Mr. David Pidduck reports

MEDIPHARM LABS REPORTS FIRST QUARTER RESULTS WITH GROWTH IN SALES, MARGIN AND EBITDA

Medipharm Labs Corp. has released its financial results for the three months ended March 31, 2023.

First quarter 2023 -- select highlights

Progress toward profitability:

• Achieved strongest EBITDA (earnings before interest, taxes, depreciation and amortization) in two years as compared with prior quarters, reducing losses to $2.1-million with continued focus on growing gross margin positive revenue segments, streamlining operations and reducing operating expenses. Adjusted EBITDA of negative $3.1-million with the inclusion of a one-time reversal of bad debt collected.
• Subsequent to closing of the company's acquisition of VIVO Cannabis Inc. on April 1, 2023, the company has implemented its plans to reduce the combined Medipharm and VIVO non-direct labour work force by approximately 30 per cent, since the announcement of the transaction. This is in addition to previously announced significant restructuring efforts made separately by both companies in 2022. This reduction is expected to save over $4-million on an annualized basis as Medipharm Labs progresses toward achieving positive EBITDA synergies between $7-million and $9-million on an annualized basis.
• Q1 2023 saw growth in revenue of 20 per cent on a year-over-year basis and slightly increased quarter-over-quarter, despite the seasonality of the Canadian adult-use market. Operating expenses reduced by 47 per cent as compared with Q1 2022.
• Gross profit was positive for the second consecutive quarter.

Continued progress solidifying leadership in cannabis-based pharmaceutical industry:

• Began in-depth correspondence with the United States Food and Drug Administration (FDA) in February, 2023, regarding recent on-site inspection related to the drug master file being submitted as part of an abbreviated new drug application (ANDA) submission by an international pharmaceutical partner.
• Medipharm Labs is the first company in Canada to go through an in-depth active pharmaceutical ingredient (API) filing review with the FDA for a natural cannabinoid molecule, according to the FDA inspection and foreign manufacturing site databases. The company is also the first THC (tetrahydrocannabinol)-touching facility in North America to have an on-site FDA inspection, according to the FDA inspection and foreign manufacturing site databases.
• In March, 2023, one of Medipharm's U.S.-based academic research partners received FDA approval of an investigational new drug (IND), which is expected to allow for participant dosing to begin in the coming months.

Transformational M&A (mergers and acquisitions):

• In December, 2022, Medipharm entered into a definitive arrangement agreement with VIVO, pursuant to which Medipharm agreed to complete the transaction. VIVO was previously listed on the Toronto Stock Exchange, and holds production, sales and research licences from Health Canada, and operates an indoor cultivation site, a Canadian onl-ine medical cannabis sales platform, international branded sales in Australia and Germany, and a network of medical cannabis patient clinics.
• On April 1, 2023, the transaction with VIVO was successfully closed. The transaction resulted in the company acquiring a European Union (EU) GMP (good manufacturing practices) cultivation site, a Canadian on-line medical cannabis sales platform, an international branded sales platform in Australia and Germany, and a network of medical cannabis patient clinics.
• The pro forma combined company resulting from the transaction is positioned to provide fulsome Canadian market coverage with cultivation and manufacturing expertise, and a full suite of dried flower and derivative products with both established medical and adult-use wellness distribution channels.
• Management believes it is on track for achieving positive EBITDA synergies between $7-million and $9-million on an annualized basis.

Solid balance sheet:

• Medipharm ended Q1 2023 with $20.2-million of cash, materially debt free and having outright ownership of its assets, including its GMP facility in Ontario. Subsequent to quarter close, the transaction with VIVO resulted in the outright ownership of two manufacturing facilities, several clinics, several parcels of land and $2.5-million in debt, which matures in 2024.

Management commentary

David Pidduck, chief executive officer, Medipharm Labs, commented: "Revenue, gross profit and EBITDA all improved versus prior year, versus prior quarter and versus trailing 12 months. All key metrics, both financial and non-financial, are going in the right direction and according to plan. We are exactly where we planned to be for readiness to implement the VIVO integration."

Greg Hunter, chief financial officer, Medipharm Labs, added: "In Q1, we continued to make progress by growing our revenue base, improving gross margin, reducing expenses and reducing cash burn as we drive towards profitability. Sales and adjusted EBITDA improved year-over-year and sequentially, and gross profit was positive for the second consecutive quarter. In addition, we implemented a restructuring plan postclosing of the transaction with VIVO, which we expect will save over $4-million on an annualized basis as we progress towards our synergy target. I am pleased with the progress we made but we still have more to do as we move towards positive EBITDA and cash flow."

Q1 2023 financial results conference call

Medipharm's executive management team will also host a conference call and audio webcast on Monday, May 15, 2023, at 8:30 a.m. ET to discuss the company's financial results.

Conference call

Toll-free number:  1-888-330-2454

International number:  1-240-789-2714

Conference ID:  4921762

Participants are asked to dial in approximately 15 minutes before the start of the call.

Audio webcast

An audio webcast will be available on-line.

For those who are unable to participate on the live conference call or webcast, a replay will be available at the company's website approximately one day after completion of the call.

About Medipharm Labs Corp.

Founded in 2015, Medipharm Labs specializes in the development and manufacture of purified, pharmaceutical-quality cannabis concentrates, active pharmaceutical ingredients (APIs) and advanced derivative products utilizing a good-manufacturing-practice-certified facility with ISO (International Organization for Standardization) standard-built clean rooms. Medipharm Labs has invested in an expert, research-driven team, state-of-the-art technology, downstream purification methodologies and purpose-built facilities with five primary extraction lines for delivery of pure, trusted and precision-dosed cannabis products for its customers. Through its wholesale and white-label platforms, Medipharm Labs formulates, develops (including through sensory testing), processes, packages and distributes cannabis extracts and advanced cannabinoid-based products to domestic and international markets.

In 2021, Medipharm Labs received a pharmaceutical drug establishment licence from Health Canada, becoming the only company in North America to hold a domestic good manufacturing licence for the extraction of natural cannabinoids. The company carries out its operations in compliance with all applicable laws in the countries in which it operates.

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