Cannabis extraction firm MediPharm Labs Corp. (
The company only obtained a sales license from Health Canada on Nov. 12, 2018, so all the revenue came in the final 50 days of the year. It reported adjusted EBITDA of $2.1 million after becoming the first fully licensed producer in Canada to specialize solely in cannabis extraction.
Chief executive Patrick McCutcheon called 2018 “a breakout” year for MediPharm. “As leading extraction specialists, we demonstrated our ability to rapidly expand our footprint and achieve significant revenue and positive operating cash flow just weeks after receiving our sales license, and our strong operations have continued into 2019,” he said. “The strength of this performance validates our uniquely focused strategy and investments. We are proud that the MediPharm Labs team stands out among the top global players in the cannabis industry producing tangible results with significant future potential.”
The company’s share price has increased 18% this week after it announced the launch of a white label solutions platform designed to cash in on the impending legalization of edibles and other concentrates. It has purchased an extra 5,000 kg of cannabis in the past two weeks in addition to its usual procurement strategy in a bid to strategically position MediPharm to “significantly increase” sales of concentrates.
MediPharm is a B2B supplier of CBD oil and concentrates for the medicinal and recreational marijuana markets. It has the capacity to process 100,000 kg of dried cannabis flower per year, and by the second quarter of 2019 it should have expanded that to 250,000 kg. It is now also offering distribution services for non-cannabis companies through its new white label arm.
During 2018, it signed four big deals with James E. Wagner Cultivation Corporation, INDIVA Limited, Emerald Health Therapeutics Inc., and The Supreme Cannabis Company, Inc. These are multi-year sales agreements and several more deals are expected going forward.
CBD oil will soon be a $16 billion industry in the U.S. alone by 2025, according to Cowen & Co. consumer research, while the market in Europe is projected to be far bigger. MediPharm is well along the road to obtaining EU GMP certification and expects to have it in place by the second half of 2019, so it should be well positioned for that trend.
Licensed producers are keen to have a strong CBD offering when entering into supply discussions with retailers, and MediPharm has first mover advantage in the extraction business. Rival firms are springing up, but it will take a while for Health Canada to process their license applications and MediPharm can set about consolidating its position in the meantime.
It has already tied up five wholesale contracts for CBD oil sales, with Canopy Growth Corp.
MediPharm is building an extraction facility in Australia as it bids to become the early market leader in the Asia Pacific region. This facility should be up and running by the end of 2019, provided the necessary licenses are granted. MediPharm already has a supply deal in place with local distributor AusCann.
McCutcheon said the firm will continue to ramp up production in 2019, while expanding its range, targeting new sales agreements and maintaining a program of acquisitions. “We expect to accelerate our growth globally as the size of our addressable market increases and we strengthen our foothold domestically with the expected legalization of vapeables, edibles, beverages and topicals providing a strong growth trajectory in Canada,” he added.
The opinions provided in this article are those of the author and do not constitute investment advice. Readers should assume that the author and/or employees of Capital 10X hold positions in the company or companies mentioned in the article. For more information, please see our Content Disclaimer.