MediPharm Labs Corp. (LABS) Earnings Call Transcript & Summary

Ladies and gentlemen, thank you for standing by, and welcome to the MediPharm Labs conference call. [Operator Instructions] Please be advised that today's conference is being recorded. [Operator Instructions] I would now like to turn the call over to Laura Lepore, Vice President. Please go ahead.

Thanks, operator, and good morning, everyone. Thanks for joining us. With me on the call today are Pat McCutcheon, Chief Executive Officer; Keith Strachan, President; and Bobby Kwon, our Chief Financial Officer. Now before we begin, please note the cautions reflecting forward-looking information, which is made on behalf of MediPharm Labs and all of its representatives on the call. The oral statements made on this call will contain forward-looking information that involves risks and uncertainties, including those introduced by the COVID-19 pandemic. 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 conclusion, forecast or projection in the forward-looking information and the material factors or assumptions that were applied in [ drawing assumptions ] or making a forecast or projection as reflected in the forward-looking information are contained in MediPharm Lab's filings with the Canadian provincial securities regulators, which are available on the SEDAR website at sedar.com. Now with that, it's my pleasure to turn the call over to Pat.

Thanks, Laura. It is with the incredible excitement to welcome everyone to the call this morning. I'd like to begin by thanking for taking the time to discuss the most significant partnership in our young company's history. It is our first agreement with a pharmaceutical company, an exclusive weighable partnership between MediPharm Labs and German-based STADA. By bringing together complementary strengths, we have an extraordinary opportunity to bring medical Canada's products to multiple markets throughout Europe, starting with Germany. This agreement will be the first in a pharma medical cannabis supply. And as such, we'll raise awareness and education to allow patients, pharmacists and physicians to act with confidence when it comes to medical cannabis. This very exciting launch begins in just a few short months. On today's call, I'll start and Keith will provide additional highlights and we'll conclude the call with your questions. For MediPharm Labs, this is a major breakthrough achievement and realization of our strategic plans. STADA is a large European pharmaceutical company with product presence in 120 countries and with significant market share in Europe. This partnership is a realization of the strategy we put in place when forming MediPharm. From the very start, we organized and invested to create the specialized research-driven pharma quality capabilities that would put us in a position to earn the trust of a sophisticated pharmaceutical company like STADA. To us, this is a major validation of our business model and our early commitment to investing in GMP-certified capabilities from 5 years ago now. Central to this agreement is that we will provide [indiscernible] active pharmaceutical ingredients for multiple products launched by STADA. In the pharma industry, API supply firms enjoy special status and MediPharm Labs is now established its place in the value chain, which is incredibly important to our future. To get here, STADA, we took a very detailed and lengthy qualification process. Initial discussions between our company became -- sorry, began over a year ago. And over the months escalated to details [indiscernible]. STADA analyzed our capabilities, including our supply chain, from start to finish to satisfy themselves that we would live up to their high standards. There's no question that STADA would not have begun this journey if MediPharm Labs wasn't GMP certified. I've been talking about the importance of GMP for a long time now, and this is the first pharma deal is exactly why we did this. Although we already gained admission to the EU through our PGA GMP licenses and enjoy several valued European customer relationships, this collaboration sets the stage for MediPharm Labs to contribute to patients and the medical community on a much, much bigger and broader scale. Our collaboration starts in Germany, which accounts for 3 quarters of the EU's medical cannabis market and we'll then move to other EU countries and territories over time. We see significant long-term opportunity to grow as we jointly fulfill patients needs in Europe, where demand for medical cannabis is often greater than the supply of pharma quality cannabis ingredients and products. We also recognized what needs to happen to make cannabis more accessible and trusted by consumers and health care professionals to recommend it. One of the most important things is for medical cannabis to earn a seal of approval from a recognized pharmaceutical company that can be trusted. Quality products and trust are key in all industries, but perhaps more so in the pharma than ever. With STADA's backing and market presence, we are on a path to become a global market leader. We're not going to speculate on the revenue potential because we need to walk before we run. The first step will be to work with STADA on product development and formulations. So instead, I would encourage you to look at the state of the medical cannabis market today and the opportunity it presents. After legalizing medical cannabis 3 years ago, Germany has become a leading power in the European industry. According to the words of Prohibition Partners, one of the cannabis industry's leading research firms, Germany is set to become a behemoth in the global market in the coming years. The Medical Cannabis Network, another independent third-party provider of research amplifies this very positive outlook. They found that in Germany, between EUR 150 million and EUR 175 million of medical cannabis is currently purchased, even though just 10% of German pharmacies dispense it and only a limited number of doctors prescribe it. Of significance, medical cannbis is covered by insurance [indiscernible] in Germany. The National Association of Statutory Health Insurance Funds, whose members cover 90% of the German market, releases quarterly data on insured covered medical cannabis. The trend line is upward, which may contribute to an increase in doctors and patients prescribing and using cannabinoid medications for a wider range of conditions and perhaps a more established and growing consensus on the benefits of such use. In terms of the market makeup, sales of cannabis-based pharmaceutical product and extract recently surpassed those of cannabis flower in Germany. Signaling that oils and [indiscernible] are becoming more popular, like we do as in Canada, to product familiarity and dosing precision. Again, this points to the opportunity for MediPharm Labs as we leverage our GMP-certified extraction facilities to create marketable products for STADA. By putting the joint resources of STADA and MediPharm Labs to work, we intend to earn the trust of medical professionals and patients and contribute to what the Medical Cannabis Network estimates could be EUR 1.5 billion market within 5 years. To emphasize, the Medical Cannabis Network is talking about a much -- as much as tenfold increase in market value in under 5 years. This growth will not happen because we want it to. It will happen because companies like ours make it so. With that, I'll now invite Keith to tell you more on the subject. Keith?

Thanks, Pat, and good morning, everyone. Appreciate everyone taking the time to jump on this call. What I'll do is I'll begin by describing our respective responsibilities. MediPharm Labs is passed with supplying GMP-certified cannabis products as well as the formulation, manufacturing, logistics and regulatory support. It really is a full meal deal that makes great use of our capabilities as a supplier of API. We are exceptionally well-qualified to perform these services as the GMP-certified medical cannabis supplier equipped with multijurisdictional state-of-the-art production capabilities, supported by sophisticated enterprise resource planning systems, or SAP, that will definitely enhance the inventory management assets associated with this complex but exciting opportunity. Our specialized scientific, legal and regulatory teams are in my estimation best-in-class and will play a part in the success of this partnership. Precision, quality and reliability of supply is MediPharm Labs forte. And we've proven this time and time again with our execution in the industry. A company of STADA's stature expects nothing else and we will deliver. We expect to begin shipments under this agreement in early 2021, with the ramp-up to follow, and our initial focus will be specifically on Germany. STADA will commercialize the output, a path for which it's qualified by virtue of trust it has earned in the medical community and its incredibly strong and deep market presence that is headlined by experienced pharma field force. By way of background, STADA is a global pharmaceutical company and employs over 12,000 professionals worldwide and focuses on 2 pillars: the first being, generic, including specialty pharmaceuticals; and the next being nonprescription consumer health products that are on the top of sellers and they're both prospective categories. Worldwide, it serves consumers in 120 countries. And the last fiscal year, achieved adjusted group sales of EUR 2.6 billion, which will be just over CAD 4 billion. STADA has deep roots and long-standing heritage of serving pharmacies as a reliable and trustworthy partner, active in Europe for over 125 years. There are about 20,000 pharmacies in Germany alone, and a significant portion of these rely on STADA for their supply of both generics and nonprescription drugs. STADA invests in R&D, its own manufacturing facilities and scientific laboratories and employ strategies that reinforce its leading marketing and sales capabilities. These strategies and investments support serious product advancements and organic growth. STADA complements its homemade growth with strategic business development that involve partnerships with the leading organizations in specialty areas, and licensing and acquisitions as we saw with the major acquisition that they had just last week. Their collaboration with MediPharm is a perfect fit with these strategies. Pat is correct in saying that the partnership did not call about by accident. STADA is deeply committed in the medical cannabis market in which Europe is its first base. Medical cannabis was legalized in Germany in March 2007, and the German government regulates and license international imports and currently developing a domestic industry through its Federal Institute for Drug and Medical Devices. Legalization has supported the growth in the medical cannabis patient population as has the fact that in the last year, research suggest that 60% of German medical cannabis prescriptions were reimbursed by insurance companies. This means more people can afford the treatment that they need. The numbers that we've seen from Prohibition Partners suggest that over 60,000 Germans are registered as users in the medical cannabis, and this is only the start. For its part, STADA will use our expertise, market reach, and reputation to build awareness and in part knowledge that will thoroughly enhance the experience of patients and the confidence of doctors and pharmacists to improve these prescription rates. This will not happen overnight. And accordingly, STADA tells us they are fully prepared to invest in the effort in a focused and dedicated manner that is attuned to German and eventual European market customs and tastes. We will learn from STADA, and they will learn from us. Now back to Pat for closing comments.

Thank you, Keith. We very much look forward to working with the STADA team. So that together, we can become a transformative force in the European medical cannabis markets. In assessing this partnership, I think, our investors analysts should note that the cannabis businesses have found European market entry difficult, even though Germany is very much reliant on international importation and will not see its first domestic harvest until next year. MediPharm Labs and STADA effectively leapfrog these challenges as a result of this important collaboration, getting to market quickly and we've qualified with GMP formulations will make us trusted and go-to partners. To conclude this partnership is further evidenced qualifying MediPharm Labs transition from leading domestic to top global pharma cannabis company focused on medical cannabis products. We are on track with the plans that we set out since our founding. Executing on this deal further validates the reason for and the value in our business model and GMP certifications, we have worked all so hard to achieve. That concludes our prepared remarks. Operator, please open the line to questions.

[Operator Instructions] Your first question comes from David Kideckel with ATB Capital Market.

Congratulations to the MediPharm doing really amazing during the announcement this morning. A couple of questions from me. The first is, given your very strong focus on pharmaceuticals and your previous experience as well, my question is, as you entered a German market initially, with STADA, I'm going to assume that this is the primary sales or the primary care sales force that might be commercializing this at first. So my question is, at what point or what place is this in their actual bag of pharmaceuticals that they're actually selling? I'd imagine that the medical cannabis products is not going to be the only product that they're going to be detailing to health care professionals. So that's my first question around it. And similarly, it seems like from the press release you put out and some of our own research, you don't know Germany accounts for quite a bit, in fact most of the European medical cannabis sales. Is it a fair assumption as well that the sales force within STADA, it's not just going to be educating health care professionals around medical -- or around your products, MediPharm, but also medical cannabis in general.

I'm going to start actually by just talking to this [indiscernible] first part of 2 questions over to Keith, and we can take it from there.

I really appreciate the question. Kind of to your original point on the marketing and sales aspect of this. As you know, pharmaceutical marketing and sales is pretty heavily regulated in those activities and partnering with someone like STADA, who has the experience in selling hundreds of different prescription generics, really helps us to make sure that we get that pull-through of products. As far as their sales team and their marketing, I think, in some cases, we might see some people that are dedicated to the sales and education of cannabis, and it's a very important market segment for both companies. So we'll see that dedication there. But you're right. As they have sales forces in the field, working with pharmacists and physicians then it just becomes one of many products that they could talk about, I think, they're specializing on different things, anything from cancer treatment, pain treatment to even last week expanding their portfolio in Parkinson's, having these people out on the ground, and these are existing relationships with physicians in Europe, will really help the cannabis industry as a whole.

Yes. David, just to add to your point. We're very excited to take these next steps with STADA. And as this the first, there's still a number of things that are going to be defined. We were assuming that as, typically, a large pharmaceuticals launch new products, there was a training, and there was kind of incubation of the actual opportunity for the medication in which through these state areas, it would be appropriate for. STADA is one of the leaders in Europe when it comes to this type of sales marketing performance. We're expecting a very significant sales force to be deployed starting in very early 2021. And the one thing that we did mention, I can just cover, and maybe you did ask actually an element in the second question. But the first part that will be coming [ out right through the ] STADA branded products. So...

Okay. That's it. No, that's helpful. So they're STADA branded products. They're not MediPharm. Okay. Interesting. That's very helpful, Pat and Keith. My last question, again, kind of 2 embedded in here, is more around the indications that perhaps you and STADA are targeting? Are there specific therapeutic indications you're targeting? And the context of that is, as we all know, with GW Pharmaceuticals, given they're a cannabinoid direct pharmaceutical company [ deploy ] not only the commercialization and marketing, but also R&D. I mean, just comparing now MediPharm, are there the kind of similarities or synergies with what GW is doing in Europe with what you're doing? And the second question within that, again, is, can you maybe just comment on any -- some of the revenue sharing arrangements you've either finalized or in the process of talking about with STADA?

Yes. So I'll take some more [ stages, ] and it's definitely a point of you and I've had nice key discussions on. I'm unfortunately unable to get into any particular [ news ] areas that we're going to be focusing on. With the first launch of the product, that will be determined over the next coming months. We are very excited to support their focus and where they feel most appropriate with the current regulatory framework in Germany. When we look at comparison to GW Pharma, this is a slightly difference where GW Pharma looks at a vertically integrated supply chain where they control the cultivation of the plant through all the value stages into actually manufacturing and packaging and then distributing of the product. In addition to doing their own controlled clinical trials and research. The way that we are accessing to now the global pharmaceutical market through this partnership with STADA is just that, in a partnership, utilizing complementary strength and skill sets where we will provide the expertise in formulation. The expertise in our methodology and our scale in producing these end products. Starting with the product was mentioned. And then moving on to a number of areas that STADA will be choosing, leveraging their strength. So it's a very much a joint venture partnership, where we're looking to utilize STADA with 125 years of experience of working with doctors and physicians and educating patients. And then actually, to the second question, I'm going to pass back to Keith to make a comment.

Yes. Just on the final part, just the way of looking at the deal and the economics of it. There's no, like, a revenue share, a profit share. It is traditional in the sense of a traditional supply agreement. So we sell them, whether it's inputs or final product, depending on the SKU, and that's sold to them, and then they sell that to pharmacies or patients. So there's no complications around anything like a royalty or profit sharing in that.

Again, congrats on this deal.

Your next question comes from Myles [ Nockwurst ] with [ Enkel Snider ].

It's [ Mills [indiscernible] ]. So a couple of questions. Is this a joint venture? Or is this a supply agreement? I'm just trying to really understand the economics behind this. And what's the tenure of the agreement? How many years does it last? And will the capital contribution from MediPharm? Any color you could provide would be helpful.

Yes. This is -- just to start off, this is definitely a supply agreement to starting our relationship with STADA. And actually I'll pass it on to Keith just to capture a couple of the logistics of the deal itself.

Yes. So it is a supply agreement, so there won't be any of the profit sharing or royalties. As far as capital contribution from MediPharm, a lot of what we will be putting into market could fall under our existing portfolio. We've spent, as you know, and most people on the call, a significant amount of capital becoming GMP-certified operation. So that capital has already been invested in, it allows us to quickly enter into deals like this. So additional capital wise, it would be nominal to fulfill the request for the initial SKUs, which we'll be putting into the market.

Yes. The initial term of the contract is 5 years, and we have a 5-year exclusivity, as mentioned. And we'll focus on bringing new innovative products to markets with the mass of our formulation expertise in 1 of the 2 platforms that we have between Canada and Australia.

Okay. That's helpful. And then STADA have an exclusive arrangement with you now. Are you precluded from signing a similar deal with another pharmaceutical company in Europe?

Yes. We have -- there's some -- there's exclusivity portions of the deal with STADA. As Pat mentioned earlier, this will be STADA products. So obviously, we will protect their intellectual property and their products throughout the market. As you know, we have other existing deals already in the European, North America and now South American market. We will continue to serve these so they don't preclude us from those current deals and some future ones of the same flavor, but this relationship and its actual products [ will either ] be unique. We're really looking forward to closer to launch at the end of 2020 and the beginning of 2021, again, to get into more detail on those SKUs and the makeup of them.

And I guess, just lastly, and this is forward-looking, but does this materially change your revenue profile versus your not [indiscernible] them?

As Pat mentioned, we're not getting into revenue speculation, kind of, heads up as the walk before we run. It is a partnership where this is something that is new to STADA and and working with a pharmaceutical company doing that. So it's hard to nail down the exact opportunity as far as revenue goes. I think, we're really happy to start in Germany, which is the largest medical cannabis market in Europe and one of the largest in the world. So there's a lot of revenue opportunity there. Albeit to put it down to an actual number or range would be really difficult at this time.

Okay. And then lastly, do they have any rights to potentially become an investor in MediPharm?

That hasn't been the part of our discussions to date.

So as we said before, this is their first step. We'll walk before we run. And we are continuing to explore the opportunities with STADA as we execute on the earlier stages of the partnership itself by distributing the products into Germany. I think, you can probably about even lean as you heard that comment.

And your next question comes from Aaron Grey from Alliance Global Partners.

Congrats to the MediPharm Labs team on the deal. First question for me, kind of, goes a little bit back to the exclusivity. Just in terms of the specific products that's going to include, guys, aren't going to have flower yourselves, even though that is currently in the German market? I understand how your extracts have certainly been kind of growing at a faster rate. But just as we look at this partnership, especially as you look into markets outside of Germany, where [ far ] might be a bigger portion. I just want to understand, do you have basically rights to exclusivity, everything outside of flower? Do they have the -- does STADA have the availability to partner with somebody else on the flower side? So their sales force does offer all those products? I just want to understand from the product format, what the exclusivity does entail.

No, great. Happy to shed some more light on this where we can. We're definitely their exclusive cannabis providers. So all things cannabis in Germany, we'll be servicing them as it relates to the agreement. We have contemplated expansion through Europe in the agreement itself. Probably not at this time able to comment too much on what that looks like. But we're excited to fully disclose more as we move further through the agreement. And then just on the point of specific products there what we'll be offering is truly unique in what I've seen personally working heavily in cannabis globally and MediPharm itself. So we're happy that they've -- to service them just with those unique products.

Yes. I think, really, we just want to want to leave on at this point, it's difficult to capture a number, and I know that we're looking to build into their model. The German medical market is early, and this is really the first deal with a major pharmaceutical company, not only for just for our company but for the entire Canadian cannabis sector of cannabis companies, and maybe I can just try to bring it back with some of the numbers that he mentioned before. The current market is between EUR 150 million and EUR 175 million this year. And it is expected to reach towards EUR 1.5 billion in the next 5 years. So working with a partner like this that has such an ingrained position in pharmaceutical sales and marketing, either over-the-counter products or pharmaceutically registered products. We feel that this is the best way for us to actually enhance and execute on our distribution strategy, just starting with Germany, and then exploring the rest of the countries that are actually within the STADA purview of distribution.

Okay. That's really helpful. And then I know you mentioned the initial products would be STADA branded, but just wanted to dig a little bit deeper in terms of the opportunities over time, maybe for some co-branded products, maybe say, STADA produced by MediPharm Labs. Because you are kind of running your own CPG or kind of portfolio within cannabis. So I want to just dig into whether or not there's opportunities over time for co-branding within the partnership?

Yes. No, Aaron, that's a great question. In Germany, specifically in Europe, we see this as a primarily medical opportunity. As you know, in pharmaceuticals, the ability to market and co-brand and whatnot is limited, everything from packaging to what we're able to do. So being a controlled narcotic, we got to be best and work in conjunction with STADA that we could be STADA's branded products. So I think that's probably the best place for it to be, considering they are a medical generic and pharmaceutical companies. So I think that it's best for the German and European market at this time.

Okay. Helpful. And just one last one for me, if I could. We talked about the German medical market. Certainly, one with a lot of opportunity given the population and GDP, even comparing it to Canada. Where we've seen a lot of historical revenues coming from MediPharm Labs. But just like we think about the growth of the market, right, so you guys mentioned about 1 in 10 pharmacies currently selling cannabis. STADA is going to have a very robust sales force team to kind of help spread the education not on your own products, but also cannabis. So just curious in terms of your conversations that you've had with STADA, just how you think the adoption of cannabis by doctors, pharmacists and hospitals as a whole within Germany, can really be expanded? And then in addition, in terms of just giving the patients to be able to get on the prescriptions and kind of increase the insurance because obviously, rising tide lifts all boats. So just in terms of your conversations, just maybe some initiatives you guys might have, perhaps talked on in terms of increasing the overall market of medical cannabis within Canada and how their sales force can be leveraged for that?

Yes. I have to admit that we're fairly early on in the conversations as to how STADA is going to launch and how they're going to incubate the market with regards to teaching and continued health education for physicians and physician networks. We expect that, they will execute as they historically have with a large educational blip that will then move into having sales reps accessing physicians directly. And just -- but I would [ add ] at this time, it's really an evolution in process in terms of how they're going to launch it. And this is definitely where we will push the baton to STADA to lead the charge on how they're going to position the launch.

Yes. And MediPharm supports that. I think, there's a couple of key elements that I mentioned on the execution and our our reputation. So number one, to win over physicians and patients and alike [indiscernible] is quality. So quality of these products is key, which we haven't seen in some cases in the global cannabis space. GMP-certified, obviously, being side-by-side with any of their pharmaceutical drug as far as the certification goes is also very important. And then lastly, just from MediPharm's contribution will be a robust and uninterrupted supply chain. So having been in the cannabis business for as long as we have, a short time but long in the world in cannabis, we've nailed down a lot around supply chain and the professionalism of that, both incoming and outgoing of products. So happy to bring that to the relationship as well.

[Operator Instructions] Your next question comes from Adam [ Epam ] with Scotia Bank.

Congratulations to the team for getting us across the line. So just something -- just a quick question on something like you've just touch on in winning physicians over. Now it sounds like the there may be plans or in potential clinical studies to support used cases for your formulations. Could you maybe speak to how potential IP generated for these studies will work, given that you're a supplier?

Yes. To date, we have not -- like as I mentioned, the agreement is a supply agreement. So we have not gone down that conversations of any sort of joint research on the clinical side and how that would look. MediPharm is active in the research community. Especially in North America, we consider ourselves a large portion of the UHN real-world study that's happening today with all of our MediPharm Labs products in that as well as the manufacturer of some of the other third-party products in that same study. So we hope to leverage a lot of those studies. Always with patient and physician education, no matter who the partner is, but especially instead of who are looking for that type of clinical information. But at this time, as far as like joint IT development on the clinical side is not something that we've started yet.

Okay. So second, is it possible to get an idea about any main hurdles from a regulatory standpoint that you'd be cleared before reaching market in Germany? And then secondly, could you maybe speak to some of the milestones that need to be reached to enter other new jurisdictions?

Yes. I'm going to pass it over to Keith for the regulatory question in terms of what potential challenges we'll get, either in-house German experts or regulatory.

Yes. No, I think there's -- in any global deal you do, there's always the regulatory hurdles. And I think that that's part of the reason why we're able to win business like this because we're probably the best jumping those hurdles. That we've seen so far with our PGA GMP certification and all the certifications that we have out of our facility in Australia, which is truly unique for that region. So some of the bigger ones is as you add SKUs in Germany, you actually add -- you would actually have to expand your narcotic listing so each company has like a narcotic drugs license, and those have to be expanded and approved. So there's approval process there. And you cannot start it until which time you lock in what products it is that you might be wanting to sell. So that's one hurdle. And the other hurdle is just in the infancy of our industry, every import and export is like individually approved by Health Canada. Because we do so much intercompany trade between Australia and Canada, we are on almost a monthly, biweekly basis, receiving export permits from Health Canada. So we have mastered the craft of getting export permits for us to [indiscernible]. But there's always that aspect of that that might slow down, whether that's a government decision or if that's just even the side effect of something like the current COVID pandemic. There always will be those hurdles and those [ disasters ] as far as having to pass some regulatory different challenges. But I'd say the key milestone will be just our actual first export product to Germany, which we'll hope to do by the end of the year.

Yes. I think one of the important -- really important things that I'll just mention again, I think, should resonate through the presentation today. Is that in joining forces with STADA and the supply agreement really gives us the advantage to leverage and utilize their strengths as a company that's been distributing and marketing products over 125 years in Germany. This is definitely a little different than the typical Canadian cannabis companies kind of distribution strategy. We're going into any of these European countries and specifically with Germany. Even though we've mentioned that we've got a couple other opportunities that we've explored, and we will continue to explore. We feel that STADA, it really has the best and also robust opportunity to compete against a number of our peers in this space, which gives us a significant leg up on opportunity to accelerate our distribution revenues into Germany to start.

Your next question comes from Scott Fortune of Roth Capital Partners.

Congratulations on the announcement and the other supply agreements you have got going globally to transition your story here. Real quick, I want to discuss the current pharma company is also starting to educate on medical cannabis in the German market. STADA is not alone in entire nearing this. We know Novartis is involved, but are there pharmaceutical or distributors involved in the space, and this is a large and growing given market with a lot of market share. A bit color on the kind of competition front. How you guys see it going forward here?

Yes. At this point, yes, there's definitely, obviously, been some rumors, and there's a little information now that is percolating kind of through the mini channels in terms of what the competition is and how the landscape is going to roll out. We feel that this first leading step that STADA is taking with us, really shows that they're going to position themselves as a stock owner in cannabis distribution and also for physician education and direct to sales marketing. So we -- it's a little relative for us to kind of comment as we're not as clear on how Novartis is going to position and with this point in particular, you're going to see a lot more follow-on with regards to disclosure as we get sooner to the launch date in January for 2021.

Yes. So I think really, competition wise, this would be first of its kind as far as distribution goes from a pharmaceutical company. You mentioned Novartis. Novartis disclosed LOI with [indiscernible]. We actually haven't seen disclosure of that even becoming a definitive agreement as of yet. So we're yet to see good traction from a company like that and actually any sort of marketing or registration of products under our product license. So just thinking back to even what we were just speaking about on milestones and regulatory hurdles, like if they were to start tomorrow, they'd still be months and months and months behind on some of those registration work that we have to date. So I think that we are clearly ahead as partners in this as far as competition goes. But even in the world of cannabis companies and some of these other companies that are going to distribute in Germany, I think, that the existing relationships that has put them in a different round of some of these cannabis start-ups. And that's why we've been looking for a partner like this.

Okay. And then kind of just circle back on the products, what are we seeing in the German market currently, patients kind of demanding or the product offering that the patients have shown strength in high CBD or THC or as such? Is there any color on in the formats, then the patients have been demanding from that standpoint?

Yes. I think when you look at it, with over 60,000 patients today, they the demand for cannabis as a medical solution. When you get down into product innovation, it's probably something that we're seeing to start to ramp up just now. To date, the majority of sales in Germany have been flower, and a lot of it comes from the sales of [indiscernible] in the Netherlands. So choice wasn't really high up there in these patients' needs. But now as more companies come in, we can expand that and give them some more options. So as we get closer to launch, I think, that we'll be excited to talk about some of those products and what options that provides with patients.

Yes, I think, with this deal, as again, we've mentioned a couple of times, it really validates cannabis as a medical therapeutic option. And with STADA being the size they are, doing -- over $2.5 billion in revenue last year. We feel very comfortable. And we hope the investor community very much sees that this is a true mirror that fills the comfort in now delivering products from a company like MediPharm Labs with such a well-established supply chain and the certifications that we have and the proof that we've already been able to move products around the world globally, really supports their need and requirements of diligence. So we feel STADA is a fantastic partner, and we feel they're [indiscernible] are going to be strong as they have with all of that products they've done over the long years and track record they've had in Germany.

Okay, great. And one last real quick follow-up. This doesn't depend on EU's GMP certification being finalized currently to begin selling in 2021, or does it?

We have all the certifications in place to go forward on the deal. Logistically, we have a GMP certification here from the Therapeutic Goods [ Administration ]. So I want to say here in Canada at our facility. And then in Australia, we have our certification in the Australian domestic certification as it's treated as in their narcotics pharmaceutical in that region, really opens up the possibilities for movement. So we'll lean on that as well as whether subcontractors in order to deliver on everything that is promised in this agreement and continue our reputation of execution. So while we await how inspections will be treated, under COVID-19 and when that might stop and we can have the last fulsome inspection of our Canadian facility, we are still able to operate this agreement commercially before that.

[Operator Instructions] Your next question comes from Shane [indiscernible] with Cannacord Genuity.

Congrats on the announcement. Most of my questions have been answered. So just one for me here. So from the press release, it seems as though the supply agreement is centered around medical cannabis product. I know that STADA has a pretty robust nonprescription consumer health product line. And so I was wondering what the potential was for potentially leveraging brands in that product line in hampered CBD type offering? Have there been any discussions there? And if so, what would the timeline look like?

Yes, it's a great question. I think STADA like a lot of pharmaceutical -- leading pharmaceutical companies that's really taken a big plunge into the health and wellness sector. If you look at some of STADA's, even recent in the last 3 months, some of the things they're doing, that's really exciting of what they're doing in nonprescription and health and wellness. So we're excited to be working with that partner. As far as future product goes, as you know, there's a lot of regulatory things still on the table as far as how things like CBD will be treated, whether that's novel food ingredients or prescription and things like that. So we will await to see what happens there before MediPharm would enter into that space with STADA or anyone else.

And there are no further questions coming up at this time. I'll turn the call back over to Pat McCutcheon, Chief Executive Officer, for closing remarks.

Yes. Thanks so much for the conference call and the questions today. We really wanted to just leave the call with such an exciting position that our company is in today. This truly is the execution of our vision and strategy that we've positioned and that we initially launched in terms of how we communicated the story of MediPharm Labs. It's not been without challenges, and it's taken a good amount of time to create a foundation as strong as we have with 2 GMP-certified facilities now that we can access the world and distribute our GMP-certified products. This relationship with STADA truly is the first of its kind in terms of the supply agreement and an opportunity now to accelerate our options of revenue into Germany and then into the rest of Europe, which is a very exciting moment for our company. Thank you so much for everyone listening and then standing by and supporting us. This is one of the most exciting times of our company's life. Thank you so much.

This concludes today's conference call. You may now disconnect.