Information on receipt of a statement on termination of the grant agreement concluded with NCBiR concerning project CT-02

Current Report No: 21/2023

Date of preparation: 6 June 2023

Subject: Information on receipt of a statement on termination of the grant agreement concluded with NCBiR concerning project CT-02

Legal basis: Art. 17(1) of MAR – inside information

The Management Board of Captor Therapeutics S.A., with its registered office in Wroclaw (the "Company"), informs that on 6 June 2023, Narodowe Centrum Badań i Rozwoju (ang. the National Center for Research and Development) ("NCBiR") served the Company with a statement of termination of the grant agreement with immediate effect, together with a request for return of the received funds; the statement relates to project CT-02 (POIR.01.01.01-00-0741/19: design and development of non-toxic ligands of ligases and their application in the treatment of autoimmune diseases).

NCBiR indicated in the statement that the termination of the grant agreement dated 1 June 2020 (the "Agreement") with an immediate effect, is justified in particular by the fact that the scope of work performed by the Company under the project is not consistent with the scope of work that was originally planned in the grant application and the Agreement, and that during the period under NCBiR's control, the originally planned objectives of the project were not achieved. In addition, according to NCBiR, it is also reasonable to assume that the project objectives outlined in the grant application and the Agreement, submitted more than 3 years ago, will not be achieved. In connection with the termination of the Agreement, NCBiR requested the Company to return, within 14 days, the received grant in the amount of PLN 6,388,361.19, together with due interest.

 The Company's position is that the information contained in NCBiR's letter, including NCBiR's expert's assessment of the project's progress, is incorrect and unsubstantiated. The Company carried out the project work in accordance with the current state of scientific knowledge, which was presented to NCBiR in a comprehensive proposal to change the assumptions of the project in order to keep innovative character of the project. This proposal was not accepted by NCBiR. In addition, NCBiR did not accept the Company's request to select other experts with relevant knowledge that, in the Company's opinion, would allow to objectively assess the progress and implementation of the project, as well as the need to change the original project assumptions that were presented while concluding the Agreement.

Because of the above, the Company is legally analyzing the effectiveness and substantive grounds for the termination submitted by NCBiR and the existence of an obligation to repay the funds. In particular, the Company intends to obtain independent opinions on the progress of the project's work in light of the unjustified, in the Company's opinion, the assessment provided by NCBiR. In the event of a decision to comply with the request to repay the funds, the Company has the necessary funds to make the repayment, with the amount of the repayment to be reduced by the amount of PLN 348,987.91 (relative to the amount indicated by NCBiR), which has already been repaid by the Company in April 2022 in connection with the results of the previous audit.

According to the Company, the CT-02 project is progressing better than originally anticipated, and in addition to compounds offering hope for treating patients suffering from autoimmune diseases such as gout, inflammatory bowel disease, and lupus nephropathy, the project has also developed a second class of compounds that overcome the blood-brain barrier, which may find application in the treatment of neurodegenerative diseases. As a result, the Company plans to continue the CT-02 project, and the modest expenditure required to advance the project to commercialisation will be financed from the Company's own funds. The Company expects to receive the results of the in vivo proof of concept study in the following months, which is the key element to commence commercialisation. After these in-vivo results are obtained, the Company does not plan to make further significant expenditures on this project while commercialisation discussions are underway.

Other projects implemented by the Company and funded by NCBiR are subject to ongoing evaluation by NCBiR, and the Company is not aware of any objections related to the progress of the other projects.

The Company will report on further issues related to the CT-02 project and the subject of this report as required by law.