United Guardian : FY-2025 Annual Report to Stockholders

Letter to Stockholders

Dear Stockholder:

As I reflect on 2025, our performance was filled with both positive outcomes and unpredictable challenges including global tariffs and geopolitical tensions. While our financial performance resulted in a decrease in sales for the year, due primarily to a decrease in sales of our cosmetic ingredients, sales of our pharmaceutical products actually increased by 15%, and sales of our medical lubricants increased by 4%. The net result was a 13% decrease in sales, from $12,181,971 in 2024 to $10,545,468 in 2025, generating net income of $3,250,875 ($0.71 per share) in 2024 compared with $2,105,738 ($0.46 per share) in 2025.

The growth in our pharmaceutical sales was driven by higher sales volumes across all three national drug wholesalers, together with lower Medicare rebates. Renacidin®, our most important pharmaceutical product, was the primary driver of the increase. In addition to the growth in Renacidin sales we also negotiated a settlement with our contract manufacturer for Renacidin related to a facility shutdown that began at the end of 2023 and extended through the first quarter of 2024. This settlement will enable us to recover lost profits associated with orders that could not be fulfilled during the shutdown. The benefit of the settlement is expected to be recognized in the first quarter of 2026.

During 2025 we invested considerable time and resources in advancing our objective of expanding domestic Renacidin sales. We previously identified that awareness of the product and the ability of patients to have it covered by insurance were the two most significant barriers to growth. Our marketing efforts so far have focused on reaching out to pharmacy benefit managers ("PBM") to have the product included on their drug formularies. To date, this outreach has resulted in formulary approval with two major PBMs, which is expected to significantly expand patient access. These initiatives will continue, and we will also be implementing new initiatives to expand awareness of Renacidin by increasing engagement with healthcare professionals. We have begun evaluating options to support this objective. Consistent with our longer-term growth plan, we also hope to expand Renacidin beyond the United States, and will take steps this year to determine the initial target markets and resources required for our first entry into international markets.

The increase in medical lubricant sales was driven primarily by higher demand from two of our large contract manufacturing customers in China. In addition, we executed a marketing agreement with Azelis UK Ltd, a subsidiary of the global Azelis Group, for our medical lubricant products in the United Kingdom and Ireland. Over the past year we have worked with Azelis to position the Lubrajel® line for the medical market by developing a go-to-market strategy, training their technical team, and completing product readiness activities. Looking ahead, we intend to invest additional marketing resources to further assess the medical market and identify opportunities to expand our presence.

Sales of our cosmetic ingredients declined in 2025 as a result of several factors. The primary driver was excess inventory held by our largest distributor, Ashland Specialty Ingredients ("ASI"), which led to reduced order quantities from ASI throughout the year. Sales were further impacted by lower global demand, particularly in China, where increased competition from local Asian producers and the effects of global tariffs also contributed to the decrease. We are working very closely with ASI to better understand the drivers affecting customer demand in order to minimize the disruptions caused by fluctuations in inventory buildup. Some additional initiatives to regain market share include offering competitive pricing where necessary to maintain existing customers; targeting markets that are less price sensitive; providing clearer product differentiation on our existing products while continuing to develop new and improved products to further create product differentiation and meet emerging customer requirements; and realigning our global distributor network to take advantage of market opportunities for growth outside of China.

Personal care remains a key area of focus with the goal of expanding our market share. In 2025, we entered into a distribution agreement with Azelis Group NV that added South Korea to their territory coverage. South Korea is among the leading global exporters of personal care products, with particular strength in skincare and cosmetics innovation. Azelis has begun to expand the Lubrajel position in South Korea, evidenced by new wins and projects currently in progress. We also entered into a distribution agreement with Brenntag Specialties ("Brenntag") in France for the promotion and distribution of Lubrajel and Natrajel® grades. France is a leading global exporter of beauty, cosmetics, and skincare products and is recognized for premium, high-quality applications, and a longstanding reputation for excellence. In addition, we are nearing completion of our updated marketing agreement with ASI. Substantially all key commercial terms have been negotiated, and we are in the final stages of reviewing the completed agreement. Although finalizing this agreement has taken longer than anticipated, we believe that ongoing communication has strengthened our relationship with ASI and has positioned us to expand our mutual business. We expect the agreement to be executed in the first half of 2026.

The sexual wellness market continues to present attractive growth potential, with an increasing number of companies seeking to develop products for this segment. According to industry analysts, the market for sexual wellness products is expected to increase by 8%-12% annually over the next 5 years, with personal care lubricants expected to exhibit the most rapid growth. One of the principal challenges is navigating the evolving regulatory landscape applicable to these applications, which can extend development timelines and delay commercialization. We continue to support our distributor, Brenntag, by providing additional resources and training materials to assist customers. Brenntag is actively promoting the Natrajel line through webinars, customer seminars, and trade events. With multiple projects in various stages of development, we are encouraged and ready to begin manufacturing this product line.

Our research and marketing teams continue to advance new ingredient development, while expanding the reach of our existing product portfolio. Our research team is finalizing two products that are expected to launch later this year and early next year, including a skincare ingredient designed to provide extended hydration benefits and a hair care ingredient that aligns with growing demand for natural products. The research and development team is also making progress on additional personal care products that are in the preliminary stages of development. On the marketing front, we have developed a comprehensive program that includes training presentations, sales kits, and an updated brochure expected to be finalized shortly. In collaboration with our distribution partners, our marketing team continues to participate in webinars, customer seminars, and customer visits to enhance brand recognition and promote newer natural grades within our portfolio. We also intend to invest additional marketing resources to develop a similar program for our medical lubricants, which we view as a market with meaningful long-term growth potential.

Over the past several years we have put in place a growth plan that we are confident will result in increased sales in the coming years, and we remain committed to implementing that marketing strategy. Throughout the year we renegotiated our distribution agreement with ASI, entered into exciting new agreements with Azelis and Brenntag, significantly improved Renacidin's position on drug formularies, and began expanding the presence of our medical lubricants in the marketplace. We believe that the progress we have made to date in implementing this growth plan reflects our continued commitment to growing our sales, and we look forward to further advancing these growth initiatives in 2026.

Sincerely,

UNITED-GUARDIAN, INC.

Donna Vigilante President