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

Welcome to the Special Meeting of Shareholders of MediPharm Labs Corp. Please note that the meeting is being recorded. I would like to introduce Mr. Keith Strachan, President of MediPharm Labs Corp. and Chair of today's meeting. Mr. Strachan, the floor is yours.

Thank you. Good afternoon, everyone. It is now 1 p.m. Toronto time. The meeting will now come to order. My name is Keith Strachan, I am the President of MediPharm Labs. On behalf of the Board and management of whom David Pidduck, Chief Financial Officer (sic) [ Chief Executive Officer ]; Greg Hunter, Chief Financial Officer; Geoff Marr, Executive Vice President and General Counsel, are in attendance. Welcome to the Special Meeting of Shareholders of MediPharm, which is being held in connection with the MediPharm's proposed plan of arrangement with VIVO Cannabis Inc. Before we begin, please note that remarks today may contain forward-looking information and forward-looking statements within the meaning of applicable securities laws. This includes statements about MediPharm Labs and its current and future plans, expectations, intentions, financial results, levels of activity, performance, goals or achievements and other future events trends or developments, including statements about the transaction with VIVO, the combined company resulting from the transaction and its future financial and operational performance; the combined company's key business segments, product offerings, pro forma and overall financial performance; potential future revenue and cost synergies resulting from the transaction and statements about the combined company's profitability and ability to grow the business ongoing going forward following the transaction. To the extent of any forward-looking information contained in these remarks constitutes financial outlook, our financial guidance and development of such financial guidance, MediPharm and VIVO made a number of assumptions and relied on a number of factors and considerations, all of which are described in the circular. Forward-looking statements are made as of the date of hereof based on information currently available to management and on estimates and assumptions made based on factors that we believe are appropriate and reasonable in the circumstances. However, there can be no assurance that such estimates and assumptions will prove to be correct. Many factors could cause actual results to differ materially from those expressed or implied by forward-looking statements. Forward-looking statements and financial outlooks are based on assumptions and subject to various risks, which include, among other things, those outlined in the circular and under the heading Risk Factors in our most recently filed Management Disclosure and Analysis and Annual Information Form, which are available on SEDAR. MediPharm's actual financial position and results of operations may differ materially from management's current expectations. As a result, we cannot guarantee that any forward-looking statements or financial outlooks will materialize, and you are cautioned not to place undue reliance on this information. Forward-looking statements are made as of the date hereof and except as many required by law, the company undertakes no obligation to update or revise any forward-looking statement, whether as a result of new information, future events or otherwise. Now back to the meeting. With the consent of the meeting, I will act as Chair of this meeting, and I appoint [ Amy Marson Garter ] of Aird & Berlis LLP to act as Secretary. We are pleased to host today's meeting through this virtual medium platform, accessible for all of our shareholders regardless of physical location. As this meeting is being held online via live webcast, it is appropriate to set out a few guidelines for online participants for the orderly conduct of this meeting. Questions can only be submitted by registered shareholders and duly appointed proxy holders entitled to attend and vote at the meeting. [Operator Instructions] Questions submitted in respect of motions, if any, will be addressed prior to the close of voting. Questions with respect to MediPharm Labs generally, if appropriate, will be answered after the completion of official business. For the purposes of the meeting today, voting will be conducted by online ballot through the facilities of this webcast. With respect to voting, if you are entitled to vote, you will receive a message on the online interface requesting you to register your votes. You will only have a certain amount of time to do so when the polls are open. If you have already voted by depositing a proxy or a voting instruction form prior to the proxy cutoff time, there is no need to vote again unless you want to change your vote. By voting again, you will be revoking your previous vote. With the consent of the meeting, I hereby appoint Lori Winchester of the TSX Trust Company, our transfer agent, to act as scrutineer. The notice calling this meeting has been delivered electronically and mailed to all shareholders as of record as of the close of business on January 23, 2023. I have received proof for delivery of such notice and ask that a copy be annexed to the minutes of this meeting as a schedule. Our bylaws provide that business may be transacted at this meeting if at least 2 shareholders who are entitled to vote at this meeting are present in-person or represented by proxy. I have been advised by the scrutineer that a quorum of shareholders is present. The scrutineers' report on attendance will be provided to the Secretary of the meeting and incorporated into the meeting minutes. I now declare that the meeting is regularly called and properly constituted for the transaction of business. For the purposes of the meeting today, voting will be conducted by online ballot to the facilities of this webcast. On a poll, every shareholder as of the record date entitled to vote at this meeting has 1 vote in respect to each common share held. If you're entitled to vote, you will see a message on the online interface requesting that you register your votes. You only have a certain amount of time to do so when the polls are open. I now instruct the scrutineer to open the polls. If you have already voted by depositing a proxy or voting instruction form prior to the proxy cutoff time, there is no need to vote again unless you want to change your vote. By voting again, you will be revoking your previous vote. As a reminder, questions can only be submitted by registered shareholders and duly appointed proxy holders entitled to attend and vote at the meeting. Questions submitted in respect of motions, if any, will be addressed prior to the close of voting. Questions with respect to MediPharm generally, if appropriate, will be addressed after the completion of formal business. Once discussion of all business items has concluded, I will give a few moments that you vote before the voting closes and on all resolutions. The results of the meeting will be publicly released and will be available on our website following the meeting. The business of the meeting is described in the joint management information circular of MediPharm and VIVO, dated February 6, 2023, which accompanied the notice of this meeting and is available on SEDAR. May I have a motion to dispense with the reading of the notice and take the notice as read?

I move that the reading of the notice of meeting be dispensed with and that the notice be taken as read.

I second the motion.

Thank you. I declare the motion carried. The first and only item of special business to be conducted at this meeting is to consider an ordinary resolution, approving the issuance by MediPharm of up to such number of common shares as may be required to be issued pursuant to a plan of arrangement under Section 192 of the Canada Business Corporations Act involving MediPharm, VIVO and the shareholders of VIVO, all as described more detail in the circular. The full text of the resolution being placed before the meeting is set out in Schedule B to the circular. An affirmative vote of a majority of the votes cast at the meeting will be sufficient to pass the resolution. Are there any questions submitted from any registered shareholder or proxy holder?

Mr. Chair, there are no questions have been submitted.

Thank you. There are no questions. May I have a motion?

I move that the resolution approving the issuance by MediPharm of up to such number of common shares as may be required to be issued pursuant to a plan of arrangement under Section 192 of the Canada Business Corporations Act involving MediPharm, VIVO and the shareholders of VIVO as set out at Schedule B to the circular, be approved.

I second the motion.

Please cast your votes on this resolution. If you have already voted prior to the meeting, there is no need to vote unless you want to change your vote. For those who have not voted on the resolution placed before this meeting and wish to do so, please do so now as the polls will be closing momentarily. [Voting]

I now instruct the scrutineer to close the polls. The polls are now closed. Based on the proxies received and the votes cast at the meeting, I declare the motion carried and resolutions passed. As there are no other questions from the floor, I request the motion that the meeting be terminated.

I move that the meeting be terminated.

I second the motion.

I declare this official meeting to be terminated. I would now like to invite MediPharm Lab's CEO, David Pidduck, to deliver remarks on behalf of management.

Thank you, Keith. We are pleased to have received shareholder support for this transaction with VIVO. I would like to take a moment to highlight some of the main reasons we are excited about our deal with VIVO. With this transaction, we continue to build on our reputation as a leading pharmaceutical cannabis company. MediPharm has assembled unmatched pharmaceutical regulatory licenses and international medical cannabis filings. The acquisition of VIVO will add several new business units and synergistic capabilities to the MediPharm Labs portfolio. VIVO has an established Australian and German medical cannabis brand, Beacon Medical. They also have a patient-centric medical cannabis clinic business, Harvest Medicine. And they bring to MPL a long-standing Canadian medical sales platform with Canna Farms Medical. Finally, with the addition of Napanee GMP facility, we are adding a second GMP site in Canada. Our goal is to provide patients access to the therapeutic value of cannabinoids. We are pleased that this transaction now adds direct-to-patient sales. VIVO's medical sales channel, Canna Farms Medical, was the first licensed producer in British Columbia and has supported over 60,000 patients since 2014. Following the transaction, it is anticipated that this platform will provide patients with a more diverse product portfolio that will include the existing MediPharm products. Direct-to-patient sales generally result in a better gross margins with the ability to bypass provincial distributors. VIVO's clinic business, Harvest Medicine, will allow real-time product feedback and clinical insights direct from patients, helping us to prioritize innovation, product development and further clinical investigations. On the revenue side, the pro forma combined company is expected to provide fulsome Canadian market coverage. With our new cultivation capabilities and existing manufacturing expertise, we now have a full suite of dried flower and derivative products with full access to both established medical and adult-use wellness distribution channels. Expanding our international medical cannabis opportunity, the pro forma combined company's international distribution will cover European and AsiaPac markets through established revenue-generating agreements. The VIVO Napanee, Ontario facility is EU GMP certified for cultivating and packaging flower. And the MediPharm Barrie, Ontario facility is GMP certified for nonflower alternative format medical products. With 2 distinct international GMP platforms, the pro forma combined company is expected to open many new product offerings for existing distribution channels and geographies. The pro forma combined company would have annualized international revenue that represents about 40% of sales. There are many potential revenue and cost synergies realizable in the near term. The combined company aims to find positive EBITDA synergies from $7 million to $9 million on an annualized basis and could reach positive EBITDA and cash flow in the first half of 2024. Finally, the resulting company will have a strong balance sheet. We continue to enjoy a solid cash position relative to our peers. We will have less than $2.5 million in debt on closing, and we have unencumbered ownership of all of our major assets. This strong balance sheet is expected to provide confidence in the combined company's ability to execute on our strategic growth roadmap, despite the macro backdrop of challenging capital markets. Thank you for participating in this shareholders' meeting. We look forward to speaking with you again later this month to present our 2022 Q4 and annual financial results. This concludes our meeting.

Thank you for attending today's meeting. You may now disconnect.