Company Update
Half Year Financial Results
4 September 2017
TPI Enterprises LtdABN 26 107 872 453
2
Contents
TPE Background 3
1st Half Highlights 6
Recent Highlights 8
Strategic Priorities and Progress 15
Financial Results 20
3
Technology and Innovation Based Company
1. Founded: January 2004
2. Listed on the ASX (TPE): August 2015
3. Employees: 62
4. Core competency: Lowest cost Narcotic Raw Material (NRM) producer based on novel environmentally friendly water based extraction technology
5. Manufacturing and Head Office: Melbourne, Victoria (relocated from Cressy in 2016)
6. Other sites: Lisbon, Portugal; Cressy, Tasmania
7. Market Cap $190 million
TPE Background
4
1. Source Raw Material (Opium Poppies) globally
a. Only company to source in both hemispheres.
2. Extract, isolate and purify Narcotic Raw Material (NRM) at our Melbourne based facilitya. Morphine b. Codeine c. Oripavined. Thebaine
3. Sell NRM globally
4. Sell Poppy seed for culinary purposes globally
Provide Access to Pain Relief
What We Do
5
Morphine
Codeine
Morphine Sulphate
Codeine Phosphate
MS Contin
Panadeine
Panadeine Forte
Thebaine
Oxycodone HCI
Hydrocodone
Buprenorphine
Oxycontin Endone
Vicadin Tylenol
Oripavine
Naloxone
Naltrexone
Buprenorphine HCI
Suboxone Revia
Subutex Contrave*
Narcan
Natural narcoticsSynthetic and semi-synthetic
narcotic derivatives
Finished Dosage Form (FDF)Active Pharmaceutical Ingredient
(API)Raw Material Sourcing Narcotic Raw Material (NRM)
Narcotics Industry Overview
1st Half Highlights
7
2017 Year To Date
1. $44 million capital raising to clear debt and strengthen balance sheet 23 March 2017
2. Toll Processing deal for 2000 tonnes of Crop (25-30 tonnes of NRM) 3 April 2017
3. 1st Hungary Straw imports arrive in Melbourne and pass quarantine 26 June 2017
4. UK Contract for Codeine Phosphate (CPO) supply of 10% market share 30 June 2017
5. 2nd UK Contract for Codeine Phosphate (CPO) supply taking total to 20% market share 11 July 2017
6. Acquisition of API and FDF site in Norway 15 July 2017
Recapitalisation, additional Sales and Acquisition
Recent Highlights
Acquisition of API & FDF
Capability in Norway
9
Exciting and transformational change for the business
1. Agreement to acquire Vistin’s CMO and Opiate API manufacturing site in Norway
2. Final settlement expected October 2017
3. 35 tonnes Codeine Phosphate API capability, expandable to 70 tonnes over 3 years
4. Fast tracks UK Sales through EDQM (European Directorate for Quality of Medicine), Certificate of Suitability (CEP) registration gains
5. >50 registered customers
6. 2 year CMO contract with Weifa, gross margin covers all fixed overheads
7. 1.6 Billion tablet capacity with room for expansion
Active Pharmaceutical and Tableting Capability Acquisition (Norway)
10
1. Experienced team in API and FDF
2. Expands TPE customers from less than 10 to greater than 50
3. Stand alone opiate API and FDF capability (rare)
4. Site capacity and sales potential through minimal CAPEX1. 35 tonne CPO to 70+ tonnes p.a over 3 years2. 0.9 Billion tablets expandable to 1.6 billion tablets sales over 3 year
5. Successful ongoing implementation of operational efficiency program1. 20million NOK saving (annualised) already realised, but not yet in reported results2. Further saving identified and will be quantified after closing
6. Fully integrates TPE from the farm to the Pharmacy
7. EPS accretive deal >10 cps in 2018, with target payback period (excluding inventory) of 3 years
Fully Integrated from the Farm to the Pharmacy
Acquisition Rationale
11
One of Four (4) Fully Integrated Narcotic Suppliers Globally
Finished Dosage Form (FDF)
Active Pharmaceutical Ingredient (API)
Raw Material Sourcing Narcotic Raw Material (NRM)
TPI current capability “Vistin Opiates” Capability
Fully integrated Value Chain
API and FDF Site Acquisition (Norway)
12
Morphine NRM
Site change using Vistin CEP will speed up UK supply by 6 months
1. Original UK supply of CPO was Q4 2018 at earliest
2. Plan was to supply Codeine CPS direct to UK and register a site change for Codeine to Codeine Phosphate production
3. Using Vistin CEP, Morphine NRM will be sent to Vistin, converted to Codeine NRM and then sent to Sterling Pharma Solutions Limited (SPSL) for conversion to Codeine Phosphate
4. Production savings through longer production runs
5. This new route will bring forward sales announced this year by 6 months
6. Now expect >30% UK market share to start in Q2 2018
Codeine NRM
Acquisition Fast Tracks UK Supply of Codeine Phosphate (CPO)
13
Supply of Morphine NRM to Vistin then Supply of CPO API Globally
1. Vistin has >50 registered CPO and Pholcodine customers
2. FY 17 Budgeted to sell 30 tonnes of CPO
3. Access to Indian Tender (20-40 tonnes p.a)
4. Will expand capacity from 35-70 tonnes of CPO over next 3 years for c.a $2 million AUD
Access to Major Open Codeine Phosphate (CPO) API markets
14
Supply of Morphine NRM to Vistin then supply of Tablets to most countries except USA
1. Most countries globally are open to tablets
2. USA requires FDA approval
3. Countries with closed API markets (UK, etc) can be supplied via tablets
Access to Codeine Phosphate (CPO) Finished Dosage Markets
Strategic Priorities & Progress
16
1. Northern Hemispherea. Hungaryb. France c. UKd. Turkeye. Portugal
2. Southern Hemispherea. Tasmaniab. New South Walesc. Victoriad. South Australiae. Northern Territory
TPE has completely changed the industry supply dynamics
Sourcing Poppies Globally
17
2017-First Year TPE has Sufficient Straw to Meet Sales
18
Ramping Production From 4.5 days/wk to 7 Days/wk
19
Sales of 55tns NRM1500 tns Poppy Seed
KPI Result
Productionthroughput ✓
Sufficient contracts
✓
Sufficient raw material
✓
Sufficient Poppy Seed ✓
Clean Poppy Seed
production
Delayed until H2
2017
Cost Reduction
KPI Result
15% fixed cost ✓
20% Reduction in
Crop Cost
✓
ReducedInterest costs
✓
Agri overheadReduction
✓
Reduction in COGS
✓
ExpandedCustomer base
KPI Result
US MarketSamples supplied
Asia Explore
UK CPO Contract
✓
India contracts
Nov2017
Other Toll contracts
N/A
Supply Chain
KPI Result
NSW/SA Growing ✓
Codeine & Thebaine varieties
✓
Hungary imports
✓
Toll Processing
✓
3000HaContracted in
Australia
2700 Ha
UK CPO API Strategy
KPI Results
Codeine NRM Produced ✓
CPO UKRegistration
batches
Oct2017
CPO CEP Submission
Jan2018
CPO Validation
Sept2018
CPO CEP Approval
Mar2018
On Track
Progress Update
Financials
21
1. Total Operating Revenue of $5.9 million
a. NRM and seed sales increase of +$4.5m compared to prior corresponding period
b. Seed sales held back due to lower global seed pricing levels, expect uplift of seed volumes 2H17
2. Gross profit of $1.2 million
a. Gross profit increase of $1.4m compared to prior corresponding period due to improved operating leverage with higher sales volumes
b. Production costs impacted by planned non-productive periods used to produce licence validation batches
3. Overhead costs of $5.4 million
a. Increase from prior period largely due to additional R&D expenses
4. Non-recurring acquisition & impairment costs of $1.8 million
a. Vistin acquisition costs and inventory impairment costs
5. Net debt reduction of $29.9m
a. Proceeds of $44.2m March 2017 capital raise partially utilised to pay down borrowings
6. Entered agreement to Acquire Vistin Opiates for A$25.4M
Profit & Loss Summary ($’000) 1H 2017 1H 2016
Operating RevenueSales of NRM & Seed
Cost of goods sold
5,952
4,705
1,482
1,674
Gross ProfitGross profit %
1,24720.9%
(192)-12.9%
Other overhead costOperating EBITDA
5,399(4,152)
4,809(5,000)
Acquisition costs & inventory impairmentsOther revenue
1,756
(21)
-
(424)
Reported EBITDADepreciation & AmortisationNet Finance expenses
(5,887)1,3631,521
(4,576)1,4501,245
Net Loss After Tax (8,770) (7,271)
Key Balance Sheet Items ($’000)June2017
December 2016
Cash & cash EquivalentsBorrrowings
10,7258,318
62328,073
Net Debt (2,406) 27,451
Contributed Equity 164,494 122,179
FY17 1st Half Results
22
Summary informationThe following disclaimer applies to this document and any information provided regarding the information contained in this document (the “Information”). The Information has been prepared by TPI Enterprises Ltd and relates to the TPI group (including, without limitation, Purplebay Pty Ltd and TPI’s Portuguese subsidiaries or any new entity subsequently incorporated following the date on which this Information is provided) (collectively “TPI”). The Information in this presentation is of general background and does not purport to be complete. You are advised to read this disclaimer carefully before reading or making any other use of this document or any information contained in this document. In accepting this document, you agree to be bound by the following terms and conditions including any modifications to them.
Not financial or product adviceThis presentation is for information purposes only and is not financial product or investment advice or a recommendation to acquire securities in TPI without taking into account the objectives, financial situation or needs of individuals. You are solely responsible for forming your own opinions and conclusions on such matters and the market and for making your own independent assessment of the Information. TPI is not licensed to provide financial product advice.
Financial dataAll dollar values are in Australian dollars (A$) unless stated otherwise.
Past performancePast performance information given in this presentation is given for illustrative purposes only and should not be relied upon as (and is not) an indication of future performance.
Future performanceThe presentation includes forward-looking statements regarding future events and the future financial performance of TPI. Forward looking words such as “expect”, “should”, “could”, “may”, “predict”, “plan”, “will”, “believe”, “forecast”, “estimate”, “target” or other similar expressions are intended to identify forward-looking statements. Any forward looking statements included in this document involve subjective judgment and analysis and are subject to significant uncertainties, risks and contingencies, many of which are outside the control of, and are unknown to, TPI and its officers, employees, agents or associates. In particular, factors such as variable climatic conditions and regulatory decisions and processes may affect the future operating and financial performance of TPI. This may cause actual results to be materially different from any future results, performance or achievements expressed or implied by such statements. The Information also assumes the success of TPI’s business strategies. The success of the strategies is subject to uncertainties and contingencies beyond control, and no assurance can be given that the anticipated benefits from the strategies will be realised in the periods for which forecasts have been prepared or otherwise. Given these uncertainties, you are cautioned to not place undue reliance on any such forward looking statements. TPI is providing this information as of the date of this presentation and does not assume any obligation to update any forward-looking statements contained in this document as a result of new information, future events or developments or otherwise.
Disclaimer