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NASDAQ and TSX: NEPTHeadquartered in Laval, Quebec, Canada
Investor PresentationLD Micro ConferenceDecember 6, 2018
CAUTIONARY NOTE AND FORWARD-LOOKING STATEMENTThis presentation is confidential and is being supplied to you solely for your information and may not be reproduced or distributed to any other person orpublished, in whole or in part, for any purpose. No reliance may be placed for any purpose whatsoever on the information contained in this presentation orthe completeness or accuracy of such information. No representation or warranty, express or implied, is given by or on behalf of Neptune Wellness SolutionsInc. (the “Corporation” or “Neptune”), or its shareholders, directors, officers or employees or any other person as to the accuracy or completeness of theinformation 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 factorsthat could cause the actual results of Neptune to be materially different from historical results or from any future results expressed or implied by suchforward-looking statements. In addition to statements which explicitly describe such risks and uncertainties, readers are urged to consider statementslabeled with the terms "believes," "belief," "expects," "intends," "anticipates," "will," "should," or "plans" to be uncertain and forward-looking. Readers arecautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of this presentation. Forward-lookinginformation in this presentation includes, but is not limited to, information or statements about our ability to successfully develop, produce, supply, promoteor 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 NoteRegarding Forward-Looking Information” section contained in Neptune’s latest Annual Information Form (the ‟AIF”), which also forms part of Neptune’slatest 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 sectionof Neptune’s website at www.neptunecorp.com. All forward-looking statements in this presentation are made as of the date of this presentation. Neptunedoes not undertake to update any such forward-looking statements whether as a result of new information, future events or otherwise, except as required bylaw. The forward-looking statements contained herein are also subject generally to other risks and uncertainties that are described from time to time inNeptune public securities filings with the Securities and Exchange Commission and the Canadian securities commissions. Additional information about theseassumptions 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-IFRSoperating segment loss when a segment is in a loss position, and Adjusted Earnings Before Interest, Taxes, Depreciation and Amortization (EBITDA) called non-IFRSoperating loss when the Corporation is in a loss position, to assess its operating performance. These non-IFRS financial measures are directly derived from theCorporation’s financial statements and are presented in a consistent manner. The Corporation uses these measures for the purposes of evaluating its historical andprospective financial performance, as well as its performance relative to competitors. These measures also help the Corporation to plan and forecast for futureperiods 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 standardizedmeanings and are unlikely to be comparable to similar measures used by other companies. Accordingly, they should not be considered in isolation. The Corporationuses 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 inour 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 fromthat used by other corporations.
Neptune obtains its Adjusted Segment EBITDA (or non-IFRS operating segment loss) measurement by adding depreciation and amortization and stock-basedcompensation 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 thecalculation as they may vary significantly from one period to another. Excluding these items does not imply they are non-recurring.
Disclaimer
3
Investment highlights
4
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
5
VISIONProvide great products
and solutions that deliver optimal health and wellness.
OPPORTUNITYFocused on markets,
characterized by large size and growth.
STRATEGYLeverage our scientific and innovative
expertise to create and provide our global customers with the best wellness
products and solutions.
$1.6BCAD
$1.8BCAD
$6.0BCAD
Medical Recreational
CanadianLegal Cannabis*
North America Nutrition Solutions **
* **
2021 Canadian market projections , CANACCORD, March 20172016 market size for North America – NEPT estimates
6
CANNABISBUSINESS
7
Objective: to be the world's leader in
extraction, purification and formulation of value-added and
differentiated cannabis products
Cannabis is consumed for many reasons …
8
WELLNESSMEDICAL NEED
Relieve painTreat health problems
Manage health problemsAvoid prescription meds
RELAXATION
RelaxFeel peaceful
PSYCHOACTIVE
Have fun
Neptune‘s Target Applications
Sleep betterManage anxiety/stressImprove quality of life
Canadian legal cannabis consumption in medical and wellness expected to soar …
9*Source: Canaccord Genuity, March 13, 2017 , Excludes global opportunities
~$8B estimated by 2021*
0
100
200
300
400
500
600
700
2017 2018 2019 2020 2021
Adult Use
Medical285
415
515
575
60
MT
Global opportunity will be primarily in medical & wellness products Medical
Cannabis*
Medical CBD
Oil only
No Current
Framework
Wellness CBD
Products
Medical and
Recreational*
Proposed
Medical
Partial
Framework
* Medical and recreational products include Medical CBD Oil
10
NEPTUNE’S POSITION WITHIN THE VALUE CHAIN
11
Raw Materials
Neptune
11
Hemp / Marijuana
Extraction and Purification
Formulated Delivery Forms
B2B*Branded Ingredients
and Formulated Products
B2CNeptune Branded
consumer products
Customers/Retail/Consumers
*Current focus
Distribution
Current Focus Within Cannabis Value Chain Leverages Core Competencies within the Largest Segment - Extracts
12
FLOWER Smoked
EXTRACTCannabinoids can
be extracted from the plant and
then used in a wide range of
health and wellness products
60%*40%*
Gel capsules
Vape pens
Edibles
Topicals
Beverages
*BDS –US Market data (California) June 29th, 2018
Smooth Execution of a 3-Phase Plan to Expand Processing Capacity as Global Markets Develop
13
Phase I II III
Investment$5M
Site security & complianceCO2
$5MPurification & isolation
SolventAs global
business requires
Availability Now Completed March 2019
Our Phase 1 Investment Was Completed August 2018!
14
Phase II investment is now underway!
Licensing Process Moving in Parallel withCommercial and Manufacturing Initiatives
Intake and Initial Screening
Application form
Business plan
Security clearance applications
Record-keeping methods
15
Detailed Review and Initiation of Security Clearance Process
Application is reviewed to:
Meet the requirements of the CR*
Assess risks to public health, safety and security
Establish that there are no grounds for refusing the application
Issuance of Licence to Process (B2B)
Issued once:
Security clearance is passed
Functional building onsite
Application meets all regulatory requirements and confirmation of readiness received from Health Canada
Submission of evidence package
License to process issued
Inspection and issuance of Commercial Sales Licence
Licensed Processor (LP) notifies Health Canada (HC) as activities begin
HC will schedule an inspection to verify that the LP meets the requirements of the CR for commercial sales licence
*CR: Cannabis Regulations
NEPTUNE GOAL
May 2017 January 2018 Q3/Q4 2018 Q1/Q2 2019
Bringing Decades of Wellness and Nutrition Product Experience to the Cannabis Industry
16
Oil extraction engineering/expertise
GMP certified facility
Forms and delivery system
Regulatory affairs
Quality control
Clinicalresearch
Global distribution
Experienced management team
Leveraging Core Competencies
Neptune Continues to Lever its Competencies Towards Differentiation
Patent
Two applications have been filed with the United States Patent and Trademark Office (USPTO) for patents related to potentially highly effective extraction of cannabis material
17
Ongoing Pharmacokinetic Studies
2 proprietary formulations to improve CBD and THC absorption
1. Phospholipid rich omega-3 from krill
2. MaxSimil® : patented omega-3 fatty acid delivery
Research Agreement
Co-development agreement with Tetra Bio-Pharma Inc. for purified cannabinoid oil-based formulations targetingpain and inflammation for the natural health products and pet veterinary markets
Strategic overview: A Multi-Phase Path to Growth
Immediate Commercialization
Global Expansion
• Extraction, purification and formulation of value added differentiated forms
• Capsules, tinctures
• Branded ingredients
B2B • Extraction, purification and formulation of value added differentiated product forms
• Capsules, beverages, edibles, tinctures
• Branded ingredients
• Launch Neptune differentiated science-based wellness products in Canada & the World
• M&A , Licensing
B2B B2C
Near Term Longer-Term
18
Clear Demand for Extraction and Formulations Capabilities
19
MULTI-YEAR SUPPLY AGREEMENT
CANOPY GROWTH
• Provide Canopy Growth with extraction capacity
• Non-exclusive agreement
• Minimum annual commitments
• Ready to begin production upon licensing
Expanding Processing Capacity to Supply Growing Demand
20
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
Estimated site capacity utilization in 12 months period from initial commercialization (MT Cannabis)
Pursuing additional commercial agreements
20
21
NUTRITIONBUSINESS
Providing Value Added Differentiated Nutrition Products and Services Based Upon Science
22
A Pathway to Sell Specialty Ingredients Specialty
Ingredients
A Pathway to Sell Turnkey Solutions
Our progress and investment in people, processes and products continue -
including via research
Turnkey NutritionSolutions
23
A value added differentiated omega-3 where our investment in supporting science continues …
StudiesPre-Clinical /
Case StudyClinical Phase Commercial
Targeted
Completion Date
Absorption(PK Comparative Study)
Absorption(Population w/ Digestive Conditions)
Bioavailability(Omega-3 Index Studies)
2019 Q2
Liposoluble Delivery System(K2, CoQ10, Curcumin, CBD, etc.)
2019 Q2
Cardiovascular Health (Inflammation
and Cholesterol)
2019 Q3
Healthy Aging(Mitochondrial and Athletes Performance)
2019 Q3
Microbiome 2019 Q2Pre-clinical Completed, Human Clinical Study Ongoing
Cystic Fibrosis Clinical Study Completed
Human ClinicalStudies Ongoing
Human ClinicalStudy Ongoing
Human clinicalstudy planning
Human PK Completed
Pre-Clinical Studies Completed, Human Clinical Study Ongoing
ECSentials Concepts
24
Pure Terpene Blend Wellness DS Blend Essential Oils + TerpeneFormulas
Nutrition Formulation Concepts
A path for product entry for consumer products marketers…
Great Features Very low carb (<1g per 250 ml serving) with no added sugar Dairy, lactose & cholesterol free Vegan, Kosher, Halal (Organic available) Non-GMO Very low allergenic potential Mild taste and can easily be flavored High levels of C8 and/or C10 MCTs
Simple & Clean label Coconut Cream base OR Water base Coconut MCT Oil (10% to 45%) Proprietary Gum mix Sea salt (Drink only)
Made with Neptune’s proprietary emulsification process tounlock the full Keto-potential of coconut derived MCTs!
Functional Drink & Supplement Options
25
Investment highlights
26
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
27
Thank You
www.neptunecorp.com
NASDAQ/TSX: NEPT
APPENDIX
28
Consolidated Financial Position + Shareholders
Equity
29
(in thousands of CAD $)September 30,
2018March 31, 2018
Cash, cash equivalents and restricted
short-term investments20,463 26,697
Total debt 4,039 4,661
Net cash, cash equivalents and restricted
short-term investments 16,424 22,036
Total Shareholders Equity 84,698 86,534
Consolidated Financial Position + Shareholders Equity
YTD investment in Cannabis Business including capital expenditures = $6.8m
YTD-2019 Consolidated Financial Results (6 months)
30
Nutraceutical Cannabis Corporate
$ $ $ $ % 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%
Nutraceutical Corporate
$ $ $ % of sales
12,846 - 12,846
4,090 - 4,090 32%
480 - 480
4,570 - 4,570
(737) - (737) 6%
(2,837) - (2,837) 22%
- (2,960) (2,960) 23%
2,594 (2,137) 457 4%
23,871 - 23,871
- 13 13
23,148 18,773 146%
(in thousands of CAD $)
YTD-2019 (a)
Consolidated
(in thousands of CAD $)
YTD-2018 (b)
Consolidated
Net income
(b) YTD-2018 excludes Acasti's results and gross margin on sales excludes impairment loss on inventories of frozen kril l , aceton
and packaging due to the sales of assets
Revenues from sales
Gross margin on sales
Royalties revenues
Total gross margin as per FS
R&D expenses net of tax credits and grants
Other income - gain on sale of assets
SG&A (Nutraceutical)
Corporate G&A expenses
Adjusted EBITDA (non-IFRS operating loss)
Income taxes
(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.
31
Equity 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%
Executive team
Jim Hamilton
President , CEO & Board Member
32
Mario Paradis, CPA, CA
VP & Chief Financial Officer
Michel TimperioPresident, New Ventures
• Responsible of BD for last 16 years for Neptune
François-Karl Brouillette
Vice President, Science & InnovationNutrition Business
• Holds a Master degree in Organic Chemistry
• + 15 years in Natural Health Product Industry
• Former owner of Biodroga Inc.
Marc VaugeoisVice President, Sales Nutrition Business
• + 25 years in health & nutrition industry
• Former owner of Biodroga Inc.
Jackie Khayat
Vice President, Bus. Development
• 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
• CFO Atrium Innovation acquired by Nestlé for $2,3B
• Senior Director PricewaterhouseCoopers
• President of DSM Nutritional Products USA
• 30 years wellness products industry experience
Jean-Daniel BélangerVice President, Legal & Corporate Affairs
• Former securities law firm partner
• Member of Quebec Bar since 2006
Board of directors
John Moretz
Chairman of the Board
33
Hélène F. Fortin
Director
Katherine Crewe
Director
Dr. Ronald Denis
Director
Rick Schottenfeld
Director
Schottenfeld Group LLC