2018 gross and net revenue of $13.3 and $9.7 million, respectively
2018 pro-forma gross and net revenue of $22.7 and $17.3 million, respectively, which includes acquired companies for all of 2018
Q4 2018 gross and net revenue of $8.1 and $5.8 million, respectively, a 152% increase compared to net revenue in Q3 2018
2018 year-end cash and short-term investments (excluding strategic equity investments) of $74.8 million
NAPANEE, ON, April 30, 2019 /CNW/ - VIVO Cannabis Inc. (TSX-V: VIVO, OTCQX: VVCIF) ("VIVO" or the "Company"), a leading provider of premium cannabis products and services for the medical and adult-use markets and holder of licenses under the CannabisAct through its wholly-owned subsidiaries, Canna Farms Limited ("Canna Farms"), ABcann Medicinals Inc. ("ABcann") and Harvest Medicine Inc. ("Harvest Medicine"), today announced the release of its fourth quarter and 2018 annual financial and operating results.
"The VIVO team achieved significant milestones in 2018, leading to substantial increases in net revenue, cash position, production capacity, organizational effectiveness and customer development," said Barry Fishman, Chief Executive Officer of VIVO. "The strategic acquisitions of Canna Farms and Harvest Medicine were important drivers of our improved financial results. Through the acquisition of Canna Farms, we have added an award-winning BC craft brand, are leveraging best practices, and have dramatically increased capacity. Harvest Medicine provides a scalable network of medical cannabis clinics offering industry-leading patient care and access to critical data to shape our innovative product development efforts. VIVO remains committed to changing the way people view cannabis and to ensuring medical patients and adult-use consumers have access to our premium cannabis products and services."
2018 and Subsequent Highlights:
Sales: 2018 net revenue of $9.7 million, compared to $0.9 million in 2017, and 2018 pro-forma net revenue of $17.3 million
EBITDA: 2018 adjusted EBITDA of ($17.7) million, compared to ($11.1) million in 2017
Cash: 2018 year-end cash and short-term investments (excluding equity investments) of $74.8 million
M&A: Completed accretive strategic acquisitions of Canna Farms, an award-winning brand and licensed producer, and Harvest Medicine, an innovative, patient-centric medical clinic operator
Patients: 18,000 active medical cannabis patients registered with Canna Farms and Beacon Medical™ at the end of 2018
Clinics: Harvest Medicine acquired Trauma Healing Centers and introduced the HMED Connect™ platform. The overall network currently services more than 27,000 active medical cannabis patients
Awards: In April 2019, Canna Farms won the O'Cannabiz People's Choice Award for Best LP Customer Service
Partnerships: Entered strategic partnerships with six provincial/territory cannabis distributors and leading Canadian cannabis retailers, Choom Holdings, National Access Cannabis Corp. and Westleaf Cannabis Inc.
Research: Initiated an innovative product development agreement with Pharmascience, a global pharmaceutical company based in Montréal, Quebec, to create novel precise-dosage formats for medical patients
Capacity: Received Health Canada approval for expansion of facilities in Hope, BC, and Napanee, ON, doubling current internal cultivation capacity to more than 8,000 kilograms. Total annualized capacity (including third party suppliers) is targeted to exceed 15,000 kilograms by early 2020
Share: Based on data supplied by Health Canada for Q4 2018, the Company estimates that it supplied approximately 4% of the overall net value of the Canadian medical and adult-use dried cannabis market
Talent: Strengthened leadership team, including the recent appointments of Gary McMullen, new VP, Napanee Operations, and Andreas Sander, President, European Operations
International: In March 2019, ABcann Germany received its pharmaceutical wholesale license and GDP-certificate and partnered with Australian Medical Cannabis Services on an observational study on the use of cannabinoids as therapy for chronic pain
Store: Launched an integrated online medical cannabis store under the Canna Farms banner, offering one-stop purchasing of Canna Farms and Beacon Medical™ brands, along with products from other cultivators
Mr. Fishman continued, "VIVO's cultivation strategy includes indoor cultivation of premium dry flower as well as the planned cost-effective seasonal greenhouse and outdoor cultivation of cannabis for extraction. Following completion and regulatory approval of our additional indoor, seasonal greenhouse and outdoor expansion plans, we expect our 2019 financial performance to be materially higher in the second half of 2019. We are also actively pursuing strategic acquisitions and partnerships to grow our business and expand our premium products and services, both in Canada and internationally. It is a very exciting time for the VIVO team, who have been working tirelessly to execute our strategic priorities and drive long-term shareholder value."
Key Financial Metrics
Year Ended December 31, 2018
Three Months Ended December 31, 2018
Adjusted EBITDA is not a measure of financial performance under IFRS. The definition for Adjusted EBITDA can be found in the Company's management's discussion and analysis for the year ended December 31, 2018 at www.sedar.com.
Canna Farms (Hope, British Columbia)
On August 31, 2018, VIVO completed the immediately accretive acquisition of Canna Farms, BC's first licensed producer of medical cannabis. A solid track record of execution contributed to Canna Farms being one of the first licensed producers to achieve positive operating cash flow. In January 2019, Daniel Laflamme, President of Canna Farms, was appointed Chief Operations Officer of VIVO, a role that provides a unique opportunity to leverage his strong leadership skills and deep knowledge of cannabis cultivation and production operations.
Canna Farms is a producer and purveyor of premium quality, award-winning, craft cannabis, with wide-spread brand recognition and appeal, as evidenced by its award for Top Reviewed Licensed Producer of the Year at the 2018 Canadian Cannabis Awards. In April 2019, Canna Farms won the People's Choice Award for "Best LP Customer Service" at the O'Cannabiz Industry Awards Gala.
In March 2019, Canna Farms received Health Canada approval for the expansion of its Yale Road facility, and more than 30,000 clones have been propagated to fill the space, expected to result in over 3,000 kilograms of annual production capacity – doubling the previous capacity in BC. It also recently received municipal approval for the construction of Phase 5, which, following expected completion in Q1 2020 and receipt of Health Canada approval, is expected to result in additional internal production capacity of 2,500 kilograms.
Canna Farms also recently launched an integrated online medical cannabis website (cannafarms.ca), creating one of the largest online platforms for medical cannabis users across Canada, with an industry-leading offering of brands and products, offering one-stop shopping for Canna Farms and Beacon Medical™ brands along with medical cannabis products from other licensed producers.
ABcann Medicinals (Napanee, Ontario)
ABcann Medicinals, located in Napanee, Ontario, is primarily focused on the production of pharmaceutical-grade cannabis for medical cannabis markets in Canada and internationally under its Beacon Medical™ label. It also produces products for the Canadian adult-use market under its Lumina™ and Fireside™ brands.
Under the leadership of Gary McMullen, the Company's recently appointed Vice-President, Napanee Operations, the team in Napanee have increased yields and implemented a number of operational efficiencies. Mr. McMullen was the co-founder of Muskoka Brewery, and has a high level of expertise in best-in-class manufacturing processes and a proven track record of successfully marketing craft products.
In March 2019, ABcann received Health Canada approval to begin cultivation in the expansion of its Vanluven facility, which includes production space built to GMP standards and a recently commissioned supercritical CO2 extraction suite to produce concentrates. ABcann is working towards obtaining EU-GMP certification of the Vanluven facility in 2019 to allow for the export of medical cannabis to international markets. The Vanluven facility also houses a world-class cannabis R&D lab, where the Company is developing proprietary technology and advanced growing techniques in partnership with some of the brightest minds in agriculture at the University of Guelph.
ABcann continues to invest in product development initiatives focused on novel genetics and growing techniques to maximize yields and efficiently extract cannabis derivatives. In March 2019, it received an amendment to its production license allowing for the sale of cannabis oil, which will allow it to significantly expand its product lines for both medical cannabis patients and adult-use consumers. ABcann also intends to use its processing license, which allows for the sale of cannabis oil as well as the manufacturing and preparation of other concentrates, to manufacture new products for the edibles and beverage segments when that market opens in late 2019. To this end, ABcann has purchased a number of capital assets, which are expected to be commissioned on-site by the end of Q2 2019.
Construction is also nearing completion of Phase 1 of the Kimmett Road facility in Napanee, consisting of four seasonal greenhouses and an associated header house, which is expected to be completed in Q3 2019. Following receipt of Health Canada approval, this facility is expected to provide an incremental 3,000 kilograms of annual production capacity at one of the lowest capital and operating costs per gram in the industry.
In January 2018, VIVO acquired Harvest Medicine, an innovative, patient-centric medical clinic operator headquartered in Alberta, and in October 2018 subsequently acquired Trauma Healing Centres, a veteran-focused medical clinic network operating in Atlantic Canada. Harvest Medicine operates five clinics in Alberta, Ontario, New Brunswick and Nova Scotia, serving more than 27,000 registered patients.
Harvest Medicine recently launched the HMED Connect™telemedicine service, which provides patients in certain provinces access to Harvest Medicine's class-leading education and patient-centric model at any time, from anywhere.
In 2019, the Company appointed Dr. Richa Love, Harvest Medicine's primary physician who has spearheaded research exploring the effects of medical cannabis for a variety of conditions, to the Company's Scientific Advisory Board as the Chief Medical Officer. Dr. Love helps guide product development and innovation and serves as a valuable resource for both patients and healthcare professionals.
Commercial and Product Development
The Company's key objectives include growth of a broad but targeted product line and a wide distribution network that includes the establishment of key strategic partnerships. VIVO is currently working to develop several new novel medical cannabis products as well as a variety of cannabis edibles and beverages in preparation for the opening of this market in Q4 2019.
The Company has entered into adult-use supply agreements with British Columbia, Alberta, Saskatchewan, Manitoba, Ontario and the Yukon, and anticipates it will have secured agreements with all ten provinces by the end of 2019. To satisfy the growing demand for VIVO products, the Company has also entered into third-party multi-year supply agreements with two Ontario-based cultivators.
In the fourth quarter of 2018, VIVO's net average selling prices (excluding excise tax and sales deductions) for dried cannabis were $7.54 per gram for adult-use consumers and $7.48 per gram for medical patients.
A research agreement to investigate and develop innovative processes for the extraction and formulation of cannabis oil has been entered into with Loyalist College's Applied Research Centre for Natural Products and Medical Cannabis (ARC), and a product development agreement has been entered into with Pharmascience, a global pharmaceutical company based in Montréal, Quebec, to develop a line of specific medical cannabis formulations intended to maximize therapeutic benefits to patients through the use of pharmaceutical-grade quality and allowing for precise dosing.
VIVO has increased its international operations in recent months through its wholly-owned subsidiaries, ABcann Germany GmbH ("ABcann Germany"), which is focussed on the European market, and Beacon Medical Australia Pty Ltd. ("Beacon Australia"), which provides an entry point to the Asia-Pacific market.
In January 2019, Andreas Sander was appointed President, European Operations, and Managing Director of ABcann Germany. Mr. Sander has more than 25 years of pharmaceutical experience, including regional leadership roles in western and eastern Europe. In Q1 2019 VIVO exported three of its proprietary cultivars, covering a broad range of cannabinoid profiles, to Europe. These cultivars are now being propagated in a GMP-certified environment to form VIVO's genetic basis for commercial cultivation in Europe and are intended to be sold through German and other European pharmacies pursuant to a supply agreement with a European partner.
In March 2019, ABcann Germany received its pharmaceutical wholesale license and GDP-certificate from the responsible authorities of the state of Brandenburg, Germany. VIVO is currently awaiting its narcotic and import license approvals in Germany to facilitate imports of higher-margin products to the European medical market from other countries, including Canada.
In addition, VIVO has entered the Australian medical cannabis market through Beacon Australia, which has included servicing Australian patients with a variety of medical conditions. The market in Australia is expected to grow and the Company believes it will benefit from its early entry advantage.
Beacon Australia has partnered with Australian Medical Cannabis Services and is currently implementing an observational study on the use of cannabinoids as therapy for chronic pain. Led by a group of well-known pain specialists in Melbourne, Australia, the study is expected to provide long-term data with which to evaluate the efficacy of medical cannabis in treating pain and further support the development of VIVO's portfolio of medical cannabis products.
VIVO reported net revenue of $9.7 million for 2018 (2017: $0.9 million), and adjusted EBITDA of ($17.7) million (2017: ($11.1) million).
As at December 31, 2018, the Company had $74.8 million in cash and short-term investments (excluding strategic equity investments) (2017: $70.8 million), total assets of $308.4 million (2017: $86.0 million), total liabilities of $86.7 million (2017: $40.0 million), and 291.0 million common shares outstanding (undiluted) (2017: 155.6 million).
Net revenue for the fourth quarter was $5.8 million, compared to $0.3 million in the fourth quarter of 2017. Net revenue for 2018 was $9.7 million, compared to net revenue of $0.9 million in 2017. The growth in revenue and net revenue for the quarter and fiscal year was primarily a result of revenues earned by Canna Farms and Harvest Medicine following their respective acquisitions by the Company.
Adjusted EBITDA was ($17.7) million for the year ended December 31, 2018 (2017: ($11.1) million) and ($7.3) million for the fourth quarter of 2018 as compared to ($4.7) million in the fourth quarter of 2017.
Annual General Meeting
The Company also announces that its 2019 annual general and special meeting of shareholders will be held at 10:00 a.m. (EST) on June 4, 2019 in Toronto, Ontario. Aaron Keay has decided not to stand for re-election to pursue other opportunities.
"On behalf of the Board of Directors and senior leadership team I would like to extend our sincere thanks and appreciation to Mr. Keay for his service as both a director and past Chief Executive Officer of the Company," stated Paul Lucas, Chairman of VIVO. "He played an integral role in bringing ABcann public and successfully executing on strategic acquisitions, capital raises and retail partnerships, and we wish him all the best in his future endeavors."
Additional details with respect to the Company's results of operations are available in its management's discussion and analysis and condensed interim consolidated financial statements for the year ended December 31, 2018, both of which can be found on SEDAR at www.sedar.com.
VIVO, based in Napanee, Ontario, is recognized for trusted, high-quality products and services. It holds production and sales licences from Health Canada and operates world-class indoor cultivation facilities with proprietary plant-growing technology. VIVO has a collection of premium brands targeting unique customer segments, including Beacon Medical™, Fireside™, Canna Farms™ and Lumina™. In August 2018, VIVO acquired Canna Farms, a premium cannabis company based in Hope, British Columbia. Canna Farms was B.C.'s first Licensed Producer and has several years of craft cultivation experience and expertise, as well as a significant patient base and positive cash flow. The Company is significantly expanding its production capacity and pursuing partnership and product development opportunities domestically, as well as in select international markets, including Germany and Australia. VIVO also operates Harvest Medicine, a patient-centric and highly scalable network of specialty medical cannabis clinics as well as a free telemedicine service. VIVO has a healthy balance sheet and is well-positioned to accelerate its growth in Canada and internationally.
ON BEHALF OF THE BOARD OF DIRECTORS
Barry Fishman (CEO and Director)
Neither TSX Venture Exchange nor its Regulation Services Provider (as that term is defined in the policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this release.
Disclaimer for Forward-Looking Information
All dollar amounts in this news release are in Canadian dollars. Certain statements in this news release are forward-looking statements, which are statements that are not purely historical, including statements regarding the beliefs, plans, expectations or intentions of VIVO and its management regarding the future. Forward-looking statements in this news release include statements regarding: the Company's plans to expand capacity and expected future production capacity; expected timing of completion of expansion projects and GMP certification; expected timing of receipt of regulatory approvals; proposed future product lines; the Company's objectives to grow its product line and distribution network, including through the creation of key strategic partnerships; expected timing of provincial distribution and supply agreements; and the Company's intent to pursue partnership and product development opportunities domestically and internationally. Such statements are subject to risks and uncertainties that may cause actual results, performance or developments to differ materially from those contained in the forward-looking statements, including: that the Company may not be able to achieve its production capacity targets at some or all of its production facilities; that the Company may not be able to launch new products in the time expected or at all; that the Company may not be able to achieve competitive margins; that the Company may not be able to increase the sales of its products in the current domestic market or to successfully launch new product lines in the time expected or at all; that new products, if launched, may not be accepted by the market or may become subject to product liability claims; that the Company may not be able to obtain a distribution/import license or a cultivation license for Germany or other emerging markets it is targeting; that the Company may not be able to serve larger and broader markets as a result of its production increase; that the Company may be unable to retain its key talent; that the Company's expansion plans may not be completed in the time expected or at all; that the Company may not obtain necessary regulatory approvals; and other factors beyond the Company's control. No assurance can be given that any of the events anticipated by the forward-looking statements will occur or, if they do occur, what benefits the Company will obtain from them. Readers are urged to consider these factors, and the more extensive risk factors included in the Company's annual information form for the year ended December 31, 2018, which is available on SEDAR, carefully in evaluating the forward-looking statements contained in this news release and are cautioned not to place undue reliance on such forward-looking statements, which are qualified in their entirety by these cautionary statements. The forward-looking statements in this news release are made as of the date hereof and the Company disclaims any intent or obligation to update publicly any such forward-looking statements, whether as a result of new information, future events or results or otherwise, except as required by applicable securities laws.
SOURCE VIVO Cannabis Inc.
For further information: VIVO Investor Relation, Heidi Christensen Brown, +1.416-848-1389, [email protected], NATIONAL Capital Markets; Michael Bumby, Chief Financial Officer, [email protected], VIVO Cannabis Inc.