tsx:leaf investor presentation march 2018...medical market is poised to grow tenfold precise dosing...
TRANSCRIPT
TSX:LEAFInvestor PresentationMarch 2018
Price Close (Mar 16, 2018): $19.34 Market Capitalization: $1.9 billion Basic and F.D. Shares: 99.8/109.6 million
Forward-Looking InformationThis Presentation contains “forward-looking information” within the meaning of applicable Canadian securities legislation which are based upon the Company’s current internal expectations, estimates,projections, assumptions and beliefs and views of future events. Forward-looking information can be identified by the use of forward-looking terminology such as “expect”, “likely”, “may”, “will”, “should”,“intend”, “anticipate”, “potential”, “proposed”, “estimate” and other similar words, including negative and grammatical variations thereof, or statements that certain events or conditions “may”, “would” or “will”happen, or by discussions of strategy. Forward-looking information include estimates, plans, expectations, opinions, forecasts, projections, targets, guidance or other statements that are not statements of fact.
Forward-looking information in this Presentation is based on our opinions, estimates and assumptions in light of our experience and perception of historical trends, current conditions and expected futuredevelopments, as well as other factors that we believe are appropriate and reasonable in the circumstances as at the date hereof. Despite a careful process to prepare and review the forward-looking information,there can be no assurance that the underlying opinions, estimates and assumptions will prove to be correct. In particular, we have made assumptions in respect of the build-out of the Bradford Facility; ourcompetitive advantages; the expected legalization of cannabis use in Canada; the growth of our business and expansion into new markets; the development of new products and product formats for our cannabis-based pharmaceutical products; our ability to retain key personnel; our ability to continue investing in our infrastructure to support our growth; our ability to obtain and maintain financing on acceptable terms; theimpact of competition; the changes and trends in the medical cannabis industry; and changes in laws, rules and regulations.
Forward-looking information is necessarily based on a number of opinions, estimates and assumptions that we considered appropriate and reasonable as of the date hereof, are subject to known and unknownrisks, uncertainties, assumptions and other factors that may cause the actual actions, events, results, performance or achievements to differ materially from what is projected in forward-looking information,including but not limited to the risks described in greater detail in the section entitled “Risk Factors” in our most recent annual information form available on SEDAR at www.sedar.com.
Although we have attempted to identify important factors that could cause actual actions, events, results, performance or achievements to differ materially from those described in forward-looking information,there may be other factors not presently known to us or that we presently believe are not material that may cause actions, events, results, performance or achievements to differ from those anticipated, estimatedor intended. Should one or more of these risks or uncertainties materialize or should assumptions underlying the forward-looking information prove incorrect, actual actions, events, results, performance orachievements may vary materially from those expressed and implied by such statements contained in this Presentation. The purpose of forward-looking information is to provide the reader with a description ofmanagement’s expectations, and such statements may not be appropriate for any other purpose. Accordingly, readers should not place undue reliance on forward-looking information. Although the Companybelieves that the expectations reflected in statements containing forward-looking information are reasonable, it can give no assurance that such expectations will prove to be correct. The Company disclaims anyobligation to update any forward-looking information, whether as a result of new information or future events or results, except to the extent required by applicable securities laws.
Non-IFRS MeasuresThis Presentation refers to certain non-IFRS financial measures including Adjusted Product Contribution Margin, Cash Cost Per Gram Sold and Adjusted EBITDA (i.e., Adjusted Earnings Before Interest, Tax,Depreciation and Amortization). See the section entitled “Non-IFRS Measures” in our Management’s Discussion and Analysis for the quarter ended December 31, 2017 available on SEDAR at www.sedar.com.These measures are not recognized measures under IFRS, do not have a standardized meaning prescribed by IFRS and are therefore unlikely to be comparable to similar measures presented by other companies.Rather, these measures are provided as additional information to complement those IFRS measures by providing additional information regarding the Company’s results of operations from management’sperspective. Accordingly, non-IFRS measures should not be considered in isolation nor as a substitute for analysis of the Company’s financial information reported under IFRS.
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Setting the standard: Our Strategy
PHARMACEUTICAL BREWERY BEVERAGE CONSUMER PRODUCTS
Winners emerge and dominate
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Decisions that set the standard
Quality assurance
Patient-centric approach
Analytically-driven operations
Ongoing innovation
Producing premium cannabis
CANADIAN MEDICAL DRIED CANNABIS MARKET SHARETotal volume sold for the twelve month period ending Sep 20171
1) Source: Health Canada (most recent available data) and MedReleaf2) Licenses held by producers as of March 6, 2018
MedReleaf
Rest of the Licensed Producers
83%
17%91 Licenses2
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$1.00
$1.50
$2.00
$2.50
$3.00
$3.50
Q2F16
Q3F16
Q4F16
Q1F17
Q2F17
Q3F17
Q4F17
Q1F18
Q2F18
Q3F18
CASH COST PER GRAM
Setting the standard: Performance
300g
$1.83
~
GRAMS PRODUCED PER SQUARE FOOT1
CASH COST PER GRAM1
1) For the three months ended December 31, 2017
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High growth with strong margins
65%F2016 F2017 YTDF17 YTDF18
Revenue($ millions) $8.98
AVG. PRICE PER GRAM
$1.83CASH COST PER GRAM
$5.80
Revenue and volume shipped for fiscal year ending March 31 and nine months ending December 31
ADJ. PRODUCT CONTRIBUTION MARGIN (THREE MONTHS ENDED DECEMBER 31, 2017)
ADJ. CONTRIBUTION MARGIN PER GRAM
6%
109%
F2016 F2017 YTDF17 YTDF18
Volume(kilograms)
40.3
19.31,689
3,668
Dried Cannabis Other Extracts
$8.05AVG. PRICE PER GRAM
DRIED CANNABIS
117%39%
$11.83AVG. PRICE PER GRAM
EXTRACTS
6
31.630.0
2,501
3,472
Focused on profitability
4.6
13.9
12.2
2.4
F2016 F2017 YTDF17 YTDF18
STRONG ADJ. EBITDA GENERATION AVERAGE CONSUMPTION
National
MedReleaf 1.35GRAMS PER DAY
s0.75GRAMS PER DAY
Adj. EBITDA for the fiscal year ending March 31 and the nine months ending December 31
National average based on Health Canada reports from January 1, 2017 to March 31, 2017 (the most recent information available from Health Canada). MedReleaf average from January 2017 to March 2017. Assumes that the national average remained the same for the period of January 2017 to March 2017.
($ millions)
1.8xNATIONAL CONSUMPTION AVERAGE
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55,000sq. ft. facility
23,500sq. ft. in cultivation
7,000kg/yr capacity
Markham facility
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Facility expansion
9
7,000 7,000 7,000 7,0009,500
28,000 28,000
105,000
M A R K H A M M A R K H A M + B R A D F O R D ( C U R R E N T )
M A R K H A M + B R A D F O R D
( F U L L C A P A C I T Y )
M A R K H A M , B R A D F O R D ,
E X E T E R
$40.3 millionRevenue in
F2017
16,500 Total
140,000Total
Summer 201835,000 Total
CULTIVATION CAPACITY (KG/YEAR)
Exeter Facility▪ 69 acres▪ 1M sq. ft. Greenhouse▪ 105,000 KG/Year▪ 95 acres adjacent land
Bradford Facility▪ 4x Markham▪ 210,000 sq. ft. Indoor
R&D LABS PHARMACEUTICAL MANUFACTURING
Business Overview
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Indoor Greenhouse
Higher quality Premium pricing
MAXIMUM CONTROL
HUMIDITY
CO2
LIGHT
NUTRIENTS
PRUNING
TEMPERATURE FORMATION
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RAW MATERIAL FOR EXTRACTS AND NON-FLOWER RELATED PRODUCTS
RAPID SCALE LOWER UNIT COSTS
Only cannabis company in Canada
ISO 9001CERTIFIED
ICH-GMPCOMPLIANCE CERTIFICATION
Fully-integrated cannabis producer, processor and distributor
Quality assurance
QUALITY CONTROL CHECKS
400+&
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Patient centric
PATIENT SAFETY• third-party tested for over 300
pesticides and other contaminants
• exclusive locking container
PATIENT-DRIVENPRODUCT DEVELOPMENT• 1,000s of completed patient surveys
• patient-centric strain development
FAST AND CONVENIENT DELIVERY• same day shipping
• same day delivery in the GTA
89% customer satisfaction13
Accessing channels, not just patientsChronic condition + payor
Veterans (PTSD)
Deploying analytics to identify high lifetime value patientswhose conditions are shown to benefit from cannabis
Healthcare spending accounts
Employee benefit plans
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Ongoing innovation: A science-driven approach
Serving patients better Plant & process productivity
Plant genetics
Plant molecular biology
Bioprocess engineering
Food science and nanotechnology
Clinical microbiologyand biochemistry
Clinical research
INNOVATE
ITERATE
University of Toronto Hamilton Health Sciences University of Waterloo Sunnybrook Health Sciences Centre
1,000sof data records collected over
10 years
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20+ dried products
6 oil products
PRODUCT LINES
4 capsule products
1 topical cream
Our portfolio: Producing premium cannabis
PROPRIETARYGENETICS
Tikun Olam® lines
Seed bank
Breeding program
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FIRST PLACE AWARDS
SECOND PLACE AWARDS
(2017)
(2017) (2017) (2016)
(2014-2017) (2017, 2015)
(2017) (2017) (2017)(2017)
Growth drivers
MEDICAL NEW PRODUCTS RECREATIONAL INTERNATIONAL
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Medical market is poised to grow tenfold
Precise dosing for patients and physicians
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Market growthANNUAL CANADIAN MEDICAL CANNABIS MARKET
Q317Annualized*
2024
$1.3 B
$407 M
*Based on Health Canada reported volume for the 3 months ending Sep at $7.50/gram
Increasing Physician Education:First Pharmacogenetics-Based Cannabis Compatibility Test
PRESCRIBING
NON-PRESCRIBING
10-15%
~75,000
?STRAIN?DOSAGE
Supply agreement with Shoppers Drug Mart
First licensed producer in Canada with an oil-capsule product and topical cream
Proven ability to launch novel new products
MEDRELEAF EXTRACTS% of Sales
AvidekelMidnightSedamenLuminarium
Precise dosing for patients and physicians
3%
21%
Q3 F17 Q3 F18
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VALUE PREMIUM
BRAND Z
$5-9BCanadian recreational market opportunity
Data driven and expert advised
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BRAND Y
CORE
Exporting our expertiseFocused on international partnerships that leverage our strategic valuein order to replicate our Canadian success with local presence in 6 countries
BrazilCompleted first ICH-GMP certified commercial export and the country’s first import of cannabis-oil
GermanySupply agreement with CannamedicalPharma GmbH
Participating in the next phase of the domestic cultivation licensing process
AustraliaPartners have received cannabis cultivation and production licence
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ManagementNeil ClosnerChief Executive Officer
• 20 years of start-up, technology, and healthcare experience
• Former VP of Business Development at Mount Sinai Hospital
• Chairman of the Board of Cannabis Canada Association
Igor GimelshteinChief Financial Officer
• Over 7 years in private equity and investment banking
• Former VP at Birch Hill Equity Partners, a leading private equity firm in Canada
Donald CourtneyChief Operating Officer
• Over 20 years of global operations and supply chain experience in the wine, food, CPG and technology sectors.
• Previously at Vincor International, Pepsi Canada, and Mars Incorporated; served as COO of LG Electronics Canada
Eitan PopperPresident
• Over 15 years of international partnerships, large scale project development, and engineering experience
• Oversees infrastructure and cultivation
Angelo FefekosVice President, Clinical Affairs andQuality Compliance
• Over 10 years experience in quality assurance and laboratory technology
• Previously managed a division of Diagnostic Medical Genetics and Allograft Technologies at Mount Sinai Hospital
Darren KarasiukVice President, Strategy
• Over 15 years of insight generation, marketing strategy and public affairs experience
• Previously VP, Insights and Advisory at Deloitte where he was a leader in the cannabis practice
Management owns 7.8%1
1Based on 109.6 million fully diluted shares outstanding
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Setting the standard
Winners emerge and dominate
CANNABISPHARMACEUTICAL BREWERY BEVERAGE
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Investor PresentationMarch 2018