Technical 420 publication from July 6. MediPharm Labs: A Global Growth Story to be Aware of
MediPharm Labs Corp. (LABS.TO) (MEDIF) has been a leader in the Canadian cannabis oil market and is an opportunity to be aware of in the extraction vertical. A few weeks ago, the company reported first quarter financial results and the market responded negatively to it.
We believe that the recent pullback is an overreaction and wanted to issue an update on the opportunity following the decline. During the first quarter, MediPharm recorded a decrease in revenue when compared to the same period last year. The decline was due to a reduction in volume and average selling price of bulk concentrates sold, which was partially offset by growing sales of consumer-packaged goods to provincial distributors throughout Canada.
MediPharm has taken steps to lower the expenses that are associated with the procurement of inventory and this is expected to have a positive impact on margins. On the business-to-business (B2B) side of the operation, the entire Canadian market recorded a decline and this is primarily due to an oversupply in the Canadian bulk crude resin and distillate markets, a slow expansion of retail channels in Canada, slow commercialization of new and specialized 2.0 businesses and operational challenges from B2B customers that are seeking to convert bulk concentrates into consumer packaged goods.
The future of MediPharm is bright and there were a number of positive developments announced in the financial results. One of the most exciting aspects of the story is related to the launch of three new SKUs of consumer-packaged cannabis-based goods across five provinces. When compared to the prior quarter, MediPharm recorded a 13% increase in the amount of sales of finished formulated products.
Going forward, the proportion of sales of finished formulated products is expected to increase due to an expansion of MediPharm’s domestic and international sales team and the launch of eight additional SKUs in the current quarter. In the current quarter, the company has already shipped more than double the amount of finished formulated products than it did in the entire first quarter.
Another exciting aspect of the MediPharm story is related to the accomplishments it has had on the international side of the industry. We are bullish on the international cannabis oil market and expect this vertical to support the growth of the business on a going forward basis.
During the first quarter, MediPharm Labs Australia secured a white label supply agreement with Compass Clinics Australia Pty Ltd. In the current quarter, the company has secured white label supply agreements with Burleigh Heads Cannabis Pty Ltd. (Australia), Helius Therapeutics Limited (New Zealand), Cannasouth Plant Research New Zealand Limited (New Zealand), and Therismos Limited (UK).
In the current quarter, MediPharm is expected to start selling GMP-certified formulated products and plans to ramp this up in the third quarter and beyond. This comes after the company’s Australian facility was certified by the Therapeutic Goods Administration (TGA) as meeting the Good Manufacturing Practice (GMP) standard and secured a license to manufacture therapeutic goods. In late 2019, MediPharm’s Canadian facility was TGA GMP certified in and it has created a global supply chain that is qualified to serve emerging international medical markets.
MediPharm is capitalizing on a multi-national growth strategy to further develop a diversified international customer portfolio that has multiple product streams that are allowed to be sold in legal cannabis markets all over the world. The granting of the GMP certification on the two facilities represents a major milestone and will allow the business to further evolve and become less reliant on the Canadian market.
https://www.technical420.com/cannabis-article/3-canadian-cannabis-extraction-leaders-to-have-on-your-radar/