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Frequently asked questions and answers about Enzymatica's acquisition of Zymetech

Why is Enzymatica purchasing Icelandic company Zymetech?

The acquisition of Zymetech aims to accelerate our expansion and reduce the company’s risks of competition. It makes Enzymatica a stronger and more attractive partner in the context of businessand on the capital market.

How does Enzymatica benefit from the acquisition of Zymetech?

The acquisition will give Enzymatica control over the entire production chain, we will own patent protection for our products on several key markets and we will substantially reduce the risk of competition by acquiring global exclusive rights to the deep-sea enzyme. In addition, Zymetech brings expertise in enzyme and formulation technology to the table, which is conducive to the development of new products. When combined with the other improvements we have made to the company over the past year, such as in terms of quality and regulations, this gives us the solid foundation required to make our planned geographic expansion a reality.

What are the details of the transaction?

Enzymatica AB (publ) (”Enzymatica”) has signed an agreement to acquire the shares of Zymetech ehf. The purchase price consists of 20,9 million new shares and 4 million new warrants in Enzymatica, and the acquisition is thus planned to be completed via a non-cash issue of shares in Enzymatica offered to Zymetech’s shareholders. The transaction is subject to approval at an extraordinary general meeting Enzymatica will give notice of.

What does the transaction entail with respect to your patent protection for ColdZyme?

The patent prevents others from developing or selling products based on the enzyme from cod and expires at the end of 2020, i.e. in five years. The patent covers Europe and certain key markets outside of the EU, including the largest markets for OTC products – Oceania, Canada, Russia, Poland, China, India and Mexico.

What is your opinion on the fact that the patent does not cover the US and Japan, the largest markets for medical equipment/OTC products?

Given that Zymetech is the only producer of the relevant deep-sea enzymes, the merger also gives Enzymatica global control over the raw material, which substantially slows down competition in important countries where Enzymatica does not have full patent protection, such as the US. Enzymatica has a technological lead of several years across the globe. In October 2015, a new patent application was published for a recombinant trypsin, which we expect will supplement the patent for the natural trypsin when it expires. This patent will cover the US as well. We have also filed several patent applications to protect our technology.

What role will Zymetech have in Enzymatica?

Researchers and product developers from Zymetech will be added to the research and development department while continuing to work in Iceland. All production and refinement of the enzyme raw material will also remain in Iceland, as well as several other functions. Zymetech's founder will become the largest single shareholder of Enzymatica and will initially be offered two board posts and a position on the nominations committee.

Does Zymetech have any agreements with distributors on the international market for sales of trypsin and for their own spray?

Zymetech mainly has agreements for dermatology products in Germany, the UK and an Asian market.

How much sales do these agreements generate for Zymetech?

SEK 3-5 million per year.

Why does Enzymatica want to conduct a preemptive rights issue of SEK 60 million?

The capital contributed from the issue will bolster the company’s financial position and we believe that this will enable faster geographic expansion. The purpose is to enable us to pursue commercial opportunities more aggressively and thus foster a long-term increase in the sales of cold product ColdZyme.

The capital contribution will facilitate preparation for the regulatory approval in the US, Asia, Australia and other regions outside of Europe, continuing diversification of the product portfolio and solid sales support for distribution partners in the form of a small internal marketing structure, including key personnel such as international product managers.

What does it mean that the new share issue has preemptive rights for existing shareholders?

It means that those who are registered as shareholders on the record date will receive warrants in proportion to their shareholdings. These shareholders are then given the opportunity to subscribe for new shares before others. The preemptive rights are represented by the warrants allotted.

Why is Enzymatica requesting a mandate to be able to conduct a private placement of SEK 40 million?

The reason for the extended mandate for a private placement is to take advantage of future opportunities to bring in strong long-term owners and provide additional financing for the company's growth strategy.

You raised SEK 80 million just over two years ago, how have these funds been used?

We launched ColdZyme on five new markets: Norway, Denmark, the UK, Finland and Spain in January 2016. As part of these product launch efforts, we ensured that the product is in compliance with each country's legal and regulatory requirements, e.g. by supplementing the documentation forming the basis for the product’s registration and making adaptations to advertising and marketing materials. Intensified quality efforts within the company have been underway since one year ago. These efforts are necessary to reach more geographic markets. We have also expanded our organizational structure so it can cope with the expansion, doubling our workforce to 15 one year ago. In addition, we have continued to invest in production and development projects related to ColdZyme.