Liminal BioSciences Inc. PFSCF

RE:Cannacord research report

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Neil Maruoka, MSc, MBA | Canaccord Genuity Corp. (Canada) | [e-mail] | 1.416.869.3073

Company Update

Q4 results: value-enhancing deals on the docket for

2015

Investment Recommendation

ProMetic reported Q4 financial results that were below our expectations on lower milestone revenue. This is not a concern for us, as it highlights the inherent lumpiness of the resins business, and we believe that the focus should be on the significant growth potential from the plasma-derived therapeutics, which are expected to come
on line by next year. We anticipate that 2015 will be a year of catalysts, as ProMetic creates value by building out its plasma-derived therapeutics pipeline, bringing on additional manufacturing capacity, advancing biotech product PBI-4050 through its first efficacy trials, and most importantly, announces the first data from the clinical trial for plasminogen. We believe that this last milestone will underscore the low risk and abbreviated timelines of ProMetic’s lead products.

Investment Highlights

• New manufacturing capacity adds cash flow. We believe that, at its core, ProMetic is a manufacturing story. Peak revenue for the plasma-derived therapeutics are constrained by manufacturing capacity, therefore, the addition of new capacity could present significant upside to our forecasts.

• Renewable pipeline of products. ProMetic’s PPPS technology is an extremely powerful platform when applied to plasma-derived therapeutics, presenting a renewable pipeline of products that can be extracted from human blood plasma with limited incremental costs. We believe that the expected announcement of two new orphan drugs should provide upside to our valuation.

• Advancing the late-stage pipeline. ProMetic expects to have several plasma-derived therapies in the clinic by the middle of the year, including orphan drug plasminogen and IVIG. These drugs represent major growth drivers for the company, with an ever- expanding pipeline generated from ProMetic's proprietary PPPS manufacturing technology.

• A possible glimpse at 4050's efficacy in 2015. We believe that PBI-4050 presents biotech-like optionality for investors. As ProMetic expands the possible indications into IPF and metabolic syndrome, we believe that we may get a glimpse into the efficacy of this drug in coming months.

Valuation

We value PLI based on a sum-of-the-parts. We value the resin business using a DCF analysis (9.4% WACC and 2.0% terminal growth), plasma-derived therapeutics with an explicit NPV, and the small molecule pipeline with a pNPV. Following the quarter, we have made only minor changes to our model and maintain our C$3.00 target price. This target implies a 16.7% return and continues to support our BUY recommendation.

Canaccord Genuity is the global capital markets group of Canaccord Genuity Group Inc. (CF : TSX | CF. : LSE)
The recommendations and opinions expressed in this research report accurately reflect the research analyst's personal, independent and objective views about any and all the companies and securities that are the subject of this report discussed herein.
For important information, please see the Important Disclosures beginning on page 5 of this document.

Canadian Equity Research

1 April 2015

BUY

unchanged

PRICE TARGET

unchanged

Price (1-Apr) Ticker

C$3.00

C$2.57 PLI-TSX

52-Week Range (C$):
Avg Daily Vol (000s) : Market Cap (C$M): Shares Out., FD (M) :
Total Return to Target (%) : Net Debt (Cash) (C$M): Long-Term Debt (C$):

0.85 - 2.87 1,371.7 1,407 547.6 16.7 (3.9) 23.2

FYE Dec

Sales (C$M)

Previous

R&D (C$M) SG&A (C$M) EBITDA (C$M) Previous

Net Income (C$M)

Previous

EPS (C$)

Previous

3 2.5 2 1.5 1 0.5

PLI Source: FactSet

2013A

2014A

(17.4) 2.6↑ (26.0)↓ (7.5)↓

(17.4) (7.3) (15.0) 2.0

(0.03) 0.00↑ (0.04)↓ (0.01)↓

68.4↓ 75.3 34.3 11.2 (30.0)↓ (21.2)↓ (2.2)↓ (8.7) (20.0) (10.4) 7.1

20.6

23.0↓ 25.6 35.2 12.9

49.1↓ 54.2 40.1 11.1

20.6

2015E

2016E

18.6 8.6 (8.7)

(0.03) (0.02)

(0.03) NA

May-14 Jun-14 Jul-14 Aug- 14 Sep-14 Oct-14 Nov- 14 Dec-14 Jan-15 Feb-15 Mar-15

ProMetic Life Sciences Inc. Company Update

Q4 and full-year 2014 results

ProMetic reported Q4 and full-year 2014 results that were below our estimates, but not overly concerning as it highlights the inherent lumpiness of the resins business. We do not believe that quarterly financial results should be a major focus for investors as the company continues to invest in several drug development programs, which are expected to be the more significant growth drivers.

Revenue for the quarter was $10.5 million, below our forecast of $13.2 million, and implied company guidance of $12.7 to 17.7 million (ProMetic expected revenue of $15 to $20 million in the second half of the year). From our perspective, what was most important was that revenue from the sale of resins was in line with our estimate at $3.5 million for the quarter. This suggests that the top-line miss was primarily related to licensing and milestone revenue, which should instead be recognized in the first half of next year.

Figure 1: Actual vs. forecast Q4 and full-year 2014 financial results

FYE Dec 31 - C$000s, except per share Q4 13A Q3 14A Q4 14A Q4 14E 2014A 2014E

Revenues from the sale of goods Revenues from the rendering of services Licensing revenues
Total Revenue
Total COGS

Total Gross Profit

Gross Margin

Research and Development (rechargeable) Research and Development (non-rechargeable) Administration and marketing expenses

Total EBITDA

EBITDA Margin

2,762 1,029 1,276 735 1,040 551

5,078 2,315

1,837 774

3,241 1,541

63.8% 66.6%

(557) 147 5,802 7,124 1,795 1,938

(3,799) (7,668)

nm nm

10,938 5,134 9,551

25,623

6,463

19,160

74.8%

3,003 29,136 10,844

(20,027)

nm

995

456 2,598 0 12,432

59,724

(6,796)

nm

500

(7,296)

nm

530,016

($0.01)

3,485 205 6,856

3,608 551 9,000

13,159

10,815 4,788 7,407

Depreciation 123 321 Amortization 137 48 Net interest expense 678 774 Other (3,015) 0 Fair value variation of warrant liability 2,863 10,420 Total Expenses 10,784 22,441

EBT (7,371) (20,624)

EBT Margin

Income Taxes

Net Income

Net Margin

Shares Outstanding (Basic)

EPS - GAAP (Basic)

Source: Company Reports, Canaccord Genuity estimates

nm nm

131 53

(7,502) (20,677)

nm nm

523,169 531,311

($0.01) ($0.04)

nm

533,511

($0.00)

For the quarter, non-rechargeable R&D expenditures of $11.5 million were quite a bit higher than our estimate of $8.5 million, as the company continues to advance multiple clinical programs for both plasma-derived and small molecule therapeutics. The company guided for non-rechargeable R&D expenses of closer to $50 million in 2015, leading us to raise our forecast from $29.4 million to $39.4 million for next year. We believe that ProMetic has a fair amount of discretion regarding the pace of R&D spending, and we would likely increase our spending forecast further when we

2

Buy unchanged Target Price C$3.00 unchanged | 1 April 2015 Pharmaceuticals 2

10,546

2,356

23,010

8,190

77.7%

15,995

69.5%

326 11,484 5,022

3,053 32,147 12,905

(8,642)

nm

(29,951)

nm

368 138 936

(16,865) 2,933

4,230

12,997

1205 489 2,760 (49,188) 15,365

18,634

4,938

46.8%

103.7%

547,628

1,804

11,355

86.3%

276 8,473 2,961

(354)

nm

158 105 774

0 0

(1,378)

nm

0

7,015

(480)

nm

(3,556)

8,494

(1,378)

(3,056)

2,576

16.1%

533,545

$0.02

$0.01

ProMetic Life Sciences Inc. Company Update

have visibility on ProMetic’s access to capital (either through additional debt, equity, or non-dilutive funding from partnership deals).

Total SG&A spending in the fourth quarter was $5.0 million, higher than our estimate of $3.0 million. However, a significant portion of SG&A expenditures is share-based payment expense, which we do not forecast in our model. For Q4, EBITDA was ($8.6 million) compared to our estimate of ($0.4 million), with the variance largely due to lower milestone revenue, higher non-rechargeable R&D spending, and share-based compensation.

Looking ahead to catalysts in 2015...

On the conference call, ProMetic confirmed the manufacturing scale-up and commercial launch of fibrinogen. The path to market was relatively easy for this product, as clinical trials and FDA approval are not required for non-medicinal use. Nonetheless, ProMetic intends to further the development of fibrinogen in the clinic, which should open up a larger market opportunity down the road. However, we believe that the most important takeaway from this announcement is the validation of ProMetic's manufacturing technology. At its core, we believe that ProMetic is a manufacturing story, and the ability to scale-up multiple products substantially de- risks the stock. Further, we believe that the addition of new manufacturing capacity should provide upside to our numbers.

Management also highlighted progress within its clinical development programs. The company has almost identified the full patient complement for its clinical trial for plasminogen, and no adverse events have been reported to date. We anticipate key data from this study in the second half of the year, which we expect will be a major catalyst for the stock. The power of ProMetic's platform is evident, as the company expects to advance its second product (IVIG) into the clinic in coming weeks, and several more (including AAT) before the end of the year. The expected announcement of two new orphan drugs would lead us to include these products in our model, providing further upside to our valuation.