Achieves Higher Gross Margin, Moves Closer to
Profitability
TORONTO, Nov. 14,
2023 /PRNewswire/ - MediPharm Labs Corp. (TSX: LABS)
(OTCQB: MEDIF) (FSE: MLZ) ("MediPharm", "MediPharm Labs" or the
"Company") a pharmaceutical company specialized in precision-based
cannabinoids, today announced its financial results for the three
months ended September 30, 2023.
Third Quarter 2023 – Select Highlights
- Settled a long-standing customer dispute for a total
consideration of $9M, including net
cash of $7.3M collected in October,
$1M in Tilray Brands, Inc. ("Tilray")
cannabis products and a four year agreement where Tilray will
purchase $0.5M of MediPharm
product.
- Gross profit of $2.4M or 28% was
positive for the fourth consecutive quarter and was the Company's
highest gross profit since Q4 2019.
- Adjusted EBITDA(1) of negative $2.4M improved $2.6M or 53% versus prior year and improved from
negative $3.2M in Q2 2023. Adjusted
EBITDA(1) continues to improve driven by margin
expansion initiatives and cost reductions.
- Following the successful integration of VIVO and the
achievement of approximately $7M in
annualized savings, the Company completed a further restructuring
in Q3 which will result in approximately $3M of additional annualized savings starting in
Q4 2023. (2)(3)(4)(5)
- Strong balance sheet, relative to many peer companies, with
$13M million of cash and less than
$3 million of debt as of September 30, 2023. The cash balance does not
include the cash collected from the customer dispute which was
received subsequent to quarter end. The current cash position is
approximately $19M.(5)
Groundwork for Growth in International Medical
Cannabis
- MediPharm executed on it its strategic international growth
plan to launch self branded products with more favourable gross
margins and longer-term potential. This plan includes the September
launch of the Beacon Medical branded portfolio in Australia of GMP oil and vapes; narcotic
license expansion for Beacon Medical Germany with oil and high
potency flower, and the signing of two new distribution agreements
in the UK for Beacon branded medical cannabis products.
- In July 2023, the Company entered
into an additional supply agreement with a top tier generic
pharmaceutical company in Brazil.
Brazilian authorities treat cannabis much like a pharmaceutical
product. Since signing the agreement the customer has applied to
the Brazilian Health Regulatory Agency for a number of cannabis
product approvals. MediPharm has received similar approvals in
Brazil with other customers. It is
anticipated the delivery of additional products could begin in Q1
2024, and substantially increase the current Brazilian
revenue.(2)
Continued Progress Solidifying Leadership in Cannabis-Based
Pharmaceutical Industry
- In July 2023, the Company
completed its first delivery of cannabis clinical trial material to
a United States ("US") research
partner. The delivery of pharmaceutical cannabis product was for a
National Institute of Health funded clinical trial, following
import permit from the United States Drug Enforcement Agency (the
"DEA") and Health Canada export permit. The Company has already
received DEA permits for replenishment of clinical trial material
and plans to make another US delivery in Q4
2023.(2)
- The Company has provided a full response to the United States
Food and Drug Administration (the "FDA") in relation to the initial
foreign drug site inspection of its Barrie facility regarding a new
Drug Master File being referenced in a recent Abbreviated New Drug
Application. This is the first FDA Audit of a purpose-built
commercial cannabis facility in Canada.
Progress Towards Profitability
- Q3 2023 gross profit was $2.4M or
28%. This is the fourth consecutive quarter of positive gross
profit. Gross profit continues to improve, driven by product mix,
production efficiencies and cost reductions. Management continues
to focus on efficiencies to drive gross profit.
- Total Opex, which includes general and administrative,
marketing and selling, and research and development expenses was
$6.1 million in the quarter versus
$7.5M in Q2 2023. Adjusting for
severance and some other discrete items, normalized Opex was
approximately $5.9M in Q3.
Retrospectively, if VIVO were included in our Q3 2022 results, Opex
in Q3 2023 is approximately 37% or $3.6M lower reflecting our combined cost
reduction initiatives.(5)
Management Commentary
David Pidduck, CEO, MediPharm
Labs commented, "We are proud of our focus on margins, cost
reductions and profitability. Now, our strong balance sheet and
improving profitability favourably positions us to make strategic
investments for revenue growth. Beyond organic growth investments,
there will be many M&A opportunities to consider in the coming
quarters to further grow our revenue and shorten the path to
profitability."
Greg Hunter, CFO, MediPharm Labs
added, "In Q3, we continued to make progress by improving gross
margins, reducing expenses and reducing cash burn as we drive
towards profitability. Adjusted EBITDA of negative
$2.4 million improved sequentially
and year over year and is our best result in over 2 years. In
addition, we strengthened our balance sheet with the settlement of
an outstanding dispute resulting in cash collection of $7.3 million subsequent to quarter end and as of
today we have approximately $19
million in cash and less than $3
million of debt."
Financial Summary
(1) Opex includes
general administrative expense, marketing and selling expenses and
R&D expenses.
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(2) Adjusted
EBITDA is a non-IFRS measure. See "Non-IFRS Measures".
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Q3 2023 Financial Results Conference Call
MediPharm's executive management team will also host a
conference call and audio webcast on Tuesday, November14, 2023 at
8:30 a.m. eastern time to discuss the
Company's financial results.
Conference Call:
Toll-free number: +1 (888) 330-2454 / International number: +1
(240) 789-2714
Conference ID: 4921762
Participants are asked to dial in approximately 15 minutes
before the start of the call.
Audio Webcast:
An audio webcast will be available by visiting the following
link here.
For those who are unable to participate on the live conference
call or webcast, a replay will be available at
https://www.medipharmlabs.com/investors approximately one day after
completion of the call.
About MediPharm Labs
Founded in 2015, MediPharm Labs specializes in the development
and manufacture of purified, pharmaceutical-quality cannabis
concentrates, active pharmaceutical ingredients (API) 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 precision-dosed 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.
In 2021, MediPharm Labs received a Pharmaceutical Drug
Establishment Licence from Health Canada, becoming the only company
in North America to hold a
domestic Good Manufacturing Licence for the extraction of natural
cannabinoids. The Company carries out its operations in compliance
with all applicable laws in the countries in which it operates.
In 2023, MediPharm acquired VIVO Cannabis Inc. which expanded
MediPharm's reach to medical patients in Canada via Canna
Farms medical ecommerce platform, and
in Australia and Germany through Beacon Medical
PTY and Beacon Medical GMBH. This acquisition also included Harvest
Medical Clinics in Canada which provides medical cannabis
patients with Physician consultations for medical cannabis
education and prescriptions.
Notes:
(1)
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This is a non-IFRS
reporting measure. See "Non-IFRS Measures" below.
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(2)
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This is forward-looking
information and based on a number of assumptions. See "Cautionary
Note Regarding Forward-Looking Information" and
"Assumptions".
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(3)
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Based on both costs and
revenue opportunities identified by MediPharm and VIVO management.
Revenue opportunity assumed that both existing products may be sold
into the existing sales channels of both VIVO and MediPharm. Costs
savings estimated depends on the eliminating duplicated public
company expenses and redundant corporate infrastructure.
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(4)
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This target, and the
related assumptions, involve known and unknown risks and
uncertainties that may cause actual results to differ materially.
While MediPharm and VIVO believe there is a reasonable basis for
this target, such target may not be met. Actual results may vary
and differ materially from the targets. See
"Assumptions".
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(5)
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Certain financial
information included in this press release is neither audited nor
reviewed. Where possible, the information has been constructed by
management from available audited or audit reviewed financial
statements. Where no audited or audit reviewed information has been
available, additional management accounting information has been
utilized to construct financial information. Readers are cautioned
not to place undue reliance on such information.
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Assumptions
In developing the financial guidance set forth above, MediPharm
has made the following assumptions and relied on the following
factors and considerations:
- The targets are based on MediPharm and VIVO's historical
results including annualized revenue from its interim financial
results for the period ended September 30,
2022, as adjusted for subsequent events including completion
of the transaction with VIVO.
- Revenue sustainability and growth depend on a variety of
factors, including among other things, location, competition, legal
and regulatory requirements. Prices are projected forward at
recently realized wholesale and direct to patient prices.
- Cost of goods sold, before taking into account the impact of
value changes in biological assets (which are non-cash in nature),
and, accordingly, are excluded from calculations of EBITDA, have
been projected based on estimated costs of production and capacity
available from a similar supply chain.
- The immediate reduction of public company professional and
service fees, such as but not limited to, errors and omissions
insurance, audit services, listing expenses and external legal
fees.
- Implied redundancy of employee roles in the Company, mainly in
corporate functions. Impacted employee severance fees are
calculated on current employment agreements and Employment
Standards Act (Ontario).
- No changes to existing medical cannabis legislation and
regulations in Canada,
Germany, Australia and Brazil.
- All VIVO and MediPharm regulatory licenses remain in good
standing with domestic and international regulators, particular
Good Manufacturing Practices (GMP).
Non-IFRS Measures
This press release contains references to "EBITDA", "Adjusted
EBITDA" and "Adjusted Gross Profit", which are non-IFRS financial
measures. Management believes that these supplementary non-IFRS
financial measures provide useful additional information related to
the operating results of the Company. These non-IFRS financial
measures are not recognized under IFRS and, accordingly, users are
cautioned that these measures should not be construed as
alternatives to net income (loss) and gross profit determined in
accordance with IFRS as measures of profitability or as
alternatives to the Company's IFRS-based Financial Statements. The
non-IFRS measures presented may not be comparable to similar
measures presented by other issuers. EBITDA refers to earnings
before interest, taxes, depreciation, and amortization and is used
as an indicator of the Company's overall profitability. Adjusted
EBITDA is a measure of the Company's overall financial performance
and is used as an alternative to earnings or income in some
circumstances. Adjusted EBITDA is essentially net income (loss)
with interest, taxes, depreciation and amortization, non-cash
adjustments and other unusual or non-recurring items added back.
Adjusted EBITDA has limitations as an analytical tool as it does
not include depreciation and amortization expense, interest income
and expense, finance fees, gain in revaluation of derivative
liabilities, taxes, government grants including rent and wage
subsidies, one-off transactions, impairment losses on inventory and
on fixed assets and intangibles, write down of deposits and
share-based compensation. 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. Adjusted EBITDA, as used within the Company's
disclosure, may not be directly comparable to Adjusted EBITDA used
by other reporting issuers. Adjusted Gross Profit refers to
gross profit excluding the adjustments for biological assets,
accelerated depreciation, write down of non-current deposits and
write down of inventory. Adjusted Gross Profit is a useful measure
as it represents gross profit for management purposes based on
costs to manufacture, package and ship inventory sold, exclusive of
any impairments due to changes in internal or external influences.
Adjusted EBITDA and Adjusted Gross Profit do not have any
standardized meanings and the Company's method of calculating such
non-IFRS measures may not be comparable to calculations used by
other companies bearing the same description. See "Use of Non-IFRS
Measures" in the Company's management's discussion and analysis for
the period ended March 31, 2023 for additional
information.
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. In this news release, forward-looking statements relate
to, among other things, statements regarding: the Company's
progress toward profitability; potential annualized savings to be
realized as a result of the Transaction and the Company's
restructuring efforts; the anticipated timing and results of
integration efforts of the Company following completion of the
Transaction; potential cost synergies to be realized as a result of
the Transaction; results of Investigational New Drug applications
submitted to the FDA by US-based research partners; and revenue
growth. 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 to obtain adequate
financing; the delay or failure to receive regulatory approvals;
and other factors discussed in MediPharm's filings, available on
the SEDAR+ website at www.sedarplus.ca. 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 assumes no obligation to update the forward-looking
statements of beliefs, opinions, projections, or other factors,
should they change.
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SOURCE MediPharm Labs Corp.