Sopharma : Consolidated management report as at 31 March 2024

MANAGEMENT REPORT FOR

Q1 2024

SOPHARMA GROUP

30 May 2024

Sopharma Group
Contents
I. General information about the Group	2
1.	Main activities	2
2.	Registration and activity of the Company	2
3. Controlled companies	2
4.	Board of directors	4
5. Shareholder structure as at 31 March 2024	5
6. Information about the shares and other securities issued by the Company	5
II.	Recent developments	6
III. Significant events in the first quarter of 2024 until the date of the consolidated management
	report	12
IV. Review of the main risks faced by the Company	13
V. Information on related party transactions	15

Management report of Sopharma Group for the first quarter of 2024

This document is a transaltion from Bulgarian. In case of discrepancies the Bulgarian text prevails.

1

Sopharma Group

I. General information about the Group

1. Main activities

Sopharma Group (the Group) is a leading Bulgarian producer, exporter and local distributor of pharmaceutical products with a strong presence in Eastern and South-eastern Europe, offering a wide range of prescription medicines and OTC products, food supplements, cosmetics and medical devices.

The Group operates in the following areas:

• production of pharmaceutical products, including medicines, mainly generics, herbal- based substances and food supplements, which is mainly done by "Sopharma" AD (the Company);
• production of medicinal products and medicinal cosmetics, as plasters, bandages and sanitary-hygiene products concentrated on the production site in Sandanski city;
• distribution of pharmaceuticals, medical supplies, sanitary materials, vitamins, food supplements, cosmetics and others, which is mainly performed by "Sopharma Trading" in Bulgaria and Serbia.
  2. Registration and activity of the Company

"Sopharma" AD is a company registered in Bulgaria under the Provisions of the Commercial Law, with its registered office in Sofia, 16 Iliensko shose str.

"Sopharma" was established in 1933. The court registration of the Group is from 15 November 1991, decision №1/1991 of Sofia City Court. "Sopharma" AD is a public company under the Law on Public Offering of Securities.

The Group conducts the production and marketing of medicinal substances and dosage forms; research, engineering and implementation activities in the field of phytochemistry, chemistry and pharmacy, production of medical devices and cosmetic products, incl. - plasters, dressings, sanitary - hygiene products, herbal cosmetics, concentrates for hemodialysis. "Sopharma" AD provides services related to production, as well as to ancillary and supporting activities.

3. Controlled companies

Sopharma Group consists of "Sopharma" AD and the following subsidiaries, directly or indirectly controlled by the Company. Additionally, the Group has investments in four associated companies ("Doverie - obedinen holding" AD - 23.46% stake, "Sopharma Imoti" REIT - 45.65% stake, "Sopharma Buildings" REIT - 31.68% stake, "Pharmanova" DOO Serbia - 25% stake) and in one joint venture ("Momina krepost" AD - 37.46% stake).

Management report of Sopharma Group for the first quarter of 2024

This document is a transaltion from Bulgarian. In case of discrepancies the Bulgarian text prevails.

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Sopharma Group

Company	Interest as at
	31.03.2024 in %
"Sopharma Trading" AD	87.68
"Pharmalogistica" AD	89.39
"Elektroncommerce" EOOD	100.00
"Phyto Palauzovo" AD	95.00
"Veta Pharma" AD	99.98
Sopharmacy EOOD**	87.68
Sopharmacy 2 EOOD**	87.68
Sopharmacy 3 EOOD**	87.68
Sopharmacy 4 EOOD**	87.68
Sopharmacy 5 EOOD**	87.68
Sopharmacy 6 EOOD**	87.68
Sopharmacy 7 EOOD**	87.68
Sopharmacy 8 EOOD**	87.68
Sopharmacy 9 EOOD**	87.68
Sopharmacy 10 EOOD**	87.68
Sopharmacy 11 EOOD**	87.68
Sopharmacy 12 EOOD**	87.68
Sopharmacy 13 EOOD**	87.68
Sopharmacy 14 EOOD**	87.68
Sopharmacy 15 EOOD**	87.68
Sopharmacy 16 EOOD**	87.68
Sopharmacy 17 EOOD**	87.68
Sopharmacy 18 EOOD**	87.68
Sopharmacy 19 EOOD**	87.68
Sopharmacy 20 EOOD**	87.68
Sopharmacy 21 EOOD**	87.68
Sopharmacy 22 EOOD**	87.68
Sopharmacy 23 EOOD**	87.68
Sopharmacy 24 EOOD**	87.68
Sopharmacy 25 EOOD**	87.68
Sopharmacy 26 EOOD**	87.68
Sopharmacy 27 EOOD**	87.68
Sopharmacy 28 EOOD**	87.68
Sopharmacy 29 EOOD**	87.68
Sopharmacy 30 EOOD**	87.68
Sopharmacy 31 EOOD**	87.68
Sopharmacy 32 EOOD**	87.68
Sopharmacy 33 EOOD**	87.68
Sopharmacy 34 EOOD**	87.68
Sopharmacy 35 EOOD**	87.68
Sopharmacy 36 EOOD**	87.68
Sopharmacy 37 EOOD**	87.68
Sopharmacy 38 EOOD**	87.68

Management report of Sopharma Group for the first quarter of 2024

This document is a transaltion from Bulgarian. In case of discrepancies the Bulgarian text prevails.

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Sopharma Group

Sopharmacy 39 EOOD**	87.68
Sopharmacy 40 EOOD**	87.68
Sopharmacy 41 EOOD**	87.68
Sopharmacy 42 EOOD**	87.68
Sopharmacy 43 EOOD**	87.68
Sopharmacy 44 EOOD**	87.68
Sopharmacy 45 EOOD**	87.68
Sopharmacy 46 EOOD**	87.68
Sopharmacy 47 EOOD**	87.68
Sopharmacy 48 EOOD**	87.68
Sopharmacy 49 EOOD**	87.68
Sopharmacy 50 EOOD**	87.68
Sopharmacy 51 EOOD**	87.68
Sopharmacy 52 EOOD**	87.68
Sopharmacy 53 EOOD**	87.68
Sopharmacy 54 EOOD**	87.68
Sopharmacy 55 EOOD**	87.68
Sopharmacy 56 EOOD**	87.68
Sopharmacy 57 EOOD**	87.68
Sopharmacy 58 EOOD**	87.68
Sopharmacy 59 EOOD**	87.68
Sopharmacy 60 EOOD**	87.68
Sopharmacy 61 EOOD**	87.68
Sopharmacy 62 EOOD**	87.68
Sopharmacy 63 EAD**	87.68
Sopharmacy 64 AD**	87.68
Sopharmacy 65 AD**	87.68
Sopharmacy 66 AD**	87.68
Sopharmacy 67 AD**	87.68
Sopharmacy 68 AD**	87.68
PAO "Vitamini"	100.00
"Sopharma" Warsaw Sp. z. o. o	100.00
"Sopharma" Poland Sp. z. o. o - in liquidation	60.00
OOO "Sopharma" Ukraine	100.00
TOO "Sopharma" Kazakhstan	100.00
"Sopharma Trading" D.o.o. **	87.68
"Pharmachim" EOOD	100.00
Sopharma Rus ООО	100.00

*effective interest in percentage **indirect interest

4. Board of directors

"Sopharma" AD has a one tier management system with a Board of Directors of five members as follows: Ognian Donev, PhD - Chairman, Vessela Stoeva - Deputy Chairman and members - Alexander Tchaoushev, Bissera Lazarova and Ivan Badinski. The company has two

Management report of Sopharma Group for the first quarter of 2024

This document is a transaltion from Bulgarian. In case of discrepancies the Bulgarian text prevails.

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Sopharma Group

procurators - Simeon Donev and Ivan Badinski. The company is represented and managed by the Executive Director Ognian Donev, PhD.

5. Shareholder structure as at 31 March 2024

5.79%

"Donev Investments Holding" AD

"Telecomplect invest" AD

22.06%

8.00%

39.59%

Ognian Ivanov Donev

"Sopharma" AD (treasury shares)

8.99% 15.57%

Other legal persons

Other physical persons

6. Information about the shares and other securities issued by the Company

The total number of shares issued as at 31 March 2024 by "Sopharma" AD is 179 100 063 with a nominal value of BGN 1 per share. All issued shares are registered, dematerialized, ordinary and indivisible, according to the Articles of Association of the Company. All issued shares are of one class. Each share gives equal rights to its holder in proportion to the nominal value of the share.

By Decision № 804 - Е of 4 November 2021 the Financial Supervision Commission entered an issue in the amount of 44,932,633 dematerialized, freely transferable and registered warrants, with an issue value of BGN 0.28, issued by "Sopharma" AD under Art. 112 b, para. 11 of the LPOS. The underlying asset of the issued warrants are future ordinary, registered, dematerialized, freely transferable shares, giving the right to one vote in the General Meeting of Shareholders, which will be issued by the company on condition only in favor of the owners of warrants. Each subscribed warrant entitles its holder to subscribe for one share of a future issue. Holders of warrants may exercise their right to subscribe for the respective number of shares from a future increase in the company's capital within 3 years at a fixed price of BGN 4,13 per share. The right to exercise arises from the date on which the issue of 44 925 943 warrants is registered with Central Depository AD - January 11, 2022. The warrants are admitted to trading on the BSE main market on the Bulgarian Stock Exchange AD as of January 25, 2022.

Management report of Sopharma Group for the first quarter of 2024

This document is a transaltion from Bulgarian. In case of discrepancies the Bulgarian text prevails.

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Sopharma Group

1. Recent developments

Key financial indicators

Indicators

Revenues

EBITDA

Operating profit

Net profit

CAPEX*

Non-current assets Current assets

Owners' equity Non-current liabilities Current liabilities

* acquired tangible and intangible fixed asset

Indicators

EBITDA/ Sales revenues

Operating profit / Sales revenues

Net profit/Sales revenues

Debt/ Equity

Net debt*/ EBITDA on annual basis

1-3/2024	1-3/2023	change
BGN '000	BGN '000	%
509 476	467 204	9.0%
45 891	45 477	0.9%
31 969	32 078	-0.3%
31 371	33 643	-6.8%
18 425	12 017	53.3%
31.03.2024	31.12.2023
BGN '000	BGN '000
725 082	727 099	-0.3%
897 006	787 063	14.0%
812 434	753 626	7.8%
151 933	151 346	0.4%
657 721	609 190	8.0%

1-3/2024	1-3/2023
9.0%	9.7%
6.3%	6.9%
6.2%	7.2%

31.03.2024	31.12.2023
1,00	1,01
2,3x	1,4x

• net debt includes bank loans and leasing and factoring liabilities less cash, taking into account the effects of the adoption of IFRS 16 Leasing, effective from 1 January 2019.

Operating revenues

Sales revenues of the Group increased by BGN 42,3 million or 9%, reaching BGN 509,5 million in the first quarter of 2024 compared to BGN 467,2 million in the first quarter of 2023. Sales of goods increased by BGN ,7 million or 12,3%, reaching BGN 435 million in the first quarter of 2024 compared to BGN 387,3 million in the first quarter of 2023. Sales of finished products decreased by BGN 5,5 million or 6.8%, to BGN 75,5 million in the first quarter of 2024 compared to BGN 79,9 million in the first quarter of 2023.

On a consolidated basis, the growth in sales of finished products in Bulgaria for the first quarter of 2024 is 7.7% compared to the previous period. According to IQVIA data, at the end of the first quarter of 2024, the company occupies 1,99% (fifteenth position) of the Bulgarian

Management report of Sopharma Group for the first quarter of 2024

This document is a transaltion from Bulgarian. In case of discrepancies the Bulgarian text prevails.

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Sopharma Group

pharmaceutical market in value and 6,78% (second position) in volume. The positions of main competitors of the company on the territory of the country are as follows: Roche - 5,21% (0,30% in volume), Merck Sharp & Dohme - 4,97% (0,12% in volume), AstraZeneca - 4,64% (0,49% in volume), Nоvartis - 3,84% (1,13% in volume), Swixx Biopharma - 3,80% (1,17% in volume), Pfizer

• 3,67% (0,67% in volume), Abbvie - 3,58% (0,08% in volume), Teva - 3,13% (8,15% in volume), Stada - 2,85% (4,39% in volume), Johnson & Johnson - 2,80% (0,82% in volume). The products with the largest share of sales in the country are Analgin, Vicetin, Famotidine, Vitamin C, Paracetamol, Methylprednisolone.

On a consolidated basis for the first quarter of 2024, growth in sales revenues was registered in Georgia by 24%, in Azerbaijan by 69.7%, in Uzbekistan by 6.1%, in Vietnam by 111.9%, in Moldova by 72.8% and in Poland by 59%.

A decrease in sales revenue was registered in Russia by 16.1%, in Ukraine by 15.6%, in Belarus by 19% and in Kazakhstan 2.8%.

Other operating income increased by BGN 1,9 million to BGN 4,6 million in the first quarter of 2024 compared to BGN 2,7 million in the first quarter of 2023 as a result of sales of fixed assets and an increase in income from services rendered.

Operating revenues

For the current period, the costs of materials increased by BGN 4,3 million to BGN 28 million, като най- with the most significant change being recorded in the costs of basic materials, which increased by BGN 5 million, and costs for electricity and heat, decreasing by BGN 10,5 million and BGN 0,9 million. Costs for external services increased by BGN 3,7 million to 23,3 million, as the most significant change there are expenses for advertising, which increased by BGN 3,3 million. Personnel expenses increased by BGN 3 million to BGN 47,1 million as a result of updating the current remuneration of the average number of employees in the Group. Other expenses for the activity increased by BGN 0,7 million.

Financial income and expenses

Financial income and expenses in the first quarter of 2024 registered a net loss of BGN 2,7 million, which is an increase of BGN 0,8 million compared to the same period the previous year. Financial income increased by BGN 0,2 millin. Financial expenses increased by a total of BGN 1,1 million, and interest expenses on received loans and leases for the current period increased by BGN 1,1 million.

Management report of Sopharma Group for the first quarter of 2024

This document is a transaltion from Bulgarian. In case of discrepancies the Bulgarian text prevails.

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Sopharma Group

Financial result

50,000
45,477	45,891
40,000
				32,078	31,969	33,643	31,371
30,000
									1-3/2023
20,000
									1-3/2024
10,000
0
			EBITDA		operating profit		net profit

Earnings before interest, taxes and depreciation EBITDA) increased by BGN 0,4 million or with 0.9%, while in the first quarter of 2024 it amounted to BGN 45,9 million compared to BGN 45,5 million in the first quarter of 2023. The realized profit from the increase in sales compared to the previous period was offset by the increased costs for realization and management in both main segments.

Profit from operating activities decreased by BGN 0,1 million or by 0.3%, to BGN 32 million in the first quarter of 2024 compared to BGN 32,1 million in the first quarter of 2023.

Net profit decreased by BGN 2,3 million or 6.8%, to BGN 31,4 million in the first quarter of

2024 compared to BGN 33,6 million in the first quarter of 2023. This decline was mainly influenced by the reduction during the current period of profits from associated companies by BGN 2,4 million.

Assets

Non-currentassets, compared to the end of 2023, decreased by BGN 2 million. The most significant increase is the change in other long-term capital investments due to the newly acquired shares in Achieve Life Sciences, Inc, USA in the amount of BGN 8,7 milion. Long-term receivables on affiliated enterprises decreased by BGN 20,7 million as a result of loans granted "Doverie Invest" EAD and "Industrial Holding Doverie" AD.

Current assets at the end of the first quarter of 2024 increased by BGN 109,9 million compared to the end of the previous year. The most significant is the impact of the increase in other short-term receivables and assets in the amount of BGN 142, 9 million, representing cash provided to the Central Depository for dividend payment, while cash and equivalents decreased by BGN 101,1 million. An increase was registered in inventories by BGN 22.3 million and in trade receivables by BGN 45.7 million.

Management report of Sopharma Group for the first quarter of 2024

This document is a transaltion from Bulgarian. In case of discrepancies the Bulgarian text prevails.

8

Sopharma Group

Owners' equity and liabilities

The equity of Sopharma Group at the end of the first quarter of 2024 increased by BGN 58,8 million compared to December 31, 2023 as a result of an increase in the fixed capital and reserves, retained earnings.

Liabilities at the end of the first quarter of 2024 increased by BGN 49,1 million compared to the end of 2023 as a result of the increase in bank loan obligations by BGN 31,9 million. Trade payables increased by BGN 9,1 million compared to the end of the previous year.

Cash flows

	31.03.2024	31.03.2023
	BGN '000	BGN '000
Net cash flows from operating activities, normalized*	(14 822)	12 709
Purchases of property, plant and equipment, intangible assets, net	(8 534)	(6 856)
Payments under lease contracts	(4 783)	(4 540)
Free cash flow (normalized)	(28 139)	1 313

• The net cash flows from/(used in) operating activities for the first quarter of 2024 are normalized with the amount paid for dividends to the Central Depository in the amount of BGN 141,890 million and not reflected at the end of the period in the "Cash flows from financial activity" section .

The free cash flow (normalized with the revenues from factoring and payments under leasing contracts), generated in the first quarter of 2024 amounts to BGN 28,1 million outflow compared to BGN 1,3 million inflow in the first quarter of 2023.

New developments and products

During the reporting period January - March 2024 in the Division "Development and Regulatory Compliance" the following activities were performed:

• New medicines

During the reporting period, a marketing authorization was obtained for four new medicinal products:

1. Sophamet XR 500 mg prolonged-release tablets (Bulgaria); o Sophamet XR 750 mg prolonged-release tablets (Bulgaria); o Sophamet XR 1000 mg prolonged-release tablets (Bulgaria); o Ketorolac-Sopharma 30 mg/ml solution for injection (Ukraine);

• New registrations and re-registrations / changes
  New registrations of medicinal products
  Documentation for registration of 18 medicinal products has been submitted:

Management report of Sopharma Group for the first quarter of 2024

This document is a transaltion from Bulgarian. In case of discrepancies the Bulgarian text prevails.

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