Mabion S A : Directors’ Report for the first half of 2023

Mabion S.A. - Directors' Report for the first half of 2023

MABION S.A. Directors' Report

for the first half of 2023

Konstantynów Łódzki, 12 September 2023

Mabion S.A. - Directors' Report for the first half of 2023

Contents

1.	Selected financial data	1
2.	Information on Mabion S.A.	2
2.1.	Introduction	2
2.2.	Management Board of Mabion S.A.	2
2.3.	Supervisory Board of Mabion S.A.	2
2.4.	Information on the capital group	3
3.	Operations of Mabion S.A.	3
3.1.	Object of activity	3
3.2.	Major events affecting Mabion S.A. in the first half of 2023 and up to the date of this report	4
3.3.	Transactions with related parties on terms other than arm's length	7
3.4.	Guarantees and sureties granted for a loan or borrowing	7
3.5.	Description of the main threats and risks for Mabion S.A.	8
4.	Analysis of the financial and assets position of Mabion S.A.	16
4.1.	Principles for drawing up the semi-annual condensed financial statements	16
4.2.	Description of factors and events of a significant impact on the condensed financial statements	17
4.3.	Factors to affect the results to be achieved within at least the next quarter	17
4.4.	Position of the Management Board on the feasibility of previously published forecasts for the year	18
5.	Shares and shareholders	18
5.1.	Share capital structure	18
5.2.	Shareholders with at least 5% of the total number of votes	18
5.3.	Number of shares held by managing and supervising persons	19
6.	Other material information and events	20

6.1. Proceedings pending before a court, an authority competent to conduct arbitration proceedings,

or a public administration body

20

6.2. Other information trelevant for the assessment of the staff, property, financial condition, financial result

and changes thereof, as well as information that is relevant for the assessment of the possibility of Mabion S.A.

fulfilling its obligations.

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Mabion S.A. - Directors' Report for the first half of 2023

1. SELECTED FINANCIAL DATA

	in PLN thousand	in EUR thousand
	from 01.01.2023	from 01.01.2022	from 01.01.2023	from 01.01.2022 to
	to 30.06.2023	to 30.06.2022	to 30.06.2023	30.06.2022
Net income from sales of products, commodities,	75,575	82,553	16,383	17,781
and materials
Profit from operating activities	35,512	10,197	7,698	2,196
Gross profit	31,714	12,560	6,875	2,705
Net profit	31,714	12,560	6,875	2,705
Weighted average number of shares (in pcs)	16,161,966	16,161,751	16,161,966	16,161,751
Profit per ordinary share (in PLN/EUR)	1.96	0.78	0.42	0.17
Diluted profit per ordinary share (in PLN/EUR)	1.96	0.78	0.42	0.17
Net cash flows from operating activities	(7,372)	(20,543)	(1,598)	(4,425)
Net cash flows from investing activities	(6,665)	(4,078)	(1,445)	(878)
Net cash flows from financing activities	(1,133)	(1,787)	(246)	(385)
Total net cash flows	(15,170)	(26,408)	(3,289)	(5,688)
	30.06.2023	31.12.2022	30.06.2023	31.12.2022
Total assets	174,724	186,175	39,261	39,697
Liabilities and provisions for liabilities	66,503	109,668	14,944	23,384
Long-term liabilities	34,635	35,366	7,783	7,541
Current liabilities	31,868	74,302	7,161	15,843
Equity	108,221	76,507	24,318	16,313
Share capital	1,616	1,616	363	345
Number of shares (in pcs)	16,162,326	16,162,326	16,162,326	16,162,326
Book value per share (in PLN/EUR) *	10.81	11.52	2.43	2.46
Diluted book value per share (in PLN/EUR)	10.81	11.52	2.43	2.46
Dividend declared or paid per share (in PLN/EUR)	-

* Net assets/Weighted average number of shares

Selected balance-sheet items presented in EUR have been translated according to the average EUR exchange rate announced by the National Bank of Poland on 30 June 2023 (4.4503 PLN/EUR) and on 31 December 2022 (4.6899 PLN/EUR). Selected items of the income statement and cash flow statement have been converted into EUR at the exchange

rate announced by the National Bank of Poland and being the arithmetic average of the average exchange rates for the euro effective as at the last day of each ended month in the period of six months ended 30 June 2023 and the period of six months ended 30 June 2022 (respectively: 4.6130 PLN/EUR and 4.6427 PLN/EUR).

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Mabion S.A. - Directors' Report for the first half of 2023

2. INFORMATION ON MABION S.A.

2.1. Introduction

Mabion S.A. (hereinafter: "Mabion" or "Company") was established on 30 May 2007 as a limited liability company with its registered office in Kutno. The legal form of the Company changed on

29 October 2009 as a result of the transformation into a joint- stock company. Currently, Mabion S.A. is entered on the Register of Entrepreneurs of the National Court Register kept by the District Court for Łódź Śródmieście in Łódź, 20th Commercial Department of the National Court Register under KRS number 0000340462. The Company was assigned tax identification number NIP 7752561383 and statistical identification number REGON 100343056.

The Company's registered office is located at ul. gen. Mariana Langiewicza 60 in Konstantynów Łódzki.

Mabion is a Polish biopharmaceutical company that provides services as a contract development and manufacturing organisation (CDMO) in the scope of development, analytics, and manufacturing of biologic medicines.

On 18 April 2023, the Management Board of Mabion S.A. adopted the Company's Strategy for 2023-2027("2023-2027 Strategy"). In line with its strategy, the Company's Management Board intends to continue the Company's development towards a fully CDMO with a biological profile. As a target, the Company will provide the full range of services typical of an integrated CDMO to clients who need support at various stages of their product development and commercialisation (from early-stage projects to commercial-scale manufacturing).

The Company's shares have been listed on the regulated market of the Warsaw Stock Exchangesince 2010.

2.2. Management Board of Mabion S.A.

As at 30 June 2023 and up to the date of this report, the composition of the Company's Management Board was as follows:

• Mr. Krzysztof Kaczmarczyk - President of the Management Board;
• Mr. Sławomir Jaros - Member of the Management Board
• Mr. Grzegorz Grabowicz - Member of the Management Board.
• Mr. Adam Pietruszkiewicz - Member of the Management Board.

In H1 2023 and until the date of this report, there were no changes to the composition of the Company's Management Board.

The distribution of key areas/tasks and responsibilities within the Company at the Management Board level is as follows:

• Krzysztof Kaczmarczyk - President of the Management Board, CEO - manages the work of the Management Board and coordinates the work of other Management Board Members. The main duties of the President of the Management Board include the development of the Company's business strategy and investment policy and the acquisition of business and strategic partners for the Company. The President of the Management Board is also responsible for risk management, disclosure obligations and investor relations, and for overseeing the proper performance of the Company's operating and financial activities.
• Sławomir Jaros - Member of the Management Board, COO and CSO - responsible for supervising, managing, and integrating the following areas in the Company: medicine design, technology development and analytics, clinical trials area, and occupational safety and pharmaceutical risk control. His duties include cooperation with external partners in the field of technology, science and commerce, and the development of strategies for new products and technologies. He is also responsible for the area of manufacturing, quality control and quality assurance, and for implementing technological and analytical processes in the pharmaceutical environment, for scaling up processes, process quality, time and cost optimisation, as well as for supervising manufacturing processes and operational management.
• Adam Pietruszkiewicz, Member of the Management Board, CCO - responsible for business development of the Company, for strategic projects, and for acquisition of new clients. It was at his initiative that the business relationship with Novavax was established.
• Grzegorz Grabowicz - Member of the Management Board, CFO - he is responsible for managing the Company's financial policy. He is responsible for acquiring funds, developing the Company's financial plans, for financial reporting and the day-to-day IT operation and development.

2.3. Supervisory Board of Mabion S.A.

As at 30 June 2023 and up to the date of this report, the composition of the Company's Supervisory Board was as follows:

• Robert Koński - Chairman of the Supervisory Board, Independent Member;
• Józef Banach - Deputy Chairman of the Supervisory Board, (Independent Member);
• Sławomir Kościak - Independent Member of the Supervisory Board;

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Mabion S.A. - Directors' Report for the first half of 2023

• David John James - Independent Member of the Supervisory Board;
• Wojciech Wośko - Member of the Supervisory Board;
• Zofia Szewczuk - Independent Member of the Supervisory Board.

In H1 2023 and until the date of this report, there were no changes to the composition of the Company's Supervisory Board. In connection with the expiry of the existing term of office of the Members of the Company's Supervisory Board, on 7 June 2023 the Ordinary General Meeting of the Company adopted resolutions to appoint all the existing Supervisory Board Members as Members of the Supervisory Board for the next i.e.

3rd joint term of office. The resolutions on the appointment of Members of the Supervisory Board of Mabion S.A. entered into force on 17 June 2023. The Company informed about the event in Current Report no. 15/2023 of 7 June 2023. On 23 June 2023, functions within the Supervisory Board were divided, as a result of which the function of Chairman was assumed by Mr. Robert Koński and the function of Deputy Chairman was assumed by Mr. Józef Banach (until 23 June 2023, these functions were held by Mr. Robert Koński and Mr. Slawomir Kościak, respectively).

2.4. Information on the capital group

Mabion S.A. has no subsidiaries and does not form a capital group.

3. OPERATIONS OF MABION S.A.

3.1. Object of activity

In the reporting period, i.e. in H1 2023, as since 2021, the Company has focused in its business activities on two areas of activity:

• implementation of commercial orders for partners in the field of contract development and manufacturing (as a Contract Development and Manufacturing Organisation, CDMO).
• development, manufacturing and marketing of own biosimilars, i.e. biological medicines that are developed to be similar to the original biotech drugs (MabionCD20, among others).

Until the Strategy for 2023-2027was adopted (i.e. until 18 April 2023), Mabion's project catalogue included three groups of projects: i.e. CDMO service projects (Nuvaxovid® vaccine), active in-house projects (MabionCD20, MabionMS and MabionEGFR), and new in-house projects (denosumab and omalizumab).

The Company's income from sales in H1 2023 was mainly earned from a CDMO service project involving collaboration with Novavax, Inc. in the area of the Nuvaxovid vaccine. The Agreement with Novavax and the additional orders entered into thereunder were of critical importance to the Company in H1 2023, both on the operational and financial level.

The cooperation with Novavax is based on the Manufacturing Agreement entered into in October 2021 for the contract manufacturing of an active substance, i.e. a vaccine antigen for COVID-19 branded as Nuvaxovid® ("product"), and on additional orders. In September 2022, annexes to the Manufacturing Agreement and Statement of Work #1 (Statement of Work #1) were executed, under which the parties updated the manufacturing schedule and agreed on a guaranteed amount of Mabion's manufacturing capacity for Novavax until Q2 2024 (period of the counterparty's unconditional commitment to acknowledge the

performance. The term of the Manufacturing Agreement was extended to the end of 2026 and the a remuneration for the Company was introduced in the absence of manufacturing orders, on account of Mabion guaranteeing and making its production capacity available. On 6 April 2023, the Company entered into Annex no. 2 to Statement of Work No. 1 with Novavax to extend the scope of the cooperation by including the manufacture of antigens being the active substance for the Omicron variant vaccines. In H1 2023, the company successfully completed GMP validation and production for the Omicron BA.5 variant and carried out a technical run for a further sub-variant, Omicron XBB.1.5 (informally Kraken).

In view of the nature of the agreement and the expected scope of the cooperation, which includes the provision of a manufacturing service or the readiness to provide a manufacturing service, the Company decided not to present percentage estimates of the expected implementation of the agreement in future periods. The above decision resulted from a mismatch between the assumed income from the implementation of the agreement and the method of accounting for the agreement and recognising income for individual reporting periods, adopted in line with the applicable regulations (IFRS 15), as well as the existence of a contractual limitation on the guaranteed unconditional recognition of performance by the counterparty in the period up to Q2 2024. In case of contract manufacturing, the Company recognises income using the progress measurement method based on inputs, which in the Company's opinion reflects in the best way the entity's results in fulfilling the identified performance obligation. The amount of remuneration allocated to this performance obligation is recognised as income in line with the performance stage in terms of cost.

In H1 2023, Mabion completed additional orders for Novavax under the Manufacturing Agreement, based on the Statements of Work ("SOW") entered into by the Parties as set out in the table below.

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