MediPharm Labs Corp. (OTCQX:MEDIF) (TSXV:LABS) (FSE:MLZ) has acquired the intellectual property portfolio of Shelter Cannabis, including cannabis dried flower and pre-roll products, manufacturing know-how, trademarks, marketing assets and provincial listings. MediPharm will pay Shelter based on an earn-out reflective of future gross sales, net of excise tax. MediPharm-originated shipments are expected to begin during Q2 2022.
Shelter's brands are currently being produced at a facility in Saskatchewan. MediPharm will move production to its existing facility in Barrie, Ontario with very little capital expenditure required, enhancing capital utilization of facilities and staff, and driving additional margin.
MediPharm has arranged to pay the vendor a royalty solely based on the future Shelter Cannabis sales, making the transaction cost 100 percent performance-based. This is expected to minimize risk to MediPharm shareholders while maximizing return and allows MediPharm to retain its substantial cash position for future growth opportunities.
"This transaction represents an important step as MediPharm continues to focus on building a Canadian recreational portfolio that is relevant, profitable and grounded in the company's unwavering commitment to high-quality products. With Shelter, we see a significant opportunity to get a head start in the important dried flower and pre-roll segment of the market, with the addition of a well-regarded list of brands, led by Shelter's flagship Wildlife brand," Bryan Howcroft, CEO of MediPharm stated. "With MediPharm's existing buying power, and established sales and production platforms, we believe there are multiple opportunities to generate revenue and cost synergies through this Transaction, to continue building value for MediPharm shareholders. Expected increased activity and success in the Canadian adult use market supports MediPharm resources as we continue to build out our pharmaceutical business with traditional pharma customers being part of longer development and sales cycle."
