MediPharm Labs Corp: Why did this Hemp Stock Fall Last Week?
MediPharm Labs Corp (TSX: LABS)(OTCQX: MEDIF) is a Canadian-based cannabis and hemp extraction company which manufactures and sells cannabis and hemp pharmaceutical products. Why did the hemp stock fall last week?
MediPharm released its quarterly earnings last Thursday. In the earnings report, MediPharm missed several key targets and the stock price tumbled 18% from CA$1.70 and is currently trading at CA$1.40. Its year to date returns are a negative 66.7%, however, this hemp stock has returned 100% since it went public in February 2018.
MediPharm’s Q1 2020 earnings highlights
MediPharm’s revenues for the first quarter of the year dropped by almost 50% year-over-year. The company management attributes the drop in sales to a slowing in demand for the bulk wholesale markets.
Needless to say, the impact on the lower demand led to a drop in the average selling price as well as a fall in overall sales volume. The total turnover for the quarter ended March 2020 was CA$11 million, compared to revenue of CA$21.9 million in the prior-year period. The company reported adjusted EBITDA margins of -51% as against 8% in the quarter ended December 2019.
But as a silver lining to the dropping revenues, the company claimed that it expects the procurement costs for inventory and the overall cost of goods sold to fall. MediPharm has a relatively strong cash position, with a CA$21.4 million outstanding cash and cash equivalents on March 31, 2020.
Additionally, the pharma-grade cannabis products manufacturer secured a private placement on June 8, 2020. The placement value was CA$37.8 million, of which one-half of the proceeds have been recognized and the other half is held in escrow. The balance is subject to realization upon completion of certain specified conditions.
MediPharm enters into supply agreements to ramp up Q2 sales
Even after a poor earnings release, MediPharm can still resurface in the post-COVID economy. According to a press release on June 19, MediPharm’s subsidiary in Australia bagged a deal to distribute cannabis oil products to Beacon Medical Australia Pty. Ltd.
Beacon Medical is a subsidiary of Vivo Cannabis Inc. (TSX: VIVO)(OTCQX: VVCIF) – another cannabis-based hemp stock. MediPharm has already shipped 35,000 units of finished products and bulk extracts to its GMP certified Australian subsidiary.
In addition to Beacon Medical, MediPharm also entered into supply agreements with Compass Clinics and Burleigh Heads Cannabis in Australia, Cannasouth Plant Research, and Helius Therapeutics in New Zealand, as well as Therismos Limited in the UK. Although the sales were expected to kick off in Q2 2020, it is bound to gain more momentum in the third quarter of this year.
MediPharm Labs Corp: Why did this Hemp Stock Fall Last Week?
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