Avicanna Reports First Quarter 2020 Financial Results and Provides Corporate Update
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TORONTO, May 25, 2020 /CNW/ – Avicanna Inc. (“Avicanna” or the “Company) (TSX: AVCN) (OTCQX: AVCNF) (FSE: 0NN) a biopharmaceutical company focused on the development, manufacturing and commercialization of plant-derived cannabinoid-based products announces results for the first quarter ended March 31, 2020.
Aras Azadian, Chief Executive Officer of Avicanna, commented “Our management team demonstrated incredible execution ability by first ensuring the safety of our team and in parallel reducing costs, all while continuing to advance our commercial activities. We are also pleased to demonstrate the maturity of the company’s global vertical integrated commercial infrastructure which is exhibited through significantly reduced capex and increased efficiencies in our global operations.”
First Quarter Operational Highlights
- Early in 2020, the Company reacted immediately to the COVID-19 crisis and initiated several cost cutting and optimization initiatives to ensure that it directed its resources to its strategic and commercial, revenue-focused activities. These measures resulted in operating expenditures decreasing by approximately 45% from Q4 2019 to Q1 2020. In addition, the Company reduced its headcount by approximately 70 persons in the quarter, which represented approximately 30% of the overall global headcount. Furthermore, management reduced their pay by approximately 30% in an effort to conserve cash and resources. This, coupled with the completion of capex-heavy projects, significantly reduced the company’s cash burn rate. In addition, our minority partners in our cultivation subsidiaries, Santa Marta Golden Hemp S.A.S. (“SMGH”) and Sativa Nativa S.A.S. (“Sativa Nativa”), contribute their portion of capital on an ongoing basis. As such the Company does not carry full cash burden of operations or capital expenditures.
- In parallel with the cost cutting initiatives, the Company’s commercial preparations and initiatives continue to progress and saw growth in its revenue by approximately 112% over the fourth quarter of 2019. The Company is expecting revenues to continue to increase through fiscal 2020 putting it in the position to generate positive cash flow by the end of 2020.
- Entered into an exclusive supply agreement with Medical Cannabis by Shoppers Drug Mart Inc. (“Shoppers”), Canada’s largest and most trusted pharmacy chain. Under the terms of the agreement the Company’s proprietary brands, Rho Phyto and Pura Earth will be distributed by Shoppers in Canada. Rho Phyto products to be distributed under this agreement have been approved for commercial sale by Health Canada.
- Entered into an exclusive import and distribution agreement with Cannvalate Pty. Ltd (“Cannvalate”), an Australian based cannabis company. Under the terms of the agreement Cannvalate will distribute the Rho Phyto line of products in Australia. The Company is expecting initial orders in the final quarter of 2020.
- Completed all 3 clinical trials for Pura Earth products that were commenced during the third quarter of 2019. The products involved were Avicanna’s formulations targeted at cosmetic factors associated with aging, acne prone skin, and eczema prone skin. The successfully completed trials involved 156 patients that were tested for both safety and certain derma-cosmetics endpoints. The results of all three studies were positive with no adverse effects, making Pura Earth one of the only cannabinoid consumer product lines with human safety and efficacy data.
- Received amendment by Health Canada to the Cannabis Research Licence to include an additional lab within JLABS @ Toronto, Avicanna’s R&D headquarters in the MaRS Discovery District.
- The Company ranked highest amongst global cannabis companies in the SAM Corporate Sustainability Assessment (“CSA”), a sustainability index that has become the basis for numerous S&P Global ESG indices and showcases the sustainability performance of some of the world’s largest companies.
Financial Highlights
- The Company recognized revenue of $260,903 from the commencement of sales through various divisions. There were no write-downs or impairments for 2019.
- In January, the Company closed a financing round, at a premium to the then market price of the Company’s stock, which added approximately CAD$2.06 million of cash to the Company’s balance sheet.
- Subsequent to quarter end, at the height of the COVID-19 pandemic, the Company closed a strategic non-brokered private placement for $2.56 million, issuing 3,200,000 units at a price of $0.80 per unit. The financing primarily included strategic partners, including Tasly International Capital Limited, a division of Tasly Holding Group Co., Ltd., a large healthcare and pharmaceutical group in China.
Recent Developments
- In April 2020, through its Avesta Genetica genetics and seed division, SMGH completed the first known industrial scale seed harvest in Colombia which included approximately 80 million premium and feminized cannabigerol (“CBG”) dominant seeds. The seeds have been tested for germination and attained feminization rates of 99%, which are deemed premium within the global seed market. The seeds will be utilized for local production, sales and exports.
- In May 2020, the Company was approved for the first ever export of hemp seeds (genetics) from Colombia from its majority owned subsidiary Santa Marta Golden Hemp S.A.S. (“SMGH”) in Santa Marta, Colombia. This export was authorized with support from the Colombian ministries of justice and agriculture.
- In May 2020, the Company entered into a strategic manufacturing and intellectual property licensing agreement with MediPharm Labs Inc. (“MediPharm”) involving licensed production, domestic and international distribution and intellectual property licensing. Under the terms of the agreement, MediPharm use the specialized contract manufacturing capabilities resident at its state-of-the-art Canadian production facility to produce Avicanna’s advanced Rho Phyto medical cannabis products and Pura Earth topicals under license for commercial sales through Medical Cannabis by Shoppers. The partnership provides Avicanna with a commercial pathway to Canadian and international sales, as well as pharmaceutical manufacturing of its products destined for clinical development with its Canadian clinical partners. Additionally, Avicanna will grant MediPharm a license to use proprietary Avicanna formulations to develop additional MediPharm Labs and white label branded products for the domestic and international market. MediPharm has proven expertise in product development and will leverage its in-house sensory testing, processing and packaging capabilities to manufacture finished products using these formulations. MediPharm Labs’ pharmaceutical and GMP-certified capabilities and international supply chain expertise will be deployed to produce and deliver the proprietary finished products to partners worldwide.