Toronto based PharmaCielo Ltd. (TSXV: PCLO) (OTCQX: PCLOF) with operations based in Rionegro, Colombia yesterday announced financial results for the third quarter ended September 30, 2022. The company also announced that its board of directors has appointed BDO Canada LLP as the new independent registered auditor of PharmaCielo.
PharmaCielo has grown its global business development organization, hiring technical business developers in Europe and appointing a president of sales. The company reports sales to Argentina, Brazil, Colombia, the Czech Republic, Uruguay, and Spain, as well as progress in markets such as Germany, Mexico, and Poland.
In the three months ended September 30, 2022, PharmaCielo reduced its Adjusted EBITDA loss from $4.2 million to $2.5 million. The company says it continues to focus on reducing discretionary expenses to lower the company’s use of cash and ensure a leaner organization with a lower cost base, while continuing to invest in the sales team, to drive top line growth.
“Our team has successfully implemented the turnaround plan we outlined for shareholders when I joined as CEO in August of last year. In the first nine months of 2022, our business development group has initiated shipments to 23 customers in nine countries, with a robust pipeline that we fully expect will translate into significant growth in 2023 both with new partners and existing ones,” said Bill Petron, Chairman and CEO.
“Concurrently, our finance and operating teams have worked together to streamline the business, cutting SG&A expenses by more than 40% over the past nine months, with a focus on the elimination of unnecessary legacy overhead, and an eye to reinvesting some of those savings in revenue-generating functions. 2023 is set to be a breakout year for PharmaCielo, as international markets continue to open, we achieve EU-GMP certification for our extracted and dried flower products, and as our team continues to execute.”
PharmaCielo had cash equivalents of just $400,000 at September 30, 2022, compared to $5.3 million at December 31, 2021. On August 30, 2022, the company announced that its previously disclosed non-brokered private placement of debenture units was oversubscribed, with a total of $15.1 million raised or committed. This financing will generate $6 million in additional capital in equal monthly instalments through the end of Q1 2023, subject to regulatory approval including that of the TSX Venture Exchange.
Preparing for dried flower export
During February of this year, the Colombian government passed regulation to enable dried cannabis flower export. On September 15, 2022, PharmaCielo announced that it had made its first shipment of dried flower to the Czech Republic, representing the company’s first shipment of medicinal grade dried flower into the EU. PharmaCielo continues to expect additional dried flower trial shipments to begin before the end of 2022 and commercial shipments to start in early 2023. The company says it has taken the necessary steps to ensure psychoactive flower and extract quotas are in place for 2022 and 2023 exports. On September 14, 2022, PharmaCielo announced that it had received a five ton quota to grow THC-dominant cannabis strains for export as dried flower to support the fulfillment of current sales agreements, beginning in early 2023.
PharmaCielo says it is working towards EU-GMP certification of all of its extracted products and expects to achieve certification in early 2023. This will better position PharmaCielo to sign larger, longer term supply agreements with global pharmaceutical and cosmetics customers. PharmaCielo plans to initiate the process to obtain EU-GMP certification for its dried flower in Q1 2023 and certification may take up to 12 months.
With a growing business development organization, and the short-term potential to sell dried flower into several markets globally, management has re-focused PharmaCielo’s product strategy to emphasize THC broad-spectrum products, as well as dried flower. These products are expected to have long-term high-margin profiles that are more sustainable than CBD isolate. PharmaCielo claims several recent wins, including: a sales agreement with a Brazilian Phyto-therapeutic customer for a proprietary CBD derivative formulation; a shipment of CBD full spectrum oil to another Brazilian customer; a shipment of 300kg of CBD Full Spectrum Oil to a Spanish pharmaceutical company; and an agreement to supply THC final products to be commercialized in Germany.
Most recently, PharmaCielo received ICANN G.A.P & GACP certifications, which open commercial access to the Israeli market. The company expects to begin shipping dried flower to Israel in early 2023.