About Neptune Wellness Solutions

Neptune Wellness Solutions Inc. (Neptune) operates as a modern consumer packaged goods (CPG) company. Neptune is a diversified and fully integrated health and wellness company with multiple brand units. Neptune focuses on building a broad portfolio of high quality, affordable consumer products in response to long-term secular trends and market demand for natural, plant-based, sustainable and purpose-driven lifestyle brands. Neptune is a provider of turnkey product development and supply chain solutions to business customers across several health and wellness verticals, including nutraceuticals and white label consumer packaged goods. Neptune has expanded its operations since June 2020 into several brand units in order to better address its markets. The main brand units are the following: Nutraceuticals, Beauty & Personal Care, and Organic Foods & Beverages. Business Strategy The company's long-term strategy is focused on the health and wellness sector with an emphasis on select the Consumer Packaged Good (CPG) verticals, including Nutraceuticals, Beauty & Personal Care, and Organic Foods & Beverages. Neptune's brand portfolio across these verticals includes Sprout, Neptune Wellness, Forest Remedies, and MaxSimil. On June 9, 2021, Neptune announced a multi-year licensing agreement between Sprout and CoComelon, the world's leading children's entertainment brand, owned and operated by Moonbug. In addition, on July 27, 2021, an initial launch was announced for Sprout products into Canada, in Metro grocery stores in the province of Ontario. Neptune’s future will be focused on brand creation, accelerating organic growth with emphasis on increased efficiency and margin expansion. This will be complimented by accretive acquisitions with a proven track record of operational excellence. On July 22, 2021, the company launched Forest Remedies’ plant-based Omega 3-6-9 gummies and soft gels. Neptune focuses on expanding its exclusive Omega-3 delivery technology MaxSimil while improving growth and profitability in its Nutraceuticals vertical. The MaxSimil product lineup will be expanded with the launch of two new consumer products: MaxSimil with CoQ10 and MaxSimil with Curcumin. Additionally, the company launched a new consumer line of Vitamin Sprays and Pumps for both children and adults with selected retail partners. To support anticipated accelerated growth, the Nutraceuticals U.S. sales force has been expanded to maximize awareness and distribution of the capabilities and expertise in CBD formulation, prebiotics and probiotics, and proteins within this important vertical. Products The company’s Nutraceutical, Beauty and Personal care products and Organic Foods and Beverages are manufactured by third party manufacturers. In order to meet demand for the company’s products, it has developed relationships with selected contract manufacturers. The company purchases raw materials for the manufacturing of its products from suppliers recognized for their quality and consistency. The company’s quality control staff requires full disclosure on the part of its suppliers and it periodically conducts on-site audits of their facilities. Canadian Cannabis Products - Extracts and Formulations The company retrofitted its existing production facility located in Sherbrooke, Province of Quebec, Canada to comply with Health Canada requirements under the Cannabis Act, in order to produce the company’s cannabis extracts and formulations at its existing site. The company’s GMP (Good Manufacturing Practices, mandated by the Natural Health Products Directorate of Health Canada) production facility features robust safety measures and equipment, which allows for enhanced manufacturing practices. The company also operates a laboratory at its facility, which allows it to conduct research, new product development and quality control analysis in-house. As a condition for obtaining its license to produce cannabis oil under the Cannabis Act, Health Canada required multiple compliance measures to be taken, including the addition of physical barriers, visual monitoring, recording devices, intrusion detection, as well as other important controls around access to the company’s existing Sherbrooke facility. On June 8, 2022, the company announced a planned accelerated divestiture of the Canadian cannabis business, including the sale of its cannabis brands and the Sherbrooke building in one or more transactions. Markets Nutraceuticals Neptune offers a variety of specialty ingredients, including its licensed specialty ingredient MaxSimil, a technology that helps increase digestion and absorption of fat-soluble and nutritional ingredients. Additionally, the company sources a variety of other marine oils, seed oils and specialty ingredients that are available for sale as raw material or transformed into finished products. The company has recently launched a new line of Vitamin Sprays and Pumps for both children and adults. Neptune is focused on expanding its exclusive Omega-3 delivery technology MaxSimil while improving growth and profitability in its Nutraceuticals vertical through its brand Biodroga. Neptune’s core strength is product innovation with a focus on specialty ingredients offered in bulk soft gels and liquid delivery systems. The company continues to expand its delivery system capabilities with projects for pumps, sprays, roll-ons and CBD enhancements. All of Neptune’s Nutraceutical products are available under distributors’ private labels, primarily sold in the Canadian and the U.S. nutraceutical markets. Neptune, through its nutraceuticals products business, also formulates, develops and provides customers with turnkey nutrition solutions. Beauty and Personal Care The company sells wellness products to the Beauty & Personal Care market through its Forest Remedies brand. Forest Remedies offers plant-based supplements, including first-of-its kind multi-omega gummies and soft gels with packaging that is 100% plastic-free. Neptune announced, on March 10, 2022, the launch of its Forest Remedies Multi Omega 3-6-9 line of supplements into more than 340 Sprouts Farmers Market stores across the U.S. This distribution agreement marks another important milestone in the company’s efforts to transform Neptune into a high-growth branded CPG company. Organic Foods and Beverages In February 2021, Neptune acquired a controlling interest in Sprout Foods, Inc., an organic plant-based baby food and toddler snack company. Sprout is an integral piece of Neptune’s health and wellness portfolio and represents a key brand within the Organic Foods and Beverages vertical. Since completing the Sprout acquisition, the company has begun expansion efforts in Sprout’s distribution across substantially all of Target’s U.S. retail stores. The company also announced, on July 27, 2021, the initial launch of Sprout products into Canada, in Metro grocery stores in the province of Ontario. Neptune further expects to launch Sprout products in North America throughout the remainder of the fiscal year. Sales and Distribution Nutraceutical Products The company sells its nutraceutical products mainly in bulk softgels or liquids to multiple distributors and customers, who commercialize these products under their private label. While the company may have orders in place with approximately 100 different distributors and customers at any one time, the majority of the company’s sales are concentrated with a small group of distributors and customers. Beauty and Personal Care The company sells its Beauty and Personal Care products through distributors and directly to retail outlets in the United States. It also sells its products online through its own website forestremedies.com, as well as e-commerce sites. Organic Foods and Beverages The company, through its Sprout Foods, Inc. (Sprout) subsidiary, sells its products to mass retailers, grocery stores and other retail outlets, as well as online through e-commerce sites and its own website sproutorganics.com. B2C Brand Portfolio Strategy The company is working on accelerating brand equity for its brand portfolio: Biodroga: Neptune, through its Biodroga Nutraceuticals Inc. (Biodroga) subsidiary, provides product development and turnkey solutions (4PL) to its customers throughout North America. Biodroga offers a full range of services, whether it is leveraging its global network of suppliers to find the best ingredients or developing unique formulations that set its customer apart from their competition. Biodroga’s core products are MaxSimil, various Omega-3 fish oils and a line of CBD (hemp-derived cannabidiol) enhanced products, as well as softgel solutions. MaxSimil: Neptune’s patented MaxSimil is an omega-3 fatty acid delivery technology that uses enzymes that mimic the natural human digestive system to predigest omega-3 fatty acids. The Journal of Nutrition by the Oxford University Press, released the results of a clinical study that evidences MaxSimil’s superior absorption as compared with standard fish oil supplements. MaxSimil was first introduced to the market in 2018, and is sold as a straight omega-3 supplement with standard and unique concentration of EPA/DHA. MaxSimil is also starting to be presented in combination with specialty ingredients, such as Curcumin, Vitamin K2 and CBD. Forest Remedies: Under its Forest Remedies brand, the company offers first-of-their kind vegan multi-omega gummies and soft gels with packaging that is 100% plastic-free. Launched on March 10, 2022, the company’s Forest Remedies Multi Omega 3-6-9 line of supplements is available into more than 340 Sprouts Farmers Market stores across the U.S. This distribution agreement marks another important milestone in its efforts to transform Neptune into a high-growth branded CPG company. Sprout: Neptune entered a new market with the Neptune/Sprout combination. Sprout has created a trusted organic baby food brand with a comprehensive range of products that are always USDA certified organic, non-GMO and contain nothing artificial. Sprout’s products target four segments: Stage 2 (children 6 months and up), Stage 3 (children 8 months and up), Toddler (children aged 12 months and up) and Snacks (children 8 months and up). Since its acquisition of a controlling interest in Sprout Foods, Inc. (Sprout), the company has begun expansion efforts in Sprouts’ distribution substantially in all of Target’s U.S. retail stores. The company also announced on July 27, 2021, its initial launch into the Canadian market through its partnership with food retailer Metro Inc. Certain toddler snacks under this brand label are available in Metro grocery stores in the province of Ontario. Regulatory The company’s Nutraceutical, Beauty, Personal Care and Organic Food and Beverage businesses are subject to varying degrees of regulation by a number of government authorities in Canada and the U.S., including Health Canada, the U.S. Food and Drug Administration (the FDA), the Federal Trade Commission (FTC), the Consumer Product Safety Commission, the U.S. Department of Agriculture, and the Environmental Protection Agency. Health Canada and the FDA, in particular, regulate the formulation, manufacturing, packaging, storage, labeling, promotion, distribution and sale of vitamins and other nutritional supplements in Canada and the U.S., while other agencies regulate marketing and advertising claims. Under Health Canada and FDA rules, companies that manufacture, package, label, distribute or hold nutritional supplements are required to meet certain GMP’s to ensure such products are of the quality specified and are properly packaged and labeled. The company is committed to meeting or exceeding the standards set by Health Canada and the FDA. The company is operating within the mandated GMP. Health Canada and he FDA also regulate the labeling and marketing of dietary supplements and nutritional products, including the following: The identification of dietary supplements or nutritional products and their nutrition and ingredient labeling; Requirements related to the wording used for claims about nutrients, health claims, and statements of nutritional support; Labeling requirements for dietary supplements or nutritional products for which high potency and antioxidant claims are made; Notification procedures for statements on dietary supplements or nutritional products; and Premarket notification procedures for new dietary ingredients in nutritional supplements. The company is also subject to a variety of other regulations in Canada and the U.S., including those relating to health, safety, bioterrorism, taxes, labor, employment, import and export, the environment and intellectual property. Cannabis Regulatory Framework On June 8, 2022, the company announced the planned accelerated divestiture of its cannabis business, including the sale of its brands, as well as the Sherbrooke building in one or more transactions. Brand Names and Trademarks Mood Ring, PanHash, Sprout, NurturMe, Nosh!, Neptune Wellness, MaxSimil, Forest Remedies, and Ocean Remedies are trademarks of the company. On June 8, 2022, the company announced the planned accelerated divestiture of its cannabis business, including the sale of its Cannabis Brands, Mood Ring and PanHash, as well as the Sherbrooke building in one or more transactions. Patent Applications On August 9, 2018, Neptune filed two applications with the United States Patent and Trademark Office (USPTO) for patents related to the extraction of cannabis material. Both processes are applicable to marijuana and hemp and have been incorporated into the company’s GMP-certified extraction facility in Sherbrooke. The first patent application outlines a method of extracting and isolating compounds from plants of the Cannabis genus at low temperature by using a cold organic solvent. The second patent application similarly provides for a method for extracting compounds from cannabis at low temperature, but without the use of organic solvents. Specifically, this patent relates to a process for high recovery of cannabinoids and terpenes by using natural solvents. Licenses On November 27, 2017, Neptune entered into an exclusive, worldwide, and royalty-bearing licensing agreement for the use of the MaxSimil technology, in combination with cannabis-derived products. This new agreement allows Neptune to research, manufacture, formulate, distribute, and sell monoglyceride omega-3-rich ingredients in combination with cannabis and/or cannabinoid-rich or hemp derived ingredients for medical and adult use applications. On June 9, 2021, Sprout Foods, Inc. entered into a multi-year licensing agreement with Moonbug Entertainment Limited (Moonbug), providing Sprout with an exclusive license to utilize certain properties relating to CoComelon, the world's leading children's entertainment brand, owned and operated by Moonbug, with Sprout products. Seasonality In addition to general economic factors, the company is impacted by seasonal factors and trends, such as major cultural events and other unpredictable matters. Strategic Partnerships In February 2022, the company brought Walmart a first-of-its-kind collaboration between Sprout Organics and popular kids' entertainment platform CoComelon. This co-branded product line is available on Walmart.com and in 900 Walmart stores next month, and has been very well-received. With this launch, Sprout Organics sells into the top organic baby food retailers in the U.S., accounting for approximately 90 percent of the overall market. History The company was founded in 1998. It was formerly known as Neptune Technologies & Bioressources Inc. and changed its name to Neptune Wellness Solutions Inc. in 2018. The company was incorporated under Part IA of the Companies Act (Quebec) in 1998.