BARRIE, Ontario, June 18, 2020 (GLOBE NEWSWIRE) -- MediPharm Labs Corp. (TSX: LABS) (OTCQX: MEDIF) (FSE: MLZ) (“MediPharm Labs” or the “Company”) a global leader in specialized, research-driven cannabis extraction, distillation and derivative products, today announced its financial results for the three months ended March 31, 2020. The Company also provided an update on the build out of its global Good Manufacturing Practices (“GMP”) certified production platforms and new international medicinal, wellness and adult use-recreational revenue streams.
“MediPharm Labs has proudly evolved from our beginning stages to today, capitalizing on a multi-jurisdictional GMP-certified manufacturing footprint to further develop a diversified international customer portfolio with multiple product streams suitable for lawful medicinal, wellness and adult-use recreational markets around the world,” said Pat McCutcheon, CEO, MediPharm Labs. “Our focus on innovation, a pharmaceutical approach, capital investments and the very high standards achieved through the GMP certification of our Canadian and Australian facilities will allow us to further evolve our business as we pursue medicinal and wellness markets, as well as international opportunities, so that we are not reliant on the challenged Canadian recreational market.”
Due to a reduction in the average selling price of bulk extracts and reduced volumes sold because of a continued muted demand in the Canadian bulk wholesale market, first quarter revenue was 49% below the same quarter a year ago.
“We successfully scaled our B2B bulk business in the lead up to Cannabis 2.0 legalization where demand for bulk cannabis concentrates soared; but the limitations of a single regulated market, with limited distribution and slow finished product roll-out, resulted in a decrease in demand for those bulk concentrates beginning in Q4 2019 and continuing to today,” said McCutcheon. “This is why our vision of operating a global platform for multi-customer, multi-product and multi-jurisdictional relationships covering medicinal, wellness and adult-use segments makes sense from strategic, risk management and value creation perspective as the Canadian market for concentrate-based products continues to mature.”
“Our capital investments in our two GMP-platforms have been made creating further differentiation from our competitors around the world and we are developing relationships in various countries for a range of cannabis products.”
BUSINESS HIGHLIGHTS AND ACCOMPLISHMENTS
Q1 FINANCIAL SUMMARY
Three-months ended | ||||||||||
March 31, 2020 | December 31, 2019 | September 30, 2019 | June 30, 2019 | March 31, 2019 | ||||||
$’000s | $’000s | $’000s | $’000s | $’000s | ||||||
Revenue | 11,089 | 32,444 | 43,386 | 31,472 | 21,950 | |||||
Gross profit | (10,882) | 9,987 | 14,754 | 11,311 | 6,862 | |||||
Gross margin % | •% | 31% | 34% | 36% | 31% | |||||
Net (loss)/income before tax | (22,029) | (2,401) | 5,395 | 4,083 | (325) | |||||
Adjusted EBITDA (1) | (5,657) | 2,661 | 10,066 | 7,700 | 4,310 | |||||
Adjusted EBITDA margin % | (51%) | 8% | 23% | 24% | 20% | |||||
(1) See Non-IFRS Measures section of this news release.
REDUCING COSTS TO ADDRESS COVID-19
“COVID-19 exacerbated the challenge of establishing a strong legal cannabis market in Canada by delaying retail store openings, making it difficult for vertically integrated producers to ramp up capabilities to convert bulk extract into finished products, and making new customers challenged to commit to longer term agreements in an economically uncertain environment,” said Bobby Kwon, Chief Financial Officer. “This reduced product ordering and sell through has negatively impacted our Q1 revenue and capacity utilization. In response, we have made strong progress on ramping up consumer packaged goods production to diversify our revenue streams while actively reducing and managing expenses to maintain a strong cash balance.”
“The Canadian market is still developing and MediPharm Labs will be the beneficiary as retail channels and available products expand. But we are not waiting, which is why we have consistently prioritized investments in, and expansion of, our international medicinal and wellness markets.”
MediPharm Labs is an essential business and as such, its Canadian manufacturing facility was exempted from provincially mandated COVID-19 closures. While the Company continues to maintain adequate inventory to supply its customers and meet demand, vertically integrated organizations have been slower to add capabilities to convert bulk extract into finished product resulting in lower-than-historical demand for bulk wholesale extracts. As a result of the pandemic, these customers may now also be experiencing further business restrictions and interruptions as well as disruptions through retail distributors which may lead to reduced product ordering and sell through.
STRENGTHENING LIQUIDITY
As announced on June 8, 2020, the Company completed a private placement, raising aggregate gross proceeds of $37.8 million, 50% of which are being held in escrow pending satisfaction of certain conditions. This substantially improved the Company’s liquidity and ability to fully support its strategies including exporting products to new international jurisdictions and launching consumer packaged cannabis-based offerings with new formulations and formats.
LOOKING AHEAD
The Company expects Canadian market inefficiencies - including those related to COVID-19 - to persist but slowly moderate while international sales agreements begin to ramp up. Accordingly, it anticipates that second half 2020 results will be stronger than first half 2020 performance. To improve performance, the Company will execute on the following priorities:
Diversifying and igniting growth by:
Maintaining liquidity and financial strength by:
“In light of the current market environment, we remain confident in our core strategies and business model. We believe our approach remains entirely appropriate for the creation of long-term customer and shareholder value,” said Mr. McCutcheon. “With the right framework in place, all the hard work already done by our team to invest in and build two high-end, pharmaceutical-grade facilities that are GMP certified, and a culture devoted to continuous improvement, I am convinced that MediPharm Labs has everything we need to succeed as a diversified global provider of differentiated medical, wellness and adult recreational use cannabis products.”
GROWTH CATALYSTS
The Company’s consolidated financial statements and management's discussion and analysis for the three months ended March 31, 2020 will be available on SEDAR and on www.medipharmlabs.com
Q1 CONFERENCE CALL AND WEBCAST
The Company will host a conference call and audio webcast on Thursday, June 18, 2020 at 8:30 a.m. Eastern Time to discuss its results and outlook.
Conference Call Information:
Toll-free number: 833-502-0471 / International number: 236-714-2179 / Conference ID: 5073099
Due to higher than normal volumes, participants are asked to dial in approximately 15 minutes before the start of the call.
Audio Webcast:
An audio webcast will be available in the Events section of the MediPharm Labs’ Investor Relations website https://ir.medipharmlabs.com/news-events or by visiting the following link: https://event.on24.com/wcc/r/2159388/A36D3A773AE4FDB8F068C0A4C5024CB0
For those who are unable to participate on the live conference call and webcast, a replay will be available approximately one hour after completion of the call.
Replay Information:
Replay number: Toll-free number: 800-585-8367 / International replay number: 416-621-4642/ Conference ID: 5073099
NON-IFRS MEASURES
Adjusted EBITDA is not a recognized performance measure under IFRS, does not have a standardized meaning and therefore may not be comparable to similar measures presented by other issuers. Adjusted EBITDA is included as a supplemental disclosure because Management believes that such measurement provides a better assessment of the Company’s operations on a continuing basis by eliminating certain non-cash charges and charges or gains that are nonrecurring. Adjusted EBITDA is defined as net loss excluding interest, taxes, depreciation and amortization, share-based compensation, and other non-cash expenses. Adjusted EBITDA has limitations as an analytical tool as it does not include depreciation and amortization expense, interest income and expense, taxes, share-based compensation and transaction fees. Because of these limitations, Adjusted EBITDA should not be considered as the sole measure of the Company’s performance and should not be considered in isolation from, or as a substitute for, analysis of the Company’s results as reported under IFRS. The most directly comparable measure to Adjusted EBITDA calculated in accordance with IFRS is operating income (loss). The above is a reconciliation of the Company’s operating loss to Adjusted EBITDA. See “Reconciliation of non-IFRS measures” in the Company’s Management’s Discussion and Analysis for the period ended March 31, 2020 for additional information.
About MediPharm Labs
Founded in 2015, MediPharm Labs specializes in the production of purified, pharmaceutical-quality cannabis oil and concentrates and advanced derivative products utilizing a Good Manufacturing Practices certified facility with ISO standard-built clean rooms. MediPharm Labs has invested in an expert, research- driven team, state-of-the-art technology, downstream purification methodologies and purpose-built facilities with five primary extraction lines for delivery of pure, trusted and precisely-dosable cannabis products for its customers. Through its wholesale and white label platforms, MediPharm Labs formulates, develops (including through sensory testing), processes, packages and distributes cannabis extracts and advanced cannabinoid-based products to domestic and international markets. As a global leader, MediPharm Labs has completed commercial exports to Australia and is nearing commercialization of its Australian extraction facility. MediPharm Labs Australia was established in 2017.
For further information, please contact:
Laura Lepore, VP, Investor Relations and Communications
Telephone: 416-913-7425 ext. 1525
Email: investors@medipharmlabs.com
Website: www.medipharmlabs.com
CAUTIONARY NOTE REGARDING FORWARD-LOOKING INFORMATION:
This news release contains “forward-looking information” and “forward-looking statements” (collectively, “forward-looking statements”) within the meaning of the applicable Canadian securities legislation. All statements, other than statements of historical fact, are forward-looking statements and are based on expectations, estimates and projections as at the date of this news release. Any statement that involves discussions with respect to predictions, expectations, beliefs, plans, projections, objectives, assumptions, future events or performance (often but not always using phrases such as “expects”, or “does not expect”, “is expected”, “anticipates” or “does not anticipate”, “plans”, “budget”, “scheduled”, “forecasts”, “estimates”, “believes” or “intends” or variations of such words and phrases or stating that certain actions, events or results “may” or “could”, “would”, “might” or “will” be taken to occur or be achieved) are not statements of historical fact and may be forward-looking statements. 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 which 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; the inability of MediPharm Labs to obtain adequate financing; the delay or failure to receive regulatory approvals; and other factors discussed in MediPharm Labs’ filings, available on the SEDAR website at www.sedar.com. 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 the forward-looking statements and information contained in this news release. Except as required by law, MediPharm Labs assumes no obligation to update the forward-looking statements of beliefs, opinions, projections, or other factors, should they change.