MediPharm Labs Reports First Quarter Results

Completes Major Steps Towards Profitability with Best Revenue and Adjusted EBITDA in Over Three Years

TORONTO, May 15, 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 months ended March 31, 2024.

Select Highlights

• Revenue increased 67% to $9.8M during the three months ended March 31, 2024 ("Q1 2024") versus revenue for the same quarter in 2023 ("Q1 2023") of $5.8M.
• Q1 2024 gross profit was $2.7M or 27% which improved significantly versus Q1 2023 gross profit of 6.6% and versus the three months ended December 31, 2023 ("Q4 2023") of 24.3%
• Adjusted EBITDA⁽¹⁾ improved 70% to negative $0.9M in Q1 2024 from negative $3.1M in Q1 2023 and improved sequentially from negative $1.6M in Q4 2023.
• MediPharm anticipates further improvement on profitability in 2024 with plans being implemented to improve Adjusted EBITDA⁽²⁾ by a further $1M to $2M, which plans include the ongoing optimization of production and logistics facilities.
• Strong balance sheet with $17M million of cash, and less than $3 million of debt as of March 31, 2023.

US Update and Strategy

• MediPharm is optimistic about recent Associated Press reports that the US Drug Enforcement Agency ("US DEA") will move cannabis from a Schedule I to a Schedule III drug. This is a solid step towards recognizing the medical benefits of cannabis and allow for the increased study of those benefits. Today, researchers face significant challenges in getting trial approvals and then dealing with the logistics of sourcing, and managing Clinical Trial Materials that may contain cannabis.
• The Company believes that the US Food and Drug Administration ("FDA") could regulate these cannabis activities, as they do with tobacco products, food, cosmetics, natural health products and drugs. ⁽²⁾
• MediPharm is the only purpose-built cannabis facility that has been inspected by the FDA and holds a current Drug Establishment Licence. MediPharm has been referenced in FDA Investigational New Drug Applications, an Abbreviated New Drug Application and a Drug Master File. The Company has also sent multiple cannabis oil shipments for  clinical trials which are DEA approved.
• In the short-term MediPharm will use this leading FDA and US DEA experience to position itself as the go-to partner for cannabis research in the US.  
• Longer term, it is likely that any new US FDA regulations will raise the bar on manufacturing quality requirements. MediPharm intends to use its advanced GMP process validation and pharmaceutical product characterization to launch products into the future regulated US market. ⁽²⁾

Continued Growth in International Medical Cannabis in Q1 2024

• Changes to the German legislation in removing cannabis from the narcotic lists has opened new commercial opportunities to streamline in-county operations and expand the addressable patient base.
• In Q1 2024, MediPharm's Beacon Medical GMBH hosted a successful audit at its German office for the continued import, manufacturing and release of cannabis products. This was followed by EU GMP renewal inspections at the Company's Canadian sites. This clears the path to increase branded product sales in the second half of 2024⁽²⁾. MediPharm now has 14 product registrations under the Beacon brand in Germany, up from 5 in Q4 2023.
• Increase in German medical cannabis sales to $1.4M, a 36% increase versus Q4 2023. 70% of these sales were non-flower products including oil, CBD isolate and dronabinol, contributing to improved overall international margin profile.  
• In Q1 2024, MediPharm medical cannabis sales in Australia were $1.8M a 64% increase from Q4 2023. The main contributor to the increase was both branded and white label GMP vape sales. New tighter rules requiring all products to meet GMP standards in Australia has opened many branded and B2B opportunities for the Company.

Management Commentary

David Pidduck, CEO, MediPharm Labs commented, "This quarter shows another quarter of growing revenue, stronger gross profit, decreasing costs and improving Adjusted EBITDA. MediPharm's balance sheet is in an excellent position to consider future investments in growth. With Adjusted EBITDA getting close to breakeven, the leadership team can now devote even more energy to growing our business. Regulatory changes in Germany and Australia and potential upcoming changes in the US are all very favourable for the Company." 

Greg Hunter, CFO, MediPharm Labs added, "Q1 2024 was another step in the right direction towards profitability and becoming cash flow positive. Our revenue and Adjusted EBITDA were both the highest in over 3 years. Revenue was $9.8 million or 67% higher than prior year and Adjusted EBITDA loss was $0.9 million which is $2.1 million better than prior year. Our cash burn was approximately $1 million resulting in an ending cash balance of $17 million with less than $3 million of debt. MediPharm is in a strong financial position to capitalize on our strong suite of licences, global customer contracts and assets as we strive for profitability in 2024."

Financial Summary

Three months ended
	31-Mar-24	31-Dec-23	30-Sep-23	30-Jun-23	31-Mar-23
	$'000s	$'000s	$'000s	$'000s	$'000s
Revenue	9,771	9,131	8,505	9,583	5,843
Gross profit	2,651	2,196	2,417	855	387
Opex(1)	(5,648)	(5,020)	(6,050)	(7,516)	(2,923)
Adjusted EBITDA (2)	(949)	(1,579)	(2,346)	(3,191)	(3,090)

(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".

Q1 2024 Financial Results Conference Call

MediPharm's executive management team will also host a conference call and audio webcast on Wednesday, May 15, 2024 at 8:30 a.m. eastern time to discuss the Company's financial results.

Conference Call:

Toll-Free number: [phone]
International number: [phone]
Conference ID: 4921762

Participants are asked to dial in approximately 15 minutes before the start of the call.

Audio Webcast: 

An audio webcast will be available by visiting the following link here.

For those who are unable to participate on the live conference call or webcast, a replay will be available at https://www.medipharmlabs.com/investors approximately one day after completion of the call.                                                          

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.

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 PTY and Beacon Medical 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, interest income and expense, finance fees, gain in revaluation of derivative liabilities, taxes, government grants including rent and wage subsidies, one-off transactions, impairment losses on inventory and on fixed assets and intangibles, write down of deposits and share-based compensation. 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
	March 31, 2024	December 31, 2023	September 30, 2023	June 30, 2023
	$'000s	$'000s	$'000s	$'000s
Net operating loss	(3,725)	(2,935)	(4,355)	(7,629)
Adjusted for:	-	-
Share-based compensation expense	895	306	386	588
Depreciation and amortization	790	717	617	692
Restructuring related severance expenses	755	335	273	1,695
Impairment loss on remeasurement of assets held for sale	-	23	17	-
Transaction fees	-	-	46	304
Recovery of impaired receivables (1)	-	-	-	(464)
Gain on disposition of assets	(276)	(174)	-	-
Early lease termination cost	44	-	-	-
Incremental cost of cannabis inventory acquired in a business combination (2)	327	372	2,055	-
Terminal costs for closed facility (3)	323	-	-	-
One-off derecognition of liabilities	(130)	-	-	-
Write down of inventories (4)	-	-	168	1,036
Fair value adjustments in gross profit	48	(223)	(1,553)	588
Other tax recovery	-	-	-	(1)
Adjusted EBITDA	(949)	(1,579)	(2,346)	(3,191)

Notes:

(1)	This relates to the reversal of a former impairment of a long outstanding receivable.
(2)	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.
(3)	This relates to employee compensation for terminated employees and write downs of the carrying value of inventory at the Company's Hope, British Columbia facility.
(4)	This adjustment is for unusual inventory write-downs only and not the total value of inventory written down.

 

	Three months ended
	March 31, 2023	December 31, 2022	September 30, 2022	June 30, 2022
	$'000s	$'000s	$'000s	$'000s
Net operating loss	(3,333)	(6,390)	(8,046)	(9,069)
Adjusted for:
Share-based compensation expense	747	1,390	161	580
Depreciation and amortization	490	540	754	759
Restructuring related severance expenses	-	-	-	952
Impairment loss on remeasurement of assets held for sale	-	13	68	-
Transaction fees	533	813	185	95
Recovery of impaired receivables (1)	(1,546)	-	-	-
Write down of inventories (2)	-	-	428	338
Impairment loss on remeasurement of disposal group	-	-	1,476	-
Adjusted EBITDA	(3,090)	(3,634)	(4,974)	(6,345)

Notes:

(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.

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; 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 successful reclassification of cannabis as a Schedule III drug, including the approval by the White House Office of Management and Budget, and the publishing of the final rule by the US DEA; the US FDA beginning to regulate activities related to sourcing and managing Clinical Trial Materials that may contain cannabis; the Company having the necessary resources and approval requirements to launch products into any future cannabis-regulated US market; ongoing demand for continued and increased product sales into the German cannabis market; the Company's ability to increase deliveries to Germany in 2024 and the impact of such continued deliveries to the Company's sales and gross profit; Australian medical cannabis market size and growth potential; ability to optimize facility utilization; 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.

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