CANN GROUP LIMITED — Investor Presentation 2021

Feb 14, 2021

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Investor presentation February 2021

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UK range – not available in Australia
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Disclaimer

This presentation (Presentation) has been prepared by Cann Group Limited (ABN 25 603 949 739) (Cann).

Summary information

This Presentation contains summary information about Cann and its activities which is current as at the date of this Presentation. The information provided in this Presentation pertaining to Cann and its business assets, strategy and operations is for general informational purposes only.

Future performance

This Presentation contains certain ‘forward looking statements’, including but not limited to projections, guidance on future revenues and other potential synergies and estimates about the future performance of Cann. Forward looking statements can generally be identified by the use of forward-looking words such as, ‘expect’, ‘anticipate’, ‘likely’, ‘intend’, ‘should’, ‘could’, ‘may’, ‘predict’, ‘plan’, ‘propose’, ‘will’, ‘believe’, ‘forecast’, ‘estimate’, ‘target’ ‘outlook’, ‘guidance’, ‘potential’ and other similar expressions within the meaning of securities laws of applicable jurisdictions.

The forward-looking statements contained in this Presentation are not guarantees or predictions of future performance and involve known and unknown risks and uncertainties and other factors, many of which are beyond the control of Cann, and may involve significant elements of subjective judgement and assumptions as to future events which may or may not be correct. No representation, warranty or assurance (express or implied) is given or made in relation to any forward-looking statement by any person (including Cann). There can be no assurance that actual outcomes will not differ materially from these forward-looking statements. A number of important factors could cause actual results or performance to differ materially from the forward-looking statements. The forward-looking statements are based on information available to Cann as at the date of this Presentation.

Except as required by law or regulation (including the ASX Listing Rules), Cann undertakes no obligation to provide any additional or updated information whether as a result of new information, future events or results or otherwise. Indications of, and guidance or outlook on, future earnings or financial position or performance are also forward-looking statements.

Past performance

Investors should note that past performance, including any historical information in this Presentation cannot be relied upon as an indicator of (and provides no guidance as to) future Cann performance including future share price performance.

All rights reserved

Copyright in this Presentation (including in any photographs) is the property of or is licensed to Cann and is protected under copyright laws. No part of this Presentation may be reproduced, distributed, or transmitted in any form or by any means, including photocopying, recording, or other electronic or mechanical methods, without the prior written permission of the Company, except in the case of brief quotations embodied in critical reviews and certain other non-commercial uses permitted by copyright law.

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Executive summary

	•	Cann has agreed terms for the acquisition of Satipharm, a European based business with proprietary cannabinoid delivery technology
	•	The acquisition secures proprietary micro-encapsulation delivery technology, enabling Cann to immediately access UK and some European low dose CBD
Strategic M&A		markets and to establish Gelpell® GMP manufacturing in Australia and fast track development of unique medicinal cannabis formulations across Cann’s
		product offering
	•	Maximum purchase consideration of CAD$4.00m will be funded through CAN scrip
	•	Significant regulatory delays due to COVID impacts both in Australia and Germany
Revenue	•	FY revenue forecast of $8m-$10m (subject to regulatory clearances) vs $15m as previously guided
guidance update	•	New forecast reflects update to expected timing only – revenue originally expected in FY21 now expected in first half of FY22
	•	Despite the delays customer demand continues to strengthen
	•	Cann continues to pursue a strategy of market leadership in the Australian medicinal cannabis industry and leveraging a combination of technology and scale
Strategy		to be a significant supplier to markets around the world
unchanged	•	Cann is executing this strategy by securing near term revenue opportunities and commercialising a pipeline of new innovative products – expected to be
		accelerated as a result of the Satipharm acquisition
Strong	•	The Mildura expansion remains a critical component of Cann’s growth strategy, with site activities underway in February
commitment	•	$50 million bank facility with NAB secured to fund expansion activities
to Mildura	•	Stage 1A scheduled for commissioning by end of current calendar year
expansion	•	Potential for further COVID impacts being monitored closely to minimise possible delay

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1. Strategic M&A to accelerate revenues & bolster product pipeline

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Share Sale Agreement executed for Cann to acquire Satipharm

• Satipharm is exclusively licensed to develop and distribute cannabis-based products utilising proprietary Gelpell[® ] micro-encapsulation technology

• Gelpell[®] is supported with data that indicates increased bio-availability and superior stability/shelf-life in products which use this technology

• Patent protected

  • Improves absorption of CBD and other cannabinoids

• Facilitates dosing accuracy  Typical ‘pharmaceutical’ presentation form

• Satipharm currently focused on low dose CBD market segment, with distribution arrangements in place in UK, Ireland and some Eastern European markets, including major pharmacy chains Boots, Lloyds and Holland & Barrett

• Satipharm is forecast to generate ~$1m in revenues for the six months to 30 June 2021, with a material ramp up in sales expected thereafter (subject to rollout of Gelpell[®] in European pharmacies)

• Cann is also in discussions with Harvest One in relation to potential distribution arrangements in North America

• Gelpell[®] based products are currently being sold by Satipharm in Australia under the Special Access Scheme and recent regulatory changes also provide a pathway toward over the counter sales

• By establishing GMP manufacturing for Gelpell[®] in Australia, Cann will utilise the technology across the full spectrum of cannabis formulations

• Cann’s ability to fast-track development of THC based medicinal cannabis products using Gelpell[® ] technology adds significant value to the Satipharm opportunity

Notes:

1. Up-front scrip consideration to be issued at 5 day VWAP on ASX trading day immediately prior to completion date

2. To be received in cash or scrip at the discretion of CAN

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Summary of key terms and conditions

	Key terms CAD$ million
	Total maximum consideration $4.00 million
	Up-front scrip consideration1 $2.50 million
	Deferred consideration2 up to $1.50 million

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Strong strategic rationale, securing both existing and future market opportunities

Existing and future opportunities in quickly developing low dose CBD market

Fast-tracked opportunities in prescription and over the counter medicinal cannabis segment

• Includes existing commercial supply agreements with retail channels in United Kingdom, Ireland and Eastern Europe and supply via Special Access Scheme in Australia. Low dose CBD products approved for OTC pharmacy supply this month.

• Cann plans to proceed with submission to have Gelpell® capsules registered on the Australian Register of Therapeutic Goods (ARTG) in Australia, following TGA approval for low dose CBD products to be sold OTC at pharmacies

• Allows Cann to utilise the proprietary Gelpell® microencapsulation technology across the full spectrum of cannabis formulations, including THC

• Existing bioavailability and stability data facilitates fast-tracking of development program

• Potential to give Cann a differentiated product position on a global basis

• North American distribution rights currently under discussion with Harvest One.

Leveraging the Satipharm acquisition to develop new market segments, access new geographies, and develop a range of unique medicinal cannabis formulations

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2. Update to revenue guidance

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Updated FY21 revenue forecast – market demand remains strong

• COVID has led to regulatory delays, both in Australia & international markets, that have limited Cann’s ability to ship product to customers

• Forecast revised to $8-10m, remains subject to receipt of necessary regulatory approvals

• New forecast reflects update to expected timing only – with some FY21 revenue now expected to be recognised in first half of FY22

• Sales to German partner iuvo Therapeutics form the majority of anticipated revenue that has been delayed

• Initial 19,000 unit order from iuvo expected to be ready for shipment by early April – order now increased to ~25,000 units given strong customer demand

• Further shipments to UK partner LYPHE Group expected in April

• Orders for supply to Australian partners continue to grow – more than 5,000 bottles expected to be delivered in current quarter

• Fundamentals of business remain unchanged

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3. Strengthening the core business model

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A vertically integrated medicinal cannabis producer, supplying markets in Australia & overseas

Production

Existing facilities currently provide 1,200kg p.a in capacity with Stage 1A of Mildura allowing for an additional 12,500kg p.a

Manufacturing

Arrangements for the manufacture of Active Pharmaceutical Ingredients (resin & oils) and finished products under GMP

Distribution

Distribution agreements in place in Australia with Symbion and in key European markets (Germany & UK) with iuvo & LYPHE Group to deliver Cann manufactured product through pharmacies to patients

Collaborations

R&D capabilities bolstered by work alongside Agriculture Victoria, CSIRO, La Trobe University, NSW DPI & Monash Medical Innovation Centre

Supply

Agreements in place to supply customers in Australia & overseas markets including the UK, Germany & New Zealand.

Cultivars

Testing & developing strains with improved attributes for cultivation at scale

Products

Expanding range of value-added products in Cann’s portfolio for supply to Australian & overseas customers

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Multiple pillars of growth

Supply/offtake agreements supporting revenue growth

• Cann has multiple supply/offtake agreements in place with both Australian domestic and overseas based medicinal cannabis companies

• • Key supply agreement with iuvo Therapeutics, with order recently increased to ~25,000 units to be manufactured and shipped immediately upon regulatory clearance

• • Cann is currently pursuing additional contracts

• • Based on customer forecasts, and subject to regulatory clearances, Cann is projecting revenues of $8-10 million in FY21

• Strategic M&A Product pipeline Mildura expansion

• • Cann Group continues to review • Cann is developing a range of • Cann remains committed to Mildura strategic M&A opportunities that drive value-added finished product expansion plans near term revenues and consolidate formulations • Mildura facility will provide

• an industry leadership position • The Satipharm acquisition fast substantial technology and efficiency

• • Cann has executed a share sale tracks Cann’s ability to develop gains agreement for the acquisition of and commercialise novel • $50m debt financing secured from Satipharm , an established Europe- cannabinoid (including THC) NAB with construction activities

• based business focused on unique formulations based on the Gelpell® restarted in February

• cannabinoid (CBD) product technology formulations • TGA down-scheduling of certain low • Monitoring COVID situation closely

• • The acquisition gives Cann an dose CBD products provides a and planning to minimise potential impact

• immediate position in the rapidly significant opportunity for Cann to growing low dose CBD market seek registration of Gelpell® in • Expansion provides scale and cost segment , and fast tracks the Australia, with supply in the interim base to enable Cann to be globally development of new, novel THC under the TGA’s Special Access competitive based medicinal cannabis Scheme • Substantial uplift in margins as Cann

• formulations • Cann’s extensive genetics program transitions from imported biomass to

• • The existing Satipharm CBD aims to develop multiple cannabis local cultivation business is projected to generate strains that address specific revenues of ~$1 million in FY21 indications

• $50m debt financing secured from NAB with construction activities restarted in February

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4. Mildura expansion program recommences

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Mildura remains a critical part of Cann’s expansion plans

• Stage 1a proposed to include capacity to produce 12,500kg of dry flower per annum

• Expected timeline:

• Construction restarted February 2021

• Planned commissioning by end of 2021

• First material planned to be processed & ready for release by March 2022

• Mildura facility will provide substantial technology & efficiency gains

• Expansion provides scale & cost base to enable Cann to be globally competitive

• Cann has received debt financing from NAB for construction of the Mildura project

• $50m amortising facility over a term of 8 years

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5. Positive industry fundamentals

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Industry status

• Australian momentum continues to be positive

• Consistent growth in SAS approvals – now more than 6,000 per month

• Level of demand expected to require 40,000kg per annum of dry flower production within five years

• Regulatory reform, including CBD becoming available over-the-counter, will improve patient access

• Global market expansion continues

• Shortage of GMP compliant product in key markets

• New international markets continue to open up including Europe (Germany, France, Poland), UK & NZ

• Important recent regulatory changes include UN decision to reschedule cannabis

• Acceptance & body of evidence increasing

• Growing number of medical professionals prescribing medicinal cannabis

• Clinical trials & medical evidence continues to build

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Corporate structure (at 12/2/21)

Share price	$0.77
ASX code	CAN
Market capitalisation	$208m
Shares on issue	270m
Options	24.2m
Cash at bank (31/12/20)	$27.74m

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Highlights

• Market demand for medicinal cannabis remains strong despite regulatory & COVID related delays

• Track record of successful cultivation and GMP standard product commercialisation

• Variety of paths to market via successful B2B supply strategy, expanding portfolio of Cann products and through planned registration of Satipharm OTC products provides B2C pathway

• Satipharm acquisition represents a unique opportunity to access low dose CBD segment and fast-track development of novel, differentiated THC formulations

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• Construction at Mildura back underway with commissioning of first stage expected by calendar year end

• Outlook continues to improve with domestic and international tailwinds including UN downscheduling, TGA ruling on CBD & US House of Reps vote

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CONTACTS:

Clive Fanning Head of Investor Relations Cann Group Limited +61 (0) 3 9095 7088 contact@canngrouplimited.com

Peter Crock CEO

Cann Group Limited +61 (0) 3 9095 7088 contact@canngrouplimited.com

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