7 March 2017 Sirona Biochem Corp. FIRST BERLIN Equity Research FY16. PRICE TARGET C$0.95 Secondary: Quotation Board Frankfurt.

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1 FIRST BERLIN Equity Research Sirona Biochem Corp RATING Canada / Pharmaceutical/Biotechnology Primary: TSX Venture FY16 PRICE TARGET C$0.95 Secondary: Quotation Board Frankfurt Results Bloomberg: SBM CN Return Potential 475.8% ISIN: CA82967M1005 Risk Rating High FULL YEAR RESULTS IN LINE; TFC-1067 PROCESS ADVANCING Ellis Acklin, Tel. +49 (0) Sirona Biochem published FY results for the period ending 31 October. Figures were broadly in line with our estimates. As expected, revenues for the fiscal year were limited to the milestone payment of C$0.4m received in June 2016 from Wanbang Biopharmaceuticals. The operating result of C$- 2.9m for the year was slightly better than our target (FBe: C$-3.2m), and the company ended the period with a cash balance of C$0.6m. After speaking with management, we believe the company has ample cash reach through H1/17 following the issuance of a convertible note in February We have partially delayed the initial TFC-849 royalty payments expected this year resulting in a new price target of C$0.95 (previously: C$0.98). Our rating remains Buy. Cash position should be adequate to get deal for TFC-1067 done Operating losses were partially offset by financing activities during the course of the fiscal year. Sirona sourced funds totalling C$1.3m and exited FY16 with cash and cash equivalents of C$0.6m. In February 2017, the company closed a non-brokered private placement of convertible notes for proceeds of C$0.7m. Each note is convertible into one common Sirona share at a price of C$0.18/share. The notes will mature in 18 months after the issuance date and have an interest rate of 12% per annum, payable quarterly until the notes are converted or repaid. Sirona is also due to receive the final disbursement from the credit line it has with the French government. Although the timing has yet to be finalised, we expect this in H1 of the current fiscal year and believe the payment will be around C$0.5m. We also remain confident that Sirona will receive a term sheet for its TFC-1067 skin lightener from a multinational cosmetics company in the near term. The highly anticipated news should then trigger the conversion of its outstanding warrants. As of the full year report, there were 8.9m warrants priced at C$0.20 and an additional 2.1m warrants from the last capital increase priced at C$0.30. (p.t.o.) 7 Si ro BUY COMPANY PROFILE Vancouver-based Sirona Biochem is a cosmetic ingredient and drug discovery company with a proprietary platform technology. The firm s laboratory, TFChem, is located in France and specialises in stabilising carbohydrate molecules with the goal of improving efficacy and safety. MARKET DATA As of 06 Mar 2017 Closing Price C$ 0.17 Shares outstanding m Market Capitalisation C$ 27.24m 52-week Range C$ 0.14 / 0.22 Avg. Volume (12 Months) 155,808 Multiples E 2018E P/E n.a EV/Sales EV/EBIT n.a Div. Yield 0.0% 0.0% 0.0% STOCK OVERVIEW Mar 16 May 16 Jul 16 Sep 16 Nov 16 Jan 17 Mar FINANCIAL HISTORY & PROJECTIONS E 2018E Revenue (C$m) Y/Y growth n.a. n.a. n.a. n.a. n.a % EBIT (C$m) EBIT margin n.a. n.a. n.a. n.a. 19.4% 78.7% Net income (C$m) EPS (diluted) (C$) DPS (C$) FCF (C$m) Net gearing -17.7% 6.9% -3.6% 12.6% -8.9% -59.2% Liquid assets (C$m) RISKS Risks to our price target include but are not limited to: development risk, financial risk, marketing risk and regulatory risk. Sirona Biochem Corp S&P/TSX Venture Composite Index COMPANY DATA As of 31 Oct 2016 Liquid Assets C$ 0.61m Current Assets C$ 1.13m Intangible Assets C$ 1.57m Total Assets C$ 3.13m Current Liabilities C$ 0.54m Shareholders Equity C$ 1.56m SHAREHOLDERS Géraldine Deliencourt-Godefroy 8.0% Gestys 5.8% Howard J. Verrico 3.4% Douglas B. Johnson 3.1% Free Float 79.7% Analyst: Ellis Acklin, Tel. +49 (0)

2 Full year results broadly in line Sirona reported revenue of C$0.4m for 2016 (FY15: C$0.0m) in conjunction with the Wanbang Biopharmaceuticals milestone payment received last June The operating loss narrowed to C$-2.9m (FBe: C$-3.2m) compared to C$-3.6m in the prior year, owing mainly to higher revenue, lower share-based payments, and lower research expenses. Share-based payments decreased by C$0.27m in 2016 to C$0.28m, whereas research expenses were lower by C$0.09m, due the decrease in general research costs. The net loss for the year totalled C$-3.0m vs C$-3.7m in the previous year. This was slightly below our projection of C$-2.7m, due to the absence of an expected tax credit built into our calculations. Table 1: Results vs our forecasts in CAD'000 FY 2016 FY 2016E Delta FY 2015 Delta Sales Milestone & Upfront payments n.m. EBIT -2,939-3,201 n.m. -3,574 n.m. margin n.m. n.m. - n.m. - Net income -2,984-2,694 n.m. -3,668 n.m. margin n.m. n.m. - n.m. - EPS (diluted, in CAD) n.m n.m. Source: First Berlin Equity Research; Sirona Biochem Sirona exited October 2015 with some C$0.6m in liquid funds on its balance sheet. Working capital requirements are negligible given the absence of significant accounts receivable and accounts payable. Shareholders equity decreased some 27% Y/Y to C$1.6m, owing mainly to the net loss. Total assets declined 25% traced mainly to cash consumed and the lower prepaid expenses and deposits line item in current assets. The equity ratio thus dipped to 50% compared to 52% in the previous year. Debt was 48% lower Y/Y, thanks to the conversion of C$0.7m in debentures into equity. We also note that Sirona restated its 2015 consolidated statements, due to the determination that the loss carry forward for French income tax purposes was not correctly applied to deferred tax liability of C$0.4m. Table 2: Balance sheet KPIs in CAD'000 FY 2016 FY 2015 Delta Liquid funds 613 1, % Equity 1,563 2, % Total assets 3,125 4, % Equity ratio 50% 52% - Debt 726 1, % Net debt/(net cash)* n.m. *includes long-term provisions for employee benefits Source: First Berlin Equity Research; Sirona Biochem Page 2/10

3 Table 3: Cash flow development in CAD'000 FY 2016 FY 2015 Delta Operating cash flow -2,103-3,063 n.m. Cash flow from investing n.m. Cash flow from financing 1,327 4, % Net cash flow* n.m. *excluding effect of exchange rate fluctuations Source: First Berlin Equity Research; Sirona Biochem Operating cash outflows totalled C$-2.1m and resulted primarily from the net loss generated from activities. Cash flow from investing totalled C$-0.1m for the year and was chiefly attributed to patent related costs. Cash flow from financing activities stems from the proceeds of a share issue for C$0.8m (FY15: C$0.0m) and the cash proceeds from the exercise of warrants and options amounting to C$0.5m (FY15: C$3.4m). The C$1.3m in cash flow from financing was insufficient to cover free cash outflows of C$-2.2m for the year resulting in a net cash outflow of some C$-0.9m for the year. Table 4: Changes to our forecasts 2017E 2018E in CAD'000 old new % delta old new % delta Sales 8,166 3, % 20,823 15, % Milestone & Upfront payments % % EBIT 5, % 17,693 12, % Margin (%) 62.8% 22.8% % 81.8% - Net income 4, % 14,711 10, % EPS diluted ($) % % Source: First Berlin Equity Research Maintain Buy rating We believe Sirona has a well diversified development pipeline that targets large addressable markets for the treatment of skin lightening, anti-aging, and diabetes. Investors have been eagerly anticipating a deal for Sirona s promising skin lightening treatment (TFC-1067) for close to a year. We continue to believe the company is deep in the negotiation process and will receive a term sheet for TFC-1067 in the near term, although we have no definitive information as to the timing. It should be noted that negotiations with global players often evolve at a glacial pace. But we contend that a deal with a multinational conglomerate would be a major milestone in Sirona s brief history and serve as a major catalyst to the Sirona share price. However, until a deal has been inked, we restrict our pipeline valuation to the compounds for which agreements are already in place. We have also dialled back our near term revenue forecasts to reflect a more conservative expectation of initial royalty payments for the commercialisation of TFC-849 as shown in table 4 above. The more conservative outlook for TFC-849 results in a new fair value of C$0.95 per share (previously: C$0.98). Page 3/10

4 Table 5: Valuation model Compound Project 1) Present Patient Treatment Market Market Peak PACME Discount Patent Time to Value Pop Cost Size Share Sales Margin 2) Factor Life 3) Market SGLT 2 Inhibitor DI-CN C$24M 88,560K $203 $17,995M 5% $3,028M 5% 25% 9 8 Years SGLT 2 Inhibitor DI-RoW C$66M 138,418K $362 $50,163M 5% $8,442M 5% 25% 9 8 Years TFC-849/-723 SKL-Asia C$95M 509,443K $15 $7,458M 6% $614M 5% 25% 16 1 Years TFC-849/-723 SKL-US C$13M 16,480K $33 $541M 12% $91M 5% 25% 16 1 Years PACME PV C$197M $84,155M $11,767M Costs PV 4) C $30M NPV C $167M Milestones PV C$1.8M Net cash (pro-forma) C$0.3M Fair Value C$169M Share Count (pro-forma) Price Target 180,421K C$0.95 1) A project typically refers to a specific indication or, where necessary or relevant, a combination between indication and geographic market 2) PACME (Profit After Costs and Marketing Expenses) reflects the company's profit share on future revenues. This share may be derived in the form of royalties (outsourced marketing/manufacturing) or operating EBITDA margin (in-house model), or some mix of both (depending on the specific parameters of partnership agreements) 3) Remaining patent life after the point of approval 4) Includes company-level R&D, G&A, Financing Costs and CapEx; COGS and S&M are factored into the PACME margin for each project Source: First Berlin Equity Research Page 4/10

5 INCOME STATEMENT All figures in CAD ' /13A 2013/14A 2014/15A 2015/16A 2016/17E 2017/18E Milestone & Upfront Payments PACME (Profit After Costs and Marketing Expenses) ,566 15,604 Operating expenditures -2,636-3,690-3,582-3,299-3,379-3,464 EBITDA -2,532-3,456-3,460-2,790 1,072 13,001 Operating income (EBIT) -2,636-3,482-3,574-2, ,765 Net financial result Pre-tax income (EBT) -2,707-3,562-3,660-2, ,681 Income taxes ,042 Other after tax items Net income / loss -2,567-3,526-3,667-2, ,639 Diluted EPS Ratios EBIT-Margin on PACME n.a. n.a. n.a. n.a. 22.8% 81.8% EBITDA margin on PACME n.a. n.a. n.a. n.a. 30.1% 83.3% Net Margin on PACME n.a. n.a. n.a. n.a. 22.9% 68.2% Expenses as % of Revenues Operating expenditures n.a. n.a. n.a. n.a % -22.2% Y-Y Growth Revenues n.m. n.m. n.m. n.m. n.m % Operating income n.m. n.m. n.m. n.m. n.m % Net income/ loss n.m. n.m. n.m. n.m. n.m % Page 5/10

6 BALANCE SHEET All figures in CAD ' /13A 2013/14A 2014/15A 2015/16A 2016/17E 2017/18E Assets Current Assets, Total 1,439 1,253 2,421 1,132 2,334 13,127 Cash and Cash Equivalents , ,064 9,369 Receivables ,270 Other Current Assets Non-Current Assets, Total 2,049 1,682 1,726 1,993 1,911 2,440 Property, Plant & Equipment Goodwill & Other Intangibles 2,006 1,649 1,697 1,715 1,664 1,614 Total Assets 3,487 2,935 4,147 3,125 4,245 15,567 Shareholders' Equity & Debt Current Liabilities, Total , Short-Term Debt Accounts Payable Other current liabilities Longterm Liabilities, Total ,019 1,019 1,019 Long Term Debt Deferred Revenue Other Liabilities Minority interests Shareholders Equity 2,239 1,692 2,146 1,563 2,845 14,460 Total Consolidated Equity and Debt 3,487 2,935 4,147 3,125 4,245 15,567 Ratios Current ratio (x) Quick ratio (x) Net gearing -18% 4% -7% 7% -12% -60% Book value per share (CAD) Net debt ,643 Page 6/10

7 CASH FLOW STATEMENT All figures in CAD ' /13A 2013/14A 2014/15A 2015/16A 2016/17E 2017/18E Net income -2,785-3,526-3,660-2, ,639 Depreciation and amortization Changes in Working Capital , ,782 Operating cash flow -2,607-1,860-3,062-2, ,093 CapEx Investments in Intangibles Free cash flow -2,615-2,095-3,181-2, ,329 Debt Financing, net Equity Financing, net 2,837 1, Other financing activities , Cash flow from financing 3,417 1,782 4,111 1, Net cash flows ,305 Cash, start of the year , ,064 Cash, end of the year , ,064 9,369 EBITDA/share Y-Y Growth Operating Cashflow n.m. n.m. n.m. n.m. n.m % Free cashflow n.m. n.m. n.m. n.m. n.m. n.m. EBITDA/share n.m. n.m. n.m. n.m. n.m % Page 7/10

8 FIRST BERLIN Equity Research FIRST BERLIN RECOMMENDATION & PRICE TARGET HISTORY Report No.: Initial Report Date of publication Previous day closing price Recommendation Price target 12 January 2015 C$0.14 Buy C$ June 2016 C$0.18 Buy C$ July 2016 C$0.18 Buy C$ October 2016 C$0.18 Buy C$ Today C$0.17 Buy C$0.95 Authored by: Ellis Acklin, Analyst Company responsible for preparation: First Berlin Equity Research GmbH Mohrenstraße Berlin Tel. +49 (0) Fax +49 (0) info@firstberlin.com Person responsible for forwarding or distributing this financial analysis: Martin Bailey Copyright 2017 First Berlin Equity Research GmbH No part of this financial analysis may be copied, photocopied, duplicated or distributed in any form or media whatsoever without prior written permission from First Berlin Equity Research GmbH. First Berlin Equity Research GmbH shall be identified as the source in the case of quotations. Further information is available on request. INFORMATION PURSUANT TO SECTION 34B OF THE GERMAN SECURITIES TRADING ACT [WPHG], TO REGULATION (EU) NO 596/2014 OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL OF APRIL 16, 2014, ON MARKET ABUSE (MARKET ABUSE REGULATION) AND TO THE GERMAN ORDINANCE ON THE ANALYSIS OF FINANCIAL INSTRUMENTS [FINANV] First Berlin Equity Research GmbH (hereinafter referred to as: First Berlin ) prepares financial analyses while taking the relevant regulatory provisions, in particular the German Securities Trading Act [WpHG], Regulation (EU) No 596/2014 of the European Parliament and of the Council of April 16, 2014, on market abuse (market abuse regulation) and the German Ordinance on the Analysis of Financial Instruments [FinAnV] into consideration. In the following First Berlin provides investors with information about the statutory provisions that are to be observed in the preparation of financial analyses. CONFLICTS OF INTEREST In accordance with Section 34b Paragraph 1 of the German Securities Trading Act [WpHG] and Regulation (EU) No 596/2014 of the European Parliament and of the Council of April 16, 2014, on market abuse (market abuse regulation) financial analyses may only be passed on or publicly distributed if circumstances or relations which may cause conflicts of interest among the authors, the legal entities responsible for such preparation or companies associated with them are disclosed along with the financial analysis. First Berlin offers a range of services that go beyond the preparation of financial analyses. Although First Berlin strives to avoid conflicts of interest wherever possible, First Berlin may maintain the following relations with the analysed company, which in particular may constitute a potential conflict of interest (further information and data may be provided on request): The author, First Berlin, or a company associated with First Berlin holds an interest of more than five percent in the share capital of the analysed company; The author, First Berlin, or a company associated with First Berlin provided investment banking or consulting services for the analysed company within the past twelve months for which remuneration was or was to be paid; The author, First Berlin, or a company associated with First Berlin reached an agreement with the analysed company for preparation of a financial analysis for which remuneration is owed; The author, First Berlin, or a company associated with First Berlin has other significant financial interests in the analysed company; In order to avoid and, if necessary, manage possible conflicts of interest both the author of the financial analysis and First Berlin shall be obliged to neither hold nor in any way trade the securities of the company analyzed. The remuneration of the author of the financial analysis stands in no direct or indirect connection with the recommendations or opinions represented in the financial analysis. Furthermore, the remuneration of the author of the financial analysis is neither coupled directly to financial transactions nor to stock exchange trading volume or asset management fees. If despite these measures one or more of the aforementioned conflicts of interest cannot be avoided on the part of the author or First Berlin, then reference shall be made to such conflict of interest. PRICE TARGET DATES Unless otherwise indicated, current prices refer to the closing prices of the previous trading day. AGREEMENT WITH THE ANALYSED COMPANY AND MAINTENANCE OF OBJECTIVITY The present financial analysis is based on the author s own knowledge and research. The author prepared this study without any direct or indirect influence exerted on the part of the analysed company. Parts of the financial analysis were possibly provided to the analysed company prior to publication in order to avoid inaccuracies in the representation of facts. However, no substantial changes were made at the request of the analysed company following any such provision. Page 8/10

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