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AG medica The world's first technology for

AG medica is a technology company founded by Polish cosmetic products based on


scientists of the younger generation, creators of Chitosan
Hydrogel technology (INCI: Aqua, Chitosan, Carbon dioxide).
Chitosan Hydrogel.
The production technology of Chitosan Hydrogel is Skin care has never been
protected by granted patents and patent applications. The
company has exclusive rights to use this technology in all so safe.
areas apart the medical area.
Chitosan hydrogel is a 100% natural substance and has the highest possible safety index for cosmetic
products (EEC's Hazard Score = 1). It can be an independent cosmetic base and, at the same time, an
active ingredient with a multi-level soothing, regenerating and protective effect on the skin. This allows
the elimination of dangerous substances from cosmetics (eg preservatives, fillers and stabilizers). The
company possesses implementation-backed experience in creating cosmetic products based on
Chitosan Hydrogel.

DEFINITION OF THE PROBLEM


Currently, the cosmetics market is dominated by products whose cosmetics base contains substances
(often synthetic) with high or medium health risk, including preservatives, thickeners and stabilizers
(EWG's Hazard Score = 3-10). These products more and more often do not meet the expectations of
conscious consumers who prefer a healthy and ecological lifestyle. There is a growing demand for safe
and natural cosmetics made of ingredients from the lowest risk for health, that is, they do not contain
substances with recognized allergenic, irritating, ecotoxic or carcinogenic properties or recognized as
dangerous for pregnant women. At the same time, WHO indicates an increase in the incidence of skin
diseases, including contact dermatitis and various types of dermatoses (eg, AD and psoriasis). This is
another factor increasing the demand for cosmetics safe for the skin, characterized by properties
possessed by Chitosan Hydrogel1.
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The safety of cosmetic products thus becomes an important criterion for purchasing decisions and is the
subject of interest of regulatory authorities. Almost 50% of the decisions of the European Commission
issued since the entry into force of the Cosmetics Regulation resulted in limitation or withdrawal from
use of preservatives. Replacing removed compounds with new ones is difficult due to the EU ban on the
introduction of cosmetics whose ingredients have been tested on animals. Despite the prohibitions and
restrictions, the complete elimination of all such ingredients from traditional cosmetics is difficult or even
impossible. The solution is to replace the currently used cosmetic bases with a base based on Chitosan
Hydrogel. Chitosan hydrogel has antimicrobial properties and it does not require the addition of
preservatives under appropriate conditions.
1
Mucha M., Chitozan - wszechstronny polimer ze źródeł odnawialnych.
Wydawnictwo Naukowo Techniczne, Warszawa (2010).

VALUE PROPOSAL (SOLUTION):


The Chitosan Hydrogel, consisting of only natural raw materials: chitosan, water and CO2, is a response
to the needs of the industry and consumer expectations. It is both an independent cosmetic base and an
active substance with a soothing, regenerating and protective activity. The Chitosan Hydrogel
simultaneously has the lowest possible Hazard Score = 1 ratio. It has the potential to replace current
solutions.

CHITOSAN HYDROGEL
TECHNOLOGY FEATURES:
Chitosan hydrogel is a 100% natural
the highest possible level of safety for the skin,
substance, which is also a unique
a completely natural product, active ingredient with a wide action
a product with preservative properties, (moisturizes, protects and
cosmetic base and active ingredient in one, regenerates) and an independent
cosmetic base.
less complicated raw materials policy.
INCI: Aqua, Chitosan, Carbon dioxide.

The launch of a new, 100% natural and safe cosmetics base based on patented Chitosan Hydrogel
technology will address consumer needs and create a competitive advantage. Cosmetics made on the
basis of Chitosan Hydrogel are not only safe products, free from substances adversely affecting health,
but also products that provide irritated skin the proper environment for regeneration and protection
against harmful external factors.

MARKET DESCRIPTION:
The value of the Global, European and Polish cosmetics market at the end of 2016 was EUR 352 billion,
EUR 67 billion and EUR 4 billion respectively. Poland is the sixth market in Europe, second only to the
largest European economies, including Germany, France and Great Britain. The Polish market has
reached this level thanks to constant development over the last 15 years. From among the six largest
European cosmetics markets, Poland in real terms (in constant prices) grew the fastest (5% - dynamics
according to current prices)2,3. Due to the lack of a clear definition of a natural cosmetic products,
estimating the size of this market segment is difficult. Nevertheless, the Allied Market Research report
indicates that this market is expected to grow globally around 9.8% annually in 2014-2020, with a 10%
share in the value of the entire cosmetics market in Western Europe in 2014. In turn, the Naturative
report - a leading Polish manufacturer of natural cosmetics, indicates a 5% share of natural products in
the Polish cosmetics market.
2
Raport o stanie branży kosmetycznej w Polsce 2017 Deloitte Advisory.
3
Euromonitor, 2017.

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The increase in the frequency of contact dermatitis symptoms and the number of people suffering from
various types of dermatoses (eg atopic dermatitis and psoriasis) means that every year, the European
Commission issues from a few to a dozen legal acts limiting or prohibiting the use of hazardous
ingredients in the production of cosmetics. The new regulations apply especially to preservatives, that
are compounds with the highest risk for health. At the same time, due to other regulations, the industry
can not market new substances.
The Cosmetics Industry Union estimates that adjusting the formulas to prohibitions and restrictions
consumes up to 60% of the resources of their R & D departments2. This means that there is not only
a need for new solutions on the market, but also the moment of entering the market with new,
breakthrough technology is appropriate.

The main recipients of Chitosan Hydrogel technology are leading global and domestic players on the
market of cosmetic products, including natural products. According to Euromonitor (2015), the global
cosmetics market is dominated by L'Oreal (USD 27.6 billion), followed by Uniliver (USD 22.3 billion),
Procter & Gamble (USD 18 billion), Estee Lauder (11, 3 billion USD), Colgate-Palmolive (10.7 billion
USD), Johnson & Johnson (7.1 billion USD) and Beiersdorf (6 billion USD). About 100 large and medium
sized companies and over 300 small and very small cosmetics producers operate on the Polish market.
The leaders of this market segment in terms of revenues are: Ziaja (PLN 245 million), Eveline (PLN 230
million), Dr Irena Eris Cosmetics Laboratory (PLN 180 million) and Oceanic (PLN 160 million)4.

AG medica will be a technology provider for global and We provide a unique technology that
local brands of cosmetic products, which will be enables the creation of safe and effective
market-verified in its own brand products. cosmetic products, free of substances
hazardous to skin and health.

Among the leading producers of polish natural cosmetics are the following companies: Naturativ, ECO
Cosmetics, Pollena Ewa and Sylveco. Pharmaceutical companies also have more and more importance on
the Polish market as well as global market: GlaxoSmithKline, Pfeizer, Bayer AG, Adamed, Polpharma,
TZMO and Aflofarm, whose portfolio is supplemented by the brands of professional cosmetics
addressed to consumers with skin problems.
The AG medica offer is directed directly to producers of cosmetics. Production under own brand
should ultimately be treated in terms of market verification of solutions proposed for implementation,
although it can achieve significant sales volumes.
4
Sektory Banku Zachodniego WBK, Branża Kosmetyczna, 2017.

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COMPETITIVE ENVIRONMENT:
Due to the size of the global cosmetics market
(billions of dollars a year), there are many cosmetics
and technology start-ups in the world whose goal is The basic competitive advantage of
to develop increasingly safe cosmetic products. The Chitosan Hydrogel is its unique
efforts of AG Medica competition focus on obtaining
cosmetic formulations using natural substances and multifunctionality (active ingredient
avoiding some of the components negatively with multilevel effect and cosmetic
perceived by conscious consumers (eg parabens,
PEGs, silicones). Nevertheless, the elimination of all base responsible for consistency and
such factors remains a difficult challenge for the product stability).
manufacturer of cosmetic products. Companies in
the immediate competitive environment focus on
the use of synthetic and natural substances with
antimicrobial activity. Chitosan Hydrogel has such properties and does not require the addition of
preservatives. Chitosan Hydrogel manufacturing technology has been patented (EPO). Competition may
therefore use chitosan as a substance, but it must use other gel-forming technologies that require the
use of hazardous substances (eg organic acids).

CAPITAL REQUIREMENT
AG medica is also looking for investors in order to further development of Chitozan Hydrogel
technology in cosmetic applications.
The company plans to acquire 2,5 million PLN (750 000 USD) in Q3 2018, for technology
development [1.5 million PLN] and for tests and sales development (including searching for global
partners) [1.0 million PLN ]. The company plans to obtain public financing from European Union Smart
Growth Operational Programme 2014-2020 (POIR 1.1.1 competition - FAST TRACK http://
bit.ly/2nnsaXE) [5.6 million PLN/ 1.7 million USD]. Funds obtained from the investor for R & D works
will constitute as own contribution to this project. As part of that project it will also be organized
manufacturing facility, ready for preparing test market batches of new products based on Chitosan
Hydrogel, as well as a table of compatibility of Chitosan Hydrogel with the most popular cosmetic
active ingredients.
BUSINESS MODEL
Cosmetics based on Chitosan Hydrogel have global implementation potential (breakthrough innovation).
The company currently does not have sufficient organizational and financial resources to build, promote
and provide distribution for the global brand. For this reason, the Company plans a diversified approach
to implementation, based on three revenue streams: A) Production under own brand (local market and
neighboring countries); B) Contract production; C) Licensing. The main purpose of launching products
under own brand will be to verify the formulations being developed in the real environment and to build
awareness and the need to use products based on Chitosan Hydrogel. This is necessary because the
recognition of chitosan is currently low, although its potential is comparable to, for example, collagen or
hyaluronic acid. Revenues from the sale of own products should ensure financing of the company's
operating costs. The information and experience gained through own branding will be used to acquire
customers in the contract production channel in which the service of developing and / or producing
formulations based on Chitosan Hydrogel will be offered. In the case of international companies' interest,
the Company's role will be to design the Hydrogel formulation and production technology adapted to
specific production lines, active substances or a type of chitosan. The unit amount of license fees will be
determined individually.

FORECASTS
Currently, it is difficult to determine the target share of individual sales channels in the Company's
revenues, and it should be assumed that this share will change over time. In the initial phase, the
Company will receive the majority of revenue from channels A and B. The company anticipates that
channel C will start operating from 2021, a year after the project under European Union Smart Growth
Operational Programme 2014-2020.

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REVENUE FROM SALE IN 2018-2023 [PLN million]
50,0
41,8
40,0

30,0
24,7
20,0 16,8
10,7
10,0
4,1
0,3 2,1
0,0
2018 2019 2020 2021 2022 2023 2024
Implementation period of the POIR 1.1.1.

The company cautiously estimates that it is able to achieve a share in the European market at 0.2% by
2024. The chart below presents forecasted revenues in 2018-2024.

CURRENT CONDITION OF THE PROJECT


The Chitosan Hydrogel technology was
originally developed as part of the production
of innovative dressing materials for patients
with hardly healing wounds (Gorczyca G.,
Tylingo R., Szweda P., Milewski S., Sadowska
M., Augustin E., Preparation and
characterization of genipin cross-linked
porous chitosan-collagen-gelatin scaffolds
using chitosan-CO2 solution. Carbohyd.
Poym. 102: 901–911 (2014)5. As part of the
work carried out in the laboratories of the
Gdańsk University of Technology by the
leaders of the AG medica team, the concept of
technology for the production of Chitosan
Hydrogel in laboratory conditions was
developed and the possibility of its use in
medical applications was confirmed. This
technology has been patented (patents B1
222739, B1 223280), the scope of protection
has been extended based on the EPO
procedure (EP2920240). The technology has received a number of awards in prestigious international
salons of inventions (Archimedes-Moscow, ARCA-Zagreb, IENA-Nuremberg). In 2015, work began on
implementation of Chitosan Hydrogel technology on the polish cosmetics market, AG medica was
established as a part of family company “KAEM Maria Krystyna Krupska”. As a result of intensive R & D
works, in 2016 the company introduced the first test product developed on the basis of this technology
– “Chitozan Naturalny Sun”, the first product of this type without preservatives and other thickeners or
stabilizers (composition: 95% w / w Hydrogel Chitosan , 5% w / w D-panthenol), INCI: Aqua, Chitosan,
D-panthenol, Carbon dioxide). This product has been successfully used by several thousand consumers
for the last two years for the care and regeneration of the skin after various types of irritations, especially
after sunburns and insect bites. The purpose of further work is to carry out the process of scaling the
author's method of producing cosmetic products based on Chitosan Hydrogel, so that further (more
complex) cosmetic products could be developed. For this purpose, AG medica intends to raise funds for
R & D works under European Union Smart Growth Operational Programme 2014-2020.
5
Gorczyca G., et al. Carbohyd. Polym. 102: 901–911 (2014).
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PROJECT LEADERS
The AG medica team consists of people with above-average scientific achievements and committed and
experienced managerial staff. The leader of the research staff of AG Medica and at the same time the initiator
and creator of the Chitosan Hydrogel technology has given up his scientific career to fully implement on the
market the initiated research project.

PhD. GRZEGORZ GORCZYCA KRZYSZTOF MALICKI


Co-founder of AG medica. An expert in A graduate of the faculty of electronics,
the field of biopolymers and telecommunications and computer
biomaterials. Initiator and co-creator of science (1999) and the faculty of
the Chitosan Hydrogel technology. He management and economics (2000) of
gained experience in managing the Gdańsk University of Technology.
innovative projects as well as in the In 2001, he completed a professional
implementation of research projects as finance course for managers at the
a project manager implemented under Gdańsk Foundation for Management
the FNP programs (VENTURES, IMPULS), as well as Development, and in 2003 he obtained the Project
the founder and Vice President of the innovative Management Professional certificate issued by PMI. In
start-up: Sorpla Sp. z o.o .. Initiator and co-creator of the years 2002-2017 he managed, from the level of a
inventions protected by five patents (4 UPRP, 1 USA); director or member / president of the board, many
author of 12 scientific publications. Participant of companies conducting R & D works, the most
renowned trainings in project management organized important of which are: Safe Computing, NET
by the Center for Entrepreneurial Learning Judge Technology, Ogicom, Inotel, Datera, Aiton Caldwell.
Bussiness School of Cambridge University "IGNITE" The biggest success was the establishment and launch
and "ENTERPRISERS". In the years 2015-2016 he was of the company Aiton Caldwell S.A. on the
an innovation broker as part of the MNiSW program. NewConnect, of which he is the main shareholder and
From 2016, an NCBiR expert in the assessment of chairman of the supervisory board. Has experience in
innovative projects under Sub-measure 1.1.1 of SG OP. initiating and building the value of projects and
At AG medica he is the project leader, director of d.s. preparing and conducting investment processes on the
Research and Development, combining duties related start-up market and M & A transactions. At AG medica
to the development of Chitosan Hydrogel technology he is the Development Manager, taking care to keep
with implementation activities aimed at locating the development strategy coherent and initiating and
technologies on the market. conducting negotiations with key business partners.

PhD. ROBERT TYLINGO CURRENT PARTNERS


An expert in the field of rheology and AG medica is currently conducting R&D works with
biopolymer chemistry. A specialist in Grupa Zefir, one of the largest Polish producers of
the field of rational management and toilet and hygiene articles. The aim of this work is to
use of by-products generated during develop hygienic wipes soaked with Chitosan
the processing of raw materials of Hydrogel. AG medica also provides Chitosan Hydrogel
marine origin, including collagen, technology in the company's R&D projects as part of
gelatin, non-collagen proteins, protein innovative paper for defrosting fish. In addition, AG
hydrolysates, fish oil and chitosan. Author of several medica is in talks with Nakatomi LLC, an international
scientific publications in JCR magazines and several. marketing agency based in Poland and the USA. This
Co-creator of the Chitosan Hydrogel technology. agency is interested in implementing The current AG
Author of several scientific publications in JCR journals, medica product “Chtozan naturalny Sun” on the US
monographs in the field of food chemistry and
technology, quality systems used in the food industry.
market (negotiable quantities for variants 36-100
A scientist closely cooperating with the industry. thousand pieces per year).
Author of numerous implementations and
technological studies carried out in cooperation with
an industrial partner. At AG medica he is a Research WE LOOK AFTER
and Development Specialist, responsible for the overall YOUR CONTACT
development of Chitosan Hydrogel technology, scaling
and identification of new applications. Ph.D. Grzegorz Gorczyca
Director of R&D
T: +48 668 425 868
E: g.gorczyca@chitozan.pl

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