To read the whole report (in Swedish), visit: http://inhalation.se/investors/finansiella-rapporter/

CEO comments

2023 was another year in which we continued to take new market share and successfully deliver on our strategic goals. Over the past three years, revenue has increased steadily by 29% from 2021 to 2022 and now by 44% from 2022 to 2023. At the same time, we have also significantly improved our operating profit during the same period. With this positive development, we are very close to reaching our strategic milestone of becoming cash flow positive in the near term.

Our offer for inhalation services (IRS) continued to develop strongly according to plan and accounted for 68% of revenue in 2023. We are in continuous dialogue with various partners to broaden our service offering. As a step in this, we are very positive about our deepened strategic collaboration with Actarmo GmbH in Germany. Actarmo has a complementary offering to ours, with expertise in formulation development, analytical testing under full Good Manufacturing Practice (GMP) and consulting services for all aspects of inhaler delivery devices. Through this collaboration, we can serve a wider customer base and expand our addressable market.

We saw a positive development in the markets where we have distribution partners in 2023; through these collaborations, we have been able to offer our unique platform technology to completely new markets. Altogether, the distribution markets contributed approximately SEK 2.5 million to the year's revenue.

The FDA study with our In Vitro module, DissolvIt, continues according to plan and resulted in approximately SEK 2 million in revenue during 2023 from the FDA. We expect to finish this study at the end of 2024 and look forward to the final results, which may mean an important validation of the DissolvIt module.

In March 2024, our feasibility study for the clinical use of the PreciseInhale platform was published in the prestigious European Journal of Pharmaceutical Sciences. This is an important milestone for ISAB and it enables in-depth cooperation discussions with companies active in the clinical market with an estimated value of SEK 5 billion.

Through our completed issue we managed to repay the bridging loan that the company took out at the beginning of the year and to ensure a stable cash flow that remained intact throughout the year.

Personally, I feel very proud of the solid work that the ISAB organization has delivered in 2023. The cooperation between the Board, our partners and our customers has continued to grow in confidence and is positive in all respects.

In 2024, we will continue on the path taken from previous years with a strong focus on our strategy, as well as increased growth and improved liquidity. Expansion of our inhalation services, the completion of the ongoing FDA study and publication of our clinical data are some of the milestones that should create opportunities for continued growth in 2024. The Board and Management look forward to a very exciting 2024 for ISAB.

Huddinge, 11 April 2024

Manoush Masarrat

CEO

Selected financial data in summary

	2023Jan-Dec	2022Jan-Dec
Net sales kSEK	17,504	12,914
Operating profit kSEK	-3,756	-12,026
Profit after tax kSEK	-4,744	-12,125
Balance sheet total kSEK	18,168	12,985
Cash flow for period, kSEK	5,986	-12,556
Cash flow for period per share (SEK)	0.45	-1.10
Cash and cash equivalents kSEK	7,825	1,839
Earnings per share before and after dilution kSEK	-0.36	-1.07
Equity, kSEK	12,954	7,553
Equity per share (SEK)	0.85	0.66
Equity ratio, %	71.30%	58.17%
R&D costs/operating costs	38.75%	40.80%
Number of shares	15,167,637	11,375,734

The net revenue in the Annual Report differs from the 2023 year-end Report as a reclassification has been made to SEK 642 thousand and moved from net turnover to other operating income.

Financing

The Board and CEO assess that the company has sufficient capital to finance the business going forward based on the current decided plan. ISAB's continued investment in the commercialization and expansion of IRS services may, however, mean that additional funding needs arise. Should such a need arise, the management and Board stand prepared to ensure a possible need for liquidity.

Total investment in R&D expenditure is shown in the table below.

R&D expenditure, costs and investments, kSEK	2023	2022
R&D costs	-5,999	-8,840
Investments in capitalised R&D costs	0	0
Amortisation of R&D costs	-1,117	1,179
Total R&D expenditure	-7,116	-7,661

Significant events during the financial year

• On January 16, the company lifted part of the loan credit with a sum of SEK 1.8 million.
• On March 7, the company announced that it had received confirmation of an IRS order worth 118,480 EUR.
• On April 6, the company announced the Board's decision on a new issue of SEK 17.1 million with preferential rights for the company's shareholders.
• On May 12, the company announced the outcome of the preferential issue of shares that the company had announced on April 6. The rights issue was subscribed to approximately 23.0% percent and approximately 57.0% was subscribed by underwriters. Through the rights issue, approximately SEK 13.7 million was added to the company before deductions for issue costs.
• On June 21, the company announced a new IRS order of 98,000 EURO from an American repeat customer for its In-vitro module DissolvIt.
• On June 27, the company announced a new order for PreciseInhale, with associated modules, for 125,800 EURO.
• On June 28, the company announced an additional instrument order from a distributor in Asia for USD 94,000.
• On August 23, the company announced that the SEK 1.8 million loan that ISAB took out on January 16, 2023 was planned to be repaid to lenders at the end of August. The total cost including setup fee and interest was approximately SEK 2.6 million.
• On October 16, the company announced a new IRS order worth 188,900 EURO. This order was from a repeat customer who is amongst the top 5 in the world in generics and it concerned the company's In-Vitro module DissolvIt.
• On October 18, the company announced that it had strengthened its IP portfolio regarding its main product PreciseInhale through a new patent granted in the USA. The patent extends to 2034.
• On November 8, the company announced a new order worth 54,700 EURO, which is the result of a collaboration with a partner specialized in regulatory testing.
• On November 13, the company announced a new instrument order for 276,450 EURO, from a repeat customer, a large European pharmaceutical company with a "substantial" pipeline of inhaled therapies.
• On November 21, the company announced that it had received a new IRS order worth EUR 100,000, from a recurring multinational European pharmaceutical company.

Significant events after the reporting period

• On January 22, the company announced that it had entered into a strategic partnership with the German company Actarmo Medical GmbH. This is in line with the company's stated strategy to expand its portfolio within inhalation research services. Actarmo has an established customer base and expertise in formulation development, analytical testing under full Good Manufacturing Practice (GMP) and consulting services for all aspects of inhaler delivery devices. With this collaboration, ISAB's potential total addressable market (TAM) is expanded by 30% to a total sum of approx. 630 MEUR.
• On March 11, the company announced the publication of its feasibility study for clinical use of the PreciseInhale platform in the highly respected publication the European Journal of Pharmaceutical Sciences. This enables in-depth collaborative discussions with companies active in the clinical market that ISAB did not have access to before and a market with an estimated value of SEK 5 billion.

Expected future developments

ISAB is steadily expanding the measures for the commercialisation of its services (IRS) and PreciseInhale and its modules. In collaboration with leading pharmaceutical companies and universities that have invested in PreciseInhale, the IRS services and PreciseInhale modules are being developed, resulting in increased functionality and thus a broader product range.

Financial development

Operating income

ISAB's revenue consists of the sale of the PreciseInhale system, the DissolvIt module and contract research services (IRS). Contract research services through the business area Inhalation Sciences Research Services (IRS) during the reporting period amounted to approximately 66% (54%) of the operating income.

Operating expenses

Amounts are stated in kSEK (thousands of Swedish kronor). Figures in parentheses refer to the corresponding period of the previous year unless otherwise stated.

Results and financial position – reporting period (Jan-Dec)

The operation's income regarding goods and services amounted to SEK 17,504 (12,194) thousand.

Operating costs amounted to SEK 18,199 (22,020) thousand.

Sales expenses

Sales and marketing costs during the reporting period amounted to SEK 6,164 (7,961) thousand.

Business development and administration costs

Business development and administration costs during the reporting period amounted to SEK 4,920,000 (5,218).

Research and development costs

Research and development costs during the reporting period amounted to SEK 7,115 (8,840) thousand. The costs refer to consumables and consultancy fees through development activities regarding the PreciseInhale systems and its modules.

Personnel costs amounted to SEK 9,220,000 (9,827) which have been allocated to the cost items R&D, sales and business development costs according to the allocation key with 40%, 40% and 20% respectively.

Depreciation amounted to SEK 1,117,000 (1,179) and is included in costs relating to R&D.

Other operating income and operating expenses

Other operating income amounted to 642 (351).

Other operating expenses amounted to 162 (0).

The operating profit amounted to SEK -3,756 (-12,026) thousand.

Profit after financial items amounted to SEK -4,744 (-12,125) thousand.

Profit after tax amounted to SEK -4,744 (-12,125) thousand.

Earnings per share before and after dilution amounted to SEK -0.36 (-1.07). The cash flow during the period amounted to SEK 5,986 (-12,556) thousand. Cash flow per share amounted to SEK 0.45 (-1.10).

Cash flow per share before capital contribution amounted to SEK -0.31 (-1.10).

Cash and cash equivalents as of 31 December 2023 amounted to SEK 7,825,000 compared to SEK 1,839,000 on 31 December 2022.

The company's equity as of 31 December 2023 amounted to SEK 12,954 compared to SEK 7,553 thousand on 31 December 2022.

Equity per share as of December 31, 2023 amounted to SEK 0.85 compared to SEK 0.66 on December 31, 2022.

The company's equity ratio as of 31 December 2023 was 71.30% compared to 58.17% on 31

December 2022.

The earnings trend follows the forecast and expectation drawn up by the management during the year.

Multi-year overview

kSEK	2023	2022	2021	2020	2019	2018	2017
Net sales	17,504	12,194	9,422	10,137	8,949	5,441	8,022
Profit after net financial items	-4,744	-12,125	-16,609	9,875	-4,345	-11,883	-6,358
Balance sheet, total	18,168	12,985	26,112	18,488	23,198	19,653	23,313
Equity ratio, %,	71	58	75	57	22	55	68
Average number of employees	8	9	9	8	7	6	5

Order intake during the period SEK 15,543 thousand (17,328)

Order backlog at the end of the period SEK 8,966,000 (9,122

To read full report (in Swedish) go HERE.

For more information about Inhalation Sciences, please contact:

Manoush Masarrat, CEO

E-mail: Manoush.masarrat@inhalation.se

Mobile: +46 (0)73 628 9153