CanniMed Therapeutics Inc. (TSX: CMED) (“CanniMed” or
the “Company”) today released its financial results for the
three and six months ended April 30, 2017.
CanniMed’s strong sales momentum continued in the second
quarter. Demand for oils has accounted for progressively more of
the Company’s production, and CanniMed’s recently announced oils
processing facility is designed to accommodate foreseen growth of
this key product group. Recent export sales for pharmacy
distribution, together with the Company’s arrangements with
PharmaChoice and discussions with other Canadian pharmacy chains
provide clear indications of future market channels for medical
cannabis, and CanniMed is focussed on this expected evolution.
Second Quarter 2017 Highlights
Financial
- Sales of $3.7 million in the quarter
were 66 per cent higher than in the comparable period of the prior
year (year-to-date sales of $7.1 million were 78 per cent higher
than the first half of the prior year).
- Concentrated cannabis oils sales
revenues, which commenced in the first quarter of 2016, accounted
for nearly 50 per cent of total revenues for the current
quarter.
- Higher sales revenues were driven by
rising demand, as dried equivalent medical cannabis sales in the
second quarter increased 72 per cent from the comparable period in
2016 to 373 kg., at an average selling price of $9.80 per gram
(year-to-date sales of 714 kg. were 77 per cent higher than in the
first half of 2016, at an average selling price of $9.54 per
gram).
- The number of active patients increased
to more than 14,000(1).
- Adjusted EBITDA from continuing
operations(2) was $(0.3) million for the quarter and $0.2 million
year-to-date.
- Net loss of $1.8 million for the
quarter ($5.1 million net loss for the first half of the year
included $2.4 million loss on derivative instruments, relating
primarily to conversion rights on debentures that were either
exercised or expired during the first quarter).
(1) Active patients are registered patients with a current and
valid Health Canada registration on file.
(2) Adjusted EBITDA is a non-IFRS measure with no standard
definition under IFRS. See the "Non-IFRS financial performance
measures and reconciliations" section of this MD&A.
Corporate
- Commenced work to design and build a
new cannabinoid oils processing facility to increase current oils
capacity.
- Signed a letter of intent with
PharmaChoice, a member-owned cooperative that represents more than
700 independent pharmacy owners across Canada, to collaborate on
pharmacist education and the distribution, sale and marketing of
medical cannabis products.
- Independent laboratory testing returned
a clean Certificate of Analysis with “not detected” levels for each
of the 56 pesticides, fungicides and plant growth regulators
(PGRs). The laboratory test results were consistent with the
Company’s production processes, which do not use pesticides,
fungicides or PGRs.
- Signed a definitive agreement with CTT
Pharmaceutical Holdings Inc. to license CTT’s Orally Dissolvable
Thin Film (“ODF”) Wafer technology patents for use in developing a
new oral delivery system.
Recent Developments
- Subsequent to the second quarter, the
Company completed the first shipment of commercial cannabis oil to
enter Australia through the sale and delivery of 3,600 ml of
CanniMed® Oils. Upon completion of the first shipment, the Company
received three additional import permits, issued by the Australian
Department of Health for an additional 360,000 ml of CanniMed® Oil
products to be shipped by the end of September 2017, subject to
receipt of export permits from Health Canada, which are in
process.
- Also, subsequent to the second quarter,
the Company sold 12,960 ml of its CanniMed® Oils to the Cayman
Islands where dispensing of the CanniMed® Oils to patients with a
valid medical document has begun.
“We are continuing to build our capabilities in all areas, to
meet growing national and international demand,” said Brent Zettl,
President and CEO of CanniMed. “The completion of our IPO, the $22
million reduction of long-term liabilities during the first half of
the year and our recent expansion into the Australian and Cayman
markets (with potential further expansion into other countries)
demonstrates our leadership position in the cultivation and sale of
pharmaceutical-quality cannabis products. The Company’s capital
expansion plans will continue to build momentum for increasing
herbal and oil production to meet the demands of our markets.”
Financial Review
Revenue for the three months ended April 30, 2017 increased to
$3.7 million from $2.2 million for the comparable period in the
previous fiscal year. This increase was attributable to a 72 per
cent increase in dried marijuana equivalent sales to 373 kg. The
increase in sales quantities was partly offset by a price cap
implemented by Veterans’ Affairs Canada. Year to date, revenue
increased to $7.1 million from $4.0 million in the first half of
2016.
Select
Financial Data
Three Months EndedApril
30
Six Months EndedApril 30
2017 2016
2017 2016 Revenue
$3,688 $2,220
$7,099 $3,985 Cost of sales
$1,966 $173
$2,958 $519 (Gain) loss on derivative
instruments
(20 ) (127 )
2,424 (104 )
Loss from continuing operations before
income tax
(1,849 ) (149 )
(5,279 ) (1,115 )
Income from discontinued operations, net
of taxes
-
(27 )
-
57
Net loss per share from continuing
operations
(0.08 ) (0.02 )
(0.26 ) (0.08 )
(basic and diluted)
Adjusted EBITDA from continuing
operations(1)
(251 ) (608 )
241 (953 )
(1) Adjusted EBITDA is a non-IFRS measure with no standard
definition under IFRS. See the "Non-IFRS financial performance
measures and reconciliations" section of this MD&A.
Corporate Activities During the
Quarter
Letter of Intent with PharmaChoice
During the quarter, the Company signed a letter of intent with
PharmaChoice, a member-owned cooperative that represents more than
700 independent pharmacy owners across Canada, to collaborate on
pharmacist education and the distribution, sale and marketing of
medical cannabis products. The parties intend that CanniMed will be
responsible for producing and delivering accredited pharmacy
education programs to PharmaChoice pharmacists and pharmacy
technicians across Canada.
In addition, CanniMed and PharmaChoice intend to enter a
definitive agreement for distribution of medical cannabis through
PharmaChoice pharmacists in Canada upon completion of the first
provincial legislation change that allows such distribution.
Agreement with CTT Pharmaceutical Holdings Inc. to License
CTT’s Orally Dissolvable Thin Film Wafer
The Company signed a definitive agreement with CTT
Pharmaceutical Holdings Inc. during the quarter, to license CTT’s
Orally Dissolvable Thin Film (“ODF”) Wafer technology. This
industry-first collaboration will enable CanniMed to exclusively
develop and commercialize this novel, smoke-free, drug delivery
system in Canada.
The agreement includes the licensing of six patents related to
cannabinoid and opioid delivery for pain management. In addition to
specified initial payments, the Company will pay a royalty of 5 per
cent of gross sales of products using the licensed delivery
technology.
Independent Laboratory Analysis of CanniMed Products for
Pesticides, Fungicides and Plant Growth Regulators
In response to market concerns about the use of pesticides in
medical cannabis products by some companies, CanniMed commissioned
an independent laboratory analysis of the Company’s herbal cannabis
products. Four lots of CanniMed’s proprietary strains (CanniMed®
22.1, CanniMed® 12.0, CanniMed® 9.9 and CanniMed® 1.13) were
analyzed. The laboratory’s testing of each analyzed lot for 56
known pesticides, fungicides and plant growth regulators (“PGRs”)
returned a clean Certificate of Analysis with “not detected” levels
for each of the 56 pesticides, fungicides and PGRs. The laboratory
test results were consistent with the Company’s production
processes, which do not use pesticides, fungicides or PGRs.
Capital Projects
Cannabis Oils Production Facility to Increase Existing
Capacity
The Company has commenced planning and engineering for a
GMP-compliant ethanol extraction facility with the capacity to
supply the equivalent of 12 million 60 ml bottles of CanniMed® Oil
per year. The initial cost estimate for the facility is $10.5
million over a 20 month schedule to commissioning. Scheduling and
costs will be further refined during the detailed design phase of
the project.
Cannabis Growth Facility
During the fourth quarter of 2016, the Company began plant
growth and production within its new 62,000 square foot POD plant
growth and production facility. In order to meet forecasted market
growth and demand, CanniMed has commenced planning for POD 2.
The Company’s expansion capital plans for POD 2 include the
engineering, design and construction of an approximately 62,000 sq.
ft. production and processing facility. This proposed single-story,
concrete structure is expected to be located within the 100-acre
site of the Company’s existing Canadian production, processing and
administrative facilities. Preliminary design and engineering of
POD 2 has commenced and construction is expected to take
approximately 18 to 24 months. When completed, the facility is
expected to consist of growth chambers and related processing
capacity designed to add approximately 5,000 kg of annual
production capacity to the Company’s existing production and
processing facilities (giving the Company a combined total of
12,000 kg of annual production capacity).
Non-IFRS Financial Measures and
Reconciliations
The Company utilizes non-IFRS financial measures as supplemental
indicators of operating performance and financial position. These
non-IFRS financial measures are used internally by the Company for
comparing actual results from one period to another. The Company
believes that, in addition to conventional measures prepared in
accordance with IFRS, certain investors use this information to
evaluate the Company’s performance and ability to generate cash
flow. Accordingly, such information is intended to provide
additional information and should not be considered in isolation or
as a substitute for measures of performance prepared in accordance
with IFRS.
Earnings before Interest, Taxes, Depreciation and
Amortization (“EBITDA”) and Adjusted EBITDA
The Company uses EBITDA and Adjusted EBITDA as a supplemental
financial measure of its operational performance. Management
believes EBITDA to be an important measure of its capacity to
generate cash flow from operations as it excludes the effects of
items which primarily reflect the impact of long-term investment
and decisions and finance strategies, rather than the performance
of the Company’s day-to-day operations. The Company measures EBITDA
as net earnings (loss) from continuing operations plus income taxes
expense (recovery), interest expense and depreciation and
amortization. Adjusted EBITDA removes non-cash expenses such as
loss on derivative instruments, share-based compensation and
non-cash expenses within cost of sales.
The Company believes that these measurements are useful in
measuring the Company’s ability to service debt, meet other payment
obligations and in comparing the Company’s financial performance
from period to period. Furthermore, Management believes that
certain investors and other stakeholders use this information to
evaluate the Company’s performance. The following table provides a
reconciliation of the Company’s calculation of EBITDA and Adjusted
EBITDA:
Calculation of EBITDA, and Adjusted EBITDA, from
Continuing Operations Three months ended April 30
2017
2016
Net loss from continuing operations
$ (1,849 )
$ (280 ) Deferred income tax expense
- 131 Finance costs
345 299 Depreciation and amortization
251 108
EBITDA from continuing operations $
(1,253 ) $
258
Calculation of EBITDA, and Adjusted
EBITDA, from Continuing Operations Three months ended April
30
2017
2016
Share-based compensation
232 104 (Gain) on
derivative instruments
(20 ) (127 ) Unrealized (gain)
from changes in fair value of biological assets
(1,038
) (1,644 ) Non-cash amounts within cost of sales Realized
gain from changes in fair value of biological assets
1,377
696 Depreciation included in production costs
451 105
Adjusted EBITDA from continuing operations $
(251 ) $
(608 )
Calculation of EBITDA, and Adjusted
EBITDA, from Continuing Operations Six months ended April
30 2017
2016
Net loss from continuing operations
$
(5,136 )
$ (1,237 ) Deferred income tax (recovery) expense
(143
) 122 Finance costs
965 595 Depreciation and
amortization
486
388
EBITDA from continuing
operations $ (3,828 )
$ (132 ) Share-based compensation
630 167 Loss (gain) on derivative instruments
2,424
(104 )
Unrealized (gain) from changes in fair
value of biological assets
(2,400 ) (2,715 ) Non-cash amounts within cost of
sales Realized gain from changes in fair value of biological assets
2,550 1,616 Depreciation
865
215
Adjusted EBITDA from continuing operations $
241 $ (953
)
About CanniMed Therapeutics Inc.
CanniMed is a Canadian-based, international plant
biopharmaceutical company and a leader in the Canadian medical
cannabis industry, with 15 years of pharmaceutical cannabis
cultivation experience, state-of-the-art, GMP-compliant production
process and world class research and development platforms with a
wide range of pharmaceutical-grade cannabis products. In addition,
the Company has an active plant biotechnology research and product
development program focused on the production of plant-based
materials for pharmaceutical, agricultural and environmental
applications.
The Company, through its subsidiaries, was the first producer to
be licensed under the Marihuana for Medical Purposes Regulations,
the predecessor to the current Access to Cannabis for Medical
Purposes Regulations. It was the sole supplier to Health Canada
under the former medical marijuana system for 13 years, and has
been producing safe and consistent medical marijuana for thousands
of Canadian patients, with no incident of product diversion or
recalls.
For more information, please visit our websites: www.cannimed.ca
(patients) and www.cannimedtherapeutics.com (investors).
Notice Regarding Forward Looking Statements
This news release contains forward-looking statements within the
meaning of applicable securities laws. All statements that are not
historical facts, including without limitation, statements
regarding future estimates, plans, programs, forecasts,
projections, objectives, assumptions, expectations or beliefs of
future performance, are “forward-looking statements”.
Forward-looking statements can be identified by the use of words
such as “plans”, “expects” or “does not expect”, “is expected”,
“estimates”, “intends”, “anticipates” or “does not anticipate”, or
“believes”, or variations of such words and phrases or state that
certain actions, events or results “may”, “could”, “would”, “might”
or “will” be taken, occur or be achieved.
Forward-looking statements are based on assumptions and involve
known and unknown risks, uncertainties and other factors which may
cause the actual results, performance or achievements of CanniMed
Therapeutics Inc. to be materially different from any future
results, performance or achievements expressed or implied by the
forward-looking statements, including the risks described in
CanniMed Therapeutics Inc.’s documents filed with applicable
Canadian securities regulatory authorities which may be viewed at
www.sedar.com . The forward-looking statements included in this
news release are made as of the date of this news release. CanniMed
Therapeutics Inc. does not undertake to publicly update such
forward-looking statements to reflect new information, subsequent
events or otherwise, unless required by applicable securities
legislation.
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For more information or to schedule an interview, please
contact:CanniMed Therapeutics Inc.Dara Willis,
416-836-9272media@cannimed.com