MediPharm Labs Reports Third Quarter 2020 Results

Published: November 18, 2020

MediPharm Labs Reports Third Quarter 2020 Results

MediPharm Labs Corp., a global innovator in specialized, research-driven cannabis extraction, distillation and derivative products announced its financial results for the three and nine months ended September 30, 2020 and outlined its plan to accelerate growth and improve profitability.

“MediPharm Labs has created a strong and capable platform to pursue global leadership of medical, wellness and adult-use markets for cannabis,” said Pat McCutcheon, CEO, MediPharm Labs. “We have identified business strengths that can be exploited including significant technical depth, global GMP supply-chain capabilities, high-potential customer agreements including a significant exclusive multi-year contract with European pharmaceutical leader STADA, and a strong cash position.”

“Economic conditions including the oversupply in the Canadian bulk crude resin and distillate markets, along with the impact of COVID 19, continue to challenge the industry,” added Mr. McCutcheon. “We are now focused on doing more to drive profitable revenue and address weaknesses including reducing our cost structure. We have taken immediate steps to improve our costs and organizational alignment against which we have put an action plan in place that will create value and enable us to achieve our potential.”

The immediate action plan to create value consists of the following elements:

  • Improve financial management to reduce and better align costs with the timing of sales generation
  • Enhance marketing and sales with focus on accelerating research and development and new product commercialization for B2B and B2C operations
  • Transition from B2B wholesale concentrate market, due to oversupply in Canada, to white label contract manufacturing
  • Reduced headcount for an annualized savings of $3 million to meet needs of current environment
  • Undertook an independent operational review to identify areas for improvement and opportunities to restore growth to help drive significant improvement in cash flows and margins

These actions, some of which were taken late in the third quarter, and others subsequent to the quarter end, will prepare MediPharm Labs for significant performance improvements in 2021 as revenue under new customer agreements ramps up.


  • Cash and equivalents balance at September 30, 2020, was $36.5 million; finalized settlement of the second tranche of the convertible debenture.
  • Revenue was $4.9 million, compared to $13.9 million in Q2 2020. Reflects lower bulk extract volumes and average selling prices, partially offset by growth in formulated finished goods sales, up 30% to provincial distributors throughout Canada, and sales from MediPharm Labs Australia.
  • Finished product shipments grew to comprise 57% of Q3 revenue up from 16% in Q2 2020.
  • Commercialized SKUs grew 13% from Q2. Increased development activities for continued growth.
  • International revenue grew to $0.7 million as sales of GMP-certified formulated products under agreements with customers in Australia, New Zealand and the U.K. ramped up.
  • Gross profit was ($10.6 million) and gross margin was (214%) compared to gross profit of $2.2 million and gross margin of 16% in Q2 2020, primarily due to a $6.3 million non-cash write down of inventory to net realizable value and a $1.5 million write down of non-current deposits given to vendors for capital expenditures.
  • Negative Adjusted EBITDA(1) was $7.3 million.
  • Net loss before tax was $15.4 million, compared to a net loss of $3.8 million in Q2 2020.


Three months ended
September 30,
June 30,
March 31,
December 31,
September 30,
Revenue 4,947 13,918 11,089 32,444 43,386
Gross profit (10,588) 2,212 (10,882) 9,987 14,754
Gross margin % (214%) 16% (98%) 31% 34%
Net (loss)/income before tax (15,422) (3,775) (22,029) (2,401) 5,395
Adjusted EBITDA (1) (7,262) (2,180) (5,657) 2,661 10,066
Adjusted EBITDA margin % (147%) (16%) (51%) 8% 23%
(1)   See Non-IFRS Measures section of this news release.


Refining Processes, Leveraging SAP and Reducing Costs: During and subsequent to the third quarter, production processes were refined, the workforce was streamlined by 20% representing $3 million annualized cost reductions, and strict spending disciplines were implemented. Along with other cost containment measures in Q4, these actions will provide benefits as revenue ramps up. The Company is also realizing increasing advantages from the recent implementation of its SAP resource planning system.

STADA Pharmaceutical Partnership and 30 Supply Contracts to Drive RevenueThe Company now has more than 30 supply agreements with customers in eight countries, including its first major collaboration with a leading European consumer healthcare and generics company. Under its agreement with STADA, MediPharm Labs will export GMP-certified finished product and cannabis API for Germany with a plan to expand to other promising European markets over time. This agreement, the first of its kind in the cannabis industry, further strengthened the Company’s reputation as a specialist pharmaceutical manufacturer of cannabis API and finished products. In addition, the Company has formed its first alliances in the large and growing Latin American market for medical cannabis and has continued to build out its MediPharm Labs Australia customer base.

Gathering Speed with Finished Goods Production and LABS Cannabis BrandIn Q3, MediPharm Labs finished goods sales to provincial retailers grew 30% despite modest month over month sales growth of adult-use cannabis channels in Canada. To enhance its prospects domestically, the Company continues to shift its focus toward white label contract manufacturing and producing finished goods gaining market share with its growing product line up. In late October, MediPharm Labs was first to market with a consumer sized 99% Pure CBD Isolate Crystal on the launch of LABS Cannabis CBD Isolate, which serves a broad range of wellness consumers and patients. More new products will follow.

Expanding Production Capabilities: The Company remains focused on global medical and wellness markets and to enhance and diversify its channels. As such, the Company continues to expand its production capabilities and contract manufacturing operations. During the quarter, SKUs increased 10% from Q2, and included tincture bottles, topicals, isolate, sublingual sprays and various formulations for edibles and beverages.

Contributing to Clinical Research: Subsequent to quarter end, the Company initiated a clinical trial to research and evaluate the effectiveness of MediPharm Labs’ proprietary cannabis-derived medical products and formulations on the treatment of end-stage renal disease or chronic kidney disease. The Company expects to expand its portfolio of clinical trials in the coming quarters.


Based on agreed customer production schedules, the Company expects revenue from its portfolio of domestic and international sales agreements will grow beginning early in 2021 and will be complemented by new sales of LABS Cannabis products.


Subsequent to quarter end, the Company announced the departures of Robert Kwon, Chief Financial Officer and the Company’s Chief Marketing Officer. A search process has been initiated for a new CFO while the role of Chief Marketing Officer will not be directly filled and but will be covered by the Company’s new VP of Sales.

As part of a broader plan to strengthen the skills and independence of the Company’s Board of Directors, MediPharm Labs welcomed Shelley Martin, the retired President and Chief Executive Office.