Neptune Wellness Solutions Inc. ("Neptune" or the "Company") (NASDAQ: NEPT) (TSX:NEPT) is pleased to announce that it has entered into a collaboration agreement with International Flavors & Fragrances Inc. (NYSE: IFF)("IFF") to co-develop hemp-derived CBD products for the mass retail and health & wellness markets. App Connect Service, Inc. ("App Connect") is also a party to the agreement to provide related branding strategies and promotional activities. In conjunction with the co-development partnership, Neptune will issue to warrants(1) to IFF.
Under this strategicproduct development partnership,IFF will leverage its intellectual property (IP) fortaste, scentandnutritionto provide essential oils and product development resources. Neptune will leverage its proprietarycold ethanolextraction processes and formulation IP to deliver high quality, full- and broad-spectrumextracts for the development, manufacture and commercialization of hemp-derived products, infused with essential oils, for the cosmetics, personal care and home caremarkets.
The first products are expected to launch under Neptune's Forest Remedies brand at U.S. retailers in the first half of calendar 2020. The Initial launch will include a variety of topical products across the aromatherapy category, a market estimated at approximately $3 billion annually. Additional category launches should follow and the total SKU count could ultimately exceed 50 SKUs. Neptune will be responsible for the marketing and sale of the products. Neptune will record revenues from product sales and in turn will pay a royalty to each of IFF and App Connect associated with the sales of co-developed products(2).
"The agreement represents a significant event in the development of our global cannabis business, expanding our business model from primarily B2B to include a robust B2C business platform. IFF has an impressive track record, remarkable capabilities and global reach. This partnership will accelerate Neptune's vision and growth strategy to be the leading producer of hemp extracts ingredients and finished products for the global health & wellness and Consumer Packaged Goods industries. We are also now better positioned to leverage our management's experience building brands and relationships with key North American retailers," statedMichael Cammarata, CEO of Neptune.
"We are pleased to enter this strategic partnership and drive innovation that satisfies customers' demands for quality, sustainability and traceability," said Nicolas Mirzayantz, Divisional CEO, Scent at IFF. "The hemp-derived CBD products we are developing will target consumer preference towards natural health & wellness products."
Christophe de Villeplee, IFF's SVP Global Consumer Fragrance added, "With health & wellness a key pillar of IFF's strategy, we believe this new partnership will greatly benefit from IFF-LMR's global expertise and leadership in naturals.
(1)Neptune will issue to IFF 2,000,000 warrants, each warrant allowing the holder to purchase one common share of Neptune at an exercise price of USD $12.00 per share with a 5-year expiration date. The issuance of warrants discussed in this press release is subject to Toronto Stock Exchange ("TSX") approval.
(2) App Connect is a company indirectly controlled by Michael Cammarata, CEO and Director of Neptune. As a result, the payment of royalties to App Connect under the agreement as contemplated above is also subject to TSX approval.