Medipharm Labs Corp

TSX:LABS

Earnings Call Transcript

[Operator]

Good morning, ladies and gentlemen. Welcome to MediPharm Labs Fourth Quarter 2020 Conference Call and Webcast. I would like to remind you that this call is being recorded on March 31, 2021, at 8:30 a.m. Eastern Time. [Operator Instructions]I'd now like to turn the call over to Laura Lepore, Vice President, Investor Relations and Communications. Please go ahead.

[Laura Lepore]

Thank you, operator, and good morning, everyone. With me on the call today are Keith Strachan, President and Interim Chief Executive Officer; and Greg Hunter, Chief Financial Officer.Now before we begin, please note the following caution regarding forward-looking statements, which is made on behalf of MediPharm Labs and all of its representatives on this call. The statements made on this call will contain forward-looking information that involves risks, uncertainties, including those introduced by the COVID-19 pandemic. Actual results could differ materially from a conclusion, forecast or projection in the forward-looking information. Certain material factors or assumptions were applied in drawing a conclusion or making a forecast or projection as reflected in the forward-looking information. Additional information about the material factors that could cause actual results to differ materially from the conclusion, forecast or projection in the forward-looking information and the material factors or assumptions that were applied in drawing a conclusion or making a forecast or projection as reflected in the forward-looking information are contained in MediPharm Labs filings with the Canadian provincial securities regulator, which are available on SEDAR at sedar.com.Now with that, it is my pleasure to turn the call over to Keith Strachan.

[Keith Strachan, Co]

Thanks, Laura, and good morning, everyone. I'll begin the call with our outlook, and then Greg will discuss Q4 results and our recently strengthened balance sheet. Then I will close with some additional thoughts.We are turning the page on a challenging year that created uncertainty for people, organizations and regulators globally. While 2020 presented certain difficulties across the cannabis industry in Canada and abroad, MediPharm also demonstrated resiliency as we remain focused on our vision to become a leading global provider of pharmaceutical API in finished dose, medical and wellness products. We are confident that 2021 will be a stronger year for MediPharm for 4 reasons: first, the expected ramp of our key customer sales agreements secured throughout 2020; second, the recent expansion of our own labs branded product line and distribution channels in Canada; third, the company-wide organizational changes made in Q4 that will allow for more efficient, effective operations as we focus on returning to profitability; and fourth, the global momentum being gained in the pharmaceutical sector's entry into cannabis, including the U.S. This is our biggest opportunity. MediPharm is well positioned with highly specialized manufacturing capabilities, GMP supply chain and expanded drug licensing to win new pharmaceutical supply contracts.Looking at our near-term growth opportunities in more detail, MediPharm Labs now has over 30 customer agreements in 8 different countries, all in keeping with our focus on domestic wellness and international pharmaceutical markets. Headlining these agreements is our exclusive partnership announced in early Q4 with STADA, the European consumer health care and generics company. I'm very proud of our team to say we have recently started shipments to STADA under this agreement. This is the very beginning of a meaningful long-term partnership, and it will be a contributor to revenue this year and into the future.To us, STADA is the right partner; Germany is the right market; and this agreement comes at the right time. Germany is leading the market globally for medical cannabis. With more than 320,000 cannabis prescriptions approved in Germany in 2020, the German market is said to be growing at around 30% annually. In about 2/3 of medical cases, health care insurance reimburses German patients using cannabis. This is more advanced than any other medical market.As a reminder, one of our roles is to provide a wide range portfolio of products and services as full turnkey finished dose supplier of all formats and delivery methods. To fulfill this role, we created a reliable supply chain to source, qualify, manufacture, label and deliver the very best medical cannabis to STADA. Manufacturing of extract products is taking place at the MediPharm Labs' GMP-certified production facility in Australia. When products arrive in Germany, MediPharm Labs ensures complete German lab testing, labeling and final distribution. STADA leads the way in medical education, marketing and sales, using its extensive field force. To that end, it's already trained 28 representatives to assist doctors in making informed decisions about prescribing cannabis for chronic pain, neurology and oncology.STADA has launched its initial offerings of GMP flower products, and extract formulations with different THC and CBD concentration will be available in the coming weeks. MediPharm Labs will supply all of these products. With the commitment and power of STADA behind this offering, we are confident that this is going to be a great success. As we said when we initially announced the deal, both STADA and MediPharm intend on expanding sales beyond Germany to additional European countries over time. As I noted, this is 1 of 30 customer agreements in place around the world, now including new business in South America with Cann Farm Peru and XLR8 Brazil. Demand signals in these markets are positive, which is obviously important to the realization of growing volumes as the year progresses. We also continue to convert opportunities into definitive deals that fit with our long-term strategy. As one example, at the beginning of this month, we were chosen by Cannim Australia to provide both white label supply and contract manufacturing. In Australia, we have commenced registrations to launch over-the-counter CBD products. Over-the-counter legislation just passed in February and we believe represents a high-growth opportunity for us, especially since manufacturers and suppliers of these CBD products must be GMP certified. Growth in Asia Pacific markets will complement our global potential and make for further use of our production capacity in Australia.In the Canadian market, our outlook has improved as we have diversified sales and are seeing increased revenue from finished formulated product. This is a result of strong progress made on building our presence in core wellness and pharmaceutical markets. Q4 provided objective evidence that this shift in focus is working. Compared to Q3, total revenues increased 22% on the strength of growth in finished formulated products, which grew 64% from the prior quarter.Our business model and capabilities were always designed to serve global medical and wellness markets. As part of our long-term strategy, we're working to increase the breadth and depth of finished formulated products, both our own and those produced under white label agreements. We are excited to make our first shipment of LABS Cannabis Pure CBD Isolate for retailers in 6 provinces in Q4 2020.This is only the beginning. 2021 will see us actively expand our Canadian B2C business through the launch of additional LABS branded products, while also benefiting from expected growth in consumer volumes for products we produce under white label agreements. This spring, we have launched 3 new oils: CBD100 Ultra Formula; THC30 Plus Formula; and the most exciting, our first third-generation product CBN Nighttime Formula. For those that may not be aware, CBN is a rare minor cannabinoid. MediPharm is now just the second company in Canada currently offering a CBN product to consumers looking for its unique benefits.It's no secret that Canada's retail channel has struggled over the past year for a variety of reasons, including the pandemic. Rollout of storefronts were slower than originally predicted, but there are now approximately 1,400 brick-and-mortar cannabis stores open across Canada, double the number from just over a year ago. This provides the foundation we need to realize the benefits of having a both diverse product offerings and broad distribution.On the distribution front, we are very pleased to announce a supply agreement in early March 2021 with the province of Quebec, under which we will supply Quebec's growing medical and wellness market this year. Quebec is the seventh province to have qualified MediPharm Labs' products for medical and wellness consumers.We're also able to better unlock the value of our GMP platform and expertise as a result of receiving our cannabis drug license in February. This cannabis drug license from Health Canada allows us to manufacture and supply pharmaceutical prescription drugs that have been classified with a DIN, drug identification number. This opens the door for us to supply cannabis-based pharmaceutical drugs and APIs for clinical research trials aimed at abbreviated drug applications and novel drug discovery. The cannabis drug license is one of the key steps required to commercialize DIN products for companies in the traditional pharmaceutical distribution channel.As a regulated business, licenses like this as well as the license we received in December authorizing us to manufacture, package and label natural health products in Canada, serve as part of our structural competitive advantage and is our moat. Specialized licenses also demonstrate to physicians, patients and consumers that MediPharm Labs is a trustworthy source for medical and wellness products in our markets. Taken together, these developments support a more positive outlook for 2021.Since Q1 and Q2 of last year included relatively healthy contributions from the spot bulk business that will not reoccur, we will continue to look for progress on a quarter-to-quarter basis. We are confident that we'll see a stronger back of 2021 as customer supply agreements and consumer sales at Labs formulations begin to ramp. As you know, we are striving to build a great business for the very long term, and the strategic headway made over the past year sets us on the right course for the future.We're also concentrating on more than just revenue growth. Sustainability comes from profitability. On that note, in Q4, we made some company-wide adjustments to our operations that will allow us to operate more efficiently and effectively in 2021. I will now turn the call over to Greg. This is Greg's first earnings call having joined as Chief Financial Officer in February. Greg brings to MediPharm over 20 years in health care and pharmaceutical experience with expertise in senior finance, operations and leadership. Having worked with Greg over the past 2 months, I could say with confidence that his disciplined approach will allow us to execute on our plan and deliver profitable growth in the future.Over to you, Greg.

[Greg Hunter, Chief Financial Officer]

Thanks, Keith, and good morning, everyone. I'm excited to be part of the MediPharm story and look forward to working with the management team to build a great company focused on profitable growth in the global pharmaceutical, medical and wellness markets.2020 was a uniquely challenging year to be in the cannabis marketplace, and MediPharm was no exception. Oversupply in the bulk concentrate and distillate market in 2020 resulted in sales volume reductions and pricing corrections, leading to a decline in both revenues and profitability. In the back half of 2020, MediPharm made a number of changes to respond to the corrections in the bulk supply market. We shifted our focus to the production of fit formulated finished products for the medical and wellness markets and adjusted our cost structure to be more in line with the new landscape. In Q4, we reduced headcount in our Canadian operations by a further 16% to deliver annual savings of approximately $3.6 million. In addition to headcount reductions, we made other operational changes to reduce costs, including renegotiation of certain contracts and elimination of nonessential services. We are leaving no stone unturned. As a management team, we are committed to growing our top line and adjusting our cost structure to return MediPharm to profitability.Turning to the P&L performance for the fourth quarter. Fourth quarter revenues grew 22% sequentially from $4.9 million in Q3 to $6.1 million in Q4. This was driven by a 64% sequential growth in our finished formulated product portfolio and was partially offset by a 36% sequential decline in our bulk supply business.Gross profit for the quarter was impacted by a number of nonrecurring items for a total of approximately $18 million. As a result, gross profit was negative $24.7 million. The nonrecurring items included a $10.7 million inventory write-down, $5.9 million accelerated depreciation on equipment no longer in use and a $1.7 million write-down of deposits on capital equipment no longer required. Adjusted for these nonrecurring items, gross profit was negative $6.8 million. The negative $6.8 million gross profit was a result of lower sales volumes, reduced selling prices and higher input costs as a result of some older inventory on hand.General and administrative expenses in the quarter increased from $4.4 million in Q3 to $5.2 million, largely driven by restructuring costs and accelerated depreciation for assets no longer in use. Excluding nonrecurring restructuring charges and accelerated depreciation, general and administrative expense declined 8% sequentially to approximately $4 million.R&D expenses increased to $0.6 million, largely driven by accelerated depreciation and restructuring, as mentioned earlier. Other operating income included $1.8 million of income from the Canadian Emergency Wage Subsidy, which was offset by a $2 million fixed asset impairment charge. Adjusted EBITDA for the fourth quarter was negative $8.8 million, driven by our negative gross margins, as I mentioned earlier. While we have made strong progress to date on the top line and operationally, as a management team, we are not satisfied with these results. As Keith discussed earlier, we are enhancing revenues with a growing and diversified pharmaceutical, medical and wellness portfolio of customers and expanding distribution and international reach. In addition, we're focused on adjusting our cost structure as required to deliver profitability.Moving to a few notable items on the balance sheet. Inventory declined to $22.1 million, which reflects the $10.7 million write-down I discussed earlier. Trade and other receivables remained consistent at $29.6 million, largely driven by 2 customers totaling just over $19 million. As disclosed in our financials, we are confident in recovering approximately $8.5 million from our previously disclosed legal proceedings and plan to collect the remainder from the other customer. Adjusting for these 2 customers, trade and other receivables is $8.6 million, which is more in line with our revenue performance. Finally, our cash balance at year-end was $19.9 million and was further enhanced by our Q1 2021 bought-deal that I will discuss shortly. Our cash balance at the end of the fourth quarter reflects the repayment of a revolving loan of $5.3 million and a $3.3 million payment of our convertible debenture. The balance of the convertible debenture stood at approximately $3.9 million at the end of March. As previously disclosed, in March of this year, we completed a bought-deal financing, which raised $33.4 million in gross proceeds from the sale of 57.5 million units at a price of $0.58 per share. This included 7.5 million units from the exercise of the underwriters' over-allotment option. Each unit consists of one common share and one share purchase warrant. Each warrant is exercisable to acquire one common share at an exercise price of $0.70 per share for a period of 24 months. The bought-deal strengthened our balance sheet so we can continue to execute our strategy to be a global leader in pharmaceutical, medical and wellness markets.With that, I'll turn it back to Keith.

[Keith Strachan, Co]

Thanks, Greg. Attracting a senior finance leader with Greg's hands-on experience is a key part of building a great company, so too, is having an invested and effective Board of Directors. On the governance file, our Board made one very welcome addition in January with the appointment of Warren Everitt, the founding CEO of Asia Pacific operations. There are very few industry executives who have as much direct knowledge of the international cannabis market as Warren, and we are very pleased that he is now contributing to corporate governance. With Warren's appointment, our Board consists of 8 members, of whom 5 are independent. One of the current key tasks for our Board is the appointment of a permanent Chief Executive Officer. We have initiated a broad international search for the perfect candidate. As we select the right person, the Board and I have the utmost confidence the senior management team will keep our company moving forward to achieve our goals.In closing, we entered 2021 with excellent momentum as we execute on our vision to be a global pharmaceutical producer, serving multiple customers across multiple jurisdictions with innovative products. We delivered positive developments that will drive short and long-term growth potential, including ramping up on new customer contracts, expanding our product offering globally, our expanded distribution network in Canada and the commercialization of our Australian facility. Most importantly, we are perfectly positioned with specialized licenses and pharmaceutical quality manufacturing capabilities to seize on the significant opportunities in front of us, with large pharmaceutical companies now moving to take their position in the cannabis market.I'd like to thank the MediPharm Labs team for putting in the hard work necessary to get us to this stage and all the long-term shareholders for your ongoing support. Thanks also to all of you, for listening today.Now operator, could you please open the lines for questions from our callers?

[Operator]

[Operator Instructions] And your first question here comes from the line of Scott Fortune from ROTH Capital.

[Unknown Analyst]

This is Nick stepping in for Scott. Just a couple of questions here. You mentioned you completed your first shipments to STADA post Q4. Could you kind of quantify that shipment or provide any color kind of on the near-term expected cadence of additional shipments there?

[Keith Strachan, Co]

Nick, thanks for joining. This is Keith. Yes, we're really excited that we did get products into Germany in this quarter, and the program has launched. We're not going to give quantities at this time, just as the program is still under development and we're still reaching patients. There will be a regular cadence of delivery. We want to obviously provide them with the best product on an ongoing basis. So we expect that cadence to keep going. But again, it is a little bit early within the launch. So we're really looking forward to getting through the first couple of weeks, and then we'll be able to talk a lot more about the 8 SKUs that we've launched into Germany and the cadence and some of the volumes. And some of that will also show up in our Q1 kind of disclosure. So more to come there, but really exciting just to open the regulatory pathway, which is sometimes the most difficult piece of it.

[Unknown Analyst]

Got it. And then if I could just touch on the cash position real quick. You guys mentioned that you had about $20 million on the quarter end, and then you raised another $33.4 million. Could you just touch on how you guys are looking at future capital allocation and the potential M&A environment here kind of moving forward?

[Keith Strachan, Co]

Yes. For sure. Appreciate the question on that. I'm going to pass it over to Greg, just to touch on kind of our current cash balance and our capital at the end of the quarter.

[Greg Hunter, Chief Financial Officer]

Thanks for the question. So yes, as you said, we're roughly $20 million at the end of the quarter and then with the bought-deal, raised just over $33 million on a gross basis. I can share with you as of yesterday's cash balance in the bank, we're in excess of $40 million of cash on hand at this point. Obviously, we're comfortable with our liquidity position at this point, and we'll continue to monitor and manage accordingly.As we've said before and I said today, we have put in some cost constraints across the entire organization for CapEx, headcount and OpEx to ensure we continue to preserve cash so that we can execute on our strategy to expand internationally into pharmaceutical medical and wellness market. So again, we're comfortable with where we are, and I'll hand it back to Keith to mention on the M&A question that you had.

[Keith Strachan, Co]

Yes. It's great. Kind of, as Greg mentioned, no major CapEx on the horizon for us as far as we've got a fully built out platform, both in Canada and Australia that are revved up and ready to go as we expand. So no major CapEx there. And we did -- in the supplementary perspective, did talk about some of the great projects that we are going to be spending this capital on, a lot of it is around further registration and licensing of pharmaceutical products.On the M&A front, as I said, we do have some great platforms in Canada and Australia that we feel can serve the world at this point for both international medical and future pharmaceutical contracts. I think if we -- as we turn our eye, like, we're always open as a business to look at different opportunities, I think it would be more in the category of something that would be asset-light around our product license in new jurisdictions that would help with the logistics and flow of goods in those jurisdictions.

[Operator]

Your next question comes from the line of Aaron Grey from AGP, Alliance Global Partners.

[Andrew Richard Bond, Equity Research Associate]

This is Andrew Bond on the line for Aaron Grey. Maybe just digging a little deeper into Nick's first question. Could you provide us some more detail on some of the specific steps STADA is taking to prepare for sales in Germany? And maybe some color on how quickly you believe sales could ramp there.

[Keith Strachan, Co]

Yes, for sure. Andrew, thanks for the question. Yes. As I mentioned, STADA is well off the races on this launch. There's already 28 people working in the field, so STADA representatives that are working in the field. If you look at some of the other field forces of their competition, I think that this would be probably one of the biggest, if not the biggest. And then this is STADA, so they already enjoyed quite a great market share in some of their other products. So their relationships with physicians and pharmacists are something that they're already familiar with and ready to do. So some of the kind of final model around sales and distribution is something that they're already experts at.

[Andrew Richard Bond, Equity Research Associate]

Great. That's great color. And then maybe just switching gears to gross margins. Could you help provide some detail on how to think about the evolution of gross margins over the next couple of quarters? And do you feel comfortable in your current inventory position today? Could you provide some color on how you expect STADA sales in Germany to have an impact around those?

[Keith Strachan, Co]

Yes, for sure. We're really comfortable with where we're at, obviously, with inventory and our ability to move the inventory that we have. I think the margins, as you see today, are not reflective of the margins of the business going forward, as we kind of take care of some of that higher expensive inventory and some of the other activities that where we've shifted focus. So I'm going to hand it over to Greg to provide a little bit more detailed color on that.

[Greg Hunter, Chief Financial Officer]

Yes. Thanks, Keith. So yes, as we said, adjusted gross margin for those discrete items in the quarter, still negative $6.8 million for the reasons I discussed. But as we go forward, we do see a path back to profitability, both on a gross margin perspective and overall EBITDA profitability.And a couple of areas where that profitability will come back from is, one, with some improved automation and process efficiencies as we implement within our manufacturing environment; two, as Keith touched on there, obviously, what's still in our gross margin and some of the higher input costs with biomass that we had acquired previously. So we expect that to improve as we go forward. And then with international sales expansion and pharmaceutical expansion, we expect to get higher up the value chain on margins there. So we see a path back to profitability from those key areas.

[Keith Strachan, Co]

Thanks, Greg. Yes. Just finally on STADA and the margins, they will be reflective of the rest of pharmaceutical and international business that Greg mentioned. So we work with that on a daily basis. And we are -- really, they're experts in the field as far as cannabis goes, so we provide them with a turnkey solution. So we expect to see a great partnership there, both in what we provide them and the economics that we get out of that partnership.

[Operator]

Your next question comes from the line of Adam Buckham from Scotiabank.

[Adam Buckham, Associate Director of Cannabis Equity Research]

So my first one is for Keith. And I appreciate the update on STADA, and I know you can't give a lot of color there. But you talked about commercializing products in the next couple of weeks here. From the info you've gotten from the sales team, the 28 guys that are over the field right now, how is the reception of these products been versus competitors in the market? And has there been any early indication of demand for those products?

[Keith Strachan, Co]

Yes. Thanks, Adam. It's a great, great feedback. So we sent off our first deliveries on some of like 2 of the 8 SKUs in February. We're already replenishing those. To kind of give you an idea of how quickly that they're selling through, I think that in a couple of different areas based on our market analysis and working with STADA, there were some gaps in the German market. If you look at some of the data that comes out from the patient reimbursement, you can see kind of a high THC and balanced oils are some gaps, and we've done a great job of filling those gaps as a partnership. So early reception is really good, already working on replenishing those. And I think that, that will keep going.The great thing about Germany is because of the majority of patients do have coverage, we do get some more in-depth reporting. So I know, for example, Canadian domestic sales performing a bit tough because you don't see the pull-through rate of the customer on some of the BDS analytics or the high-power analytics. But the great thing about working in the pharmaceutical world is really well-developed on insights on what patients are choosing for their medical choice. So we'll continue to monitor that in the coming months as we see some of the months' data release and happy to kind of share that with everyone as we find out more information.

[Adam Buckham, Associate Director of Cannabis Equity Research]

Okay. Great. So maybe just a secondary question on the pharma space on the back of that. So there's been a few interesting developments within cannabinoid-based pharma over the past couple of months. Are you able to give some high-level comments on what you're seeing in terms of contract negotiations in the market right now? And whether you've seen an uptick in demand for sort of your more medical focused products?

[Keith Strachan, Co]

Yes. Definitely. I think it's no secret to anyone that the pharmaceutical market is taking their position in cannabis, and I think MediPharm is one of the go-to partners for pharmaceutical companies, just based on the partners that we already have as far as commercial supplier with STADA and some of the licensing that we have now, like we spoke about not only being GMP certified, but we have a GMP [ that's our product license ] from Health Canada now, as we disclosed in our supplementary disclosure.After our bought-deal, we are investing significantly in expanding some of that licensing that allows us to enter that traditional pharmaceutical market. So there are a lot of people that are looking at it. I think a quick scan, you can kind of see some of the major pharmaceutical companies that are either highly in different formulations or have ongoing trials, and they'll be looking for supply of API. And I think MediPharm will be one of the few handful companies that could provide them that full pharmaceutical solution.

[Adam Buckham, Associate Director of Cannabis Equity Research]

Okay. Great. So just one last question. You touched on Australia there. If we think about your current contract base, and I understand you can't give guidance, but if we think about the ramp in those contracts, is it going to be sometime in early 2021? Or can you give us an idea of when you expect to see more meaningful revenue contribution from the Australian business?

[Keith Strachan, Co]

Yes. I think Australia is a great facility because the upselling program is made within their kind of pharmaceutical regime. It gives us a lot of flexibility for international projects. So for example, the oil that STADA is selling now is produced, formulated and filled in our Australian facility. So I think, kind of as I mentioned in the first question, was that the hardest part is opening up that regulatory pathway. So now that we deliver from Australia into other countries, it really allows us to continue to do that, and we'll see that ramp up.I mean, we still are at the mercy of regulated -- the regulatory bodies around import and export. So it's hard to say definitively when we'll see the path fully turned on, but I think we're expecting gradual growth. And a lot of that kind of in the back half of 2021 as we line up kind of our next set of permits and next set of big shipments.

[Operator]

[Operator Instructions] Your next question here comes from the line of David Kideckel from ATB Capital Markets.

[Frederico Yokota Choucair Gomes, Associate of Institutional Equity Research]

This is actually Frederico, chiming in for Dave. So obviously, a big part of your strategy is focused on international markets. I was just wondering if you could provide any color on your view of the U.S. market right now? And any specific opportunities you're looking into that market?

[Keith Strachan, Co]

Sorry, Frederico, I just lost you at the last bit of that question. Can you just ask it again?

[Frederico Yokota Choucair Gomes, Associate of Institutional Equity Research]

Yes. Any specific opportunities you're looking into the U.S. maybe?

[Keith Strachan, Co]

Yes. No, great. And that's a great question. We are looking at it very closely. I think we've seen some sort of headway there even as recent as last night with new legislation in the state of New York around legalization. So we're really excited to look at that as an opportunity.I think as we look at being a pharmaceutical company and a pharmaceutical supplier, we're entering traditional pharmaceutical channels. And a lot of those don't have many border restrictions that you would see in a recreational cannabis. So on recreational cannabis, even moving product from state to state is illegal in a lot of cases. As you register a pharma product or a pharma active ingredient, you really can have free movement. For example, if you look at Canadian pharmaceutical manufacturing, 50% of the exports from that sector in Canada actually makes their way into the U.S. So as we're able to get into that manufacturing community of the pharmaceuticals, there are really [ various endless opportunity ] for us to take advantage of U.S. patients that are looking to cannabis as a choice for a therapeutic option.

[Frederico Yokota Choucair Gomes, Associate of Institutional Equity Research]

Okay. That's helpful. And then just shifting gears a little bit. About -- you have a strong presence in oils and vapes here in Canada, but do you have any plans to enter new segments like edibles, chocolates, gummies, even beverages? Is that something that you're looking in the short to midterm?

[Keith Strachan, Co]

We keep an eye, obviously, on the adult use market here in Canada. Our line of products are primarily related to the wellness sector. So a lot of what we're selling to adult use consumers in Canada as a wellness product is the same thing that we've been selling internationally as a medical product, where there's only medical thing -- so where consumer decides to get the therapeutic benefit by going to their adult use store rather than going to a physician, we're able to fulfill that need.We're really encouraged by the ramp-up of some of the CPG products such as drinks and edible. Our role there is really providing active ingredient on the bulk market. So some of our long-term customers are very active in those, and they enjoy great shelf space and great pull-through. So what we do to support there is to provide with active ingredient. But as far as having an edible line or drink line in our GMP facilities, it's not something that we're looking at.

[Operator]

[Operator Instructions] And I'm not showing any further questions that are populating at this time. So I'll turn the call back over to Keith Strachan for any closing comments.

[Keith Strachan, Co]

Awesome. Thank you. As there is no further questions, I'll close by saying we look forward to hosting our first quarter conference call and keep you abreast of all the progress in between. Thanks for listening, everyone, and have a great day.

[Operator]

And ladies and gentlemen, this concludes today's conference call. Thank you for participating. You may now disconnect.