MediPharm Settles $9M Dispute with HEXO, Establishes New Deal with Tilray

Tilray’s acquisition of HEXO opened up new dialogue.

Toronto-based MediPharm (TSX: LABS) (OTCQX: MEDIF) announced Monday a settlement agreement of $9 million to resolve a long-standing commercial dispute with HEXO.

In 2020, MediPharm filed a claim against HEXO, one of its long-time customers, over unpaid amounts for shipped cannabis concentrates. Although the Ontario Court of Justice initially ruled in favor of MediPharm in July 2022, HEXO appealed the decision. However, under the new agreement, HEXO will drop the appeal.

The landscape of the dispute changed when Tilray Brands acquired HEXO. Both MediPharm and Tilray have used this opportunity to negotiate a resolution beneficial to both parties and to chart a course for a future business relationship.

Under the agreement’s terms:

MediPharm will receive an immediate cash payment of $3 million.
Tilray will issue $4.5 million in common shares to MediPharm.
MediPharm will obtain $1 million in Tilray cannabis products.
A four-year supply agreement worth $500,000 will see MediPharm providing products and services to Tilray.

“This settlement will allow us to receive $9 million in value, which will dramatically strengthen our balance sheet and allow us to invest in many organic and inorganic growth opportunities,” David Pidduck, CEO of MediPharm, said in a statement. “We are also excited to establish a long-term relationship with Tilray.”

The new agreement is expected to reinforce MediPharm’s debt position, positioning them better among cannabis industry peers of similar market value, it said.

Medipharm added, “Management believes this puts the company in a very strong position to continue to invest in the pharmaceutical and clinical pipelines, and to thoughtfully consider approaches to the many available consolidation opportunities in the industry.”

MediPharm’s Australian Expansion

Last week, MediPharm announced the debut of its Beacon Medical cannabis oil and inhalation cartridges in the Australian medical market. The company holds a GMP license from the country’s Therapeutic Goods Administration.

Recent rules in Australia has made it harder for other companies without these certifications to sell cannabis products, so the company also now has less competition. According to research firm Satista, the Australian medical cannabis market might touch the $200 million mark in 2023.

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