“In the first quarter of 2021, VIVO made significant contributions to its organizational foundation with the EU-GMP certification of the Vanluven Facility and by strengthening its balance sheet with an equity offering completed in February 2021.” said Rick Fitzgerald, interim-CEO of VIVO. ” We also continue to enhance our Cannabis 2.0 line of products with the formulation of our new brick hash offering and our soon to be released topical offering.”
The Canadian Cannabis industry continues to face strong headwinds caused by retail price compression and customer inventory rationalization.
Net revenue for Q1 2021 was $5.5 million, representing a 11% decrease quarter-over-quarter as compared to Q4 2020, driven by a one-time $0.6 million excise tax underestimate, a late Q4 2020 Australian shipment and overall Canadian market compression in the quarter.
VIVO continued to sustain top-tier prices for its medical and adult-use dry flower products, with a net average selling price (net of excise) of $6.28 per gram in Q1 2021, up 5% from Q4 2020 due to product mix.
Sales, general and administrative expenses were $4.1 million in Q1 2021, compared to $5.1 million in Q4 2020, a reduction of 20% driven by targeted cost reduction activities and one-time restructuring costs incurred in Q4 2020.
The Company’s adjusted EBITDA(1) was ($2.4) million for the quarter, compared to ($4.8) million in Q4 2020, the difference primarily driven by targeted cost reduction activities and restructuring in the prior quarter.
VIVO continued to strengthen its balance sheet through its $8M capital raise. The cost reduction activities and the capital raise allowed for an increase in its cash and cash equivalents balance from $5.7M in Q4 2020 to $16.9M in Q1 2021.
Key Performance Indicators
KPI (P&L amounts in millions)
Adjusted EBITDA (1)
Cash and equivalents
Active patients (2)
Net flower price per gram
Adjusted EBITDA is not a measure of financial performance under IFRS. For the Company’s definition of Adjusted EBITDA, see the Company’s management’s discussion and analysis for the three months ended March 31, 2021, available under the Company’s profile at www.sedar.com.
Represents active patients (as of the end of the quarter) who purchase medical cannabis directly from the Company. Note the six-month extension on expired authorizations by Health Canada, ended December 2020.
VIVO remains focused on executing against its four strategic priorities. In the first quarter of 2021, the Company made significant progress in enhancing supply and production capabilities, expanding its customer network, increasing product innovation and accelerating its international medical business. VIVO believes that focusing on these four priorities will generate long-term shareholder value and accelerate the path to profitability.
1. Enhance Supply and Production Capabilities
- VIVO continues to advance the integration of its Napanee, Ontario and Hope, BC operations in response to the streamlining of its Napanee operations in October 2020. The Company’s Napanee operations focus on extraction, product formulation and EU-GMP related processes. The Company’s Hope operations focus on indoor cannabis cultivation, packaging and solventless extracts and concentrates.
- VIVO continues to expand its premium dry flower cultivar offering with the addition of two new Canna Farms™ listings in Prince Edward Island: Pink Kush large format flower and multi-pack of pre-rolls. VIVO anticipates these will be available for purchase by the end of Q2.
- VIVO continues to expand its product portfolio in Quebec with the addition of three new Canna Farms™ listings: CBD Critical Mass flower, CBD Canna Bliss flower and pre-rolls. VIVO anticipates these to be available for purchase in Q3. VIVO is focused on developing new cultivars and continues to invest in phenotype hunting to provide unique genetics to cannabis markets across its entire portfolio of brands.
- Although the airhouses at the Kimmetts Facility in Napanee suffered damage during a powerful winter storm, the Company has assessed the situation and has repaired and inflated one airhouse to be used in 2021. In 2020, the airhouses provided better than expected growing conditions. The cannabis plants cultivated in the airhouses grew much larger than anticipated, and much larger than was ideal. Due to the low price of biomass following the 2020 growing season, VIVO will use the 2021 growing season to determine the optimum protocol to follow to harness the airhouses’ ideal environment to cultivate premium flower.
- The Company’s ethanol extraction suite at the Vanluven Facility continues to produce high quality cannabis extracts and distillates for use in many of VIVO’s products as well as for use in producing the Company’s emulsions made under its partnership with Vertosa. The Vanluven Facility’s focus is on the processing and manufacturing of quality oils, distillates, concentrates and more advanced formulations of VIVO’s current and anticipated portfolio of medical products, as well as edibles and topicals. VIVO has invested in automated packaging and labelling equipment which are expected to increase its finished goods throughput and lower manufacturing costs.
VIVO’s capital expenditures for 2021 will be minimal. Disciplined investments in product development, facility optimization and international market commercialization are expected to continue to facilitate future profitable growth.
2. Create a Broad and Loyal Customer Network
VIVO has a strong portfolio of brands in both the medical and adult-use markets. Its Canna Farms™ brand is one of the leading brands in the industry, known for producing award-winning, BC indoor-grown, craft cannabis flower and newly launched solvent-less extracts and edibles.
- VIVO continues to focus on supplying quality premium cannabis products, allowing the Company to maintain high prices for its medical and adult-use dry flower products, with a net average selling price of $6.28 per gram for the three months ended March 31, 2021.
- Canna Farms™ Pink Kush and Girl Scout Cookies flower and pre-rolls received ‘Craft Cannabis’ designation by Ontario Cannabis Store (OCS) as one of 20 Licensed Producers. Craft flower is hand-trimmed, hang-dried, hand-packaged, and grown in a facility that produces less than 10,000 kg of dried cannabis (or equivalent) a year.
- In January 2021, VIVO entered the Quebec market with Canna Farms™ BC Kief as the province’s first in the kief category. Quebec is the third largest market in Canada and the ninth province where VIVO products are available. In May, VIVO obtained new listings with Société Québécoise du Cannabis (SQDC) for CBD Canna Bliss flower & pre-rolls and CBD Critical Mass flower and expects them to be available for purchase in Q3 2021. VIVO is proud to be one of a handful of participants permitted access to the Quebec market.
- VIVO continues its supply and its clinic services agreement with Medical Cannabis by Shoppers™. Over the first quarter of 2021, Medical Cannabis by Shoppers™ continued to grow its selection of VIVO Cannabis products.
- VIVO’s family of brands, each targeting a specific market segment, include Canna Farms™, Beacon Medical™, Fireside™, Lumina™, Harvest Medicine™ and Canadian Bud Collection™. The Company currently sells over 100 stock keeping units.
- VIVO launched an updated Canna Farms™ website in May with refreshed branding, improved user design and overall consumer experience. Updates to the Canna Farms™ Instagram channel, internal patient newsletters and trade materials were also implemented for an omnichannel approach to drive traffic to the website as part of the integrated marketing strategy
- VIVO’s Fireside™ brand launched a new store locator to help consumers gain access to retailers in their province that carry Fireside™ products. VIVO expects the store locator to help consumers and retailers alike, as local retailers and small businesses have faced numerous challenges over the past year given the continued changes to market dynamics as a result of COVID-19. Visit https://www.firesidecannabis.com/shop/ for more information.
- Canna Farms operates an industry-leading online medical cannabis platform, (https://www.cannafarms.ca). Combining the Company’s Beacon Medical™, Fireside™, Lumina™, Canna Farms™ and Canadian Bud Collection™ brands, with products from third-party cultivators in one on-line medical store is believed to offer a distinct benefit for patients looking for a single location to access a broad selection of medical cannabis products. Canna Farms’ platform represents one of the largest medical cannabis suppliers in Canada.
In VIVO’s cannabis clinic segment, Harvest Medicine (“HMED”) operates a portfolio of four education focused, patient-centric, cannabis discovery clinics, including a 3,500 square foot clinic located in Northland Village Mall in Calgary, Alberta, a 3,000 square foot clinic inside the St. Albert Centre in St. Albert, Alberta, and two additional clinics in the provinces of New Brunswick and Nova Scotia. HMED has conducted more than 150,000 registered patient visits through its clinics, clinic-in-clinic partnerships and via its telemedicine platform, making it one of the top clinic networks in Canada. In Q1, Harvest Medicine began offering pharmacy consultations as an additional service offering for patients as part of their medical cannabis care.
As noted below under the heading “Current Outlook – COVID-19 Pandemic”, the Company temporarily suspended in-clinic visits at its Harvest Medicine clinics but the Company’s HMED Connect telemedicine platform is proving to be of increased service to the medical cannabis market as the general public has become increasingly conscious of social distancing and more patients are choosing to remain at home. HMED’s telemedicine platform brings medical cannabis information and services to patients across Canada, allowing them to access the same patient-centric services they would receive in HMED clinics, on-line.
3. Build an Innovation-Driven Branded Organization
VIVO has a strong commitment to pursuing innovation throughout its value chain. The Company is also using its robust data insights as a foundation for the development of novel products with a strong competitive edge and high margins.
- After the signing of an exclusive agreement with Vertosa Inc. (an infusion technology company based in Oakland, California), for Canadian production rights, Vertosa’s equipment was installed at the Vanluven facility. VIVO continues to build on its emulsion supply agreements with multiple cannabis beverage bottlers with others pending. VIVO expects to have a record year in 2021 given the number of recognized brands that will leverage Vertosa emulsions.
- VIVO continues to advance its product development with partner, Pharmascience Inc., a global pharmaceutical company based in Montreal, Quebec, for a unique line of specific medical cannabis formulations produced under pharmaceutical quality standards. VIVO believes that a significant catalyst to increased medical cannabis use is the introduction of new medical-grade, precise-dosed, stable formulations, which the partnership with Pharmascience is intended to target. Pharmascience recently received its highly anticipated Health Canada license to produce cannabis products; the first products from this partnership are expected to be introduced to the Canadian market by Q4 2021.
- Canna Farms was BC’s first licensed producer and proudly holds itself to the highest cultivation standards. In 2020 it was recognized by Brightfield Group as the brand with the 4th highest Brand Awareness.
- VIVO is committed to pursuing innovation throughout its value chain. The Company uses data insights gained from Harvest Medicine’s clinics and from Canna Farms’ medical cannabis platform as a foundation for the development of novel products that meet patients’ needs and give VIVO a competitive edge.
4. Accelerate International Medical Business Growth
VIVO continues to pursue its international expansion strategy, leveraging its experience and leadership to enter select, new high-growth markets. The Company’s initial focus is on the German and Australian markets.
- On March 11, 2021 VIVO’s Vanluven facility in Napanee Ontario received EU-GMP (European Union Good Manufacturing Practices) certification from Germany’s Brandenburg health authority, the Landesamt für Arbeitsschutz, Verbraucherschutz und Gesundheit (“LAVG”). The certification took effect immediately and will enable VIVO, through its ABcann Medicinals subsidiary, to export product for sale into European and other markets requiring products to be manufactured under the rigorous EU-GMP standards. ABcann has harvested its first lot of whole flower slated for EU-GMP production.
- Australia’s Therapeutics Goods Administrator (TGA) continues to report a record number of new patient approvals and triple digit growth in patient approvals year-over-year. The growth in the market has been matched by the growth in VIVO’s Beacon Medical Australia business. Data released by Stats Canada show that VIVO exported a record 18% of dry flower shipped to Australia in 2020. VIVO is well positioned to capitalize on this rapidly growing market and currently sells 5 products under the Beacon Medical Brand.
The Company is selectively expanding its international medical footprint, to enter new high-growth markets. The Company is following a capital-light approach owning no properties or major assets overseas, with an intense focus on go-to-market execution, leveraging strategic partnerships and pharmaceutical experience to ensure success.
In 2020 and early 2021, the global economy, and society generally, has been in a state of upheaval as a result of the COVID-19 pandemic. This crisis continues to have an unprecedented impact on the markets, employees, customers, patients, and business partners.
These impacts include less demand for premium cannabis, downward pricing pressure, lower than expected adult-use market growth, production inefficiencies due to staffing challenges and enhanced safety procedures, travel limitations, and limited sales interactions.
Harvest Medicine continues to limit in-clinic visits while expanding the use of its HMED Connect telemedicine platform for phone and video consultations. Harvest Medicine continues to monitor and assess the reopening of its locations.
VIVO continues to monitor COVID-19 developments and has implemented enhanced personal safety and sanitation measures at all of its facilities. VIVO’s production sites have continued operations throughout the pandemic and, to the Company’s knowledge to date, there have been no confirmed cases of COVID-19 among Company personnel.
VIVO coordinated an internal vaccination clinic at its Hope facility for frontline essential workers and has conducted a series of internal mental health & wellness sessions to support employees with managing stress and building resilience during the pandemic.
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 with respect to: the expected performance of the Company’s business and operations, and the impact of the COVID-19 pandemic thereon; the Company’s expectations regarding revenue, expenses and anticipated cash needs; the intention to grow the Company’s business and operations, including the expansion of the Company’s product lines as the adult-use market matures; the expected market availability of its new products and the variety of products offered; the benefits of Vanluven’s receipt of EU-GMP certification for the Vanluven Facility; expectations regarding the Company’s strategic partnerships; and the Company’s international expansion plans and objectives; the Company’s expected catalysts to deliver profitable growth, including entry into international markets and the development and launch of innovative products and services, and the financial impact thereof; the Company’s expectation that focusing on its four strategic priorities will generate long-term shareholder value and accelerate the path to profitability; the factors that VIVO believes will drive significant growth in medical cannabis utilization; the ability of the Company’s growth initiatives to drive future profitability; that certain products offered by the Company will be sold through the Medical Cannabis by Shoppers™ platform; and that the products generated from the Company’s partnership with Pharmascience Inc. are intended to maximize therapeutic benefit to patients. 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 medical cannabis market may not grow to the extent, within the time, or for the reasons expected by the Company; that the COVID–19 pandemic may last longer and have a more significant impact on the Company’s operations, the Canadian cannabis industry, or the global economy generally, than currently expected; that the Company faces competition against new market entrants and participants; that the Company may not be able to launch new products in the time expected or at all and that patients may not receive the expected benefits therefrom; that the Company may not be able to achieve competitive margins; 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 necessary licences; that demand for the Company’s products may not meet management’s expectations; that the benefits of EU–GMP certification may be delayed due to various factors; that the Company may be unable to retain its key talent; that the Company may not be able to execute on its strategic partnerships; that the Company may not obtain any other necessary regulatory approvals as required from time to time; that the Company may be unable to protect its intellectual property; 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 carefully, and the more extensive risk factors included in the Company’s management’s discussion and analysis for the three months ended March 31, 2021, which is available on SEDAR, 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.