Exclusive Interview with MediPharm Labs Co-Founder and President Keith Strachan
MediPharm Labs (TSX: LABS) (OTCQX: MEDIF) (FSE: MLZ), focused solely on generating cannabis concentrates, has a major income position in the Canadian cannabis market place. Co-Founder and President Keith Strachan spoke with New Cannabis Ventures about the company’s strategy to white label partnerships, the value of good quality, and international expansion plans. The audio of the complete conversation is offered at the finish of this written summary.
MediPharm Labs Leadership
Strachan has a background in provide chain management. He worked in a quantity of government positions ahead of he entered the healthcare space. It was then that he met Pat McCutcheon, Co-Founder and CEO of MediPharm Labs, who was functioning the pharmaceutical space. Strachan has usually had an entrepreneurial sense, which led him to the restaurant business enterprise and then to freelance consulting. As a consultant, he helped some of his customers by way of the cannabis application course of action. He crossed paths with McCutcheon once more, and the notion for MediPharm Labs was formed.
Now, the business has 200 workers. Some of the other essential members of the leadership group include things like Common Counsel Ahmed Shehata and CFO Bobby Kwon. Shehata comes from a background in corporate law. Kwon, a current addition to the group, previously worked with Weston Group and Unilever.
The MediPharm Labs facility is positioned in Barrie, Ontario, roughly 45 minutes north of the Toronto airport. The proximity to the higher Toronto region has helped the business to attract and retain talent, according to Strachan.
The facility is 70,000 square feet with 10,000 square feet becoming employed for production. The business presently is functioning on a quantity of Well being Canada amendments to expand the quantity of production space.
The company’s facility, positioned in an industrial zone, was standing ahead of MediPharm Labs was established, but it was a wide-open warehouse. This has permitted the business to objective-construct its facility for GMP certification, a signifier of the company’s commitment to good quality.
MediPharm Labs has a deep market place attain in Canada. Hunting at the final quarter, the business is third in Canadian cannabis business income, behind Canopy Development and Aurora.
In the brief-term, domestic development may possibly level out, according to Strachan. But, Cannabis two. is a significant chance for development in Canada. MediPharm Labs is positioned to present the active components organizations require to create beverages, edibles, topicals, and vape merchandise.
Cannabis Sourcing and Extraction
MediPharm Labs was the initially Canadian business to do concentrate-only production. In early 2018, market place demand and the quantity of licenses produced it tricky for the business to supply the dried cannabis it necessary. Now, dried cannabis is readily offered.
Higher provide has translated into decrease fees, but MediPharm Labs is not necessarily hunting to supply the least highly-priced material. Rather, the business focuses on sustainability and good quality. Will a supplier be capable to give the business item on a month-to-month basis? Is that item of higher good quality? The business vets all possible suppliers for a shared concentrate on good quality, and all shipments of dried cannabis undergo third-celebration testing.
The company’s internal science group and scientific advisory board reviewed distinct extraction methodologies and eventually decided COtwo extraction was the ideal alternative for the sort of good quality the business was targeting.
MediPharm Labs wanted to scale swiftly, so opting for an R&D strategy and establishing a new strategy to extraction was not a very good match. Hydrocarbon extraction, working with butane or propane, did not match with the company’s threat profile. In comparison to ethanol extraction, COtwo extraction makes it possible for for any earlier separation course of action of cannabinoids, according to Strachan.
White Label Partnerships
MediPharm Labs partners with other organizations to give them a platform to launch their merchandise and brands. In quite a few other mature industries, like CPG and pharmaceuticals, brands outsource their production. MediPharm Labs is hunting ahead to exactly where the market is most likely going, alternatively of exactly where it is now.
When it comes to choosing its partners, MediPharm Labs appears for thriving organizations with the potential to sell by way of. For instance, well-known brewery Ace Hill launched a dried flower line below the Ace Valley brand. The preroll became a single of the best-sellers in Ontario. When the business decided to add a higher-good quality vape pen, it was a very good match for MediPharm Labs.
Canopy Development is also a single of MediPharm Labs’ shoppers. The business sells Canopy Development an intermediate item, a winterized resin, by the kilogram, which then goes into a quantity of Canopy Growth’s item lines.
In addition to its Canadian footprint, MediPharm Labs is expanding its international attain. In Australia, the business has 80 % ownership in MediPharm Labs Australia. The business is undergoing the course of action of earning government certification for that facility. Physicians are gaining additional energy to treat sufferers, and the quantity of healthcare cannabis sufferers is expanding in this market place, according to Strachan.
In Germany, MediPharm Labs has partnered with ADREXpharma, which currently sells dry flower and CBD oil. MediPharm Labs will supply the business the active components to build THC oil. Widespread government coverage of healthcare cannabis in this market place assists producers simply because it alleviates value compression, according to Strachan.
MediPharm Labs is continuing to concentrate on international expansion, hunting at markets like Asia, South Africa, and South America.
When MediPharm Labs does not conduct clinical trials, it is in a exceptional position to help this sort of analysis. As a higher-good quality manufacturer, the business can supply clinical researchers with a repeatable item. For instance, the business is manufacturing CBD gel caps for a clinical trial run by Mount Sinai.
Trials like this also present a industrial chance. If a item comes from a thriving clinical trial, MediPharm Labs could turn into the manufacturer of selection, according to Strachan.
Funding and Capital Allocation
In June, MediPharm Labs closed on a $75 million purchased deal, oversubscribed and led by Scotiabank. And, in October, the business closed a $38.7 million upsized credit facility. MediPharm Labs has however to pull down on the line of credit, save for the mortgage on its creating. The business is nicely-funded, money flow optimistic, and not actively hunting for capital.
MediPharm Labs will be allocating its capital into a couple of distinct places. The business will be focusing on expanding and adding additional automation to its Barrie facility, staying existing with its GMP methodology, hunting at international possibilities, and acquiring the dried cannabis it wants to hold up with orders and to help the massive-income quarters it has executed on this year.
Listing on the NASDAQ
The business has had sturdy help from the retail investment sector, but now it is targeting new, institutional investors. MediPharm Labs has filed an application to list on the NASDAQ. In addition to access to institutional investment, listing on the NASDAQ will aid the business show its leadership position in the sector, according to Strachan.
Tracking the Company’s Development
MediPharm Labs reported $43.four million in Q3 income, 38 % development from Q2. Taking into consideration the regulatory atmosphere of Canada and slower than anticipated rollout of retail shops, the business, is not expecting one more 38 % development quarter in Q4, but expects to develop more than time as a market place leader, according to Strachan.
Strachan sees area for additional competitors, especially on a international scale. Maintaining in thoughts the regulatory atmosphere and the fairly compact population of Canada, the business is excited about the international healthcare chance. As the business grows, Strachan recommends investors watch the company’s continued commitment to good quality, as nicely as income and profitability.
New Cannabis Ventures delivers an Investor Dashboard for MediPharm Labs, which is a client of New Cannabis Ventures. Listen to the complete interview:
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