Ladies and gentlemen, thank you for standing by and welcome to the MediPharm Labs' 2024 second quarter financial results conference call. Please be advised that today's conference is being recorded. Before we begin, please note that remarks today may contain forward-looking information and forward-looking statements within the meaning of applicable securities laws. This includes, without limitation, statements about MediPharm Labs and its current and future plans, expectations, intentions, financial results, levels of activity, performance, goals or achievements, and other future events, trends, profitability, business growth, or developments. Forward-looking statements are made as of the date hereof, based on information currently available to management of MediPharm, and on estimates and assumptions made based on factors that MediPharm believes are appropriate and reasonable in the circumstances. There can be no assurance that such estimates and assumptions will prove to be correct.
Many factors could cause actual results to differ materially from those expressed or implied by forward-looking statements. Additional information is contained in MediPharm Labs' filing with the Canadian and provincial security regulators, which are available on SEDAR at sedar.com. The company's remarks may also contain references to certain non-IFRS financial measures, including EBITDA, adjusted EBITDA, gross profit and adjusted gross profit. These measures do not have any standardized meaning according to International Financial Reporting Standards, or IFRS, and therefore may not be comparable to similar measures presented by other companies. MediPharm believes that the non-IFRS measures referenced provide information useful to shareholders and investors in understanding their performance, and may assist in the evaluation of the combined company's business relative to that of its peers. For more information, see the section titled "Reconciliation of Non-IFRS Measures," the most recent MD&A of MediPharm, which is available on SEDAR.
I will now pass the call to David Pidduck, CEO of MediPharm. Please go ahead, sir.
Thank you, operator, and welcome everyone to our Q2 2024 earnings call. We are very happy to report today that we're close to profitability, being essentially at breakeven Adjusted EBITDA for the quarter. Q2 Adjusted EBITDA is CAD 124,000 negative for the quarter. The company and all of our hardworking employees have been strictly focused on getting to this moment. Over the last two years, we've gone through several significant restructurings: sold our MediPharm Australia facility, acquired and integrated VIVO, resolved outstanding litigation, and significantly diversified our business. Recently, we completed the integration of our Canna Farms' medical business into the Barrie operation, resulting in lower costs and better service for our medical patients. We are now in the process of selling our Hope facility, which will further improve our financials and generate additional cash.
The MediPharm team has transformed the business from losing over CAD 6 million per quarter in adjusted EBITDA in Q2 2022 to being essentially breakeven this quarter. International sales for the quarter are over 40% of our revenue. We've grown sales quarter-over-quarter for the last three quarters. We have CAD 16 million in cash at the end of the quarter and plans in place to sell underused assets that could generate significant additional cash. But obviously, we're not satisfied to just break even. We have active plans in place to generate additional revenue and to further reduce costs. On the revenue front, international sales continue to drive growth and profitability. We will continue to focus on growing our business in Europe, Australia, and Brazil. We are hopeful that our pharmaceutical partner's file in Brazil will be approved in the next quarter and start to generate revenue in Q4.
In Europe, we've made progress on initial contracts in the UK, France, and Poland. The last quarter has also seen progress with our B2B and pharma channel. We've initiated several contracts, both domestically and for international markets. We see continued future growth, developing and manufacturing brands for other LPs and global pharma companies. On the cost side, the consolidation of the Hope facility and certain further restructuring efforts already in progress will generate over CAD 1 million in additional profits on an annualized basis. We believe that further efficiency and cost reduction opportunities still exist that will improve on the already implemented savings targets I just referenced. These include finding further efficiencies in our German supply chain and in our medical and clinical businesses. So now the task moves to driving consistent, profitable revenue growth and generating positive cash flows for 2025 in our core businesses.
Our strength in international markets will be a key revenue driver. As mentioned, over 40% of our revenues last quarter came from international markets. Key drivers included newly launched vape and oil SKUs in Australia and good response to our dronabinol launch in Germany. In addition, several companies have sought us out to supply new GMP SKUs for international markets, as regulatory standards tighten in Australia and other markets. Our medical pharmaceutical approach has laid the foundation for growth in international markets, with established regulatory and supply chain pathways and reputable pharma and distribution partnerships. We've been leveraging these established paths to drive additional products through existing channels. We have also been leveraging all our quality, regulatory, and pharmaceutical expertise to assist partners.
Several recent examples of this expertise in action include developing and manufacturing products, like our agreement with Avicanna for their SEDDS capsule formulation, assisting our Brazilian pharma partner with their file submission, the recent signing of our Remidose inhaler deal, ongoing pharmaceutical product submissions with pharma partners, and continued support at various pharma and academic clinical trials. Being the only natural cannabis site in Canada that is registered and inspected by the U.S. FDA, allows us to further expand our pharmaceutical-related business into the U.S. in the future. The rescheduling of cannabis has continued to make good progress in the U.S., which will ultimately lead to more medical research, expanding the total addressable market for MediPharm in this specialized high-margin niche area. We have a solid balance sheet and strong cash position, and should soon generate even further cash through the sale of underutilized facilities.
We removed our going concern qualification last quarter, and we intend to pay off CAD 2.1 million, our only significant outstanding debt, next quarter. As mentioned before, unlike many of our peers, we do not have any CRA excise tax exposure, and unlike our peers, we hold very minimal debt. Our balance sheet and cash position now stand out as one of the strongest positions of LPs in our peer group. But industry challenges and ongoing consolidations are continuing. In the last few quarters, we've continued to see multiple LPs filing for CCAA protection. Industry profitability remains a challenge, and there are still far too many operating companies in the industry. In short, there are far too many publicly traded companies in the industry, and the industry as a whole needs to take collective costs out of the system. As a result, industry consolidation will remain a reality.
Fortunately, we are in an excellent position to benefit from a thoughtful and prudent M&A approach. We continue to evaluate opportunities that could represent significant upside for shareholders and strengthen the company long term. Our unique positioning and approach in the medical pharma space and our strong base of growing, profitable international sales makes us a unique partner of choice. Whether as a contract manufacturer, distribution partner, product development partner, or pharmaceutical supplier, MediPharm is well-positioned to grow both organically and through M&A in the near term. I will now turn it over to our President, Keith Strachan, to share some further commercial insights.
Thanks, Dave. Thank you everyone for joining us this morning. As we build on our achievements from the first quarter, the second quarter of 2024 continued to showcase our commitment to operational excellence and strategic growth in the global cannabis market. The whole company is motivated and excited as we are closing the gap to get back to profitability. This quarter, we fortified our innovative product portfolio through a new licensing agreement with Remidose Aerosols, granting us exclusive rights to their advanced cannabis product technologies. This expansion enhances our offerings across domestic and international medical cannabis markets. We will assume their existing adult use sales in Q3 and start GMP shipments of these products internationally in Q4. Also, in partnership with Avicanna, a leader in cannabis research and formulation, we have been developing the scale-up and commercialization of a new self-emulsifying drug delivery system in capsule format.
We are pleased to announce that we have now completed the scale-up, validation, and manufacturing of the first batches. Distribution of these new products are now available to Canadian cannabis patients. Our international portfolio continues to expand. In July, we began delivery of high-potency medical cannabis flower under our Beacon Medical brand in Germany. This is in response to favorable regulatory changes and is expected to complement our growing sales in that market. Additionally, our market share for GMP vapes in Australia is now third based on units sold and patient revenue, just nine months after their launch. Our international sales continue to grow and reach CAD 4.5 million in the quarter. Dronabinol sales have continued their strong performance from Q1, doubling to a total of CAD 1.9 million year to date. This revenue stream enjoys higher margins and is helping our drive towards profitability.
Our sales to our German pharma partner, STADA, also had a strong quarter, as oil and flower units to STADA patients in Germany have increased 35% in the first 6 months of 2024, compared to the same period in 2023. In compliance and quality, April was significant for us, with the successful completion of 2 EU GMP inspections. Both our Napanee and Barrie facilities were inspected by Germany's LAVG Health Department. I am pleased to report that our renewed EU GMP certifications were issued by the LAVG on July 1, 2024. Another milestone was reached in April with our submission of a Drug Master File for CBD API to Health Canada.
This submission allows for our current and future pharmaceutical partners to reference MediPharm's high-quality CBD API in their drug applications, echoing the DMF we filed with the U.S. FDA back in 2021. As we continue to advance on these fronts, our focus remains on innovation, strategic global market expansion, and enhancing operational efficiencies. These pillars not only drive our financial performance, but strengthen our position as a leader in the global cannabis market. I'll now pass the call to Greg to go over financial details.
Thanks, Keith, and good morning, everyone. As discussed in prior calls, MediPharm management has been focused on growing our revenue base through organic and inorganic initiatives, reducing cash burn, and driving towards profitability as key priorities. I am pleased to report that Q2 was another step in the right direction. Before reviewing the results, let me add some additional commentary on the progress we made on these priorities in the quarter. Q2 was a pivotal quarter, as Adjusted EBITDA loss of CAD 0.1 million was very close to breakeven and was the best in over three years. Revenue of CAD 10.3 million was the highest in over three years and increased CAD 0.8 million, or 8% versus prior year, and improved CAD 0.6 million, or 6% sequentially.
We had our largest commercial shipment of dronabinol to Germany in Q2, representing CAD 1.3 million in revenue, which was double the Q1 revenue. Our gross margin of CAD 3.4 million was the highest in over four years and was over 33% of revenue. In addition, we completed the relocation of the Hope medical channel operations to the Barrie facility, which will save approximately CAD 1 million on an annualized basis. The Hope facility is being listed for sale and could generate CAD 4 million-CAD 5 million of additional cash in the near term, adding to our balance sheet strength. Turning to the P&L performance for the second quarter. Revenue for the second quarter of CAD 10.3 million increased CAD 0.8 million, or 8% versus prior year, and increased to CAD 0.6 million or 6% sequentially from Q1 2024.
Canadian adult use and wellness revenue of CAD 1.5 million in Q2 2024 declined versus Q2 2023. Revenue also declined sequentially from CAD 2.1 million in Q1 2024, driven by increased competitive pressures. The management team will be focused on improving this revenue stream in the coming quarters. Canadian medical cannabis revenue for Q2 2024 of CAD 3.5 million was consistent with Q1 2024 and decreased from CAD 3.8 million in prior year. International medical revenue increased from CAD 3 million in Q2 2023 to CAD 4.5 million in Q2 2024, driven by dronabinol sales in Germany and new Australian vape and oil business. Revenue increased sequentially from CAD 3.2 million in Q1 2024, driven by increased dronabinol and oil sales. The international business represented approximately 44% of total revenue in Q2 versus 33% in Q1.
Pharmaceutical and B2B revenue in Q2 2024 of CAD 0.8 million increased from CAD 0.3 million in Q2 2023, largely due to a new contract manufacturing customer. Revenue decreased CAD 0.2 million sequentially from Q1 2024, driven by customer order timing. As Keith and Dave discussed previously, pharmaceutical revenue is a longer term strategy and will take time to pay off as clinical trials progress and applications make their way through the long-term process of approvals. Gross profit for Q2 was CAD 3.4 million, or 33%, and improved significantly versus Q2 2023 of 8.2%. Q2 2024 gross profit also increased versus Q1 2024, driven by increased international medical cannabis revenue that typically enjoys higher margins.
Q2 2024 gross profit was 37% when adjusting for several discrete items such as biological asset, fair value adjustments, inventory write-downs, and severance for restructure. This was the highest gross profit in over four years. Gross profit continues to improve, driven by product mix, production efficiencies, and cost reductions. Management continues to focus on driving gross profit. General and administrative expenses in the second quarter of CAD 3.9 million decreased versus CAD 5.8 million in prior year, largely driven by achievement of synergies from the integration of VIVO and a continued focus on cost reductions. G&A decreased sequentially from CAD 4.3 million in Q1 2024. Marketing and selling expenses of CAD 1.5 million was consistent with prior year and prior quarter.
Total OpEx, which includes G&A, marketing and selling, and R&D expense, was CAD 5.4 million for Q2 2024 and decreased CAD 2.1 million versus prior year due to the achievement of synergies from the integration of VIVO and a continued focus on cost reductions. In addition, Q2 2024 operating expense decreased CAD 0.3 million, or 5% versus Q1 2024. When adjusting for severance and other discrete items, Q2 2024 operating expense was CAD 4.9 million. Management continues to focus on further expense reduction opportunities, as Dave discussed. Adjusted EBITDA loss for Q2 was CAD 0.1 million and improved CAD 3.1 million, or 96% versus Q2 2023. This improvement in adjusted EBITDA is driven by revenue growth, the improvement in gross profit, and the reduction of expenses.
Q2 2024 Adjusted EBITDA improved CAD 0.8 million, or 87% versus Q1 2024, driven by revenue, gross profit, and continued expense reductions. Management continues to pursue profitable revenue growth through organic and inorganic initiatives and further expense reductions to move from our essentially breakeven Adjusted EBITDA to positive Adjusted EBITDA and positive cash flow. Moving to a few notable items on the balance sheet. Trade and other receivables balance at Q2 is CAD 6.2 million, and 93% of trade accounts receivable is paid 60 days or less. Our cash burn in Q2 was approximately CAD 1 million, resulting in an ending cash balance of CAD 16 million at June 30, 2024. The company has less than CAD 3 million of debt, and unlike many other cannabis companies, MediPharm is also up to date on cannabis excise duty and trade payables.
Although we still have work to achieve profitability and become cash flow positive, Q2 was another step in the right direction. Revenue was the highest in over three years and increased 6% sequentially to CAD 10.3 million and 8% year-over-year. Adjusted gross profit was 37%, was the highest in over four years. Adjusted EBITDA loss was close to breakeven and improved sequentially and versus prior year to CAD 0.1 million, and was the best in over four years. And finally, we have a strong balance sheet relative to our peers, with CAD 16 million of cash and less than CAD 3 million of debt, and assets held for sale that could generate more.
Finally, we have a strong balance sheet relative to our peers, with CAD 16 million of cash and less than CAD 3 million of debt, and assets held for sale that could generate another CAD 4 million-CAD 5 million of cash. As a result of our strong balance sheet and significantly improved financial performance, we are well positioned to invest in organic and inorganic growth opportunities as the industry continues to mature. With that, I'll turn it over to the operator to open the line for questions.
Thank you. We will now open the line for your questions. If you have dialed in and would like to ask a question, please press star one on your telephone keypad to raise your hand and join the queue. To withdraw your question, press star one again. If you are dialed in and listening via loudspeaker on your device, please pick up your handset and ensure that your phone is not on mute when asking your question. Our first question comes from the line of Aaron Gray with Alliance Global Partners. Please go ahead.
Hi, good morning. Thank you for the questions here. So first one for me, just want to talk a bit more about some of the M&A opportunities you spoke to, particularly in Canada. I know there's a lot of players there, still a lot of fractionalized players with small market share, 1% or even lower in some cases. So wanted to see where you see the potential ops, you know, is just adding revenue and stripping, you know, corporate synergy costs, making it appealing from an acquisition standpoint. Or do you see opportunities out there to that would help you accelerate and drive top line growth? And this one's geared more specifically to Canada, and if you don't see things in Canada, then that's fine, and then maybe talk more about outside opportunities. Thank you.
Yep. Thanks, Aaron. It's, it's Dave. So I'll touch on this, and then maybe Keith or Greg can add. So for M&A opportunities, we have to be really careful. As you know, with our cash position, we are interested-- we are an interesting partner for many, many folks out there, and so we're being very selective and thoughtful about what we do. And I think it's a combination of we're looking for any partners where there is significant synergy, and it has to be both sort of revenue synergy, because they're leveraging... either we're leveraging what they have or, or vice versa. You said you focused on the Canadian market.
There's a lot of Canadian players that don't have an international presence, where that could be significant synergy, where we have sort of channels and partners internationally, and maybe they have some areas where they're strong domestically, and that would be good synergy. You know, most of the various opportunities all come with, I'll say, general synergy opportunities in terms of people and management and facilities, potentially. So that kind of applies to a lot of players. So anything we would do, we would look at something that had significant revenue synergies in addition to just, I'll say, normal cost synergies of companies coming together. So that's kind of my reflections on that. I don't know, Keith or Greg, if you want to add anything to that.
No, thanks, Aaron. I think just to cover Dave's point, like, on from a perspective in Canada, now that we are essentially breakeven from an adjusted EBITDA perspective, obviously anything would need to be accretive. We're not looking to go backwards in that sense, and I think where we have capacity is probably where the best opportunity lies as far as consolidation goes. So as you've mentioned, there's, you know, some folks that even have, you know, 1%, 2% market share. Even we do in some adult rec categories, and we are very strong in international and medical. So as we look at other Canadian opportunities, things like other medical platforms, so we do patient direct-to-patient distribution and ordering. All of that infrastructure could take on more, and we are growing that organically.
But if there's an opportunity to grow something like that segment inorganically through M&A, that's, that's where our focus would be in Canada.
Okay, great. Thanks for the color there. Appreciate it. Second question for me, just on Germany. Could you discuss maybe how you're seeing the market evolve, you know, post the April 1 change in medical reform? Any potential bottlenecks, what you're seeing in growth, you know, as you speak with your partners out there? So that'd be helpful color there. Thank you.
Yeah, maybe, Keith, maybe you take that.
Yeah, Germany has been, you know, exciting this year as we saw the changes come into effect in April with the removal of the narcotics. There is some logistical changes that need to happen with that. So everyone who had a narcotics license for cannabis now gets a new license for cannabis. They call it the CanG. So you would register all your products, but it's just registered in a different way. So I think everyone in the industry is working through that. And BfArM, the regulator in Germany, has been very good on letting people get through that to the end of the year. We have seen a lot more physicians that are willing to write prescriptions, and we're seeing more pharmacies who are carrying the product, and that will continue to result in more sales.
Last year in Germany, MediPharm sold about $3.5, $3.6 million net sales. We've already surpassed that in 2024. So in the first six months of 2024, we are just cresting over our total sales of 2023. So that, you know, is big growth for us. Stada remains our number one partner there, especially on the oil side. They're not as impacted by what I would say, like, the patient pay model. The patient pay model is those patients who are more cannabis curious as a therapeutic benefit and going into a pharmacy and paying out of pocket. Those are mostly flower consumers, a bit more promiscuous in trying different things.
That has taken a pharma approach, where they're getting folks for therapeutic benefits on prescriptions and keeping them on those prescriptions. Their business year to date is already up 35%, and their business is, call it 80%-85% oil, which is, you know, higher margin. So in some cases, a little bit lower on the top line as far as blasting out a ton of flower, but obviously great for us from a margin perspective. We do see that need and demand for the flower, so we continue to increase our flower sales.
I think our big bolus of more deliveries actually started in July and into August, so we'll see that translate more into Q3, and then we'll be able to, you know, see how that's trending into Q4, post the load-in of some of those new Beacon Medical strains. Beacon Medical, which is a MediPharm-owned brand internationally in Germany, was always small, and we bought that from VIVO in 2023, but was really big and a market leader in Australia and continues to be. And so we want to replicate our success in Australia with that brand in Germany, and we've started to do that by signing on... With the changes in April, we've signed on new distributors and new partners, and we're focused on more high-potency THC, as we mentioned in the earlier remarks.
And so those deliveries started, and then we'll see how those trend, and we are excited to give an update on that, you know, in the back half of the year here.
Okay, great. Really appreciate that, Color. I'll jump back in the queue.
Again, if you would like to ask a question, please press star one. Seeing no further questions, I will now turn the call back to David Pidduck for any closing remarks.
Thanks, operator, and thank you everyone for joining us. We look forward to seeing everybody or speaking with everybody in next quarter. And everybody, hope you're having a great summer. Take care.
This will conclude today's conference call. Thank you all for your participation. You may now disconnect.