MediPharm Labs Reports Second Quarter Results Closing in on Positive Adjusted EBITDA(1) as Gross Profit Continues to Improve

TORONTO, Aug. 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 six months ended June 30, 2024 ("Q2 2024").

Key Highlights

• Adjusted EBITDA⁽¹⁾: Negative $124K in Q2 2024, significantly improved from negative $949K during the three months ended March 31, 2024 ("Q1 2024"), and representing 96% growth versus Adjusted EBITDA⁽¹⁾ for the same quarter in 2023 ("Q2 2023").
• Net Revenue: $10.3M in Q2 2024, an 8% increase as compared to Q2 2023, and a 6% increase as compared to Q1 2024, representing the highest net revenue in over three years. International revenue represented 44% of total revenue in Q2 2024.
• Gross Profit: 33% in Q2 2024, significantly increased from 8.1% in Q2 2023, driven by cost reductions, production efficiencies and favourable product mix with the expansion of international medical revenue.
• Cash Balance: $16 million at the end of Q2 2024.
• Operating Expenses: Reduced by $2M as compared to Q2 2023, driven by execution of acquisition synergies and overall cost reductions.
• Innovation in Pharma Quality Cannabis
• European Union Dronabinol Sales Success: After a strong Q1 2024, MediPharm Labs doubled its dronabinol sales in Q2 2024, achieving total sales of $1.9M year to date. Dronabinol is a pharmaceutical monograph product produced by MediPharm Labs in a specialized all-natural process.
• Licensing Agreement with Remidose Aerosols: The agreement provides exclusive rights to advanced non-combustible cannabis products. This aerosol technology, produced in both spray and inhaler formats, is expected to expand the Company's product offerings in the adult use wellness, Canadian medical cannabis, and international medical cannabis markets.⁽²⁾
• Launch of SEDDS Capsules: In partnership with Avicanna, the company successfully manufactured self-emulsifying drug delivery systems (SEDDS) capsules. Distribution is now available for Canadian patients in two formulations.
• Leadership in Australian flower alternatives: As of July 2024, MediPharm Labs holds the third largest market share for GMP vapes in Australia, both in terms of units sold and patient revenue,⁽³⁾ just nine months after launching these products.

Operational Highlights

• Streamlined Medical Cannabis Operations: In Q2 2024, MediPharm Labs reduced the scale of its operations at its facility in Hope, British Columbia (the "Hope Facility") and relocated its direct-to-patient medical sales logistics to its facility in Barrie, Ontario (the "Barrie Facility"). This move is anticipated to streamline operations, deliver cost savings of approximately $1M annually and deliver better service to the Company's medical cannabis patients.⁽²⁾ The sale of the Hope Facility has the potential to generate additional cash in the near term.⁽²⁾
• EU GMP Inspections: The Landesamt für Arbeitsschutz Verbraucherschutz und Gesundheit ("LAVG"), the health authority of Brandenburg, Germany, completed inspections of both the Company's facility in Napanee, Ontario and the Barrie Facility in April 2024. EU-GMP certification of both facilities was confirmed and renewed with certificates issued July 1, 2024, which do not expire until July 2027.
• DMF Submission for CBD API: In April 2024, MediPharm Labs submitted a Drug Master File ("DMF") for cannabidiol ("CBD") active pharmaceutical ingredients ("API") to Health Canada, allowing current and future pharmaceutical partners to reference MediPharm's CBD API in new and generic drug applications. This complements the DMF filed with the United States Food and Drug Administration in 2021.
• New High Potency Medical Cannabis Products in Germany: In July 2024, the Company began delivering new high potency medical cannabis flower branded under Beacon Medical GmbH to distribution partners in Germany, complementing existing sales as the market grows due to favourable regulatory changes.

Management Commentary

David Pidduck, CEO, MediPharm Labs commented, "We are very pleased with our Q2 results, showcasing substantial improvements in both revenue and profitability. The strategic initiatives implemented, including cost reductions and operational efficiencies, are yielding positive results. We are particularly encouraged by the continued growth in our international sales and the progress in innovation of non-combustible cannabis formats."

Greg Hunter, CFO, MediPharm Labs added, "Q2 2024 was a major step in the right direction towards profitability and becoming cash flow positive. Our revenue and Adjusted EBITDA⁽¹⁾ were both the highest in over three years and Q2 put MediPharm on the verge of profitability. Revenue was $10.3M or 8% higher than prior year and Adjusted EBITDA⁽¹⁾ loss was $0.1M which is $3.1M better than prior year and $0.8M better than Q1 2024. Our cash burn was approximately $1M resulting in a cash balance of $16M with less than $3M of debt at the end of Q2 2024. 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 the back half of 2024."⁽²⁾

Financial Summary

Three months ended
	30-Jun-24	31-Mar-24	31-Dec-23	30-Sep-23	30-Jun-23
	$'000s	$'000s	$'000s	$'000s	$'000s
Revenue	10,350	9,771	9,131	8,505	9,583
Gross profit	3,418	2,651	2,196	2,417	855
Opex(1)	(5,382)	(5,648)	(5,020)	(6,050)	(7,516)
Adjusted EBITDA (2)	(124)	(949)	(1,579)	(2,346)	(3,191)

(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".

Q2 2024 Financial Results Conference Call

MediPharm's executive management team will also host a conference call and audio webcast on Wednesday, August 14, 2024 at 8:30 a.m. (Eastern time) to discuss the Company's financial results for Q2 2024.

Conference Call:

North America Toll-Free: [phone]

International Toll: [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.
(3)	According to industry data aggregated by NostraData PTY.

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
	June 30, 2024	March 31, 2024	December 31, 2023	September 30, 2023
	$'000s	$'000s	$'000s	$'000s
Net operating loss	(2,573)	(3,725)	(2,935)	(4,355)
Adjusted for:	-	-	-
Share-based compensation expense	576	895	306	386
Depreciation and amortization	731	790	717	617
Restructuring related severance expenses	305	755	335	273
Impairment loss on remeasurement of assets held for sale	77	-	23	17
Transaction fees for mergers and acquisitions	-	-	-	46
Gain on disposition of assets	(20)	(276)	(174)	-
Early lease termination cost	-	44	-	-
Incremental cost of cannabis inventory acquired in a business combination (1)	162	327	372	2,055
Terminal costs for closed facility (2)	95	323	-	-
One-off derecognition of liabilities	-	(130)	-	-
Write down of inventories (3)	60	-	-	168
Fair value adjustments in gross profit	170	48	(223)	(1,553)
HST reassessment (4)	240	-	-	-
Payroll tax assessment	42	-	-	-
Miscellaneous	11	-	-	-
Adjusted EBITDA	(124)	(949)	(1,579)	(2,346)

(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.

	Three months ended
	June 30, 2023	March 31, 2023	December 31, 2022	September 30, 2022
	$'000s	$'000s	$'000s	$'000s
Net operating loss	(7,629)	(3,333)	(6,390)	(8,046)
Adjusted for:
Share-based compensation expense	588	747	1,390	161
Depreciation and amortization	692	490	540	754
Restructuring related severance expenses	1,695	-	-	-
Impairment loss on remeasurement of assets held for sale	-	-	13	68
Transaction fees for mergers and acquisitions	304	533	813	185
Recovery of impaired receivables (1)	(464)	(1,546)	-	-
Write down of inventories (2)	1,036	-	-	428
Impairment loss on remeasurement of disposal group	-	-	-	1,476
Fair value adjustments in gross profit	588	-	-	-
Other tax recovery	(1)	-	-	-
Miscellaneous	-	19	-	-
Adjusted EBITDA	(3,191)	(3,090)	(3,634)	(4,974)

(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; the impact of the licensing agreement with Remidose Aerosols on the Company's product offerings in the adult use wellness, Canadian medical cannabis, and international medical cannabis markets; the anticipated impact of the Company's reduction in operations at the Hope Facility and relocation of its direct-to-patient medical sales logistics to the Barrie Facility; the potential sale of the Hope Facility; market growth in Germany due to favourable regulatory changes; 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; 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.

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SOURCE MediPharm Labs Corp.

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