Medipharm Labs Corp (OTCMKTS: MEDIF) is exploding just as was the case in the first quarter of the year. The stock is already up by more than 150% in what is turning out to be a breakout year. The surge comes on investors reacting to the company’s transition into a revenue-generating entity.
MEDIF Catalysts and Share Price Analysis
The company generated revenues of $10.2 million in Q4, after receiving a sales license from Health Canada in November. In addition to sales growth, the company also achieved significant milestones throughout the year, positioning itself for robust growth in 2019.
The signing of a large private label cannabis oil, sales agreement with canopy Growth is one of the milestones that continue to excite investors. The company has also strengthened its licensed extraction throughput by 50%, a development that should allow it to address market needs and generate significant value in the process.
The stock taking a flight in response to recent developments does not come as a surprise. With the stock currently trading in a steep uptrend, potential entry positions should be on pullbacks, which may come into being as minor corrections.
After a recent spike, support is seen at the $2.50 mark, above which MediPharm Labs remains supported for further upside action. A violation of the critical support level would leave the stock susceptible to a drop to the sub $2 a share mark.
What Does MediPharm Labs Do?
MediPharm Labs bills itself as the first company to become licensed under the ACMPR. Focus on cannabis concentrates has seen the company engage in the production of purified pharmaceutical-grade cannabis oil and concentrates, used in advanced derivative products.
Revenue And Profit Growth
Shares of MediPharm Labs are flying high on investors reacting to an earnings report that underscores underlying growth. The report indicates that the company generated revenues of $10.2 million for the three months ended December 31, 2018. Gross profit surged to $4 million as Gross margin expanded to 39%.
During the quarter, the company became a fully licensed producer specializing in cannabis extraction. In addition to signing a cannabis oil, sales agreement with Canopy Growth, the company also entered into a 4-year tolling agreement with James E. Wagner Cultivation Corporation, India.
“As leading extraction specialists, we demonstrated our ability to rapidly expand our footprint and achieve significant revenue and positive operating cash flow just weeks after receiving our sales License and our strong operations have continued into 2019. The strength of this performance validates our uniquely focused strategy and investments,” CEO Patrick McCutcheon in a statement.
In keeping up with the 2018 momentum, plans are underway to forge additional domestic and international sales and supply agreements to strengthen the company’s sales channels. Expansion into Europe is also on the agenda as the company is currently pursuing European Union GMP Certification.
MediPharm Labs also intends to expand its white-label solutions platform to include formulation processing and distribution services.
The expansion seeks to prepare the company for the much-awaited legalization of concentrates, edibles beverages and topical in October of this year. The management also intends to strengthen the company’s production capacity with the installation of two additional primary extraction lines.
The expansion should take MediPharm labs processing capacity to 250,000kg supported by seven extraction lines. The company is also fresh from acquiring 5,000 kg worth of dried cannabis supply as part of a strategy that seeks to increase the sale of cannabis concentrates.
“With our extensive network of cultivation partnerships, we continue to secure and purchase increasing volumes of additional dried cannabis supply to further boost our sizeable inventory of high-quality Pharma-grade cannabis oil,” added CEO McCutcheon.
What Next For MediPharm Labs
Revenue growth, expanding cannabis processing capacity as well as expansion into new markets explain why MediPharm has emerged as a firm favorite in the cannabis sector. A spike in trading volume attests to strengthened investor confidence about the company’s long-term prospects.
As it stands, MediPharm Labs is an attractive investment option for gaining exposure to the burgeoning cannabis sector. However, buying at current highs would be exposing one to a horrible risk-reward ratio. For that reason, it would be wise to wait for pullbacks as the stock remains well positioned to continue climbing the ladder.
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Disclosure: We have no position in MEDIF and have not been compensated for this article.