Cassiopea S p A : Annual Report 2020

ANNUAL

REPORT

2020

Cassiopea at a Glance

Cassiopea is a specialty pharmaceutical company developing and preparing to com- mercialize prescription drugs with novel mechanisms of action (MOA) to address long-standing and essential dermatological conditions, particularly acne, androgenetic alopecia (or AGA) and genital warts. Cassiopea is investing in innovation that is driving scientific advancement in areas that have been largely ignored for decades. The Company's portfolio comprises four unencumbered clinical candidates, for which the Company owns the worldwide rights. These product candidates are based on three new chemical entities ("NCEs") that target unmet medical needs and address significant market opportunities in the medical dermatology market. Cassiopea's management team directly and indirectly through the service agreement with Cosmo, has extensive experience in product development and commercialization, having served in prominent roles at several leading pharmaceutical and medical dermatology companies. The Company's strategy is to leverage this expertise to optimize the commercial potential for its products directly or with a partner in the US and partner the products in countries outside of the US.

Key events in 2020

During the first half 2020, development activity focused on fluid interaction with the FDA in conjunction with the Clascoterone Cream 1 % NDA, the ongoing Phase II trial of Clascoterone solution for androgenetic alopecia in females, the Special Protocol Assessment submission to the FDA for the Phase III program of Clascoterone solution 7.5 % in males, and completing the Supply Agreement with Cosmo for Clascoterone cream 1 %, assuring a long term reliable source of supply.

From an operating perspective, our comprehensive strategic and tactical launch plan was established, thus laying the blueprint for the launch of Clascoterone cream 1 % after FDA approval is obtained. Meanwhile, prestigious dermatology journals such as JAMA Dermatology and Journal of the American Academy of Dermatology (JAAD) have published our Phase III data.

On 18 June 2020, we announced that the capital increase reserved for existing shareholders was successfully concluded and 750,000 new registered shares were subscribed at an offer price of EUR 31 with gross proceeds of EUR 23.25 million.

On 27 August 2020, we announced that the United States Food and Drug Administ-ration (FDA) approved Winlevi® (clascoterone cream 1 %) for the treatment of acne in patients 12 years and older.1 Notwithstanding acne being the most prevalent skin condition in the US. affecting up to 50 million Americans annually.2 the last FDA approval of an acne drug with a new mechanism of action (MOA) occurred nearly 40 years ago.

Acne is a multifactorial skin condition, affected by four distinct pathways: excess oil (sebum) production, clogged pores (hyperkeratinization), bacteria growth (C. acnes), and inflammation.3 Topical treatment options that target androgens, which largely drive sebum production and inflammation,3 presented a significant unmet need in the acne treatment market until now.

Cassiopea's first-in-class topical androgen receptor inhibitor, Winlevi®, tackles the androgen hormone component of acne in both males and females.1 Androgen receptor inhibitors act by limiting the effects of these hormones on increasing sebum production and inflammation.4

In pivotal clinical trials, Winlevi® demonstrated treatment success and reductions in acne lesions and was well tolerated when used twice a day. The most frequently observed local skin reaction was mild erythema.5, 6

Although Winlevi's® exact mechanism of action is unknown, laboratory studies suggest the active ingredient, clascoterone, competes with androgens, specifically dihydrotestosterone (DHT), for binding to the androgen receptors within the sebaceous gland and hair follicles.7

Winlevi® is expected to be available in the United States in Q3 2021. Complete pre- scribing information is available onwww.WINLEVI.com.1

On 8 October 2020, we announced that we have completed the enrollment of its phase II trial investigating clascoterone solution for the treatment of androgenetic alopecia (AGA) in females.

The Phase II multicenter, prospective, randomized, double-blind, vehicle controlled, dose ranging study will evaluate the efficacy and safety of clascoterone solution for the treatment of AGA in females. The six-month study enrolled 293 female subjects between 18-55 years of age with mild to moderate AGA in Germany. The four-arm study enrolled approximately 70 subjects per arm in each of four treatment groups: clascoterone solution 5 % BID (twice daily), clascoterone solution 7.5 % BID (twice daily), minoxidil solution 2 % BID (twice daily) and vehicle BID (twice daily). The co-primary endpoints are: (1) change from baseline in non-vellus Target Area Hair Count (TAHC) at month 6 in comparison to vehicle and (2) Hair Growth Assessment (HGA) score at month 6 in comparison to vehicle. Top line results are expected to be available in Q3 2021.

On 23 December 2020, we announced that Chris Tanner is retiring as Chief Financial Officer as of 31 December 2020. Chris Tanner served as Cassiopea's Chief Financial Officer since its formation and helped bring the company public in 2015. At the meeting of December 22 the board approved the nomination of Pierpaolo Guzzo as Chief Financial Officer of Cassiopea starting 1 January 2021. Pierpaolo Guzzo is a Certified Public Accountant, with an extensive track record in accounting, private equity and merchant banking, and will retain his role as board member of Cassiopea.

All operations were carried out within the budgeted framework. In 2020, Cassiopea spent EUR 6,440 thousand predominantly in the advancement of our clinical programs.

At the end of 2020, cash amounted to EUR 2,646 thousand, which is in line with what had originally been planned.

Concerning forward-looking statements

This report contains certain "forward-looking statements," which can be identified by the use of terminology such as "could," "might," "propose," "addressable," "outlook," "attractive" or similar wording. Such forward-looking statements reflect the current views of the Management and are not guarantees of future performance and involve risks and uncertainties. Readers are cautioned that actual results may differ materially from those in the forward-looking statements as a result of various factors. Cassiopea is providing the information in this report as of this date and does not under-take any obligation to update any forward-looking statements contained in it as a result of new information, future events or otherwise.

Cassiopea Pipeline

PRODUCT

WINLEVI® (clascoterone cream 1 %)

Androgen receptor inhibitor

See full Prescribing Information

Clascoterone solution

Androgen receptor inhibitor

Androgenetic alopecia in malesClascoterone solution

Androgen receptor inhibitor

Androgenetic alopecia in females

PROPOSED INDICATION

CB-06-01

Antibiotic

AcneCB-06-02

Immune modulator

Genital Warts

Key figures

EUR 1,000

Income statement Revenue

PRECLINICALPHASE I

PHASE II

Other income Cost of sales

PHASE III

APPROVAL

31.12.2020

31.12.2019

Current liabilities Equity

• R&D costs (6,440) (7,875)

• SG&A costs (5,175) (3,879)

• Operating result (11,021) (11,068)

• Profit (loss) before taxes (12,308) (11,700)

• Profit (loss) for the period (12,308) (11,700)

Shares

Weighted average number shares Basic earnings (loss) per share (in EUR)

EUR 1,000

Statement of financial position Non-current assets

Inventories

Cash and cash equivalents Other current assetsNon-current liabilities 66 10,660

Equity ratio

12,797 12,536

- 686 -

10,000,000

(1.170)

31.12.2019

-

2,646 696 2,423 2,829

2,946 1,674 15,615 3,727

23.2 %

Table of Contents

Cassiopea at a Glance ................................................................................................................................ 2

Key events in 2020 ........................................................................................................................................... 3

Cassiopea Pipeline .......................................................................................................................................... 5

Letter to Shareholders .............................................................................................................................. 10

Business Strategy and Markets ........................................................................................................ 12

Research and Development ................................................................................................................. 14

Patents and Trademarks ......................................................................................................................... 20

Corporate Governance ............................................................................................................................ 26

Financial review .............................................................................................................................................. 54

Consolidated Financial Statements ............................................................................................. 58

Notes to the Consolidated Financial Statements ............................................................ 62

Auditor report ................................................................................................................................................... 98

Information for Investors ..................................................................................................................... 104

Glossary .............................................................................................................................................................. 108

Contacts and Addresses ...................................................................................................................... 112

Cassiopea Annual Report 2020 - Table of Contents