Tuesday , 27 October 2020

Cannabis Central: MediPharm Labs Shows Impressive Q2 Performance On All Fronts

MediPharm Labs Corp. (TSX: LABS) (OTCQX: MEDIF), a cannabis extraction, distillation, purification and cannabinoid isolation company, reported its Q2 financial results last week becoming the first public Canadian extraction-only company to deliver bottom-line earnings and do so while investing heavily in its extraction and production platforms ahead of benefits realized.

By Lorimer Wilson, editor of munKNEE.com, Your KEY to Making Money!

Q2 Financial Highlights (all dollars are Canadian dollars and all comparative numbers relate to Q1)

  • Revenue increased by 43% to $31.5M
  • Gross Profit increased by 65% to $11.3M
  • Gross Margin increased to 36% from 31%
  • Adjusted EBITDA increased by 79% to $7.7M
  • Adjusted EBITDA margin increased to 24% from 20%
  • Net income before tax increased to $4.1M from a net loss of $0.3M

Q2 Business Highlights

  • the retirement of the Company’ Chief Operating Officer
  • the appointed of a Chief Strategy Officer to advance the Company’s strategic corporate initiatives
  • the division of former COO responsibilities among the President, Executive Vice President, and Chief Strategy Officer
  • the assumption of additional production leadership responsibilities by members of the company’s 180 researchers, scientists, professionals and technicians
  • the granting of 1,851,700 options to directors, officers, employees and consultants of the Company as part of its continued policy of incentivizing its employee base
  • the listing of the stock on the Toronto Stock Exchange
  • an increase in Canadian production to an average of 75 million MG of active cannabinoid component concentrate on a weekly basis
  • an increase in annual dried cannabis processing capacity in Canada to 300,000 KG
  • the construction of 25,000 square feet of additional licensed space at the Company’s Barrie, Ontario facilities to accommodate significant automation of manufacturing and specialized R&D activities
  • the completion of the first international shipment of medical cannabis concentrate to AusCann in Australia
  • the completion of a 10,000 sq. ft. purpose-built facility near Melbourne, Australia and
  • the receipt of a manufacturing licence for the above mentioned production facility

Catalysts Going Forward

  • Canadian legalization of vapeables, topicals and edibles in the fall of 2019 which will add significantly to the addressable market for cannabis derivatives
  • Higher margin product development of soft gel caps and vaporizer cartridges
  • Expanded distribution through new supplier status with additional Canadian provincial government cannabis boards
  • Increased production and capacity at its Barrie, Ontario Canadian facility to over 500,000 KG annually of dried cannabis processing with the opening of a new extraction line set to open later this year
  • Realization of new customer agreements currently in process
  • Expected licensing of the MediPharm Labs Australia cannabis extraction facility
  • Expected European Union GMP certification of Barrie, Ontario, Canada facility
  • Evaluation of partnership opportunities in Europe, Latin America, the Caribbean and South Africa

Stock Price

As can be seen in the chart below, MediPharm Labs’ stock price has steadily increased over the past 6 months despite the major volatility along the way.

It’s stock appreciated by:

  • 92%% between Dec.31st, 2018 and March 29, 2019
  • 55% between March 29th and June 30th
  • 6% between June 30th and July 31st
  • 30.6% between July 31st and its peak on August 9th the weekend before the Q2 financial report

but dropped 16.3 % last week to its current $6.00 which still represents a 245% increase since the beginning of 2019 and an increase of 15.8% in the past 6 weeks (i.e. since July 31st)

According to Patrick McCutcheon, Chief Executive Officer of MediPharm Labs “the company has become the first public Canadian extraction-only company to deliver bottom-line earnings and do so while investing heavily in sophisticated extraction and production platforms ahead of benefits realized” and “the significant momentum gained through important new customer and procurement relationships, and the successful ramp up of the Canadian and Australian facilities will drive growth and value for the remainder of this year and well beyond.” Source

This Q2 financial report substantiates the CEO’s comments above suggesting that MediPharm Labs may well continue its impressive performance on all fronts for the foreseeable future.