Investor Presentation LD Micro Conference - December 6, 2018 NASDAQ and TSX: NEPT Headquartered in Laval, Quebec, Canada - Neptune Wellness ...
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Investor Presentation LD Micro Conference December 6, 2018 NASDAQ and TSX: NEPT Headquartered in Laval, Quebec, Canada
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 Wellness Solutions
Inc. (the “Corporation” or “Neptune”), 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.
Statements in this presentation that are not statements of historical or current fact constitute ‟forward-looking statements” within the meaning of the U.S.
securities laws and Canadian securities laws. Such forward-looking statements involve known and unknown risks, uncertainties, and other unknown factors
that could cause the actual results of Neptune to be materially different from historical results or from any future results expressed or implied by such
forward-looking statements. In addition to statements which explicitly describe such risks and uncertainties, readers are urged to consider statements
labeled with the terms "believes," "belief," "expects," "intends," "anticipates," "will," "should," or "plans" to be uncertain and forward-looking. Readers are
cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of this presentation. Forward-looking
information in this presentation includes, but is not limited to, information or statements about our ability to successfully develop, produce, supply, promote
or generate any revenue from the sale of any cannabis-based products in the legal cannabis market.
The forward-looking statements contained in this presentation are expressly qualified in their entirety by this cautionary statement and the ‟Cautionary Note
Regarding Forward-Looking Information” section contained in Neptune’s latest Annual Information Form (the ‟AIF”), which also forms part of Neptune’s
latest annual report on Form 40-F, and which is available on SEDAR at www.sedar.com, on EDGAR at www.sec.gov/edgar.shtml and on the Investors section
of Neptune’s website at www.neptunecorp.com. All forward-looking statements in this presentation are made as of the date of this presentation. Neptune
does not undertake to update any such forward-looking statements whether as a result of new information, future events or otherwise, except as required by
law. The forward-looking statements contained herein are also subject generally to other risks and uncertainties that are described from time to time in
Neptune public securities filings with the Securities and Exchange Commission and the Canadian securities commissions. Additional information about these
assumptions and risks and uncertainties is contained in the AIF under ‟Risk Factors”.
2
Disclaimer
CAUTION REGARDING NON-IFRS FINANCIAL MEASURES
The Corporation uses two adjusted financial measures, Adjusted Segment Earnings Before Interest, Taxes, Depreciation and Amortization (EBITDA) called non-IFRS
operating segment loss when a segment is in a loss position, and Adjusted Earnings Before Interest, Taxes, Depreciation and Amortization (EBITDA) called non-IFRS
operating loss when the Corporation is in a loss position, to assess its operating performance. These non-IFRS financial measures are directly derived from the
Corporation’s financial statements and are presented in a consistent manner. The Corporation uses these measures for the purposes of evaluating its historical and
prospective financial performance, as well as its performance relative to competitors. These measures also help the Corporation to plan and forecast for future
periods as well as to make operational and strategic decisions. The Corporation believes that providing this information to investors, in addition to IFRS measures,
allows them to see the Corporation’s results through the eyes of management, and to better understand its historical and future financial performance.
Securities regulations require that companies caution readers that earnings and other measures adjusted to a basis other than IFRS do not have standardized
meanings and are unlikely to be comparable to similar measures used by other companies. Accordingly, they should not be considered in isolation. The Corporation
uses Adjusted Segment EBITDA (or non-IFRS operating segment loss when in a loss position) and Adjusted EBITDA (or non-IFRS operating loss when in a loss position)
to measure its performance from one period to the next without the variation caused by certain adjustments that could potentially distort the analysis of trends in
our operating performance, and because the Corporation believes it provides meaningful information on the Corporation’s financial condition and operating results.
Neptune’s method for calculating Adjusted Segment EBITDA (or non-IFRS operating segment loss) and Adjusted EBITDA (or non-IFRS operating loss) may differ from
that used by other corporations.
Neptune obtains its Adjusted Segment EBITDA (or non-IFRS operating segment loss) measurement by adding depreciation and amortization and stock-based
compensation to segment income (loss) from operating activities before corporate expenses. Neptune obtains its Adjusted EBITDA (or non-IFRS operating loss)
measurement by adding to net income (loss), net finance costs, depreciation and amortization and by subtracting income tax recovery. Other items such as stock-
based compensation and legal fees related to royalty settlements that do not impact core operating performance of the Corporation are excluded from the
calculation as they may vary significantly from one period to another. Excluding these items does not imply they are non-recurring.
3
Investment highlights
Established nutritional products supplier entering legal
cannabis oil market
• Leverages core competencies in science, extraction, formulation,
regulation and global commercialization
• State-of-the-art cannabis oil extraction and lab facility
• Ongoing profitable nutritional business
Multi-billion cannabis oil market in early high growth stage
• Multiple medical, health and wellness applications developing
• Expanding global demand for extraction and formulation
• Competition fragmented, significant barriers to entry
Executing on 3 elements towards business readiness:
site infrastructure, commercial agreements and regulatory
• Phase I complete; Phase II underway
• Initial commercial agreements in place
• Expect to be operational once licenced issued
Near- and longer-term growth strategies in place
• Near-term: B2B products
• Long-term: B2B, B2C, differentiated science-based wellness products
• Year 1 volumes expected to cover Cannabis Business operation costs
and generate positive EBITDA for the cannabis business
Cash position to execute growth initiatives
4
VISION STRATEGY OPPORTUNITY
Provide great products Leverage our scientific and innovative Focused on markets,
and solutions that deliver optimal expertise to create and provide our characterized by large size
health and wellness. global customers with the best wellness and growth.
products and solutions.
Canadian North America
Legal Cannabis* Nutrition Solutions **
$1.8B
CAD
$1.6B
CAD
$6.0B
CAD
Medical Recreational
* 2021 Canadian market projections , CANACCORD, March 2017
** 2016 market size for North America – NEPT estimates 5
CANNABIS
BUSINESS
6
Objective: to be the
world's leader in
extraction, purification
and formulation of
value-added and
differentiated cannabis
products
7
Cannabis is consumed for many reasons …
Neptune‘s Target Applications
MEDICAL NEED WELLNESS RELAXATION PSYCHOACTIVE
Relieve pain Sleep better Relax Have fun
Treat health problems Manage anxiety/stress Feel peaceful
Manage health problems Improve quality of life
Avoid prescription meds
8
Canadian legal cannabis consumption in medical and
wellness expected to soar …
MT
700
600 575
515
500
415 Adult Use
400
300 285
Medical
200
100 60
0
2017 2018 2019 2020 2021
~$8B estimated by 2021*
9
*Source: Canaccord Genuity, March 13, 2017 , Excludes global opportunities
Global opportunity will be primarily in medical & wellness products
Medical and Medical Medical CBD Partial Proposed Wellness CBD No Current
Recreational* Cannabis* Oil only Framework Medical Products Framework
* Medical and recreational products include Medical CBD Oil
10NEPTUNE’S POSITION WITHIN THE VALUE CHAIN
Raw
Neptune Distribution
Materials
Extraction and B2B*
Purification Branded Ingredients
and Formulated
Hemp / Products
Marijuana
Customers/Retail/Consumers
Formulated B2C
Delivery Forms Neptune Branded
consumer products
*Current focus 11Current Focus Within Cannabis Value Chain Leverages Core
Competencies within the Largest Segment - Extracts
Gel capsules
40%* 60%* Beverages
Topicals
EXTRACT
Cannabinoids can
be extracted from the plant and Vape pens
then used in a wide range of
health and wellness products
FLOWER
Smoked
Edibles
*BDS –US Market data (California) June 29th, 2018 12Smooth Execution of a 3-Phase Plan
to Expand Processing Capacity as Global Markets Develop
Phase I II III
$5M $5M
Investment Site security & compliance Purification & isolation As global
CO2 Solvent business requires
Availability Now Completed March 2019
13Our Phase 1 Investment Was Completed August 2018!
Phase II investment is now underway!
14Licensing Process Moving in Parallel with
Commercial and Manufacturing Initiatives
Intake and Initial Detailed Review and Issuance of Licence Inspection and issuance
Screening Initiation of Security to Process (B2B) of Commercial Sales
Clearance Process Licence
Application is reviewed to: Issued once:
Application form Licensed Processor (LP) notifies
Meet the requirements of Security clearance is passed
Business plan Health Canada (HC) as activities
the CR* Functional building onsite begin
Security clearance
applications Assess risks to public health, Application meets all regulatory HC will schedule an inspection to
safety and security requirements and confirmation verify that the LP meets the
Record-keeping methods of readiness received from
Establish that there are no requirements of the CR for
grounds for refusing the Health Canada commercial sales licence
application Submission of evidence package
License to process issued
NEPTUNE GOAL
May 2017 January 2018 Q3/Q4 2018 Q1/Q2 2019
*CR: Cannabis Regulations
15Bringing Decades of Wellness and Nutrition Product
Experience to the Cannabis Industry
Oil extraction GMP certified Forms and Regulatory
engineering/expertise facility delivery system affairs
Quality Clinical Global Experienced
control research distribution management team
Leveraging Core Competencies
16Neptune Continues to Lever its Competencies Towards Differentiation
Ongoing
Patent Pharmacokinetic Studies Research Agreement
Two applications have been 2 proprietary formulations to Co-development agreement
filed with the United States improve CBD and THC absorption with Tetra Bio-Pharma Inc. for
Patent and Trademark Office purified cannabinoid oil-
(USPTO) for patents related based formulations targeting
1. Phospholipid rich omega-3
to potentially highly effective pain and inflammation for the
from krill
extraction of cannabis natural health products and
material 2. MaxSimil® : patented omega-3 pet veterinary markets
fatty acid delivery
17Strategic overview: A Multi-Phase Path to Growth
Near Term Longer-Term
Immediate Global Expansion
Commercialization
B2B B2C
B2B • Extraction, purification and formulation of value added
differentiated product forms
• Extraction, purification and formulation
of value added differentiated forms • Capsules, beverages, edibles, tinctures
• Capsules, tinctures • Branded ingredients
• Branded ingredients • Launch Neptune differentiated science-based wellness
products in Canada & the World
• M&A , Licensing
18Clear Demand for Extraction and Formulations Capabilities
MULTI-YEAR SUPPLY AGREEMENT
CANOPY GROWTH
• Provide Canopy Growth with extraction capacity
• Non-exclusive agreement
• Minimum annual commitments
• Ready to begin production upon licensing
19Expanding Processing Capacity to Supply Growing Demand
Estimated site capacity utilization in 12 months period
from initial commercialization (MT Cannabis)
Booked and projected opportunities to date
resulting in solid initial volume expectations
Year 1 volumes expected to cover Cannabis
Business operation costs and be EBITDA
positive
Pursuing additional commercial agreements
20
20NUTRITION
BUSINESS
21Providing Value Added Differentiated
Nutrition Products and Services Based Upon Science
A Pathway to Sell
Turnkey Nutrition Specialty
Specialty Ingredients
Solutions Ingredients
A Pathway to Sell
Turnkey Solutions
Our progress and investment in people,
processes and products continue -
including via research
22A value added differentiated omega-3 where
our investment in supporting science continues …
Pre-Clinical / Targeted
Studies Clinical Phase Commercial
Case Study Completion Date
Absorption
(PK Comparative Study)
Human PK Completed
Absorption
(Population w/ Digestive Conditions)
Cystic Fibrosis Clinical Study Completed
Bioavailability Human Clinical 2019 Q2
(Omega-3 Index Studies) Studies Ongoing
Liposoluble Delivery System Human Clinical 2019 Q2
(K2, CoQ10, Curcumin, CBD, etc.) Study Ongoing
Cardiovascular Health (Inflammation Pre-Clinical Studies Completed, 2019 Q3
and Cholesterol) Human Clinical Study Ongoing
Healthy Aging Human clinical 2019 Q3
(Mitochondrial and Athletes Performance) study planning
Pre-clinical Completed, 2019 Q2
Microbiome Human Clinical Study Ongoing
23ECSentials Concepts
Nutrition Formulation Concepts
Wellness DS Blend Pure Terpene Blend Essential Oils + Terpene
Formulas
A path for product entry for consumer products marketers…
24Functional Drink &
Supplement Options
Great Features
Very low carb (Investment highlights
Established nutritional products supplier entering legal
cannabis oil market
• Leverages core competencies in science, extraction, formulation,
regulation and global commercialization
• State-of-the-art cannabis oil extraction and lab facility
• Ongoing profitable nutritional business
Multi-billion cannabis oil market in early high growth stage
• Multiple medical, health and wellness applications developing
• Expanding global demand for extraction and formulation
• Competition fragmented, significant barriers to entry
Executing on 3 elements towards business readiness:
site infrastructure, commercial agreements and regulatory
• Phase I complete; Phase II underway
• Initial commercial agreements in place
• Expect to be operational once licenced issued
Near- and longer-term growth strategies in place
• Near-term: B2B products
• Long-term: B2B, B2C, differentiated science-based wellness products
• Year 1 volumes expected to cover Cannabis Business operation costs
and generate positive EBITDA for the cannabis business
Cash position to execute growth initiatives
26Thank You
www.neptunecorp.com
NASDAQ/TSX: NEPT
27APPENDIX
28Consolidated Financial Position + Shareholders Equity
September 30,
(in thousands of CAD $) March 31, 2018
2018
Cash, cash equivalents and restricted
20,463 26,697
short-term investments Consolidated Financial
Total debt Position
4,039 + Shareholders
4,661
Net cash, cash equivalents and restricted
Equity
16,424 22,036
short-term investments
Total Shareholders Equity 84,698 86,534
YTD investment in Cannabis Business including
capital expenditures = $6.8m
29YTD-2019 Consolidated Financial Results (6 months)
YTD-2019 (a)
Nutraceutical Cannabis Corporate Consolidated
(in thousands of CAD $) $ $ $ $ % of sales
Revenues from sales 11,482 - - 11,482
Gross margin on sales 3,093 - - 3,093 27%
Royalties revenues 758 - - 758
Total gross margin as per FS 3,851 - - 3,851
R&D expenses net of tax credits and grants (186) (3,179) - (3,365) 29%
SG&A (Nutraceutical and Cannabis) (2,183) (976) - (3,159) 28%
Corporate G&A expenses - - (4,183) (4,183) 36%
Adjusted EBITDA (non-IFRS operating loss) 2,100 (2,620) (2,964) (3,484) -30%
Income taxes - - (92) (92)
Net income (loss) 1,482 (4,155) (7,150) -62%
YTD-2018 (b)
Nutraceutical Corporate Consolidated
(in thousands of CAD $) $ $ $ % of sales
Revenues from sales 12,846 - 12,846
Gross margin on sales 4,090 - 4,090 32%
Royalties revenues 480 - 480
Total gross margin as per FS 4,570 - 4,570
R&D expenses net of tax credits and grants (737) - (737) 6%
SG&A (Nutraceutical) (2,837) - (2,837) 22%
Corporate G&A expenses - (2,960) (2,960) 23%
Adjusted EBITDA (non-IFRS operating loss) 2,594 (2,137) 457 4%
Other income - gain on sale of assets 23,871 - 23,871
Income taxes - 13 13
Net income 23,148 18,773 146%
(a) Nutraceutical and cannabis are two reportable segments of the Corporation. The corporate column represents unallocated costs
which are corporate G&A expenses, net finance costs and income taxes.
(b) YTD-2018 excludes Acasti's results and gross margin on sales excludes impairment loss on inventories of frozen krill, aceton
and packaging due to the sales of assets 30Equity Structure
as of September 30, 2018
Common shares 79,809,443
Deferred Stock Units 454,983
Options 9,804,934
Warrants 750,000
Total diluted shares 90,819,360
Insiders ownership (Shares and DSU): approx.10%
31Executive team
Jim Hamilton Jean-Daniel Bélanger Marc Vaugeois
Vice President, Sales
President , CEO & Board Member Vice President, Legal & Nutrition Business
Corporate Affairs
• President of DSM • Former securities law • + 25 years in health &
Nutritional Products USA firm partner nutrition industry
• 30 years wellness products • Member of Quebec Bar • Former owner of
industry experience since 2006 Biodroga Inc.
Mario Paradis, CPA, CA François-Karl Brouillette
VP & Chief Financial Officer Vice President, Science & Innovation
Nutrition Business
• CFO Atrium Innovation
acquired by Nestlé for $2,3B • Holds a Master degree in Organic Chemistry
• Senior Director • + 15 years in Natural Health Product Industry
PricewaterhouseCoopers
• Former owner of Biodroga Inc.
Michel Timperio Jackie Khayat
President, New Ventures Vice President, Bus. Development
• Responsible of BD for last
16 years for Neptune • 15 years in Nutraceutical and Healthcare sales
experience
• Science degree in Nutrition and now completing
her Executive MBA at Concordia University
• Formally of 3M Canada
32Board of directors
John Moretz Hélène F. Fortin
Chairman of the Board Director
Katherine Crewe Rick Schottenfeld
Director Director
Schottenfeld Group LLC
Dr. Ronald Denis
Director
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