Neptune Technologies & Bioresources, Inc. (NEPT) as covered by Catalyst Equity Research

1. Joseph Pantginis, Ph.D., (646) 358-1907
jpantginis@roth.com
Raluca Pancratov, Ph.D., (646) 358-1914
rpancratov@roth.com
Sales (800) 933-6830, Trading (800) 933-6820
COMPANY NOTE | EQUITY RESEARCH | May 22, 2012
Healthcare: Biotechnology
Neptune Technologies & Bioressources | NEPT - $2.91 - NASDAQ
| Buy
Company Update
Stock Data NEPT: Further Steps to Strengthen IP and
52-Week Low - High $2.02 - $4.66 Commercial Profile for NKO
Shares Out. (mil) 49.69
Mkt. Cap.(mil) $144.6 Neptune filed for Reexamination of an Australian patent granted to its
3-Mo. Avg. Vol. 108,092 competitor Aker. Neptune believes that the claims of Aker's patent are
12-Mo.Price Target $9.00 obvious, given previous opinions of the U.S. and European Patent Offices,
Cash (mil) $17.7 and its activities do not infringe Aker's IP Separately, Neptune obtained the
.
Tot. Debt (mil) $0.0 sustainability certification "Friend of the Sea" that can be extended to its krill
EPS $ oil distributors.
Yr Feb —2011— —2012E— —2013E— Event
Curr Curr Neptune requested re-examination of the AU2008231570 Australian patent
1Q 0.01A (0.03)A (0.02)E granted to competitor Aker Biomarine, as it believes the claims of this patent
2Q 0.01A (0.04)A (0.02)E
are obvious given prior publications and patents. According to Neptune, its
3Q 0.04A (0.01)A (0.01)E
activities do not infringe its competitor's patents, but the company believes that
4Q (0.04)A (0.01)E 0.02E
YEAR 0.01A (0.09)E (0.03)E
Aker's claims are invalid, based on previously issued European and U.S. patent
P/E NM NM NM office opinions. Separately, Neptune obtained a sustainability certification from
the international organization "Friends of the Sea", which will enable the
Revenue ($ millions) company and the distributors of NKO to label products as "eco-friendly".
Yr Feb —2011— —2012E— —2013E— Impact
Curr Curr
We view as positive Neptune's proactive efforts to maintain its strong IP
1Q 4.2A 4.3A 5.2E
position in Australia. We also believe Neptune benefits from key patents
2Q 4.1A 4.4A 5.3E
3Q 4.3A 5.1A 6.6E
issued in the U.S. covering krill-derived omega-3 phospholipids, active and
4Q 4.1A 5.2E 9.5E enforceable even while undergoing re-examination by the USPTO at Aker's
YEAR 16.7A 18.9E 26.5E request. With the sustainability certification and eco-friendly label, NKO may
see an expansion of its commercial profile, in our belief. Neptune's efforts in
NEPT One-Year Price and Volume History this direction are further underscored by an active marketing and branding
1.2 5.50 strategy in North America with additions of key distributors and of a celebrity
1.0 5.00
4.50
spokesperson. The stock is poised for significant growth this year, in our
0.8 4.00 view, with key top line results from two ongoing Phase II CaPre clinical
0.6 3.50 studies conducted by Acasti in Canada. Data from an open label study in
0.4 3.00
2.50 hypertriglyceridemia are anticipated mid-year, and data from a randomized,
0.2 2.00 double blind Phase II study are expected by the end of 2012. These results, in
0.0 1.50
addition to clinical PK/PD data garnered to date by Acasti, will likely support
Aug-11
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May-12
Jun-11
Feb-12
Mar-12
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Vol (m) Price the commencement of a potential pivotal trial in the U.S. by the end of 2012.
Action
We reiterate our Buy rating and $9 target. Based on the revenue growth
potential for the multiple krill oil initiatives, we believe Neptune warrants
a higher valuation. We believe that the Neptune/Acasti story has been
significantly de-risked based on the success of the overall omega-3 market,
with both Lovaza and AMR101 as well as multiple published studies setting
the stage for Neptune’s anticipated commercialization success.
Intraday price: $2.97, 9:52am ET, 5/22/12
Important Disclosures & Regulation AC Certification(s) are located on page 6 to 7 of this report.
Roth Capital Partners, LLC | 888 San Clemente Drive | Newport Beach CA 92660 | 949 720 5700 | Member FINRA/SIPC

2. NEPTUNE TECHNOLOGIES & BIORESSOURCES Company Note - May 22, 2012
VALUATION
We reiterate our Buy rating and $9.00 price target. Our valuation of Neptune is based on a sum of the parts
analysis:
s Probability weighted clinical net present value (NPV) model of the pharmaceutical, CaPre, initial cardiovascular
opportunity with Neptune’s Acasti subsidiary.
s A discounted earnings valuation on Neptune’s core revenue and earnings on the sale of bulk krill oil (primarily
NKO currently).
Factors that could impede shares of Neptune from reaching our price target include negative data readouts
from ongoing clinical studies, any perceived delays in the CaPre regulatory path as well as Neptune's ability to
continue to fund its operations and monetize its expansion plans for NKO manufacturing.
RISKS
s Capacity expansion. Neptune is currently at or near full capacity in the manufacturing of NKO. The company
is now in the expansion phase for its Sherbrooke Canada facility with the goal of taking the current capacity of
130,000 kg per year to >400,000 kg per year in 2014 and approximately doubled over the next year. In line with
this capacity expansion is the expectation for increased revenue growth. Any potential delays in the timelines
in building out the expansion could have a deleterious effect on the company’s business model.
s Time behind the competition. The medical benefits of omega-3’s, specifically pharmaceutical grade
formulations (Lovaza, AMR101, CaPre) have been shown in multiple clinical trials. Drugs such as Lovaza
have laid important groundwork as the market prepares for additional and differentiated products. To this end,
AMR101 has the potential to significantly impact Lovaza’s market share, in our belief. Neptune/Acasti’s CaPre
is entering a large Phase II study in high triglyceride patients. Therefore the product is several years behind
AMR101 for potential commercialization.
s Market perception and education for differentiated profile of krill oil (NKO/CaPre). While potential CaPre
pharmaceutical sales should be driven by physician prescribing habits for patients with high triglycerides, we
believe patients still need to be educated about the differentiation of krill oil compared to the multitude of
omega-3 products available both off the shelf and through Lovaza and potentially AMR101 prescriptions. While
we do not believe this is a large risk for the company, Neptune/Acasti will need to be cognizant of addressing
the market properly.
s Financing and clinical trial risks. As with all drug development companies the need to continually fund drug
development exists. Should Neptune not be able to secure sufficient funding to grow its underlying business, it
could significantly impact the valuation of the shares. The company does have the potential to offset this risk by
having a revenue stream which is expected to grow from the sale of bulk krill oil to distributors and subsidiaries.
Additionally the pharmaceutical development pathway being pursued by Acasti and NeuroBioPharm are critical
to Neptune's success. Any failed or inconclusive clinical trials could significantly impact Neptune's shares.
COMPANY DESCRIPTION
Neptune Technologies & Bioressources Inc. researches, develops and commercializes proprietary bioactive
ingredients and products with the goal of superior added-value and clinically proven health benefits. The
Company extracts a range of bioactive ingredients such as novel proprietary omega-3 phospholipids from
abundant yet underexploited marine biomass including Krill, a cold deep water zooplankton. Neptune’s
first commercially available product is Neptune Krill Oil (NKO®), which represents marine based omega-3
phospholipids with potential in cardiovascular, cognitive and anti-inflammatory disorders. Neptune is pursuing
market opportunities in the nutraceutical market including dietary supplements and functional foods. The
Company is also pursuing opportunities in the pharmaceutical market through its pharmaceutical subsidiaries,
Acasti and NeuroBioPharm (including medical food, over-the-counter and prescription drug applications).
Page 2 of 7

3. NEPTUNE TECHNOLOGIES & BIORESSOURCES Company Note - May 22, 2012
Page 3 of 7

4. NEPTUNE TECHNOLOGIES & BIORESSOURCES Company Note - May 22, 2012
(Cdn$ in millions except per share data) - February fiscal year
Profit & Loss 2010A 2011A 2012E 2013E 2014E 2015E 2016E
License and milestone 0.0 0.0 0.0 1.0 1.8 4.5 8.2
Contract manufacturing 0.0 0.0 0.0 0.0 0.0 0.0 0.0
Product and royalty 12.7 16.7 18.9 25.5 34.6 37.3 42.7
Other revenues 0.0 0.0 0.0 0.0 0.0 0.0 0.0
Revenues 12.7 16.7 18.9 26.5 36.4 41.8 50.9
CoGS 11.2 13.9 9.1 12.8 17.3 18.7 21.4
Gross Profit 1.5 2.8 9.8 13.8 19.1 23.2 29.6
Gross margin 12% 17% 52% 52% 52% 55% 58%
G&A 0.0 0.0 10.8 11.1 11.2 11.3 11.6
R&D 2.7 2.5 5.3 5.5 5.6 5.7 5.7
Other op ex 1.9 2.1 (0.0) 0.0 0.0 0.0 0.0
EBIT (3.1) (1.8) (6.2) (2.9) 2.3 6.2 12.3
EBIT margin nm nm nm nm 6% 15% 24%
Depreciation 0.0 0.0 0.0 0.0 0.0 0.0 0.0
Amortisation Intangibles 0.0 0.0 0.0 0.0 0.0 0.0 0.0
EBITDA (3.1) (1.8) (6.2) (2.9) 2.3 6.2 12.3
EBITDA margin nm nm nm nm 6% 15% 24%
Non operating expenses 0.0 0.0 0.0 0.0 0.0 0.0 0.0
Net Interest Income/Other 2.3 2.8 2.4 2.0 0.4 0.6 1.1
Interest expense 0.7 0.4 0.4 0.4 0.2 0.2 0.2
EBT (1.5) 0.5 (4.3) (1.3) 2.5 6.5 13.2
EBT margin nm 3% nm nm 7% 16% 26%
Provision for taxes 0.0 0.0 0.0 0.0 0.0 0.0 0.7
Net Income (1.5) 0.5 (4.3) (1.3) 2.5 6.5 12.5
Participation of preffered stock (0.0) (0.0) 0.0 0.0 0.0 0.0 0.0
Net Income to common (1.5) 0.5 (4.3) (1.3) 2.5 6.5 12.5
net margin nm 3% nm nm 7% 16% 25%
NoSH -basic 37.9 40.5 49.6 50.0 50.5 55.0 55.5
NoSH-diluted 37.9 41.1 49.6 52.0 53.5 59.0 60.0
EPS - basic (0.04) 0.01 (0.09) (0.03) 0.05 0.12 0.23
EPS - diluted (0.04) 0.01 (0.09) (0.02) 0.05 0.11 0.21
Source: Company documents and ROTH Capital Partners estimates
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5. NEPTUNE TECHNOLOGIES & BIORESSOURCES Company Note - May 22, 2012
Quarterly P&L May Aug Nov Feb May Aug Nov Feb
February fiscal year (Cdn$) Q1'12A Q2'12A H1'12A Q3'12A 9M'12A Q4'12E FY'12E Q1'13E Q2'13E H1'13E Q3'13E 9M'13E Q4'13E FY'13E
License and milestone 0.00 0.00 0.00 0.00 0.00 0.00 0.0 0.00 0.00 0.00 0.00 0.00 1.00 1.0
Contract manufacturing 0.00 0.00 0.00 0.00 0.00 0.00 0.0 0.00 0.00 0.00 0.00 0.00 0.00 0.0
Product and royalty 4.28 4.35 8.64 5.12 13.76 5.16 18.9 5.20 5.25 10.45 6.55 17.00 8.54 25.5
Other revenues 0.00 0.00 0.00 0.00 0.00 0.00 0.0 0.00 0.00 0.00 0.00 0.00 0.00 0.0
Revenues 4.28 4.35 8.64 5.12 13.76 5.16 18.9 5.20 5.25 10.45 6.55 17.00 9.54 26.5
CoGS 2.06 2.13 4.19 2.39 6.58 2.52 9.1 2.55 2.56 5.11 3.20 8.31 4.46 12.8
Gross Profit 2.22 2.22 4.45 2.73 7.17 2.65 9.8 2.65 2.69 5.34 3.35 8.69 5.08 13.8
Gross margin 52% 51% 51% 53% 52% 51% 52% 51% 51% 51% 51% 51% 53% 52%
G&A 2.46 2.75 5.21 2.88 8.09 2.69 10.8 2.70 2.75 5.45 2.77 8.22 2.89 11.1
R&D 0.74 1.50 2.23 1.71 3.94 1.33 5.3 1.35 1.37 2.72 1.40 4.12 1.42 5.5
Other op ex -0.01 0.00 -0.01 0.00 -0.01 0.00 (0.0) 0.00 0.00 0.00 0.00 0.00 0.00 0.0
EBITDA (1.0) (2.0) (3.0) (1.9) (4.8) (1.4) (6.2) (1.4) (1.4) (2.8) (0.8) (3.6) 0.8 (2.9)
EBITDA margin nm nm
Non operating expenses 0.00 0.00 0.00 0.00 0.00 0.00 0.0 0.00 0.00 0.00 0.00 0.00 0.00 0.0
Net Interest Income/Other 0.14 0.25 0.40 1.36 1.75 0.65 2.4 0.50 0.50 1.00 0.50 1.50 0.50 2.0
Interest expense 0.44 0.00 0.44 0.00 0.44 0.00 0.4 0.00 0.00 0.00 0.00 0.00 0.40 0.4
EBT (1.3) (1.8) (3.0) (0.5) (3.5) (0.7) (4.3) (0.9) (0.9) (1.8) (0.3) (2.1) 0.9 (1.3)
EBT margin nm nm
Provision for taxes 0.00 0.00 0.00 0.00 0.00 0.00 0.0 0.00 0.00 0.00 0.00 0.00 0.00 0.0
Participation of preferred stock
Net Income to common (1.3) (1.8) (3.0) (0.5) (3.5) (0.7) (4.3) (0.9) (0.9) (1.8) (0.3) (2.1) 0.9 (1.3)
net margin nm nm
NoSH-basic 48.3 49.0 48.69 49.58 48.99 49.10 49.60 50.0 50.0 50.00 50.00 50.00 50.00 50.00
NoSH-diluted 48.3 49.0 48.69 49.58 48.99 50.00 49.60 50.0 50.0 50.00 50.00 50.00 52.00 52.00
EPS - basic (0.03) (0.04) (0.06) (0.01) (0.07) (0.01) (0.09) (0.02) (0.02) (0.04) (0.01) (0.04) 0.02 (0.03)
EPS - diluted (0.03) (0.04) (0.06) (0.01) (0.07) (0.01) (0.09) (0.02) (0.02) (0.04) (0.01) (0.04) 0.02 (0.02)
Source: Company documents and ROTH Capital Partners estimates
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6. NEPTUNE TECHNOLOGIES & BIORESSOURCES Company Note - May 22, 2012
Regulation Analyst Certification ("Reg AC"): The research analyst primarily responsible for the content of this report certifies
the following under Reg AC: I hereby certify that all views expressed in this report accurately reflect my personal views about
the subject company or companies and its or their securities. I also certify that no part of my compensation was, is or will be,
directly or indirectly, related to the specific recommendations or views expressed in this report.
Disclosures:
ROTH makes a market in shares of Neptune Technologies & Bioressources and as such, buys and sells from customers on
a principal basis.
On September 28, 2010, ROTH changed its rating system in order to replace the Hold rating with Neutral.
On May 26, 2011, ROTH changed its rating system in order to incorporate coverage that is Under Review.
Each box on the Rating and Price Target History chart above represents a date on which an analyst made a change to a
rating or price target, except for the first box, which may only represent the first note written during the past three years.
Distribution Ratings/IB Services shows the number of companies in each rating category from which Roth or an affiliate
received compensation for investment banking services in the past 12 month.
Distribution of IB Services Firmwide
IB Serv./Past 12 Mos.
as of 05/22/12
Rating Count Percent Count Percent
Buy [B] 185 70.34 59 31.89
Neutral [N] 61 23.19 6 9.84
Sell [S] 1 0.38 0 0
Under Review [UR] 16 6.08 8 50.00
Our rating system attempts to incorporate industry, company and/or overall market risk and volatility. Consequently, at any
given point in time, our investment rating on a stock and its implied price movement may not correspond to the stated 12-
month price target.
Ratings System Definitions - ROTH employs a rating system based on the following:
Buy: A rating, which at the time it is instituted and or reiterated, that indicates an expectation of a total return of at least
10% over the next 12 months.
Neutral: A rating, which at the time it is instituted and or reiterated, that indicates an expectation of a total return between
negative 10% and 10% over the next 12 months.
Sell: A rating, which at the time it is instituted and or reiterated, that indicates an expectation that the price will depreciate by
more than 10% over the next 12 months.
Under Review [UR]: A rating, which at the time it is instituted and or reiterated, indicates the temporary removal of the prior
rating, price target and estimates for the security. Prior rating, price target and estimates should no longer be relied upon for
UR-rated securities.
Not Covered [NC]: ROTH does not publish research or have an opinion about this security.
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7. NEPTUNE TECHNOLOGIES & BIORESSOURCES Company Note - May 22, 2012
ROTH Capital Partners, LLC expects to receive or intends to seek compensation for investment banking or other business
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