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spk00: Ladies and gentlemen, thank you for standing by and welcome to the MetaFarm Labs third quarter 2021 financial results conference call. At this time, all participants are in listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press star one on your telephone keypad. Please be advised that today's conference is being recorded. If you require further assistance, please press star zero. I would now like to hand the conference over to your speaker today, Keith Straughan, President of MediPharm Labs. Please go ahead, sir.
spk05: Keith Straughan, President, MediPharm Labs Thank you, operator, and good morning. Joining me on the call today are Greg Hunter, our CFO, and Brian Howcroft, our newly appointed CEO. Before we begin, please note the following caution respecting forward-looking statements which is made on behalf of MediPharm Labs and all of its representatives on this call. The statements made on this call will contain forward-looking information that involves risks and uncertainties. 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 conclusions, forecasts, 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 MediPharm Labs filings Canadian and provincial security regulators, which are available on the CDAR website at cdar.com. I'm excited to now hand the call over to Brian Howcroft, our new CEO, for introductory remarks.
spk03: Thank you, Keith. Good morning, and thank you for joining our quarterly financial earnings call. My name is Brian Howcroft, and as of today, CEO of Medifarm Labs. I'm joined today by Greg Hunter, Medifarm's chief financial officer, and Keith Strawn, Medifarm's president. Before Greg and Keith present our quarterly results, I would like to say a few words. Firstly, I would like to thank Keith Strawn for his leadership as interim CEO and his support during the CEO transition period. Keith's knowledge of Medifarm, and more broadly, the cannabis industry, is deep, and I greatly look forward to learning from Keith and Medifarm's leadership team as we move forward. Over the coming weeks, I'll be having a lot of dialogue with shareholders, analysts, customers, and the team here at Medifarm as I look to fully understand our position and ways we can more effectively leverage Medifarm's strengths for strategic and operational improvement. I see Medifarm in a similar light in many ways to my experience at South Medic, a business in a highly regulated environment with many strengths. At South Medic, We executed our business strategy and were disciplined about achieving results. In a similar way, I plan to execute against Medifarm's strategy and build a plan to restore the company's profitability through revenue growth and operational improvements. I am well aware that the business has not performed to its full capability over the last 18 months, and I look forward to getting us back on the right path. I will communicate those plans to you as they are developed, and will update you on our progress and successes. I will now turn the call over to Keith to provide a quarterly business update.
spk05: Thank you, Brian. We are very excited to have you join the company to lead our growth strategies going forward. I look forward to supporting your vision to see us grow as the world's leading precision-based cannabinoid company with a focus on international markets. Our third quarter continued the trend of a transformational year at Medifarm Labs, establishing ourselves as a true pharmaceutical company with expertise in cannabis. Today, I will speak to the advancements made in Q3, which were highlighted with ongoing pharmaceutical licensing and revenue growth in our international sales. Greg will then discuss Q3 results, including areas where we saw growth and segments where we have opportunity to improve. Then I will close with final observations and an update on near-term initiatives. To start, I'd like to highlight the areas where we continue to be leaders in the pharmaceutical sector of cannabis in the field of drug development and manufacturing, as well as reintroduce our plan to capitalize on this unique status in the industry. In the first month of Q3, we were awarded a drug establishment license from Health Canada. A drug establishment license is a certification issued by Health Canada that a manufacturer maintains pharmaceutical good manufacturing practices, commonly referred to as GMP. It is achieved through an extensive review of a company's quality management systems over several months and then an in-person or virtual inspection by Health Canada spanning multiple weeks. In short, to obtain a DEL is a significant and material undertaking, and especially in comparison to the cannabis processing license, which is commonplace in the cannabis industry today. What makes Medifarm truly unique is that we obtain this license for natural cannabis extraction, purification, and fabrication of finished goods. This makes us one of only a limited number of pharmaceutical manufacturers worldwide who can provide cannabinoid API and finished product and actually the sole license of this nature in North America. This will serve the cannabis pharmaceutical market, which experts expect to be worth $2.6 billion by 2025. This, along with a rapid growth expected to continue after 2025 as major cannabis drug patents begin to expire in 2026, positions Medifarm as a top-tier precision-based cannabinoids company. In the few short months since being awarded the DEL, Medifarm has increased its access to existing medical cannabis programs, updating foreign health authorities with our new certifications to work towards using pharmaceutical trade neutral recognition agreements to allow for international shipments in medical cannabis programs, as we do from our Australian site today. These already include UK, EU, and Brazil with additional countries to be sought after in short order. It is important to note that this license negates the need for EU GMP certification. a standard we operate at but have not had a final inspection due to COVID travel restrictions placed on government inspectors. MediPharm has used the DEL to increase our presence in novel clinical drug trials providing cannabis as an API, such as McMaster University's study that uses MediPharm Labs CBD-50 to treat insomnia related to depression. Participating in these trials often uses our own formulation and strategically enables us to lock in future manufacturing rights if and when these new drugs receive FDA and Health Canada marketing authorization. This allows us the opportunity to increase our chances of success in multiple clinical development programs while not limiting ourselves to a single one. This strategy reduces our downside risk, which is commonplace for pharmaceutical companies. Many pharmaceutical has commenced to use the DEL to facilitate GMP tolling services that allow for major international cannabis companies to access the export market without further capital investments in their own international GMP operations. And most importantly, Medifarm has used the DEL to start the vendor qualification process with pharmaceutical companies to provide them with API or finish those products for the manufacturing of their future cannabis drugs, including generic cannabinoid-derived pharmaceuticals. All these drug establishment-licensed business activities create a near-term opportunity where we simultaneously execute on our long-term strategy of producing cannabinoid-derived pharmaceuticals, clinically proven and FDA approved. This is a great development for Medifarm and our shareholders, and it means our outlook for growth as a precision-based cannabinoid company has never been stronger. Now turning to our third quarter results. Beyond the great advancements in our core pharmaceutical strategy, Q3 saw growth in other areas, the most promising being international distribution. As a testament to the execution in our international contracts, we saw quarter-over-quarter growth of 16.5% in our international revenue. This growth was concentrated in Australia and Germany. Medifarm's purpose-built GMP manufacturing facility in the state of Victoria of Australia gives us unique access to these markets. A global hub, the Therapeutic Goods Administration and the Office of Drug Control Certifications serve the growing Australian medical market and future CBB OTC markets. These certifications are also recognized around the world and have allowed repeat deliveries, Germany and future deliveries, to medical cannabis countries like New Zealand and Denmark. In Germany specifically, we added our fifth customer while making multiple replenishments to our first four customers, including growing our wholesale private label program with Schatta, one of the EU's largest generic drug companies. As a value add to our GMP cannabis oil, Medifarm has used its industry-leading quality management system and intimate knowledge of the cannabis supply chain to source and deliver GMP flour to Stata. In 2022, we will be strengthening this portion of our business with lower-cost flour to allow for that category to become more margin-accretive like all of our other international businesses. As we continue to see sequential quarter over quarter growth in international sales and build our major pharmaceutical pipeline, we are committed to driving growth in Canada's medical and adult use markets as part of our commitment to building a profitable and sustainable business. In Canada, we increase sales and marketing efforts successfully, which we anticipate will translate into sales growth in Q4 and moving forward. I will touch more on those sales and marketing strategies later in the call. In Q3, the Medifarm Labs line of premium cannabis oils were fourth in Canadian retail sales based on high fire data. While we are very pleased with this market share, we also believe there is much opportunity to grow market presence in the oil category. As companies ranked first to third in this category accounted for over 18 million in retail sales in Q3, excluding Quebec. Just moving one spot into the third position could see the retail sales value in this category at least double for Medifarm. This current success will lead to higher sales to provinces in Q4 as the inventory from distribution centers pull through and the increased revenue further as retail store listings continue to increase across the country. It is important to note that Medifarm Labs premium cannabis oil has an average price nearly twice as what our top competitors are selling for. This shows that our brand story of higher quality product offering is working well, especially with CBD 50, which is included in active clinical trial, CBD 100, and our CBN oil. To expand in this category, we will continue to focus on our premium portfolio sales in retail while driving innovation. We continue to launch unique oil SKUs, with a CBD and CBN oil launching in Ontario during this week alone. After the success of our THC CBN oil, we believe that consumers will also pay a premium for CBN oil without THC, whose notable benefits include aiding sleep. Staying true to our pharmaceutical roots, our oil portfolio provides the same or similar formulations that are used in many clinical trial programs in our international medical cannabis sales program. We've also taken notice that consumers are using vapes as a wellness product as it can deliver a therapeutic benefit with a faster onset and is easier to titrate. To this end, in Q3, we expanded retail listings of our CBD vape by 200%. This unique vape formula does not crystallize in the cartridge like many other CBD-only vapes. Additionally, our CBN vape, the only CBN-dominant vape on the market, saw retail listings increase by 140%. The uptake of these SKUs by retail stores in Q3 will translate to increased sales for virtual retailers in Q4 and onwards. In summary, our domestic presence is still growing in distribution and revenue. Most importantly, it serves as a proof of concept for our ability to provide end-to-end development, manufacturing, and distribution solutions for multinational pharmaceutical companies. I will now turn the call over to Greg to discuss our financial results. Thanks, Keith, and good morning, everyone. I'm pleased to report we continue to make progress with our international expansion with international revenues increasing 16.5% sequentially in Q3 versus Q2. This is the third consecutive quarter with double digit international revenue growth. In addition, we added another customer in Germany, bringing our customer count with successful German deliveries to five. Germany is the largest international medical market with a market value estimated to be 7.7 billion euros by 2028, according to Forbes, and continues to be a strategic priority for Medifarm.
spk03: Turning to the P&L performance for the third quarter.
spk05: Q3 revenues increased 6.5% sequentially from 5.1 million in Q2 to 5.4 million in Q3. International revenues increased 16.5% sequentially to 2.9 million, with German revenues of 1.1 million and Australian revenues of 1.8 million. Canadian domestic revenues stabilized in Q3 at 2.5 million, and we are optimistic to see growth in Q4 and beyond. Gross profit for the quarter of negative 1.9 million was impacted by a 0.5 million inventory write-down to net realizable value. Adjusted for this inventory write-down, gross profit was negative 1.4 million, which improved slightly versus Q2 adjusted gross profit. General and administrative expense in the quarter decreased sequentially from 5.2 million in Q2 to 4.6 million in Q3, largely due to bad debt expense recorded in Q2. Marketing and selling expenses in the quarter decreased sequentially from $1.1 million in Q2 to $0.9 million in Q3. R&D expenses increased sequentially from $140,000 in Q2 to $280,000 in Q3. These expenses will vary as we selectively invest to advance our capabilities and product portfolios. Other operating income decreased sequentially from $3.2 million in Q2 to $0.6 million in Q3, driven by the Canadian emergency wage and rent subsidy. Adjusted EBITDA for Q3 was negative $5.6 million versus negative $3.7 million in Q2. The reason for the change was largely driven by income from the Canadian emergency wage and rent subsidy. Moving to a few notable items on the balance sheet. trade and other receivables decreased from $32.6 million in Q2 to $29.4 million in Q3. As discussed in previous quarters, there were two customers owing a total of approximately $19 million at the end of Q2. This balance has decreased to $15.8 million in Q3, including $8.5 million, which is subject to legal proceedings that we have previously disclosed and remain confident in its collection. The remainder of the $15.8 million is due from a second customer, and we are still confident in its collectability. Adjusting for these two customers and the wage and rent subsidy, trade and other receivables is approximately $13 million. Our cash balance on September 30 was $38 million, which decreased slightly from $38.8 million at June 30. The cash balance owing on the convertible to venture stood at approximately $1.9 million at the end of September. As of today, the cash balance remaining is approximately $0.5 million. While we made progress in the quarter by expanding our international presence and revenue and managing our cash consumption, we still have work to return the business to profitability and drive positive cash flow. I'm excited to work with Brian to transition Medifarm to profitability and look forward to updating you on our progress. In addition, I would like to thank Keith for his leadership as interim CEO and look forward to continuing to work with him in his role as president. With that, I'll turn it back to Keith. Thank you, Greg. I will now provide some final thoughts on our outlook and plan to continue to increase revenue. There is a lot of opportunity for increased sales in Canada and internationally. based on our fully built and funded manufacturing platform, we can increase revenue significantly without further capital investments. In August, I shared three initiatives we would undertake to increase sales. Since then, we have made incremental progress that led to increased sales in some categories and planted seeds for growth in others. These include, one, investment in more sales resources. Domestically, We more than doubled our sales team in July and August. Those reps are now trained and in the field, and in Q3, this led to 12% distribution growth in retail store listings across all of our SKUs. The pull-through from this shelf space penetration will result in better sales results going forward. Internationally, in the back half of the quarter, we successfully added sales personnel in Germany and Mexico to cover sales growth in the EU and Latin America. Early ROI is already in place with our achievement of international sales growth for the third subsequent quarter and new contracts signed in those regions. Two, expanding contract manufacturing. In Q3, we started GMP tolling activities in our Barrie facility, and also increased volumes in our Australian facility. Providing partners with access to the highest quality cannabis manufacturing platform to deliver them cost-saving and international reach is of paramount importance to us and them. Revenue in this category is still growing as our partners deliver these products to their own international patients. We expect this growth to be material in 2022. Brief. continued innovation. On the pharmaceutical front, there are limited cannabis manufacturers with GMP certification, but even fewer that have completed cannabinoid API characterization. For example, in Q3, the Medifarm R&D team fully characterized pure CBD isolate right down to the 100th of the percent of each component. This, along with our validation and the stability of our GMP-manufactured CBD, are major components of completing a drug master file with the US FDA. A drug master file progresses our pharmaceutical sales initiative as those customers register for marketable, novel, and generic drugs where CBD is an active ingredient. This will lead to major long-term and stable supply agreements when these drugs receive FDA and or European Medicine Agency approval. Overall, Q3 was a productive quarter, marking the startup of sales volumes under important new international customer deliveries, further global market penetration for our products, and an improvement in the bottom line performance. 2021 is and continues to be a year of transformation for Medifarm. and our new pharmaceutical licensing and introduction of a new CEO to bring fresh leadership to our company are a few more pieces in the journey of this transformation. MediPharm does have several initiatives to complete to get back to profitability, but we have the platform and licenses to get there. With a strong cash balance that only decreased $800,000 in Q3 from $38,000 0.8 million to 38 million, better efficiency in collection of accounts receivables, and only $500,000 remaining in convertible debt, now is the perfect time for Brian to take the reins as CEO. Brian can now bring his expertise and experience as a sales and operational expert to outline and execute on the path to profitability. Some cannabis companies may not have the longevity to survive this nascent market as it matures. But as a pharmaceutical company with such a strong platform and balance sheet, MediPharm is just getting started. Now, operator, could you please open the lines to questions from our callers?
spk00: Absolutely. If you would like to ask a question, please press star 1 on your telephone keypad. Again, that's star one to ask an audio question. Please hold for your first question. Your first question comes from the line of Tammy Chin with BMO Capital Markets. Please state your question.
spk01: Hi, good morning. Thanks for the question. First for me is on the gross margin or gross profit line. So excluding that write down, you're still at a gross profit loss. So I'm just wondering, is this still because you're working through legacy flower inventory? And if so, do you have a sense of when you'll be fully worked through that?
spk02: Yeah, thanks, Tammy, for the question. It's Greg here. So there's a couple things on gross margin.
spk05: Yes, there is some older inventory that we are still working through. One of the big items, though, that we've talked about in past quarters is, you know, improved margins with volume. Again, with the sales that we're at right now, as we talked about before, we're underutilized in the plant, so you don't get the same absorption. So we expect as we ramp sales, that will improve. In addition, you know, international sales, as we continue to expand and we enjoy higher prices in those markets, we do expect to see that improve, and we've seen three consecutive quarters now of double-digit revenue growth. Certainly there's some automation and efficiency, and then there's other cost reduction initiatives that we're working on, particularly with some of our German flower business that we've talked about to improve margins. And then the longer-term one that's really going to improve it is as we get into the pharmaceutical sales, which is a little bit longer, but we expect to see improved margins on that. So hopefully that gives you a little bit of color there.
spk01: Yeah, that does. Thanks. And my second question was, I think on a sequential basis, there was a modest decline in your international sales to Germany. So I just wanted to ask what was going on there? Because it sounds like you not only added a fifth customer, but you've been replenishing the existing four. And to tie to that, can you also elaborate a bit more on that German flour business? So like, where are you sourcing the flour from? Where do you think the cost reduction opportunities could be in that part of the business? Thank you.
spk05: Thank you, Kate. This is Keith. Yeah, we did see a very small decline in the top-line revenue in Germany. Mostly just the business itself is still a bit lumpy, so we started deliveries there in late February, and we're kind of beholden to – the import-export approval of both countries. So both the health authority in Germany and the health authority here, Health Canada, issue permits, and then we load in based on those permits. So we'll see that kind of be a little bit up and down until we bring on more customers to smooth it out. But it was a small decline, but we're seeing, you know, good things in the market that are, you know, pushing positive, and we are very bullish on that area as well. On the flour itself, it is something that we've done as a value add to Stata. So they came to us and they wanted to have a complete package for their patients. And they saw us as their exclusive cannabis partner. So what we did is we went out and sourced that flour from GMP Growers in Canada. I think when we set up the contract in 2021, there was opportunities with only so many GMP growers and so much inventory out there. I think those opportunities have expanded since then, and what we can offer to German patients has expanded as well. So just as we saw some of the price bubbling out in places like Canada, Two years ago, we're seeing that a little bit on the GMP file as well. So we'll be able to, you know, capture a little bit more of a margin as well as pass on some of that cost savings to patients.
spk00: Got it. Thank you. Your next question comes from the line of Sean Meir with Canaccord.
spk06: Hey, good morning, and thank you for taking my questions. First one's just touching on your international sales. With that accounting for more than 50% of your sales in the quarter, just wanted to get a sense for what you're doing and help manage the cadence of those revenues. International sales tend to be quite spread out timing-wise and large in order sizes, as you probably know, so there's no certainty on the cash flow. I'm just trying to get an understanding of the initiatives that you're undertaking to help manage this reality and what we should expect to see going forward in terms of quarterly fluctuations from the international segment.
spk05: Thanks for the question. I think it's a good one. We've really done a lot of work in this regard. I think the number one that helps take the lumpiness out of the business is more customers. So as you see, as it flows from, you know, let's say a single customer, in March we delivered internationally to Germany to only two customers in last quarter, you know, that was five. So what we'll see is as we add more customers, we'll change that. You know, the big part of our international sales is also Australia where we have our, you know, wholly owned subsidiary and building there. So we are able to take away some of the uncertainties as far as import export goes as we can stock things in country and product and API sales. So I think that we have a few initiatives on the go to continue to improve that.
spk06: Thank you. Thank you for the call there.
spk05: No problem.
spk06: I just wanted to continue. Looking more broadly, I guess, at the German market, there's been more recent talks about a pathway to a recreational program in that market. So just given that it's a large part of your business now being the German – operations in the German market. Just what's your understanding of what's happening from, you know, a federal regulation standpoint over there and the potential for adult use reform in that country and in that market, if and how Metaparm would play? And that's my last question.
spk05: Yeah, I think it's really exciting to see the development and, you know, the removal of the stigma of cannabis as a medical product or even as a wellness outage product. And we've seen a lot of that in Germany. You know, I was in Germany the week before the election, and there was a lot of buzz around the industry folks that I met with around, you know, that they were expecting a change of government. As you know, the German government, the expected coalition government is still negotiating how that coalition is going to work. We probably won't see the outcome of that for a few weeks, but it is exciting that cannabis legislation is front and center there. So, you know, at the very least, what we could expect is, you know, easier pathways on medical. So just having that accepting coalition of cannabis, things like quotas of how much medical cannabis the supplier is allowed to have, we could see maybe go away or at least increase drastically. On the adult use market, I think we're in a great position. As you know, a lot of adult use cannabis users are do seek out that cannabis as a wellness product and kind of self-medicating. Some analysts say or experts say that in Germany, that distribution of adult cannabis would be through pharmacies. So since we've set up those distribution channels today, we can easily plug in to serve that adult use market, which obviously would be a massive increase to what they have in the medical market today.
spk06: Thank you, and I'll pass it on.
spk00: Your next question comes from the line of Scott Thornton with WAP Capital Markets.
spk02: Hey, good morning. This is Nick on for Scott. I was just looking for color on the product uptake side with Stata. You mentioned launching eight products back in April, and I think that included three extract formulations. I was just wondering what the initial uptake among pharmacies and consumers has looked like and kind of how that's influenced future product rollouts. Thanks.
spk05: Thanks. Yeah, question. All of our, you know, German customers have been onboarding different SKUs. As you mentioned, have eight active SKUs in the German market today. We are looking to those have been successful to date. You know, there are some more successful than others. What's really popular with German patients today is ITHC. So our IPHC skews, we see move more. And on the extract side, balanced oil is also popular with patients today. So like a one-to-one formulation. So with that knowledge that we have now, you know, launching their line in February, it really gives us an opportunity to continue to innovate and And so in 2022, we'll be completing the registration process for additional SKUs there that kind of meet the market demand. So, you know, a few more flower SKUs that are high THC that, you know, are available in the Canadian market today that we will make available to German patients. And then some more unique cannabis oil SKUs, much like our Medifarm Labs oil line that we have in Canada today.
spk02: Okay, I appreciate that caller. And then looking at Canada, you mentioned in the past seeing more spot purchasing versus kind of long-term agreements being made there. I was wondering what you're seeing on the Canadian LP side now with the recent purchasing cadences in this lower-cost environment, and just kind of on the flip side of that, how that's affected your purchasing strategy in that market.
spk05: Yeah, I think in the Canadian market, we do continue to see spot purchasing being quite popular as the pricing kind of levels itself out. What's really encouraging in the Canadian market is I think, you know, 2020, we had a pretty big supply glut, especially in intermediate products such as concentrate and distillate. I think that a lot of that has been worked through or has expired. So what we're seeing now is larger LPs with big product lines reaching out to processors like ourselves to augment their inventory with additional concentrate or distillate to make their products. So we're seeing some of that bulk market come back. It is slower. It's not in comparison to like – timeline like of 2019 but it is encouraging to see that we're also seeing as these companies mature everyone take a little bit more of a mature purchasing approach and a more of a evaluation of as far as insourcing or outsourcing some of their activities so some of the larger licensed producers are looking more and more back some of the tolling models to have some of their products made where they think that there could be some cost savings. So I think that it's really encouraging to see, you know, as we have rollover of new management teams in the industry and the industry maturing, that we'll get more mature purchasing practices that we see in other industries.
spk02: Great. That's it for me. I'll pass it on. Thank you.
spk00: If you would like to ask a question, please press star 1 on your telephone keypad. Again, that's star one to ask an audio question. Your next question comes from the line of Aaron Gray with AGP. Please state your question.
spk04: Hi, good morning. This is Andrew Bond on the line for Aaron. Thanks for taking our questions. First one for us on the Canada market, we've seen some of your legacy extraction peers begin to sell flower products in the Canadian adult use market. Is this something you believe could be complementary to your current product selling in Canada? Are you comfortable focusing on current formats and pharmaceutical sales internationally? Thanks.
spk05: Thanks, Andrew. I think, you know, at this time, we do have a great platform and a great base to make concentrate products. The Canadian flower market is one that obviously a lot of our peers are entering into, but it is quite a crowded market. So at this point in time, we don't have any immediate plans to launch a flower brand. just looking at kind of as that goes. If that market, you know, years from now were to level out and we had, you know, good partners that we are also buying on the GMP side, you know, it could be something that we re-look at. But when we talk to the provincial boards today, they are not having any problems with, you know, multiple license holders wanting to sell flour. So we feel that we could better participate in the oil and concentrate markets. And really where we do separate ourselves in those markets is through innovation. So as I mentioned on the call, like just this week in Ontario, we're launching a CBN-dominant oil that has CBN and CBD, so no THC. So we find products like that is really where we can be successful and really rely on our strengths.
spk04: Perfect. Thanks, Keith. That's a really helpful color. And then kind of related to that, you mentioned the expectation for a large pickup in tolling services, which has historically been a smaller segment for you. How large of a contributor do you believe tolling could be as you look to make GNP API for some Canadian LPs? And when do you believe longer term this could be a service larger pharmaceutical seekout?
spk05: Yeah, I think for us, contract manufacturing for large pharmaceutical companies, large wellness companies is something that is what we're very well set up for in the future. And those are the types of conversations that we're having in our business development and sales pipeline today. So really excited to do that. Contract manufacturing for us has been a little bit of a smaller piece amongst license holders in Canada for various reasons, but we do have some very successful contracts. We do make, for example, like Ace Valley Bait Pens, which are one of the higher-ranked bait pens now owned by Canopy Growth. We did launch a very innovative line of creams and gels with Avicano, which is a company that grew up their R&D through KLABS. at the Mars Building, so where it makes sense and hits our platform. The GMP tolling is something that is very interesting because we are pretty much the only person providing that in Canada today. So that does create a better opportunity. Although, you know, the license holders that have kind of that international reach is also a small number. So it's hard to pay a number on what that would be like today, just like launching our own international business. We saw some lumpiness, especially in the beginning and even still today. It's hard to pay a number on, you know, where they'll see the pull through to their international patients.
spk04: Great. Thanks very much, Keith. I'll pass it on.
spk00: You do have a follow-up question from the line of Tammy Chan with BMO Capital Markets. Please state your question.
spk01: Thanks for the follow-up. Just quick clarification, going back to your comment about the eight SKUs with data. So are the SKUs that are more popular, is that primarily flour SKUs or among the ones that are more fast-moving? It's kind of balanced between both flour and oils. Thank you.
spk05: I think it is pretty much a balance. As far as the value goes, volume-wise, there is more flour that moves, but it is obviously a lower-cost item for patients. A lot of patients in Germany do have coverage, but on the flour market, you see more of a patient-payer side. We do probably volume-wise... get more of a pull-through on the flour side, whereas value-wise, it's closer to an even split. And that's representative of the data that we see across all of Germany. So extracts have been rising as far as products go in Germany quarter over quarter, and they're almost neck and neck with flour now. You know, that's extract, and then there's also their, like, their marketable drug concentrate business, things like Epidiolex, Gernabinol, and whatnot, too, which are, you know, concentrate-based products. So, overall, the concentrates make up a big part of that medical, and we pretty much, that is pretty much in line with the industry there.
spk01: Okay, thank you.
spk00: At this time, there are no further questions. I will now turn the floor back to Mr. Strawn for any additional or closing remarks.
spk05: Thank you. There's no further questions. I'll close by saying we look forward to hosting our fourth quarter and 2021 annual conference call in March and keeping you abreast of progress in between. Thank you for listening and have a great day.
spk00: Thank you for participating in today's conference call. You may now disconnect your lines at this time.
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