MediPharm Labs Corp. (TSX: LABS) (OTCQX: MEDIF) announced its revenues fell to $4.9 million for the third quarter ending September 30, 2020, versus $13.9 million for the second quarter of 2020. This was a massive decline from last year’s revenue of $43 million for the same time period. The company also delivered a net loss before tax of $15.4 million, compared to a net income of $5.3 million for last year’s third quarter. It also increased sequentially from a loss of $3.7 million in the second quarter.
MediPharm said that the decline in revenue was due to lower bulk extract volumes and average selling prices, which were partially offset by growth in formulated finished goods sales, up 30% to provincial distributors throughout Canada, and sales from MediPharm Labs Australia. The company told investors in a statement that based on agreed customer production schedules, it expects revenue from its portfolio of domestic and international sales agreements to grow beginning early in 2021 and will be complemented by new sales of LABS Cannabis products.
“Economic conditions including the oversupply in the Canadian bulk crude resin and distillate markets, along with the impact of COVID 19, continue to challenge the industry,” said Pat McCutcheon, CEO, MediPharm Labs. “We are now focused on doing more to drive profitable revenue and address weaknesses including reducing our cost structure. We have taken immediate steps to improve our costs and organizational alignment against which we have put an action plan in place that will create value and enable us to achieve our potential.”
The company reported its gross profit was ($10.6 million) and gross margin was (214%) compared to a gross profit of $2.2 million and a gross margin of 16% in the second quarter of 2020. This was primarily due to a $6.3 million non-cash write-down of inventory to net realizable value and a $1.5 million write-down of non-current deposits given to vendors for capital expenditures. The gross profit was $$14.7 million for the 2019 third quarter. The negative Adjusted EBITDA was $7.3 million.
The company said that it had a cash and equivalents balance of $36.5 million on September 30, 2020.
C Suite Changes
Following the end of the quarter, MediPharm announced the departures of Robert Kwon, Chief Financial Officer, and the company’s Chief Marketing Officer. A search process has been initiated for a new CFO while the role of Chief Marketing Officer will not be directly filled and but will be covered by the company’s new VP of Sales.