1

08/21/2017 Small Capitalization Research

Initiation Report

Financial Data

Brief

Price $0.40

52 Week Range $0.28 -$0.98

Shares Outstanding

(mn) $121.14

Market Cap (mn) $46.03

Average Six-Month

Trading Volume

(thousands)

18.70

Number of Analysts

Covering 1

Enterprise Value to

Revenue 6.72

Market Opportunity Market Opportuni

Price-Volume History

Unique Global Manufacturing Platform

Poised To Generate Expanding Cash Flow

Investment Highlights:

• Orgenesis offers investors a way to invest in the

growing cell therapy market, with the regenerative

medicine market projected to reach $53.7 billion by

20211, without the risk of investing in one specific

cell therapy company, which generally have highly

volatile, binomial investment outcomes. By

investing in Orgenesis, investors own a share of the

diversified revenue generated by Orgenesis’s

growing customer base, while still benefiting from

large upside if their customers’ products are

successful via exponentially larger contract

revenue

• Backed by strong intellectual property licensed

from Tel Hashomer, Orgenesis, through its

subsidiary Orgenesis Ltd., has developed unique

technologies with a lead indication for insulin-

dependent diabetes, or type 1 diabetes. Orgenesis

is currently developing a cellular approach directed

at converting liver cells into functional, glucose-

responsive, insulin-producing cells as a treatment

for type 1 diabetes. Diabetes is one of the most

challenging health problems of the 21st century and

has immense economic and social costs.

• Orgenesis attractively finances its business through

grants, private placements, local government

support programs and organic revenue from its

growing CDMO business segment

• Based on our financial valuation models, Orgenesis

appears undervalued with numerous catalysts over

the next 18 months

Orgenesis Inc. (ORGS)

Hunter Diamond

research@diamondequityresearch.com

54 West 40th Street, 1st Floor New York, NY 10018

Company Description

Orgenesis Inc. (ORGS) is a U.S.-based

biopharmaceutical company which is among the

first in a new wave of vertically integrated

manufacturing and development services within

regenerative medicine.

2

Orgenesis (the “Company”) is a member of a unique group of companies with the experience and expertise in

development and manufacturing which is needed by cell therapy companies. The number of clinical trials has

grown dramatically in recent years reflecting the scientific and business potential of the field of regenerative

medicine. The overall number of clinical trials has doubled over the past two years (from 330 in 2014 to 804 in

2016)1. Of these clinical trials over 67% are in phase II and phase III, as more companies approach

commercialization.

Orgenesis functions as a contract development and manufacturing organization (CDMO)2 , through its fully

owned subsidiary MaSTherCell and its international partnerships, to deliver optimized process industrialization

capabilities to cell therapy companies. Comprehensive services range from early-stage R&D services such as

synthesis, scale-up, formulation development, stability studies and method development all the way through

manufacturing services, ranging from preclinical R&D material for clinical trial purposes and pending

commercial production1. The relationship between a biotechnology company and a CDMO is analogous to a

U.S. based company hiring an overseas manufacturer, so that the company can focus on their core business and

the manufacturer can use its expertise within mass producing a quality product, thereby allowing the U.S.

company to optimize their margins and differentiate their product offering. According to industry surveys3

CDMO growth is likely to continue over the coming years due to the growth of the regenerative medicine field,

higher competition which is driving a greater need for cost efficiency and product differentiation and the

entrance of small virtual startups with no manufacturing capacity.

Source: Report #S520, “Tissue Engineering, Cell Therapy and Transplantation: Products, Technologies & Market Opportunities, Worldwide, 2009-2018.”

1 Alliance for Regenerative Medicine, Annual Report 2016 2 A contract manufacturing organization (CMO), sometimes called a contract development and manufacturing organization (CDMO), is an entity that serves other

companies in the pharmaceutical industry on a contract basis to provide comprehensive services from drug development through drug manufacturing. This allows major pharmaceutical companies to outsource those aspects of the business, which can help with scalability or can allow the major companies to focus on drug discovery and

drug marketing instead. 3 Sunday, January 31, 2016 Tweet Email Print. “Strong CMO/CDMO Market Outlook for 2016, but Beware Moderating Factors.” American Pharmaceutical Review,

American Pharmaceutical Review, 31 Jan. 2016, www.americanpharmaceuticalreview.com/Featured-Articles/183087-Strong-CMO-CDMO-Market-outlook-for-2016-

but-beware-moderating-factors

3

If the regenerative medicine industry is to realize its full potential, manufacturing and logistics need to be in

place to ensure their safety, potency and consistency at economically sustainable costs. While cell therapy

research and manufacturing challenges may be negative factors for the cell therapy companies, the reality is the

opposite for the CDMO. These factors create pressure for cell therapy companies to seek third-party partners

who possess technical, manufacturing and regulatory expertise in cell therapy development and manufacturing

such as MaSTherCell.

The principal way Orgenesis seeks to differentiate itself from other cell therapy companies is through its

wholly-owned CDMO subsidiary MaSTherCell and its world-wide network of partners. The combination of

MaSTherCell and the company’s world-wide network creates a unique competitive advantage. The goal of a

CDMO is to industrialize cell therapy for fast, safe and cost-effective production for logistics and distribution to

any market around the globe. All MaSTherCell’s services are already compliant with GMP requirements,

ensuring the identity, purity, stability, potency and robustness of cell therapy products from clinical phase I, II,

III through pending commercialization. The company aims to be the premier service provider in the

regenerative medicine industry by leveraging the experience and expertise of MaSTherCell as a recognized

leader in cell therapy development and manufacturing.

MaSTherCell is developing new technologies for other cell therapy companies, such as cell-based cancer

immunotherapies and neoconservative diseases. Orgenesis’s vertical integration helps solve the main

challenges faced by most cell therapy companies including reducing the cost of goods sold and creating

optimized logistics, through its CDMO division. Orgenesis’s vision is to be the worldwide best in class

CDMO, offering global one-stop-shop manufacturing and logistics services and breakthrough technologies

enabling promising therapies to go to market faster at a fraction of the cost.

Source: Orgenesis Website

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Business Model

Orgenesis, through its subsidiary MaSTherCell, is currently working closely with some of the leading immuno-

oncology companies who are seeking to develop the latest cell treatment therapies. The revenue model of

Orgenesis CDMO activities is mostly based on fees per batch. It is important to note that Autologous is one batch

for one patient and Alogeneic is one batch for multiple patients, hence the lower cost6. Once MaStherCell is

contracted to work with one of its clients, manufacturing and logistics activities generate revenue from Phase I

to III, even if the treatment is not approved by regulators. When a client reaches the commercial stage, their

demand for manufacturing substantially increases, while barriers preventing the client from switching to

another manufacturing organization are extremely high. The difficulty in transferring CDMOs is a result of

the tech transfer of such complex manufacturing processes being extremely lengthy, requiring many months of

training highly specialized employees, while gaining new regulatory approvals.

Orgenesis looks well positioned to continue aggressively expanding its revenue for the following reasons:

(1) A higher number of companies in later phases of clinical trials

(2) Cell therapy companies requiring higher manufacturing abilities concurrent with a global reach

(3) An increasing need for the manufacturing scalability provided by a CDMO

MaSTherCell is working with best-in-class biotech clients such as Adaptimmune, Servier, and CRISPR to name

a few, with a strong expertise in state-of-the-art technologies like CAR-T 7. These therapies are leading the way

with the first wave of approval in the U.S. for immuno-oncology indications, including the first Novartis CAR-

T therapy for patients in need8. The challenge is not just the invention of treatments that work, but also the creation

of manufacturing processes that can turn remarkable science into mass-market products. 9 “Successful

manufacturing is key from the onset of the project and it’s something companies working in CAR-T should focus

6 Li, Wangzhi. “Latest Insights In Key CART Commercial Questions: Manufacturing, Toxicity, Cost.” Ladenburg Research Report,

12 June 2017. 7 Adoptive cell transfer (ACT), which uses a patient’s T cells (T lymphocytes) that are harvested and genetically engineered to

produce chimeric antigen receptors (CARs) and recognize specific proteins (antigens) on tumor cells, is receiving a good portion of

that attention. The CAR-T cells are expanded and then reinfused back into the patient, where they multiply and et 8 “Novartis CAR-T Cell Therapy CTL019 Unanimously (10-0) Recommended for Approval by FDA Advisory Committee to Treat

Pediatric, Young Adult r/r B-Cell ALL.” Novartis, Novartis, 13 July 2017, www.novartis.com/news/media-releases/novartis-car-t-

cell-therapy-ctl019-unanimously-10-0-recommended-approval-fda. 9 “Cancer treatment: scaling up a vein-to-vein solution: Cell therapies could win regulatory approval but can the process ever be

economically viable to satisfy investors?”; D. Crow, June 2017, Financial Times

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on early in the development process. (…) Having a quality system and personnel equipped to support the

manufacturing process through commercialization are key to any development program.”10

For Orgenesis to capture the growing potential of the CDMO market it will clearly rely on MaSTherCell

remaining the manufacturing and logistic partner to its customers once they receive market approval, with

MaSTherCell capable of providing the services and solutions customers need as they scale production.

In order to achieve its goal of becoming a premier CDMO, Orgenesis strives to provide:

1. A global network of manufacturing plants and logistic services, technology and regulatory know how;

2. Innovative technologies which reduce the cost of tech transfer and offer process scalability and underlying efficiency

gains for its customers;

3. Capacity to achieve all client production targets;

4. Royalty support programs for smaller biotech companies which lack capital;

5. Capturing the total value chain ( medium and reagents , viruses, plastic disposables); and

6. Logistics.

Unique Technology Platform Targeting Diabetes

Backed by strong intellectual property and patents licensed from Tel Hashomer, Orgenesis, through its subsidiary

Orgenesis Ltd., has developed unique trans-differentiation technologies11 with a lead indication for insulin-

dependent diabetes, or type 1 diabetes. Orgenesis is currently developing a cellular approach directed at

converting liver cells into functional, glucose-responsive, insulin-producing cells as a treatment for diabetes. This

new therapeutic approach is called Autologous Insulin Producing (AIP) cell transplantation. Current treatments

that involve transplanting healthy cells from donors have had a high rejection rate by the patient’s immune system.

The goal of AIP is to provide Type 1 Diabetes patients with long-term insulin independence. Orgenesis’s cell

therapy does not use stem cells, but rather is focused on the use of fully mature, adult cells. To treat diabetes, the

cells are derived from the patient’s liver and are transdifferentiated to become adult AIP cells. Orgenesis’s

treatment is autologous (same donor and patient) given that this treatment has the greatest likelihood of acceptance

from the patient and reduces the likelihood of immune-rejection by the recipient.

10 B.Sasu, Pfizer, ARM Annual report 2016 11 Transdifferentiation references the conversion of one cell type to another cell type

6

The current market size of the diabetic treatment industry is 30 million patients in the United States alone, which

accounts for 9.3% of the U.S. population12. The worldwide medical population size of Diabetes is totaled at 415

million globally13.

Source: Journal of Integrative Nephrology & Andrology “Association of lipid abnormalities and oxidative stress with diabetic nephropathy” 2017

The large market explains the enormous market capitalizations of major insulin-providers such as Novo Nordisk

A/S, Eli Lilly and Company, Sanofi-Aventis.

If Orgenesis’s new treatment is successful it would can cure a disease that currently affects 422 million people

worldwide14. The vertical integration of manufacturing and logistics services, through MaSTherCell, would

generate recurring revenue stream and higher profit margin.

This unique technology platform and manufacturing expertise offers additional potential indications and a new

cell source. This novel -technology might also be useful for other therapeutic indications such as oncology,

cardiovascular, immunology and musculoskeletal diseases.

12 At A Glance 2016 Diabetes. https://www.cdc.gov/chronicdisease/resources/publications/aag/pdf/2016/diabetes-aag.pdf 13 Diabetes Prevalence. http://www.diabetes.co.uk/diabetes-prevalence.html 14“Number of Adults with Diabetes Reaches 422 Million Worldwide, with Fastest Increases in Low and Middle Income

Countries.” ScienceDaily, ScienceDaily, 6 Apr. 2016, www.sciencedaily.com/release s/2016/04/16040 6074921.htm

7

Competitive Landscape

While existing for years within “big Pharma”, the CDMO segment operating within the Cell Therapy field is

more recent and industry consolidation is at its infancy. The market remains fragmented in terms of both

regulatory aspects (quality management) and competitors, while the biotechnology clients need global services.

Orgenesis competes with a number of companies both directly and indirectly in the CDMO field. Key competitors

include the following: Lonza Group Ltd, Progenitor Cell Therapy (PCT) LLC (fully acquired by Hitachi in 2017),

Pharmacell BV (acquired by Lonza Group Ltd in 2017), WuxiAppTec (WuXi PharmaTech (Cayman) Inc.),

Cognate Bioservices Inc., Apceth GmbH & Co. KG, Eufets GmbH, Fraunhofer Gesellschaft, Cellforcure SASU,

Cell Therapy Catapult Limited and Molmed S.p.A. Merger and acquisition activity in the field of contract

manufacturing has been pretty intense with two major recent deals: the acquisition of Caladrius’ PCT by Hitachi

and more recently the full acquisition of Pharmacell by Lonza. These deals show the growing attractiveness of

the field as well as the internationalization of the market. Within the market clients are looking for an increasingly

international presence and concurrently a high quality and brand. MaSTherCell is looking to position itself at the

higher end of both these criteria (graph below).

Source: Diamond Equity Research Analysis

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Collaboration Agreements

Orgenesis’ is building up a leading international CDMO focusing on cell manufacturing and a strong pipeline

of regenerative medicine products. One of the priorities of Orgenesis has been to become global and the first truly

international CDMO. Orgenesis has directly signed joint-venture agreements with At-Vio Biotech CMO in Israel

and entered the Asian Market via the joint-venture with the South Korean CMO CureCell Co. The outreach to

Asian markets and Middle-Eastern markets through joint ventures and collaboration agreements, is being pursued

to manage costs through long term reductions in cost of goods sold and faster times to market.

Financial Results

The Company reported strong top line growth for the second quarter. The Company grew revenue over 24%

quarter over quarter and over 100% years over year, partially due to their full integration of MaSTherCell. For

the quarter, the Company reported negative EBITDA of $1.7 million and a net loss of $559 thousand.

Management believes that the cash on hand ($658 thousand) as well as the subscription proceeds of $14 million

that they anticipate receiving through 2018 from one of its investors will allow the Company to conduct their

operations until the end of 2018. The Company discloses segment information showing the performance of each

division using “Adjusted EBIT”, which is earnings before financial expenses and taxes and excluding share based

compensation expenses and non-recurring expenses and income. As can be seen below, the CDMO division

generates positive Adjusted EBIT and helps to subsidize the negative earnings of the CTB division, with the CTB

being a more typical biotechnology business.

Source: Orgenesis 10-Q Filing

9

Source: Orgenesis 10Q Filing

Source: Orgenesis 10Q Filing

10

We have used Bottom Up methodology to derive Orgenesis’s income for fiscal years 2017–2020, using their

segment revenue streams. We note the revenue stream is only from MaSTherCell excluding joint ventures,

given the early stage nature of their CTM business segment, while the research and development expenses are

from their CTB division. Full model assumptions can be found in Appendix.

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Valuation

Orgenesis, thanks to its vertically integrated manufacturing and development services within regenerative

therapies is a non-traditional biotech investment opportunity in that it has a stable revenue stream. The Company’s

combination of a developing stage regenerative clinical development Company with a global manufacturing

organization is the reason the Company’s current market capitalization of $47 million, is much larger than other

micro-cap biotech therapy-provider companies (which usually have market capitalizations of $10 to $20 million).

We view the best way to value Orgenesis as a sum of the parts which includes the technology platform value with

lead indication for type 1 diabetes and the revenue generation of their CDMO division.

We performed technology value analysis16 to attain a valuation for Orgenesis. Six companies with similar

market capitalizations and business model were selected with slight variations in their respective industries.

BioTime Inc, Madrigal Pharmaceuticals, Trinity Biotech and vTv Therapeutics conduct clinical testing for

diabetes and liver diseases, whereas Vericel and Mannkind provides treatment to diabetic patients in the form of

medical products and cellular therapy. Based on our analysis we arrived at a median value of $106 million,

which based on projected 2017 basic shares outstanding is approximately $.90 per share, more than 100%

above where the stock trades currently.

Source: Diamond Equity Research Analysis/ Factset

16 Technology value analysis approximates the value the market assigns to the underlying technology of a business and is calculated as

market capitalization minus cash and cash equivalents.

12

Therapeutics Market based assessment partly reflects the business model of Orgenesis Inc by excluding its

global manufacturing services and the substantial market opportunity in this field. M&A activity in contract

manufacturing has been pretty intense with two major recent deals: the acquisition of Caladrius’ PCT by Hitachi

and more recently the full acquisition of Pharmacell by Lonza. This shows the growing attractiveness of the

field, as well as the internationalization with a couple of strategic buyers whose strategy is to consolidate at a

global level with a strong focus on technological developments. Large industrial groups like ThermoFisher

represent the majority of the deals. We view Orgenesis as an attractive acquisition target at current prices

with its hyper growth CDMO franchise.

Source Diamond Equity Research Analysis

By comparing the respective Manufacturing Transactions Multiples, we arrive at a median enterprise value of

$28 million for MaSTherCell and an average Enterprise Value of $30 million based on 2017 projected revenue.

When examining the median and mean enterprise value for MaSTherCell of $27 million and $30 million and

the median and mean technology value of $106 million and $114 million, the stock as a whole appears

undervalued relative to its current market capitalization of $42 million.

13

Source: Diamond Equity Research Analysis

Investment Highlights

Orgenesis offers investors the rare opportunity to own a biotechnology stock

with significant upside if their diabetes product reaches the market but also

more limited downside given the strong revenue growth of the Company’s

CDMO business

Orgenesis appears undervalued based on its top line growth and depressed

valuation with numerous catalysts over the next 18 months and is a potential

acquisition target for a more established company

The Company has sufficient capital to achieve its near-term goals and can

continue to attractively finance the business via grants, organic revenue and

local government support, with limited dilution18

18 In the event that the remaining subscription proceeds from a private placement with an institutional investor referred to below, in the aggregate net amount of $13 million (out of $16 million) will not be paid periodically through May 2018, then the Company will need to raise significant funds in order to continue to meet its liquidity needs, realize its business plan and maintain operations.

Multiple (X) 2017E 2018E

MaSThercell Projected Revenue 10,210$ 15,049$

Last CDMO Deal 3.7X 37,777$ 55,681$

Median 2.7X 27,567$ 40,632$

Mean 2.9X 29,992$ 44,206$

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Management Team

Vered Caplan

CEO and Director

• 4 years CEO of Kamedis Company

• 3 years spent as CEO of GammaCan

• 5 years spent as Director of Opticul Ltd, Inmotion Ltd, Nehora Photonics Ltd, Ocure Ltd, and Eve Medical

Ltd

• Received a M.S. in bio-medical engineering from Tel-Aviv University and a B.S. in mechanical engineering

from the Technion Institute of Technology

Sarah Ferber Ph.D.

Chief Science Officer & Founder

• Studied biochemistry at Technion under the guidance of Nobel Prize winners in Chemistry in 2004

• Attended Harvard Medical School for a post-doctoral

• Has a lab of her own in the Endocrine Research Lab at the Sheba Medical Center

• Has received numerous awards such as TEVA, LINDER. RUBIN, and WOLFSEN for her notable research

discovery involving human stem cells

• Her research has been funded for the past 10 years by the Juvenile Diabetes Research Foundation, the Israel

Academy of Science Foundation and D-Cure

Neil Reithinger

CFO

• Currenly the Founder and President of Eventus Advisory Group and Eventus Consulting

• 1 year spent as COO and CFO of New Leaf Brands

• 2 years spent as CEO of Nutritional Specialties

• 11 years spent as CEO and President of Baywood International

• Received a B.S. in Accounting from the University of Arizona and is licensed CPA

Board of Directors

Dr. David Sidransky

Chairman

• Recognized by TIME magazine as one of the top physicians and scientists in America for his research on

cancer

• 22 years spent as Director of Head and Neck Cancer Research Division at Johns Hopkins University

• Founder of multiple biotechnology companies and holds numerous biotechnology patents

• Previously served as Vice Chairman of the Board of Directors for ImClone Systems, now known as Eli Lilly

• Currently serving on the board of KV Pharmaceutical, Rosetta Genomics and Champions Oncology Inc

15

• Has received many awards and honors for his work including the 1997 Sarstedt International Prize from the

German Society of Clinical Chemistry, 1998 Alton Ochsner Award and the 2004 Richard and Hinda Rosenthal

Award from AACR

Guy Yachin

Director

• Former CEO of NasVax Ltd

• Previously served as CEO of MGVS

• 6 years spent as CEO and Founder of Chiasma Inc, where grew the company’s presence in Israel and the

USA

• Previously served as CEO of Naiot Technological Center where he served as a seed investor to more than a

dozen startups in the biomedical industry

• Received a B.S. in industrial Engineering and Management and an MBA from the Technion

Yaron Adler

Director

• 9 years spent as CEO and Co-Founder of IncrediMail

• Is an active investor and advisor to many internet and mobility application companies such as eToro,

Typemock, Inneractive, Traffilog, Triplay and WhiteSmoke

• 5 years spent as a product manager and software engineer at Tecnomatix Technologies

• Received his B.A. in computer science and economics from Tel-Aviv University

Hugues Bultot

Director

• 3 years spent as CEO of MaSTherCell SA

• Founder and CEO of Univercells SA

• 5 years spent as Founder and CEO of Artelis

• Previously served as a Manager and COO for a private equity firm called Synerfi

• Currently serving on the Board of Directors of Ovizio and Vivaldi Bioscience

Ashish Nanda

Director

• Joined Orgenesis in 2016

• Previously served as Managing Director of Innovations Group

• 4 years spent as Asst. Manager Corporate Banking at Emirates Banking Group

• Received a Chartered Accountancy from the Institute of Chartered Accountants

16

Risk Factors

Orgenesis (the “Company”), like many other biotech companies faces inherent risks going forward due to the

competitive market they operate in, as well as internal risk factors. The Company has a history of losses and

negative free cash flow and may never achieve consistent profitability. The Company has a limited operating

history, limited capital and limited stream of revenues, which may act as internal factors restraining the

Company’s growth.

The Company also faces potential competition from both well-established and emerging companies, which

could limit the Company’s growth. MaSTherCell is also very dependent on its key employees and contractors

given the complexity of its business, there is no assurance the Company will be able to attract and retain top

talent.

The Company also faces regulatory risks, including the approval of their drugs by the U.S. Food and Drug

Administration (FDA) . Given the inherently risky nature of engaging in the R&D of bio-pharmaceutical

products, Orgenesis may suffer from extensive, complex, and costly government regulation as well as

inspections not only in the U.S. but also worldwide.

If the Company fails to obtain the capital necessary to fund their operations, their financial results, financial

condition and ability to continue as a going concern will be adversely affected and Orgenesis will have to delay,

reduce the scope of or terminate some or all of their research and development programs and may be forced to

cease operations. Orgenesis will require additional capital to fund the continued development of their cell

therapy product candidates and the operation, enhancement and expansion of their manufacturing operations

and their clinical development activities.

The Company owes a significant amount on convertible loan agreements and, unless these amounts are

converted or the Company raises significant working capital, Orgenesis may not be able to pay them when due.

The ability to pay these notes is dependent on the Company raising sufficient capital and/or achieving internal

cash flow generation.

Some of the Company’s directors and officers are not residents of the United States, making it difficult for

investors to enforce action against them. Some of these directors and officers have a substantial portion of their

assets outside the United States, making it difficult to enforce judgements predicated upon civil liability

provisions of United States securities law.

The Company is dependent on external capital to grow its CDMO operations; if the Company is unable to

obtain financing on attractive terms the Company may be forced to reduce or eliminate the expansion of their

contract development and/or manufacturing operations.

For Full List of Risk Factors See the Company’s 10K Filing

17

Appendix:

Key MaSTherCell Income Statement Assumptions:

A. Revenue Growth: The Company’s revenue stream is dependent solely upon its CDMO business in

FY17, which is growing significantly as per its latest quarterly filing (2Q17). We have considered a

growth rate of ~60% in FY17. The Company did not realize any revenue till FY15, therefore, CAGR

for past five years until FY16 is not meaningful. Forward looking CAGR for 5 years comes out to be

~55.4%, after incorporating our assumptions. Our revenue projections are based on the high switching

costs customers have, which supports stable top line growth.

Source: Diamond Equity Research Analysis

B. Gross Margin: Margins for the remaining quarters of FY17 are assumed to be same as that of 2Q17. As

a result, gross margin for FY17 is expected to reach ~41%. For FY18, we have slightly increased the

margins due to economies of scale. For the subsequent years, we have increased our margin assumptions

to 50% as per management guidance, which we view as attainable.

C. Operating expenses: We assume operating expenses decrease as a percent of sales due to greater

operating efficiency, decreasing from FY2018 to FY2020. We have decreased SG&A expense over the

period on the basis of peer averages.

D. EBITDA Margin: Margins are expected to improve in comparison to the historical trends for FY17 and

FY18. The management expects to realize ~20% of margins going beyond our projections. We have

8

.

7

%

55.4%

18

incorporated the guideline into our model, moving towards that long-term objective, which we view as

reasonable.

E. Shares outstanding: Dilution in shares has been assumed based on historical trends and assumes further

share issuances related to additional financings. Average percentage of dilution from past 10 quarters

has been applied to the basic shares outstanding to calculate the diluted shares.

F. Financial expenses, net: We have calculated cost of debt by considering LTM financial expenses, net

from P&L and long-term loans payable and convertible bonds outstanding from the balance sheet. We

have based our assumptions on the average cost of debt values.

G. Share of income/loss in associated company and translation adjustments are assumed to be zero in

the forecasted periods

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Disclosures

Diamond Equity Research, LLC has created and distributed this report. This report is based on information we

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We do not represent that this report is accurate or complete, and it should not be relied on as such. Any and all

information contained within this report is subject to change without any formal or other notice provided.

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This report is not disseminated in connection with any distribution of securities and is not an offer to sell or the

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crucial that you at least look at current SEC filings and read the latest press releases. Information contained in

the company’s financial publications or displayed on their website, were extracted from current documents filed

with the SEC, included on the company’s website or obtained from other publicly available sources deemed

reliable. Statements included in this report may constitute forward-looking statements within the meaning of the

Private Securities Litigation Reform Act of 1995. Any statements that express or involve discussions with

respect to predictions, expectations, beliefs, plans, projections, objectives, goals, assumptions or future events or

performance are not statements of historical fact and may be "forward looking statements”. Such statements are

based on expectations, estimates and projections at the time the statements are made and involve many risks and

uncertainties such as competitive factors, technological development, market demand and the company's ability

to obtain new contracts and accurately estimate net revenues due to variability in size, scope and duration of

projects, and internal issues, which could cause actual results or events to differ materially from those presently

anticipated.

Diamond Equity Research LLC is being compensated by Orgenesis Inc. for producing research materials

regarding Orgenesis Inc. and its securities. Payment is made in cash and is billed one time and upfront for a six

month subscription, which includes one initiation report and one update report. As of 08/21/2017 the issuer had

paid us $10,000 for our services, which commenced 07/07/2017. Additional fees may have accrued since then.

Diamond Equity Research, LLC, its subsidiaries, and employees may currently have no position in Orgenesis

Inc. but may open a long/short equity position of the shares of the subject company in this report. Diamond

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