1

YaleSchoolofManagement

KwasiKyei,ChrisMartin&VictorZhu

EnvivaPartners,LP(EVA)StrongMidstreamPlayerwithFavorableDemand/SupplyDynamicsandPublicPolicyDriversRecommendation:Buy UnitsOutstanding:24.8MPrice(asof10/27/2016):$27.65 Float(%): 87%52-weekrange:$13.4-$28.6 EPS,Adj+: 1.98MarketCapitalization:685M ShortInterest(%) 1.1%EnterpriseValue:874M Industry:Forestry&WoodProducts,MLPs

EXECUTIVESUMMARYTheworld’sdemandforrenewableenergyisrapidlyaccelerating.Woodpelletsarerecognizedasacleanrenewableenergysourceforindustrialpowergenerationandhaveemergedasoneofthemostcostefficientandpracticalwaystoadoptrenewableenergyatscaleandreducegreenhousegas(GHG)emissions.Envivaisahiddengemthatoffersthebestexposuretothegrowingdemandforrenewableenergy,andwoodpelletsinparticular.Thecompanyhastremendousgrowthprospectsandisrunbyawell-seasonedmanagementteamwithatrackrecordofbringingaccretiveacquisitionsthatbringpositivecashflowstothefirm.Asthedominantsupplierintheglobalwoodpelletmarket,Envivahasaclearproductioncostadvantageversusitscompetitorsandisbestpositionedtoseizeextensiveopportunitiesofferedininternationalmarkets.Withadividendyieldof7-8%,Envivaisundervaluedandshouldofferanupsideof37%fromitscurrentprice.

60%

80%

100%

120%

140%

160%

180%

200%

10/29/2015 11/29/2015 12/29/2015 1/29/2016 2/29/2016 3/31/2016 4/30/2016 5/31/2016 6/30/2016 7/31/2016 8/31/2016 9/30/2016

RecentStockPerformancevsPeersandS&P

Enviva WoodProducers Non-TraditionalAssetClassMLPs TraditionalAssetClassMLPs S&P500

+91%

+47%

+23%

+2%-%

2

Theendof2016isaparticularlyopportunistictimetoinvestinEnviva:1. Theglobaldemandforwoodpelletsisforecastedtorapidlyincreaseinthenear-term,in

particularduetoincreaseddemandfromEuropeannationsthatarewellbehindscheduleinreachingbinding2020renewableenergytargets.Suppliesarelimited,soamassiveglobalshortageispredicted.

2. TheUNParisAgreementonclimatechangewillbecomeinternationalbindinglaw(“enterintoforce”)onNovember4,2016requiringits195signatories(includingtheUnitedStatesandChina)tocutdownonGHGs,creatingashort-termcatalystonthedemandforEnviva’sproductandstrengtheningthelegislationitdependson.

3. Envivaoffersthebestbiomassexposuretocapturetherisingrenewableenergydemandduetoitscurrentdominantposition,itslowcoststructurerelativetoitscompetitors,pipelineofprojectstoincreaseitscapacityanditsworldclassmanagementteam.

BIOMASSPELLETINDUSTRYOVERVIEWBiomasspelletsarearenewablefuelthathavetraditionallybeenusedforheating,butareincreasinglybeingusedasanalternativeenergysourceforpowergeneration.Woodpelletsarethemostcommontypeofbiomasspellets.1TheUnitedStatesistheleadingproducerandexporterofwoodpelletswithproductionconcentratedinthesoutheast,oneoftheworld’sstrongesttimber-producingregions.AlargeportionofthisproductionisexportedtoEuropeforpowergeneration,astheEuropeanUnionisthelargestconsumerofwoodpelletsanditsforestresourcesaremuchmorelimitedthanthoseoftheUS.In2014Europeancountriesaccountedfor80.9%ofglobalpelletconsumption,with60%ofEuropeanimportscomingfromtheUS.2Theglobalmarketforbiomasspelletswasvaluedatjustunder$7billionin2014.3Theindustryisgrowingrapidlyasglobaldemandforrenewableenergysourceslikewoodpelletsincreases.Demandforutility-gradewoodpelletsisprojectedtogrowfromabout11millionmetrictonsperannum(MTPA)in2014to36millionMTPAin2020,reflectinga21%compoundannualgrowthrate.EuropeanUnionpoliciesmandatingGHGsreductionsandincreaseduseofrenewableenergysourcesarelargelyresponsibleforincreaseddemandandindustrygrowth,withmanyEuropeanpowercompaniespursuinglargewoodpelletpowergenerationprojects.FurtherbutlesssignificantdemandcomesfromAsiaandtheUS.Globalwoodpelletsupplyisprojectedtoincreaseto17millionMTPAby2020,

1http://www.pelletheat.org/what-are-pellets- 2RBCCapitalMarkets,EnvivaPartners,LPEquityResearchReport,Dec.6,20153http://www.prnewswire.com/news-releases/global-biomass-pellet-market-size-share-development-growth-and-demand-forecast-to-2020--industry-insights-by-application-heat-sector-power-sector-300217373.html

3

fallingfarshortoftheprojected2020demand,resultinginapotentialshortageof19MTPA(Exhibit1).2 ENVIVAPARTNERS,LPBUSINESSOVERVIEWEnvivaPartners,LP(NYSE:EVA)istheworld’slargestproducerofwoodpellets,acost-effectivealternativetocoalofferingelectricutilitiesapracticalcleanenergysolution.EnvivaownsandoperateswoodpelletproductionandtransportationinfrastructurestrategicallylocatedinthesoutheasternUnitedStates.Sincefoundedin2014,ithasbecometheworld’slargestsupplierofutility-gradewoodpelletsforpowergenerators.Woodpelletsareaparticularlyattractiverenewableenergysourceforelectricutilities,offeringcarbondioxideemissionreductionsofapproximately80%withnopowergenerationinterruptionnecessary.4EnvivaPartners,LPisapublicly-tradedmasterlimitedpartnershipthatownsandoperatessixwoodpelletproductionplantsinNorthCarolina,Virginia,Mississippi,andFloridawithanannualproductioncapacityofabout2.3millionmetrictons.Envivaexportswoodpelletsthroughadeep-watermarineterminalitownsandoperatesatthePortofChesapeake,Virginia,aswellasthroughlong-termcontractswithportsinAlabamaandFlorida.Envivadevelopsandbuildsitswoodpelletproductionandtransportationinfrastructurethroughaseparateentity,EnvivaDevelopmentHoldings,LLCawholly-owned,privatecompany.AsimplifieddescriptionofEnviva’sbusinessmodelisasfollows:thecompanyprocureswoodfiberintheregionssurroundingitsproductionplants,convertsthisfiberintopellets(aneasilytransportable,compactformofwoodfiberidealforcombustion),transportsthepelletstoexportterminalsviatruck,train,andbarge,andultimatelyshipsthepelletstoEuropeviaoceanvessels.Exhibit2belowshowsEnviva’smidstreamoperationwithinthelargerrenewablewoodfibersupplychain,andcomparesthissupplychaintothatofconventionalfossilfuels.

4http://www.envivabiomass.com/about/

Exhibit2

Source:Enviva Partners,LP,2016Enviva’s midstreamoperation

4

INVESTMENTTHESIS1.Massivesupplygap:AsexplainedintheIndustryOverview(pg.2),globaldemandforwoodpelletsisprojectedtoincreaseby21%CAGRbetween2014and2020,resultingina2020demandof36MTPA.Thisgrowthindemandwillnotbematchedbyasimilargrowthinsupply,whichisprojectedat17MTPAin2020.Theresultwillbeashortageof19MTPAinglobalwoodpelletmarkets.UsingEnviva’s2015revenueof$192.7permetricton,thisgaprepresentsapproximately$3.5billion.Asthemarketleader,Envivaisprimedtocapitalizeonthisopportunity.2.Woodpelletsofferapracticalsolutiontorenewableenergytargets:Manyindustrialeconomiesfacethechallengeofexpandingtheirrenewableenergygenerationcapacitytomeetenvironmentaltargets.Woodpelletsrepresentaparticularlyattractiveoptiontomeetsuchtargets.Whilemostrenewableenergysourcesaredifficultandexpensivetoimplementatscale,coalpowerplantscanquicklyandcost-effectivelybeconvertedtorunonbiofuels.Whenwoodpelletsareusedasareplacementforcoals,carbondioxideemissionscanbereducedbyabout80%.Thismethodofgeneratingrenewableenergycapacitybasedonwoodpelletsofferssignificantadvantagesrelativetootherrenewableenergysources:

• Cost:Installationcostsaremultipletimeslowerthanthoseofotheralternativeenergysourcessuchassolarandwind(Exhibit3).Furthermore,theunitcostofmegawatt-hourisalsosignificantlylowerthanthatofotherrenewableenergysources.2

• Gridcompatibility:Existingpowerplantscanbeconvertedtorunonwoodpellets,sonoalterationstotheelectricgridarenecessary.

• Baseloaddemand:Woodpellet-basedpoweriscapableofprovidingreliableandconstantelectricitytomeetbaseloadelectricitydemand(unlikewindandsolar,whichvarywiththeweather).

• Dispatchable:Powergeneratedfromwood-pelletscaneasilybeturnedonoroff.Thus,woodpelletsrepresentacheap,fastandpracticalwayformajorpowergeneratorstomakesignificantprogresstowardsmeetingrenewableenergytargetsatscale.Envivaissosuccessfulbecauseitisthegloballeaderintheprovisionofthispracticalsolutionforthegrowingchallengeofincreasedadoptionofrenewableenergy.3.EuropeanUnionpoliciesdrivemarketgrowth:Undercurrentpoliciesknowncollectivelyasthe“20-20-20”plan,EuropeanUnionnationsarerequiredto:1)reduceGHGsby20%relative

Exhibit3

Source:Barclays,2015

5

to1990GHGemissionslevels;and2)reachtargetsthatensurethat20%ofallenergysuppliedtoconsumersintheEUisderivedfromrenewablesources.Bothofthesetargetsmustbeachievedbytheyear2020.MostEUmembersaresignificantlybehindinmakingprogresstowardsthesebinding2020targets.Overall,renewableenergymadeuponly15%oftheEU’stotalenergyconsumptionin2013,agapthatissometimesevenmorepronouncedatthecountrylevel.Forexample,theUKhasonlyaccomplished28%ofitsrequiredrenewableenergymix.2Asaresult,Europeandemandforcost-effectiverenewableenergysolutionsthatcanbeimplementedatscaleisincreasingsubstantially.4.Dominantplayerintheworldmarket:Astheworld’slargestproducerandsupplierofutility-gradewoodpellets(Exhibit4),Envivaispoisedtocapitalizeonthetrendsinthegrowingwoodpelletmarket.Historically,thebiomasspelletindustryhasneverhadaverystrongorconsolidatedsupplybase.Envivasetsitselfapartwithitsenterpriseindustrial-scaleapproachincluding:anexpertteamofforesters,engineers,andlogisticians;multipleplantsallowingforoptimizedproduction;yearsofexperienceandasuccessful‘buildandcopy’framework;aconservativebalancesheet;andmulti-billiondollarinvestorsexperiencedinenergyandforestproducts.Responsiblefortheproductionof45%ofwoodpelletsintheUSand15%globally,2Envivaisclearlythedominantplayerintheglobalsupplyofwoodpelletsandreadytotakeadvantageoftheforecastedmismatchbetweensupplyanddemandincomingyears.

5.Highlyreliablecashflowsoverthelong-term:EnvivaexportsthemajorityofitswoodpelletstocreditworthyEuropeanelectricutilitiesandlarge-scalepowergenerators.Itssalesstrategyistocontractallofitsproductioncapacityunderlongtermagreements.Itdoessothroughlong-term,take-or-payagreementswithanaverageremainingtermof9.6years.5Enviva’stake-or-paycontractsareusuallydenominatedinUSDollarsandincludeclausestoprotectEnvivaagainstchangesinlawthatcouldaffectthecost-competitivenessofwoodpellets.Suchastrategyprovidesforstabilityanddependabilityoffuturerevenues,significantlyreducingtheriskassociatedwithEnviva’sbusinessmodel.6.Strategiclocationofassets:AllofEnviva’sassetsarestrategicallylocatedinthesoutheasternUnitedStates,oneoftheworld’sstrongesttimber-producingregionscharacterizedbyaclimateandsoilregimeidealforplantationforestry.ThesoutheasternUS

5http://www.envivapartners.com/sites/envivabiomass.investorhq.businesswire.com/files/doc_library/file/Enviva_Investor_Presentation_Aug_

_2016.pdf

Exhibit4

Source:Enviva Partners,LP,2016

6

timbermarketischaracterizedbywoodchippricesthataremuchlowerthanthoseofmarketswithhighdemandforEnviva’swoodpellets(Exhibit5).TheareassurroundingEnviva’splantscontainabundantforestresourcesandthousandsofwillingsellersoflow-valuewoodfiberthatgenerallycomesfromwastewood.Theresultisalow,stablepriceofdeliveredwoodfiber.

Exhibit5

Source:EnvivaPartners,LP,2016

7.World-classmanagementteam:Enviva’smanagementteamischaracterizedbysignificantexperienceintheforestproductsindustryaswellasexperiencemanaginglarge-scalepubliccompanies.Seniormanagementhasdemonstratedsuccessinacquiring,construction,operating,andcontractingEnviva’sassets.TheteambringsavarietyofexperiencewithindustryleadersincludingBP,Exxon,theEnvironmentalProtectionAgency,GM,andPlumCreek,amongothers.WHYNOW?TheUnitedNationsParisAgreement:TheUNParisAgreementonclimatechangewasreachedatthe21stConferenceofthePartiestotheUnitedNationsFrameworkConventiononClimateChange(UNFCCC)inDecemberof2015.However,inorderto‘enterintoforce’andbecomebinding,theagreementhadtobeindividuallyratifiedbyatleast55PartiestotheConventionrepresentingatleastanestimated55%ofglobalemissions.ThiswasaccomplishedmuchmorequicklythanexpectedonOctober5,2016.Asaresult,theagreementwillnowbecomebindinginternationallawonNovember4,2016,whenall197PartiestotheUNFCCC(includingboththeUSandChina)willberequiredtostrengtheneffortstoreducegreenhousegasemissions.6Furthermore,the22ndConferenceofthePartiestotheUNFCCCwillbeginjustafewdayslateronNovember7,whenUNFCCCPartieswilldiscussconcreteimplementationstrategiesforthecommitmentsmadetheyearprior.Furthermore,theConferenceissuretoputaspotlighton

6http://unfccc.int/paris_agreement/items/9485.php

7

theagreement’snewbindingstatus(whichhasnotyetseensignificantnewscoverage).Ultimately,inearlyNovemberweexpecttosee:

• Countriesmakemoresignificantcommitmentsspecifyinghowtheywillachievetheirrenewableenergytargets;and

• Investorsandthebusinesscommunitybecomeawareoftheagreement’sbrandnewstatusasbindinginternationallaw.

Asaresult,weexpecttoseealargeincreaseindemandforEnviva’swoodpelletsbeginninginearly-tomid-November.Materializationofexistingandfuturecontracts:Envivaisgrowingintermsofproductioncapacityandtransportationefficiencywiththesupportofitscommittedinvestors.Inearly2016,ajointventurebetweenEnvivaHoldings,LLCandJohnHancockLifeInsuranceCompany(“theHancockJV”),completedtheconstructionoftheEnvivaPelletsSampsonproductionplantinNorthCarolina,withanannualproductioncapacityofover500,000metrictons.TheHancockJVhasofferedtoselltheplant,alongwithoff-takecontractsrepresentingtheplant’sfullproductioncapacityforitsfirst10yearsofoperation,toEnvivaPartners,LP.Itisexpectedthattheacquisitionwillbeclosedby1/3/2017,andtheplantwillprovideapproximately$20millionincrementaladjustedEBITDAannually.TheHancockJVisalsofinalizingtheconstructionoftheEnvivaPortofWilmingtoninNorthCarolina(projectedforOctober2016),whichwillprovideabout$7millioninitialincrementaladjustedEBITDA.7COMPETITORANALYSISThebarriertoentryintheindustrialwoodpelletindustryisveryhigh.Theindustryhashistoricallybeencharacterizedbyfragmentedworldwidesupplybase,withalimitednumberofsuppliersworldwide.Envivadistinguishesitselffromitscompetitionwithanindustrial,enterprise-scaleapproach.DuetotherisingregulationinEurope,thereisahugedemandforitsproducts.Approximately58%oftheworld'sutility-gradewoodpelletproductioncapacityislocatedinNorthAmerica8.EVA’scompetitorsinNorthAmericaincludeFramRenewableFuels(whichisownedbyanindividualinvestor),GeorgiaBiomass(aplantownedbyRWEInnogy),RentechInc.,PacificBioEnergy,PinnacleRenewableEnergyInc.,DraxBiomassInc.(affiliatesofGermanPelletsGmbH),TheNavigatorCompany,S.A.,ZilkhaBiomassLLCandTheWesterveltCompany.RISKSOutcomeofthe2016USPresidentialelection:IfRepublicanpresidentialcandidateDonaldTrumpwinstheelection,hemayattempttoannultheUS’ssigningoftheUNParisAgreement.ThiscouldadverselyimpactthefuturegrowthofcleanenergyproviderssuchasEnviva.

7http://www.businesswire.com/news/home/20161017006493/en/Enviva-Partners-LP-Receives-Offer-Acquire-Sampson 8EVA201510Kfiling

8

Highconcentrationofrevenue:EnvivaderivessubstantiallyalloftheirrevenuesfromcustomersinNorthernEurope.Mostnotably,DraxGDFSuez,andE.ONaccountforasignificantportionofEnviva’srevenue.IfEnvivafailstodiversifyitscustomerbase,itsfutureresultsofoperations,businessandabilitytopaycashdistributionscanbeadverselyimpacted.Regulatoryrisks:Changesingovernmentpolicies,incentivesandtaxesimplementedtosupportlow-carbonandrenewableenergycouldaffectthecost-competitivenessofwoodpellets.Government’sregulatoryinitiativesonforestryproductsandpotentialforlitigationmayincreasecostsandofferadditionaloperatingrestrictionsanddelaysforEnviva’ssuppliersandcustomers.Thiswouldresultinadeclineinthedemandfortheirproducts.Transportationinstability:Enviva’sbusinesscouldsufferafailureoftheshiploadingequipmentatthePortofChesapeakeorPortPanamaCityorbeadverselyimpactedbytheclosureofitsport.Majorfluctuationsintransportationcostsandtheavailabilityofshipping,railortrucktransportationcanimpairthecompany’sabilitytodeliveritsproductstotheirendcustomers,whichultimatelyaffectthetoplinerevenue.Contractingrisk:FailuretorevieworrenewEnviva’scontractswithfavorabletermscanimpactthecompany’sabilitytosustainitscashdistributiongivenasizeableportionofitsrevenueistiedtoitsexistingcontracts.Acquisitionrisk:Enviva’sfuturegrowthisdependentonitsabilitytoexecute3rdpartyacquisitions.Ifthecompanyisunabletoexecutesuchtransactions,itsabilitytogrowatitscurrentratemaybehindered.Fundingrisk:Thefundingofequityanddebtmaynotbeinfavorabletermsoverthenextyearastheinterestrateisexpectedtorise.

9

VALUATIONGiventhehighdividendpayment/yieldnatureofMLPbusinesses,weuseDividendDiscountModelandGordonGrowthModeltovalueEVA.Weutilizeablendedrateofthetwovaluationsandthisleadstoa$37.00perunit(a37%premiumoverEVA’spriceof$27.65).Ourvaluationuses2017Easthebaseyear.

UnitsoutstandingforvaluationproformaforEVA’s$100MequityissuanceFINANCIALMODEL

Gordongrowthmodel

2017Edistributionperunit $2.07

Discountrate 8.7%

LongtermDistributiongrowth 3.0%

Valueofunit $36.02

Currentpriceofunit $27.65

Premiumtocurrent 30.3%

Totalunits 32.517

ImpliedEquityValue $1,171

ImpliedEnterpriseValue $1,561

Dividenddiscountmodel

Presentvalueofprojecteddistributions 15.86

Presentvalue-unitvalueatterminalyear 23.89

Valueperunit $39.75

Currentpriceofunit $27.65

Premiumtocurrent 43.8%

Totalunits 32.517

ImpliedEquityValue $1,293

ImpliedEnterpriseValue $1,683

Valueperunit-Gordon $36.02Valueperunit-DDM $39.75Blendedpriceperunit $37.89Premiumtocurrent 37.0%

2016E 2017E 2018E 2019E 2020E

IndustrialwoodpelletDemand 14.538 17.155 19.900 22.885 26.318

EnvivaMetrictons(inmillions) 2.472 2.916 3.284 3.719 4.211

EnvivaRevenuepermetricton $193.16 $192.91 $191.91 $190.00 $190.00

TotalRevenues $477 $563 $630 $707 $800

Costofgoodssold 399.4 473.8 512.5 583.6 657.0

GrossProfit 78.0 88.9 117.7 123.0 143.1

GrossMargin 16.3% 15.8% 18.7% 17.4% 17.9%

SG&AD&A 0.0 0.1 0.1 0.1 0.1

Generalandadministrative 18.5 22.5 25.2 28.3 32.0

Operatingexpenses 18.6 22.6 25.3 28.3 32.1

Operatingincome 59.5 66.3 92.4 94.6 111.0

Operatingmargin 12.5% 11.8% 14.7% 13.4% 13.9%

Totalotherexpenses 13.5 18.5 21.4 31.5 31.5

Netincome $46.0 $47.8 $71.0 $63.1 $79.5

NonGAAPMeasures:

AdjustedEBITDA $93.6 $105.3 $134.9 $140.8 $161.7

DistributableCashFlow $77.1 $81.3 $107.3 $102.4 $122.3

CashAvailableforDistributiontoLP $75.7 $77.4 $98.4 $94.2 $112.5

10

ComparableCompanyAnalysisSinceEVA’spurecompetitorsareprivatelyheld,weutilizethreecompsets:woodproducers,non-traditionalMLPs,andtraditionalMLPs.

Current 2017E 2017EPrice Yield EV/EBITDA P/CF

EnvivaPartners $27.65 7.5% 7.8 7.7

WoodProducersTrexCompany $52.76 -% 11.2 14.8UniversalForestProductsInc. $86.41 1.04% 7.1 12.6Average 0.52% 9.2 13.7Median 0.52% 9.2 13.7

Non-TraditionalAssetClassMLPsWestlakeChemicalPartners $21.15 6.26% 3.7 1.4HI-CrushPartners $17.50 -% 26.9 25.7SunCokeEnergyPartnersLP $16.75 14.13% 7.1 3.9ForesightEnergyLP $6.09 11.25% 8.7 3.8TransoceanPartnersLLC $12.05 12.03% 6.9 2.7Average 8.73% 10.7 7.5Median 11.25% 7.1 3.8

TraditionalAssetClassMLPsConeMidstreamPartners $21.09 4.99% 13.4 8.9DelekLogiticsPartners $25.25 10.36% 8.8 7.8PBFLogisticsLP $21.74 8.90% 7.7 8.3SunocoLP $28.41 11.19% 9.3 4.2GasLogPartnersLP $21.25 8.99% 8.6 5.0Average 8.89% 9.5 6.8Median 8.99% 8.8 7.8

PeerComparison

11

AdditionalPerformanceStockPicksFacebook,Inc.(NASDAQ:“FB”)

Advertisingtechnologyrevenueisexpectedtogrowby300%+by2020-upfrom$30Bin2015to$100Bby2020.Facebookremainsaleadingadvertisingtechplayerwith13-15%marketshare(secondandgrowing).FBisexpectedtogenerateROIC’sof25-30%overthenextfiveyears.

Basedonourpreliminaryfinancialmodel,wehaveplaceda$140persharepricetargetonFB,basedsolelyonitsadvertisingfranchise.Webelievethatanalystscontinuetoplacelesssignificanceonthefirm’sabilitytomonetizeitslongertermprojectse.g.virtualreality/Oculus,Enterprisepotential.

Near-termcatalystsinclude:1)Q4tendstobestrongquartersforadvertisersasmarketingofficersandcompaniespushtohitfullyearnumbers,2)Instagram,FacebookVideos,andFacebookDynamicAdshavebeenstrongadplatformsforclientsandexpectedtocontinuetoshowsolidmomentum,3)Strongex-USrevenueacceleration:AsiaPacifichasremainstrongandEuropebouncedbackandisexpectedtoasolidcontributortogrowth,and4)leadingmobileanddesktopchannelsallowFBtocapturemultipleadvertisingrevenuestreams.

Long-termdriversinclude:1)GrowthofmultipleproductsincludingWhatsApp,Messenger,andOffers/Local,2)virtualrealityremainsadisruptiveplatformformultipleindustries.

IncyteCorporation(NASDAQ:“INCY”)

INCYisabiotechcompanyfocusedondrugdevelopmentinhematology/oncologyandinflammation.INCYremainsoneofthedifferentiatedbiotechassetsofscalewithsolidoncologyproductandlatestagepipeline.INCYhasonemarketedJAK1/2inhibitorJakafi.JakafiwasapprovedbytheFDAformyelofibrosis(inNovember2011)andforpolycythemiavera(inDecember2014).Myelofibrosisandpolycythemiaveraarebothrarebloodcancers.

INCYholdspatentsthatcoverthecompositionofmatteranduseofJakafithroughlate2026,whichpatentshavebeengrantedextensionsthroughlate2027.TheJakafifranchise,alone,isexpectedtohavea$3.5-4Bpeaksales.INCYhasacollaborationandlicenseagreementwithNovartisforJakafiex-U.S.

Near-termcatalystsinclude:1)pipelineincludes-baricitinib(withEliLilly)isunderregulatoryreview(USandEurope)forrheumatoidarthritisandcouldbeapprovedin2017,2)oncologyandrarediseaseshavebeenhottakeoverareasforlargepharma,3)significantuncertainty

12

overthelastfewmonthsasbiotechsbecameatargetofthepoliticalrhetoricexpectedtocalmpost-election.

Long-termdrivers:INCYhasanemergingrichearlystageoncology/inflammationpipeline,withmultiplephaseIIstudiesongoingandcompleted.

BioMarinPharmaceuticals(NASDAQ:“BMRN”)

BioMarinisabiopharmacompanyfocusedonthedevelopmentandcommercializationofdrugsforthetreatmentofseriousrareandultrararediseases.BMRNhasahighlydiversifiedportfoliothathasthepotentialtogeneratesuperiorgrowthandperformance.

BMRNhas5marketedproducts.BMRN’smostrecentlyapproveddrugisVimizim;itreceivedmarketingapprovalintheU.S.andtheEUinFebruary2014andApril2014,respectively.BMRNisexpectedtohavetwonewproductsbytheendof2017–BrineurainCLN2(aformofBattendisease)shouldreceiveFDAapprovalbyJanuary2017,andPegvaliaseinPhenylketonuriainlate2016/early2017.

Near-termcatalystsinclude:1)InitialreadofVimizimsales,2)Pipeline.Pipeline.Pipeline.PotentialapprovalsofBrineuraandPegvaliase,3)rarediseasesandoncologyhavebeenhottakeoverareasforlargepharma,3)significantuncertaintyoverthelastfewmonthsasbiotechsbecameatargetofthepoliticalrhetoricexpectedtocalmpost-election

Long-termdrivers:BMRN’sVosoritide(forachondroplasia)isalsoapromisingpipelineopportunity,andisexpectedtoinitiatePhase3trialslater2016.

EnergyRecovery,Inc(NASDAQ:ERII)

ERIIisaleadingmanufacturerofenergyrecoverydevicesusedinthewaterdesalinationindustry.ItsclientsincludelargescalewaterdesalinationandtreatmentplantssuchasAccinoaWater.Itoffersthebestexposureintothegrowingglobaldemandforfreshwater,whichdoublesevery20yearsandoffersalargeupsideinoil&gaswithlimiteddownsiderisksofatraditionaloilexplorationcompany.ERII’shighgrossmarginover65%andlowCapExshouldleadtoanexceptionalreturnonequity.ERIIisundervaluedonahistoricalandrelativebasisanddeservestobetradedatEV/EBITDAmultipleclosertoitspeers.Thiswillleadtoa35%upsideforthestockoverthe1-yearhorizon.

Itsinvestmentthesisissimple.Drinkingwaterisscarce;lessthan1%percentofEarth’swaterisdrinkable.ERIIhasalltheattributesofalong-termwinnerinthewaterdesalinationmarket:anearly-moveradvantageandanindustry-standarddevicewith60%+grossmargin.

13

Inadditiontoitswaterdesalinationbusiness,therecentsuccessfulintroductionofitsgroundbreakingproduct“VorTeq”intheoil&gasindustryofferslargeupsidetothecompany.Onanindustrylevel,theStratisticsMRCpredictsthatglobalpressurepumpingmarketwillgrowataCAGRof~17%toreach$225billionby2022.Managementanticipatesitsoil&gasrevenuetooutpacewaterdesalinationrevenuebytheyear2019.

Neartermcatalystsinclude:SchlumbergerMilestonetests,Watershortageevents,Crosssellingbenefitsmaterialize,ShareBuyback,IPPatentsapproval.