MediPharm Labs Corp. (TSXV: LABS) (OTCQX: MEDIF) (FSE: MLZ)
(“MediPharm Labs” or the “Company”) a global leader in specialized,
research-driven cannabis extraction, distillation, purification and
cannabinoid isolation, is pleased to announce first quarter
financial results for the three months ended March 31, 2019. The
consolidated financial statements and management's discussion and
analysis for the period will be available on SEDAR and on
www.medipharmlabs.com.
Key Q1 2019 Financial and Year-to-Date
Highlights
- Revenue of $22 million, a 115%
increase over Q4 2018, leading the Canadian cannabis
extraction-only industry
- Gross Profit of $6.9 million, Gross
Margin 31%
- Adjusted EBITDA(1) of $4.3 million,
a 102% increase over Q4 2018, Adjusted EBITDA(1) margin of 20%
- Strong, positive cashflows from
operations
- Q1 revenue includes $7.6 million
revenue for initial shipment of large private label cannabis oil
contract with a large Licensed Producer
- Acquired more than 5,000 kg (or 5
million grams) of dried cannabis in last 2 weeks of Q1 from
multiple Licensed Producers to fulfill robust demand for private
label offerings
- Continued significant capital
investment, further increasing scale of operations to enhance
efficiencies through automation, increase throughput capacity and
new equipment for diversified product lines including distillates,
vapeables, softgel caps and bottled cannabis oil
- Received over $7 million in cash
proceeds from warrant exercises subsequent to March 31, 2019
“As a differentiated cannabis company, we
achieved strong first quarter results and set the pace for
continued robust growth, marking our position among top-tier
Canadian cannabis companies,” said Patrick McCutcheon, Chief
Executive Officer, MediPharm Labs. “Our revenue and adjusted EBITDA
performance, which more than doubled to $22 million and $4.3
million in our first full quarter of operations, illustrates the
value of our specialized focus and ability to execute as the
Canadian market's leading extraction experts and providers of
high-quality cannabinoid-based derivative formulations at scale. It
also demonstrates our ability to convert revenue into positive
operating cash flow – a key milestone achieved less than five
months after receiving our sales licence.”
“Our very strong start to the year included
signing our fifth, 3-year tolling agreement, with TerrAscend Corp.,
and completing two new private label supply agreements in the
quarter, raising the total potential value of our private label
sales agreements to in excess of $85 million over a 15-month period
from December 2018. This strong sales momentum continued well into
the second quarter, with several new agreements in process and a
healthy pipeline beyond those.”
“In anticipation of expanded legalization in the
fall of 2019, we are advancing our distillate and white label
solutions platforms to enhance our position for vapeables, edibles
and topicals as we expect our addressable market and consumer
demand to significantly increase. Our white label offering will be
an enduring advantage and attractive solution for LP’s,
direct-to-consumer brands and CPG companies, which we expect will
also accelerate our growth in the months and years ahead.”
Key Operational and Year-to-Date 2019
Highlights
- Executed multiple private label
sales agreements with potential sales value in excess of
$85-million over 15-month period from December 2018, with a robust
pipeline of additional private label sales opportunities
- Signed first international private
label sale agreement with AusCann Group Holdings Ltd. for export of
cannabis oil from Canada to Australia for chronic pain
medicines
- Continued expansion of white label
solutions platform, as planned, to offer formulation, manufacturing
and distribution services, in addition to active ingredients, for
cannabis oil input products including for vapeables, edibles,
beverages and topicals; expected to drive future margin
expansion
- Appointed renowned medical expert
and pharmaceutical researcher, Dr. Paul Tam, to the Board of
Directors and Audit Committee
- Appointed Braden Fenske, former
Group Product Director, Global Strategic Marketing for Biosense
Webster Inc., a Johnson & Johnson Company, to newly created
Chief Strategy Officer position to advance corporate strategy,
global growth and strategic partnerships
- Assembled diverse team of globally
renowned experts to form our Science Advisory Committee
Near Term Catalysts
- New agreements in process
- Large volume purchases of dried
cannabis
- Canadian legalization of vapeables
and edibles in fall 2019 creates another significant addressable
market for cannabis derivatives
- On track to increase annual
throughput capacity from 150,000 kg to 250,000 kg during 2019
- First oil shipment to AusCann Group
Holdings in Australia from Canadian extraction-only company
- Advancing international growth
strategy - significant progress on construction of MediPharm Labs
Australia state-of-the-art cannabis extraction facility with
licensing expected H2/19
- Continued progress toward European
Union GMP certification to address EU market demand
- Identification and evaluation of
additional jurisdictions for continued global expansion
opportunities in Europe, Latin America, the Caribbean and
Africa
First Quarter 2019 Key Financial Measures
|
Three-months ended |
|
March 31, 2019$’000s |
December 31, 2018$’000s |
Revenue |
21,950 |
10,198 |
Gross profit |
6,862 |
3,967 |
Gross margin % |
31% |
39% |
Net loss |
(573) |
(3,542) |
|
|
|
Adjusted
EBITDA(1) |
4,310 |
2,129 |
Adjusted
EBITDA margin % |
20% |
21% |
|
|
|
Ongoing Strategic Initiatives
- Forge Additional Domestic
and International Sales and Supply Agreements: Utilizing a
first-mover and proprietary advantages, the Company is focused on
procuring cost efficient, bulk dried cannabis supply, increasing
wholesale private label cannabis concentrate (crude resin and
distillate) production and value-added products, services and
tolling to win new business domestically and internationally.
- Expand White-Label
Solutions Platform Including Formulation, Processing and
Distribution Services: Expected legalization of vapeables,
edibles, beverages and topicals in October 2019 is also expected to
expand the Company’s addressable market for cannabis derivatives
and act as a catalyst to encourage a broad array of
direct-to-consumer brands and non-cannabis consumer packaged goods
companies to seek partners like MediPharm Labs for active
ingredients as well as formulation, processing and distribution.
- Increase cGMP-built
Production Capacity: The Company is on track with the
installation and commissioning of 2 additional primary extraction
lines at its Barrie facility that are expected to increase annual
processing capacity to 250,000 kg over a total of 7 extraction
lines. Utilizing cGMP methodology, multiple extraction lines
provide flexibility to dedicate to specific customer batches and
significantly enhance productivity. Flexibility over multiple
extraction lines will be transformative, providing a continued
competitive advantage in the cannabis market.
- Achieve European Union GMP
Certification at Barrie Facility: Expect to achieve
certification in the H2 2019 enabling the Company to serve
substantial European demand.
- Complete First
International Facility in Australia: Australian centre of
excellence is expected to be commissioned in H2 2019, pending
licensing, and will act as hub to access Asia-Pacific regions.
The facility is designed to produce to cGMP standards with an
annual extraction capacity of approximately 75,000 kg of dried
cannabis. The Australia region is expected to provide a strong
backdrop for cultivation given the favorable growing conditions
where the Company is seeking to procure locally sourced lower-cost
supply inputs for production.
- Expand Secondary Extraction
Capabilities: Advancing industrial-scale distillation and
commercial chromatography capabilities to produce active
pharmaceutical ingredients that require cannabinoid purity of at
least 99.9%. Development is underway for specialized,
proprietary chromatography processing with trials expected to
commence H2 2019.
- M&A and Joint Venture
Opportunities: The Company has established a robust
pipeline of opportunities to replicate its unique business model in
other jurisdictions and evaluating complementary acquisitions to
further enhance and accelerate growth.
First Quarter 2019 Financial Results
Summary
|
Three-month periods ended |
|
March 31 |
|
2019 |
|
2018 |
|
|
$’000s |
|
$’000s |
|
|
|
|
Revenue from contracts with
customers |
21,950 |
|
- |
|
Cost of sales |
(15,088 |
) |
- |
|
|
|
|
Gross
profit |
6,862 |
|
- |
|
|
|
|
General administrative
expenses |
(2,128 |
) |
(394 |
) |
Marketing and selling
expenses |
(907 |
) |
(11 |
) |
Share-based compensation
expense |
(3,972 |
) |
(758 |
) |
Other operating expenses |
(7 |
) |
(105 |
) |
|
|
|
Operating
loss |
(152 |
) |
(1,268 |
) |
|
|
|
Finance income |
5 |
|
- |
|
Finance expense |
(178 |
) |
(81 |
) |
|
|
|
Loss before
taxation |
(325 |
) |
(1,349 |
) |
|
|
|
Taxation expense |
(248 |
) |
- |
|
Net loss for the period |
(573 |
) |
(1,349 |
) |
|
|
|
(1) 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, and share-based compensation.
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,
2019 for additional information.
About MediPharm Labs Corp.
Founded in 2015, MediPharm Labs has the
distinction of being the first company in Canada to become a
licensed producer for cannabis oil production under the ACMPR
without first receiving a cannabis cultivation license. This expert
focus on cannabis concentrates from being built to cGMP (current
Good Manufacturing Practices) and ISO standard-built clean rooms
and critical environments laboratory, allows MediPharm Labs to
produce purified, pharmaceutical-like cannabis oil and concentrates
for advanced derivative products. MediPharm Labs has invested in an
expert, research-driven team, state-of-the-art technology,
downstream extraction methodologies and purpose-built facilities to
deliver pure, safe and precisely-dosed cannabis products to
patients and consumers. MediPharm Labs’ private label program is a
high margin business for the Company, whereby it opportunistically
procures dry cannabis flower and trim from its numerous product
supply partners, to produce cannabis oil concentrate products for
resale globally on a private label basis.
Through its subsidiary, MediPharm Labs Australia
Pty. Ltd., MediPharm Labs has also completed its application
process with the federal Office of Drug Control to extract and
import medical cannabis products in Australia.
For further information, please
contact:Laura Lepore, Vice President, Investor
Relations & CommunicationsTelephone: 705-719-7425 ext
216Email: investors@medipharmlabs.com Website:
www.medipharmlabs.com
NEITHER THE TSX VENTURE EXCHANGE NOR ITS REGULATION SERVICES
PROVIDER (AS THAT TERM IS DEFINED IN THE POLICIES OF THE TSXV)
ACCEPTS RESPONSIBILITY FOR THE ADEQUACY OR ACCURACY OF THIS
RELEASE.
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, expectations for revenue generation from
existing contracts, expanding product offerings and legalization of
same, development of R&D and IP, signing new sales and supply
agreements, expanding white-label solutions platform, increasing
production capacity, exportation to Australia, expanding merger and
acquisition and international growth pipeline, expanding secondary
extraction capabilities, cGMP certification and the completion of
Australian facility and establishment and licensing of operations
in Australia. 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; and the delay or failure to receive regulatory
approvals. 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.
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