Q3 2021 Medipharm Labs Corp Earnings Call
Ladies and gentlemen, thank you for standing by and welcome to the meta farm Labs third quarter 2021 financial results conference call.
At this time, all participants are in listen only mode.
After the speaker's presentation, there will be a question and answer session to ask a question. During the session you will need to press star one on your telephone keypad. Please be advised that today's conference is being recorded.
If you require further assistance. Please press star Zero I would now like to hand, the conference over to your speaker today, Keith Strawn President of met a farm lapse. Please go ahead Sir.
Thank you operator and good morning.
Joining me on the call today are Greg Hunter, our CFO and Brian <unk>, our newly appointed CEO.
Before we begin please note the following caution respecting forward looking statements, which was made on behalf of many of our labs and all of its representatives on this call.
The statements made on this call will contain.
Forward looking information that involves risks and uncertainties.
Actual results could differ materially from a conclusion forecast or projection in the forward looking information certain material factors or assumptions were applied in drawing a conclusion or making a forecast or projection as reflected in the forward looking information additional information.
Information about the material factors that could cause actual results to differ materially from the conclusions forecasts or projections in the forward looking information and the material factors or assumptions that were applied in drawing a conclusion or making a forecast or projection as reflected in the forward looking information are contained in many farms.
<unk> filings with Canadian provincial Securities regulators, which are.
Our available on the SEDAR website at SEDAR Dot Com I'm excited to now hand, the call over to Brian how crop our new CEO for introductory remarks.
Thank you Keith good morning, and thank you for joining our quarterly financial earnings call. My name is Brian <unk> and as of today CEO of maybe farm laughs I'm joined today by Greg Hunter, Many firms Chief Financial Officer, and key strong maybe firms president.
Before dragging keep present, our quarterly results I would like to say a few words.
Firstly I would like to thank Keith strong for his leadership as interim CEO and to support during the CEO transition period, <unk> knowledge of <unk> and more broadly the cannabis industry is deep and I greatly look forward.
I'm learning from Keith and many firms leadership team as we move forward over.
Over the coming weeks I'll be having a lot of dialogue with shareholders analysts customers and the team here at <unk> as I look to fully understand our position and ways. We can more effectively leverage many firms strengths for strategic and operational improvement.
I see many firm in a similar light in many ways to my experience as.
Our business in a highly regulated environment with many strengths.
<unk>, we executed our business strategy and we are disciplined about achieving results in a similar way I plan to execute against many firms strategy and build a plan to restore the company's profitability through revenue growth and operational improvements.
I am well aware that the business has not performed to its full capability over the last 18 months and I look forward to getting us back on the right path I will communicate those plans to you as they are developed and will update you on our progress and successes.
I will now turn the call over to Keith to provide a quarterly business update.
Thank you Brian we are very excited to have you join the company to lead our growth strategies going forward.
Look forward to supporting your vision to see us grow as the worlds, leading precision based cannabinoid company with a focus on international markets.
Our third quarter continued the trend of a transformational year at many farm labs establish ourselves as a true pharmaceutical company with expertise in cannabis.
I will speak to the advancements made in Q3, which were highlighted with ongoing pharmaceutical licensing and revenue growth in our international sales.
Greg will then discuss Q3 results, including areas, where we saw growth in segments, where we have opportunity to improve.
And then I will close with final observations and an update on near term initiatives.
To start I'd like to highlight the areas, where we continue to be leaders in the pharmaceutical sector of cannabis in the field of drug development and manufacturing as.
As well as reintroduce our plan to capitalize on this unique status in the industry.
In the first month of Q3, we were awarded a drug establishment license from Health Canada.
A drug establishment license is a certification issued by health, Canada Manny.
A manufacturer maintains pharmaceutical good manufacturing practices, commonly referred to as GMP.
It is achieved through an extensive review of a company's quality management systems over several months and then an in person or virtual inspection by health, Canada spanning multiple weeks in short to obtain a D. L is a significant and material undertaking and especially in comparison to the cannabis processing license.
Which is commonplace in the cannabis industry today.
What makes Merry farm truly unique is that we obtain this license for natural cannabis extraction chair.
Clarification and fabrication of finished goods.
This makes us one of only a limited number of pharmaceutical manufacturers worldwide, who can provide cannabinoid API and finished products.
And actually the sole license of this nature in North America.
This will serve the cannabis pharmaceutical market, which experts expect.
Could be worth $2 $6 billion by 2025.
This along with our rapid growth expected to continue after 2025 as major cannabis drug patents begin to expire in 2026 physicians many farm as a top tier precision based cannabinoid company.
In the few short months since being awarded the D E L.
Mehdi farm has increased its access to existing medical cannabis programs.
Updating foreign health authorities with our new certifications to work towards using pharmaceutical trade mutual recognition agreements to allow for international shipments and medical cannabis programs.
As we do from our Australian site today.
These already include.
U K EU and Brazil with additional countries to be sought after in short order.
It is important to note that this license negate the need for EU GMP certification.
Standard we operate at but I have not had a final inspection due to COVID-19 travel restrictions placed on government inspectors.
Are your farmers use the D L to increase our presence and novel clinical drug trials, providing cannabis as an API such as Mcmaster University study that uses many farm labs, CBD 50 to treat insomnia related to depression.
Participating in these trials often uses our own formulation and strategically enables us to lock in future manufacturing rates, if and when these new drugs received FDA and health, Canada marketing authorization.
This allows us the opportunity to increase our chances of success in multiple clinical development programs will not limit ourselves to a single one this strategy reduces our downside risks, which is commonplace for pharmaceutical companies.
Many farm.
Has commenced to use the D. L to facilitate GMP tolling services that allow for a major international cannabis companies to access the export markets without further capital investment in their own international GNP operations.
And most importantly, Berry farm has used the D. L to start the vendor qualification process with pharmaceutical companies to provide them with API. Our finished dose products for the manufacturing of their future cannabis drugs, including generic cannabinoid derived pharmaceuticals.
All of these drug establishment license business activities create a near term opportunity, while we simultaneously execute on our long term strategy of producing cannabinoid derived pharmaceuticals clinically proven and FDA approved.
This is a great development for many farm and our shareholders and it means our outlook for growth as a precision based cannabinoid company has never been stronger.
Now turning to our third quarter results.
Beyond the great advancements in our core pharmaceutical strategy Q3 saw growth in other areas.
The most promising being international distribution.
A testament to the execution in our international contracts, we saw quarter over quarter growth of 16, 5% and our international revenue.
This growth was concentrated in Australia, and Germany. Many farms purpose built GMP manufacturing facility in the state of Victoria, Australia. It gives us unique access to these markets a global hub the therapeutic goods administration in the office of drug control certifications serve the growing Australia in medical.
And future CBD OTC market.
These certifications are also recognized around the world have allowed repeat deliveries, Germany and future deliveries to medical cannabis countries like New Zealand and Denmark.
In Germany, specifically, we added our fifth customer, while making multiple replenishment to our first four customers, including growing our wholesale private label program with China.
The eu's largest generic drug companies.
Value add to our GMP cannabis oil many farm has used its industry, leading quality management system and intimate knowledge of the candidates supply chain to source and deliver GMP flower to staff in 2022, we will be strengthening this portion of our business with lower cost flower to allow for that category become more margin accretive.
<unk> like.
All of our other international business.
As we continue to see sequential quarter over quarter growth in international sales and build our major pharmaceutical pipeline. We are committed to driving growth in Canada is medical and adult use markets as part of our commitment to building a profitable and sustainable business.
In Canada, we increased sales and marketing efforts successfully which we anticipate will translate into <unk>.
Sales growth in Q4 and moving forward.
I will touch more on those sales and marketing strategy later in the call.
In Q3, the many farm labs lineup premium cannabis oils or fourth and Canadian retail sales based on high fire data.
While we are very pleased with this market share. We also believe there is much opportunity to grow market presence in the oil category.
As companies ranked first to third in this category accounted for over $18 million in retail sales in Q3.
Excluding Quebec.
Just moving one spot into the third position could see the retail sales value in this category at least double for many farm.
This current success will lead to higher sales to provinces in Q4 as the inventory from distribution centers pull through and the increased revenue further as retail store listings continue to increase across the country.
It is important to note that many farm labs premium cannabis oil has an average price nearly twice as what our top competitors are selling for this shows that our brand story, a higher quality product offering is working well, especially with CBD 50, which is included in active clinical trials CBD 100.
And our CDN oil.
To expand in this category, we will continue to focus on our premium portfolio of sales and retail what's driving innovation.
We continue to launch unique oil skus.
With a C b D and C B N oil launching in Ontario during this week alone.
After the success of our Th C. C. D N oil we believe that consumers will also pay a premium for C b and oil without THC, whose notable benefits.
Crude aiding sleep.
Staying true to our pharmaceutical routes our oil portfolio provides the same or similar formulations that are used in many clinical trial programs and our international medical cannabis sales program.
We have also taken notice that consumers are using <unk> as a wellness products as it can deliver a therapeutic benefit with a faster onset and is easier to titrate.
To this end in Q3, we expanded retail listing of our CBD base by 200%.
This unique base formula does not crystallizing the cartridges like many other CBD only base. Additionally, our CDN based the only CDN dominant based on the market side.
Retail listings increased by 140%.
The uptake of these skus by retail stores in Q3 will translate to increased sales for Mitchell retailers in Q4 and onwards.
In summary, our domestic presence is still growing in distribution and revenue. Most importantly, it serves as a proof of concept for our ability to provide end to end development manufacturing and distribution solutions for multinational pharmaceutical companies.
I'll now turn the call over to Greg to discuss our financial results.
Thanks, Keith and good morning, everyone. I am pleased to report we continue to make progress with our international expansion with international revenues, increasing 16, 5% sequentially in Q3 versus Q2. This is the third consecutive quarter with double digit international revenue growth. In addition.
We added another customer in Germany, bringing our customer count with successful German deliveries to five <unk>.
Germany is the largest international medical market with a market value estimated to be $7 7 billion euros by 2028. According to Forbes and continues to be a strategic priority for <unk>.
Turning to the P&L performance for the third quarter Q.
Q3 revenues increased six 5% sequentially from $5 1 million in Q2 to $5 4 million in Q3.
International revenues increased 16, 5% sequentially to $2 9 million with German revenues of $1 1 million and Australian revenues of $1 8 million.
Canadian domestic revenue stabilized in Q3 at $2 5 million and we are optimistic to see growth in Q4 and beyond.
Most profit for the quarter of negative $1 9 million was impacted by a 0.5 million inventory write down to net realizable value.
Adjusted for this inventory write down gross profit was negative $1 4 million, which improved slightly versus Q2 adjusted gross profit.
<unk> and administrative expense in the quarter decreased sequentially from $5 2 million in Q2 to $4 6 million in Q3, largely due to bad debt expense recorded in Q2.
Marketing and selling expenses in the quarter decreased sequentially from $1 1 million in Q2 to 0.9 million in Q3.
R&D expenses increased sequentially from 140000 in Q2 to 280000 in Q3. These expenses will vary as we selectively invest to advance our capabilities and product portfolio.
Other operating income decreased sequentially from $3 2 million in Q2 to zero point $6 million in Q3, driven by the Canadian emergency wage and rent subsidies.
Adjusted EBITDA for Q3 was negative $5 6 million versus negative $3 7 million in Q2. The reason for the change was largely driven by income from the Canadian emergency wage and rent subsidy.
Moving to a few notable items on the balance sheet.
And other receivables decreased from $32 6 million in Q2 to $29 4 million in Q3.
As discussed in previous quarters, there were two customers or a total of approximately $19 million at the end of Q2.
This balance has decreased to $15 8 million in Q3, including $8 5 million, which is subject to legal proceedings that we have previously disclosed and remain confident in its collection.
Remainder of the $15 8 million is due from a second customer and we are still confident in its collectibility.
Adjusting for these two customers and the wage and rent subsidy trade and other receivables is approximately $13 million.
Our cash balance on September 30 was $38 million, which decreased slightly from $38 8 million at June 30.
The cash balance on the convertible debenture stood at approximately $1 9 million at the end of September as of today, our cash balance remaining is approximately zero point $5 million.
While we made progress in the quarter by expanding our international presence and revenue and managing our cash consumption.
Still have work to return the business to profitability and drive positive cash flow.
I'm excited to work with Brian to transition many farm to profitability and look forward to updating you on our progress. In addition, I would like to thank Keith for his leadership as interim CEO and look forward to continuing to work with him in his role as president.
I'll turn it back to Keith.
Thank you Greg.
I will now provide some final thoughts on our outlook and plan to continue to increase revenue.
There's a lot of opportunity for increased sales in Canada and internationally based on a fully built and funded manufacturing platform. We can increase revenue significantly without further capital investments.
In August I shared three initiatives, we would undertake to increase sales.
Since then we have made incremental progress that led to increased sales in some categories and planted seeds for growth in others.
These include.
One investment in more sales resources domestically, we more than doubled our sales team in July and August those reps are now trained and in the field and in Q3. This led to 12% distribution growth and retail store listings across all of our Skus.
The pull through from this shelf space penetration will result in better sales results going forward.
Internationally in the back half of the quarter, we successfully added sales personnel in Germany, and Mexico to cover sales growth in the EU and Latin America.
Early ROI is already in place with our achievement of international sales growth for the third subsequent quarter and new contracts signed in those regions.
Two <unk>.
<unk> contract manufacturing and.
In Q3, we started GMP tolling activities and our Barrie facility and also increased volumes in our Australian facility.
Providing partners with access to the highest quality cannabis manufacturing platforms to deliver them cost savings and international reach is of Paramount importance to us and them revenue in this category is still growing as our partners deliver these products to their own international patients. We expect this growth to be.
In 2022.
Three continued innovation on.
On the pharmaceutical front there are limited cannabis manufacturers with GMP certification, but EBIT fewer that have completed cannabinoid API characterization. For example in Q3, the Medi farm R&D team fully characterized pure CBD isolate right down to the 100 of the person.
<unk> of each component this along with our validation and the stability of our GMP manufactured CBD are major components of completing a drug master file with the U S. FDA.
A drug master file progresses, our pharmaceutical sales initiatives as those customers Register for marketable novel and generic drugs, where CBD is an active ingredient.
This will lead to major long term and stable supply agreements. When these drugs received FDA and European Medicines agency approval.
Overall, Q3 was a productive quarter, marking the startup of sales volumes under important new international customer deliveries.
Further global market penetration for our products and an improvement in the bottom line performance.
2021 is and continues to be a year of transformation for many farm.
And our new pharmaceutical licensing and introduction of a new CEO to bring fresh leadership to our company or a few more pieces and the journey of this transformation.
Many farm does have several initiatives to complete to get back to profitability.
We have the platform and licenses to get there.
With a strong cash balance that only decreased $800000 in Q3 from $38 8 million to $38 million better efficiency and collection of accounts receivables and only $500000 remaining and convertible debt now is the perfect time for Brian to take the.
Our range as CEO.
Brian can now bring us expertise and experience as a sales and operational expert to outline and execute on the path to profitability.
Some cannabis companies may not have the longevity to survive this nascent market as it matures.
But as a pharmaceutical company with such a strong platform and balance sheet Betty farmers just getting started.
Now operator could you. Please open the lines to questions from our callers.
Absolutely if he would like to ask a question. Please press star one on your telephone keypad again, Thats star one to ask an audio question.
Please hold for your first question.
Your first question comes from the line of Tami Chen with BMO capital markets. Please state your question.
Hi, good morning, Thanks for the question first.
First for me is on the gross margin or gross profit line. So excluding that AR write down you're still at a gross profit loss. So I'm just wondering is it because.
Because you're working to a legacy flower inventory and if so do you have a sense of when you'll be fully worked through that.
Yeah. Thanks, Tammy further question, it's Greg here. So there's a couple of things on gross margin. Yes. There is some older inventory that we're still working through what are the big items that we've talked about in past quarters has improved margins with volume again with the sales.
We're at right now as we've talked about before were underutilized in the plant. So you don't get the same absorption. So we expect as as we ramp sales.
That will improve in addition, you know international sales as we continue to expand and.
And we enjoy higher prices in those markets, we do expect to see that improve and we've seen three consecutive quarters now of double digit revenue growth.
Certainly there are some automation and efficiency and then theres other cost reduction initiatives that we're working on particularly with some of our German flower business that we've talked about to improve margins and then the longer term one that's really going to improve it is as we get into the pharmaceutical sales.
Which is a little bit longer, but we expect to see improved margins on that so hopefully that gives you a little bit of color there.
Yeah that does thanks, and my second question was I think on a sequential basis. There was a modest decline in their international sales to Germany. So I just wanted to ask them what was going on there because it sounds like not only added a fifth customer, but he's been replenishing.
The existing four and tied to that can you also elaborate a bit more on that chairman flower business. So like what are you sourcing the flower from and <unk>.
Where do you think the cost reduction opportunities could be in that part of the business. Thank you.
Thanks, Dave.
Yeah, we did see a very small decline in the top line revenue.
In Germany.
Mostly just the business itself is still a bit lumpy. So we started deliveries there in late February and we're kind of holding to.
The import export approval of both countries. So both the health authority in Germany, and Health Authority here Health, Canada issue permits and then we load in based on those permits. So we will see you will see that kind of be a little bit up and down until we bring on more customers to smooth it out but it was a small decline.
We're seeing good good things in the market that.
Pushing positive and we are very bullish on that area as well on the flower itself.
It is something that we've done it in a value add to scatter them.
So they came to us and they wanted to have like a complete package for their patients.
They saw us as their exclusive cannabis partner. So what we did is we went out source that flower from GMP growers in Canada.
We set up the contracts in 2021, there was opportunities with only so many GMP growers it so much.
Inventory out there I think that is actually that those opportunities have expanded since then and what we can offer to German patients has expanded as well. So just as we saw some of the price leveling out and the industry in places like Canada two years ago, we're seeing that a little bit on that on the GMP flower as well so we'll be able to.
Capture a little bit more of a margin as well as pass on some of that cost base of patients.
Got it thank you.
Your next question comes from the line of Sean Mirror with Canaccord.
Hey, good morning, and thank you for taking my questions.
First one just touching on your international sales without accounting for more than 50% of yourselves.
In the quarter, just wanted to get a sense for what youre doing and help manage the cadence of those revenues.
International sales tend to be quite spread out timing wise and large order sizes as you probably know so there's no certainty on the cash flow. So I'm just trying to get an understanding of the initiatives that you're undertaking to help manage this reality and what.
What we should expect to see going forward in terms of quarterly fluctuations from the international segment.
Good morning, Yeah. Thanks for the question I think it's a good one we've really done a lot of work in this regard I think that the number one that helps.
Take the Lumpiness out of their business is more customers.
Do you see ebbs and flows from let's say a single customer in March we delivered internationally to Germany to only two customers in last quarter.
Five.
So we'll see as we add more customers will change that.
A big part of our International sales is also Australia, where we have our wholly owned subsidiary and building. There. So we are able to take away some of the uncertainties as far as import export goes as we can stock things in country.
<unk> and product and API sales. So I think that we have a few initiatives on the go to continue to improve that.
Okay.
Thank you thank you for that.
Oh, I don't know Bob.
Just wanted to continue a looking more more broadly I guess at the German market.
There's been more recent talked about a pathway to a recreational program in that market. So just given the you know it's a large part of your business now being the German or odd.
Operations in the German market, just what's your understanding of what's happening from a federal regulation standpoint over there.
And the potential for adult use reform in that country and and in that market, if and how our metal form would play and that's my last question.
Yeah, I think it's really exciting to see the developments.
And you know the removal of the stigma of cannabis as a medical product or even add a wellness product and we've seen a lot of that.
In Germany.
I was in Germany, the week before the election, and there was a lot of buzz around the industry folks that I met with around you know that they were expecting a change of government.
As you know the German government.
Expected coalition government is still negotiating how that coalition is going to work and we probably won't see the outcome of that for a few weeks, but it is exciting that cannabis legislation is front and center. There. So you don't have to.
Barry leased what we could expect is easier.
Easier pathways on medical so just having that accepting coalition of candidates things like quotas of how much medical cannabis. The suppliers are allowed to have we could see maybe go away or at least increased drastically on the adult use market I think we're in a great position as you know a lot of adult use.
Cannabis users.
Do seek out that candidate as a wellness product and kind of self medicating.
Some some analysts say extra.
Experts say that in Germany that distribution of adult candidates would be through pharmacy. So since we've set up those distribution channels today.
Can easily plug in.
To serve that adult use market, which obviously would be.
Massive increase to what they have in the medical market today.
Thank you and I'll pass it on.
Your next question comes from the line of Scott front.
With Roth capital markets.
Hey, Good morning. This is Mike on for Scott I was just looking for color on the product uptake side with startup you mentioned launching eight products back in April and I think that included three extract formulations I was just wondering what the initial uptake among pharmacies and consumers has looked like and kind of how that's influenced future product rollouts.
Thanks for that question all of our German customers have been Onboarding, a different skus out of themselves as you as you mentioned had eight active skus in the German market. Today, we are looking to those have been successful to date.
There are some more successful than others, what's really popular with German patients today has high THC.
So our ITC Skus, we see move more and on the extract side.
Oil is also a popular patients today, so like a one to one.
Formulation, so with that knowledge that we have now launching in February it really gives us an opportunity to continue to innovate and so in 2022 will be completed in the registration process for additional skus, there that kind of meet the market demand. So you know a few more.
Our flower Skus that are high THC.
Are available in the Canadian market today that we will make available to German patients.
And then some more unique candidates foil skews much like our many farm last oil line that we have in Canada today.
Okay I appreciate that color and then looking at Canada, you mentioned in the past seeing more spot purchasing versus kind of long term agreements being made there.
I was wondering what youre seeing on the Canadian LP side now with the recent purchasing cadences and this lower cost environment and just kind of on the flip side of that how that's affected your purchasing strategy in that market.
Yeah, I think in the Canadian market, we do continue to see a spot purchasing being quite popular at as.
The pricing kind of leveled itself out.
What's really encouraging in the Canadian market is I think.
2020, we had a pretty big supply glass, especially in intermediate products, such as I'm concentrating distillate I think that a lot of that has been worked through or.
Or has expired so what we're seeing now is larger Lps with big product lines are reaching out to processors like ourselves to augment their inventory with additional concentrate or distillate to make their products. So we're seeing some of that bulk market come back. It is slower its not you know in comparison to like you know.
Timeline of 2019, but it is encouraging to.
I see that we're also seeing as these companies mature everyone take a little bit more of a mature purchasing approach and a more of a.
Evaluation of as far as enforcing our outsourcing some of their activities with some of the larger license producers are looking more and more back at some of the tolling model you have some of their products made where they think that there could be some cost savings. So I think that was really encouraging to see you know as we have them.
Rollover of new management teams in the industry and the industry maturing that we will get more mature purchasing practices that we see in other industries.
Great. That's it for me I'll pass it on thank you.
If you would like to ask a question. Please press star one on your telephone keypad again Thats Star one to ask an audio question. Your next question comes from the line of Ann Gray with AGP. Please state your question.
Hi, Good morning. This is Andrew bond on the line for Aaron Thanks for taking our questions.
First one for us.
On the Canada market, we've seen some of your legacy extraction peers begin to sell flower products in the Canadian adult use market.
Is this something you believe could be complementary to your current products selling in Canada are you comfortable focusing on current formats and pharmaceutical sales internationally. Thanks.
Thanks, Andrew I think at this time, we do have a great.
Platform and a great base to make concentrate products.
Indian flower market you know it is one that we're.
Obviously, a lot of our peers are entering into but it is quite a crowded market. So at this point in time, we don't have any immediate plans to launch a flower brand just looking at kind of at that goes into that market.
Years from now or to level out and we have you know good partners that we are also buying on the G&P side, there could be something that we really looked at but when we talk to the provincial boards today. They are not having any problems with multiple license holders wanting to sell flower. So we feel that we can better participate in the oil and gas.
Concentrate markets and really where we do a separate ourselves in those markets is through innovation. So as I mentioned on the call like just this week in Ontario were launching CBS dominant.
Oil that has C D N and CBD or THC. So we find a product like that is really where we can be successful and really rely on our strengths.
Perfect. Thanks, Keith that's really helpful color.
Then.
Kind of related to that you mentioned in your expectation for a large pickup in tolling services, which has historically been a smaller segment for you how large of a contributor do you believe tolling could be as you look to make GMP API for some Canadian Lps and when do you believe longer term this could be a service larger pharmaceutical CECO. Thanks.
Yeah, I think for us contract manufacturing for large pharmaceutical companies are large wellness companies is something that is what we're very well set up for in the future and those are the types of conversations that we're having on our business development and sales pipeline today, So really excited to do that.
Contract manufacturing for us has been a little bit of a smaller piece amongst license holders are in Canada for various reasons, but we do have some very successful contracts. We do make for example, like Ace Valley Vape pens whichever one of that hiring vape pens now owned by canopy growth, we didn't launch out very innovative lineup of Cree.
<unk> and gel with Abbvie kana, which as.
You know a company that grew up their R&D through J labs at the large building, so where it makes sense and it hits our platform. The GMP tolling is something that is very interesting because we are pretty much the only person providing that in Canada today.
So that does create a better opportunity although.
The license holders that have kind of that international reach is also a small number so it's hard to peg a number on what that would be like today, just like our launching our own international business. We saw some lumpiness, especially in the beginning and even still today, it's hard to peg a number on where they will see the pull through to their international patients.
Great. Thanks, very much I'll pass it on.
Yeah.
You do have a follow up question from the line of Timmy Chen with BMO capital markets. Please state your question.
Thanks for the follow up I'm, just quick clarification going back to your comment about the he is with data.
So I the Skus that are more popular is that primarily a flower skus or are among the ones that are more fashion thing, it's kind of balanced between both flower and oil. Thank you.
Hey, Jamie I think it is a pretty much a balance. So we we are as far as the value goes so volume wise there is more flower that moves.
It is obviously, a lower cost item for patients and.
Lot of patients in Germany do have coverage on the flower market you see more of a patient payer.
So we do probably volume wise get more of a pull through on the flower side, whereas value wise, it's it's closer to an even split.
That's representative of the data that we see across all of Germany. So.
Extracts have been rising as far as products go in Germany, a quarter over quarter, and Theyre, almost neck and neck with flower now and then.
Extract and then there's also there are constant like there.
And both drug concentrate business things like epic Isle extra an abnormal and whatnot to which are concentrate based products. So overall the concentrates make up a big part of that medical and in and we.
Pretty much that is pretty much in line with the industry there.
Okay. Thank you.
Yeah.
At this time there are no further questions I would now let's turn the floor back to Mr. Strong for any additional or closing remarks.
Thank you if there's no further questions I'll close by saying, we look forward to hosting our fourth quarter and 2021 annual conference call in March and keeping you abreast of progress in between thank you for listening and have a great day.
Thank you for participating in today's conference call. You May now disconnect your lines at this time.
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