During the last year, we have noticed a substantial increase in demand for cannabis concentrates and this comes after Canada legalized cannabis derivative products in late 2019. The change in the types of products that are available is referred to as Canada’s cannabis 2.0 market and we are favorable on companies that are capitalizing on this vertical.
MediPharm Labs Corp. (TSX: LABS) (OTCQX: MEDIF) (FSE: MLZ) has been a beneficiary of Canada’s cannabis 2.0 market and we consider it to be a leading play on the global cannabis concentrate market. The company is focused on capturing additional market share in Canada’s medical and recreational cannabis market as well as emerging international markets and we are favorable on the direction the business is heading.
A Canadian Expansion Story to be Aware of
In Canada, the specialized cannabis extraction company has been executing on a multi-faceted growth strategy and we are favorable on the direction the business is heading. Earlier this week, MediPharm Labs reported to have entered into a supply agreement in Quebec. In addition to Quebec, the company’s private and white-label cannabis products are available in 6 other provinces (Ontario, Nova Scotia, Alberta, British Columbia, Manitoba, and Saskatchewan) and expects its products to be available in additional provinces later this year.
MediPharm cannabis products will be for sale in Quebec’s recreational market through provincial-owned retail outlets and an e-commerce platform. We are bullish on the growth prospects that are associated with the Quebec market and expect it to serve as a major revenue generator for the business.
With the agreement with Quebec, MediPharm is delivering its premium proprietary cannabis derivative products to 95% of the retail market in Canada. In Quebec, the amount of product that is needed will be determined on a month-over-month basis and we will monitor how MediPharm’s products gain traction with consumers.
Executing on an Australian Growth Strategy
On the international front, Australia represents a major market opportunity for MediPharm Labs and we expect the business to capture additional market share in the Southeast Asian market as a result of the success that it has had in Australia.
Earlier this week, MediPharm Labs Australia (a wholly subsidiary of the company) announced a new good manufacturing practices (GMP) white-label supply and contract manufacturing agreement with Cannim Australia Pty Ltd. We consider Cannim to be a strategic partner for MediPharm Labs and expect the relationship to support the growth of both businesses.
In 2017, Cannim was founded and operates in Jamaica and Australia. The company has established a network of EU GMP manufacturers and alliances and is focused on delivering a range of branded products to consumers and patients. During the last year, Cannim’s management team has been highly focused on expanding the business and expect the relationship with MediPharm to serve as a catalyst for growth.
Australia’s legal cannabis market has been recording impressive growth and demand for premium novel formulations for cannabis products has been steadily rising. We believe that MediPharm has competitive advantage over other Australian cannabis operators due to its GMP-certified manufacturing capabilities as well as its distribution channels to execute on a pipeline of new business opportunities.
Cannim to Play an Important Role in MediPharm’s Growth Strategy
The agreement with Cannim has a three-year term and provides the companies with an option to extend. According to the arrangement, MediPharm Labs Australia will supply a full range of specially formulated cannabidiol (CBD) and tetrahydrocannabinol (THC) cannabis oil products that will initially be sold under Cannim’s Lumir brand. MediPharm Labs Australia will also provide Cannim with contract manufacturing with their starting material and we will monitor how the relationship serves a as a value driver for both businesses.
Concurrent with the announcement, MediPharm Labs has started the registration process for the launch of next generation over-the-counter (OTC) products in Australia in 2021. We expect the company to benefit from having a GMP certified platform as it allows for the launch of CBD products that will be available to all 5,700 pharmacies across Australia and to sell direct-to-consumers without a prescription.
Last month, MediPharm commenced the product registration process following the Therapeutic Goods Administration (TGA) re-scheduling of CBD in Australia. The change in legislation is significant and is expected to lead to an increase in demand for CBD products in Australia. All OTC products are required to be manufactured in GMP certified facility and we believe this gives MediPharm an advantage over its competition.
In February, the TGA reclassified low dosage CBD (150 mg a day) from a Schedule 4 substance (requires a prescription) to a Schedule 3 substance. The change in scheduling is significant and now, registered cannabis products can be sold over the counter. MediPharm Labs Australia is well positioned to start capitalizing on the increased demand for the new OTC segment and we will be monitoring how the story advances from here.
MediPharm reported to already be seeing increased interest from pharmaceutical companies that are looking for a GMP certified partner to comply with the TGA minimum requirements and execute on a burgeoning growth vertical. We believe the management team has done a great job at positioning the business for long-term growth and are bullish on the leverage that it has to strategic international markets.
Has an Attractive Valuation and Significant Catalysts for Growth
MediPharm Labs represents a differentiated play on the global cannabis market and we are favorable on how the business is positioned to be a long-term beneficiary of it. By focusing on burgeoning markets like Australia and Latin America, the company has been able to capture market share in new markets and we are favorable on this trend.
Although MediPharm Labs has been nothing short of an execution story as it relates to the domestic and international cannabis market opportunity, the recent trend has been to the downside. The stock dipped lower after MediPharm Labs announced a private placement financing and believe the market is discounting the long-term potential of the business.
Going forward, we are of the opinion that MediPharm has significant potential catalysts for growth. At current levels, we find the valuation to be compelling and the risk-reward profile to be favorable. MediPharm is led by a management team that is focused on some of the most attractive verticals of the cannabis value chain and our readers should be aware of the opportunity.
If you are interested in learning more about how MediPharm Labs is positioned to capitalize on the international cannabis market, please send an email to email@example.com with the subject “MediPharm Labs” to be added to our distribution list.
This news release contains forward-looking statements relating to the future operations of Medipharm Labs, and the other statements are not historical facts. Forward-looking statements are often identified by terms such as “will”, “may”, “should”, “anticipate”, “expects” and similar expressions. All statements other than statements of historical fact, included in this release, including, without limitation, statements regarding the future plans and objectives of Medipharm Labs’, are forward-looking statements and involve risks and uncertainties. There can be no assurance that such statements will prove to be accurate and actual results and future events could differ materially from those anticipated in such statements. Important factors that could cause actual results to differ materially from the expectations of Medipharm Labs. include risks detailed from time to time in the filings made by Medipharm Labs. under securities regulations.