OUR CANNABIS BUSINESS ROADMAP. November 28 th, 2017

Transcription

1 OUR CANNABIS BUSINESS ROADMAP November 28 th,

2 DISCLAIMER CAUTIONARY NOTE AND FORWARD-LOOKING STATEMENT This presentation is confidential and is being supplied to you solely for your information and may not be reproduced or distributed to any other person or published, in whole or in part, for any purpose. No reliance may be placed for any purpose whatsoever on the information contained in this presentation or the completeness or accuracy of such information. No representation or warranty, express or implied, is given by or on behalf of Neptune Technologies & Bioressources Inc. (the Company ), or its shareholders, directors, officers or employees or any other person as to the accuracy or completeness of the information or opinions contained in this presentation, and no liability is accepted for any such information or opinions. Certain statements contained in this presentation constitute forward-looking statements within the meaning of Canadian securities laws. These forward-looking statements, by their nature, require the Company to make certain assumptions and necessarily involve known and unknown risks and uncertainties that could cause actual results to differ materially from those expressed or implied in these forward-looking statements. Forward-looking statements are only management s beliefs, expectations and intentions and are not guarantees of performance. Whenever possible, words such as may, will, would, could, expect, believe, plan, anticipate, intend, estimate, continue, or the negative or comparable terminology, as well as terms usually used in the future and the conditional, have been used to identify these forward-looking statements. Forward-looking statements contained in this presentation may include discussions on financial outlooks, the Company s business or financial objectives, its strategies or future actions, including the Company s strategy and future actions in the Cannabis market, its targets, expectations for financial condition or outlook for operations and future contingent payments, the expected timing for receipt of licences from Health Canada and the expected growth and development of the Cannabis market and the potential revenues related thereto. These forward-looking statements reflect management s beliefs and are based upon certain material assumptions of future events that were applied in drawing a conclusion or making a forecast or projection, including management s perceptions of historical trends, current conditions and expected future developments, as well as other considerations that are believed to be appropriate in the circumstances. Although management considers these assumptions to be reasonable based on information currently available to it, many factors could cause the actual results, performance or achievements to be materially different from any future results, performance or achievements that may be expressed or implied by such forward-looking statements. Such factors include, among others, general business, economic, competitive, political and social uncertainties, conclusions of economic evaluations and studies, other general risks and uncertainties associated with the Cannabis market, as well as the risks and uncertainties discussed in the Company s quarterly and annual management discussion and analysis filed with the Canadian securities administrators and available under the Company s profile on SEDAR at Should one or more of these risks or uncertainties materialize, or should assumptions underlying the forward-looking statements prove incorrect, actual results, performance or achievements could vary materially from those expressed or implied by the forward-looking statements contained in this presentation. These factors should be considered carefully and readers should not place undue reliance on the forward-looking statements. The forward-looking information set forth herein reflects the Company s expectations as at the date of this presentation and is subject to change after such date. The Company disclaims any intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, other than as required by law. The forward-looking statements contained in this presentation are expressly qualified by this cautionary statement. 2

3 A BRIEF INTRODUCTION OF OUR TEAM HERE TODAY Jim Hamilton President & CEO Mario Paradis Vice President & Chief Financial Officer Michel Timperio President, Cannabis Business Eric Krudener Director of Product & Brand Development Melody Harwood Head of Scientific & Regulatory Affairs Étienne Villeneuve Head of Operations & Technical Services

4 OUR AGENDA Some perspectives on our business A view of the cannabis market The science and regulatory landscape Our business roadmap Discussion 4

5 OUR BEGINNING THE OMEGA-3 PHOSPHOLIPID PIONEERS (KRILL OIL) MT Global market building through innovation, science, R&D and extraction technology since 1998 Market Insights , GOED 5

6 AREAS OF FOCUS REFOCUSING ON LARGER MARKETS A strategic review of our business concluded that our focus should be on categories characterized by larger size and segment growth Growth Rates: +++ Cannabis** $CDN 7.8 B ++ Solutions Business* $US 1-2B - Krill Oil* $US M *2016 market size NEPT est. (Krill = global, Solutions Business category= NA) **2021 Canadian market projections, CANACCORD Genuity March 13,

7 ASSET SALE STRENGTHENS BALANCE SHEET Bulk Krill Business & IP We retained Greatly improved! ACASTI PHARMA We now have the assets and balance sheet to advance our evolutionary agenda! Sherbrooke site = sqf, GMP certified, CFIA and NNHPD licensed, automated CFIA, Canadian Food Inspection Agency; NNHPD, Natural and Non-prescription Health Products Directorate 7

8 OUR EVOLUTION IS CONSISTENT WITH OUR MISSION STRATEGY, AND WILL NOW INCLUDE LEGAL CANNABIS Our Mission: Leverage our scientific and innovative expertise to create and provide our customers globally with the best nutritional and wellness products solutions. LEGAL CANNABIS Specialty Ingredients Solutions Business Consumer Brands 8

9 OUR EVOLUTION WILL LEVER OUR EXISTING GMP CERTIFIED FACILITY AND EXTRACTION EXPERTISE Announced* : $5M investment in site for cannabis licence and production *Press release issued on November 14,

10 OUR EVOLUTION WILL LEVER OUR EXISTING CORE COMPETENCES Announced* : Global MaxSimil licence extended to include cannabis *Press release issued on November 27,

11 small intestine WHAT IS? MaxSimil technology mimics the biological digestive process and predigests fish oils to deliver absorption-ready monoglyceriderich omega-3 fish oils. Large Triglyceride droplet Fish Oil Bile Salts Lipase Enzyme Patented Technology Monoglyceride-rich Omega-3 Fish Oil 11

12 EPA+DHA (%) MAXSIMIL OFFERS SUPERIOR ABSORPTION MaxSimil fish oil is clinically demonstrated* with statistically significant results to be more than 3 times better absorbed than regular fish oils** 3 MaxSimil EPA+DHA EE EPA+DHA 2,5 2 1,5 1 3X 0, TIME (HRS) *Unpublished double-blind crossover pharmacokinetic clinical study comparing absorption of EPA+DHA in blood plasma between a regular ethyl ester (EE) fish oil and MaxSimil enhanced fish oil. **These statements have not been evaluated by the Food and Drug Administration. This product is not intended to diagnose, treat, cure, or prevent any disease. 12

13 small intestine MAXSIMIL FOR CANNABINOIDS MaxSimil technology could improve the pharmacokinetics of poorly absorbed lipid-soluble active ingredients such as cannabinoids + Cannabinoids 13

14 CANNABIS EXTRACTION - AN IDEAL FIT FOR NEPTUNE Why enter cannabis specialty extractions business? It s an adjacent space for Neptune as it fits with our mission, strategy, and competencies Wellness mission Oil extraction engineering GMP certified facility Forms and delivery systems Regulatory affairs Quality control Clinical research Global distribution 14

15 OUR AGENDA Some perspectives on our business A view of the cannabis market The science and regulatory landscape Our business roadmap Discussion 15

16 THE CANNABIS MARKET IN CANADA IS PROJECTED TO GROW 10X OVER 5 YEARS Cannabis consumed in Canada Thousands of kg of cannabis (projection) 700 Estimated $7.8 billion retail market in Adult use Medical Source: Canaccord Genuity, March 13, 2017 Excludes global opportunities 16

17 CONSUMER RESEARCH SUGGESTS NUMEROUS REASONS FOR CONSUMPTION OF CANNABIS Medical Need Wellness Social / Relaxation Psychoactive Primary Focus for Neptune Reason Percent Relieve pain 14% Treat or manage 3% health problems Avoid prescription 2% medications Reason Percent Sleep better 11% Manage anxiety 8% Manage stress 4% Improve quality life 4% Enhance creativity 3% Energize myself 1% Reason Percent Relax/mellow 19% Have fun 8% Be happy 6% Feel peaceful 3% Reason Percent Get high or stoned 5% Source: BDS Analytics survey of Colorado consumers 9% of remaining responses are below 2% 17

18 MANY BRANDS FOCUS ON THE WELLNESS MARKET Products aimed at helping consumers with sleep, anxiety, stress, pain, inflammation, and similar indications 18

19 STUDIES IN DEVELOPED MARKETS SUGGEST APPROXIMATELY HALF THE MARKET IS CONSUMED IN DIFFERENTIATED, EXTRACTED FORMS 50% Flower and Rosin Smoked Edibles Vape pens Gel capsules 50% Topicals Source: BDS Analytics Extract Cannabinoids can be extracted from the plant and then used in a wide range of consumer products Beverages 19

20 OUR AGENDA Some perspectives on our business A view of the cannabis market The science and regulatory landscape Our business roadmap Discussion 20

21 THE SCIENCE OF THE CANNABIS PLANT Active Compounds in Cannabis Cannabinoids More than 85 cannabinoids have been identified in the cannabis plant, with the highest concentration in the buds Two most abundant cannabinoids: Tetrahydrocannabinol (THC)* Strong psychotropic effect Cannabidiol (CBD)* Non-psychoactive The percentage of each cannabinoid varies significantly across strains and depends also on cultivation variables Terpenes Cannabis contains up to 120 terpenes, which give cannabis its distinctive aroma and flavor, and may provide health benefits *Present in the plant in carboxylic acid form; THC must be decarboxylated in order to have psychotropic activity. 21 Source: Andre et al., Cannabis sativa: The Plant of the Thousand and One Molecules. Front Plant Sci. 7:19.

22 CANNABIS AND THE ENDOCANNABINOID SYSTEM Source: Sanatio Strauss, The Healing Power of Cannabis. Available at: 22

23 SMOKABLES VS. INGESTIBLES The delivery form influences the onset and duration of effect cannabis will have Panaxia Pharmaceutical Industries, THC will enter the bloodstream quickly and reach a higher concentration in the bloodstream when smoked vs. consumed Grotenhermen, Clinical Pharmacokinetics of Cannabinoids. Journal of Cannabis Therapeutics Vol. 3(1):3-51. The onset of effects is quicker and higher when cannabis is smoked, but the effects are of longer duration when cannabis is consumed Oral delivery forms of cannabis provide an easier control of dosage and a sustained biological effect Photo: Leafly, 2017,

24 GLOBAL REGULATORY STATUS OF CANNABIS Medical and Adult-Use Medical Only State-by-state Governance Illegal or Not identified Assuming the adoption and entry into force on July 1, 2018 of proposed Canadian federal Bill C-45 An Act respecting cannabis and to amend the Controlled Drugs and Substances Act, the Criminal Code and other Acts. 24

25 STATUS OF CANNABIS IN THE UNITED STATES Source: Arcview Market Research/BDS Analytics, The State of Legal Marijuana Markets, 5th Edition. 25

26 AN OVERVIEW OF LICENCE APPLICATIONS IN CANADA Total Applications: 1665* Issued Licences: 76** Applications refused, returned, withdrawn 71% Licences in progress or issued 29% LPs with Licences for 'Cultivation and/or Sale of plants/drie d cannabis' only 59% LPs also with Licences for Production and/or Sale of fresh product/oil' 41% *As of May 25, 2016 **As of November 24, 2017 Source : Health Canada website: 26

27 THE LICENSING PROCESS IN CANADA Intake and Initial Screening Application form, business plan, Security Clearance Applications, and record-keeping methods for security, production, inventory, and destruction methods Detailed Review and Initiation of Security Clearance Process Application is reviewed to : 1. Ensure that it meets the requirements of the ACMPR 2. Establish unlikelihood to create risks to public health, safety or security 3. Establish that there are no other grounds for refusing the application. Issuance of Licence to Produce Issued once: 1. Application meets all regulatory requirements 2. Security clearance is passed 3. There is a functional building at the site Inspection and Sales Licence LP notifies Health Canada as activities begin; once notified, HC will schedule an inspection to verify that the LP meets the requirements of the ACMPR, including, but not limited to, Good Production Practices, packaging, labelling, shipping, and record keeping prior to allowing the sale or provision of product. STRATEGY / GOAL Potential timeline for Neptune Completed May 2017 Jan 2018 J/A 2018 Q3/Q Build extraction facility infrastructure and provide Health Canada with visual evidence of the site completion before an official licence is granted. 27

28 HEMP OPPORTUNITY Industry growth: The global CBD oil market is forecasted to grow at a CAGR of 39% during the period Science: Same clinical benefits as marijuana-derived CBD oil, but without THC Transferable capabilities: Process developed at Sherbrooke facility could be used for hemp or marijuana extracts Hemp oil, including CBD-rich oil, provides an interesting opportunity to further utilize the extraction process to be implemented at the Sherbrooke facility Supply: Raw material cost for hemp is much lower than for marijuana Barriers to entry: New proposed regulatory framework indicates that CBD-rich products from hemp will fall under the licensing requirements for adult-use marijuana Same Value-added services: Oil extraction provides the entry point and opportunity to also provide formulation, bottling, labeling, and/or branding Natures Pure CBD Oil Distribution, Available at: 28

29 OUR AGENDA Some perspectives on our business A view of the cannabis market The science and regulatory landscape Our business roadmap Discussion 29

30 OUR CANNABIS BUSINESS FOCUS WILL BE LINKED TO OUR STRATEGY OF SPECIALTY INGREDIENTS, SOLUTIONS AND BRANDS Cultivator Processing/ Specialty Ingredients Delivery Forms Solutions Brands Retail Consumers Molson Tyson Foods Cargill 30

31 OUR COMMERCIAL FOCUS IN CANADA WILL BE B2G, B2B AND B2C 23% of Canada s population is located in the province of Quebec 3% Sources: Health Canada Website, November 24, 2017; Statistics Canada, Sept

32 OUR MANUFACTURING VISION Step 1 Site Security licence compliance Co 2 extraction Step 2 Solvent extraction Global cannabis scope Delivery forms manufacturing Hemp extraction Vision : Become world s center of excellence for cannabinoids extracts and delivery forms 32

33 FINANCIAL POSITION PROFORMA, NUTRACEUTICAL SEGMENT (in millions of CAD $) Sept. 30, 2017 Cash and short-term investments 31.8 Total debt, interest rate of 5% 4.9 Net cash and short-term investments 26.9 Evolution of Cash Position Until Year-End (Projections) In millions of CAD $ Cash as of 09/30/ CAPEX related to Cannabis business 5.0 Investments to support Cannabis business Debt capital repayment 0.7 Projected cash as of 03/31/

34 MARKET VALIDATIONS SOME PERSPECTIVES Canadian Marijuana Stocks 11/21/2017 Symbol Market Cap (CAD $M) Canopy Growth Corp WEED 3,480 Aurora Cannabis Inc ACB 2,204 MedRelead Corp LEAF 1,475 Aphria Inc APH 1,343 CanniMed Therapeutics Inc CMED 438 Organigram Holdings Inc OGI 365 Supreme Pharmacauticals Inc FIRE 321 Emerald Health Therapeutics Inc EMH 219 Delta 9 Cannabis Inc NINE 214 Hydropothecary Corp/The THCX 203 Neptune Sum-of-the-part CAD $M Net Cash, Sept 30, 2017 Building + equipment Sept 30, 2017 (net book value) Biodroga Nutraceuticals (acquisition cost) Acasti Pharma (Fair market value as of November 21, 2017) Total 96.8 Neptune Market Capitalization as of Nov 21, 2017 : $120 M 34

35 Penetration rate Penetration rate ILLUSTRATIVE CANADIAN CANNABIS OIL MARKET OPPORTUNITY SIZING THE OPPORTUNITY (IN CANADIAN DOLLARS) Revenues 1 Selling price of $1,500/kg % 82,500, ,000, ,000,000 10% 165,000, ,000, ,000,000 15% 246,000, ,000, ,000,000 Gross Profit 2 Selling price of $1,500/kg % 41,060,000 50,480,000 56,600,000 10% 82,120, ,960, ,200,000 15% 121,680, ,440, ,800,000 Selling price of $1,850/kg % 101,750, ,800, ,600,000 10% 203,500, ,600, ,200,000 15% 303,400, ,400, ,800,000 Selling price of $2,200/kg % 121,000, ,776, ,200,000 10% 242,000, ,200, ,400,000 15% 360,800, ,800, ,600,000 Selling price of $1,850/kg % 60,310,000 74,280,000 83,200,000 10% 120,620, ,560, ,400,000 15% 179,080, ,840, ,600,000 Selling price of $2,200/kg % 79,560,000 98,256, ,800,000 10% 159,120, ,160, ,600,000 15% 236,480, ,240, ,400,000 Management assumptions based on available market data We assumed that 50% of total canadian market (slide 16) to be oil derived products 7gr of dried flower to produce 1gr of extract 17% of cannabinoid content in the dried flower 80% of cannabinoid content in the concentrated extract Standardized oil wholesale price from $1,500/kg to $2,200/kg Dried flower cost of $4/gr The above illustrative market potential scenarios do not constitute forecast or guidance on Neptune s revenue or profit for the relevant years, and the assumptions used are subject to variation over time. Any generation of revenue by Neptune in the cannabis oil market is dependent, amongst other things, on Neptune obtaining the required licence from Health Canada (see slide 28) and starting production at its Sherbrooke plant. There is no certainty that revenues or profit will be generated to the levels shown in the above illustrative market potential, or at all. Please see the forward-looking statement disclaimer on slide 2. 1: Assuming the indicated penetration rate of the total cannabis oil market evaluated by Canaccord study for the relevant year 2: Gross profits correspond the revenues minus costs of raw material using the assumptions below, and do not reflect Neptune-specific operating costs and are an illustration of market potential and not Neptune-specific figures. 35

36 SUMMARY Refocused on larger, faster growing markets Cannabis extraction an ideal fit with core competencies MaxSimil enhances differentiation Expectation to get the Licence to Produce from HC by J/A-2018 Visible path to greatly improved profitability Strengthened balance sheet to fund growth initiatives 36

37 APPENDIX 37

38 MEDICAL CANNABIS USED FOR MANY COMMON AILMENTS Chronic pain, inflammation, cancer, spasms, nausea, glaucoma, sleep and anxiety related conditions are the most common uses of medical cannabis Sources: Ackrell Capital, U.S. Cannabis Investment Report 2016; Sanatio Strauss, The Chemistry of a Cannabis High: How THC s Psychoactive Properties Protect the Brain. Available at 38

39 THANK YOU neptunecorp.com TSX - NASDAQ : NEPT 39