MediPharm Labs Corp (MEDIF)

[FUNMAN]

Regarding over production: Apparently the wrong companies are over producing. Case in point, last Q Aphria had to buy flower on the wholesale market because Health Canada delayed Aphria's Diamond facility license for over a year.

OGI revealed they had a one time sale which made their Q numbers look great. They don't anticipate repeating those transactions.

I assume that deal was between Aphria and OGI.

At Aphria, Simon said in an interview he would be able to sell all of the flower he could get his hands on. I assume that would necessitate reasonable wholesale or cultivation prices.

They are ramping up two thirds of the diamond facility now. I assume he will sell his flower while some other companies are unable to.

A bit more color if you will, and only an opinion. It’s a consolidation issue. Hexo has a contract with Valens. The contract in dispute concerns the carry over from Newstrike purchase. Not saying the don’t have to honor it, just saying. Hexo is having product being returned to them / stuff that didn’t sell after 3mo comes back. This is happening all over.
Hexo has subtracted nearly $9 million from their gross revenue due to product returns and provisions for future product returns.
Overcapacity.
So, companies, not just Hexo are having product returned, they can’t sell enough of the product they get from Valens side and then Medif keeps sending the {Newstrike contract stuff as well}
So Hexo no doubt tries to renegotiate, Medif doesn’t want to cut its own throat so here we are.
The bigger picture is the stuff isn’t selling.

Well, a couple of things. First there certainly is a demand, and the more conservative Est were very close. In regards to overcapacity, everybody jumped into the pool at the same time with the hope they would be the chosen ones. Some will be correct, but many more will not make it. At least to where they thought they would. Read a report short time ago, if the ramp up to the projected sale totals by 2025 are correct, they are already producing that volume rate now {going on last years out put}. If so then all that needs to happen is a reduction of the current players by hopefully 2/3rds.
We’ll see what happens, but if everybody tries to stay in, nobody will get any traction, or at least not enough. Story is still being written and will be for a while. IMO