MediPharm Labs Corp.

Ladies and gentlemen, thank you for standing by and welcome to the MetaPharm Labs 2022 Second Quarter Financial Results Conference Call. Please be advised that today's conference is being recorded. Before we begin, please note the following caution respecting forward-looking statements, which is made on behalf of MetaPharm Labs and all its representatives on this call. The statements made on this call will contain forward-looking information that involve risk 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 MetaPharm Labs' filings with the Canadian and provincial security regulators, which are available on the CDAR website at cdar.com. I will now pass the call to David Pittock, CEO of MetaPharm.

Please go ahead.

Thank you, Operator, and good morning, everyone. we appreciate you joining us for MetaFarm Labs' 2022 Financial Results Conference Call. Joining me on the call today are Keith Straughan, MetaFarm's President, and Greg Hunter, the company's Chief Financial Officer. I will address some of our strategic achievements and growth opportunities, and then hand the call over to Keith and Greg to provide more detail on quarterly results. I joined MetaFarm in April from the pharma industry because I recognized the significant emerging opportunity for pharmaceuticals containing cannabinoids, and identified MediPharm as the most pharma-like organization in the industry. As a team, we are relentlessly focused on driving revenue with our established platform, both organically and through selective, opportunistic M&A activity. In tandem with this commitment to revenue growth, we are executing against several priorities to optimize the business and ensure that revenue is profitable. For the mid to long term, we continue to invest in new pharma opportunities. Our priorities include right sizing and better utilizing our manufacturing footprint, eliminating unnecessary headcount, and making continued progress on some key business fundamentals. We need to improve margins and pricing on certain products, renegotiate or exit certain contracts, and continue making progress on working capital, inventory, and cash management to maintain balance sheet strength. I'm happy to say that the team has made progress on all of these initiatives over the past few months. Regarding our manufacturing footprint, we recently announced the sale of MetaPharm Labs Australia. While the Australian facility was serving the local Australian market as well as the EU, given the capacity available in Canada, as well as the recent receipt of a GMP drug establishment license at our Canadian site, it made most sense to serve all jurisdictions from Canada at this stage. The sale is expected to close in the next 60 days with proceeds of at least $6.9 million Australian dollars. In addition to the cash injection, this change will provide annual savings of approximately $4 million annually. We also addressed the difficult challenge of rightsizing our headcount. We had two key objectives with the restructuring. One was to treat our excellent employees with care and respect as they transitioned out of the organization. The second was to ensure that as we made changes, we retained the critical resources and talent required to fuel our growth plan. With this in mind, we have implemented headcount reductions of more than 30% of salary employees. Changes were made across all departments and all levels, including VPs and managers, and should be fully implemented by Q4. We anticipate that these reductions will result in annualized savings of over $3 million starting in Q3 of this year. There are also several incremental but important items that the team is starting to address within the organization, starting with a focus on gross margin. We are committed to ensuring that incremental sales are gross margin accretives, and we are not willing to generate volume for volume's sake. In Q2, there were cases where we sacrificed short-term, top-line results in order to maintain our margins. The finance team has already done a good job of bringing rigor to the cash management cycle, and we will continue to focus on inventory and receivables and carefully analyzing cash cycle timelines from production through collection. We hope to see additional positive results from these efforts in early 2023. Given our balance sheet strength, we see the opportunity to execute a creative and opportunistic M&A in the current environment that builds on MetaFarm's unique capabilities in the pharma, global, and Canadian business segments. We will be very prudent both with our balance sheet and with our stock as we actively look for deals that would build on our strengths while driving returns for shareholders. The recent acquisition of IP from Shelter Cannabis is an example of a creative deal that can be accretive for shareholders. We have manufacturing capacity, people, established channels, and a sales pipeline that we can use to seamlessly leverage the right transaction and use it to drive us closer to profitability. Our balance sheet strength gives us an edge in the current market compared to many smaller players. turning to the larger strategic growth opportunity. In an industry that is still trying to find its feet, MetaFarm knows exactly where its foundation is. As an earlier mover in the cannabis space with access to capital, MetaFarm put resources into being a standout, high-quality producer with a portfolio of domestic and international licenses. As some of our peers were out buying facilities they would later close or companies that are now being written off, we saw a path to success by investing in our core strength. securing licenses and building processes in preparation to be one of the very few players who can compete and win in the pharma cannabinoid space and the natural health products wellness space where GMP level quality is a must. Many companies are now seeing that the need for GMP facilities, but they're also realizing that transitioning an existing cannabis facility to a GMP facility is extremely expensive, difficult, time consuming, and often not practical. On the international medical cannabis front, our multi-year head start has given us access to markets like Europe, Australia, and Brazil. In the world of research, we are becoming the go-to partner for fully funded clinical trials. And in the pharma space, we are creating relationships to provide API and finished dose formats for future marketable drug products. In Canada, many of you will have seen that the government-appointed Science Advisory Committee has just released a number of recommendations in relation to over-the-counter CBD health products. This committee recognized the current Food and Drug Act has the framework to regulate non-prescription and natural health products containing CBD. The MediPharm Dell and Natural Health Products GMP licenses and award-winning CBD product portfolio make us the only purpose-built cannabis facility ready to participate in this market today. This report, if implemented, could put CBD in the Canadian natural health products market. While the final recommendations and the timelines for implementation are unclear, we believe that MetaPharm is already uniquely positioned to supply a full portfolio of NHP and GMP-compliant products. In the U.S., where new marketable drugs are approved by the FDA in both new novel and generic formats, manufacturers will need GMP API for mass production, the only FDA CBD-approved drug today, Epidiolex, is made with a naturally sourced API. MetaPharm is one of only two commercial scale natural extractors in North America with a natural CBD API drug master file. Epidiolex alone is a $900 million a year drug. Our R&D team has been working over several years to allow us to participate as a potential API supplier to this market. In Germany, the current coalition government has made cannabis legalization a key priority. With a population of over 90 million, this will create a new wellness segment for non-smokable formats. The long-tail opportunity in Germany was further validated as we saw one of the largest cannabis companies in the world, Curaleaf, make another acquisition in the EU last week. For Medifarm, we are already in Germany and have been selling medical cannabis products there since February 2021. Their health authority has accepted our GMP license for imports and we have 12 extract products registered in their medical program. with four new products launching by year end. According to Prohibition Partners, extracts accounted for 35% of German medical cannabis sales by April 2021. These are just some examples of opportunities on the horizon. The future for global opportunities requires stricter quality GMP expertise and processes. Newer countries that start with only medical cannabis usually have very stringent approval processes. We are proud of our ability to get approval from countries like Brazil, where we have been approved and will be launching two products starting in Q3 of this year. As the global cannabis market evolves, MetaFarm's GMP and pharma approach provide unique advantages to accessing new global medical and wellness cannabis opportunities. I will now pass the call over to Keith.