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Please refer to important disclosures at the end of the report

SynBiotic SE Germany - Health Care / Pharma

17-May-21

Buy (Initiation)

Price target: EUR 75.00 Aliaksandr Halitsa

Analyst

Price: EUR 22.00 Next result: tbd

Bloomberg: L3D GY Market cap: EUR 59.9 m [email protected]

Reuters: L3D.DE Enterprise Value: EUR 62.5 m Tel.: +49 40 414 3885 83

When time meets opportunity; initiate with a BUY

Billy Caldwell was handed a “death warrant” when his life-saving cannabis-based epilepsy medication was confiscated at Heathrow Airport. A 300-day seizure-free period ended abruptly with hospitalization. It is only after an emergency permission was granted that Billy’s life was no longer in danger. This precedent helped the paradigm shift towards recognition of the therapeutic potential of cannabis and cannabinoids.

Following the UN’s decision in December 2020 to remove cannabis from the list of hard drugs and the subsequent European Commission’s acknowledgement of cannabidiol (CBD) – an active ingredient derived from the hemp plant – as food rather than narcotic, the European cannabis market is ripe for further regulatory easing and with that for substantial growth in the coming years (+67% CAGR to € 3.2bn by 2025E).

As the only listed European cannabis player, SynBiotic is pioneering the European cannabis revolution in a unique way. Unlike most of its peers, instead of placing the entire focus on CBD products, SynBiotic – besides operating one of the largest CBD brands in Germany – is building a “center of competence” in the cannabinoid space that goes far beyond CBD, effectively consolidating the strongest players under one roof via a Buy-and-Build strategy.

SynBiotic was incorporated in 2020 and merged with Solidmind (successful D2C retailer of nutritional products, including CBD) with an aim of building a platform-company by adding production and, most importantly, R&D capabilities, which are seen to be the key driver behind the new product developments in the cannabinoid space.

With that, the company should be best positioned to tackle the immense market opportunity in the Sleep, Pain and Anxiety problem areas estimated at € 250bn p.a., as cannabinoid based products evolve into a mainstream consumer category and carry a substantial medical potential.

Valuation upside is easy to grasp. In the US and Canada where regulatory pathways are more defined and consumer acceptance is on the rise, cannabis companies have seen their valuations surge, underpinning the attractiveness of the market.

This should serve as a blue print for the European cannabis industry AND SynBiotic is at the helm of it. In light of improving regulatory backdrop in Europe, the valuation gap to the US/Canadian peers is seen to progressively narrow suggesting a multi-bagger investment opportunity. Initiated with BUY; PT of € 75 based on a peer group analysis.

Source: Company data, Hauck & Auf häuser

High/low 52 weeks: 28.60 / 19.30

Price/Book Ratio: -296.7

Relative performance (SDAX):

3 months -17.3 %

6 months -

12 months -

Changes in estimates

Sales EBIT EPS

2020 old:

∆

2021 old:

∆

2022 old:

∆

Key share data:

Number of shares: (in m pcs) 2.6

Authorised capital: (in € m) -

Book value per share: (in €) -

Ø trading volume: (12 months) -

Major shareholders:

Management & Founders

63.0 %

Other institutional investors

26.0 %

Free Float 11.0 %

Company description: Buy-and-Build cannabis platform-company w ith a focus on pharmaceutical and dietary

supplements and R&D of new cannabinoid and terpene-based solutions addressing the Sleep, Pain and Anxiety problem areas

Y/E 31.12 (EUR m) 2017 2018 2019 2020E 2021E 2022E 2023E

Sales n/a n/a n/a 9.4 14.8 30.4 50.2

Sales growth n/a n/a n/a n/a % 58 % 105 % 65 %

EBITDA n/a n/a n/a 0.0 0.4 3.2 4.7

EBIT n/a n/a n/a -0.4 -0.2 2.4 3.9

Net income n/a n/a n/a -0.3 -0.1 1.7 2.7

Net debt n/a n/a n/a 0.0 0.0 0.0 0.0

Net gearing n/a n/a n/a 0.0 % 0.0 % 0.0 % 0.0 %

Net Debt/EBITDA n/a n/a n/a 0.0 0.0 0.0 0.0

EPS pro f orma n/a n/a n/a -0.10 -0.05 0.63 1.04

CPS n/a n/a n/a n/a n/a n/a n/a

DPS n/a n/a n/a 0.00 0.00 0.00 0.00

Div idend y ield n/a n/a n/a 0.0 % 0.0 % 0.0 % 0.0 %

Gross prof it margin n/a n/a n/a 65.5 % 78.5 % 78.5 % 78.5 %

EBITDA margin n/a n/a n/a 0.3 % 2.8 % 10.4 % 9.4 %

EBIT margin n/a n/a n/a -3.9 % -1.2 % 7.8 % 7.8 %

ROCE n/a n/a n/a n/a n/a n/a n/a

EV/sales 0.0 0.0 0.0 6.7 4.2 2.1 1.2

EV/EBITDA n/a n/a n/a n/a n/a 19.7 13.3

EV/EBIT n/a n/a n/a n/a n/a 26.4 16.0

PER n/a n/a n/a n/a n/a 36.2 21.9

Adjusted FCF y ield n/a n/a n/a n/a n/a 2.6 % 4.4 %

Source: Hauck & Auf häuser Close price as of : 07.05.2021

SynBiotic SE

2 Hauck & Aufhäuser Privatbankiers AG

Table of Contents SynBiotic SE 1

Introducing SynBiotic 3

Competitive Quality 7

Growth 14

Valuation 17

Company Background 18

Contacts: Hauck & Aufhäuser Privatbankiers AG 32

SynBiotic SE


Introducing SynBiotic

SynBiotic is a Buy-and-Build operator in the European cannabis and cannabinoid market with an overarching objective to establish a fully integrated platform-company with activities spanning across the entire value

chain from R&D through manufacturing to final distribution of cannabinoid-based products.

The company was founded in mid-2020 based on an integration with the profitable German company SOLIDMIND Group GmbH (founded in 2015), which operated a number of successful direct-to-consumer (D2C) brands of

dietary supplements and health products, including one of the top 3 German CBD brands.

Through its Buy-and-Build strategy, SynBiotic has also established a meaningful presence across other important verticals of the value chain in a short period of time (see Competitive Quality for more details).

Source: Company data; Hauck & Aufhäuser * a completed takeover secured by April 2023

With a view on loosening regulations, rising consumer acceptance and a

growing body of research highlighting cannabis’ health benefits, SynBiotic looks set to transform its first-mover advantage into market share and become one of the leading European cannabis and cannabinoid players.

What are cannabinoids?

Cannabinoids are compounds (or natural active ingredients) found in the hemp plant (cannabis sativa) and other plants like hops, cacao, etc. In the modern world, cannabinoids increasingly receive a completely different meaning and

perception than what has been commonly associated with cannabis.

SynBiotic Platform Overview

Research & Development Production & Biotech Distribution

SynBiotic SE

Successful D2C brands(including one of the Top 3 German

CBD brands Hempamed)

Cannexo Pharma GmbH

Development and distribution of medical cannabisproducts

Proprietary clinical trial with cannabinoids

Development, analytics and contract manufacturing

Proprietary drug discovery platform

100%*

100%

50%

25% 100%

Independent German distributor of medical cannabis products

100%

SynBiotic SE


Changing perception of Cannabis

Source: Hauck & Aufhäuser

There are more than 100 individual cannabinoids in the hemp plant. While most of the them are still unstudied due to their small quantities in the hemp/cannabis

plant, the two most prominent cannabinoids are:

Tetrahydrocannabinol (THC) is the most notable cannabinoid responsible

for psychotropic effects, such as an alteration in perception, mood, consciousness, cognition, or behavior (i.e. it makes people “high”). While yet under-researched, there is an increasing amount of evidence in support

of THC’s potential in medicine.

Cannabidiol (CBD) is the most widely available cannabinoid accounting for

40% of the hemp plant’s extract. Unlike THC, it does not have a psychotropic effect but has a host of therapeutic benefits. Among others, CBD is shown to help with anxiety, depression, and seizures.

The role of cannabinoids in the human body Cannabinoids are the regulators of the endocannabinoid system , which is

an important part of the central nervous system and plays a critical role in a variety of physiological processes including appetite, pain-sensation, mood, and memory.

In simple terms, the role of the endocannabinoid system (ECS) is to maintain homeostasis or balance by ensuring that cells communicate

effectively when addressing signals of pain, stress or inflammation. A simple analogy would be to imagine the ECS as your apartment building and

your noisy neighbor being the stress signal. You asking your neighbor to turn the music down is the process by which the ECS restores the balance in the body.

In detail, there is a large number of cannabinoid receptors located throughout our body. Cannabinoids – which can be of internal (produced within the body)

or external origins (plant-derived) – activate these receptors and thereby support the functioning of the ECS.

Archaic perception of Cannabis Modern day Cannabis

SynBiotic SE


Source: Company data, Hauck & Aufhäuser

CBD redefines cannabis consumption

As mentioned, out of more than 100 identified cannabinoids in the hemp plant, CBD is the most researched one .

Cannabinoids spectrum


CBD is typically extracted from the hemp plant using the so-called CO2 extraction method where pressurized carbon dioxide pulls the desired

substances (e.g. cannabinoids, terpene oils and waxes) from the plant. Following the extraction, the CBD extract is combined with other ingredients

in order to arrive at a ready-to-sell product, which can come in many forms including oils, edibles, food supplements, cosmetics, etc.

Endocannabinoid System

Endocannabinoid System

Appetite

Digestion

Immune Response

Inflammation

Mood

Sleep

Pain

...many more

Cannabinoids

THC

CBC

CBV

…

CBG

CBD

SynBiotic SE



Thanks to its numerous beneficial physiological effects on the human

body, CBD is even sometimes referred to as “super food”. Although high-quality medical research is only now picking up its pace, there’s

ample of anecdotal evidence supporting multiple use cases of CBD products in the areas of sleeplessness, pain, anxiety and neurological disorders. This makes CBD and other less studied cannabinoids well worth of further research

and examination.

Source: Healthline; Hauck & Aufhäuser

Selected categories of CBD products

Oils and tinctures Edibles Vaporizers Creams and lotions

Use cases for CBD

Anxiety relief

and more...

Neuroprotective

Pain relief

Anti-seizure

Cancer treatment

SynBiotic SE


Competitive Quality

Major regulatory breakthrough for cannabis in Europe

When it comes to cannabis, the regulatory landscape is far from harmonized. On the contrary, there are significant differences in how regulators view cannabis processing and CBD-containing products across the continents and

individual counties. Based on the “cannabis friendliness” score that takes into account various

cannabis-related regulatory aspects and determines the friendliness of the local laws for growing, buying and using hemp products, North America is by far the most advanced region, while Europe is catching up fast.

Source: DailyCBD; Hauck & Aufhäuser

Indeed, 2020 marked a number of important milestones for the European cannabis industry, providing a positive impulse for growing cannabis

acceptance and the recognition of its therapeutic benefits.

Medical cannabis is removed from the list of hard drugs. In December

2020, the United Nations (UN) accepted the recommendation made by the World Health Organisation (WHO) to remove medical cannabis from the list of hard drugs (e.g. heroin) listed under the Schedule IV.

Although cannabis remains a subject to strict international control (per Schedule I), the UN decision is an important step towards the changing

perception of cannabis as a substance with a host of beneficial therapeutic effects rather than a dangerous drug.

Europe is Catching up to North America in "Cannabis Friendliness" score

87%

62%

58%

51%

46%

0% 20% 40% 60% 80% 100%

North America

Europe

Africa & The Middle East

South America

APAC

Improving regulatory framework around cannabis and CBD

The leading European cannabis platform-company in the making

Capital markets access fuels the Buy-and-Build strategy

Innovations to ensure a well-diversified exposure across the cannabinoid space

Strong, established consumer brands assist swift commercialization of new products

SynBiotic SE


Source: Prohibition Partners; Hauck & Aufhäuser

European Commission acknowledges CBD as a food and not a narcotic. In spite of its preliminary negative stance on CBD, the European Commission stated that CBD should not be regulated as a narcotic and therefore can qualify as food.

This should have taken away significant uncertainty with regards to the future of CBD and CBD-based products in Europe, thus boosting the CBD

industry’s confidence .

Not least due to the recent advancements towards a friendlier regulatory stance on cannabis, less restrictive and much clearer regulatory guidelines on the use of CBD in food are seen to be increasingly established throughout Europe

in the coming years. This, in turn, should open up a significant market opportunity, especially for

early-movers, like SynBiotic, who have:

already established a strong market presence with CBD products and

are gaining expertise in other areas of the cannabinoid space at a rapid pace

Building the leading European cannabis platform-company

Unlike most of the European cannabis players who put all their efforts into establishing a dominant position in the market for CBD products, SynBiotic –thanks to its “platform approach” goes beyond that.

Namely, it seeks to consolidate the strongest players in the cannabinoid space under one roof, thereby creating a “center of competence” that

addresses customer needs in a holistic and the most effective way by researching other less-studied cannabinoids.

Cannabis is removed from the list of hard drugs

I

IV

Schedules Harmfulness Degree of ControlExamples oflisted drugs

Substabces with addictiv e propeties, presenting a serious

risk of abuse

Very strict; subject to all measures of control applicable to

drugs (art. 2.1.)

Cannabis and its deriv ativ es, cocaine,

heroin, methadone,

morphine, opium

The most dangerous substances, already listed in

Schedule I, which are

particularly harmf ul and of

extremely limited medical or therapeutic value

Very strict; leading to a compete ban on 'the production,

manuf acture, export and import

of , trade in, possession or use of

any such drug except f or amounts which may be

necessary f or medical and

scientif ic research' (art. 2.5.b)

Cannabis and cannabis resin, heroin

SynBiotic SE



Having started as a retailer of food supplements, including CBD products, SynBiotic has quickly expanded into the areas of Research & Development and Production via M&A.

Today, the company’s business activities are structured along the main key pillars that should ensure that it is best positioned not only to capitalize on the

near-term opportunity in the CBD market, but to supply the most effective cannabinoid-based products over the long term.


Holistic approach towards cannabinoids

CBN

CBD

CBG

...

THC

CBC

Competitors

THC

CBD

SynBiotic

SynBiotic Platform

Research & Development Production & Biotech Distribution

GreenLight Pharmaceutical LTD(25% ow nership)

- 8 active therapeutic programmes

Further ventures(in negotiations)

- Focus on alternative plants w ith cannabinoids

Lean Labs Pharma GmbH(100% ow nership)

- Development, analytics and contract

manufacturing services

Further ventures(Letter of Intent)

- Broad IP in biosynthetic production of

cannabinoids (e.g. in yeast cultures)

Solidmind Group GmbH(100% ow nership)

- Excellent D2C access in the w ellbeing industry- Multiples successful D2C brands

Cannexo Pharma GmbH(50.1% ow nership)

- Distribution of cannabis-based medical products

Innovative engine(IP generation)

Growth engine(Consumer access)

Manufacturing engine(translating IP into consumer products)

NeuroTheryX Canda Ltd

- Exploring the mechanisms of action and relationships behind cannabinoids such as CBD

or THC

- Identif ication and development of cannabinoid-based medicines for mental health

and neuropsychiatric disorders

(2) BioCBD, Vicupets - BioCBD: natural CBD products (oil, lotions, etc.)- Vicupets: supplementary feeds for pets

(1) Hempamed- One of the biggest CBD e-commerce players in Germany

GECA Pharma GmbH(100% ow nership)

- Import & distribution of medical cannabis products

The Hempany(25% ow nership)

- Hemp based beverages like "hemi" (hemp milk)

SynBiotic SE


(1) Research & Development represents the company’s “innovative engine”,

which ensures that it stays on top of the developments in the cannabinoids market and drives innovations through therapeutic programs as well as research of alternative plants with cannabinoid content.

Here, the strategy is to establish minority interests in companies with attractive IP and expertise . By doing so, SynBiotic ensures that it will get

preferential access to technologies and IP, which could then be converted into market-ready products.

For instance, it acquired a 25% interest in GreenLight Pharmaceuticals, which is an Irish biopharmaceutical company focused on researching, developing and licensing of molecules from phyto-cannabinoids and other

proprietary plant-based formulations to target a range of disease areas. Furthermore, SynBiotic secured the rights to fully takeover NeuroTheryX

Canada Ltd (by April 2023), which is a Toronto-based R&D company that pursues the discovery and commercialization of therapeutic drugs. Its proprietary drug research platform allows to quickly determine drug mechanism

of action, which is of a great value in yet under-studied cannabinoid space. Another area of interest is alternative plants rich in cannabinoids. To this

end, SynBiotic is in discussion with a potential partner where it may acquire a minority participation.

(2) Production & Biotech is the company’s “manufacturing engine” responsible for translating innovations into market-ready branded products. This

covers development, analytics as well as contract manufacturing services and will be extended to include expertise in the area of biosynthetic production of cannabinoids via a planned acquisition. In this division, SynBiotic seeks to

acquire majority interests of more than 50% in entities active in manufacturing of cannabinoid-based products.

This division is currently comprised of Lean Labs Pharma (100% ownership) which is a German cannabinoid production company active in product development, analytics and contract manufacturing. In addition, SynBiotic

signed a Letter of Intent to acquire a stake in a company with a broad IP in biosynthetic production of cannabinoids (e.g. in yeast cultures).

(3) Distribution is the “growth engine” of the company responsible for bringing the market-ready products to final consumers through effect ive

marketing and strong brand building. Currently, the main focus lies on the three most promising and fastest growing segments within the cannabinoid industry: supplements, cosmetics and pet health.

Solidmind Group is essentially an umbrella company for various D2C brands, including Hempamed, which is one of the largest CBD brands in Germany,

another CBD brand BioCBD and supplementary feeds for pets Vicupets. The Hempamy is a producer of plant-based milk alternatives where SynBiotic

holds a 25% stake. Cannexo Pharma (JV) together with GECA Pharma (fully owned) lay the

foundation of SynBiotic’s pharmaceutical arm. GECA holds pharmaceutical wholesale license in accordance with §52a of the German Pharmaceuticals Act (AMG) and the permit to handle narcotics, and the permit to market

medicinal products pursuant to the AMRad Regulation. With its expert knowledge and all the necessary licenses, GECA is best

positioned to monetize SynBiotic’s growing R&D prowess over the mid- to long-term.

SynBiotic SE


SynBiotic SE


Access to capital markets fuels Buy-and-Build strategy SynBiotic is the only European listed cannabis player. This offers the company financial flexibility, which allows it to execute on strategic, value

enhancing acquisitions in a timely manner building a full-fledged platform-company in the cannabinoid space.

The rationale of the platform approach is simple: Instead putting all eggs in one basket by only focusing on the mainstream cannabinoids, like CBD, SynBiotic is constantly scouting the broader market landscape for “gems” that

could significantly contribute to its long-term vision – “to build the most effective products on the market”.

Specifically, via its Buy-and-Build strategy SynBiotic is looking to establish a well-diversified range of expertise across a variety of cannabinoids and their potential application in consumer and medical products.

In this context, the recently announced takeover of NeuroTheryX is case in point, perfectly underscoring SynBiotics strategy to gain access to attractive

technologies and IP in the cannabinoid space.

Innovations to drive long term value creation

In April 2021, SynBiotic has entered into a takeover agreement with Canadian R&D-company NeuroTheryX with a proprietary drug research platform and a robust pipeline of therapeutic products, especially in the cannabinoid

space. Based on years of research, NeuroTheryX has accumulated extensive know-

how in the mechanisms of action and relationship between different cannabinoids, such as CBD and THC as well as terpenes, that can be leveraged to create innovative cannabinoid-based medicines.

Note: Terpenes are highly aromatic compounds that determine the smell of many plants. Some may interact with the endocannabinoid system the same

way cannabinoids do. Some terpenes might promote relaxation and stress -relief, while other potentially promote focus and acuity.

Together with its partner Cyclica, NeuroTheryX created the NineteenGale JV (where it holds 65%), which is focused on creating the next generation of novel cannabinoid-inspired therapeutics for mental health and

neuropsychiatric disorders.

Source: Cyclical; Company data; Hauck & Aufhäuser

Advancing first-in-class cannabinoid-inspired drugs via the NineteenGale JV

Mission: identify and develop novel cannabinoid-inspired drugs for bipolar disorder, anxiety, and pain management

65% owned by NeuroTheryX

SynBiotic SE


NeuroTheryX’ drug discovery platform and Cyclica’s proprietary screening platform together form a highly synergistic mechanism to effectively uncover novel protein targets of NeuroTheryX’ lead molecule in the area of

neurodegenerative diseases. With this acquisition, SynBiotic has completed its R&D vertical and is now well

positioned to advance a range of novel molecular entities through the development pipeline . In fact, initial molecules have already shown promising in vitro and in vivo data.

Strong brand ensures swift commercialization

In order to ensure market access and efficient distribution, a strong brand is essential. Here, Hempamed together with BioCBD have been able to establish a strong presence with the former being recognized as one of the top 3 CBD

brands in Germany with excellent customer satisfaction.

Source: Hempamed; Hauck & Aufhäuser

Hempamed stands out from the crowd thanks to its in-house manufacturing and quality control. This guarantees consistent quality of the final product at a fair price, which reinforces strong brand perception.

With that, SynBiotic secured an efficient distribution platform for existing as well as future products in the D2C space, while its JV Cannexo Pharma should ensure the distribution of cannabinoid-based D2C and medical products.

Strong brand perception

SynBiotic SE


Growth

A Look at the Market Opportunity

At the highest level, the total addressable market (TAM) for cannabinoid-based

products can be defined based on the prevalence of the following three problem areas – Sleep, Pain, and Anxiety.

This represents a huge market opportunity. In Europe alone, over 150 million people suffer from sleep disorders, more than 100 million live with chronic pain, and around 60 million fight anxiety.


Currently, these problem areas are largely addressed by OTC and prescription pharmaceuticals with cumulative sales of more than € 250bn. Yet, many of

these drugs fail to benefit the patient and even lead to severe side effects.

Naturally, there’s a strong interest in innovative, more effective and patient-

friendly medications. In this context, thanks to its ability to interact with various receptors throughout the central nervous and immune system, cannabinoids stand out as an exciting field of R&D.

European CBD market in its early innings On the back of the changing attitude towards Cannabis supported by plenty of anecdotal and early clinical evidence, cannabinoids are increasingly being

viewed as a legitimate therapeutic substance with strong potential. CBD is currently the most common and accessible cannabinoid used in a whole

range of D2C products (e.g. CBD oil). According to the EU CBD Consumer Report, the European CBD market currently amounts to around € 8bn. The two largest CBD markets in Europe are Germany and UK generating € 1.8bn

and € 1.7bn respectively. As the complex regulatory landscape for marketing cannabis-based products in

Europe is seen to undergo serious reforms over the coming years, the European CBD market is seen to reach € 14bn by 2025.

SynBiotic targets the multi-billion market of sleep disorders, chronic pain & anxiety

over

150 million people suffer from

sleep disorders

over

100 million people w ith chronic

pain

over

60 million people endure

anxiety

Sleep Pain Anxiety

SynBiotic SE


SynBiotic operates one of the leading CBD brands in Germany…

SOLIDMIND Group is the distribution backbone of SynBiotic comprising a number of successful D2C brands in the area of nutritional supplements. The two major brands are Hempamed and BioCBD.

Hempamed is a “success story” on its own. Within 2 years, Hempamed was transformed from a € 200k annual sales business into one of the top 3 CBD

brands in Germany with c. € 7m profitable sales in 2020 generated solely online.

In sum, with Hempamed, BioCBD and other smaller brands Solidmind generated close to € 10m sales in 2020. By 2023E, this vertical is seen to grow organically to € 30m+ (>50% CAGR; eH&A), supported by continuous

customer growth, not least helped by increasing marketing efforts and an expanding product offering.


…while expanding into further attractive verticals

Apart from cannabinoids, a whole range of modern products can be produced from the hemp plant on the basis of its vital ingredients, which can be legally sold over the counter as they do not contain any intoxicating components.

With the recent acquisition of a 25% stake in The Hempany – with an option to increase its participation to up to 80% by June 2022 – SynBiotic paved its

way into the highly attractive vertical of plant-based milk. The Hempany’s main product is the hemp milk “hemi” , which is made from

organic hemp seeds. From the end of March, the product is sold in all Rossmann and Alnatura stores. The company is also looking to expand its product range to include other dairy product alternatives, like yogurts, ice cream, cheese, etc.

The European dairy alternative market was valued at over € 2bn in 2019. Soymilk and almond milk account for >80% of the total. The remainder

comprises hemp, pea, hazelnut, coconut and cashew milks and is poised for the strongest growth of c. 15% CAGR through 2025E.

This provides SynBiotic with an extremely favorable backdrop to establish another attractive D2C vertical, beyond CBD products. For instance, the well-known producers of plant-based dairy products OATLY and Alpro in 2020

generated an estimated sales of $ 400m and $ 800m respectively.

Hempamed, BioCBD, other smaller brands sales (in € m)

912

18

34

0

5

10

15

20

25

30

35

40

2020 2021E 2022E 2023E

SynBiotic SE


As a result, SynBiotic’s D2C sales should see dynamic growth supported by

strong branding coupled with a favorable industry backdrop and further add-on acquisitions in the CBD space and other attractive verticals.


Dynamic D2C sales growth forecast (in € m)

9 1218

343

12

16

0

10

20

30

40

50

60

2020P 2021E 2022E 2023E

Organic sales Add-on acquisitions

SynBiotic SE


Valuation

Given the rather nascent nature of the cannabis industry with substantial long - term growth potential, EV/Sales multiples seem to be best suited for valuation purposes.

Our peer group consists of cannabis players that cover similar parts of the value chain as SynBiotic and are hence exposed to the same underlying growth drivers.

All of the selected peers are based in either Canada or the United States. A

majority of them is specialized in producing and distributing cannabis for medical use given currently a more defined regulatory framework in the US and Canada, in comparison to Europe.

Note that the companies that in addition to distributing products also pursue R&D in the cannabinoid space are trading at the upper range of the EV/Sales spectrum. This makes sense, as innovation-driven companies, like Terrascend,

Canopy Growth and Cronos, are much better positioned to create value over the long term in the still nascent cannabinoid space.

To this end, SynBiotic has already established a strong R&D footprint via its 25% stake in GreenLight Pharmaceutical and the recent takeover of

NeuroTheryX featuring a number of active and highly-promising development programs.

Based on our peer group analysis, we derive a fair equity value range between € 146 and € 247m for SynBiotic. Our PT of € 75 is based on the average of the range.

Note: We apply a 25% discount to the peer group multiples to reflect the

currently lesser regulatory “friendliness” towards cannabis in Europe than in the US.

Source: Bloomberg, Hauck & Aufhäuser

Name Currency Share PriceMarket Cap

(in m)

EV

(in m)

2021 2022 2023

APHRIA INC CAD 18.9 5,981 5,926 9.4 7.1 5.7

CURALEAF HOLDING CAD 17.4 11,872 12,375 9.8 6.7 5.0

TRULIEVE CANNABI CAD 51.1 9,417 9,466 11.0 8.5 6.7

GREEN THUMB INDU USD 32.0 7,102 7,271 8.5 6.4 4.6

CANOPY GROWTH CO CAD 33.2 12,669 11,449 20.3 14.3 10.7

CRONOS GROUP INC CAD 10.0 3,613 2,330 28.0 17.5 10.1

AURORA CANNABIS CAD 11.0 2,168 2,506 8.6 6.1 4.9

CRESCO LABS INC CAD 16.0 5,869 6,338 7.8 5.4 4.4

TERRASCEND CORP CAD 13.6 4,416 4,622 12.9 8.7 7.0

Average 12.9 9.0 6.6

SynBiotic SE 2021 2022 2023

Solidmind revenue (in € m) 12 19 33

Add-on acquisitions in D2C verticle (e.g. The Hempany, etc.) 3 11 17

Total revenue (in € m) 15 30 50

Peer group multiple 12.9 9.0 6.6

Assumed discount -25% -25% -25%

Fair multiple 9.7 6.7 4.9

Fair EV 146 202 247

Net Debt (in € m) 2.6 2.6 2.6

Fair Equity Value 143 200 244

NOSH 2.6 2.6 2.6

Fair Equity Value per share 55 76 93

Fair Equity Value per share (average 2021-2023E)

Upside(+)/Downside(-)

EV/Sales

75

227%

SynBiotic SE


Company Background

Shareholder Structure

Source: Company data; Hauck & Aufhäuser

The two renowned investors in the cannabis space – Christian Angermayer and Michael Auerbach – joined forces to co-found and support SynBiotic on its path to become the leading European cannabis platform-company.

Christian Angermayer

Christian Angermayer is a high-profile entrepreneur and investor with a focus on Life Sciences, FinTech/InsurTech/PropTech & Crypto and DeepTech (e.g. SpaceTech, AI, etc.). He is the founder of ATAI Life Sciences AG, which is a

biotech platform company pioneering mental health innovation by developing more effective and potentially disease-modifying mental health treatments by researching both psychedelic and non-psychedelic compounds. ATAI reached

a c. $2bn valuation within 2.5 years since its foundation.

Michael Auerbach

Michael Auerbach is the founder of Subversive Capital, which has been a pioneering investor in emerging industries, specializing in both early and late-

Shareholder Structure

Management & Founders

63%

Other institutional investors

26%

Freefloat11%

SynBiotic SE


stage investments as well as SPAC acquisitions. With his holding Subvers ive

Capital is one of the most renowned investors in Cannabis companies worldwide. Furthermore, he sits on the Board of Directors of Tilray, Inc. – the first Nasdaq-listed global cannabis company.

The most recent milestones

Source: Company data; Hauck & Aufhäuser

SynBiotic's most recent milestones

Mar 2021Investment in The Hempany• Acquisition of a 25.1% stake in the German based hemp milk producer • In addition to hemp milk, The Hempany also plans to sell other natural hemp-based products in the future

(e.g. yogurts)

Dec 2020Successful Capital Increase (EUR 6.38m)• Multiple times oversubscribed • Proceeds from the capital increase will be used in particular for upcoming acquisitions

Nov 2020Acquisition of Lean Labs Pharma • German cannabinoid production company active in product development, analytics and contract manufacturing• Paid with a capital increase of 440,000 shares

Sep 2020Acquisition of BioCBD from Umtr Group• German e-commerce company offering CBD-containing oils, cosmetics and liquids for e-cigarettes • Purchase price in the low single-digit million range

Jun 2020Acquisition and integration of SOLIDMIND Group• Leading German CBD e-commerce player • Capital increase through contribution in kind in exchange for 1,000,000 shares (Purchase price = € 25m)

Dec 2020Successful Capital Increase (EUR 1.25m)• Funds raised were used to support the Buy-and-Build strategy to develop SynBiotic into the leading German

cannabinoid player

April 2021

Full take-over of Canadian R&D-company NeuroTheryX secured• SynBiotic subscribed a € 2m convertible bond (~13.33% post conversion ownership; conversion price: $ 3.0)• Call option to acquire the remaining shares at $ 2.5 per share until March, 2024

May 2021

Full take-over of GECA Pharma GmbH• German licensed cannabis importer and wholesaler of medical cannabis products• Paid with a capital increase of 60,000

SynBiotic SE


Management Board

Lars Müller (CEO)

Lars Müller is a serial entrepreneur with more than 10 years experience in scaling profitable companies. He has been active in the cannabinoid industry since 2015 and has accumulated an in-depth industry know-how. Mr. Müller

established one of the most successful CBD brands in Germany – Hempamed.

Supervisory Board

Sebastian Stietzel (Chairman of the Supervisory Board)

Serial entrepreneur with a strong focus on strategy

Master’s degree in business administration with a focus on IT supported marketing and HR

Rich expertise in post-merger integrations and capital markets fitness Dr. Marlon Braumann (Member of the Supervisory Board)

Serial entrepreneur and one of the founding partners of European VC fund Elevat3 Capital – main focus on biotech, medtech, and fintech investments

Founder of the global wildlife trust AMES Foundation

SynBiotic SE


Thomas Henke (Member of the Supervisory Board)

Investor with extensive transaction experience across private equity, venture capital, growth capital and PIPE transactions.

Hands-on support of portfolio companies

Leadership of Portfolio Companies Dr. Le Roy Dowey (CEO Greenlight Pharmaceutical LTD)

Joined Greenlight Pharmaceutical in June 2018

Quality Assurance Office at Ulster’s Biomedical Sciences Research Institute (BMSRI)

BSc in Biochemistry from Queen’s University, Belfast

PhD in Nutritional Biochemistry at Ulster University (2002)

Dr. James Linden (Founder & Chairman Greenlight Pharmaceutical LTD)

PhD in Biochemistry in the Department of Ophthalmology, Queens University , Belfast

Has built a world-class research network

SynBiotic SE


Rainer Seiler (Co-Founder & Shareholder Cannexo Pharma GmbH)

Managing Director at Zur Rose Gruppe

General Sales Manager at ratiopharm

Key Account Management Director within the pharmaceutical industry, wholesalers and mail-order-pharmacy companies

Overview of SynBiotic’s Portfolio Companies

SOLIDMIND represents the backbone of SynBiotic being a successful

brand-building group in the wellbeing industry with a clear focus on CBD and hemp-based products. Currently, the company operates three successful CBD brands Hempamed, BioCBD and Sleep, which generated a total

revenue of € 10m in 2020 and growing. The goal of SOLIDMIND is to establish sustainable brands and products that

address the subjects of mental fitness, focus, relaxation and sleep. The individual brands are deliberately aimed at different target groups using selective marketing strategies in order to achieve a clear differentiation.

1. Hempamed – Under the brand Hempamed, SOLIDMIND offers its

customers CBD oils and pills, CBD-containing body and care products as

well as nutritional products such as hemp oil. Hempamed positions itself as

a premium player in the market and primarily attracts female customers, who

are on average 50 years old. Within a remarkably short period of four years,

Hempamed was able to establish itself as one of the three largest CBD

brands in Germany generating more than € 7m in revenue in 2020. Since its

inception, Hempamed has shown a 100% CAGR and is increasing its

customer base by an average of 200 new customers per day.

2. BioCBD – Through its e-commerce brand BioCBD, SOLIDMIND provides

certified organic CBD oils and CBD-containing liquids for electronic

cigarettes and vaporizers. The oils are available in the form of drops and

have a CBD concentration between 5% and 30%. SynBiotic acquired

BioCBD from the British Umtr Group and established it as one of the biggest

German marketplaces for organic CBD and hemp products with € 2m

revenue in 2020.

3. Sleep – Sleep is a powder containing a mix of highly dosed minerals, amino

acids and vitamins to help people with sleep disorders fall asleep. The

essential ingredient in the berry-tasting powder is melatonin, the hormone

that controls the human sleep cycle. The human body automatically

produces melatonin when it gets dark which leads to the feeling of tiredness.

Hence, by taking Sleep shortly before bedtime, extra melatonin is supplied

to the body, which leads to an intensified feeling of tiredness and therefore

a better sleep.

SynBiotic SE


The Hempany was founded in 2020 by a team of four entrepreneurs and

since then made it its mission to broaden the market for plant-based milk alternatives by introducing its hemp milk drink under the brand “hemi”. While oat and almond milk, sold by big brands like OATLY and Alpro have

dominated the market for plant-based milk alternatives, the share of hemp milk is still relatively small, but offers massive growth potential due to the unique characteristics of the hemp plant. “Hemi” is rich in polyunsaturated

fatty acids, such as omega 3 and 6 and free of allergens, gluten, lactose and carbohydrates, which therefore appeals to a wide range of customers. It is currently sold in all Rossmann and Alnatura shops as well as in the

company’s own online shop.

Founded in 2014, GreenLight Pharmaceuticals is an Irish biopharma company focused on researching, developing and licensing of molecules from phyto-cannabinoids and other proprietary plant-based formulations to

target a range of disease areas. In its research and development process, GreenLight works closely together

with research-intensive universities. Its current pipeline comprises eight therapeutic research and development programs with four universities in Ireland and the UK. The core disease areas include inflammatory, immune, neurological conditions as well as cancer.

The conducted research enables GreenLight to develop plant-derived molecules from proprietary strains for environmentally friendly and

sustainable medicines to fight a range of diseases. SynBiotic acquired a 25% stake in GreenLight in 2020.

Cannexo Pharma GmbH was founded as a JV in November 2020 and essentially serves as SynBiotic’s medical cannabis arm. The joint venture

combines SynBiotic’s expertise in cannabinoids with first-hand pharma experience from Rainer Seiler, former Sales Director ratiopharm and ex-Managing Director of Zur Rose Group, Daniel Morent, CEO Swissdrinx AG

and Gregor Stähli, ex-Director of Sales at Omnimedica AG. The first product launch under the umbrella of Cannexo Pharma is planned for 2021.

GECA Pharma GmbH was founded in 2017 with the aim of closing the supply gap for medical cannabis in Germany. The company imports medical

cannabis products and distributes them exclusively to pharmacies, wholesalers and medical facilities with the required federal purchase authorization.

Lean Labs is a German cannabinoid production company active in product development, analytics and contract manufacturing. With over five years of

industry experience in development, extraction and analysis of cannabinoid -containing products, Lean Labs is one of the most experienced players in the German cannabinoid market.

In its product development department, Lean Labs determines the exact specifications of the desired product for its customers in a detailed

development process. For instance, this includes the colour and texture of the extracts as well as the taste or consistency.

The analytical department is then primarily responsible for the quality assurance of the products. Lean Labs’ professional and accurate analysis can determine the full spectrum of cannabinoids and terpenes and ensures

the purity of the products. In contract manufacturing, Lean Labs ultimately offers the entire filling

process in addition to the development and manufacturing of the products,

SynBiotic SE


which is fully oriented towards individual customer requirements. Whether

bulk packs or little bottles with pipettes or spray caps, Lean Labs has so far been able to realize any customer requirements as desired.

NeuroTheryX is a Toronto-based R&D company that pursues the discovery and commercialization of therapeutic drugs. Its proprietary drug research

platform allows to quickly determine drug mechanism of action, which is of a great value in the yet not too well understood cannabinoid space.

Together with its JV partner Cyclica, NeuroTheryX is focused on creating the next generation of novel cannabinoid-inspired therapeutics for mental health and neuropsychiatric disorders.

SynBiotic SE


Financials

Profit and loss (EUR m) 2017 2018 2019 2020E 2021E 2022E 2023E

Net sales 0.0 0.0 0.0 0.0 0.0 0.0 0.0

Sales growth n/a 0.0 % 0.0 % n/a 57.9 % 100.0 % 66.7 %

Increase/decrease in f inished goods and work-in-process 0.0 n/a n/a n/a n/a n/a n/a

Total sales 0.0 n/a n/a n/a n/a n/a n/a

Other operating income 0.0 n/a n/a n/a n/a n/a n/a

Material expenses 0.0 0.0 0.0 0.0 0.0 0.0 0.0

Personnel expenses 0.0 n/a n/a n/a n/a n/a n/a

Other operating expenses 0.0 n/a n/a n/a n/a n/a n/a

Total operating expenses 0.0 n/a n/a n/a n/a n/a n/a

EBITDA 0.0 0.0 0.0 0.1 0.6 2.9 4.6

Depreciation 0.0 0.0 0.0 0.4 0.6 0.8 0.8

EBITA 0.0 0.0 0.0 -0.3 0.0 2.1 3.8

Amortisation of goodwill 0.0 0.0 0.0 0.0 0.0 0.0 0.0

Amortisation of intangible assets 0.0 0.0 0.0 0.0 0.0 0.0 0.0

Impairment charges 0.0 0.0 0.0 0.0 0.0 0.0 0.0

EBIT (inc revaluation net) 0.0 0.0 0.0 -0.3 0.0 2.1 3.8

Interest income 0.0 0.0 0.0 0.0 0.0 0.0 0.0

Interest expenses 0.0 0.0 0.0 0.0 0.0 0.0 0.0

Other f inancial result 0.0 0.0 0.0 0.0 0.0 0.0 0.0

Financial result 0.0 0.0 0.0 0.0 0.0 0.0 0.0

Recurring pretax income from continuing operations 0.0 0.0 0.0 -0.3 0.0 2.1 3.8

Extraordinary income/loss n/a 0.0 0.0 0.0 0.0 0.0 0.0

Earnings before taxes 0.0 0.0 0.0 -0.3 0.0 2.1 3.8

Taxes 0.0 0.0 0.0 -0.1 0.0 0.6 1.1

Net income from continuing operations 0.0 0.0 0.0 -0.2 0.0 1.4 2.6

Result f rom discontinued operations (net of tax) 0.0 0.0 0.0 0.0 0.0 0.0 0.0

Net income 0.0 0.0 0.0 -0.2 0.0 1.4 2.6

Minority interest 0.0 0.0 0.0 0.0 0.0 0.0 0.0

Net profit (reported) 0.0 0.0 0.0 -0.2 0.0 1.4 2.6

Av erage number of shares 0.0 0.0 0.0 2.6 2.6 2.6 2.6

EPS reported n/a n/a n/a -0.07 -0.01 0.55 1.00

Profit and loss (common size) 2017 2018 2019 2020E 2021E 2022E 2023E

Net sales n/a n/a n/a n/a n/a n/a n/a

Increase/decrease in f inished goods and work-in-process n/a n/a n/a n/a n/a n/a n/a

Total sales n/a n/a n/a n/a n/a n/a n/a

Other operating income n/a n/a n/a n/a n/a n/a n/a

Material expenses n/a n/a n/a n/a n/a n/a n/a

Personnel expenses n/a n/a n/a n/a n/a n/a n/a

Other operating expenses n/a n/a n/a n/a n/a n/a n/a

Total operating expenses n/a n/a n/a n/a n/a n/a n/a

EBITDA 0.0 % 0.0 % 0.0 % 1.3 % 3.8 % 9.5 % 9.1 %

Depreciation 0.0 % 0.0 % 0.0 % 4.2 % 4.0 % 2.7 % 1.6 %

EBITA 0.0 % 0.0 % 0.0 % neg. neg. 6.8 % 7.5 %

Amortisation of goodwill 0.0 % 0.0 % 0.0 % 0.0 % 0.0 % 0.0 % 0.0 %

Amortisation of intangible assets 0.0 % 0.0 % 0.0 % 0.0 % 0.0 % 0.0 % 0.0 %

Impairment charges 0.0 % 0.0 % 0.0 % 0.0 % 0.0 % 0.0 % 0.0 %

EBIT (inc revaluation net) 0.0 % 0.0 % 0.0 % neg. neg. 6.8 % 7.5 %

Interest income 0.0 % 0.0 % 0.0 % 0.0 % 0.0 % 0.0 % 0.0 %

Interest expenses 0.0 % 0.0 % 0.0 % 0.0 % 0.0 % 0.0 % 0.0 %

Other f inancial result 0.0 % 0.0 % 0.0 % 0.0 % 0.0 % 0.0 % 0.0 %

Financial result 0.0 % 0.0 % 0.0 % 0.0 % 0.0 % 0.0 % 0.0 %

Recurring pretax income from continuing operations 0.0 % 0.0 % 0.0 % neg. neg. 6.8 % 7.5 %

Extraordinary income/loss n/a 0.0 % 0.0 % 0.0 % 0.0 % 0.0 % 0.0 %

Earnings before taxes 0.0 % 0.0 % 0.0 % neg. neg. 6.8 % 7.5 %

Tax rate n/a n/a n/a 30.0 % 30.0 % 30.0 % 30.0 %

Net income from continuing operations 0.0 % 0.0 % 0.0 % neg. neg. 4.8 % 5.3 %

Income f rom discontinued operations (net of tax) 0.0 % 0.0 % 0.0 % 0.0 % 0.0 % 0.0 % 0.0 %

Net income 0.0 % 0.0 % 0.0 % neg. neg. 4.8 % 5.3 %

Minority interest 0.0 % 0.0 % 0.0 % 0.0 % 0.0 % 0.0 % 0.0 %

Net profit (reported) 0.0 % 0.0 % 0.0 % neg. neg. 4.8 % 5.3 %

Source: Hauck & Auf häuser

SynBiotic SE


Cash flow statement (EUR m) 2017 2018 2019 2020E 2021E 2022E 2023E

Net prof it/loss 0.0 0.0 0.0 -0.2 0.0 1.4 2.6

Depreciation of f ixed assets (incl. leases) 0.0 0.0 0.0 0.4 0.6 0.8 0.8

Amortisation of goodwill 0.0 0.0 0.0 0.0 0.0 0.0 0.0

Amortisation of intangible assets 0.0 0.0 0.0 0.0 0.0 0.0 0.0

Others 0.0 0.0 0.0 0.0 0.0 0.0 0.0

Cash f low f rom operations bef ore changes in w/c 0.0 0.0 0.0 0.2 0.6 2.2 3.4

Increase/decrease in inv entory 0.0 0.0 0.0 0.0 0.0 0.0 0.0

Increase/decrease in accounts receiv able 0.0 0.0 0.0 0.0 0.0 0.0 0.0

Increase/decrease in accounts pay able 0.0 0.0 0.0 0.0 0.0 0.0 0.0

Increase/decrease in other working capital positions 0.0 0.0 0.0 0.0 0.0 0.0 0.0

Increase/decrease in working capital 0.0 0.0 0.0 0.0 0.0 0.0 0.0

Cash flow from operating activities 0.0 0.0 0.0 0.2 0.6 2.2 3.4

CAPEX 0.0 0.0 0.0 0.0 0.0 0.0 0.0

Pay ments f or acquisitions 0.0 0.0 0.0 0.0 0.0 0.0 0.0

Financial inv estments 0.0 0.0 0.0 0.0 0.0 0.0 0.0

Income f rom asset disposals 0.0 0.0 0.0 0.0 0.0 0.0 0.0

Cash flow from investing activities 0.0 0.0 0.0 0.0 0.0 0.0 0.0

Cash f low bef ore f inancing 0.0 0.0 0.0 0.2 0.6 2.2 3.4

Increase/decrease in debt position 0.0 0.0 0.0 0.0 0.0 0.0 0.0

Purchase of own shares 0.0 0.0 0.0 0.0 0.0 0.0 0.0

Capital measures 0.0 0.0 0.0 0.0 0.0 0.0 0.0

Div idends paid 0.0 0.0 0.0 0.0 0.0 0.0 0.0

Others 0.0 0.0 0.0 0.0 0.0 0.0 0.0

Ef f ects of exchange rate changes on cash 0.0 0.0 0.0 0.0 0.0 0.0 0.0

Cash flow from financing activities 0.0 0.0 0.0 0.0 0.0 0.0 0.0

Increase/decrease in liquid assets 0.0 0.0 0.0 0.2 0.6 2.2 3.4

Liquid assets at end of period 0.0 0.0 0.0 0.2 0.8 3.0 6.4


SynBiotic SE


Key ratios (EUR m) 2017 2018 2019 2020E 2021E 2022E 2023E

P&L growth analysis

Sales growth n/a 0.0 % 0.0 % n/a 57.9 % 100.0 % 66.7 %

EBITDA growth n/a n/a n/a n/a n/a n/a n/a

EBIT growth n/a n/a n/a n/a n/a n/a n/a

EPS growth n/a n/a n/a n/a n/a n/a n/a

Efficiency

Total operating costs / sales 0.0 % 0.0 % 0.0 % 68.4 % 78.7 % 71.7 % 71.0 %

Sales per employ ee n/a n/a n/a n/a n/a n/a n/a

EBITDA per employ ee n/a n/a n/a n/a n/a n/a n/a


SynBiotic SE


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Company Disclosure

SynBiotic SE 2

Historical target price and rating changes for SynBiotic SE in the last 12 months

Initiation coverage

Company Date Analyst Rating Target price Close

SynBiotic SE


Hauck & Aufhäuser distribution of ratings and in proportion to investment banking services

Buy 72.26 % 79.31 %

Sell 6.45 % 0.00 %

Hold 21.29 % 20.69 %

Date of publication creation: #ATTRIBUTE_DOC_RELEASED_DATE#

Date of publication dissemination: #ATTRIBUTE_DOC_DISTRIBUTION_DATE#

SynBiotic SE


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SynBiotic SE


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SynBiotic SE


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