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.

Bill Petron, CEO of PharmaCielo, thanked the Colombian government which “has consistently demonstrated a commitment to supporting domestic cannabis producers, and building its export industry into a position of global dominance”. He assured Colombian dried cannabis flower is “well-positioned to compete with higher cost cannabis flower currently being exported to the EU, Israel, Australia and other markets from jurisdictions such as Canada.” Petron expects 2023 to be an important growth year for the Colombian cannabis industry, as well as for PharmaCielo.

To demonstrate its ambition to export to new markets, the Canada-based company announced that it made its first shipment to a customer in the Czech Republic, in the European Union. The client, which the business declined to identify, was described as an “established cannabinoid-focused pharmaceutical distributor and clinical research organization in the country” that currently imports cannabinoids from The Netherlands and Canada.

According to Bill Petron, “the EU is the biggest opportunity for global cannabinoid exporters, and PharmaCielo is positioned to win market share against current suppliers.” PharmaCielo’s CEO claimed its business has made progress in several markets, including Germany, Israel, Brazil, Mexico, Poland, and now, the Czech Republic.

“We expect the combination of these recent developments and sustained sales efforts to make the next eighteen months a pivotal period for the company,” he concluded.

“Extractions Solutions is an innovative, rapidly growing cannabinoid post-processor, refiner and manufacturer, with an established customer base across the European market. With a commitment to providing high quality products and custom solutions, as well as seed to solution traceability, PharmaCielo was a logical choice as we continue to build-out our product portfolio. PharmaCielo has the quality, consistency, sophistication, and scale that we require of our API partners, and we look forward to continuing to advance the relationship as we seek to serve our customers across the EU, and globally,” said Dirk Eduard M. de Maeyer, Executive Director of Extractions Solutions

Bill Petron, CEO of PharmaCielo added: “We are pleased to announce our entrance into a new market, with the initial shipment of PharmaCielo API1 to Extractions Solutions, in support of their product development efforts. This serves to further expand our distribution network throughout Europe, building on our recent announcements that we will be bringing PharmaCielo products to the German and Polish medical cannabis markets. Our sales team has already made substantial progress in the first five months of 2022, and we expect to continue this trend through the rest of the year as we drive toward increased revenues and sustained profitability.”

Such legislation takes a further step, building on last year’s Decree 811 creating a licensing scheme and legalizing export of commercial marijuana, after allowing its use for scientific and medical purposes in 2016 with Law 1787.

Signed February 20, the new law enables domestic production and marketing of non-psychoactive cannabis products, and further defines import and export rules.

“This resolution allows, defines and establishes all the mechanisms and procedures for the industrial use of the cannabis plant in sectors such as food, beverages, alcoholic beverages and dietary supplements, defining, of course, that these uses have to do with the non-psychoactive component,” said Colombian President Ivan Duque.

“There has already been progress in credits for small and medium-sized producers. These credits continue to be developed through the Agrarian Bank, where cannabis producers are also provided with all the issues of foreign exchange management, monetization and marketing from Colombia,” The president continued.

Colombian Health Minister Fernando Ruiz Gómez added that the regulation is important for the safe development of the legal cannabis industry, including oversight by Colombia’s food and drug regulatory agency INVIMA (Instituto Nacionál de Vigilancia de Medicamentos y Alimentos).

“The different sanitary provisions that must take place by INVIMA, with good manufacturing practices, and all labeling and packaging requirements, are fundamental for all the progress of the industry,” said Dr. Gómez.

“This opens the possibility, with the components of the cannabis plant and its non-psychoactive derivatives, of producing dietary supplements complementing the existing dietary supplements in Colombia, in order to advance in the entire process of supporting nutrition and support to people who require dietary supplements”.

Cannabis Industry Pleased

Bill Petron, CEO of PharmaCielo (TSXV: PCLO) (OTCQX: PCLOF), a Colombian cannabis producer with Toronto headquarters commented on the news, saying in a statement: “The passing of Regulation 227 is a historic development for the Colombian cannabis industry, opening the large and growing global dried flower market as well as multiple CBD-based opportunities, to Colombian producers. The Colombian government has consistently demonstrated its desire to build this industry into a global leader, and in our opinion the announcement makes Colombia the most export-friendly and competitive jurisdiction in the world.

Dried flower accounts for up to 50% market share in most mature cannabis markets globally and represents a massive opportunity both for the Colombian industry, and PharmaCielo. With scalable cultivation and processing capacity in place, a structural cost advantage, and the sophistication to ensure consistently high-quality products, PharmaCielo is positioned to capture market share against current international exports from markets like Canada.

The government’s revised approach to the quota system will both ensure speed to market, as well as greater efficiency throughout the sales process. We expect 2022 to be a very exciting year of growth for PharmaCielo, as we launch and expand dried flower exports, bringing global patients access to high quality, affordable medical cannabis products.”

Above photo: Wilson Ruiz Orejuela, Minister of Justice and Law, and Juan Gonzalo Botero, Deputy Minister of Agricultural Affairs of the Ministry of Agriculture and Rural Development join President Ivan Duque at the podium and health minister Dr. Fernando Ruíz Gómez announcing the legislation.