VIVO Cannabis™ Reports Q1 2019 Financial Results
- Net revenue of $5.1 million, compared to $5.8 million in Q4 2018 – Q4 2018 sales benefited from initial product stocking by provincial distributors
- Adjusted EBITDA of ($2.2M), compared to ($7.3M) in Q4 2018
- Cash and short-term investments (excluding strategic equity investments) of $68.4 million as at March 31, 2019
- Net selling price of VIVO's premium cannabis dry flower products was $7.70 per gram (top-tier in the industry), up from $7.51 in Q4 2018
- B.C. and Ontario facility expansions received Health Canada approval in March 2019 and are expected to add over 4,000 kilograms per year of premium cultivation, with initial packaged product entering the market in the second half of 2019
NAPANEE, ON, May 29, 2019 /CNW/ - VIVO Cannabis Inc. (TSX-V: VIVO, OTCQX: VVCIF) ("VIVO" or the "Company"), a leading provider of premium cannabis products and services for the medical and adult-use markets and licensed producer of cannabis under the Cannabis Act through its wholly-owned subsidiaries, Canna Farms Limited ("Canna Farms") and ABcann Medicinals Inc. ("ABcann"), and its medical cannabis clinic network operated by Harvest Medicine Inc. ("Harvest Medicine"), today released its Q1 2019 financial and operating results.
"The first half of 2019 has been focused on increasing VIVO's production capacity. With the recent doubling of capacity at both our Canna Farms and Vanluven facilities, we have been very successful in that regard," said Barry Fishman, President and Chief Executive Officer of VIVO. "Our goal has always been to increase long-term shareholder value by establishing ourselves as a premium provider of cannabis products and services. We are lowering our cost per kilogram through increased production capacity, thereby realizing economies of scale."
Strategic Overview
VIVO has developed its strategic plan for growth and is focusing its resources on execution and communicating its progress to its stakeholders. The key priorities are as follows:
- Expanding capacity and increasing production capability – In Q1 2019, VIVO doubled its annual production capacity at both its Canna Farms facility in Hope, B.C., and its Vanluven facility in Napanee, Ontario, and commenced construction on Phase 5 of the Canna Farms facility. VIVO has also acquired additional properties to further expand – 2 acres in Hope, B.C., adjacent to the Canna Farms facility, and 16 acres zoned for cannabis cultivation within 15 minutes of the Canna Farms facility. This is in addition to the 65 acres already owned by the Company minutes from the Vanluven facility in Napanee, Ontario, where VIVO is completing the construction of its new Kimmett facility.
- Leadership in the Canadian medical market – VIVO has continued to build upon the Canna Farms medical cannabis platform (https://www.cannafarms.ca), where patients can access the widest selection of cannabis strains, and where cannabis cultivators can enter the medical marketplace, make a fair return on their quality products, and avoid having to implement the processes necessary to navigate the complexities of the medical cannabis fulfillment space. The platform now provides patients access to products cultivated by four separate licensed producers. Harvest Medicine's business continues to expand, with the roll out of the HMED Connect telemedicine platform bringing medical cannabis information to the wide patient population that can benefit from being educated about the applications and proper use of medical cannabis.
- Innovation and product development – VIVO's GMP-designed Vanluven facility is conducting ongoing research related to the development of optimized indoor, seasonal greenhouse and outdoor grown cannabis cultivars, as well as developing as a center of excellence for extraction via multiple methodologies, and for formulation expertise in the development of cannabis infused edibles and beverages. VIVO expects to receive Health Canada approval of its supercritical CO2 extraction facility in Q2 2019 and additional extraction capacity is expected to come on-line in Q3 2019. The seasonal greenhouses, which represent Phase I of VIVO's innovative new Kimmett facility, are currently undergoing a pre-licensing review by Health Canada and, pending approval, are expected to produce up to 3,000 kilograms of cannabis for extraction in 2019. The Company has multiple products in development in anticipation of the opening of the edibles, concentrates and beverages market in late 2019, as well as multiple cannabis-based medical products in development.
- International market growth – VIVO continues to focus on targeted international expansion activities and intends to expand into select markets in which medical cannabis can be legally prescribed, leveraging the strong pharmaceutical background of its leadership team, its experience operating the Harvest Medicine clinics, and its work with patients that have benefited from medical cannabis, to increase its global footprint as a leader in the medical cannabis sector. One of the Company's partners is currently propagating VIVO cultivars in a GMP facility in Europe. The Company's Australian strategy is also developing along multiple lines in step with the expansion of the Australian medical market. VIVO has shipped product to Australia from both its Canna Farms and Vanluven facilities as of Q1 2019.
VIVO's revenue decreased in the first quarter of 2019 as compared to the fourth quarter of 2018, as expected, as Q4 2018 sales benefited from initial product stocking for the adult-use market by provincial distributors. VIVO's net income of $5.0 million (basic and diluted income of $0.02 per share) for the first quarter of 2019, as compared to its net loss of $8.0 million for the fourth quarter of 2018, was primarily attributable to an unrealized gain on financial assets of $8.9 million related to an increase in the market value of certain equity investments held by the Company, which is anticipated to be reversed in Q2 2019.
As at March 31, 2019, cash and cash equivalents and short-term investments were $68.4 million, as compared to $74.8 million at December 31, 2018.
Additional details with respect to VIVO's financial results are available in the Company's management's discussion and analysis and interim financial statements for the period ended March 31, 2019, both of which can be found on SEDAR at www.sedar.com.
Key Financial Results
|
|||
( $ millions except per share amounts) |
Three Months Ended March 31, 2019 |
Three Months Ended December 31, 2018 |
Three Months Ended March 31, 2018 |
Net revenue |
5.1 |
5.8 |
0.5 |
Net income (loss) |
5.0 |
(8.0) |
(7.0) |
Basic and diluted income (loss) per share |
0.02 |
(0.03) |
(0.08) |
Adjusted EBITDA(1) |
(2.2) |
(7.3) |
(3.2) |
(1) Adjusted EBITDA is not a measure of financial performance under IFRS. The definition for Adjusted EBITDA, which excludes unrealized gains and losses related to strategic investments, can be found in the Company's management's discussion and analysis for the three months ended March 31, 2019, which is available under the Company's profile at www.sedar.com. |
Business Segment Overview
VIVO's mission is to create long-term shareholder value by focusing on achieving its strategic priorities as outlined above, through the operation of its three primary business segments in the cannabis sector, being:
- Premium Cannabis Product Segment operated by Canna Farms and ABcann, through which the Company produces and sells cannabis and cannabis-derived products for medical purposes and for the adult-use market
- Medical Cannabis Clinic Segment, under which the Company operates education-focused, patient-centric, cannabis discovery clinics under its Harvest Medicine brand
- Corporate and International Segment, which relates to VIVO's non-production related corporate activities, as well as the Company's international operations
Premium Cannabis Product Segment
Canna Farms
In March 2019, Canna Farms, located in Hope, B.C., received Health Canada approval for the expansion of its Yale Road facility. Over 30,000 clones have been propagated to fill the space, which is expected to result in over 3,000 kilograms of additional annual production capacity – doubling the previous capacity in B.C. Canna Farms also recently received municipal approval for the construction of Phase 5 of its facility, which, following its expected completion in Q1 2020 and the receipt of Health Canada approval, is expected to result in additional internal annual production capacity of 2,500 kilograms.
The Canna Farms medical cannabis platform continues to grow, and now offers the largest variety of medical cannabis products in Canada. The platform now provides patients access to premium products cultivated by four separate licensed producers as, subsequent to March 31, 2019, VIVO announced the addition of GTEC Holdings Ltd. to the list of licensed producers selling product to medical patients via the platform.
Canna Farms continues to receive the strong support of its clients, winning the People's Choice Award for "Best LP Customer Service" at the O'Cannabiz Industry Gala in April 2019.
ABcann
In March 2019, ABcann, located in Napanee, Ontario, received Health Canada approval to begin cultivation in the expansion of its Vanluven facility, which includes production space built to GMP standards and a recently commissioned supercritical CO2 extraction suite to produce concentrates. This approval more than doubles the facility's annual production capacity.
ABcann continues to invest in initiatives focused on novel genetics and growing techniques to maximize yields. In March 2019, it received an amendment to its production license allowing for the sale of cannabis oil, which will allow it to significantly expand its product lines for both medical cannabis patients and adult-use consumers. It intends to use its processing license, which also allows the manufacturing and preparation of other concentrates, to manufacture new products for the edibles and beverage segments when those markets open in late 2019. The Vanluven facility also houses a world class cannabis R&D lab, where the Company is developing proprietary cultivation techniques in partnership with the University of Guelph. ABcann is working towards obtaining EU-GMP certification of the Vanluven facility in late 2019 to allow for the export of medical cannabis to international markets.
Construction is nearing completion at Phase 1 of ABcann's Kimmett facility, consisting of four seasonal greenhouses and an associated header house, which are expected to be completed in Q3 2019. Following receipt of Health Canada approval, this first phase of the Kimmett facility is expected to provide an additional 3,000 kilograms of annual production capacity at one of the lowest capital and operating costs per gram in the industry.
Medical Cannabis Clinic Segment
Harvest Medicine operates five medical cannabis clinics in the provinces of Alberta, New Brunswick, Nova Scotia and Ontario, including a 3,500 square foot clinic in Northland Village Mall in Calgary, Alberta, and a 3,000 square feet clinic in the St. Albert Centre in St. Albert, Alberta.
In October 2018, Harvest Medicine launched its HMED Connect telemedicine platform, which allows patients across Canada, where permitted, to access Harvest Medicine's class-leading education and patient-centric model at any time. HMED Connect is expected to create significant partnership opportunities with pharmacies, long-term care facilities and insurance companies.
Through its clinics and HMED Connect, Harvest Medicine serves over 27,000 registered patients, making it one of the top clinic networks in Canada. It continues to evaluate new clinic locations throughout Canada.
Corporate and International Segment
VIVO has increased its international operations in recent months through its wholly-owned subsidiaries, ABcann Germany GmbH ("ABcann Germany"), which is focused on the European market, and Beacon Medical Australia Pty Ltd. ("Beacon Australia"), which provides an entry point to the Asia-Pacific market.
In the first quarter of 2019, VIVO exported three of its proprietary cultivars, covering a broad range of cannabinoid profiles, to Europe. These cultivars are now being propagated in a GMP-designed facility to form VIVO's genetic basis for commercial cultivation in Europe and are intended to be sold through German pharmacies pursuant to a supply agreement with VIVO's distribution partner.
In March 2019, ABcann Germany received its pharmaceutical wholesale license and GDP-certificate from the regulatory authorities of the state of Brandenburg, Germany. The Company is currently awaiting its narcotic and import license approvals in Germany to facilitate imports of products to the European medical market from other countries, including Canada.
VIVO is active in the Australian medical cannabis market through Beacon Australia and has provided its products to Australian patients with a variety of medical conditions. The market in Australia is expected to grow and the Company believes it will benefit from the extensive opportunities evolving there.
Beacon Australia has partnered with Australian Medical Cannabis Services and is currently conducting an observational study on the use of cannabinoids as therapy for chronic pain. Led by a group of well-known pain specialists in Melbourne, Australia, the study is expected to provide long-term data that helps evaluate the efficacy of medical cannabis in treating pain and further support the development of VIVO's portfolio of medical cannabis products.
Subsequent to March 31, 2019, VIVO signed a distribution agreement with Burleigh Heads Cannabis Pty Ltd., one of Australia's leading medicinal cannabis distributors. The agreement is expected to increase the ability of Australian patients to access VIVO's high-quality medicinal cannabis flower, oil and other products via approved channels.
About VIVO Cannabis™
VIVO, based in Napanee, Ontario, is recognized for trusted, premium cannabis products and services. It holds production and sales licences from Health Canada and operates world-class indoor cultivation facilities with proprietary plant-growing technology at its Canna Farms facility in Hope, B.C., and at its Vanluven facility in Napanee, Ontario. VIVO has a collection of premium brands targeting unique customer segments, including Beacon Medical™, Fireside™, Canna Farms™ and Lumina™. The Company is significantly expanding its production capacity and distribution channels; growing its domestic medical cannabis platform, including Harvest Medicine, its patient-centric, highly scalable network of specialty medical cannabis clinics and services; promoting production and cultivation innovation and pursuing partnership and product development opportunities; and actively focusing on growth in select international markets, including Germany and Australia. VIVO has a healthy balance sheet and is well-positioned to accelerate its growth in Canada and internationally. For more information visit: www.vivocannabis.com
ON BEHALF OF THE BOARD OF DIRECTORS
Barry Fishman
CEO and Director
Neither TSX Venture Exchange nor its Regulation Services Provider (as that term is defined in the policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this release.
Disclaimer for Forward-Looking Information
All dollar amounts in this news release are in Canadian dollars. Certain statements in this news release are forward-looking statements, which are statements that are not purely historical, including statements regarding the beliefs, plans, expectations or intentions of VIVO and its management regarding the future. Forward-looking statements in this news release include statements regarding: the Company's plans to expand capacity and expected future capacity; expected timing of completion of expansion projects and GMP certification; expected timing of receipt of regulatory approvals; proposed future product lines; the Company's objectives to grow its product line and distribution network, including through the creation of key strategic partnerships; and the Company's intent to pursue opportunities domestically and internationally. Such statements are subject to risks and uncertainties that may cause actual results, performance or developments to differ materially from those contained in the forward-looking statements, including: that the Company may not be able to achieve its production capacity targets at some or all of its facilities; that the Company may not be able to launch new products in the time expected or at all; that the Company may not be able to achieve competitive margins; that the Company may not be able to increase the sales of its products in the current domestic market or to successfully launch new product lines in the time expected or at all; that new products, if launched, may not be accepted by the market or may become subject to product liability claims; that the Company may not be able to obtain necessary licenses; that the Company may not be able to serve larger and broader markets as a result of its production increase; that the Company may be unable to retain its key talent; that the Company's expansion plans may not be completed in the time expected or at all; that the Company may not obtain necessary regulatory approvals; and other factors beyond the Company's control. No assurance can be given that any of the events anticipated by the forward-looking statements will occur or, if they do occur, what benefits the Company will obtain from them. Readers are urged to consider these factors, and the more extensive risk factors included in the Company's annual information form for the year ended December 31, 2018, which is available on SEDAR, carefully in evaluating the forward-looking statements contained in this news release, and are cautioned not to place undue reliance on such forward-looking statements, which are qualified in their entirety by these cautionary statements. The forward-looking statements in this news release are made as of the date hereof and the Company disclaims any intent or obligation to update publicly any such forward-looking statements, whether as a result of new information, future events or results or otherwise, except as required by applicable securities laws.
SOURCE VIVO Cannabis Inc.
VIVO Investor Relations: Craig MacPhail, +1-416-848-9839, [email protected]; NATIONAL Capital Markets: Michael Bumby, Chief Financial Officer, [email protected], VIVO Cannabis Inc.
Share this article