AGM Chairmans Address 31.6.19

CHAIRMAN'S ADDRESS The last 12 months has been one of the most testing periods in this company's recent history. The Medsafe Alert of February 2018 had a catastrophic impact on sales of Arthrem in New Zealand. The Alert was issued just after the company launched Arthrem in Australia and blunted the impact of extensive television advertising in New South Wales. There was also a significant impact on the launch and up take of Artevite which occurred at the same time. As noted in the Annual Report, sales in New Zealand plummeted with total sales being 69% lower for the full year compared to the previous year. The directors noted in the half year report that plans to launch two new products in mid-2018 have been shelved until conditions improved. No such improvement has been noted. Medsafe Prosecution The servicing of a notice of prosecution of the company by the Ministry of Health In February this year for nine alleged breaches of the Medicines Act 1981 was not expected by the company. Two of the charges related to selling an unlicensed medicine, being Arthrem, and seven for breaches of advertising restrictions. As noted in the Annual Report all of the company's marketing material, including point of sale material and bottle labels, was submitted to the Therapeutic Goods Advertising Pre-Vetting Service (TAPS) for approval prior to publication or printing. The use of TAPS is not a free service. The company must pay for each and every item submitted for review and, once approved, each item displays the TAPS approval number. The use of TAPS is recommended by Medsafe for any party seeking to sell or promote a therapeutic good or dietary supplement. Since the notice of prosecution the company has submitted additional material to TAPS for review and TAPS has refused to accept the work. In view of the prosecution and the implications of being found guilty of selling an unlicensed medicine, the directors have decided to keep selling Arthrem in New Zealand but to refrain from any promotional expenditure. If the company is found to have been selling an unlicensed medicine then it is highly likely that the company cannot continue to sell Arthrem. The prosecution has meant a rethink of activities in Australia and, despite Arthrem being available in almost 1,000 pharmacies, the view is that there is considerable risk to the product and the brand. The directors have decided to continue selling Arthrem but terminate existing distribution arrangements in order to reduce costs. Any consideration of new products and new markets has been deferred until the prosecution has been resolved. An initial court hearing has been set down for 20 June this year. The company intends to defend the charges and it is likely that a full trial will occur some months later. Hopefully the matter can be resolved by year end. The directors wish to acknowledge the support of shareholders participating in the cash issue held in December 2018. In particular our thanks go to the Brankin Trust, being the interests associated with Mr Tom Brankin, a director of the company. The Brankin Trust is now the largest shareholder in the company. I wish to thank my co-directors for their considerable personal commitment to the company during the year and to our management team for their continued commitment through a very tough time. Stephen Underwood End. End CA:00335341 For:PIL Type:GENERAL Time:2019-05-31 09:33:32