Avicanna Inc. (TSX: AVCN) experienced a remarkable year-over-year revenue increase of 314% in 2023, reaching $16.8 million. The company's CEO, Aras Azadian, announced the financial results during an earnings call, highlighting significant growth and strategic initiatives.
Cost-cutting efforts in the first half of the year and the acquisition of Medical Cannabis by Shoppers contributed to the robust performance. The launch of MyMedi.ca, a medical cannabis care platform, generated revenues of over $13 million. The company also reported a gross profit of $6.7 million, indicating a 40% profit margin.
With the commercialization of its proprietary brand RHO Phyto and the expansion of its Canadian operations, Avicanna has strengthened its market position. Internationally, the company received marketing authorization for its pharmaceutical product Trunerox in Colombia and is poised to commercialize it in 2024.
Avicanna's R&D efforts are centered on developing a pipeline of indication-specific drug candidates, and it is actively pursuing pharmaceutical partnerships and M&A opportunities to bolster its growth trajectory.
Key Takeaways
- Avicanna's revenues soared by over 300% in 2023, reaching $16.8 million.
- The company launched MyMedi.ca, which contributed over $13 million in revenue.
- A 51% increase in the sale of finished products was achieved in the Canadian market.
- Trunerox received marketing authorization in Colombia and is set for commercialization in 2024.
- Avicanna's Aureus brand successfully exported to 17 international markets.
- The company aims for positive EBITDA by the end of 2024 and is exploring M&A opportunities.
Company Outlook
- Avicanna plans to focus on expanding its South American presence, especially in Colombia and Brazil.
- Gradual expansion into the European market is planned, starting with Germany.
- Positive EBITDA is targeted by the end of 2024.
- The company is exploring M&A opportunities to enhance growth.
Bearish Highlights
- The company did not disclose the potential size of the new distribution partnership opportunity.
- Limited details were provided on the two pharmaceutical partnerships due to confidentiality constraints.
Bullish Highlights
- The acquisition of Medical Cannabis by Shoppers and the launch of MyMedi.ca were key growth drivers.
- Expansion of the commercialization of RHO Phyto and the launch of 10 commercial SKUs with Viola Brands.
- Successful exports of the Aureus brand's active pharmaceutical ingredients to multiple international markets.
Misses
- Specific financial impacts of the new pharmaceutical partnerships have not yet been quantified.
Q&A Highlights
- Avicanna does not expect significant impact from forex fluctuations between Colombia and Canada.
- Contracts are framed in USD to mitigate currency risk.
- Further updates on the company's progress will be provided at the end of Q1 2024.
Avicanna's robust financial performance in 2023 and strategic initiatives indicate a strong footing for the company's future growth. With the anticipated commercialization of Trunerox and the expansion into new markets, the company is well-positioned to capitalize on the growing demand for medical cannabis products.
Avicanna's focus on R&D and pharmaceutical partnerships further underscores its commitment to innovation and market expansion. Investors and stakeholders can expect further updates as the company progresses through 2024.
Full transcript - Avicanna Inc (AVCN) Q4 2023:
Aras Azadian: Good morning, everyone and welcome. Thank you for joining our Year-End 2023 Earnings call. My name is Aras Azadian, I’m the Founder and the CEO of Avicanna. I’m joined today by Phil, our CFO, and together we're happy to provide our corporate update and results of the full year of 2023. We will also allow a few minutes at the end for questions as well. Phil?
Phillip Cardella: Good morning, everyone. I'm Phil Cardella, CFO of Avicanna. And before we begin, I would like to remind you that there are several risk factors and other cautionary statements contained in our SEDAR filings, including our annual information form for the year ended December 31, 2023. We will not review those risk factors and other cautionary statements on this call. However, we encourage you to read them carefully. Various remarks on this call concerning expectations, predictions, plans, and prospects constitute forward-looking statements or information. These forward-looking statements or information are subject to risks and uncertainties that may cause actual results to differ from historical or anticipated results. Any forward-looking statements or information reflect management's current view only. We undertake no obligation to revise or update such statements or make additional forward-looking statements in the future, except as required by applicable laws. Reference may be made during this call to future-orientated financial information and financial outlooks, all of which are subject to the same assumptions, risk factors, limitations, and qualifications as forward-looking statements or information. While we believe that such estimates have been prepared on a reasonable basis, reflecting best estimates and judgments, the actual financial results of the company may vary from the amounts discussed out herein, and such variation may be material. During today's call, we may refer to non-IFRS measures, such as adjusted EBITDA, as defined or reconciled in our earnings materials in the appendix of this presentation. These non-IFRS measures as defined by the company may not be comparable to measures with similar titles used by other companies. Certain information that may be mentioned during this call, including industry information and estimates is obtained from third party sources, including public sources, and there can be no assurance as to the accuracy or completeness of such information. Although believed to be reliable, management has not independently verified any of the data from third party sources. Thank you.
Aras Azadian: Thank you, Phil. That was fast. So 2023 was a tremendous year for Avicanna as we made strides towards our long-term vision, all while making improvements to our fundamentals. We continue to advance all four of our business pillars during 2023 and deliver what is the best financial performance of our company's short history. This includes rapid growth of over 300% in our revenues when compared to the previous year. And this is paired with significant improvements to our gross profits and our consolidated margins, all of which Phil will expand into on the financial section. During the first half of 2023, we focused on optimization cost-cutting initiatives, which really included the prioritization of our Canadian operations in preparation for the acquisition of the Shoppers Drug Mart, Medical Cannabis Division, which was called Medical Cannabis by Shoppers. During the second half of the year, our efforts were dedicated to closing the acquisition and integrating the asset of the acquired business unit, again Medical Cannabis by Shoppers, into our operations. We successfully launched MyMedi.ca as a result, which is our new medical cannabis care platform, which combined with our proprietary products, solidified our leadership position within the medical aspects of the cannabis sector. Additionally, we continued to advance our Canadian commercialization, which yielded 51% growth in our finished products sold in Canada. This expansion was increased through the number of commercial SKUs, through the number of commercial listings, and the fact that we have now launched products across seven different medical platforms, including our own MyMedi. Our R&D and clinical efforts, sustaining our intellectual property, has also expanded and has led to two new strategic collaborations with two separate international pharmaceutical companies and has led to the marketing authorization of our first pharmaceutical product through INVIMA called Trunerox, which was recently announced during early Q1 2024. An overview of MyMedi. So on August 2, 2023, we proudly launched our new medical cannabis platform called MyMedi.ca. As mentioned, this was a rise from the acquisition of the Shoppers Drug Mart division. MyMedi.ca features a diverse portfolio of products from Avicanna and 15 licensed producers here in Canada. The platform is available nationwide and led by our pharmacists led bilingual patient support programs, in addition to educational resources for the medical community, all of which is to facilitate the incorporation of medical cannabis into the healthcare regimen. MyMedi is operated under Northern Green Canada, which is a licensed producer and logistics operator of the business unit. Through MyMedi.ca, the company provides what we believe to be the most robust medical cannabis access program and support program nationwide to tens of thousands of Canadian patients who have obtained medical cannabis authorizations from their health care providers. Other MyMedi.ca features include, as I mentioned, multi-brand from 15 different licensed producers with about 200 plus SKUs, including 40 different brands. The emphasis is really on offering a broad range of available options that are in line with the patient's needs. We also include training and medical products as mentioned. These services include the incorporation of medical cannabis into the healthcare regimen through Avicanna's own Avicenna Academy, which is a more practical guide to prescribing medical cannabis, and in collaboration with the Canadian Consortium of Investigation for Cannabinoid, which is an accredited syllabus. We've also developed and grown our own specialty program for patients, including insurance coverage and good faith coverage for direct billing for veterans. This refinement of preferred vendor relationships with insurance providers is something that is very specific to MyMedi and has allowed us to do direct billing for specific patients. This is an area where we expect tremendous growth in the near future. This is all part of the MyMedi platform, while we're adhering to the best medical practices including maintaining arm's length relationship with the prescribers, specifically the cannabis clinics. As mentioned, we prioritized the launch and the operationalization of MyMedi.ca, which was an immense challenge for us to take on a short period of time. I'm really happy to see the results of which has led to over $13 million in our revenues during 2023. Furthermore, since the launch of MyMedi, we successfully transitioned over 96% of the patients from the legacy medical cannabis by Shoppers Division. We've developed an infrastructure to offer insurance reimbursement which includes 15 insurance providers and public institutions, including safety boards such as WSIB, Ontario and WSBC. Overall, insurance adjudication and reimbursement account for over 65% of MyMedi.ca sales, and insurance accounts is the highest growing segment. We facilitated the transfer and the advancement of the previously announced clinical trials, including observational real-world evidence studies, including our own studies with SickKids, which is on a product candidate for Epidermolysis Bullosa, and several other studies. We've enhanced our portfolio and refined inventory management processes to ensure consistent stocking of what is now 31 of our own SKUs as of this quarter on the MyMedi.ca platform. We've established new relationships with a network of 50 specialized medical cannabis clinics, hospitals and 1,500 healthcare providers and continue to expand these relationships beyond the traditional cannabis clinics and prescribers. We aim to expand MyMedi through naive patients and new prescribers through educational campaigns, medical affairs, including our upcoming symposium that we're hosting at the MaRS Discovery (NASDAQ:WBD) District on May 13th. In terms of our Canadian portfolio and commercial update, Canada continues to be the core of our operations and currently the most significant revenue driver for us. In Canada, we've established the infrastructure and proof-of-concept of our intellectual property and proprietary products, which we aim to then expand internationally. In line with our focus and the nature of our products during the past year we focused on expanding access to our products including the RHO Phyto branded SKUs into other medical cannabis channels. This included the successful launch of our products on Canna Farms platform and the Canopy Growth (NASDAQ:CGC) Spectrum platform, which combined with several other medical cannabis platforms, now means that we have access to approximately 50% of the registered medical cannabis patients in Canada. As a reminder, RHO Phyto is our proprietary medical cannabis brand that offers a range of scientifically driven products including oral, sublingual, topical, transdermal formulations in various ratios of CBD, THC and rare cannabinoids such as CBG. RHO Phyto has undergone in vitro and in vivo studies and goes above and beyond Health Canada's requirements for medical cannabis, but is in line with our commitments to pharmaceutical grade formulations and products. Many of these products, as mentioned, are enrolled in several different preclinical and observational human studies and will be part of our pharmaceutical pipeline developments in the future. Overall, we experience expansion in our proprietary products on adult use and medical cannabis channels, which now totals 133 Canadian commercial listings. We further progress our exclusive agreement with Viola Brands in Canada and have launched what is now 10 commercial SKUs, including our THC drops, which are proprietary in fluid technology. Our combined efforts to advance our Canadian commercialization during the year, which included the extensions of our portfolio, new commercial listings, new education platforms, led to approximately 190,000 finished products sold during the year, which represents a 51% increase from the previous year. It's also worth noting that the proprietary nature of our products and their high entry barriers has also yielded above industry margins that are significantly higher when compared to adult use operators. The Canadian portfolio and commercial efforts during 2023 were largely part and accomplished through the efficient and rapid translation of our research and development projects, our intellectual property from the lab to the market. All of this is also done through an asset light manufacturing model. This includes, as I mentioned, what is now 31 proprietary products that are manufactured through six different licensed producers in Canada in an effort to diversify the risk and exposure to the weakness of the sector. Our six manufacturing partners specialize in particular product forms and have active brands on the MyMedi platform as well, in line with our strategy to establish symbiotic relationships with our Canadian licensed producer partners. And look at our international operations. We prioritize and optimize our international efforts really to focus on our long-term pharmaceutical pipeline and expanding our medical cannabis products globally. Our international operations remain focused on the production, manufacturing of our product -- proprietary finished products across several categories including cosmetics, medical and pharmaceuticals including Trunerox, which is a recently approved drug in Colombia. Trunerox, which is a proprietary 10% CBD oral formulation is our first indication-specific pharmaceutical that has obtained marketing authorization. Trunerox obtained drug approval in Colombia early this year from the Colombia National Institute of Drug and Food Surveillance, which is called INVIMA. Trunerox was approved for the treatment of severe seizures related to Lennox-Gastaut syndrome and Dravet syndrome, which are two of the most rare epileptic disorders. Approximately 50 million people worldwide have epilepsy, which is a common neurological disorder with nearly 139 per each 100,000 people that are impacted. Trunerox is manufactured under GMP, Good Manufacturing Practices, [indiscernible] Pharmaceuticals in Bogota, and is utilizing our own Aureus branded CBD isolate, which is manufactured at our own facility in Santa Marta Golden Hemp. The company expects Trunerox to be commercialized later this year, in 2024, and we expect the products to be covered by reimbursement in Colombia while being priced excessively for private payers. The company also anticipates Trunerox to commercialize in other Central and South American markets, plus the Caribbean, where we expect an expedited fashion of approval is expected for, given the INVIMA's approval. Also at an international level, it's worth noting the progress we've made with Aureus. Aureus is our line of active pharmaceutical ingredients including CBD, CBG and THC. This is all manufactured in our own facility, Santa Marta Golden Hemp. The cannabinoid raw material supplied by SMGH forms part of our own supply chain and a source of reliable input for our consumer retail medical and pharmaceutical preparations, but also SMGH is a source of supply for our partners. SMGH has received good agriculture and collection practices and USDA organic certification under the United States Department of Agriculture. We've now successfully exported SMGH products into 17 different international markets. Additionally, SMGH is dedicated to providing consistent high-quality input for our global partners, as I mentioned. Notably, Aureus branded API was a source of API for two drug approvals in early 2024, including our own Trunerox in Columbia and a THC preparation that was approved by ANVISA in Brazil through our partners. It's worth noting the significance of these approvals as we've established SMGH since 2017 not to only be our own source of quality API, but to ensure that the API therefore is used and delivered at an accessible product price. Finally, in terms of our R&D and pharmaceutical pipeline, with what is now eight years of R&D pre-clinical and clinical development on cannabinoids, we believe that we've established what is a leading scientific platform and continue to really develop our intellectual property portfolio. Our dedication to product development and evaluating the potential role of cannabinoids for therapeutic benefits have been at the core of the company's vision since inception and have been a major contributor in establishing our reputation as leaders within this field. As mentioned, we’ve successfully developed and delivered over 30 proprietary products across various international markets through our scientific platform. We continue to collaborate with leading academic and clinical institutions in various pre-clinical and clinical projects, projects that we expect to expand through 2024. In collaboration with researchers, we have successfully obtained eight peer-reviewed government grants supporting our research initiatives in the previous years. It's also worth noting that our own intellectual property, including formulations, trademarks, and all associated methodologies remain Avicanna's intellectual property. Our pipeline of indication-specific drug candidates are currently in various stages of clinical development and pipeline indications are designed to meet various clinical indications including neurology, depression, sleep, and dermatology. We view the potential marketing authorization and commercial pathways of pharmaceutical products in two ways. One, primary focus with near-term results is the pharmaceutical approvals in South America and Central America, including RDC 327 legislation in Brazil and an example of the INVIMA Columbia approval such as Trunerox. Second is more our long-term vision, which is North American and European pharmaceutical approvals, including Health Canada, FDA, and EMA. Phil?
Phillip Cardella: Okay. Hello, everybody. I will go through a quick financial highlights. As Aras discussed, 2023 was a progressive year for Avicanna. With the launch of MyMedi during Q3, we have realized significant revenue growth and operational improvements throughout the company. We closed out 2023 with total revenue of $16.8 million, an increase of 314% over last year's revenue of $4 million. This includes $13.2 million in sales directly related to the acquisition of medical cannabis by Shoppers Drug Mart and the launch of the MyMedi.ca platform. Outside of MyMedi, our product sales in North and South America were $3 million, up from $2.8 million in 2022. Licensing revenue in 2023 was $415,000 compared to $1.1 million in 2022. Delays in ongoing project milestones resulted in lower than expected licensing revenue in 2023, but as all projects are ongoing, we expect to compensate for this in 2024. We ended 2023 with consolidated gross profit of $6.7 million, an almost 500% increase from 2022 gross profit of $1.1 million. This represents a profit margin of 40% compared to 27% in 2022. Our gross margins in North America, which includes sales through MyMedi and other medical and retail channels was 45% for the year, compared to 36% in 2022. This was attributed to our continued expansion of our product portfolio and the higher margin than our sales of our own proprietary products on mymedia.ca. We took this trend of increased product sales and margin improvements in Canada to continue into 2024. The company has continued to drive cost control measures and efficiencies resulting in an increase in operating costs of only 19%. The adjusted EBITDA loss for the year was $4.2 million compared against an EBITDA loss of over $8.3 million in 2022, an improvement of 49%, making 2023 our lowest EBITDA loss since going public in 2019. It's worth noting that the MyMedi.ca contribution were generally realized during the second half of 2023, and we intend to continue to raise efficiencies to achieve our goal of being EBITDA positive by the end of 2024. As mentioned, our operating costs did increase in the current period due largely to the launch of MyMedi. The largest increases in costs were selling and marketing expenses, IT expenses related to the platform's backend and call center, as well as salary and wages given the addition of approximately 30 new employees. However, this increase is comparatively small considering the significant revenue growth brought on from this new business unit. In conjunction with our EBITDA goals, we continue to work to strengthen our working capital position with a goal of achieving positive operating cash flows and limit our reliance on cash flows from equity and debt financing. We will achieve these working capital improvements by managing inventory to ensure we consistently have sufficient stock growth in Canada and through the expected increase in revenue generated activities of our other business pillars internationally. Cash used in operations were significantly decreased during 2023 with approximately $1.4 million compared to $7.4 million in 2022. These improvements are due not only to increased revenues with the MyMedi platform, but also the consistent receivables from the platform's insurance provider partners. Simultaneously, cash flows from financings were reduced to $3.5 million compared to $9.9 million in 2022. During 2023, we completed only two private placement transactions compared to a total of five private placements in the prior year. In addition, our debt was decreased from a total of $2.8 million in 2022, including $1.9 million in convertible debentures to $1.6 million at the end of 2023, none of which is convertible. Overall, 2023 was our best financial year, which has set the stage for promising 2024 with exciting developments across all business units. Thank you for your attention. I'll pass it back to Aras.
Aras Azadian: Thanks, Phil. Just to wrap up, as Phil clearly noted, the results of our financial and business performance this past year really demonstrated the potential scalability of our formulations, business model, and also the maturity of the company. We are very optimistic about what is to come and believe that the additional capacity to further scale and the path towards EBITDA positive during 2024 is very realistic. I believe that we've solidified our leadership position in the Canadian market with respect to medical cannabis and expect to see further growth during 2024 across our medical affairs and education platforms for both MyMedi.ca and our own finished products. Internationally, we believe that our years of investment and dedication have begun to bear fruit this year as demonstrated with the recent developments and the milestones related to our pharmaceutical pipeline intellectual property. We are seeing early signs of the potential of the future as an innovative and growing biopharmaceutical company at a global level. We look forward to the commercialization of Trunerox in Colombia and the opportunities that this first drug may have beyond the initial Colombian market. In parallel, again, we're in a position to also dedicate resources to advancing our R&D and clinical efforts. This is something that has been part of our vision from the early days, and we're very happy to be back in a position to further dedicate resources to that and to the development of our intellectual property and our pharmaceutical pipeline. I'll pause now to see if there's any questions. If anyone has any questions please just write them on the right side of the screen and we'll be able to answer them. Thanks, Michael. Which countries outside of Canada would be your next major revenue streams? I would say -- I would look at it from a region perspective. I think during 2024, the primary focus would be the South American market, specifically Colombia with the approval of Trunerox, and second Brazil where we were making strides with our own formulations and products, but also we're supplying some of the other large pharmaceutical companies that are active in the space. So I would say South America during 2024, and we will be also slowly expanding into the European region. Within Europe, we believe Germany will be the first destination through one of our pharmaceutical partnerships that we announced earlier this year. Thanks, Dave. Do we see any M&A potential opportunities in this fiscal year given the market conditions? I think the short answer is absolutely. We're assessing various opportunities today. There is a lot of opportunities in terms of local Canadian opportunities that are cannabis-based or cannabinoid-based companies that have good assets, but might be, from a commercial perspective, not in the greatest position. And then internationally, we're looking at companies that will give us easier access from a commercialization perspective for our own products. So yes, there are tremendous opportunities given the market conditions that we are assessing and we will look forward to reviewing deeper details. Hi Albert. Can you share some economics from the recently announced partnerships? Well the recently announced partnerships, specifically the unnamed pharmaceutical companies are quite limited in a sense that there are very early stages from an announcement perspective, but what I can say is, one of them is a distribution partnership for our topical products that will be commercialized through cosmetics, which means very fast route to market. We like the economics of that deal because the API, the active ingredients, the formulation, the manufacturing is all done out of South America. So the products are actually very well priced and we expect to have high margins. In terms of their potential size of the opportunity, it's a little bit premature for us to disclose that. The second pharmaceutical partnership we announced is much more focused on R&D. This is a collaboration with a major multinational company in a sense where they're testing the feasibility of our formulations related to their technology and will sort of be the intel inside for that technology. So again, a little bit too early to provide details, but I expect later on this year we'll see both the results of that and we'll be able to expand more about those opportunities. Can we talk about the two pharmaceutical partnerships? Well, yes, I mean, we spoke a little bit about those. I think it's just very important to know that given the size and the scale of those opportunities and the type of companies that they are, they're very conservative in terms of disclosure. And unfortunately, that's the nature of the beast when you're related or adjacent to a stigmatized industry such as cannabinoids. But both those companies are multinationals with massive reach. One of them is much more of a commercial entity across the European Union. And that was the first one that we announced related to the topicals. We expect to initially launch those products in Germany and to expand in other parts of the region, which I think will be a fairly large opportunity, as I was saying earlier. The second partnership is again, much more focused on intellectual property, but I think that's just the first step within that relationship and we expect that to also be expanding at a massive rate throughout this year. Any other questions, folks?
Phillip Cardella: We have a question from [Michael Cot] (ph). How does the ForEx fluctuations between Columbia and Canada influence cost and revenue stream? So as of now, the bulk of our revenue is within Canada. So we don't foresee too much of a difference between those fluctuations going into 2024. But we do also mean we do see some of the licensing activity that will be coming out of Columbia. So that is a risk. We haven't considered any of our -- any hedging of those -- of that ForEx going forward. But one of the things we do is, we try to frame any of those contracts into USD, so to base them into a more stable currency to ensure that we're able to compensate for any of those fluctuations.
Aras Azadian: If there are no more questions. I want to again thank everyone for taking the time to listening in and obviously following the story. Again tremendous year, very much supported -- very much excited about what's to come and thankful for the support we continue to have. Looking forward to updating everyone at the end of Q1, which we expect will be early signals of the year 2024. Thank you very much for attending.
End of Q&A:
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