MediPharm Labs Provides Update on VIVO Integration and Board Appointee
April 13th, 2023
MediPharm Labs Corp. (TSX: LABS) (OTCQX: MEDIF) (FSE: MLZ) (“MediPharm Labs”, “MediPharm” or the “Company”) a pharmaceutical company specialized in precision-based cannabinoids, is pleased to provide an update on significant progress made on the integration of VIVO Cannabis Inc.’s (“VIVO”) operations following the completion of its plan of arrangement with VIVO, pursuant to which MediPharm acquired all of the issued and outstanding common shares of VIVO in an all-equity business combination transaction effective April 1, 2023 (the “Transaction”).
Initial Cost Savings
Following completion of the Transaction, MediPharm Labs has executed on initial steps to achieving positive EBITDA (5) synergies between $7M to $9M on an annualized basis.(1)(2)(3)(4)
Since signing of the definitive arrangement agreement with VIVO in December 2022, management has been working together to develop operational plans for the Company to meet the goal of being EBITDA(5) positive in the first half of 2024.(1)
In the first week post-closing of the Transaction, all employees were made aware of the combined Company’s objectives, and organizational restructuring initiatives were communicated.
The Company has now implemented its plans to reduce the combined MediPharm and VIVO non-direct labour workforce by approximately 30%, since the announcement of the transaction. It is expected that all headcount related savings will be fully implemented within four to six months.(1) This is in addition to previously announced restructuring efforts made separately by both companies in 2022. As a result of these efforts, total non-direct labour headcount between both companies will have been reduced by approximately 45% as compared to January 2022. (1)
Restructuring has been implemented at all levels including the C-Suite. Senior executive level positions have now been reduced by 50% as compared to January 2022. These senior level changes represent the largest portion of employee related cost savings and position a leaner senior management team to deliver on operational objectives.
These significant headcount reductions are paired with cost synergies related to combining and centralizing some company functions and reducing various public company costs previously incurred by both MediPharm and VIVO.
Michael Bumby Appointed to the Board of Directors
Dr. Michael Bumby has been appointed to the MediPharm Labs Board of Directors, effective April 1, 2023. Michael served as the Chief Financial Officer of VIVIO for over 5 years prior to the transaction. Michael has over 20 years of experience in pharmaceuticals with more than 10 years spent internationally with Eli Lilly. He has held previous CFO roles with multiple, NASDAQ and TSX listed public Canadian biotech companies.
The Board and Management welcomes Dr. Michael Bumby to the Board.
David Pidduck, CEO, MediPharm Labs commented, “We are excited about the VIVO integration, and were committed to giving our employees and customers organizational clarity as early as possible. I want to recognize the many talented leaders and employees who have helped build both organizations over the years. The newly combined team is now focused on improving profitability by both driving revenue and reducing costs.”(1)
Investor Deck Update
Following the Transaction, MediPharm Labs has published an investor deck which can viewed at www.medipharmlabs.com/investors
This is forward-looking information and based on a number of assumptions. See “Cautionary Note Regarding Forward-Looking Information” and “Assumptions”.
Based on both costs and revenue opportunities identified by MediPharm and VIVO management. Revenue opportunity assumed that both existing products may be sold into the existing sales channels of both VIVO and MediPharm. Costs savings estimated depends on the eliminating duplicated public company expenses and redundant corporate infrastructure.
This target, and the related assumptions, involve known and unknown risks and uncertainties that may cause actual results to differ materially. While MediPharm and VIVO believe there is a reasonable basis for this target, such target may not be met. Actual results may vary and differ materially from the targets. See “Assumptions”.
Certain financial information included in this press release is neither audited nor reviewed. Where possible, the information has been constructed by management from available audited or audit reviewed financial statements. Where no audited or audit reviewed information has been available, additional management accounting information has been utilized to construct financial information. Readers are cautioned not to place undue reliance on such information.
This is a non-IFRS reporting measure. For a reconciliation of this to the nearest IFRS measure, see “Non- IFRS Measures” below.
About MediPharm Labs
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 Establish License from Health Canada, becoming the only company in North America to hold a domestic Good Manufacturing License 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 developing the financial guidance set forth above, MediPharm made the following assumptions and relied on the following factors and considerations:
The targets are based on MediPharm and VIVO’s historical results including annualized revenue from its interim financial results for the period ended September 30, 2022, as adjusted for subsequent events including completion of the Transaction.
Revenue sustainability and growth depend on a variety of factors, including among other things, location, competition, legal and regulatory requirements. Prices are projected forward at recently realized wholesale and direct to patient prices.
Cost of goods sold, before taking into account the impact of value changes in biological assets (which are non-cash in nature), and, accordingly, are excluded from calculations of EBITDA, have been projected based on estimated costs of production and capacity available from a similar supply chain.
The immediate reduction of public company professional and service fees, such as but not limited to, errors and omissions insurance, audit services, listing expenses and external legal fees.
Implied redundancy of employee roles in the combined Company, mainly in corporate functions. Impacted employee severance fees are calculated on current employment agreements and Employment Standards Act (Ontario).
No changes to existing medical cannabis legislation and regulations in Canada, Germany, Australia and Brazil.
All VIVO and MediPharm regulatory licenses remain in good standing with domestic and international regulators, particular Good Manufacturing Practices (GMP).
This news release contains references to certain non-IFRS financial measures, including “EBITDA”, which means earnings before interest, taxes, depreciation, and amortization and is used as an indicator of the Company’s overall profitability. These measures do not have any standardized meaning according to International Financial Reporting Standards (“IFRS”) and therefore may not be comparable to similar measures presented by other companies. There are no comparable IFRS financial measures presented in MediPharm or VIVO’s unaudited condensed interim consolidated financial statements. The most directly comparable measure to EBITDA calculated in accordance with IFRS is operating income (loss). MediPharm believes that the non-IFRS measure presented herein provides 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 most recent MD&A of each of MediPharm and VIVO available on www.sedar.com.
Cautionary Note Regarding Forward-Looking Information:
This news release contains “forward-looking information” and “forward-looking statements” (collectively, “forward-looking statements”) within the meaning of the applicable Canadian securities legislation. All statements, other than statements of historical fact, are forward-looking statements and are based on expectations, estimates and projections as at the date of this news release. Any statement that involves discussions with respect to predictions, expectations, beliefs, plans, projections, objectives, assumptions, future events or performance (often but not always using phrases such as “expects”, or “does not expect”, “is expected”, “anticipates” or “does not anticipate”, “plans”, “budget”, “scheduled”, “forecasts”, “estimates”, “believes” or “intends” or variations of such words and phrases or stating that certain actions, events or results “may” or “could”, “would”, “might” or “will” be taken to occur or be achieved) are not statements of historical fact and may be forward-looking statements. In this news release, forward-looking statements relate to, among other things, statements regarding: the combined Company following completion of the Transaction; the anticipated timing and results of integration efforts of the Company following completion of the Transaction; the future financial and operational performance of the combined Company; the combined Company’s pro-forma and overall financial performance; potential future revenue and cost synergies resulting from the Transaction; and statements about the combined Company’s profitability and ability to grow the business going forward following the Transaction. Forward-looking statements are necessarily based upon a number of estimates and assumptions that, while considered reasonable, are subject to known and unknown risks, uncertainties, and other factors which may cause the actual results and future events to differ materially from those expressed or implied by such forward-looking statements. Such factors include, but are not limited to: general business, economic, competitive, political and social uncertainties; and other factors discussed in MediPharm public filings, including the joint management information circular of MediPharm and VIVO dated February 6, 2023, which are available on SEDAR at www.sedar.com. There can be no assurance that such statements will prove to be accurate, as actual results and future events could differ materially from those anticipated in such statements. Accordingly, readers should not place undue reliance on the forward-looking statements and information contained in this news release. Except as required by law, MediPharm assumes no obligation to update the forward-looking statements of beliefs, opinions, projections, or other factors, should they change.
For further information, please contact:
MediPharm Labs Investor Relations
Telephone: +1 416.913.7425 ext. 1525
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