Second Quarter Overview
“In Q2 2021, we were awarded one of the most difficult to achieve North American GMP certifications to establish ourselves and as a true pharmaceutical company while continuing to deliver our international medical cannabis sales,” said
“Looking ahead, efforts are well underway to ensure
Q2 2021 Key Highlights
Achieved Major Pharmaceutical Milestone for global distribution, including the
- Highly regulated traditional and established pharmaceutical channels have no borders. During the second quarter,
MediPharm hostedHealth Canada pharmaceutical inspectors for an intensive GMP Drug Establishment Licence inspection. Subsequent to the quarter, onJuly 12, 2021 ,MediPharm was awarded a Drug Establishment Licence (the “DEL”) to confirm compliance with international Good Manufacturing Practice (“GMP”) Standards. This truly makesMediPharm a full pharmaceutical company that can support big pharma’s entry into the drugs containing cannabis space. - The DEL allows
MediPharm to conduct pharmaceutical manufacturing and sale of Active Pharmaceutical Ingredients and Finished Dose Goods containing cannabis. These channels are focused on larger patient markets that lack a defined federal cannabis framework, including inthe United States . - This is the first domestic GMP Licence in
North America for cannabis related pharmaceutical production that includes the full extraction of the cannabis natural plant. - The DEL enhances supply chain capability by allowing
MediPharm to ship products fromCanada to its global customer base. This eliminates the need for an EU GMP licence as EU regulatory bodies will recognize the domestic certification under existing pharmaceutical Mutual Recognition Agreements. This is in conjunction with the Company’s Australian subsidiary further strengthens MediPharm’s global reach. - MediPharm’s current and future domestic Canadian cannabis partners will benefit from the DEL as
MediPharm can now provide them a conduit to pharmaceutical and international markets - Patient demand for cannabis as a medical solution has increased around the world. Research advancements and big pharma participation will fill this need with traditional pharmaceutical drugs. These pharmaceutical companies are MediPharm’s current and future customers.
Continued International Growth, Leveraging Australian GMP Platform
- International sales increased 24% sequentially to
$2.5M withGermany increasing 24% sequentially andAustralia increasing 30% sequentially. - Added two new customer deliveries in
Germany and sent follow-up orders to Q1 2021 customers,STADA and Adrex Pharma, executing on a total of four customer fulfillments. - Strengthened position as a recognized global leader in medical cannabis production with approval by the Health Canada DEL which allows the export of cannabis oil products to customers globally.
Scaled Canadian Presence with High-Demand New Products, Expanded Distribution
- Succeeded in the
Ontario Cannabis Store product call adding SKUs in oil and vape formats, particularly a high demand CBD vape product that contains only CBD and naturally derived terpenes. This CBD vape is more shelf stable versus current Canadian competitors. - Began delivery to government operated cannabis retail stores in the Province of
Québec . The Company has experienced positive reorders with weekly POs being fulfilled. - The Company continued to experience the negative effects of COVID19 on Canadian retail sales. Most retail stores were still operating under strict provincial COVID19 restrictions and provincial operated distributors continued to lower inventory on-hand, both of which negatively impacted Canadian adult-use sales. The Company expects Canadian adult-use sales to increase if COVID19 restrictions continue to be relaxed in the second half of 2021.
Balance Sheet Stability Supports Strategic Execution
- Cash and cash equivalents totaled
$39 million atJune 30, 2021 and the cash balance outstanding under the convertible notes was under$2 million . This strong cash balance, together with expected income tax refunds and CEWS/CERS payments is sufficient to support of the Company’s long-term growth strategy.
Financial Results Summary Table
Three months ended | |||||||
2021 | 2021 | 2020 | |||||
$’000s | $’000s | $’000s | |||||
Revenue | 5,072 | 5,495 | 6,058 | ||||
Gross Profit | (7,733 | ) | (680 | ) | (24,720 | ) | |
Adjusted Gross Profit (1) | (1,419 | ) | (680 | ) | (6,813 | ) | |
Net loss | (11,812 | ) | (13,867 | ) | (30,951 | ) | |
Loss per share – basic and diluted | (0.04 | ) | (0.07 | ) | (0.21 | ) | |
Adjusted EBITDA (2) | (3,675 | ) | (6,159 | ) | (8,767 | ) |
(1) Adjusted Gross Profit is a non-IFRS measure. See Non-IFRS Measures section of this news release.
(2) Adjusted EBITDA is a non-IFRS measure. See Non-IFRS Measures section of this news release.
Q2 2021 FINANCIAL RESULTS COMMENTARY AND NEAR-TERM OUTLOOK
“Q2 2021 continued to show the strength of our diversified GMP platform to service or growing list of international medical customers,” said
“As a multi-site and multi-country operator, with unique pharmaceutical licences and high-demand formulations, we continue to make investments to drive future growth and expand our international sales. To maximize opportunities and market share in
- Sales declined 7.7% sequentially to
$5.1M . International sales increased 24% sequentially from$2.0M to$2.5M while domestic Canadian sales declined 26% from$3.5M to$2.6M as a result of restrictive COVID19 lock downs and resulting provincial distributor inventory reductions. - Gross profit of (
$7.7M ) was impacted by$5.7M of inventory write-downs from NRV and slow moving and obsolete inventory as well as$0.5M of accelerated deprecation for assets not in use. Adjusting for these 2 items gross profit was ($1.4M ). Q2 gross profit declined sequentially due to lower sales volumes, product mix and production volumes in the Canadian domestic market as a result of restrictive COVID19 lock downs. - Net loss of
$11.8M improved sequentially due to reduced finance expense from the convertible debenture, Q2 income from the Canadian emergency wage subsidy and the Canadian emergency rent subsidy but was partially offset by inventory write-downs. - Adjusted EBITDA of (
$3.7M ) improved sequentially and included income of$3.7M for the Canadian emergency wage subsidy and the Canadian emergency rent subsidy.
Going forward, the Company expects finished product sales to continue to improve and sales to international pharmaceutical, medical and wellness markets to build over time according to planned customer ramp-up schedules.
Looking Ahead - Strategic Pharmaceutical Progress Update
To maintain leadership in the emerging global pharmaceutical, medical and wellness cannabis market – which represents more sustainable and profitable revenue -
Licensing and Regulatory Progress -
Medical Product Registration – The Company continues the complex and highly regulated medical product registration process in key markets, such as
Clinical Trial Participation – Given the Company’s unique licensing and expertise it continues to participate in the research sector of the cannabis industry. In Q2 2021, the Company entered into a research master agreement with
Growing International Sales - The Company expects international sales to accelerate as strong progress has been made with over 30 sales agreements in place in nine countries. International revenues reflect sales to customers in only three countries thus far. European revenue, representing one of the fastest growing cannabis markets, saw repeat orders and revenue growth in Q2 2021 with now four German partner deliveries. As stated in the past, the early years in international pharmaceutical contracts are lean, but sales will grow steadily through 2021 and expand exponentially over time.
GOVERNANCE UPDATE
Appointment of New Board Chair
The Company’s Board of Directors is pleased to announce that it has unanimously appointed
As Chairman,
CEO Search
The Company’s Board of Directors previously appointed a special committee to lead the search for a permanent CEO. Following its engagement with global search firm Korn Ferry, the search committee has interviewed several strong candidates and anticipates selecting a new CEO aligned to its growth into a global pharmaceutical company.
Q2 2021 FINANCIAL RESULTS CONFERENCE CALL
Audio Conference Call Dial in Details:
Date: | ||
Time: | ||
Dial In: | Toll-free number: +1-833-502-0471 / International number: +1-236-714-2179 | |
Conference ID: | 4889291 | |
Audio Webcast: | WEBCAST or https://ir.medipharmlabs.com/news-events in the Events section | |
Replay: | +1-800-585-8367/ International +1-416-621-4642 Conference ID: 4889291 | |
until |
NON-IFRS MEASURES
Adjusted EBITDA and adjusted Gross Profit are not recognized performance measures under IFRS, do not have a standardized meaning and therefore may not be comparable to similar measures presented by other issuers. Adjusted EBITDA and adjusted Gross Profit are 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 non-recurring. Adjusted EBITDA is defined as net loss excluding interest, taxes, depreciation and amortization expense, interest income and expense, finance fees, gain in revaluation of derivative liabilities, taxes, impairment losses on inventory, write down of deposits 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
About
Founded in 2015,
For further information, please contact:
MediPharm Investor Relations
Telephone: +1 416.913.7425 ext. 1525
Email: investors@medipharmlabs.com
Website: www.medipharmlabs.com
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 establishing itself as an international pharmaceutical company; a leading position in the projected multibillion-dollar global cannabis pharmaceutical market; becoming the go-to partner for pharmaceutical companies around the globe; material revenue growth in years to come; supporting big pharma’s entry into the drugs containing cannabis space; enhanced supply chain capability; increasing patient demand; research advancements; big pharma participation in the cannabis industry; adult-use sales increasing if COVID19 restrictions continue to be relaxed in the second half of 2021; the Company’s strong cash balance together with expected income tax refunds and CEWS/CERS payments being sufficient to support its long-term growth strategy; investments driving future growth; expanding international sales; finished product sales continuing to improve; sales to international pharmaceutical, medical and wellness markets to build over time according to planned customer ramp-up schedules; access to new markets; participation in IP-capable clinical trials; partnerships with other pharmaceutical companies; additional medical product registrations; acceleration of international sales; steady sales growth through 2021; sales expanding exponentially over time; returning to profitability; strong demand signals for
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