Avicanna Reports Fourth Quarter 2019 Financial Results and Provides Corporate Update
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TORONTO, April 15, 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 fourth quarter ended December 31, 2019.
Aras Azadian, Chief Executive Officer of Avicanna, commented “This was a transformational quarter for Avicanna as we evolved from years of R&D and build-out of our infrastructure into a revenue generating company. During this period we launched two separate business units into the global market, raised efficiencies across all platforms, completed our agricultural infrastructure, fortified our leadership position on cannabinoid R&D and clinical development and have validated our vision of being a vertically integrated and data driven biopharmaceutical enterprise positioned to set the standards in the medical cannabis industry.”
Fourth Quarter Operational Highlights
- Executed strategy of becoming vertically integrated and executing on commercial initiatives. This included the completion of approximately 480,000 square feet of cultivation space, achieving full extraction and analytical capabilities, manufacturing finished products for commercial distribution, and continued advancements in research and development initiatives.
- Increase of capacity to approximately 31,000 kilograms of dried flower annually, which increased from the third quarter estimates that by year end our capacity would be approximately 29,000 kilograms of dried flower annually. Extraction capacity is 300kg of biomass per day.
- Commenced revenue generation for two major business lines including CBD-based derma-cosmetic product line, Pura Earth™, through 59 retail locations across Colombia and the launch of Aureus B-B brand of raw material cannabinoids (API) with sales in Colombia, South Africa and the United Kingdom and, subsequent to December 31, 2019, Argentina.
- Advanced discussions with Health Canada with respect to the pharmaceutical Phase II clinical trial to test Avicanna’s dermatological product on the effect on a severe and rare genetic dermatological condition, Epidermolysis Bullosa, in partnership with Toronto’s Hospital for Sick Children, with an expectation of receiving approval to commence the trial in Q3 2020.
- Further solidified its global leadership position as an organic and sustainable source of cannabinoids with the receipt by Santa Marta Golden Hemp S.A.S. (“SMGH”) of the first Colombian USDA National Organic Program certification of the cultivation processes of its hemp (CBD dominant) genetic strain, and ranked highest amongst global cannabis companies on the SAM Corporate Sustainability Assessment by S&P Global, results of which were received subsequent to December 31, 2019.
- The launch of Avicanna’s Rho Phyto™ brand in the State of California through a licensing agreement with LC2019 Inc. (“LC2019”). In keeping with its obligations as a TSX issuer, Avicanna does not receive any compensation from the agreement with LC2019; however, Avicanna has an option to acquire LC2019 upon certain events occurring, such as cannabis becoming federally legal in the US. The launch of products manufactured using Avicanna IP and sold under Avicanna’s brand is a further validation of Avicanna’s R&D and commercialization strength and serves as a model for global expansion.
- As at December 31, 2019, the Company had approximately 1.075 kilograms of dried flower on hand, and 117 kilograms of active pharmaceutical ingredients (“API”) on hand and available for sale. The build up of inventory is expected to support anticipated global sales in future periods.
- Commenced trading on the OTCQX Best Market in the United States under the symbol “AVCNF” and on the Frankfurt Stock Exchange under the symbol “0NN”.
- The Company recognized revenue of $168,252 and an additional $3.3 million in deferred revenue from the licensing of certain intellectual property to LC 2019. There were no write-downs or impairments for 2019.
- Subsequent to year-end, 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.
- Avicanna has completed all major capital expenditures in the quarter to build out its infrastructure. The Company is now in a position to commence full scale commercial activities to generate revenue and does not anticipate further significant infrastructure expenditures in the near future to meet its commercial milestones.
- Costs increased for the twelve months ending December 31, 2019 as a result of scaling up operations, build out of its cultivation infrastructure and significant costs associated with its go public transaction resulted in a successful listing on the Toronto Stock Exchange. As these costs are non-recurring in nature along with the Company’s ability to increase efficiencies in its operations, management is anticipating operational expenditures to decrease in the first quarter of 2020.
- Initiated a strategy to increase efficiencies, scale back on non-essential capital expenditures and reduce head count. Management believes the initiative will lead to substantial cost reductions in the first quarter of 2020, which are estimated to be 30% reduction in operational costs and a 70% reduction in capital expenditures.
- 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 to the Cannabis Research Licence to include an additional lab within JLABS @ Toronto, Avicanna’s R&D headquarters.
Response to COVID-19
- With the health and safety of our team and the societies in which we operate in as a key focus, Avicanna has taken appropriate measures to reduce exposure to the possible risks associated to the COVID-19 pandemic. Our offices have been temporarily closed as team members work from home in Santa Marta, Bogota, Toronto, London and Berlin.
- While our manufacturing efforts through third party contract manufacturing organizations are deemed essential and continue to operate, our R&D efforts have been reduced as our licensed research laboratories in Toronto including JLABS @ Toronto and the University of Toronto both maintain minimal activity.
- SMGH and Sativa Nativa S.A.S. (“SN”) cultivation and processing are deemed as essential services in Colombia and continue to operate with specific sanitizing and distancing measures in place to protect team members.
- We have adjusted our commercial, educational and marketing efforts to leverage virtual media and have prioritized commercial efforts to medical and pharmacy related channels.