MediPharm Labs Reports Third Quarter Results

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Nov 14, 2024, 07:00 ET

Strong Growth in International GMP Medical Markets

TORONTO, Nov. 14, 2024 /PRNewswire/ - MediPharm Labs Corp. (TSX: LABS) (OTCQB: MEDIF) (FSE: MLZ) ("MediPharm", "MediPharm Labs" or the "Company") a pharmaceutical company specialized in precision-based cannabinoids announced its financial results for the three and nine months ended September 30, 2024.

Key Highlights

Adjusted EBITDA⁽¹⁾: Negative $743K in the three months ended September 30, 2024 ("Q3 2024"), significantly improved from negative $2.4M during the same period in 2023 ("Q3 2023").
Net Revenue: $9.8M in Q3 2024, a 15% increase as compared to Q3 2023. International medical cannabis revenue grew 37% versus Q3 2023 and represented 36% of revenues in the quarter. Canadian medical and business to business sales represented 46% of total revenue in Q3 2024.
Gross Profit: 32% in Q3 2024, a 29% improvement from Q3 2023, driven by cost reductions, production efficiencies and favourable product mix.
Final Convertible Debt Payment: $2.2M debt payment in Q3 2024. This fully pays off all of the Company's convertible debt. The Company is now free of any material debt with full mortgage free ownership of its three production facilities.
Cash Balance: $13 million at the end of Q3 2024.

Growth in International GMP Sales

Refresh of Beacon Branded Flower in Germany: Beacon branded medical sales of $400K in Q3 2024 vs $135k in all of 2023. MediPharm is using its experience in Germany and Beacon branded assets from Australia to further build brand equity and exert better control of growth opportunities
Continued Success in Australia: $2.5M in wholesale sales in Australia in Q3 2024 was the best quarter sales since acquiring Beacon Medical Australia PTY Ltd. ("Beacon Medical Australia") in the second quarter of 2023. The growth was driven by the addition of new high potency flower stock keeping units ("SKUs") and the recent new launches of Good Manufacturing Practices ("GMP") oils, vapes and live resin vape cartridges.
Future International Growth Opportunities: MediPharm has additional commitments for sales into new international markets and is currently completing certain international regulatory registrations.⁽²⁾ Late-stage regulatory registrations include UK, Brazil and New Zealand. Early to mid-stage regulatory registrations include France, Spain, Poland and Switzerland. These markets vary in size, however MediPharm is well positioned with plans to sell higher value GMP products, like cannabis oil and dronabinol, given its history and expertise in supplying GMP compliant products.⁽²⁾

Commercial Highlights

Product Launches: MediPharm continued to build on its product innovations in Q3 2024, commercializing 11 unique SKUs, four of which were live resin GMP vapes for the Australian medical market. Overcoming the many challenges, whether regulatory, validation or stability associated with a new international GMP SKU like live resin allows for a competitive moat in this emerging global concentrate category.
Domestic Medical: Completing the relocation of medical sales and distribution from Hope, BC to Barrie, ON has resulted in cost savings and better service for our patients. This also allows for the future sale of the facility in Hope, BC (the "Hope Facility").⁽²⁾ Product mix on this ecommerce platform continues to grow with 24 new SKUs onboarded in Q3 2024.⁽²⁾
Harvest Medicine Cannabis Clinics: Harvest Medicine Inc. ("Harvest Medicine") cannabis clinic sales remain consistent even as the number of new medical cannabis patients in Canada declines. This shows that Harvest Medicine is successful with patient retention including with the important Veteran patients, even as other companies exit the clinic business. After achieving further efficiencies in clinic operations this stand-alone business unit now enjoys net positive cash flow from operations.

Management Commentary

David Pidduck, CEO, MediPharm Labs commented, "MediPharm accomplished several important milestones in Q3 that will position us well for profitability in 2025. MediPharm has successfully diversified its business. As a global GMP player, our international sales grew 37% vs. Q3 2023, resulting in over 35% of revenue coming from outside Canada.

We have a strong presence in the Canadian medical channel, and growing B2B sales. Additionally, MediPharm continues to launch new products and build on our very broad product line in the Canadian adult use and wellness channel. This diversity has contributed to our balance sheet strength and our ability to capitalize on future growth opportunities in various countries, product categories, and channels."

Greg Hunter, CFO, MediPharm Labs added, "Q3 2024 was a major step in the right direction towards profitability. Paying off our debt and rationalizing facilities, pursuing cost efficiencies while growing our higher margin international revenues are all critical elements to position us for long term sustainable growth.

Our strong balance sheet makes us an ideal partner for corporate development opportunities as we continue to see consolidation in the industry globally."

Financial Summary

Three months ended
	30-Sep- 24	30-Jun- 24	31-Mar- 24	31-Dec- 23	30-Sep- 23
	$'000s	$'000s	$'000s	$'000s	$'000s
Revenue	9,798	10,350	9,771	9,131	8,505
Gross profit	3,120	3,418	2,651	2,196	2,417
Opex ⁽¹⁾	(5,442)	(5,382)	(5,648)	(5,020)	(6,050)
Adjusted EBITDA ⁽²⁾	(743)	(124)	(949)	(1,579)	(2,346)

(1) Opex includes general administrative expense, marketing and selling expenses and R&D expenses.

(2) Adjusted EBITDA is a non-IFRS measure. See "Non-IFRS Measures".

Q3 2024 Financial Results and Business Results

MediPharm's executive management team has prepared an updated company presentation to share select highlights from the Company's Q3 2024 and some strategic growth perspectives. The presentation will be available on MediPharm's website, in the Investor section.

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 GMP 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 Australia and Beacon Medical Germany 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)	This is a non-IFRS reporting measure. See "Non-IFRS Measures" below.
(2)	This is a forward-looking statement and based on a number of assumptions. See "Cautionary Note Regarding Forward-Looking Information" below.

Non-IFRS Measures

This press release contains references to "Adjusted EBITDA", which is a non-IFRS financial measure. Management believes that this supplementary non-IFRS financial measure provides useful additional information related to the operating results of the Company. This non-IFRS financial measure is not recognized under IFRS and, accordingly, users are cautioned that this measure should not be construed as an alternative 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 measure presented may not be comparable to similar measures presented by other issuers. 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, restructuring related severance expense, government grants including rent and wage subsidies, transaction fees, unusual write down of inventory, impairment of fixed assets and intangibles, impairment loss on assets held for sale, impairment of receivables, share-based compensation, fair value adjustments to biological assets and inventory. 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 EBITDA does not have a standardized meaning and the Company's method of calculating such non-IFRS measure may not be comparable to calculations used by other companies bearing the same description.

The following tables reconcile the Company's net operating income (loss) (as reported) and Adjusted EBITDA for the past eight quarters:

	Three months ended
	September 30, 2024	June 30, 2024	March 31, 2024	December 31, 2023
	$'000s	$'000s	$'000s	$'000s
Net operating loss	(2,708)	(2,573)	(3,725)	(2,935)
Adjusted for:	-	-	-	-
Share-based compensation expense	160	576	895	306
Depreciation and amortization	518	731	790	717
Restructuring related severance expenses	87	305	755	335
Impairment loss on remeasurement of assets held for sale	113	77	-	23
Gain on disposition of assets	-	(20)	(276)	(174)
Early lease termination cost	-	-	44	-
Incremental cost of cannabis inventory acquired in a business combination ⁽¹⁾	110	162	327	372
Terminal costs for closed facility ⁽²⁾	-	95	323	-
One-off derecognition of liabilities	-	-	(130)	-
Write down of inventories ⁽³⁾	27	60	-	-
Fair value adjustments in gross profit	519	170	48	(223)
HST reassessment ⁽⁴⁾	153	240	-	-
Payroll tax assessment	-	42	-	-
Miscellaneous	-	11	-	-
Transaction costs ⁽⁵⁾	278	-	-	-
Adjusted EBITDA	(743)	(124)	(949)	(1,579)

(1)	Incremental cost of cannabis inventory acquired in a business combination represents the fair value realized on sale of cannabis inventory acquired in a business combination.
(2)	This relates to employee compensation for terminated employees and write downs of the carrying value of inventory at the Hope Facility.
(3)	This adjustment is for unusual inventory write-downs only and not the total value of inventory written down.
(4)	This relates to a liability recognized in connection with a notice of reassessment issued by the tax authorities.
(5)	This includes non-recurring fees, expenses associated with the evaluation of potential mergers and acquisitions, and fees related to reorganization of legal entities.

	Three months ended
	September 30, 2023	June 30, 2023	March 31, 2023	December 31, 2022
	$'000s	$'000s	$'000s	$'000s
Net operating loss	(4,355)	(7,629)	(3,333)	(6,390)
Adjusted for:
Share-based compensation expense	386	588	747	1,390
Depreciation and amortization	617	692	490	540
Restructuring related severance expenses	273	1,695	-	-
Impairment loss on remeasurement of assets held for sale	17	-	-	13
Transaction costs ⁽⁴⁾	46	304	533	813
Recovery of impaired receivables ⁽¹⁾	-	(464)	(1,546)	-
Write down of inventories ⁽²⁾	168	1,036	-	-
Incremental cost of cannabis inventory acquired in a business combination ⁽³⁾	2,055	-	-	-
Fair value adjustments in gross profit	(1,553)	588	-	-
Other tax recovery	-	(1)	-	-
Miscellaneous	-	-	19	-
Adjusted EBITDA	(2,346)	(3,191)	(3,090)	(3,634)

(1)	This relates to the reversal of a former impairment of a long outstanding receivable.
(2)	This adjustment is for unusual inventory write-downs only and not the total value of inventory written down.
(3)	Incremental cost of cannabis inventory acquired in a business combination represents the fair value realized on sale of cannabis inventory acquired in a business combination.
(4)	This includes non-recurring fees and expenses associated with the evaluation of potential mergers and acquisitions.

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; intended expansions, exports, distributions and GMP certifications; the potential sale of the Hope Facility; the Company's ability to use its experience in Germany to capitalize on growth; the Company's ability to sell higher value GMP products; potential improvements in gross margin and revenue, potential future and annualized savings to be realized as a result of Company's restructuring efforts, including the Company's ongoing plans to optimize its production and logistics facilities; the Company's ability to innovate additional cannabis delivery formats; the Company having the necessary resources and approval requirements to launch products into any future cannabis-regulated US market; Australian medical cannabis market size and growth potential; international cannabis market size and growth potential; ecommerce platform growth potential; future patient retention in the Company's medical cannabis clinics; ability to overcome regulatory, validation or stability challenges; ability to optimize facility utilization; ability to streamline operations; ability to deliver cost savings; ability to deliver better service; and ability to grow profitable sales. 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.

SOURCE MediPharm Labs Corp.