BioGaia Annual Report 2021

Annual Report 2021

2 BIOGAIA ANNUAL REPORT 2021 “Since we started BioGaia 32 years ago, we have developed into a world-leading probiotics company at the forefront of microbiome research with safe, effective and consumer-friendly products on the global market. This is a very strong plat- form that we are now leveraging to become even more consumer-oriented.” PETER ROTHSCHILD, FOUNDER

BioGaia’s 2021 Sustainability Report is a separate report prepared according to the requirements for sustainability reporting in the Swedish Annual Accounts Act. This Annual Report includes a summary of the Sustainability Report, see pages 36–41 and 46–47 (business risks and uncertainties). This is a translation of the Swedish version of the Annual Report. In the event of differences, the Swedish version shall prevail. The Annual General Meeting will be held on 6 May 2022. Contents Key events 2021 5 Message from the Chairman 6 Message from the CEO 8 BioGaia’s subsidiaries 10 BioGaia’s products 14 Market trends 16 Value creation 18 Value chain 20 Omnichannel strategy 22 BioGaia’s markets 24 BioGaia’s research 32 BioGaia Academy 34 Sustainability 36 Financial information and notes 42 Executive Management 80 Board of Directors 81 Glossary 82

4 BIOGAIA ANNUAL REPORT 2021 BioGaia in brief Vision Become the world’s most trusted global probiotics brand. Mission To provide the world with probiotics that have clinically proven positive effects on health and well-being. Positioning Food supplements with clinically tested, high-quality probiotics that are sold through pharmacies and via online retail platforms. Core Values Innovation / Collaboration / Passion Class B share of the Parent Company BioGaia AB BioGaia’s share is listed on the Mid Cap segment of the Nasdaq OMX Nordic Stockholm Exchange. Company presentation BioGaia AB organisation CEO Vice President Digital Chief Scientific Officer Chief Financial Officer Vice President General Counsel Chief Operating Officer Vice President Marketing & Communication s Executive Vice President Business Development Executive Vice President Sales Vice President HR CONTENTS

BIOGAIA ANNUAL REPORT 2021 5 Key events 2021 Sales by market and segment Annual sales past 5 years (SEKm) Key figures 2021 Paediatrics 86% Adult Health 14% Paediatrics 47% Adult Health 53% Paediatrics 91% Adult Health 9% Paediatrics 77% Adult Health 23% Försäljning per geogra sk marknad EMEA APAC AMERICAS TOTAL Americas 0 100 200 300 400 500 600 700 800 2021 2020 2019 2018 2017 615 742 768 747 785 Operating margin 32 % Sales growth (12% excl. foreign exchange effects) 5 % Proportion own brand and co-branding 81 % CONTENTS

6 BIOGAIA ANNUAL REPORT 2021 BioGaia’s strong research core crucial for long-term profitability The probiotics market is changing fast. The current pandemic has led to an increased focus on health and a desire to purchase goods online, thereby dramatically accelerating the trend. In parallel, consumers have become more aware and are demanding products that are proven to be safe, effective and of high quality. BioGaia’s strong research roots, combined with our global presence and strategic investments to be close to consumers, offer significant potential for the brand. MESSAGE FROM THE CHAIRMAN CONTENTS

BIOGAIA ANNUAL REPORT 2021 7 BioGaia becomes even more consumer-oriented The digitalisation trend, which was given an enormous boost in 2020 due to the Covid-19 pandemic, continued at the same pace in 2021. We took a number of important steps on our strategic journey to move closer to consumers and noted a highly positive trend, particularly in the USA, China, Vietnam and Indonesia, where we use an omnichannel strategy and e-commerce dominates the market. We are yet to fully recover in Europe, where digital develop- ments are progressing slightly slower and sales are primarily through pharmacies. During the year, we continued to build the organisation to complement our already strong position in business- to-business with a strong presence also in business-to- consumer. Our goal is to meet consumers on platforms that they use in all of our markets and to continue to invest in research and development in order to solve health problems for people all over the world. The right skills and change leadership are crucial in this transition. Several central new functions are now in place and work is conti- nuing to integrate these into the existing organisation. Unique strengths compared with our competitors In the fierce competitive environment, with many large and active players in the market, BioGaia possesses unique strengths lacking in several of our competitors. We conduct our own research and development and use clinical studies to show that the products we make are really effective. Research is in our DNA and is something we will never sacrifice. Our research is indication- directed. This means we start with a condition such as colic, constipation and osteopenia and conduct pre- clinical and clinical studies that focus on this particular condition. Few other companies use this approach. During the year, BioGaia Pharma received formal approval from competent authorities to proceed with both of its planned clinical studies. It is fantastic that we could successfully start two clinical trials of a potential pharmaceutical despite limited resources and are now progressing to the next phase in drug development. We are also constantly striving to remain at the fore- front in respect of new product formulas. BioGaia was first in the world to launch drops and chewable tablets. We want our products to be convenient for consumers and to work in everyday situations and to always be based on the insights we gain from our consumer surveys. Strong platform for profitable growth BioGaia’s brand is already global and we have a better spread than all of our competitors, largely thanks to our outstanding distributors who work hard to get doctors, dentists, midwives and nurses to understand and recommend our products to consumers. Our broad spread is an excellent tool in the fierce competition for consumer attention. Our global presence is also a very strong plat- form that we can leverage on our journey to become even more consumer-oriented. Combined with our clinically tested products that have been proven to be effective, this will provide the conditions needed for long-term growth and profitability in the major shift currently taking place in the market due to digitalisation. Peter Rothschild, Chairman of the Board of BioGaia “Research is in our DNA and is something we will never sacrifice.” CONTENTS

8 BIOGAIA ANNUAL REPORT 2021 Continued focus on building the world’s most trusted probiotics brand 2021 was a year when the world recovered and adapted to the new situation brought about by the pandemic. We can see strong growth in interest around the world for preventive health and products that strengthen the immune system. BioGaia has an important role to play in this trend. We are continuing to build a trusted brand globally – both in the healthcare sector and directly to consumers. Greater presence in key markets Overall, 2021 was a good year when many important pieces fell into place in our efforts to continue to build BioGaia’s brand. I am pleased by the professionalism shown by the organisation in delivering on its commitments. Despite continued sluggish sales in Europe, this was offset by the strong performance in other parts of the world. In Asia, sales increased in part due to our online ventures in China, our sales via dental surgeries and our own e-commerce platform in Japan as well as advantageous demographic trends in Indonesia and Vietnam. The USA accounted for the most outstanding development, where several successful launches of new products together with our omnichannel strategy yielded another record year. The USA is now BioGaia’s largest market and it was a great pleasure to sign an agreement at the end of the year to acquire our American distribution partner Everidis. BioGaia and Everidis have been partners since 2007, where Everidis has leveraged its unique under- standing of the USA probiotics market and been highly successful in its omnichannel strategy combined with marketing to the healthcare sector and end consumers. This approach has set a standard for the whole BioGaia group. I am now extremely pleased that we have made this partnership permanent, can contribute resources, strengthen the pace of efforts to reach out directly to consumers, and build BioGaia into a leading brand in the USA. We are currently present in 110 countries, through distribution partners and our own subsidiaries. We established BioGaia Japan in 2006, with a unique concept targetting dental clinics. At the beginning of the year, Protectis Mum was launched for pregnant women with very good results while we concurrently increased our presence in digital channels. In Sweden, we took over from the previous distributor of the Adult Health portfolio. BioGaia is now available at the main pharmacy chains and on e-commerce websites, online pharmacies, from Amazon and in our own online store and we have continued to grow in all channels compared with last year. We have also taken over distribution in Finland, where BioGaia’s products are now available at Finnish pharmacies and e-pharmacies under our own brand. In November, we started our own sales company in the UK. Our products will now be sold via our own online store, from Amazon and at selected pharmacy chains both online and offline. New products and uniform brand offering As a means of achieving our target to meet consumers regardless of where they buy their probiotics, we must invest even more in marketing directly to consumers and we intensified our efforts to add more consumer-oriented communication during the year. We have strengthened the management team with a new function, BioGaia Digital, which is similar to a digital incubator. BioGaia MESSAGE FROM THE CEO CONTENTS

BIOGAIA ANNUAL REPORT 2021 9 Digital works closely together with marketing and sales to support the organisation and our partners with guidelines, tools and content to ensure a uniform brand offering. At the same time as we are investing in both physical and digital sales channels, we are also striving to develop new products together with our amazing distribution partners. Consumers are increasingly aware and want to know what the products contain, and quality and safety are crucial elements. In this respect, BioGaia has a unique strength and competitive advantage since research and clinical studies form the foundation of our offering. Our origins are in developing clinically tested probiotics of highest quality for children and we are now evolving to focus on great products for consumers throughout their life cycles. We want to improve global health, which is also one the UN Sustainable Development Goals. It is very gratifying that our research company has made tremendous progress during the year. BioGaia Pharma has received approval for two clinical studies and MetaboGen is focusing on developing next-generation probiotics. Stepping up sustainability work We have continued to work hard with sustainability and have taken several steps towards the goal of integrating it in all parts of the business. One highly positive effect of our strategy to increase our direct presence in markets has been that we now have greater influence over our environmental impact. We have stepped up efforts to reduce emissions from our packaging and to phase out palm oil, introduced a whistleblower system, held Groupwide anti-corruption training programmes, implemented a Code of Conduct and increased diversity in both management and on the Board. In addition, we continued to pursue our strong and important community engagement by supporting various organisations in health- promoting activities and through the Prevent Antibiotic Resistance (PAR) foundation. As a result of our hard work, in November we welcomed the fact that MSCI raised BioGaia’s ESG rating from BBB to A, an important endorsement for us and our shareholders. There is clear and strong growth in the health trend and in preventive healthcare. People are increasingly interested in proactively improving their health, and probiotics can help to provide a balanced intestinal flora and an effective immune system. Given BioGaia’s passion, inherent potential, strategy and cooperation, I am very optimistic about the future. I would like to take this opportunity to thank all of the exceptional and dedicated employees at BioGaia, our customers and other partners for a marvellous job this year. Together, we have the necessary prerequisites to achieve our vision to become the most trusted probiotics brand. Isabelle Ducellier, CEO BioGaia CONTENTS

10 BIOGAIA ANNUAL REPORT 2021 MetaboGen MetaboGen is a wholly owned subsidiary that conducts research and product development focusing on the microbiome and its potential to become the next generation of probiotic products. During 2021, MetaboGen has achieved several important milestones in our development projects. In addition, we have continued to create the right conditions for our own product development, with new premises, collaborations and new employees. MetaboGen has developed a unique production technology that helps oxygen-sensitive bacteria survive in a product. Such bacteria exist in healthy intestinal flora, but are lacking when the balance of the flora is disrupted. They therefore have great potential as new probiotic products. In 2021, MetaboGen’s unique technology received patent approval in most countries. After a long wait due to the pandemic, we could finally begin META003 in August 2021, a clinical study in which we are studying the effect of our first product on individuals with an elevated risk of developing diabetes. The study, which is taking place at the Sahlgrenska University Hospital in Gothenburg, is fully engaged in enrolling participants and is expected to continue throughout 2022. In 2021, we concluded an exploratory study of 100 pregnant women with Intrahepatic Cholestasis of Pregnancy (ICP), in partnership with Ferring Pharmaceuticals. The study was carried out at Kvinnokliniken in Lund and Södersjukhuset in Stockholm. Ferring ultimately chose not to continue with the project, though the results of the study were interesting and we now have an opportunity to find other licensees, or alternatively develop a product ourselves. Over the past year, we also concluded the first phase of our project in melanoma indications, where the micro- biome appears to influence the outcome in connection with immunotherapy. We can see a potential for our strains in the field and are currently investigating the prospects for clinical studies and continued development. Over the past year, MetaboGen has expanded its organisation with new employees and continued work with product optimisation and moved to new, larger premises with specialised laboratories. Today, we have very good capacity to manage the entire development chain, from the identification of new bacteria strains, through safety assessment and product development to the design and implementation of clinical studies. We are also continuing to develop our fermentation capacity on a small scale and currently manufacture, together with the fellow subsidiary BioGaia Production in Eslöv, products for clinical studies, in oxygen-free conditions. “I look forward to yet another exciting year with MetaboGen, where we take decisive steps forward in 2022 towards the launch of our first product.” Sara Malcus, Managing Director MetaboGen BIOGAIA’S SUBSIDIARIES CONTENTS

BIOGAIA ANNUAL REPORT 2021 11 BioGaia Production BioGaia Production AB is a wholly owned subsidiary of BioGaia AB that manufactures and packages BioGaia’s drops in glass bottles and plastic tubes, tablets/capsules in bottles, minipacks and product samples. BioGaia Production AB has a Good Manufacturing Practice (GMP) certificate from the Swedish Medical Products Agency. BioGaia Production AB is a critical facility in BioGaia’s operations and, thanks to strong and coordinated efforts from all employees, we successfully maintained production levels without any delays to customers. In 2021, we continued our ongoing efforts to streamline operations and experienced strong growth and increased sales without the need to employ more staff. Our operations are particularly vulnerable as they require people to be on-site or production would cease. It requires everyone to roll up their sleeves and help out when unforeseen events occurred. This has been our everyday life for the past two years and the whole organisation has acted in this way. During the year, we received another GMP certificate, drug licensing authorisation to produce and package study products that are to be sent to the two clinical studies beginning in 2022. We also began constructing production premises for a pilot plant that will consist of a 100-litre fermentation facility (the expansion is progressing as planned and the municipality is expected to receive approval for the new development plan during the first quarter of 2022). The year has been full of various difficulties due to the pandemic, relating to everything from the delivery of material and raw materials to having healthy personnel on site. I am very proud of all of the loyal, diligent and helpful employees who always do their utmost and support and help each other across all boundaries. Without them, we would never have seen the outstanding performance and growth we are experiencing today. We are ready to face the challenges that 2022 can bring. BIOGAIA’S SUBSIDIARIES “The year has been full of various challenges due to the pandemic. We successfully maintained production levels and deliveries according to plan without any delays to customers.” Peter Persson, Managing Director BioGaia Production CONTENTS

12 BIOGAIA ANNUAL REPORT 2021 BioGaia Pharma BioGaia Pharma applies extensive experience in probiotics research and development in the develop- ment of new biotherapeutic product platforms. BioGaia Pharma selects and develops pharmaceutical candidates based on supporting pre-clinical and clinical research. In 2021, BioGaia Pharma took several steps towards building support for its prioritised programmes, which aim to supply effective pharmaceuticals based on live bacteria where a medical need exists and where the current standard of care is not optimal. 2021 was mainly marked by preparations to start clinical studies for the two pharmaceutical candidates in our two prioritised programmes. During the summer, we received formal approval from competent authorities in France and Sweden to move to the next phase. Before the end of 2021, the study product was filled and packaged (by our product partner BioGaia Production) and is now available for all of the six centres involved in the studies. Enrollment of patients also began at the end of 2021. The first programme, BGP014, concerns Ulcerous Colic (UC). Ulcerous Colic is a debilitating condition characterised by chronic inflammation of the intestinal tract. The first stage of this programme is to study safety, tolerance and preliminary efficacy of BGP014 in the approved Phase I trial at several centres on UC patients with mild to moderate symptoms. The trial is taking place in Sweden. The second programme, BGP345A, aims to treat constipation in patients receiving opioids to relieve pain. The study is a Phase II trial at several centres to assess the safety and preliminary effects. The study is taking place in France. Looking ahead, we are also preparing for the next stage of enrolling patients and completing the clinical trials and look forward to the next and future phases. “We are delighted this year to have reached our ambitious goal to start clinical trials in both of our development programmes.” Nigel Titford, Managing Director BioGaia Pharma BIOGAIA’S SUBSIDIARIES CONTENTS

BIOGAIA ANNUAL REPORT 2021 13 BioGaia Invest Since 2021, BioGaia Invest is a new wholly owned subsidiary of BioGaia AB that focuses on identifying and investing in small companies concentrating on breakthrough technology, services and products that can promote BioGaia’s growth. BioGaia AB established BioGaia Invest in March 2021 to drive strong growth and remain at the forefront of research and innovation. During its first year of operation, the BioGaia Invest invested in Boneprox and Skinome, which are experts in osteopenia and skincare products that strengthen the skins natural microbiome, respectively. With the investments, we can create new communication and information channels that will help BioGaia to leverage new technology and innovations. Boneprox is a company specialising in artificial intelligence in dentistry, with a focus on linking dentistry with healthcare. Boneprox patented technology can be used to detect osteopenia using ordinary dental x-rays. Osteopenia is a disease characterized by low bone density, which leads to a fragile skeleton. Early diagnosis is crucial to prevent the disease from becoming a great burden to the patient and the healthcare system. In conjunction with the investment, Boneprox and BioGaia Japan will cooperate to detect patients at risk of osteopenia, while in parallel BioGaia’s bone health product, BioGaia Osfortis, will be offered to individuals with low bone density. The second investment was in Skinome, a company that works with “microbiome-friendly” skincare. Skinome’s products are developed to strengthen the skin’s natural microbiome. BioGaia and Skinome will collaborate in the development of microbiome-friendly probiotic skincare products, both for Skinome and for roll out in BioGaia’s international network. BIOGAIA’S SUBSIDIARIES “We look forward to new opportunities in 2022 and to the ongoing collaboration with Boneprox and Skinome, which we are convinced will lead to increased growth for BioGaia.” Sebastian Schröder, Managing Director BioGaia Invest CONTENTS

14 BIOGAIA ANNUAL REPORT 2021 Product portfolio for the health of the whole family BioGaia’s products are clinically tested, high-quality probiotics sold by pharmacies and via online platforms worldwide. The product portfolio aims to promote health for the whole family, but with a particular focus on mother and child health. The product range includes oil drops, chewable tablets and lozenges, capsules and oral rehydration solution (ORS). In most countries the products are registered as a food supplement. The Paediatrics segment currently accounts for nearly 80% of BioGaia’s total sales. The vision for the product portfolio in mother and child is to launch products specifically for mother’s health and to create a broader portfolio in child health using new probiotic strains that enable us to target new indications. The portfolio has evolved from containing more broadly based products to more specific products. BIOGAIA’S PRODUCTS Free from More and more consumers are demanding products free from allergens. BioGaia complies with EU requirements and offers Protectis drops and tablets (with and without vitamin D) and capsules free from gluten, lactose and milk protein. BioGaia Protectis capsules are vegan. CONTENTS

BIOGAIA ANNUAL REPORT 2021 15 Product launches in 2021 BioGaia Prodentis Kids Even if most parents do their best to ensure that children brush their teeth regularly, there is still a risk that children develop caries. With varying genetic susceptibility and diet, everyone has different degrees of resistance to the pathogenic bacteria that are the root cause of caries. In 2021, BioGaia launched Prodentis Kids, which can help to maintain a healthy balance in the mouth, and reduce risk factors in the development of caries and inflammation of the gums. The product contains a combination of probiotics and Xylitol. Probiotics are not only important for the gut, but also for health and balance in the oral microbiota. Xylitol helps to maintain the mineralisation of teeth. The patented probiotic strains, L. reuteri DSM 17938 and L. reuteri ATCC PTA 5289, which are present in the product, act synergistically to improve oral health. The product can be used as a complement to brushing your teeth every day. BioGaia Prodentis Kids has been tested in clinical studies and is safe for children to use. BioGaia Protectis Immune Boost Interest in preventive treatment and products that can strengthen the immune system has grown during the pandemic1). In 2021, BioGaia launched the BioGaia Protectis Immune Boost product, which contains a combination of probiotics and vitamin D and has demonstrated clinically- proven effect in a number of studies. BioGaia Protectis Immune Boost is a series of products suitable for the entire family. Since up to 80% of the immune system is present in the gut, a healthy microbiota is important for a well-functioning immune system. BioGaia’s probiotic strain L. reuteri DSM 17938 has immunomodulating effects. It can prevent pathogenic bacteria frommultiplying in the intestines. Combined with the immunosupportive vitamin D, the product promotes an improvement in general health. BioGaia Protectis Immune Boost is available as oil drops, chewable tablets and capsules with different levels of vitamin D suitable for all ages. BioGaia Pharax The common cold and sore throat are the most common infections in the upper respiratory tract in children of preschool age, and are a significant reason for visiting a paediatrician and for absence from school and work. Pharax is a new product from BioGaia that aims to strengthen the oral immune system. The product has been found to reduce the duration and severity of upper respiratory tract infections in children. BioGaia created Pharax to offer a probiotic complement to normal analgesics and as an alternative to antibiotics, which have no effect on virus infections. Given that Pharax is a natural and non-invasive product, parents can give Pharax to their children without the worry of adverse side effects. Pharax probiotic drops are safe to use for children, and are free frommilk protein, gluten and lactose. They have no side effects, and only supply healthy and positive bacteria with antiviral properties. Five drops given twice a day (morning and evening) for ten days have been shown in studies to reduce the duration and severity of a cold. Suitable for children from six months up to the age of five. 70% of colds are caused by viruses. The common cold is the most common disease among children up to the age of five and the main reason for visiting a paediatrician. A child of preschool age has, for example, on average six to eight colds per year, and the spread of infection is greatest in families with children that attend preschools. Most symptoms are mild; runny and blocked nose, sneezing, slight fever, sore throat and cough. Antibiotics are only effective in diseases caused by bacteria and most common colds are caused by viruses, which leave parents with few alternatives apart from analgesics to offer some relief to their children. 1) FMCG Gurus 2021 CONTENTS

16 BIOGAIA ANNUAL REPORT 2021 Trends in society During 2021 one trend in particular dominated the world and has escalated during the Covid-19 pandemic: preventive health care with a focus on strengthening the immune system. The pandemic has placed pressure on the healthcare system and increased incentives to prevent disease rather than treating disease when it has broken out as it may then be too late to avoid negative consequences. Increased illness and growing health interest Insights gained from a market survey completed in May 2021 indicate that consumers have become increasingly concerned about their basic health, such as vulnerability to diseases and ability to recover from sickness. The prioritisation of, and interest in, health with a focus on the immune system has increased around the world. 64% of the global consumers in the survey stated that they have take action to improve their health and immune system over the past year (2020)1. 70% of the polled have taken active measures to strengthen their health and immune system, compared with 53% who answered the same question one year earlier. The trend whereby a growing number of consumers want to reduce the risk of falling sick and retain good health confirms a change in consumer behaviour and that BioGaia is on the right path by adding consumer communication in channels complementary to the healthcare system. Previously, BioGaia mainly came into contact with consumers first when they sought medical care and needed treatment. As a large consumer group is thinking more about preventing disease and maintaining good health, it is important and relevant for BioGaia to catch the attention of consumers at an earlier stage, on Google, via PR articles, advertising on health website or via relevant influencers. In the same survey and when answering questions about the health areas they hope to improve in the coming year, gut health and the immune systemwere the most popular areas and are areas in which BioGaia offers health-promoting products. Changes to consumer purchasing behaviour Digitalisation and the transition to online purchasing, which has been a clear trend for many years, have accelerated as a result of the pandemic. The lockdown of society and restrictions on physical contact have even convinced parts of the population that were previously reluctant to use technology to choose digital alternatives. With the continued restrictions in society in 2021, the change in consumer purchasing behaviour, which was identified during the first year of the pandemic, has continued2). E-commerce has grown and a broader target group is now opting to search for information and shop online. Food and health products are goods that have noted a clear upturn in e-commerce3). In line with its omnichannel strategy, BioGaia has intensified work to add communication directly to consumers in digital channels and make its products available via e-commerce. Lifestyle and preventive healthcare The world’s population is growing and ageing, and as a result there is increasing interest in health. The western MARKET TRENDS 1) FMCG Gurus 2021 2) E-barometer; Statista 2022 Global number of digital buyers 2014–2021 3) McKinsey & Company Covid-19 US Consumer Pulse Survey 6/15–6/21/2020; E-barometer CONTENTS

BIOGAIA ANNUAL REPORT 2021 17 lifestyle has spread across the world in recent decades, as have the resulting lifestyle diseases. The physical and mental health of a growing number of people are being impacted by stress, sedentarism and poor diet. Concurrently, a rising number of consumers are taking greater responsibility for their health by seeking information about healthy diets and preventive healthcare. The interest in health products and food supplements is therefore expected to continue to rise sharply. Interest has grown in recent years in the importance of intestinal flora for our health and it is increasingly clear that the intestinal flora changes as we age. Trends in the wider world provide both challenges and opportunities for BioGaia and our ability to create value for stakeholders through our research and our products. Unrelenting growth in antibiotic resistance The focus on the pandemic has overshadowed another pending global disaster, galloping antibiotic resistance. According to field reports and surveys from the WHO, there is a risk for further spread of antibiotic resistance following an increase in the incorrect over-use of antibiotics due to the pandemic. With their immuno-strengthening effects, probiotics may have an important role to play in the fight against antibiotic resistance. A study published in the European Journal of Public Health shows, for example, a link between intake of BioGaia’s probiotic L. reuteri DSM 17938 and a reduced need for antibiotics in children. The Prevent Antibiotic Resistance (PAR) foundation, which BioGaia started in 2017, makes a financial contribution to research and information on measures to reduce the need for antibiotics. In 2021, funds were distributed to projects focusing on preventive measures among elderly individuals. Increased focus on sustainability Few people can have missed the COP26 climate summit and the major humanitarian crisis cause by the pandemic worldwide. Consumers, and also other stakeholders, have become increasingly aware and sustainability is more frequently an important demand imposed in connection with purchasing or collaboration. Issues related to responsibility, environmental impact, business ethics and control are more important from a business and risk perspective. Customers want sustainable products and services while suppliers want to work with innovative, long-term and stable customers. Acting responsibly is also more highly valued by the employees of today and tomorrow. In 2021, BioGaia took additional steps in the right direction to ensure good business ethics, improve its environmental impact and offer a workplace that motivates and creates well-being. Read more on page 36. CONTENTS

18 BIOGAIA ANNUAL REPORT 2021 Society BioGaia contributes to society by being a good citizen and by offering products that contribute to improved health. Consumers BioGaia offers consumers probiotic products that contribute to improved health. Employees BioGaia offers its employees a meaningful and stimulating workplace where employees feel job satisfaction. Researchers BioGaia contributes to increased knowledge of probiotics. Distributors BioGaia builds long-term relationships with distributors and supports them within sales and marketing. Suppliers BioGaia contributes to development of suppliers through long-term relationships and being a reliable partner. Shareholders Through good risk management and a long- term strategy BioGaia offers a stable value appreciation for its shareholders. Value creation for BioGaia’s stakeholders VALUE CREATION Improved health and lower cost to society for ill health. CONTENTS

BIOGAIA ANNUAL REPORT 2021 19 37 new products launched during the year 8% average growth in past 5 years 32% operating margin 100 % of tablet product range available as palm oil-free variants SEK 56.4 m in tax SEK 3.6 m in community engagement 167 employees 13% of net sales to research and development 236 published articles (Dec 2021) 20,000 individuals have participated in clinical studies (Dec 2021) CONTENTS

20 BIOGAIA ANNUAL REPORT 2021 BioGaia’s value chain BioGaia conducts its own research as well as collaborating with a large external researcher network. Research includes everything from developing and improving methods for how probiotic cultures are produced to extensive pre-clinical and clinical research. BioGaia also works strategically to identify new bacteria strains for the probiotics of the future. BioGaia’s product development works to analyse and identify new product formulas and create new delivery formats and packaging solutions. Raw materials for products, material for packaging and bacteria cultures come from external suppliers. VALUE CHAIN Research Product development Raw material use CONTENTS

BIOGAIA ANNUAL REPORT 2021 21 Production and product packing is handled both by external suppliers and BioGaia AB’s subsidiary BioGaia Production. In the supply chain, BioGaia takes care of logistics as well as quality assurance and control of products and production. The finished products are collected from the production unit by BioGaia’s partners which legalise, market and distribute them in the different markets. BioGaia supports its distribution partners and own subsidiaries with sales and marketing activities in line with BioGaia’s global brand strategy and also in regulatory issues. Production and packaging Distribution Sales CONTENTS

22 BIOGAIA ANNUAL REPORT 2021 Omnichannel strategy the way forward BioGaia has steadily complemented its marketing model with more consumer-oriented communication. In 2021, competencies within digitalisation and consumer marketing were strengthened in order to support the organisation with tools for a strong, clear and uniform brand offering in all channels used by consumers. Over the past 32 years, BioGaia has built a top-class medical marketing model. By focusing on solid research, BioGaia shows doctors that the products are effective and doctors therefore then recommend the products to their patients. This still forms the basis of marketing and will continue to do so, but consumers’ buying behaviour and customer journey have changed in pace with digitalisation and new social channels. In 2020, the pandemic led to a rapid acceleration in e-commerce by 40%, an increase that continued at the same rate in 2021. “If we are to remain relevant and raise awareness of probiotics in an increasingly competitive market, we must be available where consumers are, understand their needs and talk their language. We want to be part of the entire consumer lifecycle. We are already very good at medical marketing and have added expertise during the year in marketing directly to consumers,” says Linda Hägglund, Vice President Marketing. The markets in which BioGaia operates are at different levels when it comes to digitalisation. There is also some variation depending on whether BioGaia is present itself in the country or distributes the products through partners. The first stage in building a strong global brand is to draw up new visual guidelines, to update the brand platform and to create tool kits that BioGaia’s partners and own subsidiaries can use in marketing to consumers. Ultimately, the aim is to be relevant for consumers regardless of which channel or stage in the customer journey. This expansion in marketing requires more ability and capacity in several areas and the organisation was strengthened during the year with a new function, BioGaia Digital, led by Sebastian Heimfors. BioGaia Digital is similar to a digital incubator and works closely together with marketing and sales to build a strong, clear and uniform brand offering in all digital channels. “The entire retail landscape is in the midst of a transformation to follow a customer journey that is increasingly non-linear. We must ensure that we put consumers at the centre, create insights through analysis to understand the customer journey and thereby increase the relevance of our message. We are now increasing the capacity of our organisation and adding expertise and new tools together with marketing and sales,” says Sebastian Heimfors. In 2021, the BioGaia brand was established in Finland and the UK and on 31 December its American partner, Everidis, was acquired. In these markets and in Sweden and Japan, BioGaia now has direct responsibility for marketing. OMNICHANNEL STRATEGY CONTENTS

BIOGAIA ANNUAL REPORT 2021 23 “We are now testing content in various channels in our direct markets where it is easy to follow up and assess the response we receive. We want to support our partners and direct markets as part of the ongoing transformation and in this way we can develop much stronger tool boxes that can be adapted and used in their markets. For example, this could concern banners or short films to publish on YouTube or Instagram. We are building a strong, uniform BioGaia by supporting our partners with relevant marketing material for use in all platforms used by consumers,” says Linda Hägglund. Same message in different ways Market place E-com Retail Online Offline Symposium webinar Education BioGaia Academy Publication Direct to consumer indirect to consumer via partner HPC & academia to patient B2 B C CONTENTS

24 BIOGAIA ANNUAL REPORT 2021 BioGaia increases its presence in key markets BIOGAIA’S MARKETS Over 32 years, BioGaia has successfully built a global presence in 110 countries through long-term relationships and collaborations with distribution partners. BioGaia’s brand now occupies a strong position in the healthcare sector in these markets. A number of key markets have been identified: The USA, Japan, China, Brazil, France, Italy and the UK. During the year, BioGaia increased its presence in some markets to align with its omnichannel strategy to be relevant also to end consumers. Important steps were taken during the year to become even more accessible in highly attractive probiotics markets by establishing own companies and taking control of distribution in Finland and the UK, and by acquiring the American distribution partner Everidis. CONTENTS

BIOGAIA ANNUAL REPORT 2021 25 Key market Own distribution Distribution partner Sales by geographical market Americas 30% EMEA 43% Asia Pacific 27% % EMEA, SEKm Asia Pacific, SEKm Americas, SEKm 0 50 100 150 200 250 21 17 18 19 20 0 100 200 300 400 500 21 17 18 19 20 0 50 100 150 200 250 21 17 18 19 20 Share of global e-commerce 18 % CONTENTS

26 BIOGAIA ANNUAL REPORT 2021 USA – BioGaia acquires its partner Everidis and strengthens position in the American market 2021 was another record year for BioGaia in the USA with a number of successful product launches. At the end of the year, BioGaia acquired its American partner of 13 years, Everidis, as a step to increase the pace of its initiative to directly reach consumers while continuing to market to the healthcare sector. USA is a key market for BioGaia, where we have had a partnership since 2007 with Everidis, our exclusive distributor of products under BioGaia’s brand in the USA. Everidis has a well established omnichannel strategy and focuses on e-commerce rather than traditional pharmacy sales and marketing to consumers is almost exclusively digital. Doctors, dentists and other healthcare professionals are targeted by medical marketing. The omnichannel strategy has been highly successful and in keeping with the general digitalisation trend, which has now made the USA BioGaia’s largest market. Following the acquisition and support fromBioGaia, Everidis will have more resources to further increase its pace, reach out directly to consumers and work with the healthcare sector. With a customer value of USD 2 billion, the USA is the world’s largest probiotics market with excellent potential for continued growth. BioGaia’s close collaboration with Everidis in product development and building new product categories led to several successful product launches in 2021. Immune Boost was launched during the year, a range comprising drops for small children, tablets for children and capsules for adults. BioGaia has also noted growing interest for its dental tablets and launched Prodentis Kids tablets and Prodentis Baby Drops. All of the products were very warmly received by the market. B ioGaia and Everidis have a tremendous collaboration and during the year we continued to build our brand, move closer to consumers and increase engagement through relevant content in all channels with excellent results. Joakim Annwall, Regional Director BioGaia Biologics INC in North America T he idea of making the partnership permanent is brilliant, and we couldn’t be more excited to become part of the BioGaia family. Everidis’ talented team is building BioGaia into a powerful and trusted brand in the United States. With BioGaia, we will have access to resources and capabilities to help catapult growth and achieve the goal of becoming the leader of the science-driven probiotic category. Jennifer Cherry, CEO of Everidis. CONTENTS

BIOGAIA ANNUAL REPORT 2021 27 Japan – transition to digital channels boosted sales Despite a slightly weak start to the year due to restrictions as a result of the pandemic, the transition to digital channels and e-commerce led to an increase in sales. Japan is a very important market for BioGaia, which established its own subsidiary in the country in 2006. BioGaia Japan primarily targets dental clinics and has drawn up a unique concept that not only focuses on oral health products but also includes all of BioGaia’s products. Dentists are trained by BioGaia and include BioGaia’s products in their treatment of patients. From the start, the products were marketed under the BioGaia brand directly to dental surgeries and thanks to the products’ excellent clinical results, BioGaia has succeeded in building a strong brand in the Japanese market. The pandemic continued to have a serious impact on Japan during the first part of 2021 with lockdowns and restrictions, which made it difficult to reach dental surgeries and conduct sales activities. Despite the difficult conditions, Prodentis MUM for pregnant women was launched early in the year with very good results, and greater focus was given to digital channels and e-commerce. Sales via e-commerce and BioGaia’s own online store reported considerable growth during the year. BioGaia Academy, which develops and conducts external training in the field of probiotics, was converted into a digital format and took place through webinars. J apan is mainly an offline market where we are gradually growing our digital presence with excellent results and maintaining trust among doctors and dentists. Following this turbulent year, I am convinced that the omnichannel strategy is the right way forward. Keitaro Nomura, Managing Director BioGaia Japan China – stable sales growth throughout the year In 2021, BioGaia continued to strengthen its digital presence and its shift closer to consumers. The Paediatrics segment demonstrated stable sales growth throughout the year. China is one of BioGaia’s most important growth markets in Asia and there is significant awareness among Chinese consumers about probiotics and their health benefits. Probiotics are primarily sold through e-commerce. Sales growth in the Paediatrics segment remained stable throughout the year and the rise in e-commerce sales offset the sales decline in physical pharmacies during the pandemic. Efforts to strengthen the digital presence and the shift closer to consumers are continuously ongoing and BioGaia enjoys very good cooperation with the local partner Dr. Mums to drive traffic to the website while BioGaia AB provides support through film clips and other digital content in line with the overall brand strategy. Osfortis and Protectis capsules were also added to the online store during the year. BioGaia Academy was held in Chinese in the Paediatrics segment, which helped to further strengthen BioGaia’s brand and position among doctors and other healthcare professionals. BioGaia has a unique combination of leading-edge skills and omnichannel strategy, which are central in remaining relevant in a highly competitive market. I am very pleased to see that both China and Japan made good progress even in the chaotic circumstances during the pandemic. China is mainly an online market from which we can learn lessons and use these in other markets. Jonas Weimer, Regional Director, APAC CONTENTS

28 BIOGAIA ANNUAL REPORT 2021 France – BioGaia retains leading position in drops and focuses on developing Adult Health portfolio In 2021, BioGaia invested more in marketing in digital channels and visibility at pharmacies in pace with consumers beginning to use more sources to search for recommendations outside of the healthcare and medical services area. The leading position in drops has been retained while the position in the Adult Health portfolio was developed. In 2021, years of investments in brand awareness for BioGaia’s drops bore fruit and sales of drops continued to grow during the year. The sales trend for Protectis Vitamin D tablets stabilised and grew at a slower rate compared with the first year of the Covid-19 pandemic. BioGaia’s partner in France, PediAct, has an established omnichannel strategy and the main target groups are doctors, midwives, pharmacists, recent parents and whole families. French consumers use a growing number of sources for purchasing probiotics rather than only recommendations from the healthcare system and pharmacies. During the year, PediAct intensified its activities in digital marketing directly to consumers, focusing on maintaining contacts with pharmacies, training pharmacists and increasing visibility in stores. Presence in digital channels increased in part through the establishment of social media networks with three agents, collaboration started with the e-commerce website ConsoBaby and the WeMoms app (the largest community for mothers in France) and new partnerships with influencers. The introduction of Gastrus (food supplements for sensitive stomachs) in the French market was sluggish. Focus remains on a positioning in dyspepsia (sensitive stomach) but it has been difficult for pharmacies to set aside time and interest as these are the primary centres for Covid-19 testing and vaccination in France. Italy – increased establishment of e-commerce As a result of the impact of the pandemic, BioGaia in Italy has converted its medical marketing model into a hybrid model and added marketing and sales directly to consumers. Sales via Amazon and other e-commerce platforms are gaining momentum for consumers focused on products that strengthen the immune system, while in parallel sales via pharmacies are recovering. 2021 was another difficult year in the Italian market, but in the third quarter sales began to recover and this positive trend has continued. BioGaia’s partners, NOOS and Recordati, have continued to invest in marketing activities and prescriptions are increasing in the network of doctors. The sale team is back out in the field after the lockdowns and an internal training programme is in progress to update their knowledge. In addition, NOOS and Recordati have also initiated sales via Amazon and through a few local online pharmacies. Recordati focuses on preventive health and products that strengthen the immune system. This goes hand in hand with its more consumer-oriented strategy where communication concerning vitamin D products containing BioGaia’s probiotics is easier thanks to proven efficacy and the fact that fewer children are being born in Italy. Recordati uses a hybrid marketing model that combines visits by sales representatives to doctors and the activation of sales at pharmacies through campaigns, a presence in all digital channels and on Amazon. D evelopments in France and Italy were challenging in 2021. Because of a well established brand and strong position in prevention of infantile colic and other acute conditions involving sensitive stomachs, sales of drops were positive. Sales of tablets were adversely affected by fewer infections and antibiotic treatments in both Italy and France, where the market has been driven by recommendations and prescriptions from the healthcare system. We can now see a recovery in demand in acute conditions and preventive health for the whole family portfolio as well as a promising activity plan from our partners. Ana Pérez Sanz, Regional Director, EMEA CONTENTS

BIOGAIA ANNUAL REPORT 2021 29 UK – distribution under our own management In November 2021, BioGaia began selling its probiotic products under its own management in the UK market. The decision is part of the company’s overall strategy of increasing sales directly to consumers and sales via its own e-commerce solution. BioGaia is planning to launch its entire product portfolio in the UK market. BioGaia’s probiotic products have been available to a limited extent in the UK market for just over eight years, but only through a smaller distributor. In November 2021, the agreement was ended and BioGaia took over sales. In addition to its own e-commerce, BioGaia’s probiotic products will also be sold on Amazon and in selected pharmacy chains both online and offline. BioGaia will eventually also start medical marketing to doctors and other healthcare professionals. The UK is a very attractive market with many consumers who have excellent knowledge of probiotics. With BioGaia’s clinically tested probiotic products – something that many consumers demand – there is a strong offering for the UK market. With BioGaia’s global omnichannel strategy as a starting point, own distribution in the UK is a natural step. T he UK is a medium-size market for probiotic products. However, together with the broader market, which includes food supplements and vitamins, the estimated market value is about GBP 1.5 billion. I am optimistic about our opportunities for increasing sales in the UK, and am looking forward with confidence to developments in the near future. Steven Hicks, Managing Director of BioGaia UK Brazil – expanded collaboration in digital sales BioGaia retained its position as number two in the market thanks to a joint effort with its partner Aché Brazil to leverage digital sales channels. 2021 was another tough year as BioGaia’s partner Aché Brazil could not fully utilise its strong sale team due to continued restrictions and lockdowns. Pharmacies, healthcare companies, doctors and consumers were forced to adapt to the new reality and use digital channels, which was a strong driver in the market during the year. BioGaia therefore extended its collaborations to take advantage of digital channels to reach out to both doctors and consumers. To maintain sales during the year, many activities took place as virtual events, including webinars, e-detailing through WhatsApp, short films on social media, partnerships with influencers, banners on various websites and campaigns on RAPPI (a delivery service that offers purchasing and delivery to the home or office). More than 40 short meetings were held with doctors across the country. Thanks to these joint efforts with Aché Brazil, BioGaia could, despite difficult circumstances, retain its position as number two in the market. I am sure that 2022 will be a much better year as we launch our new powder product, Reuteri minipack, in the first quarter and prepare for the launch of vitamin D drops in early 2023. We have strengthened our collaboration with Aché at all levels and are keen to accelerate our projects and launches to continue to grow our business in Brazil. Cristián Contreras, Regional Director, Latin America CONTENTS