MediPharm Labs Corp. (TSX-V: LABS) (OTCQX: MEDIF) (FSE: MLZ) (“MediPharm Labs” or the “Company”) a global leader in specialized, research-driven cannabis extraction, distillation, purification and cannabinoid isolation, is pleased to provide an update to investors on the significant strategic progress it is making, including with its successful ramp up of production capacity to supply its growing customer base.
- Growing Private Label Volume & Forging White Label Platform: To date, MediPharm Labs has signed four large contracts including with Canopy Growth, Cronos Group and AusCann for the sale of private-label cannabis concentrate. It has also launched a White Label platform to serve consumer packaged goods (CPG) companies and licensed producers (LPs) in Canada and announced a supply contract for a minimum of approximately two million vape pens with Ace Valley, subject to purchase orders from provincial distributors.
- Increasing Production: By end of Q2 2019, the Company increased production to an average of 75 million milligrams of active cannabinoid component concentrate on a weekly basis that will support significant, large-scale white label contracts.
- Building Scale: MediPharm Labs has increased annual dried cannabis processing capacity to 300,000 KG and with a new customized, large-scale extraction line set to open in 2019, annual capacity is expected to increase to over 500,000 KG.
- Broadening Global and Domestic Distribution: MediPharm Labs has commenced global distribution with its first exports to Australia and has become the first and only third-party concentrate manufacturer to start shipping private label products to three Canadian Provincial distributors with a rollout to all provinces expected by the end of 2019.
- Expanding Footprint: The Company plans to open, subject to Health Canada approval, 25,000 square feet of additional licensed space in H2 2019 for significant automation to support filling, packaging and new product manufacturing, cannabinoid isolation activities and specialized R&D.
- Increasing Dried Cannabis Supply: MediPharm Labs purchased 9,000 KG of dried cannabis in June 2019 and expects to process and sell it in Q3 2019.
- Governance and Quality: The Company has acquired dried cannabis from more than 23 Health Canada-compliant Licensed Producers that meet MediPharm Labs’ enhanced quality control agreements and third-party testing.
- New Product Development: The Company will ramp up industrial scale Soft Gel capsule capabilities in Q3 2019 and is building the foundation to be one of the largest vapourizer fill manufacturers in Canada by this fall.
- Australia Gaining Momentum: MediPharm Labs Australia received its manufacturing licence in May from the Australian Office of Drug Control. Construction of the facility is well underway and nearing completion with equipment ordered for installation in H2 2019. MediPharm Labs Australia is expected to have 75,000 KG of annual capacity.
- Financing: The Company completed a $75 million bought deal financing to fund capital expenditures at its Canadian and Australian facilities, for domestic and international expansions, research and development and general corporate purposes. Signed a $20 million debt facility term sheet with a Schedule 1 Bank.
“MediPharm Labs is executing exceptionally well against all of our strategic operating priorities for 2019 and this will be reflected in our financial results for Q2 and beyond, “said Patrick McCutcheon, Chief Executive Officer, MediPharm Labs.” I am particularly pleased with the pace of new sales, the advancements we’re making in scaling up global production and the high-quality collaborations underway with industry Health Canada compliant suppliers, customers and scientific partners. I am confident that our recent momentum will continue as we strive to produce the world’s best cannabis concentrates and drive future cannabis product innovation.”
Growing Private Label Production and White Label Platform
MediPharm Labs has increased production of private label cannabis concentrate products and distillate supply – including CBD or THC dominant as well as balanced formulations – to meet the growing demand for specialty concentrate based consumer end products ahead of legalization of vapeables, edibles and topicals in the fall of 2019. Production and quality operations teams ramped up weekly production output to approximately 75 million milligrams of active cannabinoid component concentrate at the end of Q2 2019.
To date, MediPharm Labs has signed four significant contracts for the sale of private label cannabis concentrate including to Canopy Growth, Cronos Group and AusCann. The Company also launched its White Label platform to service direct-to-consumer brands, CPG companies and large LPs in Canada. In June 2019, MediPharm announced its first white label deal to produce a minimum of approximately two million vape pens with Ace Valley, subject to purchase orders from provincial distributors.
Increasing Production Volumes
The number of dry cannabis suppliers and concentrate purchasers in Canada continues to increase. In turn, this has resulted in higher demand that supports MediPharm Labs’ differentiated, private label business model.
The Company announced it successfully acquired 9,000 KG of dried cannabis in the last three weeks of June 2019 expected to be processed and sold in Q3 2019, and 5,000 KG in the last two weeks of March 2019 that were processed and sold in Q2 2019.
Enhanced Governance and Quality
To date, the Company has purchased dried cannabis from over 23 suppliers across the country. MediPharm Labs has conducted in-depth qualifications of all of its dry cannabis and product suppliers.
Potential suppliers to MediPharm Labs are subjected to rigorous scrutiny before entering into agreements which require an enhanced Quality Agreement beyond Health Canada standards. This enhanced supplier qualification aligns with our pharmaceutical-like standards for production of cannabis oil and derivative products. All suppliers and customers remain in good standing with Health Canada Licensing and Inspection division.
Broadening Domestic and Global Distribution
During the quarter, MediPharm Labs became the only third-party concentrate manufacturer to begin shipping white label products, including bottled oil, to Provincial cannabis distributors. MediPharm Labs’ white label products can be found in three provinces including Ontario, British Columbia and Alberta. The Company expects to rollout distribution of Health Canada approved products to all remaining provinces during H2 2019.
MediPharm Labs successfully completed its first international export of commercial volume cannabis concentrate to AusCann in Australia in June 2019. The Company continues to focus on accessing and distributing its private label cannabis concentrate to global markets, including across Europe, and is working on various commercial terms.
Expanding Footprint in Canada
At MediPharm Labs’ facility in Barrie, Ontario, the Company is adding over 25,000 square feet of purpose-built production space for filling and packing automation, new product manufacturing, cannabinoid isolation activities and specialized R&D projects. Taking a phased approach, operations in this new space are expected to come as each phase becomes approved by Health Canada during the second half of 2019.
Building Scale and Increasing Capacity
MediPharm Labs has successfully completed several equipment automation and innovation projects. The success of these optimization projects has resulted in an increased in capacity of dry cannabis processing to 300,000 KG annually.
As a global leader in extraction with a focus on providing high quality cannabinoid concentrates, MediPharm Labs recently completed a 14-month project for an additional, fully customized large-scale extraction line. The extractor has completed its factory testing in Europe and is being shipped to the Company’s Barrie, Ontario facility. Upon completion of installation, operator training, EU GMP qualification and regulatory prestart activities, operational capacity of specialized and automated dry cannabis processing will exceed 500,000 KG annually.
New Product Development
MediPharm Labs is continuing to evolve its product mix. The bulk of its production and revenue to date has been in high quality winterized resin. This critical input ingredient will become the key building block for future high-growth and high-margin products:
Soft Gel Caps: MediPharm Labs has focused on building scale across operations and product lines including bottled oil and gel caps. An industrial scale soft gel capsule project is underway. Equipment has been deployed, equipment training has started, and formulation work is being conducted.
Vapourizers: The Company is building the foundation to be one of the largest vaporizer cartridge manufacturers in Canada. With new regulations finalized and set to come into effect on October 17, 2019 MediPharm Labs has finalized various formulations and started vapourizer pen cartridge filling research and development trials to ensure readiness to serve current and future white-label partners.