Thank you for your continued support of Pathway Health. Although the capital markets have been challenging for our industry and our shareholders alike, 2021 was in fact a transformative year for Pathway Health on a number of fronts. We are pleased to provide a high-level review of the Company’s target markets, achievements during 2021 and our strategic focus for 2022.

Chronic Pain Market
According to the Canadian Pain Task Force (established in March 2019 by the Government of Canada), an estimated 7.6 million, or one in five Canadians (across their lifespan), live with chronic pain.[1] In fact, chronic pain in Canada costs more than cancer, heart disease, and HIV combined.[2] Chronic pain is often associated with other chronic conditions and can affect people across their entire lifetime. Chronic pain has significant impacts on physical and mental health, family and community life, society, and the economy, with the total direct and indirect cost to Canadians of $38.2 to $40.3 billion in 2019.1 Health Canada’s Action Plan for Pain in Canada March 2021 Report estimates the direct costs (expenditures for physicians’ services, prescription drugs, and hospital inpatient and outpatient care) were between $15.1 and $17.2 billion in 2019. Preliminary estimates by Health Canada forecasts the number of individuals living with chronic pain will increase by 17.5% from 2019 to 2030 as the population grows and ages to as many as 8.3 million Canadians by 2025 and 9.0 million by 2030. By 2030, the estimated direct costs will rise to $20.5–$23.4 billion and indirect costs to $31.5 billion, resulting in a total cost increase of 36.2% during this period to $52–$55 billion. 1 Despite the substantial cost, people living with pain in Canada continue to face tremendous barriers to care, employment supports, and other services.

Medical Cannabis Market:
The size of the global medical cannabis market was estimated at USD $16.47 billion in 2021 and is forecasted to grow to USD $46.18 by 2026, with a CAGR of 22.9% during that period.[3]  According to Statistics Canada , total cannabis sales in Canada in 2019 was approximately $6 billion.[4] Health Canada’s 2021 Canadian Cannabis Survey indicates that 17% of those surveyed who had used cannabis in the past 12 month used it for medical purposes only and another 28% used it for both medical and recreational purposes.[5] Based on these survey results, we estimate the potential sales of cannabis solely for medical purposes may have accounted for $1 billion ($6 billion * 17%) of the $6 billion sales in 2021.

With the anticipated next round of amendments to the Cannabis Act (“Cannabis 3.0”), it is expected Cannabis Health Products (“CHPs”) will be introduced, potentially starting with CBD based CHPs. The Institute of Fiscal Studies and Democracy at the University of Ottawa estimates the market size for CBD based products will be about $1.88 billion in the first year after a new regulatory approach to CBD based products is adopted. This market is expected to grow at an average annual rate of 6.9% a year, reaching $2.45 billion by the fifth year.[6] We believe the CHP market represents a unique opportunity for Pathway Health because of our valued relationships with pharmacists and pharmacy corporations.  We expect as part of Cannabis 3.0 amendments, Health Canada will also be establishing retail pharmacies as the primary distribution channel for these cannabinoid-based products. Pathway Health currently has agreements with companies representing approximately 2,000 retail pharmacies across Canada and this number is expected to increase in 2022.  We have a powerful opportunity to capitalize on the combination of our leading position in providing medical cannabis services along with our unique partnership position with pharmacies.

Corporate Strategy
Our strategy is focused on strengthening our unique and comprehensive approach to chronic pain management to improve patient outcomes for the 1 in 5 Canadian who suffer from chronic pain[7] by:

  • Expanding the breadth and reach of the services and products we offer both organically and through acquisitions, as well as through our pharmacy partnerships. We will continue to look to expand our interventional pain management business and to aggregate patients to strengthen our position as the largest medical cannabis service provider in Canada. We also intend to expand our service offering by acquiring/partnering with allied health and mental health services providers.
  • Continuing to expand on our preeminent partnership position with some of the leading retail pharmacy companies in the country as they prepare for their anticipated entry into the distribution of Cannabis Health Products (CHPs) following the anticipated regulatory changes.

Looking Back at 2021
In advancing our strategic goals, we achieved the following in 2021:

  • Despite issues created by the ongoing pandemic, we achieved year-over-year patient visit growth in each of our clinic divisions, with 10% overall growth, increasing the number of patient visits to over 80,000 for 2021.
  • In September 2021, we acquired the assets of O Cannabis We Stand on Guard for Thee Corporation, which included more than 4,000 active patients.
  • In December 2021, we announced the engagement of Dr. Jimmy Nanda to lead our initiative to expand Pathway Health’s allied health services in Canada and potentially beyond. Dr. Nanda has been a leader in the Canadian and Indian chiropractic doctor space for over 17 years and has been instrumental in developing chiropractic medicine within multidisciplinary chronic pain treatment systems in Canada. Dr. Nanda is also a leader and expert in the implementation of concussion, sports medicine, and clinical protocols for doctors and in chronic pain clinics.
  • In December, we also signed an LOI to acquire the allied health assets of NewLight Pain Clinic, which includes approximately 3,500 patients.
  • During the year, we entered strategic relationships with 2 advanced formulation and manufacturing partners to work with our product development business. These relationships represent important elements of our CHP product development and supply chain strategy. We anticipate signing additional agreements in 2022.
  • Signed agreements with 3 of Canada’s largest pharmacy chains bringing our total number of retail pharmacies who will have access to our Medical Cannabis Management System (MCMS) program to approximately 2,000. These agreements are important milestones in advancing our strategy of working closely with the pharmacies in preparation for their expected pivotal role in medical cannabis going forward – including potentially being the primary distribution channel for CHPs.
  • We expanded our pharmacy and product division by adding Dr. Jordan Silver as Senior Director of Product Development. Furthermore, we engaged marketing, branding, and product regulatory consulting expertise as well as additional relationship pharmacy personnel in preparation for what we believe will be a pivotal year leading up to the creation of CHPs and how they are to be manufactured and distributed.

Looking Ahead in 2022
In 2022, in addition to continuing to execute on our Corporate Strategy, our efforts will focus on those initiatives that:

  • We expect will contribute to extending the geographic reach of our clinic service businesses and product offerings, including expansion in the under penetrated Quebec market.
  • We expect will facilitate access to patients in communities that are particularly vulnerable to suffering from chronic pain and related issues.
  • Continue to expand our access to advanced formulation technologies for CHP development through partnerships.
  • Continue to both expand and deepen relationships with our network of pharmacy partners.
  • Continue to evaluate select international partnership opportunities that could open doors for Pathway Health to participate in the growing international market for medical cannabis products and services.

We also anticipate being more active in our marketing activities. Pathway Health has a compelling story to tell, and we are looking to share our story more broadly in the coming months. Insiders, who combined own more than 50% of the outstanding shares, continue to be motivated to support the Company. As part of this initiative, and as an initial step in creating a bridge to future potential markets, we announced our shares being listed on the Frankfurt Exchange and we are also evaluating a potential listing in the United States.

There is much work ahead, as we continue to aggressively push to drive growth and build scale in our existing businesses and set a solid foundation for our future CHP business. We are grateful to all of you who have stayed with us during the recent turbulent capital markets environment.

We are excited about the opportunities that lay ahead for us in 2022. We thank you in advance for your continued support.

This communication includes certain “forward-looking statements” under applicable Canadian securities legislation. Forward-looking statements are necessarily based upon a number of estimates and assumptions that, while considered reasonable, are subject to known and unknown risks, uncertainties, and other factors that may cause the actual results and future events to differ materially from those expressed or implied by such forward-looking statements. Such factors include, but are not limited to: general business, economic, competitive, political and social uncertainties; delay or failure to receive applicable approvals; and the results of operations. There can be no assurance that such statements will prove to be accurate, as actual results and future events could differ materially from those anticipated in such statements. Accordingly, readers should not place undue reliance on forward-looking statements. Pathway disclaims any intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law.

[1] An Action Plan for Pain in Canada, Health Canada, May 2021
[2] Lynch ME. The need for a Canadian pain strategy. Pain Res Manag. 2011 Mar-Apr; 16(2): 77–80
[5] 2021 Canadian Cannabis Survey (CCS), Health Canada, 2021
[7] An Action Plan for Pain in Canada, Health Canada, May 2021