MediPharm Labs Corp., 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)
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.”
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.
