Interim Report H1 2018 - NattoPharma · 2018-08-22 · Nutraceutical: Growing Vitamin K2 Market Enormous Potential Future Volume •From Health Specialty ⥤Mass Market supplement

confidential

Our Science. Your Trust™

Interim Report H1 201822 August 2018

Kjetil RamsøyChief Executive Officer

Christopher SpeedSVP Global Sales & Marketing

confidential

Our Science. Your Trust™2

DisclaimerThis presentation includes forward-looking statements regarding NattoPharma ASA, including projections and

expectations, which involve risk and uncertainty. Such statements are included without any guarantees to their

future realization. Although NattoPharma ASA believes that the expectations regarding the Company reflected

in such forward-looking statements are based on reasonable assumptions, no assurance can be given that

such projections will be fulfilled. Any such forward-looking statement must be considered along with knowledge

that actual events or results may vary materially from such predictions due to, among other things, political,

economic, financial or legal changes in the markets in which NattoPharma ASA does business, and competitive

developments or risks inherent to the Company’s business plans. Many of these factors are beyond

NattoPharma ASA’s ability to control or predict. Given these uncertainties, readers are cautioned not to place

undue reliance on any forward-looking statements. The Company does not intend, and does not assume any

obligation, to update the forward-looking statements included in this presentation as of any date subsequent to

the date hereof.

confidential


confidential


Financial Highlights H1 2018

3

• Record revenue for the first half as well as for the second quarter 2018

• Continued revenue growth, with a 225% increase from the start of 2015 to date

• Positive EBITDA and Adj. EBITDA for the period

• Transformation from 2015 till 2018 is staggering and is a testament to the continued improvement process

confidential


confidential


Sales development – Natural vs Pure

4

• Growth in both product categories

• PharmaPURE growth impacted by production ramp-up

• Long term trend of continued growth

• Growth curve for both product categories show positive trend in 2018

confidential


confidential


Supply of raw materials

5

Commissioned Q2 2018, First delivery Q3/Q4 2018

In production 2016

Commissioned Q2 2018, First delivery Q4 2018

In production Q4 2017

Pro

du

ctio

n S

ite

s

Site

3Si

te 2

Site

1

Production Lines

✓ Building added capacity and de-risking dependency on critical production sites by securing:

➢ Multiple production lines➢ Additional manufacturing sites

✓ Several alternatives being reviewed and implemented in 2018

✓ Working on further yield and optimizations gains to reduce cost

Site

5Si

te 4

Development work initiated, expected commissioning 2019

Samples under qualification

CommissionedQ1 2018

PlannedH2 2018

confidential


confidential


Organization

6

• Added new resources to prepare for the continued growth ahead

• Increased and improved focus on sales, by adding new global position for sales & marketing as well as more resources to the sales team

• New COO role created to professionalize the supply chain, to prepare for much larger volume in the coming years

confidential


confidential


Portfolio expansion

7

• Continued effort to identify the next

ingredient to bring into the portfolio

• Focused on

–Clinical validation

–Quality controlled

–Market potential

• Announcements will be made once we

have a new ingredient to launch

confidential


confidential


Nasdaq First North

8

• Application for delisting from Nasdaq First

North is sent

• Objective is to consolidate the trade on the

two stock exchanges in the attempt to

increase the volume and attract interest

for the share

• Last trading day to be announced once

more information is available from Nasdaq

confidential


confidential


Kaydence Pharma

9

confidential

Our Science. Your Trust™Our Science. Your Trust™

Sales and Marketing

confidential

Christopher Speed

SVP Global Sales & Marketing

confidential


confidential


confidential

Global Vitamin K2 Sales & Outlook

Aggressive geographical expansion across the entire global market make increases in total

volume revenue entirely feasible.

Key indicators:

• The K2 industry has maintained impressive growth over the the past 5 years growing

from $20M 2014 to $45M in 2017

• In the U.S. natural channel, 2017 sales of Vitamin K2 finished products were strong,

ranking the 5th-growing ingredient

• Within the practitioner market, Vitamin K2 has been been identified as a Top 4

Nutrition Trend for 2018

• All signs show that volume growth will eventuate through all channels as Vitamin K2

sales are driven from health retail and internet to MLM, mass market, and functional

foods.

confidential


Short- and Long-term Goals

How to capitalize on the Vitamin K2

industry’s bright future

confidential


confidential


Short-Term Vitamin K2 Industry Goals

• Perpetuate full acceptance around Vitamin K2’s effect on human health

• Already recognized for bone and general health

• Enhance focus on cardiovascular health

• Signify as an essential nutrient for multivitamins (prenatal, kids, teen, adult)

• Increased buy-in value to all key stakeholders (shareholders, medical community, customers)

• Strong marketing presence and sales leadership coupled with swift geographical expansion

into the correct markets

• Dependable production/supply, underpinned by excellence throughout entire supply chain

and customer technical support

confidential


confidential


Short-Term Vitamin K2 Industry Goals (cont.)

• Increased focus on quality and transparency

• Must recognize brands are increasingly building finished-product testing into

ingredient purchase agreements

• Collaborative spirit with market-shapers:

• Product innovators (i.e., encapsulators, ingredient engineers, etc.)

• Consumer influencers (i.e., practitioners, bloggers, experts, etc.)

• Direct brand-owner relationships

• Wise stewardship of all marketing and scientific assets (esp. patents and market expertise)

• Alignment with distributors/key regional marketing partners on corporate goals

confidential


confidential


Long-Term Vitamin K2 Industry Goals

• Need to establish a Vitamin K2 Recommended Dietary Intake (RDI):

• Increase and evolve discussion to identifying regular vs. situational deficiency

• Innovation around encapsulation technologies and applications in a growing range of delivery

forms

• Emphasis on selling the correct balance of K2 forms

• Improved operating profit for the Vitamin K2 industry

• Launch a reputable K2 trade association

– A clear unified voice

– Product quality transparency via establishment of independent quality testing programs

of clinically validated K2 raw materials

confidential


confidential


Long-Term Vitamin K2 Industry Goals (cont.)

NattoPharma consciously abstained from the current K2 trade association because its charter

does not emphasize K2 evidence and efficacy.

• Current trade association focuses strictly on testing finished products, which may already

contain raw materials that are:

• Sub-par / contaminated inactive cis-isomers

• Undemonstrated to be safe (i.e., not GRAS or TGA compliant, etc.)

• Completely lacking in-vitro, in-vivo and human clinical evidence of efficacy

confidential


Driving the MenaQ7® K2 Message

Marketing Support Examples

confidential

confidential


confidential


NattoPharma Begins to Promote: Again

confidential


confidential


Nat

ura

lSy

nth

eti

c

An award-winning, nature-identical synthetic Vitamin K2, MenaQ7® PharmPure is the only all-trans synthetic available that is free of cis-isomers.

Naturally derived Vitamin K2 as MK-7 uses a fermentation medium with chickpea protein and Bacillus licheniformis. The result is a MenaQ7® variety free from all known allergens including soy. A proprietary multi-step process of purification, condensation, and crystallization produces a product that is more than 96% pure, natural, all-trans MK-7.

A natural soy based MenaQ7® Vitamin K2 product offering to ensure the increasingly diversified market is supplied with an ingredient matching their K2 needs.

Thanks to a proprietary technological breakthrough, MenaQ7® Full Spectrum provides the vital menaquinone isomers MK-6, 7, and 9 for optimal and maximal delivery of Vitamin K2 with respect to absorption, half-life and biological activity.

We are the ONLY K2-MK7 Player to offer a full-range of

multiple K2 technologies to address market needs

confidential


confidential


MenaQ7® is the Expert Brand

20

confidential


confidential


MenaQ7 Full Spectrum

CryoCap

MenaQ7 Soy

Joint Health

Digestive Health

Mental Acuity

MenaQ7 Full Spectrum – opens doors

MenaQ7 Soy – China

CryoCap – Solving Problems

Sales Growth Strategy

Existing Sales Up 30%

Increase Global Markets

Expanding CV Claims

Multivitamins

Create New Customers

Introduce New Products Develop New Ingredients

Increase Existing Base

confidential


confidential


Nutraceutical: Growing Vitamin K2 Market Enormous

Potential Future Volume

• From Health Specialty ⥤Mass Market supplement ⥤ Functional Food

• Additional applications

• Cardiovascular

• Multivitamins

• Geographic expansion

• Asia

• Brazil

• R.O.W.

2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022

Volume Growth

Health Retail

Internet

Food

Mass Market

MLM

TODAY

confidential


confidential


Increase Global Markets & Offerings

confidential


confidential


How will NattoPharma Rise to the Challenge?

• NattoPharma will continue to establish its competitive advantage by maintaining a strong

marketing presence, education initiatives and leadership examples through:

• Controlling the K2 conversation

• Emphasizing that NattoPharma has sponsored all research confirming Vitamin K2 is safe,

efficacious, and provides true health benefits.

• MenaQ7® trials include adult and child populations; healthy and patient populations

(19 published trials with more underway)

• Highlighting NattoPharma’s robust IP portfolio, proving that MenaQ7® is the only K2 clinically

shown to be pure, safe, and bio-effective / bioavailable, with the most comprehensive

portfolio.

confidential


Comments to the Financial Statement

confidential


confidential


Sales Development 2014 – H1 2018

• The rolling 12-months revenue continues on

a positive trend

• Record revenue in Q2’18 as first ever

quarter with more than NOK 25m in product

revenue

• Maintaining guiding of annual growth

between 40% and 50% for 2018 full year

confidential


confidential


Income Statement H1’2018

• H1’18 revenue growth of 54% compared to

same period last year

• Margin in first 6 months impacted by delay in

delivery from one production site

• Operating Expenses increase driven by

investment in personnel

• Growth in cost is according to expectations,

and well below continued growth in revenue

• Supplement business now has 7 consecutive

quarters of profit on Adjusted EBITDA level

Income Statement

(Numbers in 1 000 NOK) Act H1'18 Act H1'17

Product Revenue 47 193 30 611 16 582 54,2 %

Cost of Sa les -27 529 -16 601 -10 928

Gross Profit 19 664 14 010 5 654 40,4 %

Gross Margin in % of revenue 41,7 % 45,8 %

Personnel Cost * -10 344 -7 038 -3 306

Other Operating Expenses (excl. Option cost) -6 819 -5 517 -1 303

Adj Total Operating Expenses -17 164 -12 555 -4 609 36,7 %

Adj EBITDA 2 500 1 456 1 045 71,8 %

Adj. EBITDA in % of revenue 5,3 % 4,8 %

Option Cost (Non-Cash) -1 563 -1 293

EBITDA 937 163 775 476,8 %

EBITDA in % of revenue 2,0 % 0,5 %

* adjusted for cost reinvoiced Kaydence Pharma

Comparison

confidential


confidential


Balance Sheet - 30.06.2018

• Trade and other receivables consists of

o Accounts Receivables : NOK 21,2 million

o Other Receivables : NOK 7,6 million

• Cash balance is NOK 14 million

• Long Term Loan is all related to the sellers

credit provided to Kaydence Pharma AS

– Reduction in loan balance from end of 2017

is related to implementation of IFRS 9 and

related recognition of impairment risk

• Equity is NOK 104,6 million –> 71,9% of total

assets, or 84,7% adjust for the deferred gain

on the Pharma transaction

– Reduction in EQ includes recognized

impairment related to IFRS 9

confidential


confidential


Cash

• Cash balance has been stable in the first 6 months

• Continued investment in working capital has been

offset by good cash management and collection of

customer receivables

• Positive EBITDA contributes to offset negative cash

impact from working capital investment

• Short term operating loan agreement entered into

in July to finance delivery of more product from

new supply line

• Barring any unforeseen events, cash balance is

expected to be sufficient for expected growth in the

coming period

confidential


Kjetil Ramsøy

Chief Executive Officer

Q & A Session

Christopher Speed

SVP Global Sales & Marketing

Documents

Interim Report H1 2018 - NattoPharma · 2018-08-22 · Nutraceutical: Growing Vitamin K2 Market Enormous Potential Future Volume •From Health Specialty ⥤Mass Market supplement