MediPharm Labs Corp.

Good day. Thank you for standing by and welcome to the MetaFarm Labs first quarter 2021 conference call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you'll need to press star 1 on your telephone. If you require any further assistance, please press star 0. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Laura LaPorte, Vice President of Investor Relations. Please go ahead. Thank you, operator, and good morning, everyone. With me on the call today are Keith Strong, President and Interim Chief Executive Officer, and Greg Hunter, Chief Financial Officer. Before we begin, please note the following caution respecting forward-looking statements, which is made on behalf of Medifarm Labs and all of its representatives on the call. The statements made on this call today will contain forward-looking information that involves risks and uncertainties, including those introduced by the COVID-19 pandemic. Actual results could differ materially from a conclusion, forecast, or projection in the forward-looking information. Certain material factors or assumptions were applied in drawing a conclusion or making a forecast or projection as reflected in the forward-looking information. Additional information about the material factors that could cause actual results to differ materially from the conclusion, forecast, or projections in the forward-looking information and the material factors or assumptions that were applied in drawing a conclusion or making a forecast or projection as reflected in the forward-looking information are contained in MediFarm Labs' filings with the Canadian and provincial securities regulators, which are available on the CDAR website at cdar.com. With that, I would now like to turn the call over to Keith Strong.

Thanks, Laura, and good morning, everyone. Our first quarter included several important business developments that set the stage for a very productive future. Today, I will speak to the advancements made in Q1, which were achieved in the context of ongoing industry challenges related to COVID-19. Greg will then discuss Q1 results, including continued progress with cost containment that narrowed our operating loss. And then I will close with final observations on our business agenda and outlook. First, since we operate Medifarm to create long-lasting shareholder value, I would like to take a few additional minutes to remind you of our objective and strategic priorities, how we perform against those priorities, how we expect our accomplishments to translate into longer-term financial results, why we are fundamentally different than others in the industry, and why that is good for our shareholders. From the outset, Medifarm's objective was to become a leading pharmaceutical company specializing in cannabis. Taking charge in an emerging multi-billion dollar global pharmaceutical, medical and wellness cannabis market by providing multiple products and turnkey solutions to a broad customer base across multiple jurisdictions. To achieve this objective, we have focused on delivering against our top priorities. One, execute on a global platform purpose-built to pharmaceutical specifications or good manufacturing practices. to establish ourselves as a go-to provider for pharmaceutical companies. Two, secure pharmaceutical licenses globally to pioneer multiple regulatory pathways and access new markets, including the U.S. Three, develop an international presence as a manufacturer of innovative formulations, turnkey brands, and distribution solutions for multiple customers globally. And four, build a profitable, sustainable business here domestically in Canada to drive our innovation and R&D to support our longer-term objectives. So, how have we performed? To begin, our accomplishments are many. I'm very pleased to say we are in a fundamentally different place than when we were first licensed in 2018. And we're in a better position today compared to others in the industry. First, we have created a unique platform to achieve GMP certification in both Canada and Australia that qualifies us to work with big pharma and other companies in over 50 countries around the world. This is a significant achievement. It puts us in a best-in-class position with pharma companies now expanding into the medical cannabis space. While some in the capital markets continue to assess Medifarm as if it is a traditional extraction-only company, I want to be clear that we are inherently and fundamentally different than all others in the cannabis space. This is by design. The depth and breadth of our team, technology, expertise and licenses and global reach have not been replicated. And for shareholders, this is a very good thing as the still to come pharmaceutical opportunity is significant and wide open to us. Second, we have established a portfolio of pharmaceutical licenses that, again, has not been replicated. Critically important, we continue to expand our license portfolio to become even more specialized in producing pharmaceutical cannabis products and participating in cannabis drug discovery clinical trials. This expansion will further strengthen our competitive advantage and make us a natural partner for pharmaceutical companies and clinical trial groups entering into the space. Longer term, we believe that traditionally approved pharmaceutical drugs containing cannabis will represent a larger, more sustainable, and profitable revenue opportunity in multiple jurisdictions, especially when compared to recreational CBD or hemp segments. Even in the U.S., we are coming at the market from a position of strength. Although cannabis is not federally legal in the US, the pharmaceutical products we expect to produce over time will not be restricted by cannabis regulations. Instead, as a pharmaceutical company, our products will be assessed and then approved by the US FDA and other health regulators in the jurisdictions we choose to work in. This is a significant difference and advantage over the jurisdiction or state-specific programs that we see in place today. Third, we have quickly expanded our international presence and customer base to over 30 partnerships and nine countries across four continents. Our customer base has grown rapidly. We expect this baseline of customers to support and add to our performance over the balance of this year and create tangible momentum for 2022. Many of these agreements are yet to mobilize as we complete international product registrations. As these pathways open, we are confident it will lead to significant revenue opportunities. International sales volumes will also help mitigate the impact of challenging conditions in Canada as a result of COVID-19 restrictions. We have already seen this benefit in Q1. In delivering against our priority, the breakthrough achievement is our first pharma partnership with Stata. a top five European generic pharmaceutical company. This exclusive agreement was a pivotal moment for the industry and a huge validation of our business model. It represents our first entry into a growing European pharma market, beginning with Germany. As early as next year, Stata and Medifarm are committed to entering into additional European jurisdictions, which is a very exciting prospect. However, I do want to emphasize that Germany alone is an extremely attractive market. It stands as the world's leading country for medical cannabis with more than 320,000 cannabis prescriptions approved in 2020. This is more advanced medical market than any other and is said to be growing at around 30% annually. In about two thirds of medical cases, healthcare insurance reimburses German patients using cannabis today. With the Stata partnership and others, we expect to dominate this market. In the seven months since signing with Stata, there has been a significant ramp up in large pharma companies entering the cannabis industry. Because of our reputation and capabilities, many of these companies are looking to Medifarm to provide a true turnkey solution to launching medical and wellness products. These projects create a near-term opportunity while also preparing for a long-term opportunity to produce future cannabis-based, clinically proven, FDA-registered and approved drugs. This is a great development for shareholders and means our outlook for growth as a specialist pharma company is bullish. On the product side, we have created an initial suite of brands and formulations in various formats and delivery methods. This diversifies our revenue stream and provides the greatest potential in our domestic Canadian market compared to us selling only bulk formulated oils. Our domestic presence serves as a proof of concept for our ability to provide end-to-end development, manufacturing, and distribution solutions for multinational pharma, CPG, and innovative healthcare and wellness brand companies. The slow-to-start Canadian adult use market has proven to be difficult, and we have responded by launching new branded product formulations. We also reduced headcount costs by 30% over the last three quarters, embedding new disciplines into finance and operations, and maximizing the management insight available through our SAP system to improve margin, product, and contract manufacturing performance. As we discussed last quarter, 2021 is expected to be a crossover year, as Medifarm evolves into a multi-country operator with a highly diversified, high-quality product portfolio and a larger customer base. Now turning to our first quarter results. At the top of the list of Q1 accomplishments is our first sales in Germany, which added to total international revenue of $2.1 million. This is a great start, but it's only the start. While top line declined slightly from last quarter, revenue from international sales increased over 600%, reflecting initial late quarter exports to only a small number of customers in Germany, Australia, and Peru. An important related development, and one that is on our priority list, is that the Australian Therapeutic Goods Administration recently approved our application to export GMP certified cannabis oil products to our private label partners in Germany. including Stata and Ajax Pharma. This is another advantage of having GMP certification, which will become increasingly important as medical markets expand worldwide and regulators insist on quality standardization. These authorizations and initial deliveries demonstrate that we can leverage our existing infrastructure in Australia and Canada without having to add domestic assets in every region we serve. Our already operating and easily expandable manufacturing platform remains a significant economic advantage for us as we pursue our global ambitions. Scaling up versus scaling out is preferred from efficiency, profitability, and regulatory viewpoints. Recently, I took part in a panel discussion hosted by Alliance Global Partners. And the consensus among panelists, and rightfully so, is that the entrance of big pharma will play an outsized role in encouraging German physicians to prescribe cannabis. As one of the more prominent members of large pharma, we couldn't have selected a better partner than Stata to trailblaze the emerging European pharmaceutical cannabis market. With our help, Stata has the means to catalyze the market by expanding available product formats while they move to educate physicians and pharmacists on the efficacy of cannabis treatments. One of the reasons we are confident 2021 will be a better year is the ramp up of this and other agreements. As I mentioned, we now have more than 30 committed supply agreements in nine countries compared to roughly half of that in only two countries a year ago. Our strategy of targeted international expansion to medical and wellness customers is gaining traction, and that will lead to higher sales this year. We're also very pleased to complete our first shipments of premium, high-THC medical cannabis oil to CanFarm Peru. This was our first sale in Latin America, and more will follow pending final product registrations covering our supply to other customers, including Accelerate Brazil. In Australia, we are actively working with our customers on registrations to launch over-the-counter CBD products. Over-the-counter legislation passed in February, and we believe OTC represents a high growth opportunity for us, especially since manufacturers and suppliers of these CBD products must be GMP certified. To prepare for this growth, our Canadian operations recently made deliveries of GMP CBD isolate to Medifarm Labs Australia with more volume to follow in Q2. Our ambitions are clearly global in nature, but we are also committed to driving growth in Canada's medical wellness and adult use markets as part of our priority of building a profitable, sustainable domestic business. As mentioned, the domestic industry has faced certain difficulties, and these continued in January and February as the province of Ontario reduced inventory in response to pandemic lockdowns affecting retail sales. This did have an impact on our Q1 revenue. However, the good news is we still make progress in launching new branded products in late March with positive initial demand signals. I'm particularly pleased with consumer response to our first CBN-rich formula. One of only two available in Canada, it sold out at retail within just a few weeks of launch. We immediately used our robust manufacturing platform to respond to this demand and quickly restocked in each of our provincial listings. More Medifarm branded offerings will follow as we look to meet consumer wellness needs with innovative products such as THC-free oil, additional minor cannabinoid tinctures, and available CBD and CBN. As an important footnote, we announced the supply agreement in early March with the province of Quebec, under which we will supply Quebec's growing medical and wellness market this year. I'm happy to report that the first Quebec shipments will leave our facility this week. For the remainder of 2021, expect to see us expand our Canadian B2C business while also benefiting from expanded growth in consumer volumes for products we produce under white-label agreements with some of the country's top licensed producers. Taking together the ramp-up of sales to committed customers' success with new product launches and the supply agreements secured in Q1 illustrate the advantages of GMP certification and our focus on supplying medical and wellness markets as a global provider of pharmaceutical API and finished dose products. We are in a crossover period to our future, a period where the short-term financial results do not reflect the future potential, but they are the yardsticks that we use to measure our progress. It is therefore important to us that we improve earnings even as we pivot to the next stage of our growth. I'll point out that in Q4 2020, we achieved domestic revenues of $5.7 million. If we see the easing of COVID restrictions, we expect to rebound to those levels. This will be in concert with our established baseline of $2 million in international sales in Q1 2021. together depicting a more attractive revenues in the near term. With that, I will now turn the call over to Greg for his report.

Thanks, Keith, and good morning, everyone.