Q1 2024 MediPharm Labs Corp Earnings Call

Unknown Speaker: and forward-looking statements within the meaning of applicable security laws. This includes, without limitation, statements about MediPharm Labs and its current and future plans, expectations, intentions, financial results, levels of activity, performance, goals, or achievements, and other future events, trends, profitability, business growth, or developments. Forward-looking statements are made as of the date here, based on information currently available to management of MediPharm and on estimates and assumptions made based on factors that MediPharm believes are appropriate and reasonable in the circumstances. However, there can be no assurance that such estimates and assumptions will prove to be correct.

Within the meeting of applicable security laws. This includes without limitation statements about meta farm labs, and its current and future plans expectations intentions financial results levels of activity performance goals or achievements and other future events.

Unknown Speaker: Any factors could cause actual results to differ materially from those expressed or implied by forward-looking statements. Additional information is contained in MediPharm Labs' filings with the Canadian and Provincial Securities Regulators, which are available on CDAR at CDAR.com. The company's remarks may also contain references to certain non-IFRS financial measures, including EBITDA, Adjusted EBITDA, Gross Profit, and Actual Gross Profit. These measures do not have any standardized meaning according to International Financial Reporting Standards or IFRS and therefore may not be comparable to similar measures presented by other companies.

Keith Strachan: We are being conservative there so we don't build in too much cost or infrastructure to get ahead of ourselves, but I think that 10% growth would be great for us at that margin and great for our small team. Just to remind everyone, we are very asset light in Australia. We do have a great managing director there, and he has a small team of three that are out talking to physicians all around the country, but we have no infrastructure as far as quality and logistics are concerned. We do it all through a partner, which allows us to be super flexible and to keep our optics.

Unknown Speaker: MediPharm believes that the non-IFRS measures referenced provide information useful to shareholders and investors in understanding our performance and may assist in the evaluation of the combined company's business relative to that of its peers. For more information, please see the section titled Reconciliation of Non-IFRS Measures in the most recent MD&A of MediPharm, which is available on CDAR. I will now pass the call to David Pidduck, CEO of MediPharm

Profitability.

David A. Pidduck: Maybe the only thing I'd add to that, Keith, is on the vape front, we're seeing good growth in vapes, but there are still a lot of what we'll call them non-compliant vapes in the market, and so there's going to be some growth in general in the market, but I think there's going to be a growth as companies can't import further GMP compliant products or the government tightens in terms of people who are breaking the rules and have product on the market that's non-compliant, that will work its way out of the system. There's still lots of that in the system now.

Business growth or developments.

Forward looking statements are made as of yet.

Based on information currently available to management of men a farm and on estimates and assumptions made based on factors that met a firm believes are appropriate and reasonable in the circumstances. However, there can be no assurance that such estimates and assumptions will prove to be correct.

David A. Pidduck: As that works its way out of the system, that's just good for suppliers like us. And that's why we're seeing lots when we continue to see more B2B customers coming to us saying, "Can you help? Our supply is running out, and we can no longer supply what we have now." So I think there's lots of good momentum for us in the Australian market.

Any factors could cause actual results to differ materially from those expressed or implied by forward looking statements.

All information is contained in met a firm labs filings with the Canadian provincial Securities regulators, which are available on SEDAR at SEDAR Dot com. The company's remarks may also contain references to certain non I F. R. S financial measures, including EBITDA adjusted EBITDA gross profit and actual gross profit these measure.

<unk> do not have any standardized meeting according to international financial reporting standards or Ifr S. And therefore may not be comparable to similar measures presented by other companies met a firm believes that the non I F. R. S measures referenced provide information useful to shareholders and investors in understanding our performance and may assist in eval.

<unk> of the combined company's business relative to that of its peers for more information. Please see the section titled reconciliation of non I FRS measures. The most recent M. DNA of met a fine which is available on SEDAR I will now pass the call to David Piddock C. E O of meta farm. Please go ahead Sir.

Remy Smith: Great, I appreciate the answers there. It's all for me.

David A. Pidduck: Thanks, operator, and good morning, everyone. We appreciate you joining us for MediPharm Labs' Q1 2024 conference call. Joining me on the call today are Keith Strachan, MediPharm's president, and Greg Hunter, the company's chief financial officer. I will address some of our highlights for the start of the year and discuss how we believe recent global market developments have positioned MediPharm favorably for growth. I will then hand the call over to Keith and Greg to provide more insight on some of the operational and financial results.

Operator: Again, if you would like to ask... Press star 1 on your telephone keypad. And there are no further questions at this time. I will now turn the call back over to David Pidduck for some final closing remarks.

Thank you operator, and good morning, everyone. We appreciate you joining us for meta farm Labs Q1, 2024 conference call. Joining me on the call today are Keith <unk>, President and Great Hunter, the Companys Chief Financial Officer.

David A. Pidduck: Great. Thanks, Operator. Thanks, everyone, for joining us this morning, and we look forward to speaking again on our Q2 call. Everybody have a great day.

I will address some of our highlights for the start of the year and discuss how we believe recent global market development position meta farm favorably for growth.

Operator: This concludes today's conference call. Thank you for your participation. You may now disconnect.

Operator: Please wait. The conference will begin shortly.

Then hand, the call over to Keith and Greg to provide more insight on some of the operational and financial results.

David A. Pidduck: Q1 was our best quarter in terms of revenue and adjusted EBITDA in three years. Q1 performance continues the improvement trend on our path towards profitability. We've made great progress on all fronts, revenue, gross profit, OPEX, and adjusted EBITDA. This quarter saw revenues grow almost 70% versus the prior year and 7% over the prior quarter.

Speaker Change: Q1 was our best quarter in terms of revenue and adjusted EBITDA in three years Q1 performance continued the improvement trend on our path towards profitability.

Speaker Change: <unk> made great progress on all fronts revenue gross profit Opex and adjusted EBITDA.

Speaker Change: This quarter saw revenues grow almost 70% versus prior year and 7% over prior quarter. This show is not just the effects of the vivo acquisition, which we completed last year, but strong growth in some of our international and <unk> markets.

Greg Hunter: This shows not just the effects of the VIVO acquisition, which we completed last year, but strong growth in some of our international and B2B markets. Greg will discuss our significant improvements in Gross Profit, OPEX, and Cash Flow. We closed our Vevo transaction just over a year ago.

Speaker Change: Greg will discuss our significant improvement in gross profit opex and cash flow.

Speaker Change: We closed our vivo transaction just over a year ago, we are on track and our integration efforts as we continue to realize efficiencies and synergies.

David A. Pidduck: We are on track in our integration efforts as we continue to realize efficiencies and synergies. Our cost reductions are expected to continue, including the rationalization of some of our manufacturing sites in the coming quarters, which we anticipate will see further efficiencies and savings throughout 2024. Our focus on EBITDA improvement continues to bear fruit as we had a less than $1 million adjusted EBITDA loss in Q1 2024. We anticipate these quarterly trends in EBITDA improvement continuing in 2024 as we continue toward breakeven adjusted EBITDA.

Speaker Change: Our cost reductions are expected to continue including the rationalization of some of our manufacturing sites in the coming quarters, which we anticipate will see further efficiencies and savings throughout 2024.

Speaker Change: Our focus on EBITDA improvement continues to bear fruit as we had less than $1 million adjusted EBITDA loss. In Q1 2024, we anticipate these quarterly trends in EBITDA improvement continuing in 2024, as we continued toward breakeven adjusted EBITDA.

David A. Pidduck: Our balance sheet is in great shape. $17 million in cash, less than $3 million in debt, and full ownership of all our assets, including this reproduction facility. Our cash position of $17 million, combined with our quarterly cash burn of about $1 million, has significantly improved our liquidity position. This financial stability positions us well for considering accretive investments in M&A and in organic growth initiatives. There are many distressed assets available today on the market, but we are being very cautious and thorough in our due diligence to ensure that any contemplated transaction would be accretive.

Speaker Change: Our balance sheet is in great shape with.

The $17 million in cash less than $3 million of debt and full ownership of all our <unk>, including the three production facilities.

Speaker Change: Our cash position of $17 million combined with our quarterly cash burn of about $1 million has significantly improved our liquidity position.

Speaker Change: This financial stability positions us well for considering accretive investments and M&A and inorganic growth initiatives.

Speaker Change: There are many distressed assets available today in the market.

Speaker Change: We're being very cautious and thorough in our due diligence to ensure that any contemplated transaction would be accretive.

David A. Pidduck: Our experience with the VIVO integration has shown that we can quickly and profitably integrate and drive synergies with like-sized organizations. There have been many recent global developments that position MediPharm well for future growth. Evolving regulations in Australia, Germany, and Brazil, and recent announcements in the U.S. all point to the emerging need for stronger GMP-compliant and pharmaceutically capable companies. Today, global sales represent over 30% of our revenue. And this segment grew by 75% year over year and 33% sequentially in Q1 versus Q4.

Speaker Change: Our experience with the vivo integration has shown that we can quickly and profitably integrate and drive synergies with lifestyle organization.

Speaker Change: There have been many recent global developments that position <unk> well for future growth.

If all the regulations in Australia, Germany, and Brazil, and recent announcements in the U S. All point to the emerging need for stronger GMP compliant and pharmaceuticals capable company today global sales represent over 30% of our revenue and this segment grew by 75% year over year and 33% sequentially.

Speaker Change: In Q1 versus Q4.

David A. Pidduck: These international markets generally have more restrictive regulatory requirements but enjoy higher margins. We've invested for many years in the foundations and capabilities for significant global growth. Quality Systems, Licensing, GMP Facility, and IT Infrastructure.

Speaker Change: These international markets generally have more restrictive regulatory requirement, but enjoy higher margins.

Speaker Change: We've invested over many years in the foundations and capability for significant global growth.

Speaker Change: Quality system licensing GMP facility.

Speaker Change: Infrastructure clinical trial capability, R&D I'll grab establishment license big pharma partnerships and global footprint and infrastructure. These are the capabilities that <unk> invested in specifically to position us to benefit from the very trends, we now see emerging.

David A. Pidduck: Clinical Trial Capability, R&D, Drug Establishment License, Big Pharma Partners, and global footprints in infrastructure. These are the capabilities that MediPharm has invested in specifically to position us to benefit from the very trends we now see emerging. Our pharmaceutical, medical, and clinical approach has made us a partner of choice for pharma companies looking to enter the cannabis market in their respective countries. Our extensive suite of regulatory approvals and GMP, Drug Establishment License, NHP, and other licenses. Allow us to ship cannabis and drug products to most countries with a cannabis regulatory framework, although with tightening requirements in multiple jurisdictions.

Speaker Change: Our pharmaceutical medical and clinical approach has made us the partner of choice for pharma companies looking to enter the cannabis market in their respective countries.

Speaker Change: Our extensive suite of regulatory approvals and GMP drug establishment license and HP and other licenses allow us to ship cannabis in drug products to most countries with a cannabis regulatory framework.

Speaker Change: With tightening requirement in multiple jurisdictions, we've been approached by several international companies for support with quality focused GMP production and supply.

David A. Pidduck: We've been approached by several international companies for support with quality-focused GMP production and supply. In the last several months, we have signed a number of new B2B international agreements, including deals with local pharma companies. In Q1, we began to see some of the first revenues from these new initiatives.

Speaker Change: In the last several months, we have signed a number of new <unk> International agreement, including deals with local pharma company.

Speaker Change: In Q1, we began to see some of the first revenues from these new initiatives.

Speaker Change: We look forward to further growth in 2024 as these agreements begin to generate revenue.

David A. Pidduck: We look forward to further growth in 2024 as these agreements begin to generate revenue. I thought I would share our perspectives on some of these key market developments and the potential positive implications for the company. First, Australia. Australia has implemented new GMP requirements. These new tighter rules require that all products now must meet new GMP standards in Australia. This change has opened many branded and B2B opportunities for the company, already driving new vape and oil sales in Q1. In Q1 2024, MediPharm medical cannabis sales in Australia saw a 64% increase from Q4 2023. The main contributor to the increase was both branded and white-labeled GMP vape sales. Now to Germany.

Speaker Change: I thought I would share a perspective on some of these key market developments and the potential positive implications for the company.

Speaker Change: First Australia.

Speaker Change: Australia has implemented new GMP requirements.

Speaker Change: These new tighter rules require that all products now must meet new GMP standards in Australia.

This change has opened many branded and <unk> opportunities for the company already driving new vape and oil sales in Q1 and.

Speaker Change: In Q1, 2024 met a farm medical cannabis sales in Australia saw 64% increase from Q4 2023, the main contributor to the increase with both branded and white labeled GNP vape sales.

David A. Pidduck: In Germany, we expect the changes to German legislation removing cannabis from the narcotic list could reduce the prescribing stigma amongst physicians and drive market growth. The new regulations have opened up commercial opportunities, streamlined in-country operations, and expanded the addressable patient base. In Q1 2024, MediPharm's Beacon Medical GMBH hosted a successful audit at its German... This clears the path to increased branded product sales in the second half of 2024. MediPharm now has 14 product registrations under the Beacon brand in Germany, that's up from five in Q4 2023. German medical cannabis sales had a 36% increase versus Q4 2023. 70% of these sales were non-flour products, including oil, CBD isolate, and granola.

Speaker Change: Now to Germany.

Speaker Change: Germany, we expect the changes to the German legislation and removing candidates from our product list could reduce the prescribing statement amongst physicians and drive market growth.

Speaker Change: The new regulations have opened up commercial opportunities to streamline and country operation and expand the addressable patient base.

Speaker Change: In Q1, 2024 Mega farms Beacon medical <unk> hosted a successful audit at its German office.

Speaker Change: This clears the path to increased branded product sales in the second half of 2024.

Speaker Change: <unk> now has 14 product registration under the <unk> brand in Germany, that's up from five in Q4 2023.

Speaker Change: German medical cannabis sales had a 36% increase versus Q4 2023, 70% of the sale or non flower products, including oil CBD isolate and dronabinol.

David A. Pidduck: Moving to Brazil, Brazil is a challenging market to get approvals through their strict pharma regulations. MediPharm recently completed a successful Envisa audit. The company already has two approvals, and with our local Big Pharma partner, we expect further file approvals in the coming quarter, and the U.S. Recently, as you are all aware, the AP reported that the U.S. Drug Enforcement Agency, DEA, will move cannabis from a Schedule I to a Schedule III drug.

Speaker Change: Moving to Brazil, Brazil is a challenging market to get approvals through their strict farmer regulations <unk> recently completed a successful and visa audit.

Speaker Change: Company already has two approvals and with our local big pharma partner, we expect further final approvals in the coming quarter.

Speaker Change: In the U S.

Speaker Change: The U S. Recently as you are all aware the associated press reported that the U S. Drug enforcement agency USDA will move candidates from our schedule wanting to a schedule III drug.

David A. Pidduck: MediPharm sees this as a solid step towards recognizing the medical benefits of cannabis and facilitating further clinical research. Today, researchers face significant challenges in getting trial approvals and then dealing with the logistics of sourcing and managing clinical trial materials that may contain cannabis. MediPharm is the only purpose-built cannabis facility that has been inspected by the US FDA and holds the current drug establishment license. MediPharm has been referenced in FDA investigational new drug applications, an abbreviated new drug application, and a drug master file.

Speaker Change: Meta farm thesis is a solid step towards recognizing the medical benefits of cannabis and facilitating further clinical research.

Speaker Change: Today, researchers face significant challenges getting trial approvals and then dealing with the logistics of sourcing and managing clinical trial material that may contain candidates met a farm is the only purpose built cannabis facility that has been inspected by the U S FDA and hold the current drug establishment licenses.

Speaker Change: Net of farmers has been referenced in FDA investigational, new drug application and an abbreviated new drug application and the drug Master file. The company has also set multiple cannabis shipments into the U S for clinical trials, which were DEA approved.

David A. Pidduck: The company has also sent multiple cannabis shipments into the U.S. for clinical trials, which were DEA approved. In the short term, MediPharm will use this leading FDA and DEA experience to position itself as a go-to partner for cannabis research in the U.S. Longer term, we believe it is likely that any new U.S. FDA regulations will raise the bar on manufacturing quality. MediPharm will be able to use its advanced GMP process validation and pharmaceutical product characterization to launch products into the future regulated U.S. market.

Speaker Change: In the short term meta farm will use this leading FDA and DEA experience to position itself as the go to partner for cannabis research in the U S.

Speaker Change: Longer term, we believe it is likely that any new U S. FDA regulations will raise the bar on manufacturing quality requirements.

Speaker Change: <unk> will be able to use its advanced GMP process validation and pharmaceutical product characterization launched products into the future regulated U S market.

David A. Pidduck: All of this is in addition to progressing some of our existing longer-term clinical trials and drug applications. We continue to execute in line with our plan. We now have revenue, gross profit, OPEX, and EBITDA results all trending in the right direction. We have a robust revenue pipeline, with a number of new agreements signed and in the works from multiple partners in multiple markets. And, as we have just discussed, MediPharm also has many significant longer-term strategic growth opportunities. I will now pass the call over to our co-founder and president, Keith Strachan.

All of this is in addition to progressing some of our existing longer term clinical trials and drug application.

Speaker Change: We continue to execute in line with our plans. We now have revenue gross profit Opex and EBITDA results all trending in the right direction we.

Speaker Change: We have a robust revenue pipeline with a number of new agreements signed and in the works for multiple partners in multiple markets.

Speaker Change: And as just discussed metaphor I'm also has many significant longer term strategic growth opportunities.

I will now pass the call over to our co founder and President Keith strong.

Keith: Thanks, Dave.

Keith Strachan: Thanks, everyone, for joining us this morning. As Dave mentioned, Q1 was our best quarter in over three years in terms of revenue and adjusted EBIT. I'm excited to share some of the operational and commercial highlights that led to our success and some new opportunities going forward. Our international sales had a strong start to the year, growing 75% year over year. In Germany, additional growth came from the commercial launch of GERNABIC. This is a pure 99% THC API that we sell both in bulk and filled syringe formats to multiple customers. Traditionally, the gerabinol market was supplied from European synthetic sources.

Keith: Thanks, everyone for joining us this morning, as Dave mentioned Q1 was our best quarter in over three years in terms of revenue and adjusted EBITDA I am excited to share some of the operational and commercial highlights that learner success and some new opportunities going forward.

Keith Strachan: Our international sales had strong start to the year growing 75% year over year.

Keith Strachan: In Germany, the additional growth came from commercial launch of Dronabinol.

Keith Strachan: This is a pure 99% THC API that we sell both in bulk and filled syringe formats to multiple customers.

Keith Strachan: Traditionally the dronabinol market with supply from European synthetic sources, our product is naturally derived isolated that is preferred by patients taking natural solutions our process and scale also makes our cost very competitive.

Keith Strachan: Our product is a naturally derived isolate that is preferred by patients seeking natural solutions. Our process and scale also make our costs very competitive. Based on our more natural product and our competitive pricing, many customers and partners have been selecting us as their vendor of choice. SFATA, our large pharmaceutical partner, continues to see growth in oil sales, with a 30% increase from the same period last year. This more than makes up for the lower German flower sales, where we continue to take a step back based on price compression, changing the margin profile.

Keith Strachan: Based on our more natural products and our competitive pricing many customers and partners have been selecting <unk> as their vendor of choice.

Keith Strachan: Scatter or large pharmaceutical partner continues to see growth in oil sales with a 30% increase from the same period last year.

Keith Strachan: This more than makes up for the lower German flower sales, where we continue to take a step back based on price compression changing the margin profile.

Keith Strachan: We will continue to supply select GMP flour and GMP flour manufacturing services where the business makes sense for MediPharm. The vast majority of our GMP flour from our Napanee grow facility is directed to our branded products in Australia.

We will continue to supply select GMP flower and GMP flower manufacturing services, where the business makes sense for <unk>.

Keith Strachan: The vast majority of our GMP flower from our Napa <expletive> facility is directed to our branded products in Australia.

Keith Strachan: Our brand, Beacon Medical, is a leading brand in Australia. Our strategy for this medical market is to win over prescribers and patients with consistent quality and a product that is always in stock. This patient-centric approach of a prescriber-by-prescriber sales strategy has been paying off. In March 2024, we had 350 unique prescribers.

Keith Strachan: Our brand BK medical is a leading brand in Australia.

Keith Strachan: Our strategy for this medical market is to win over prescribers and patients with consistent quality and product that is always in stock.

Keith Strachan: This patient centric approach of our prescriber by prescribers sales strategy has been paying off.

Keith Strachan: This is a 40% increase from the 250 unique prescribers that we had in March 2023. Additionally, in March 2024, we had almost 35% of our physicians prescribe a Beacon-branded vape cartridge. This shows the fast adoption of our GMP vapes that we just launched in September 2023. In Australia, we continue to expand the portfolio as we have two new 30% THC SKUs hitting the market in Q2 2024. The team is now working on the GMP validation and stability of our live resin vape cartridges to give patients a more full-spectrum option for inhalation cartons. International work continues in countries primed for growth such as Brazil, France, and Poland. Dave spoke about Brazil and other countries.

Keith Strachan: In March 2024, we had 350 unique prescribers. This is a 40% increase from the 250 unique prescribers that we had in March 2023.

Keith Strachan: Also in March 2024, we had almost 35% of our physicians prescribed a beacon branded vape cartridge. This displays the fast adoption of our GMP dates that we've just launched in September 2023.

Keith Strachan: In Australia, we continue to expand the portfolio as we have two new 30% THC skus hitting the market in Q2 2024.

Keith Strachan: The team is now working on the GMP validation and stability of our live resin vape cartridges to give patients a more full spectrum auction for inhalation carts.

Keith Strachan: International work continues in countries prime for growth, such as Brazil, France and Poland.

Speaker Change: Dave spoke about Brazil.

Keith Strachan: In France, the government just completed a successful medical cannabis pilot program and is now launching a full program similar to the ones that we see in Germany and Australia. The Polish cannabis market has been active longer, but given that product requirements are difficult, it is still an undersupplied nation. MediPharm is working with multiple clients to leverage our GMP status and pharma quality to commercialize products in both these jurisdictions. Back in Canada, in Q1, we had eight new product launches in various product categories.

Speaker Change: France. The government just completed a successful medical cannabis pilot program is now launching a full program similar to the ones that we see in Germany and Australia.

Speaker Change: The Polish cannabis market has been active longer but given that product requirements are difficult. It is still an under supplied nation. Many farm is working with multiple clients to leverage our GMP status in pharma quality to commercialized products and both of these jurisdictions.

Speaker Change: Back in Canada in Q1, we had eight new product launches in various product categories.

Keith Strachan: Our success in the domestic market has been in cannabis oil. This category represents 60 percent of our sales, and we're able to win here as consumers seek a wellness product that has the same attributes as other products they take for therapeutic benefits, such as NutraSuitable. MediPharm is one of the only domestic producers who aligns well with this customer segment. However, we need to keep innovating in the wellness and better for you cannabis categories.

Speaker Change: Our success in the domestic market has been in cannabis oil. This category represents 60% of our sales and we were able to win here as consumers seek a wellness product that has the same attribute and other products they take for therapeutic benefit such as nutraceutical.

Speaker Change: Many farm is one of the only domestic producers who align well with this customer segment.

Speaker Change: However, we need to keep innovating and the wellness and better for you cannabis categories. We are currently reviewing some alternate non multiple formats and anticipate launching domestically and our medical channel and in the adult use market in the back half of 2024.

Keith Strachan: We are currently reviewing some alternate non-smokable formats and anticipate launching these domestically in our medical channel and in the adult use market in the back half of 2024. We are very proud of the great strides we made in Q1 2024, which is evident in our significant profit improvement. This momentum will be the driving force on our path to profitability, and I see meaningful progress in 2024. I'll now pass the call to Greg to discuss MediPharm's financing. Thanks, Keith.

Speaker Change: We are very proud of the great strides we made in Q1 2024, which is evident in our significant profit improvement. This momentum will be the driving force on our path to profitability that it is making meaningful progress in 2024.

Speaker Change: I'll now pass the call to Greg to discuss many farms financials.

Greg Hunter: Thanks, Keith, and good morning, everyone. As discussed in prior calls, MediPharm management has been focused on growing our revenue base through organic and inorganic initiatives, reducing cash burn, and driving towards profitability as key priorities. I'm pleased to report that Q1 was another step in the right direction. Before reviewing the results for the quarter, let me add some additional commentary on the progress we made on these priorities in the first quarter.

Greg: Thanks, Keith and good morning, everyone as discussed in prior calls many farm management has been focused on growing our revenue base through organic and inorganic initiatives, reducing cash burn and driving towards profitability as key priorities.

Greg: I'm pleased to report that Q1 was another step in the right direction.

Greg: Before reviewing our results for the quarter, let me add some additional commentary on the progress we've made on these priorities in the first quarter.

Greg Hunter: Revenue of $9.8 million was the highest in over three years and increased $3.9 million or 67% versus the prior year and improved $0.6 million or 7% sequentially, despite Q1 typically being lower due to industry seasonality. We had our largest commercial shipment of Dronabinol to Germany in Q1, representing $0.6 million in revenue. We had our largest commercial shipment of vapes to Australia in Q1, representing $0.5 million in revenue. And we recognized $0.6 million in revenue from a new domestic contract manufacturing customer.

Greg: Revenue of $9 8 million was the highest in over three years and increased $3 9 million or 67% versus prior year and improved <unk> 6 million or 7% sequentially. Despite Q1, typically being lower due to industry seasonality.

Greg: We had our largest commercial shipment of Dronabinol to Germany in Q1, representing zero point $6 million in revenue.

Greg: We had our largest commercial shipment of <unk> to Australia in Q1, representing zero point $5 million in revenue.

And we recognized zero point $6 million in revenue from a new domestic contract manufacturing customer.

Greg Hunter: Our gross profit of $2.7 million was the highest in over four years and was over 27% of revenue. In addition, we executed an additional cost reduction plan that will save approximately $1 million on an annualized basis starting in Q2 by making a difficult decision to close our HOPE facility. And finally, we improved our adjusted EBITDA loss from 1.6 million in Q4 to 0.9 million in Q1 2024. This is our best result in over four years.

Speaker Change: Our gross profit of $2 7 million was the highest in over four years and was over 27% of revenue.

Speaker Change: In addition, we executed an additional cost reduction plan that will save approximately $1 million on an annualized basis, starting in Q2 by making the difficult decision to close our hopes facility.

Speaker Change: And finally, we improved our adjusted EBITDA loss from $1 6 million in Q4 to zero point $9 million. In Q1 2024. This is the best result in over four years.

Greg Hunter: Turning to the P&L performance for the first quarter, revenue for the first quarter of $9.8 million increased $3.9 million or 67% versus the prior year and increased $0.6 million or 7% sequentially from Q4 2023. Canadian adult use and wellness revenue of $2.1 million in Q1 2024 declined versus Q1 2023 as we carefully managed sales and marketing expenditures and exited selected products with a focus on profitability. Revenue also declined sequentially from $2.7 million in Q4 2023, driven by industry seasonality.

Speaker Change: Turning to the P&L performance for the first quarter.

Speaker Change: Revenue for the first quarter of $9 8 million increased $3 9 million or <unk>, 67% versus prior year and increased <unk> 6 million or 7% sequentially from Q4 2023.

Speaker Change: Canadian adult use and wellness revenue of $2 1 million in Q1, 2024 decline versus Q1, 'twenty three as we carefully managed sales and marketing expenditures and exited selected products with a focus on profitability.

Speaker Change: Revenue also declined sequentially from $2 7 million in Q4, 2023, driven by industry seasonality.

Greg Hunter: Canadian medical cannabis revenue for Q1 2024 increased significantly from $0.6 million in Q1 2023 to $3.5 million in Q1 2024, driven by the integration of the VIVO medical channel and new business with third-party medical channels. However, revenue decreased sequentially, driven by order timing from third-party medical channels.

Speaker Change: Canadian medical cannabis revenue for Q1, 2024 increased significantly from zero point $6 million in Q1, 2023 to $3 5 million in Q1 2024, driven by the integration of the vivo medical channel.

Speaker Change: And new business with third party medical channels revenue decreased sequentially, driven by order timing from third party medical channels.

Greg Hunter: International medical revenue increased from $1.8 million in Q1 2023 to $3.2 million in Q1 2024, driven by the integration of Vivo's Australian business, new Australian vape and oil business, as well as new Dranabinol sales in Germany. Revenue increased sequentially from $2.3 million in Q4 2023, driven by increased granabinol sales in Germany and new vape business in Australia. The international business represented approximately 33% of total revenue in Q1.

International Medical revenue increased from $1 8 million in Q1, 2023 to $3 2 million in Q1 2024, driven by the integration of vivo as Australian business, New Australian Vape and oil business as well as new Dronabinol sales in Germany.

Speaker Change: Revenue increased sequentially from $2 3 million in Q4, 2023, driven by increased Dronabinol sales in Germany, and new business in Australia.

The international business represented approximately 33% of total revenue in Q1.

Greg Hunter: Pharmaceutical and B2B revenue of $1 million in Q1 2024 increased from $0.5 million in Q1 2023 and increased $0.6 million sequentially from Q4 2023. The increase is largely due to the new contract manufacturing customer mentioned earlier. As Dave and Keith discussed previously, pharmaceutical revenue is a longer-term strategy and will take time to pay off as clinical trials progress and applications make their way through the long-term process of approval.

Speaker Change: Pharmaceutical and <unk> revenue in Q1, 2024 of $1 million increased from zero point $5 million in Q1, 'twenty three and increased <unk> 6 million sequentially from Q4 'twenty three the increase is largely due to the new contract manufacturing customer mentioned earlier.

Speaker Change: As Dave and Keith discussed previously pharmaceutical revenue as a longer term strategy and will take time to pay off as clinical trials progress and applications make their way through the long term process of approvals.

Greg Hunter: Gross profit for Q1 was $2.7 million, or 27.4%, and improved significantly versus Q1 2023 of 6.6%. Q1 2024 gross profit also increased versus Q4 2023, driven by increased international medical cannabis revenue that typically enjoys higher margins. Q124 gross profit was 34% when adjusting for several discrete items, such as biological asset fair value adjustments, inventory write-downs, and severance for restructuring. This was the highest adjusted gross profit in over three years. Gross profit continues to improve, driven by product mix, production efficiency, and cost reduction.

Speaker Change: Gross profit for Q1 was $2 7 million or 27, 4% and improved significantly versus Q1 2023 of six 6% Q.

Keith Strachan: Q1, 2024 gross profit also increased versus Q4 2023, driven by increased international medical cannabis revenue typically enjoys higher margins.

Speaker Change: Q1, 24 gross profit was 34% when adjusting for several discrete items, such as biological assets' fair value adjustments inventory write downs.

Speaker Change: Severance for restructuring.

Speaker Change: This was the highest adjusted gross profit in over three years.

Speaker Change: Gross profit continues to improve driven by product mix production efficiencies and cost reductions management continues to focus on efficiencies to drive gross profit.

Greg Hunter: Management continues to focus on efficiencies to drive gross profit. General and administrative expense in the first quarter of $4.3 million increased versus the prior year due to the integration of VIVO, a $1.5 million bad debt recovery in Q1 2023, and $0.5 million of severance for restructuring in Q1 2024. GNA increased sequentially versus Q4 2023, largely driven by severance for restructuring. Marketing and selling expense of $1.3 million was consistent with the prior year and decreased $0.2 million sequentially.

Speaker Change: General and administrative expense in the first quarter of $4 3 million increase versus prior year due to the integration of vivo.

Speaker Change: A $1 5 million bad debt recovery in Q1, 23, and <unk> 5 million of severance for restructuring in Q1 2024.

Speaker Change: G&A increased sequentially versus Q4, 2023, largely driven by severance for restructuring.

Speaker Change: Marketing and selling expense of $1 3 million was consistent with prior year and decreased 0.2 million sequentially.

Greg Hunter: Total OPEX, which includes DNA, marketing and selling, and R&D expenses, was $5.6 million for Q1 2024 and increased $2.7 million versus the prior year due to the integration of VIVO, a $1.5 million bad debt recovery in Q1 2023, and $0.5 million of severance associated with restructuring. In addition, Q1 2024 operating expenses increased $0.6 million or 12% versus Q4 2023, driven by $0.5 When adjusting for severance and other discrete items, Q1 2024 operating expense was $5.1 million, and it is consistent with Q4 2023. Management continues to focus on expense reduction opportunities.

Speaker Change: Total opex, which includes G&A marketing and selling and R&D expense was $5 6 million for Q1, 2024, and increased $2 7 million versus prior year due to the integration of vivo a $1 5 million bad debt recovery in Q1, 2023, and <unk> 5 million of severance for restructured.

Speaker Change: In Q1 2024.

Speaker Change: In addition, Q1 2024 operating expenses increased <unk> 6 million or 12% versus Q4, 2023, driven by <unk> 5 million severance associated with restructuring when adjusting for severance and other discrete items Q1 2020 for operating expense was $5 1 million.

Speaker Change: And is consistent with Q4 2023 management continues to focus on expense reduction opportunities.

Greg Hunter: Adjusted EBITDA loss for Q1 was $0.9 million and improved $2.1 million, or 70% versus Q1 2023. This improvement in adjusted EBITDA is driven by revenue growth, an improvement in gross profit, and a reduction of expenses. Q1 2024 adjusted EBITDA improved $0.7 million, or 42% versus Q4 2023, driven by gross profit and continued expense reduction. Moving to a few notable items on the balance. Trade and other receivables increased from $5.9 million in Q4 2023 to $6.5 million in Q1, driven by increased revenue. As of Q1, 92% of accounts receivables are aged 60 days or less.

Speaker Change: Adjusted EBITDA loss for Q1 was <unk> 9 million and improved $2 1 million or 70% versus Q1 2023.

Speaker Change: This improvement in adjusted EBITDA is driven by revenue growth the improvement in gross profit and the reduction of expenses.

Speaker Change: Q1, 2024, adjusted EBITDA improved <unk> 7 million or 42% versus Q4, 2023, driven by gross profit and continued expense reductions.

Speaker Change: Moving to a few notable items on the balance sheet.

Speaker Change: Trade and other receivables increased from $5 9 million in Q4, 2023 to $6 5 million in Q1, driven by increased revenues as of Q1, 92% of accounts receivables is aged 60 days or less.

Operator: Our cash burn in Q1 was approximately $1 million, resulting in an ending cash balance of $17 million at March 31st. The company has less than $3 million of debt, and contrary to many other cannabis companies, MediPharm is also up to date on cannabis excise duties and trade payables. Although we still have work to achieve profitability and become cash flow positive, Q1 was another step in the right direction. Revenue was the highest in over three years and increased 7% sequentially to $9.8 million and 67% year over year.

Speaker Change: Our cash burn in Q1 was approximately $1 million, resulting in an ending cash balance of $17 million at March 31.

Speaker Change: The company is less than $3 million of debt and contrary to many other cannabis companies. Many farmers also up to date on cannabis excise duties and trade payables.

Although we still have work to achieve profitability and become cash flow positive Q1 was another step in the right direction.

Speaker Change: Revenue was the highest in over three years and increased 7% sequentially to $9 8 million and 67% year over year.

Operator: Adjusted gross profit of 34% was the highest in over three years. Adjusted EBITDA loss improved sequentially and versus the prior year to $0.9 million and was the best in over four years. And finally, we have a strong balance sheet relative to our peers, with $17 million of cash and less than $3 million of debt. As a result of our strong balance sheet and significantly improved financial performance, we are well positioned to invest in organic and inorganic growth opportunities as the industry continues to mature. With that, I'll turn it over to the operator to open the line for questions.

Speaker Change: Adjusted gross profit of 34% was the highest in over three years.

Speaker Change: Adjusted EBITDA loss improved sequentially and versus prior year to <unk> 9 million and was the best in over four years and finally, we have a strong balance sheet relative to our peers was $17 million of cash and less than $3 million of that.

As a result of our strong balance sheet and significantly improved financial performance, we are well positioned to invest in organic and inorganic growth opportunities as the industry continues to mature.

Speaker Change: With that I'll turn it over to the operator to open the line for questions.

Operator: Thank you. We will now begin the question and answer session. If you would like to ask a question, please press star 1 on your telephone keypad to raise your hand and join the queue. If you would like to withdraw your question, simply press star 1 again. Your first question comes from the line of Aaron Grey from Alliance Global Partners. Your line is open.

Speaker Change: Thank you we will now begin the question and answer session. If you would like to ask a question. Please press star one on your telephone keypad to raise your hand and joined the queue. If you would like to withdraw your question simply press Star one again.

Speaker Change: Your first question comes from the line of Aaron Grey from Alliance Global Partners. Your line is open.

Remy Smith: Good morning, and thank you for my questions. This is Remy Smith on behalf of Aaron Grey.

Aaron Thomas Grey: Hi, good morning, and thank you for taking.

Aaron Thomas Grey: My questions. This is Robert Smith on for Erinn, Greg.

Remy Smith: My first question is in regards to Germany with the cannabis reform that happened there more recently. So now that we're live post-April 1, the first phase, can you speak to any data points on increased interest you have started seeing from physicians as well as patients in the market?

Robert Smith: My first question in regards to Germany, where the Canada surface perform that happen there more recently.

Aaron Thomas Grey: Another.

Speaker Change: Alive Post April one.

Speaker Change: The first phase can you speak to.

Speaker Change: Any data points on increased interest thought is seeing from positions as well as patients in the market.

Unknown Speaker: Thanks, Remy. I'll let Keith take that. Good morning, Remy.

Keith Strachan: Thanks, Rami I'll, let Keith take that.

Keith Strachan: There's a lot of excitement about April 1 in Germany and the new rules. I think the most notable thing on our end is that, with it no longer being a narcotic, it opens up some additional pharmacies that wouldn't usually carry cannabis and some physicians who probably wouldn't usually prescribe it. So what we're seeing is pharmacies are definitely busier with prescriptions, and there's definitely been an increase in patients. With that, we're seeing more and more, as Dave mentioned in his comments, international B2B interest.

Speaker Change: Good morning Ravi.

Keith Strachan: There's a lot of a lot.

Keith Strachan: A lot of excitement with April one in Germany, and the rules I think the most notable thing on our end is with it no longer being narcotic.

Keith Strachan: It opens up some additional pharmacies that wouldn't usually carry.

Keith Strachan: Candidates and some physicians, who probably wouldn't usually.

Speaker Change: Prescribed candidate so what we're seeing is pharmacies are definitely busier with <unk>.

Prescriptions.

Speaker Change: And Theres definitely band.

Dave: Ah patient increase with that we're seeing more and more as Dave mentioned in his comments international B to B.

Speaker Change: Bob.

Keith Strachan: So that pipeline is filling with folks that want to do business with MediPharm, given that we have a vast portfolio of GMP licenses for both concentrate products and flower. So we're working our way through those to make sure that they're good, viable partners. Some of them that we've signed on in the last month will be launched later this quarter. And then what we'll probably see is a bigger volume from bigger, longer-term partners like Stata and Adrex start flowing in more and more in the back half of 2024.

Dave: Interests. So that pipeline is filling with folks that want to do business with <unk> given that we have a vast portfolio of GMP licenses for both.

Dave: Johnson trade products and flowers.

Dave: And so we're working our way through those to make sure that theyre good viable partners.

Dave: Some of them that we've signed on in the last months there'll be launched in later this quarter and then what we'd probably see as the bigger volume from bigger longer term partners like stack.

Dave: <unk>.

Dave: To start flowing in more and more in the back half of 2024 so.

Dave: I guess to summarize lots of interest definitely on the flower side that should flow into also oil products and being that we are the second largest oil manufacturer for Germany, we should get.

Keith Strachan: So I guess to summarize, lots of interest definitely on the flower side, and that should flow into also oil products. And being that we are the second largest oil manufacturer in Germany, we should also, as the market grows, maintain that market share.

Dave: So as the market grows we'll maintain that market share.

Dave: Okay.

Remy Smith: Great, that's helpful there. And then my second question, for rescheduling, have you looked further into the potential impacts of rescheduling Schedule 3 and the opportunities it could present? I know you touched on a little bit in the opening remarks, but how big of a revenue opportunity do you believe the direct medical channel can be for you guys?

Speaker Change: Alright, that's helpful. There and then my second question for Rescheduling have you look further into the potential.

Dave: Impacts.

Speaker Change: Reschedule in schedule III any opportunities that could present I know you've touched on a little bit.

Speaker Change: In the in the opening remarks, but how big of a revenue opportunity and you believe.

Speaker Change: The direct medical channel can be for you guys.

David A. Pidduck: Yeah, I think that there's a great opportunity with the rescheduling of cannabis in the U.S., and we really have a short-term strategy there and a long-term one. In the short term, it opens up more opportunities for research. So, as you can see on the back of all of the rescheduling, there are more and more calls for funding to do more research on cannabis, its effects, the toxicology of cannabis, and so on and so forth.

Speaker Change: Yes, I think that there's a great opportunity with the rescheduling of Canada, and the U S and we really have a short term strategy. There in a long term short term it opens up more opportunities for research. So as you see on the back of all of the rescheduling they are more and more calls for.

Speaker Change: Funding to do more research in cannabis.

Speaker Change: The effects of cannabis that toxicology of candidates and so on and so forth. There are not many providers in the world who can make it THC product that is GMP compliant that the FDA.

David A. Pidduck: There are not many providers in the world who can make a THC product that is GMP compliant and that the FDA will allow for, let's say, a new investigative drug trial like the one that we're doing with the University of Southern California. As far as numbers go, that opportunity for us with the University of Southern California, I believe last year was around a half a million dollars in revenue. This year, we'll be in or around the same place.

Speaker Change: We will allow for let's say a new investigative drug.

Speaker Change: Drug trial like the one that we're doing with the University of Southern California.

Speaker Change: As far as numbers go that opportunity for us with the University of Southern California, I believe last year was around a half a million dollars in revenue.

Speaker Change: And this year will be in or around the same.

David A. Pidduck: There are a lot of patients. It's multi-site, and that's great margin for us. It's small.

Speaker Change: There are a lot of patients multi site and.

Speaker Change: And Thats great margins for us that's small that's only one trial, though so with the rescheduling if you could imagine.

David A. Pidduck: That's only one trial, though. So, with the rescheduling, if you can imagine 10 trials, we have more than enough capacity and resources to support that now with our current footprint. And so, we can see that grow into a large opportunity of high-margin work with really little competition. Folks like the University of Southern California don't want to buy cannabis oil from a facility north of Toronto if they don't have to, but we are the only person that meets all of their requirements, and that will parlay into us now having the expertise and the experience to do more of those. So that's a short-term strategy.

Speaker Change: 10 trials.

Speaker Change: Have more than enough capacity.

Speaker Change: And resources to support that now with the current footprint and so we can see that grow into a large opportunity of high margin work and really little competition. So it looks like the university of Southern California, They don't want to buy cannabis oil from.

Speaker Change: Facility North of Toronto, if they don't have to do but we are the only person that met all of their requirements and that will parlay into now as having the expertise and the experience to do more of those thats a short term strategy long term what.

David A. Pidduck: Long-term, what we see is this opening up new conversations to add to new legislation. We think, especially when it comes to CBD, that that will fall under the guise of the U.S. FDA, and they will treat it like another nutraceutical product. In Canada, we call it a natural health product. In the U.S., it is commonly referred to in regulations as a dietary supplement.

Speaker Change: What we see is this open up new conversations.

Speaker Change: To add to new legislation, we think especially when it comes to CBD that that will fall under the guise of that.

Speaker Change: U S FDA and they will treat it like another nutraceutical product.

Speaker Change: In Canada, we call the natural health product in U S. Commonly referred to in the regulations as a dietary supplements and so what that would do is it will allow.

David A. Pidduck: And so, what that would do is it would allow everyone to fall into those regulations. We have the licenses today to make those products. So we have a natural health product GMP license from the government of Canada. We also have our drug establishment license from the government of Canada. We have our US FDA site license, so those channels are already open for us. We also have done extensive work on the characterization of those products.

Speaker Change: Everyone to fall into those regulations.

Speaker Change: We have the licenses today can make those products. So we have a natural health product GMP license from the government of Canada, we have our drug establish a license from the government of Canada, and we have our U S. FDA site license. So those channels are already open for us.

Speaker Change: We also have done extensive work in the characterization of those products.

David A. Pidduck: So things like validation and stability, we're months and years ahead of other people. So when that long-term opportunity comes, the tracks are already laid, and we can take advantage of that right away, whereas a lot of our peers in the space would be starting a bit flat-footed or from ground zero and, depending on their infrastructure, may not even be able to get there. So we have a short-term and a long-term strategy in the US, and we're excited to pursue both.

Speaker Change: So things like validation and stability.

Months and years ahead of other people. So in that long term opportunity comes the tracks already laid and we can take advantage of that right away, whereas a lot of our peers in the space would be starting a bit flat footed or from ground zero and that depending on the infrastructure may not even be able to get there. So we have a <unk>.

Speaker Change: Short term and our long term strategy in the U S and we're excited.

Speaker Change: To go after both of those.

Speaker Change: Great. That's helpful. There and then my last question just in Australia, So nice to see the rebound in the quarter and you spoke to.

Speaker Change: New Skus coming online how much how much run rate you see for growth in the market. There still just below kind of the quarterly levels of $2 2 million. So curious if you believe you can eclipse that and grow beyond that in the next few quarters.

Speaker Change: Yes, I think were Australia, there is a really good opportunity.

Speaker Change: The market there continues to grow I think.

Speaker Change: A lot of new entrants into the space, though as well, especially on the flower side, where we keep a little bit of a competitive edge Dave.

Speaker Change: Dave mentioned in his comments the strict rules around GMP or concentrated products, we've seen that in our base.

Speaker Change: The vape products that we're sending their G&P and they have full stability and validation and all that and we're seeing that grow month over month prescriber over prescriber on the flower side, we really do need to continue to refresh our portfolio. So with those two new 30% THC skus entering the market in this.

Speaker Change: Order, we will be able to gauge the opportunity that we have planned for growth.

Speaker Change: And that.

Speaker Change: Both in this year and into next year.

Speaker Change: That growth projection for us is probably anywhere from like.

Speaker Change: At 10% quarter over quarter.

Speaker Change: Obviously, when you get to area. Your results. So we are being conservative there that we don't build in too much cost or infrastructure to get ahead of ourselves, but I think that 10% growth as it would be great for us at that margin and great for our small team. We just to remind everyone. We are very asset light.

Speaker Change: In Australia.

Speaker Change: We do have a great managing director there and he had a small team of three that are out talking to physicians all around the country.

Speaker Change: But no infrastructure as far as quality.

Speaker Change: In logistics, we do all through a partner, which allows us to be super flexible and to keep our opex down.

Keith Strachan: Maybe the only thing I'd add to that Keith.

Keith Strachan: Is on the rate front, we're seeing good growth in <unk>, but there are still a lot of what we'll call them noncompliance tapes in the market and so there's going to be some growth.

Keith Strachan: In general in the market, but I think theres going to be a growth as as.

Keith Strachan: As companies.

Keith Strachan: Cant import further at GMP compliant products or the government.

Keith Strachan: <unk> in terms of people, who are breaking the rules and have product on the market. That's noncompliant that will work its way out of the system. There's still lots of that in the system now as that works its way out of this system. That's just good for suppliers like ours and Thats why were seeing lots when we continue to see.

Keith Strachan: More <unk> customers coming to us, saying can you help our suppliers our supply is running out and we can no longer supply, but we have now so I think theres lots of good.

Speaker Change: Momentum for us in the Australia market.

Speaker Change: Okay I appreciate the answers there it's all for me.

Randy: Thanks Randy.

Speaker Change: Again, if you would like to ask.

Speaker Change: Press Star one on your telephone keypad.

Speaker Change: And there are no further questions at this time I will now turn the call back over to David <unk> for some final closing remarks.

Speaker Change: Great. Thanks, operator.

David A. Pidduck: To everyone for joining us this morning, and we look forward to speaking again in our Q2 call everybody have a great day.

Speaker Change: Today's conference call. Thank you for your participation you may now disconnect.

Remy Smith: Great That's helpful here.

Remy Smith: And then my last question, just in Australia, nice to see the rebound in the quarter, and you spoke to some new SKUs coming in line. How much run rate do you see for growth in the market there? Still just below, kind of, the quarterly levels of 2.2 million. I'm curious if you believe you can eclipse that and grow based on that in the next few quarters.

Speaker Change: Please wait the conference will begin shortly.

Keith Strachan: Yeah, I think for Australia, there is a really good opportunity. The market there continues to grow. I think there will be a lot of new entrants into the space, though, as well, especially on the flower side, where we keep a little bit of a competitive edge. Dave mentioned in his comments the strict rules around GMP for concentrate products. We've seen that in our vapes. The vape products that we're sending there are GMP, and they have full stability and validation and all that.

Keith Strachan: And we're seeing that grow month over month, prescriber over prescriber. On the flower side, we really do need to continue to refresh our portfolio. With those two new 30% THC skews entering the market this quarter, we will be able to gauge the opportunity there. We have planned for growth in that, both this year and into next year. That growth projection for us is probably anywhere from 10% quarter over quarter and, obviously, when you get to year results.

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