 cancer patients in the US alone each year

High incidence rate across patient population

A common side effect – physically…. Annually, about 400,000 patients in the US experience some type of oral complications as a result of cancer treatment, according to estimates by the American Cancer Society.6 Tissue trauma and pain from OM were identified as major clinical problems as early as the 1970s, and yet they remain a significant concern for the majority of patients undergoing cancer treatments7.

The National Cancer Institute estimated in 2005 that almost 100% of patients receiving radiation therapy for head and neck cancers experience OM, as do 80% of patients undergoing hematopoietic stem cell transplantation and 40% of patients receiving standard dose chemotherapy8. In fact, OM is frequently under-reported and under-diagnosed: if the symptoms are mild or if not queried, patients often do not report OM9, implying that the figure for diagnosed cases does not reflect actual incidence.

6 Susan D Bruce, Annette Quinn US Oncological Disease, 2007;1(1):86-91 7 Susan D Bruce, Annette Quinn US Oncological Disease, 2007;1(1):86-91 8 Susan D Bruce, Annette Quinn US Oncological Disease, 2007;1(1):86-91 9 http://www.touchoncology.com/articles/pain-oral-mucositis

http://www.touchoncology.com/articles/pain-oral-mucositis



ORAL MUCOSITIS INCIDENCE RATE ACROSS PATIENT POPULATION

Source: Oncology Nursing society and Nordea

Source: Oncology Nursing society and Nordea Source: Oncology Nursing society and Nordea

Costly medical care on top of cancer therapies

…and financially On top of physical pain, significant OM complications add financial pain to those cancer patients who may already be facing whopping medical bills.

For example, the major clinical consequences of radiation-induced OM include hospital admission or extended hospitalisation for total parenteral nutrition (getting nutrition into the body through the veins), intravenous (IV) analgesia, and IV antibiotics. 62% of patients require hospitalisation, and 70% of patients with Grade 3-4 OM require a feeding tube. Moreover, 35% of patients reduce or cease their cancer treatment due to radiation-induced OM.10

WORLD HEALTH ORGANISATION SCALE FOR OM

Source: https://www.ncbi.nlm.nih.gov/pmc/articles/PMC2266835/

Adds more than USD 17,000 to patients’ hospital bills

The incremental cost of mucositis is more than USD 17,000 per patient11. For those undergoing bone marrow transplantation, a one point increase in peak mucositis scores can add up to USD 25,000 to their hospital bills.12

HEMATOPOIETIC CELL TRANSPLANT PATIENTS

Source: https://www.ncbi.nlm.nih.gov/pmc/articles/PMC2266835/

10 https://www.frontiersin.org/articles/10.3389/fonc.2017.00089/full 11 Grant Zeng http://scr.zacks.com/News/Press-Releases/Press-Release-Details/2016/SNGX-Positive-Long-Term-Results-Reported-from-Phase-II-SGX942-for-the-Treatment-of-Oral-Mucositis-/default.aspx 12 Rajesh V. Lalla et tal Source: https://www.ncbi.nlm.nih.gov/pmc/articles/PMC2266835/

100%

1 Head and neck cancer patients receiving radiation therapy

80%

1 Bone marrow transplent patients

40%

1Cancer patients receiving standard dose chemo therapyCancer patients receiving

standard dose chemo therapy

Grade 0 = No oral mucositis

Grade 1 = Erythema and soreness

Grade 2 = Ulcers, able to eat solids

Grade 3 = Ulcers, requires liquid diet (due to mucositis)

Grade 4 = Ulcers, alimentation not possible (due to mocositis)

ONE POINT INCREASE IN PEAK MUCOSITIS SCORES IS ASSOCIATED WITH:

2.1 fold increase in risk of significant infection

2.6 additional days of injectable narcotic therapy

2.6 additional days in hospital

2.7 additional days of total parenteral nutrition

3.9 fold increase in 100-day mortality risk

=Over USD25000 additional hospital charges

http://scr.zacks.com/News/Press-Releases/Press-Release-Details/2016/SNGX-Positive-Long-Term-Results-Reported-from-Phase-II-SGX942-for-the-Treatment-of-Oral-Mucositis-/default.aspx




Pain control is a primary component of any OM management strategy Local treatment is favoured over a systematic one for mild to moderate OM pain

Three types of topical agents commonly used for OM pain control

The US remains in the midst of an opioid crisis

Non-opioid-based treatment options may be desired given this crisis

OM pain management Given that pain is the leading symptom of OM and can affect a patient’s ability to function (including eating), pain management is a primary component of any mucositis management strategy. For mild to moderate OM pain, managing pain locally is considered more beneficial than systemically, as local treatments have fewer side effects.13 The following are three types of topical agents commonly used for OM pain.

1) Topical anaesthetics, such as lidocaine 2% alone or mixed with mouthwashes (“magic mouthwashes”) may be effective but have a short duration of effect (15-30 minutes)14. While cited as the most used first-line product by both physicians and nurses, a magic mouthwash’s formulation is not standardised; each hospital has its own “home brew”. Lidocaine based magical mouthwash is most common in the US.

2) Topical opioids (eg morphine) are effective for relieving pain extended duration (four to six hours); indeed, opioid therapy (systemic) remains the mainstay for OM-related pain management. However, opioid medications are commonly abused because they are so addictive, and the US has been struggling with an opioid epidemic since the late 1990s.

Authorities in the US, including the FDA, are now stepping up to clamp down on the growing opioid abuse, such as by introducing new measures to regulate pain clinics and limit the quantity of opioids that doctors can dispense. Hence, both physicians and the government are likely to have an interest in alternatives that can avoid or reduce the use of opioids.

3) Topical coating agents, such as sucralfate, may reduce local mucosal sensitivity. Such agents produce a paste-like protective coating in the oral cavity. We note that the Mucositis Study Group of the Multinational Association for Supportive Care in Cancer and the International Society of Oral Oncology (MASCC/ISOO) guidelines recommend against the use of sucralfate mouthwash to treat OM15 owing to a lack of evidence and questionable effectiveness (Rubenstein et al 2004)16.

Addressable OM population in the US stands at 244,000

Doctors are optimistic on BUPI outlook Estimations of the market size of an effective OM treatment vary. The annual global market for mucositis has been estimated by some research to be as high as USD 750m-1.2bn17, and growing rapidly, driven by the growing cancer market. Head and neck cancers represent about 20% of the total potential mucositis market18, according to the same research.

The addressable market opportunity for a bupivacaine lozenge is estimated at USD 205-615m annually in the US, depending on the price point19, based on the analysis of LifeSci Capital, with an estimated addressable OM population of 244,000. The existing pool of head and neck cancer patients was excluded in the analysis as a measure of conservatism.

13 Robertson JJ. Managing pharyngeal and oral mucosal pain. Curr Emerg Hosp Med Rep 2016; 4:57–65. 14 A. Mirabile et tal Pain management in head and neck cancer patients undergoing chemo-radiotherapy 15 Management of Oral and Gastrointestinal Mucosal Injury: ESMO Clinical Practice Guidelines Annals of Oncology 26 (Supplement 5): v139–v151, 2015 16 Mucositis Study Section of the Multinational Association for Supportive Care in Cancer., International Society for Oral Oncology.Cancer. 2004 May 1; 100(9 Suppl):2026-46 https://www.ncbi.nlm.nih.gov/pmc/articles/PMC1936261/ 17 Grant Zeng SNGX: Zacks Company Report http://scr.zacks.com/News/Press-Releases/Press-Release-Details/2016/SNGX-Positive-Long-Term-Results-Reported-from-Phase-II-SGX942-for-the-Treatment-of-Oral-Mucositis-/default.aspx 18 Grant Zeng http://scr.zacks.com/News/Press-Releases/Press-Release-Details/2016/SNGX-Positive-Long-Term-Results-Reported-from-Phase-II-SGX942-for-the-Treatment-of-Oral-Mucositis-/default.aspx 19 LifeSci Capital, Oral Mucositis Market Insights – Based on Findings from a Physician Survey, February 28, 2018

https://www.ncbi.nlm.nih.gov/pmc/articles/PMC1936261/







Moberg Pharma projects BUPI sales at USD 100-200m per year

Moberg Pharma sees BUPI as the leader in managing OM pain and estimates annual sales could be USD 100-200m globally, assuming successful commercialisation for OM and at least one other indication. This is up from the original forecast of USD 50-100m in light of the optimistic views of physicians reflected in the survey that the above analysis was based on, with 99% of respondents indicating they would use a bupivacaine lozenge product.



Market overview: Liquid bandages The liquid bandage market is valued at USD ~19m, according to Prestige Brands, of which New Skin contributed around USD 10m. As people turn to a more active lifestyle and the global population increases, there will be a natural rise in injuries and wound infections. Hence, further growth upside may be unlocked in this segment.

Dominated by major players…

…but there are still opportunities for small companies in niche segments

Alternatives to the conventional basic beige bandages

Estimated market size of USD ~19m in 2016

Beyond the basic beige The global wound management market is dominated by a handful of prominent companies such as Johnson & Johnson and 3M. Johnson & Johnson’s Band-Aid branded adhesive bandages, for instance, are a household name in bandages and are part of its large wound care product offering. The company’s wound care franchise sales were USD 779m in 2017, representing 5.7% of its consumer segment.

However, there are many medium-sized and smaller companies with niche product offerings. Competition is heated given the constant quest for the best and most efficient products to treat wounds. In the past two decades, innovation in product design and function has been one driver in the first-aid market, and it appears that the aim of these products has remained fairly constant: treating a minor injury.

In 2002, for instance, Johnson & Johnson introduced the Band-Aid Liquid Bandage, which contained the same active ingredient as the surgical glue offered by its subsidiary Ethicon as an alternative to stitches. The liquid bandage, however, was discontinued a few years ago. In 2003, Curad launched a spray bandage, a spin on the liquid bandage concept.

Currently, liquid bandages remain a fraction of the total bandage market. Prestige Brands, the previous owner of New Skin, estimated the US market value of the segment at USD~18.7m in 2016, and says the segment has decreased in size in recent years by CAGR of -7.2%. We note that New Skin holds a large market share, estimated at ~75% according to Moberg Pharma. As such, the sales development of New Skin specifically has a large impact on the total market estimate. We thus expect the general market development of liquid bandages to be highly dependent on the success of individual products.

NEW SKIN’S HISTORICAL MARKET SHARE

Source : Prestige Brands and Nordea

HISTORICAL LIQUID BANDAGE MARKET ESTIMATES

Source: Prestige Brands and Nordea

47% 45%

54% 56% 56%64% 67% 68%

63%

0%

10%

20%

30%

40%

50%

60%

70%

80%

2008 2009 2010 2011 2012 2013 2014 2015 2016

23.419.5 18.7 18.7

2013 2014 2015 2016

US

Dm



Market overview: Pain relief sprays Topical anaesthetics come in a range of dosage forms, including aerosols, creams, gels and more. Many of these are based on benzocaine or lidocaine. Desmoplastic is based on the former. Its previous owner, Prestige Brands, estimated the market value of the pain relief sprays segment to be USD ~34m, in which Dermoplast holds a market share of more than 20%.

Estimated market size of USD ~34m in 2016

Estimated market share of ~21% in 2016

The US topical anaesthetics market includes a variety of treatments in a range of forms, including aerosols, creams and gels. According to the American Academy of Dermatology, benzocaine and lidocaine are commonly used active ingredients. Mayo Clinic describes benzocaine as generally used to relieve the pain and itching caused by conditions such as sunburn, insect bites and stings. Lidocaine has a somewhat broader application range but can be used for the same purposes as benzocaine.

Anaesthetic sprays such as Dermoplast have traditionally primarily targeted hospitals, as reflected in the current sales mix of about 2:3 between households and hospitals. In total, Prestige Brands, the previous owner of Dermoplast, estimated the US market value of pain relief sprays at USD ~34m in 2016. This estimated market has, however, slightly declined in recent years, by a CAGR of 0.8%. In the pain relief spray segment, Dermoplast held a market share of ~21% in 2016. As for New Skin, we expect the market here is driven by the development of specific products.

DERMOPLAST’S HISTORICAL US MARKET SHARE

Source : Prestige brands and Nordea

HISTORICAL PAIN RELIEF SPRAY MARKET ESTIMATES

Source : Prestige brands and Nordea

Oral products with benzocaine can be life-threatening

The FDA warns about oral use of benzocaine In May 2018, the US FDA issued a warning that OTC oral products based on benzocaine should not be used to treat infants or children younger than two years old. Benzocaine can cause a condition that greatly reduces the amount of oxygen carried through the blood. This condition, methemoglobinemia, can be life threatening and can result in death. As a result, the FDA has urged manufacturers to stop marketing paediatric OTC oral benzocaine products. If companies do not comply, the FDA will take action to remove these products from the market. We would like to stress that this relates to oral products for infants, whereas Dermoplast is not intended for oral use at all. Nevertheless, this recent FDA warning could potentially be expanded to cover more benzocaine-based products and could impact consumers’ general attitude towards the agent.

16% 15% 15% 15% 15%16% 16% 17%

21%

0%

5%

10%

15%

20%

25%

2008 2009 2010 2011 2012 2013 2014 2015 2016

34.5 34.1 33.9 33.7

2013 2014 2015 2016

US

Dm



Historical financials Moberg Pharma has exhibited rapid revenue growth at a 2013-17 CAGR of ~29%, reaching SEK 439m last year. However, this has been mainly driven by acquisitions of new products, particularly in 2016. The main brand, Kerasal Nail, grew organically by 2% in 2017. Gross margins have been stable at around 70-75% and opex relative to sales has decreased. The company’s financial position changed significantly as the acquisitions made in 2016 were financed by a SEK 600m bond issue and a SEK 159m equity issue.

Strong revenue growth driven by acquisitions

Main brand grew organically by 7% in 2017

Revenue Moberg Pharma has exhibited rapid growth with a CAGR of ~29% since 2013, resulting in revenue of SEK 439m in 2017. However, this was largely driven by acquisitions; the main brand, Kerasal Nail, grew organically by 2% last year. New Skin, which was acquired in July 2016, grew organically by 7%, 17% and 29% in Q4 2017, Q1 2018 and Q2 2018 respectively. Dermoplast, which was acquired in December 2016, grew organically by 12% and 31% Q1 2018 and Q2 2018. Additionally, in August 2017, the Fiber Choice brand was divested, followed by the divestment of the Balmex brand in February 2018. In total, the now divested products contributed SEK ~68m of sales in 2017, representing about 16% of total revenue.

REVENUE SPLIT BY PRODUCT FOR 2017


REVENUE SPLIT BY PRODUCT


90% of revenue comes from the US

The majority of revenue comes from the US (~90%), whereas a smaller proportion of sales (~10%) are generated in Canada, the EU and South East Asia. While revenue has been growing in the US, sales in the EU and in Asia in particular declined under 2017. The difficulties in Asia can be attributed to local regulations that to a varying degree hinder effective marketing in the region, according to the company.

Kerasal Nail 35%

Dermoplast 22%

New Skin20%

Other7%

Balmex (divested in

2018)7%

Divested9%

93 113 155 151 1465 23 8

9536

87

5985

128147

103

157200

286334

439

2013 2014 2015 2016 2017

SEK

m

Kerasal Nail (sales) Kerasal Nail (milestone)Dermoplast New SkinOther products

CAGR: 29.2%



REVENUE SPLIT BY REGION


Direct sales to retailers in the US and UK

Sales to distributors in RoW

In the US, Moberg Pharma sells its products through direct sales to retailers, including chains such as Walmart, Target, CVS and Walgreens. In total, the products are sold in more than 30,000 stores as well as online, primarily via Amazon.

In the rest of the word, the company’s products are sold in around 30 markets. Unlike the US, these regions are organised through sales to distributors.

The milestone payments between 2013 and 2017 relate solely to Kerasal Nail.

REVENUE SPLIT BY CHANNEL


Sales peaks in spring and summer

Sales follow a seasonal pattern, with peaks during the spring and summer months, as reflected in the Q2 results. The seasonality can be explained by the nature of Moberg Pharma’s products, with nail fungus conditions, for example, gaining particular attention when outdoor activities start to pick up. The company also increases its marketing efforts when the high season is approaching, which naturally has an additional impact on revenue.

94 148 211

275 396

43 30

32 19

20

20 22

42 40

23

157 200

286 334

439

2013 2014 2015 2016 2017

SE

Km

US Europe RoW

94 139207

267389

5959

7667

42

52

3

8

157200

286334

439

2013 2014 2015 2016 2017

SEK

m

Milestone payments Sales of products to distributors Direct sales to retailers



QUARTERLY REVENUE 2013-18


Stable gross margins at 70-75%

Gross margin COGS have developed in line with revenue, resulting in stable gross margins at 70-75% between 2013 and 2017. The lower part of the interval, however, is seen in later years, even though margins seem to have improved the last twelve months.

COGS AND GROSS MARGIN


Opex/sales has decreased to ~56%

Opex In total, opex in relation to sales has decreased from ~80% to ~56% between 2013 and 2017, as a result of a relative decrease in relation to sales in R&D, and business development and administrative expenses.

OPEX SPLIT FOR 2013-17


Selling expenses at 43-44%

Selling expenses in relation to sales have been stable at 43-44% between 2013 and 2017, with the exception of an increase to 47% in 2016 likely caused by the additional resources needed to accommodate the new product acquisitions. Note that the company reports amortisation of product rights under selling expenses, which are separate in our calculations. The increase in the amortisation of product rights is a result of the newly acquired products.

020406080

100120140160

Q1-

13

Q2-

13

Q3-

13

Q4-

13

Q1-

14

Q2-

14

Q3-

14

Q4-

14

Q1-

15

Q2-

15

Q3-

15

Q4-

15

Q1-

16

Q2-

16

Q3-

16

Q4-

16

Q1-

17

Q2-

17

Q3-

17

Q4-

17

Q1-

18

Q2-

18

SE

Km

75% 75% 75%70% 71% 75%

0%

20%

40%

60%

80%

100%

0

20

40

60

80

100

120

140

2013 2014 2015 2016 2017 LTM

SE

Km

COGS Gross margin

70 86123 157 191 18328 2726

3035 38

29 2023

1214 15

36

4 3

0%

20%

40%

60%

80%

100%

0

100

200

300

2013 2014 2015 2016 2017 LTM

SE

Km

Selling exp. less amort. of product rights Business development and admin. exp.R&D expenses Other operating exp.OPEX as % of sales



SELLLING EXPENSES

Source: Nordea and Company data

Business development and administrative expenses/sales have decreased to ~8%

Business development and administrative expenses decreased in relation to sales from ~18% to ~8% between 2013 and 2017. The increased business development and administrative expenses in 2016 and 2017 resulted from an intensified growth strategy, including additional costs for the integration of the newly acquired products.

BUSINESS DEVELOPMENT AND ADMINISTRATIVE EXPENSES


R&D expenses has decreased… …but net investments in R&D has increased MOB-015 is the main driver behind increased investments in R&D

R&D expenses have more than halved between 2013 and 2017, although not due to a decreased focus on R&D, but rather a result of increased capitalisation. In 2017, the company had three ongoing development projects that are being capitalised: the next generation of Kerasal Nail, MOB-015 and BUPI. All development expenses directly attributable to the next generation of Kerasal Nail have been capitalised from 2015. In Q2 2015 and Q1 2016, ph III preparations were initiated for MOB-015 and BUPI, respectively, meaning that direct development expenditures relating to these have been capitalised ever since. In 2017, net investments in R&D reached SEK 71.8m, of which ~83% was allocated to MOB-015.

R&D AND EXPENSES AND CAPITALISATION


70 86 123

157 191 183

67

1014

36 34

44% 43% 43% 47% 43% 42%

0%

20%

40%

60%

80%

100%

0

50

100

150

200

250

2013 2014 2015 2016 2017 LTM

SE

Km

Amortisation of product rightsSelling expenses less amort. of product rightsSelling expenses less amort. of product rights as % of sales

18%

13%

9% 9% 8% 9%

0%

5%

10%

15%

20%

0

10

20

30

40

2013 2014 2015 2016 2017 LTM

SE

Km

Business dev. and admin expenses Business dev. and admin expenses as % of sales

2920 23

12 140.4 4

12

62

132

0153045607590

105120135150

2013 2014 2015 2016 2017

SEK

m

R&D expenses Capitalised expenditure for R&D work



Workforce of 40 in 2017 The workforce increased from 29 to 40 between 2013 and 2017, which has been a natural step in the expansionary strategy. Personnel costs increased at a higher rate and reached SEK 58.3m last year, at around 12% of sales.

NUMBER OF EMPLOYEES AND PERSONNEL COSTS


EBIT margins inflated by capital gains from divestments

EBIT Reported EBIT and EBIT margins improved between 2013 and 2016. In 2017, however, margins reverted and came in at 12%. Nevertheless, last year’s decrease can be explained by inflated figures in 2016, mainly driven by capital gains from divestments. Capital gains were SEK 44.8m and SEK 13m in 2016 and 2017, respectively, which had a significant impact on the results.

EBIT AND EBIT MARGIN


OTHER OPERATING INCOME


Underlying operations improved in 2017

Adjusting for M&A activity in recent years, FX gains and research grants, the underlying operations have developed differently. Unlike the reported figures, the adjusted EBIT numbers show that operations were weak in 2016 but improved in 2017.

0

10

20

30

40

50

60

2013 2014 2015 2016 2017

Empl

oyee

s / S

EKm

Employees Personnel costs

EMPLOYEES CAGR 8.4% PERS. COSTS CAGR 12.0%

-9%

9%12%

19%

12%

17%

-15%

-10%

-5%

0%

5%

10%

15%

20%

-20-10

01020304050607080

2013 2014 2015 2016 2017 LTM

SE

Km

EBIT EBIT margin

1.1 5.8 6.7 4.4 4.3

44.8

13.0

0

15

30

45

60

2013 2014 2015 2016 2017

SEK

m

Capital gains from sales of non-current assets

Other (research grants, FX-gains and Revaluation of deferredconsideration)



ADJUSTED EBIT AND EBIT MARGIN


Free cash flow has been weighed down by large investments

Cash flow Moberg Pharma’s free cash flow has been negative overall since 2013, with a slight pickup in 2017 to SEK 34m. Whereas operating activities have generated overall positive cash flow, significant investment activities, particularly in 2016, have resulted in large cash outflows.

CASH FLOW


Working capital has increased

Overall, working capital has increased since 2017. An inventory build-up was generated 2015 and 2016, and then partly reversed in 2017. Changes in operating liabilities have remained largely unchanged, averaging SEK ~0.2m between 2013 and 2017. Operating receivables increased significantly in conjunction with the product acquisitions in 2016, but were partly reversed the following year.

NET WORKING CAPITAL COMPONENTS


NET WORKING CAPITAL


-9%

6%

10%

4%8%

-15%

-10%

-5%

0%

5%

10%

15%

20%

-20

-10

0

10

20

30

40

50

2013 2014 2015 2016 2017

SE

Km

Adjusted EBIT Adjusted EBIT margin

-3

16 31

-18

54

-50-8 -13

-699

34

-800

-700

-600

-500

-400

-300

-200

-100

0

100

2013 2014 2015 2016 2017

SEK

m

Cash flow from operating activities Free cash flow

-100

-50

0

50

100

150

2013 2014 2015 2016 2017

SEK

m

Inventory Account receivables Other current assets

Accounts payable Other current liabilities

-4%

8%11%

18%

9%

-10%

-5%

0%

5%

10%

15%

20%

-10

0

10

20

30

40

50

60

70

2013 2014 2015 2016 2017

SEK

m

Net working capital Net working capiital as % of sales



Several acquisitions and divestment of product rights between 2013 and 2018

Moberg Pharma has been very active in acquiring and divesting product rights from other companies. In April 2016, the JointFlex, Fergon and Vanquish products were divested. In June of the same year it acquired New Skin, Fiber Choice and PediaCare, although it divested the latter two shortly after. In addition, Dermoplast was acquired in the end of 2016. Fiber Choice and Balmex were divested in 2017 and 2018, respectively.

AQUISTIONS AND DIVESTMENTS DURING 2013-18


Investments driven primarily by acquisitions of product rights

The acquisitions and divestments of product rights ha accounted for the majority of investment activity in recent years, whereas other investments have been relatively minor. For example, tangible capex has been less than SEK 0.5m per year between 2013 and 2017. Investments in subsidiaries in 2013 and 2014 amounted to SEK 16.7m and SEK 17.2m.

NET INVESTMENT COMPONENTS


NET INVESTMENTS


Bond issue of SEK 600m and SEK 159m in 2016 Bond carries STIBOR + 6%

Balance sheet Until the acquisitions made in 2016, Moberg Pharma relied on equity financing. The primarily debt-financed acquisitions in 2016 changed this significantly, since they were financed with a bond issue of SEK 600m and equity issues of a total SEK 159m. As of Q2 2018, interest-bearing liabilities consisted of a SEK ~600m bond loan, which is set to mature on 29 January 2021. The bond carries a variable interest rate of STIBOR + 6%. In turn, the newly issued bond increased the interest expenses to SEK 31m and SEK 39m in 2016 and 2017, respectively.

Fiber Choice was divested in 2017

Balmex was divested in 2018

The rights for BUPI was aquired in 2014

New Skin, PediaCare, Fiber Choice and Dermoplast were aquired in 2016

JointFlex, Fergon, Vanquish and

PediaCare were divested in 2016

Domeboro, Vanquish and Fergon were aquired in 2013

Balmex was aquired in 2015

-1,000

-800

-600

-400

-200

0

200

2013 2014 2015 2016 2017

SE

Km

R&D Aquired product rightsDiveested product rights OtherUnspecified invest. in intang. NI equipment and tools

-47 -24 -44

-681

-20

-800

-700

-600

-500

-400

-300

-200

-100

0

2013 2014 2015 2016 2017

SE

Km

Net investments



FINANCING DISTRIBUTION END OF PERIOD 2013 – Q2 2018


INTEREST EXPENSE AND SIMILAR ITEMS


Net debt/EBIDTA at 5.3x in 2017

As a result of the debt issue in 2016, net debt/EBITDA increased to 6.5x. The ratio reverted to 5.3x in 2017, however. The reversion was partly due to an increase in cash and cash equivalents, and partly due to improved EBITDA, whereas total liabilities remained stable at SEK ~671m.

NET DEBT/EBITDA


CASH AND CASH EQUIVALENTS


No material impact from IFRS 15 and IFRS 9

No material IFRS impact In conjunction with Q1 2018 Moberg Pharma started to report according to IFRS 15 and IFRS 9. The company indicates that this has not had any material effect and so it will not make restatements of previous periods.

201 304 353 562 552 581

19 3 -

596 597 600

52 53 45

75 74 85

0

200

400

600

800

1,000

1,200

1,400

2013 2014 2015 2016 2017 Q2 2018

SE

Km

Equity Non-current liabilities Current liabilities

3 2 1

31

39

05

1015202530354045

2013 2014 2015 2016 2017

SE

Km

-0.4 -1.8 -0.9

6.5

5.3

-4x

-2x

0x

2x

4x

6x

8x

2013 2014 2015 2016 2017

SEK

m

Net debt / EBITDA

27

62

45

86

119 122

0

20

40

60

80

100

120

140

2013 2014 2015 2016 2017 Q2 2018

SE

Km



Estimates We estimate that Moberg Pharma´s current portfolio will grow at a CAGR of 4% in 2018-23E, driven by increased focus on profitable markets, marketing and overall market growth. For the current portfolio, we expect EBITDA in 2018-23E to develop with a CAGR of 7%. In addition, we expect that MOB-015 will be launched in 2022 and 2023 in the US and Europe respectively. BUPI is expected to be launched in 2022.

Group estimates We expect that Moberg Pharma will continue to deliver solid short-term growth in the current portfolio, however, with EBITDA margins slightly below the target of 25%. In addition, we estimate that MOB-015 will be launched in 2022 and 2023 in the US and Europe respectively, and that BUPI will be launched 2022. Thereafter, the pipeline will contribute significant revenue growth and margin expansion.

ESTIMATED REVENUE SPLIT FOR GROUP


ESTIMATED EBITDA FOR GROUP


Cost split will remain stable

We estimate that the cost split will remain stable, with selling expenses continuing to be the main cost driver. Thus, we do not believe that increased opex relative to sales is a necessity to continue delivering top-line growth going forward, an assumption that is backed by the solid Q2 2018 results. In addition to the current cost split, we assume risk-adjusted overhead costs for the pipeline portfolio at 3-9% of group sales.

ESTIMATED GROUP OPEX SPLIT AS PERCENT OF SALES


We model that depreciation and amortisation of product rights will remain stable over time and thus maintain the largest fraction of total D&A. In addition, we assume that the capitalised research and development investments will be start being amortised in 2022.

0100200300400500600700800900

2015 2016 2017 2018E2019E2020E2021E2022E2023E

SE

Km

Total product revenue Total pipeline revenue (risk adjusted)

0%

10%

20%

30%

40%

050

100150200250300350

SE

Km

EBITDA from pipeline (risk adjusted)EBITDA from current portfolioGroup EBITDA margin

0%

20%

40%

60%

80%

2015 2016 2017 2018E 2019E 2020E 2021E 2022E 2023EOther operating expenses Pipeline overhead (risk adjusted)Research and development expenses Business development and administrative expensesSelling expenses less D/A



ESTIMATED DEPRECIATION AND AMORTISATION


EST. DEPRECIATION AND AMORTISATION AS % OF SALES


4 % CAGR between 2018-23E

Current portfolio estimates We believe that Moberg Pharma´s net revenue from the commercial business will continue to benefit from the strategic focus on the three core brands, particularly in the short-term, resulting in a CAGR of ~4% between 2018-23E. Growth is primarily driven by an increased focus on profitable markets, marketing and overall market growth.

ESTIMATED REVENUE SPLIT FOR THE CURRENT PORTFOLIO


Expect Kerasal Nail to perform well in the US… …but to grow slowly in the RoW

We expect Kerasal Nail in the US to continue being a significant driver of revenue growth, at a CAGR of ~3-4% between 2018-23E. Sales are expected to be particularly strong in the coming quarters, but will later trend down slightly.

The short-term performance is attributed to continued benefits from the synergistic portfolio and marketing efforts in the US. On the other hand, we expect that the decreased focus on markets outside the US to result in lower growth for RoW.

ESTIMATED KERASAL NAIL REVENUE


0

20

40

60

80

2015 2016 2017 2018E 2019E 2020E 2021E 2022E 2023E

SE

Km

Pipeline amortisationOther depreciation/amortisationProduct right depreciation/amortisation

0%

2%

4%

6%

8%

10%

12%

2015 2016 2017 2018E 2019E 2020E 2021E 2022E 2023EPipeline amortisationOther depreciation/amortisationProduct right depreciation/amortisation

0

100

200

300

400

500

600

2015 2016 2017 2018E 2019E 2020E 2021E 2022E 2023E

SE

Km

Kerasal Nail Dermoplast New Skin Other products

0

50

100

150

200

250

2015 2016 2017 2018E 2019E 2020E 2021E 2022E 2023E

SE

Km

Direct sales (US) Sales to distributors (RoW) Milestone payments



We see the greatest potential in Dermoplast

Whereas both New Skin and Dermoplast have seen strong momentum under Moberg Pharma´s management, we see more potential in the latter going forward, expecting a CAGR of ~4% and ~5%, respectively. The slightly more modest outlook for New Skin is attributed to the historical decreasing demand for liquid bandage products. However, since Moberg Pharma took over the product rights, it has shown its ability to attract new customers to the segment, so we model above-market growth for the coming quarters.

NEW SKIN REVENUE FORECAST


DERMOPLAST REVENUE FORECAST

Source: Company data and Nordea estimates Gross margins above historical averages

We expect that gross margins for the current portfolio will strengthen and trend above historical averages at ~75%. The improved margins are attributed to the more profitable product mix.

GROSS PROFIT AND PROFIT MARGIN OF CURRENT PORTFOLIO


Pipeline estimates are based on a top-down approach Assuming 40-60% probability of success

Assuming 40/60 royalty split after COGS

Pipeline We base our pipeline estimates on a top-down approach and value each separate project. The lion’s share of the pipeline value is attributed to MOB-015, which we expect to be launched in 2022 in the US and 2023 in Europe. The project is currently in ph III and we have assumed a 40-60% probability of success.

While Jublia, key competitor to MOB-015, had a successful launch in 2014 after heavy marketing, we acknowledge that growth has been slowing considerably in US. However, the slowdown can be attributed to large distribution problems which we do not expect for MOB-015. In addition, the product Clenafin (Jublia overseas) performs well in Canada and Japan.

We use a royalty-based sales model for the prescriptive market in the US and RoW, while we assume that Moberg Pharma commercialises the product by itself in RoW OTC segment. We are assuming 40/60 profit share after COGS from a partnership in the US and RoW Rx markets.

Based on market growth of 2%, we calculate prescriptions for onychomycosis to

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reach ~4.4m by 2022 in the US and model that MOB-015 will be able to gain a peak market share of ~7% by 2027, at latest. In addition, we calculate Rx peak market sales potential of USD 52m outside the US (eg Japan and Canada) in 2027. Beyond 2027, we model fading market sales until the patent expiration in 2032E.

For the RoW OTC market, we anticipate a significantly lower price but a higher market share. We also assume that Moberg will commercialise the product by itself and estimate peak market sales to reach above USD 50m in 2026E.

MAIN ASSUMPTIONS: MOB-015 US Rx MARKET


We use a gross price of USD 1,150 in US

We do not include any milestone payments into our numbers, which could provide upside. A comparable transaction was conducted in 2014 when Anacor received USD 65m plus a 50/50 profit share split after COGS from Sandoz (a Novartis subsidiary) for Kerydin. For the US our market forecast is based on a gross price of USD 1,150 in 2022, which is in line with our estimated gross price for Jublia, but below Moberg Pharma´s expected price of USD 1,700. We then use a gross-to-net factor of 60% to derive net sales. For the OTC market, we model a significantly lower price of USD 25. Dependent on a successful trial outcome, we believe there is clearly a case for MOB-015 to grab a meaningful share and revive the market. Still, in order to account for the uncertainty we are currently on the conservative side in our sales estimates. Our peak global market sales estimate is USD 274m (Rx and OTC), which is line with the lower range of management’s sales expectations.

MOB-015 MODEL: US Rx MARKET

Source: Nordea estimates MOB-015 MODEL: ROW Rx MARKET


Market Prescription growth 2%Price inflation 2%Gross price 2022 (USD) 1,150 Gross-to-net factor 60%

Moberg PharmaRoyalty 40%Gross margin 90%Probability 40-60%Peak market share (US) 7.0%

WACC 13%

2018E 2019E 2020E 2021E 2022E 2023E 2024E 2025E 2026E 2027EMarket size (no. prescriptions) 4,036,517 4,117,248 4,199,593 4,283,585 4,369,256 4,456,641 4,545,774 4,636,690 4,729,423 4,824,012 Market share 0% 0% 0% 0% 2% 3% 4% 5% 6% 7%Price (USD) - - - - 1,150 1,173 1,196 1,220 1,245 1,270 Market sales (USDm) - gross price - - - - 100 157 218 255 324 429 Gross-to-net factor - - - - 60% 60% 60% 60% 60% 60%Market sales (USDm) - net price - - - - 40 63 87 102 130 172 COGS (USDm) - - - - 4- 6- 9- 10- 13- 17- Gross profit (USDm) - - - - 36 56 78 92 117 154 Gross margin - - - - 90% 90% 90% 90% 90% 90%

Royalty sales (SEKm) - - - - 133 207 288 337 428 567 Probability - - - - 40% 40% 40% 40% 40% 40%Sales - risk adj. (SEKm) - - - - 53 83 115 135 171 227

2018E 2019E 2020E 2021E 2022E 2023E 2024E 2025E 2026E 2027EMarket size (no. prescriptions) 2,691,012 2,744,832 2,799,728 2,855,723 2,912,837 2,971,094 3,030,516 3,091,126 3,152,949 3,216,008 Market share 0% 0% 0% 0% 3% 4% 5% 6% 7% 9%Market sales (USDm) - net price - - - - 12 19 26 31 39 52 COGS (USDm) - - - - 1- 2- 3- 3- 4- 5- Gross profit (USDm) - - - - 11 17 24 28 35 47 Gross margin - - - - 90% 90% 90% 90% 90% 90%

Royalty sales (SEKm) - - - - 40 63 87 102 129 171 Probability - - - - 40% 40% 40% 40% 40% 40%Sales - risk adj. (SEKm) - - - - 16 25 35 41 52 69



MOB-015 MODEL: ROW OTC MARKET


The model is sensitive to underlying parameters

We note that our model on MOB-015 is particulary sensitive to changes in probability of launch and assumed selling price.

MOB-015: PROB. VS Rx PRICE 2022 – VALUE PER SHARE

Assuming 40% probability of success

Assumed peak sales of USD 50m

Source: Nordea estimates We expect Moberg’s second pipeline project, BUPI, to reach the market in 2022. The project is currently subject to partnership discussions and preparations to initiate ph III. Based on an addressable oral mucositis population of around 200-250,000 patients and about 25-50% penetration, Moberg sees a market opportunity between USD 100-200m based on a report from LifeSci Capital.

As BUPI is slightly outside of Moberg’s core segment, we take a cautious stand and assign a 40% probability of launch and peak sales of USD 50m. We assume that Moberg will partner up and gain a 30% royalty after COGS. No milestone payments have been included in our numbers, but we have assumed that a potential partner covers development costs for ph III. Our BUPI model ranges until patent expiration in 2032E.

BUPI MODEL

Source: Nordea estimates Elevated net debt/EBITDA will improve over time

Balance sheet Moberg Pharma’s gearing is currently elevated due to recent transactions and bond financing. We expect the net debt/EBITDA situation to improve over time due to growth in operational cash flows. However, we do not expect to see any product acquisitions in the near-term until the company reaches a more normalised debt situation in 2021-2022. Net working capital has decreased from its peak in 2016 and was ~9% of net revenue in 2017. We expect it to remain in line with last years’ figures going forward.

2018E 2019E 2020E 2021E 2022E 2023E 2024E 2025E 2026E 2027EMarket size (no. units) 12,109,552 12,351,743 12,598,778 12,850,754 13,107,769 13,369,924 13,637,323 13,910,069 14,188,270 14,472,036 Market share - - - - - 11% 12% 13% 14% 14%Price (USD) - - - - - 25 25 25 25 25 Market sales (USDm) - - - - - 35 41 46 50 51 Market sales (SEKm) - - - - - 322 372 425 456 465 Probability - - - - - 40% 40% 40% 40% 40%Sales - risk adj. (SEKm) 129 149 170 182 186

23 30% 40% 50% 60% 70% 550 8 13 18 24 29

850 11 18 25 31 381,150 15 23 31 39 471,450 19 28 37 47 561,750 23 33 44 54 65

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2018E 2019E 2020E 2021E 2022E 2023E 2024E 2025EMarket sales (USDm) - - - - 10 30 40 50 COGS (USDm) - - - - 1.5- 4.5- 6.0- 7.5- Gross profit (USDm) - - - - 8.5 25.5 34.0 42.5 Gross margin - - - - 85% 85% 85% 85%Royalty sales (SEKm) - - - - 9 28 37 46 Probability - - - - 40% 40% 40% 40%Royalty sales - risk adj. (SEKm) - - - - 4 11 15 18



ESTIMATED NET DEBT/EBITDA


NET WORKING CAPITAL TO NET SALES


Interest expenditures will suppress cash flow until the pipeline kicks in

Cash flow Moberg Pharma generated free cash flow (FCF) of SEK 34m in 2017. Going forward, we believe that interest expenditures (SEK ~39m per year) from the debt of ~600m will suppress cash flow generation until the pipeline kicks in. The company has no history of large tangible investments and we expect that R&D and future acquisition of product rights will continue being the bulk of net investments. In absolute terms, capex is rather flat during the forecast period, with the shift in 2022 when the ph III study is completed.

ESTIMATED FREE CASH FLOW


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Detailed estimates

QUARTERLY NUMBERS

Source: Company data and Nordea estimates ANNUAL NUMBERS


Q1 2017 Q2 2017 Q3 2017 Q4 2017 Q1 2018 Q2 2018 Q3 2018E Q4 2018ENet revenue 105 136 108 90 92 142 108 89 Growth (fixed rate) 43% 79% 8% -9% -5% 7% -11% -12%FX 8% 12% -4% -8% -7% -3% 11% 10%Total growth 51% 91% 4% 1% -12% 4% 0% -2%

Kersal Nail (direct) 20 41 28 15 22 56 26 17 Kersal Nail (distributor sales) 13 12 8 9 14 7 10 11 Dermoplast 21 26 25 23 22 33 30 28 New Skin 19 22 24 21 21 28 28 25 Other 31 34 24 14 13 17 14 8 Milestones 0 - - 8 - - - -

Cost of goods sold -32 -37 -31 -25 -24 -31 -31 -25Gross profit 73 99 77 65 67 110 77 64 - margin 70% 73% 71% 72% 73% 78% 71% 72%

Selling expenses -53 -85 -56 -33 -42 -87 -56 -32Business dev. and admin. expens -8 -9 -7 -10 -10 -11 -9 -10R&D costs -4 -4 -3 -3 -4 -5 -4 -5Other 0 -1 16 -1 1 8 0 0EBIT 7 0 27 18 13 16 8 17- margin 7% 0% 25% 20% 14% 11% 7% 19%

Net financials -10 -9 -10 -10 -10 -10 -10 -10Pretax profit -3 -9 16 8 3 6 -2 7Tax 0 2 -4 2 -1 -2 0 -1Net profit -3 -8 12 10 2 5 -1 6EPS -0.17 -0.44 0.70 0.54 0.11 0.27 -0.08 0.36

2016 2017 2018E 2019E 2020ENet revenue 334 439 430 465 484 Growth (fixed rate) 17% 31% -4% 3% 4%FX 0% 0% 2% 5% 0%Total growth 17% 31% -2% 8% 4%

Kersal Nail (direct) 91 104 122 131 135 Kersal Nail (distributor sales) 61 50 41 44 45 Dermoplast n.a 95 113 125 131 New Skin 36 87 102 112 116 Other 147 103 53 53 56 Milestones 0 8 - - -

Cost of goods sold -101 -125 -112 -116 -120Gross profit 233 314 319 348 364 - margin 70% 71% 74% 75% 75%

Selling expenses -171 -227 -217 -239 -247Business dev. and admin. expenses -30 -35 -39 -39 -39R&D costs -12 -14 -18 -14 -10Other 43 13 10 0 0EBIT 62 51 54 56 68- margin 19% 12% 12% 12% 14%

Net financials -16 -39 -39 -39 -39Pretax profit 47 12 15 17 30Tax -14 -1 -3 -4 -7Net profit 33 11 12 13 23EPS 1.88 0.64 0.65 0.76 1.30



Risk factors Below, we list the main risk factors that we find relevant for Moberg Pharma. The purpose of this is not to provide a comprehensive picture of all of the risks that the company may face, but instead to highlight those that we find most relevant. The main risks we see relate to the clinical trial of the pipeline drug candidates, competitive treatment methods and substances, dependency on retail distributors as well as financial risk.

No guarantee that clinical trials are successful despite promising results in earlier trials

Clinical studies Moberg Pharma is dependent on the successful phase III trials of its two pipeline assets, particularly for MOB-015. Failure to achieve successful phase III results could affect the prospects of commercialisation and limit its earnings potential.

Clinical trials are risky and there are no guarantees that they will be successful despite promising results in earlier trials. Even in the case of positive results, there is a risk that regulatory bodies, such as the FDA and EMA, might interpret the results differently. Trials are also time-consuming, expensive and require certain expertise. A trial can take several years to complete, and regulatory bodies may delay or terminate trials at any time.

Risk factors affecting the commercial and developmental success of MOB-015 and BUPI include, but are not limited to, completion of clinical trials, regulatory and market approvals, protection and maintenance of intellectual property, competition from other treatments and – upon launch – the sales and distribution model.

Dependence on prescription products quantify for remuneration

Healthcare reforms The success of Moberg Pharma’s future prescription products depends on whether these products qualify for remuneration from publicly or privately funded healthcare remuneration systems. A development that eliminates or reduces the remuneration levels for Moberg Pharma’s future products on any of the company’s existing or potential markets may hamper the company’s ability to sell its products or cause the customers in these markets to use cheaper products instead.

Competing treatment methods and substances could impact Moberg Pharma´s future revenues

Competing treatment methods and substances Moberg Pharma faces the risk that new and competing substances or treatment innovations will make existing products redundant or inferior. In turn, this could impact the company´s future revenues. We argue that the risk for new and competing treatment methods and substances are most significant for the pipeline drug candidates, MOB-015 and BUPI, but acknowledge that similar risks are also inherent in the current product portfolio.

Less favourable or cancelled distribution agreements could imply a significant reduction in revenue and margins

Dependence on retail distributors Moberg Pharma’s current portfolio is dependent on its existing distribution agreements with large retail chains, particularly in the US. As a result, the company faces the risk of agreements becoming less favourable or cancelled. We find the risk manageable but recognise that the company´s current portfolio consists of a few brands that account for a significant part of revenue. This means that a less favourable or cancelled agreement – even for only one of the company´s products – could imply a significant reduction in revenue and margins.

If patent protection is lost, the company could face competition from generics

Patent risk Moberg Pharma holds a number of patents. If a product or drug candidate were to lose its patent protection, the company could face competition from generics, thereby putting pressure on revenues and margins.



Product liability As with any pharmaceutical company, there is always risk concerning product liability obligations. A private individual or a public authority may sue Moberg Pharma, for instance, for undisclosed side effects.

Risk that the company may be unable to make acquisitions at attractive prices

Acquisition risk Moberg Pharma’s operations include the acquisition of new products and trademarks. The company evaluates ongoing opportunities for acquisitions as part of its daily operations. Making acquisitions entails risks. There is a risk that the company may be unable to make acquisitions at attractive prices, or at all. In addition, there is a risk that acquired trademarks may be challenged by competing companies, calling into question Moberg Pharma’s right to those trademarks. Moberg Pharma is also exposed to the risk that the value of its trademarks could be reduced due to unforeseen events.

Dependence on key employees Moberg Pharma’s success is dependent on a number of key employees and their specific knowhow of and experience with the product portfolio, the project pipeline and the commercialisation of the products. We consider this risk manageable, as Moberg Pharma’s main assets are its product rights and pipeline assets.

Financial risk Moberg Pharma has an outstanding bond of SEK ~600m, which carries STIBOR +6% and is set to mature on 29 January 2021. We find the risk of Moberg Pharma not being able to pay the ongoing interest rate expenditures to be limited, but acknowledge that if the company is unable to repay or refinance the bond, it might be forced to sell its assets under pressured terms or turn to capital market to raise new funds.

Moberg Pharma´s current policy is not to hedge financial risk relating to loans transactions and translation exposures. As around 90% of the company´s revenues come from the US, the unhedged exposure to the USD can have a material effect on the company´s income statement, balance sheet and cash flow. Similarly, the company is also, albeit to a lesser extent, exposed to the EUR.



Reported numbers and forecasts



INCOME STATEMENTSEKm 2013 2014 2015 2016 2017 2018E 2019E 2020E 2021E 2022ENet revenue 157 200 286 334 439 430 465 484 501 589 Revenue growth 27.2% 42.7% 17.1% 31.3% -2.0% 7.9% 4.2% 3.5% 17.5% EBITDA -8 25 46 78 89 92 95 108 118 180 Depreciation and impairments PPE 0 0 0 0 0 0 0 0 0 0 EBITA -8 25 46 78 89 92 95 108 118 180 Amortisation and impairments -6 -8 -11 -16 -38 -38 -39 -39 -39 -65 EBIT -14 17 35 62 51 54 56 68 78 115 of which associates 0 0 0 0 0 0 0 0 0 0 Associates excl. from EBIT 0 0 0 0 0 0 0 0 0 0 Net financials -2 -1 -1 -16 -39 -39 -39 -39 -39 -39 Pre-Tax Profit -16 17 35 47 12 15 17 30 40 76 Reported taxes 5 -4 -9 -14 -1 -3 -4 -7 -9 -17 Net profit from cont. operations -11 12 26 33 11 12 13 23 31 59 Discontinued operations 0 0 0 0 0 0 0 0 0 0 Minority interest 0 0 0 0 0 0 0 0 0 0 Net profit to equity -11 12 26 33 11 12 13 23 31 59EPS -0.97 0.95 1.78 2.25 0.64 0.65 0.76 1.30 1.73 3.34 DPS 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 of which ordinary 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 of which extraordinary 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00

Profit margin in percent EBITDA -5.1% 12.6% 16.2% 23.3% 20.4% 21.4% 20.5% 22.3% 23.5% 30.6% EBITA -5.1% 12.6% 16.2% 23.3% 20.4% 21.4% 20.5% 22.3% 23.5% 30.6% EBIT -8.9% 8.6% 12.3% 18.6% 11.6% 12.5% 12.1% 14.1% 15.6% 19.6%

Adjusted earnings EBITDA (adj.) -8 25 46 78 89 92 95 108 118 180 EBITA (adj.) -8 25 46 78 89 92 95 108 118 180 EBIT (adj.) -14 17 35 62 51 54 56 68 78 115 EPS (adj.) -0.97 0.95 1.78 2.25 0.64 0.65 0.76 1.30 1.73 3.34

Adjusted profit margins in percent EBITDA (adj.) -5.1% 12.6% 16.2% 23.3% 20.4% 21.4% 20.5% 22.3% 23.5% 30.6% EBITA (adj.) -5.1% 12.6% 16.2% 23.3% 20.4% 21.4% 20.5% 22.3% 23.5% 30.6% EBIT (adj.) -8.9% 8.6% 12.3% 18.6% 11.6% 12.5% 12.1% 14.1% 15.6% 19.6%

Performance metrics CAGR last 5 years Net revenue n.a. n.a. n.a. n.a. n.a. 22.3% 18.3% 11.1% 8.4% 6.0% EBITDA n.a. n.a. n.a. n.a. n.a. -263.2% 30.4% 18.3% 8.6% 15.0% EBIT n.a. n.a. n.a. n.a. n.a. -230.7% 26.6% 14.2% 4.7% 17.7% EPS n.a. n.a. n.a. n.a. n.a. -192.4% -4.5% -6.0% -5.1% 39.4% DPS n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a.

Average EBIT margin -8.9% 0.9% 6.0% 10.3% 10.7% 13.0% 13.2% 13.5% 13.3% 15.1% Average EBITDA margin -5.1% 4.9% 9.9% 14.5% 16.3% 19.6% 20.5% 21.5% 21.7% 24.0%

VALUATION RATIOS - ADJUSTED EARNINGSSEKm 2013 2014 2015 2016 2017 2018E 2019E 2020E 2021E 2022E P/E (adj.) n.m. 39.8 37.2 25.3 42.8 79.4 68.4 39.9 29.9 15.5 EV/EBITDA (adj.) n.m. 17.3 19.3 17.0 10.6 15.2 14.8 12.8 11.2 6.7 EV/EBITA (adj.) n.m. 17.3 19.3 17.0 10.6 15.2 14.8 12.8 11.2 6.7 EV/EBIT (adj.) n.m. 25.4 25.4 21.3 18.5 26.1 25.2 20.1 16.9 10.5

Valuation ratios/reported earnings P/E n.m. 39.8 37.2 25.3 42.8 79.4 68.4 39.9 29.9 15.5 EV/Sales 2.3 2.2 3.1 4.0 2.2 3.3 3.0 2.8 2.6 2.1 EV/EBITDA n.m. 17.3 19.3 17.0 10.6 15.2 14.8 12.8 11.2 6.7 EV/EBITA n.m. 17.3 19.3 17.0 10.6 15.2 14.8 12.8 11.2 6.7 EV/EBIT n.m. 25.4 25.4 21.3 18.5 26.1 25.2 20.1 16.9 10.5 Dividend yield (ord.) n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. FCF yield -0.9% 3.3% -1.4% -85.0% 7.2% -1.3% -1.1% 4.1% 5.5% 12.3% Payout ratio n.a. 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%




BALANCE SHEETSEKm 2013 2014 2015 2016 2017 2018E 2019E 2020E 2021E 2022E Intangible assets 182 216 261 1000 980 1004 1025 1009 988 926 of which R&D 0 4 12 62 132 220 279 302 321 299 of which other intangibles 111 128 159 840 758 696 656 617 578 538 of which goodwill 70 85 90 98 89 89 89 89 89 89 Tangible assets 1 1 1 1 1 1 1 1 1 1 Shares associates 0 0 0 0 0 0 0 0 0 0 Interest bearing assets 0 0 0 0 0 0 0 0 0 0 Deferred tax assets 29 25 16 10 9 9 9 9 9 9 Other non-int. bearing assets 0 0 0 0 0 0 0 0 0 0 Other non-current assets 0 0 0 0 0 0 0 0 0 0 Total non-current assets 212 242 278 1011 990 1014 1035 1019 998 936 Inventory 7 13 22 42 27 26 28 29 30 36 Accounts receivable 18 30 38 67 67 66 71 74 77 90 Other current assets 7 12 13 26 20 20 21 22 23 27 Cash and bank 27 62 45 86 119 107 97 134 185 298 Total current assets 59 117 119 221 233 219 218 260 315 450 Assets held for sale 0 0 0 0 0 0 0 0 0 0Total assets 272 360 397 1232 1223 1233 1253 1279 1312 1386

Shareholders equity 201 304 353 562 552 564 577 600 631 690 of which preferred stock 0 0 0 0 0 0 0 0 0 0 of which Equity of hyb. debt 0 0 0 0 0 0 0 0 0 0 Minority interest 0 0 0 0 0 0 0 0 0 0 Total Equity 201 304 353 562 552 564 577 600 631 690 Deferred tax 0 0 0 7 5 5 5 5 5 5 Long term int. bearing debt 17 3 0 589 592 592 592 592 592 592Non-current liabilities 0 0 0 0 0 0 0 0 0 0 Pension provisions 0 0 0 0 0 0 0 0 0 0 Other long-term provisions 0 0 0 0 0 0 0 0 0 0 Other long-term liabilities 2 0 0 0 0 0 0 0 0 0 Convertible debt 0 0 0 0 0 0 0 0 0 0 Shareholder debt 0 0 0 0 0 0 0 0 0 0 Hybrid debt 0 0 0 0 0 0 0 0 0 0 Total non-curr. liabilities 19 3 0 596 597 597 597 597 597 597 Short-term provisions 0 0 0 0 0 0 0 0 0 0 Accounts payable 5 7 15 16 25 25 27 28 29 34 Other current liabilities 34 33 26 59 48 47 51 53 55 65 Short term interest bearing debt 13 13 3 0 0 0 0 0 0 0 Total current liabilities 52 53 45 75 74 72 78 81 84 99 Liab.for assets held for sale 0 0 0 0 0 0 0 0 0 0Total liabilities and equity 272 360 397 1232 1223 1233 1253 1279 1312 1386

Balance sheet and debt metrics Net debt 3 -46 -42 503 472 485 495 457 407 294 Working capital -6 16 32 60 40 39 43 44 46 54 Invested capital 206 258 311 1072 1030 1054 1078 1063 1044 990 Capital employed 220 307 353 1158 1150 1161 1175 1198 1228 1287 ROE 4.9% 7.8% 7.1% 2.0% 2.1% 2.4% 3.9% 5.0% 9.0% 19.1% ROIC -9.4% 5.5% 9.1% 6.5% 4.0% 4.0% 4.1% 5.0% 5.8% 8.8%

Net debt/EBITDA n.m. -1.8 -0.9 6.5 5.3 5.3 5.2 4.2 3.5 1.6Interest coverage -5.1 11.7 53.9 2.5 1.3 1.4 1.4 1.8 2.0 3.0Equity ratio 74.2% 84.4% 88.8% 45.6% 45.2% 45.7% 46.1% 47.0% 48.1% 49.8%Net gearing 1.4% -15.1% -11.9% 89.6% 85.5% 85.9% 85.7% 76.2% 64.5% 42.6%




CASH FLOW STATEMENTSEKm 2013 2014 2015 2016 2017 2018E 2019E 2020E 2021E 2022EEBITDA (adj.) for associates -8 25 46 78 89 92 95 108 118 180 Paid taxes 0 0 0 0 -1 -3 -4 -7 -9 -17 Net financials -1 -1 0 -8 -36 -39 -39 -39 -39 -39 Change in Provisions 0 0 0 0 0 0 0 0 0 0 Change in other LT non-IB -28 3 9 6 1 0 0 0 0 0 Cash flow to/from associates 0 0 0 0 0 0 0 0 0 0 Dividends paid to minorities 0 0 0 0 0 0 0 0 0 0 Other adj. to reconcile to cash flow 28 -2 -7 -49 -12 0 0 0 0 0Funds from operations (FFO) -8 24 47 27 42 50 53 62 70 124 Change in NWC 5 -8 -17 -44 12 1 -3 -2 -2 -8Cash flow from op. (CFO) -3 16 31 -18 54 51 49 60 68 116 Capital Expenditure 0 0 -11 -51 -73 -88 -60 -23 -18 -3Free Cash Flow before A&D -3 16 20 -69 -20 -37 -10 37 50 113 Proceeds from sale of assets 0 0 0 129 54 35 0 0 0 0 Acquisitions 0 0 -33 -759 0 -10 0 0 0 0 Free cash flow -3 16 -13 -699 34 -12 -10 37 50 113

Dividends paid 0 0 0 0 0 0 0 0 0 0 Equity issues / buybacks 34 56 9 154 1 0 0 0 0 0 Net change in debt -10 -13 -13 584 0 0 0 0 0 0 Other financing adjustments 0 1 0 2 -2 0 0 0 0 0 Other non-cash adjustments -47 -24 0 -1 0 0 0 0 0 0 Change in cash -26 35 -17 41 33 -12 -10 37 50 113

Cash flow metrics Capex/D&A 3% 1% 94% 325% 191% 227% 152% 59% 47% 5% Capex/Sales 0.1% 0% 4% 15% 17% 20% 13% 5% 4% 1%

Key information Share price year end (current) 31.6 38.0 66.0 57.0 27.2 51.8 51.8 51.8 51.8 51.8 Market cap 356.0 483.3 935.4 821.6 474.1 917.1 917.1 917.1 917.1 917.1 Enterprise value 358.9 437.5 893.3 1324.5 946.4 1401.6 1411.8 1374.4 1324.2 1211.3 Diluted no. of shares, year-end (m) 11.3 12.7 14.2 14.4 17.4 17.7 17.7 17.7 17.7 17.7



Glossary Anaesthetic Drug to prevent pain.

Benzocaine Benzocaine is an ester local anaesthetic commonly used as a topical pain reliever.

Biopsy

A biopsy is a medical test commonly performed by a surgeon, interventional radiologist, or an interventional cardiologist involving extraction of sample cells or tissues for examination to determine the presence or extent of a disease.

Bupivacaine A long-term locally administered oral anaesthetic that had previously only been injected.

Clinical phase Drug candidates in clinical phase trials are tested on humans. There are three phases that need to be passed before the candidate can be submitted for regulatory approval.

Clinical studies A study of the effects of a pharmaceutical on humans.

Cure - Clinical cure Clinical cure refers to an improvement in the appearance of the nail, often defined as a normal appearance in 80-100% of the nails.

Cure - Complete cure Complete cure is when mycotic cure and clinical cure are both achieved.

Cure - Mycotic cure Mycotic cure means that no organism is identified in microscopy and culture.

Dermatology The science of the skin and its diseases.

EMA The European Medicines Agency (EMA) is the EU's medical authority.

Epidemiological Relating to the branch of medicine which deals with the incidence, distribution, and control of diseases.

FDA The US Food and Drug Administration (FDA) is the US's medical authority.

Nail fungus Fungus infection of the nail that often results in the thickening and crumbling of the nail and the separation of the nail from the nail bed.

NRx New prescriptions.

Onychomycosis Onychomycosis, also known as tinea unguium, is a fungal infection of the nail. Fungal infections of the nail often result in the thickening and crumbling of the nail and the separation of the nail from the nail bed.

Oral Mucositis Oral mucositis is defined as damage and inflammation of the mucosa and adjacent underlying tissue in the oral cavity and the throat. This condition frequently affects patients receiving chemotherapy and/or with radiation therapy during their cancer treatment.



Podiatrists Professional in podiatric medicine, which is a branch of medicine devoted to the study, diagnosis, and medical and surgical treatment of disorders of the foot, ankle and lower extremities.

Psoriasis Psoriasis is a common chronic skin condition. Psoriasis can also affect the fingernails and toenails, leading to thick fingernails with pitting, ridges in the nails, nail lifting away from the nail bed, and irregular contours of the nail.

TRx Total prescriptions.



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Completion date 20 August 2018, 10:39 CET

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