Mr. David Pidduck reports

MEDIPHARM LABS REPORTS FOURTH QUARTER AND FULL YEAR RESULTS

Medipharm Labs Corp. has released its financial results for the full year and three months ended Dec. 31, 2023.

Select highlights:

• 2023 full-year revenue increased approximately 50 per cent to $33-million versus prior year of $22-million.
• 2023 full-year adjusted EBITDA (earnings before interest, taxes, depreciation and amortization) improved 50 per cent to negative $10-million in 2023 from negative $21-million in 2022.
• Fourth quarter 2023 gross profit was $2.2-million, or 24 per cent. Gross profit showed significant improvement over Q4 2022 of $200,000, or 4 per cent.
• Q4 2023 adjusted EBITDA of negative $1.6-million improved 55 per cent from negative $3.6-million in Q4 2022, and improved over 30 per cent from negative $2.4-million in Q3 2023. Adjusted EBITDA continues to improve, driven by margin expansion initiatives and cost reductions.
• Strong balance sheet, relative to many peer companies, with approximately $18-million of cash and less than $3-million of debt as of Dec. 31, 2023.

Continued growth in international medical cannabis:

• In Q4 2023, Medipharm completed an in-person inspection from the Brazilian Health Regulatory Agency (ANVISA) -- the first cannabis company in North America to complete an in-person inspection for good manufacturing practice (GMP) cannabis production for Brazil.
• Brazil, with a population of 215 million, has seen tremendous growth in medical cannabis patients with a 480-per-cent increase in prescriptions in 2022. Medipharm has two medical cannabis products with ANVISA authorizations and will increase deliveries to a new pharma partner in 2024.
• In Q4 2023, Medipharm completed the development and initial deliveries of THC (tetrahydrocannabinol) isolate, commonly known as dronabinol, for the European Union market. Subsequent to year-end, Medipharm has made deliveries of this product to multiple customers, and it anticipates it having a materially positive impact to sales and gross profit.
• In 2023, Medipharm expanded its top Australian medical cannabis flower brand, Beacon Medical, to include high-quality GMP oils and vapes. Australia is the largest medical cannabis market outside of North America, which The Pennington Institute (Cannabis in Australia 2023 report) estimates generated over $400-million (Australian) in 2023.

Progress toward profitability:

• Medipharm achieved a 2023 gross margin of 18 per cent versus negative 9 per cent in 2022. Positively moving to 24 per cent in Q4 2023. This improvement is a trend the company believes will continue. With the success in improving product mix and cost of goods sold, Medipharm now has the foundation for a profitable future.
• Total opex (operating expenditures), which includes general administrative, marketing and selling, and research and development expenses, was reduced by $2-million, or 10 per cent, on a year-over-year basis, while growing sales by 50 per cent in the same time period. Additional reductions implemented in Q4 2023 will further reduce opex in 2024. This execution of doing more with less has resulted in a revised cost base, positioning the company for profitability.
• Medipharm plans to further improve on profitability in 2024, including optimizing facility utilization with additional contract manufacturing, growing sales of healthy margin products, increasing international sales with local pharmaceutical partners, and refreshing the Canadian adult use and wellness portfolio to grow sales in the company's largest addressable market.

Management commentary

David Pidduck, chief executive officer, Medipharm Labs, commented: "Medipharm now has the margins, opex and adjusted EBITDA results all trending in the right direction. We also have a robust revenue pipeline with multiple partners in multiple markets. The transformation to a profitable growing company continues. Over the years, we have invested in our infrastructure as a high-quality and high-capacity pharmaceutical-grade manufacturer, allowing us to grow sales with new opportunities and markets, without additional investment into capital or resources. We are proud of the work completed in 2023 and excited about the future of Medipharm Labs."

Greg Hunter, chief financial officer, Medipharm Labs, added: "Two thousand twenty-three was a transformation year for Medipharm, with the acquisition of Vivo, revenue increased by approximately 50 per cent year-over-year and expanded our reach into Australia and the Canadian medical business. Gross margins expanded significantly to 24 per cent in Q4 and opex was reduced to produce the best adjusted EBITDA in four years. In Q4, we continued to make progress by improving gross margins, reducing expenses and reducing cash burn as we drive towards profitability. Adjusted EBITDA of negative $1.6-million improved sequentially and year-over-year, and is our best result in over four years. In addition, we ended the year with a strong balance sheet, with $18-million of cash and less than $3-million of debt. Medipharm is in a strong financial position to capitalize on our strong suite of licences, global customer contracts and assets as we move in to 2024."

Q4 2023 financial results conference call

Medipharm's executive management team will also host a conference call and audio webcast on Wednesday, March 27, 2024, at 8:30 a.m. Eastern Time to discuss the company's financial results.

Conference call

Toll-free number:  1-888-330-2379

International number:  1-240-789-2710

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 (API) and advanced derivative products utilizing a good-manufacturing-practices-certified facility with ISO 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.

In 2023, Medipharm acquired Vivo Cannabis Inc., which expanded Medipharm's reach to medical patients in Canada via Canna Farms medical e-commerce platform, and in Australia and Germany through Beacon Medical Pty. and Beacon Medical GmbH. This acquisition also included Harvest Medical Clinics in Canada, which provides medical cannabis patients with physician consultations for medical cannabis education and prescriptions.

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