MediPharm Labs Strengthens Recreational Business Adding Flower and Pre-Rolls to Portfolio - Acquires IP from Canadian Consumer Favourite, Shelter Cannabis Brands

• Known for its high-quality, specialty recreational dried flower products, Shelter Cannabis is expected to complement MediPharm's existing Canadian cannabis portfolio.
  
  
• Adds IP and well-regarded Shelter brands Wildlife and Shelter Craft to MediPharm.
  
  
• MediPharm expects to leverage its recently expanded national sales network to drive Shelter's growth beyond current five province market.
  
  
• MediPharm will produce Shelter Cannabis products in its Barrie, Ontario facility, enhancing capacity utilization which leverages existing infrastructure and overhead.
  
  
• This new position in the Canadian flower market creates opportunity to improve MediPharm's existing medical cannabis flower distribution network, where products are already shipped to pharmaceutical partners in Germany and the UK.
  
  
• Expected increased activity and success in the Canadian adult use market continues to support MediPharm resources needed to maintain leadership as a global pharmaceutical company specialized in cannabis.
  
  
• Non-dilutive, with 100% performance-based cash payment.

TORONTO, March 22, 2022 /CNW/ - MediPharm Labs Corp. (TSXV: LABS) (OTCQX: MEDIF) (FSE: MLZ) ("MediPharm", "MediPharm Labs" or the "Company") a pharmaceutical company specialized in precision-based cannabinoids, today announced that it has acquired the intellectual property portfolio of Shelter Cannabis ("Shelter"), including cannabis dried flower and pre-roll products, manufacturing know-how, trademarks, marketing assets and provincial listings (the "Transaction"). MediPharm will pay Shelter based on an earn-out reflective of future gross sales, net of excise tax. MediPharm-originated shipments are expected to begin during Q2 2022.

Transaction Highlights

• Fills a key gap in MediPharm product portfolio – MediPharm strengthens its recreational business by adding Shelter's highly recognizable Wildlife and Craft dried flower and pre-roll brands and products; dried flower is a roughly CAD $2.6B category that accounts for over 70 per cent of domestic cannabis sales¹. The addition of these brands and products aligns with the Company's portfolio of pharmaceutical cannabinoid products to create a differentiated business focused on quality and craftsmanship in cannabis. 
  
  
• Investments made to date create frictionless pathways to integrate and optimize Shelter Cannabis brands – With its established provincial agreements, logistics and sales teams, the Company will aim to optimize investments made to date and solidify its presence in the Canadian adult-use market. Over the past eight months, MediPharm has added considerable resources to its established sales network across Canada – which is now composed of over 20 dedicated sales and marketing professionals. MediPharm sees an opportunity to leverage this network to deepen Shelter's shelf presence in its existing provinces, and to expand to additional markets. MediPharm now ships to 9 of the 10 provinces with Newfoundland registration underway.
  
  
• Additional synergies by moving Shelter's production to MediPharm's existing facility – Shelter's brands are currently being produced at a facility in Saskatchewan. MediPharm will move production to its existing facility in Barrie, Ontario with very little capital expenditure required, enhancing capital utilization of facilities and staff, and driving additional margin.
  
  
• Opportunity to expand international medical flower business – MediPharm already supplies medical flower to the UK and German medical cannabis markets where flower makes up the majority of sales.
  
  
• Non-dilutive transaction, with payment based on future performance – MediPharm has arranged to pay the vendor a royalty solely based on the future Shelter Cannabis sales, making the transaction cost 100 per cent performance based. This is expected to minimize risk to MediPharm shareholders, while maximizing return and allows MediPharm to retain its substantial cash position for future growth opportunities.

Management Commentary

Bryan Howcroft, CEO of MediPharm commented, "This Transaction represents an important step as MediPharm continues to focus on building a Canadian recreational portfolio that is relevant, profitable and grounded in the Company's unwavering commitment to high quality products. With Shelter, we see a significant opportunity to get a head start in the important dried flower and pre-roll segment of the market, with the addition of a well-regarded list of brands, led by Shelter's flagship Wildlife brand. With MediPharm's existing buying power, and established sales and production platforms, we believe there are multiple opportunities to generate revenue and cost synergies through this Transaction, to continue building value for MediPharm shareholders. Expected increased activity and success in the Canadian adult use market supports MediPharm resources as we continue to build out our pharmaceutical business with traditional pharma customers being part of longer development and sales cycle."

Shelter's CEO Michael Nederhoff said, "We are very excited by the opportunity that MediPharm has created for our brands to live on in the Canadian recreational market. After a successful journey, Shelter and Wildlife have made a lasting impression which MediPharm will now take ownership of and continue to grow."

About MediPharm Labs

Founded in 2015, MediPharm 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 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 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 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.

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: new position in Canadian flower market and creation of opportunity to improve MediPharm's medical cannabis flower distribution network; expected increased activity and success in the Canadian adult use market; growth of the Shelter brands beyond their current market; enhanced capacity utilization of Shelter products in the Barrie facility; when shipments will commence, ability to create a differentiated business focused, opportunity to leverage its established sales network to deepen Shelter's shelf presence; capital expenditure required; enhanced utilization; additional margins being driven; and minimized risk to MediPharm shareholders while maximizing return. 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.sedar.com. 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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¹ MJBiz – 2021 annualized figures based on January to June 2021 Canadian sales data

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SOURCE MediPharm Labs Corp.

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