CanniMed Therapeutics Inc. (TSX:CMED) today released its financial results for the three and nine months ended July 31, 2017.

Highlights

Sales of $4.8 million in the quarter were 80 per cent higher than in the comparable period of the prior year and were 29 per cent higher than the second quarter of 2017. Year-to-date sales of $11.9 million were 79 per cent higher than the first nine months of the prior year and have surpassed full year fiscal 2016 sales.

Concentrated cannabis oils sales revenues were approximately 57 per cent of total revenues for the current quarter.

Higher sales revenues were driven by rising demand, as dried equivalent medical cannabis sales in the third quarter increased 82 per cent from the comparable period in 2016 to 463 kg, at an average selling price of $9.89 per gram equivalent (sales of 1,177 kg at an average selling price of $9.68 per gram equivalent were 79 per cent higher than in the first nine months of 2016 and 24 per cent higher than full year 2016).

Adjusted EBITDA from continuing operations was $(0.3) million for the quarter ($(0.1) million for the year to date).

Net loss of $1.4 million for the quarter ($6.5 million net loss for the first nine months of the year included a $2.3 million loss on derivative instruments, relating primarily to conversion rights on debentures that were either exercised or expired during the first quarter).

Commenced design of a large-scale cannabinoid oils processing facility to increase current oils capacity. Civil works commenced in September 2017.

Completed installation of capsule manufacturing equipment with design capacity of up to 11,000 capsules per hour, and, after the third quarter, initiated the Health Canada approval process.

Continued negotiations with several Canadian pharmacy chains, building on the previously announced letter of intent with PharmaChoice, to collaborate on pharmacist education and the distribution, sale and marketing of the Company’s medical cannabis products.

Completed the first shipments of commercial cannabis oil to enter Australia and the Cayman Islands. Continued negotiations for export arrangements with parties in Europe, Africa and Australia.

With current and planned capital expenditures, the Company is targeting production expansion which is estimated to reach 17,000 to 21,000 kg within the next 24 months.

Pursuing accretive transactions including recreational opportunities in accordance with applicable laws and regulations.

“We continue to be pleased with CanniMed’s remarkable sales growth as more and more patients and doctors gain confidence in our medical cannabis oils and dried herbal products,” said Brent Zettl, President and CEO of CanniMed. “Producing to pharmaceutical standards in a pesticide-free environment sets a high standard and differentiates our products from others. We are advancing several new growth initiatives, including increasing productive capacity at our main facility in Saskatoon, developing exports in several countries and opening our sights on recreational market opportunities.”

Three Months Ended July 31 Nine Months Ended July 31 2017 2016 2017 2016 Financial Data Revenue $4,770 $2,650 $11,869 $6,635 Cost of sales $2,127 $538 $5,085 $1,057 (Gain) loss on derivative instruments $(116 ) $4 $2,308 $(100 ) Loss from continuing operations before income tax $(1,356 ) $(446 ) $(6,635 ) $(1,344 ) Adjusted EBITDA from continuing operations(1) $(342 ) $(347 ) $(101 ) $(1,256 ) Revenue per gram of dried marijuana equivalent $9.89 $9.85 $9.68 $9.44 Operating Data Total dried marijuana produced (harvested) (000s grams) 393 401 1,267 1,127 Total dried marijuana equivalent sold (000s grams) 463 255 1,177 658 Total dried marijuana sold (000s grams) 277 195 762 549 Total oils sold (000s ml) 1,114 361 2,494 655

(1) The Company provides selected non-IFRS measures as supplementary information that management believes may be useful to investors to explain the Company’s financial results. Please see description and reconciliation of non-IFRS measures in the “Non-IFRS Financial Measures and Reconciliations” section of the Company’s MD&A dated September 8, 2017, available at www.SEDAR.com.

CanniMed’s production is concentrated at its 100-acre site in Saskatoon. The 62,000 square foot POD growth facility commenced validation of the first of its growth chambers in the fourth quarter of 2016, with all 18 chambers validated and in production by August 2017. During July 2017 the BGC growth chambers, containing an additional 12 chambers, were taken off-line for upgrading of security and heating, ventilation and air conditioning systems.

Financial Review

Revenue

Revenue for the three months ended July 31, 2017 increased 80 per cent to $4.8 million from the comparable period in the previous fiscal year. This increase was attributable to a 208 kg increase in dried marijuana equivalent sales (Q3 2017 – 277 kg of herbal sales quantities, 186 kg equivalent of oil sales volume; Q3 2016 – 195 kg of herbal sales volume, 60 kg equivalent of oil sales volume), partly offset by a price cap implemented by Veterans’ Affairs Canada.

Year-to-date, revenue increased 79 per cent to $11.9 million from the comparable period in 2016. This increase was primarily attributable to increased sales quantities (YTD Q3 2017 – 762 kg of herbal sales volume, 415 kg equivalent of oils sales volume; YTD Q3 2016 – 549 kg of herbal sales volume, 109 kg of oils sales volume).

Cost of Sales

Cost of sales is expected to vary on a quarterly basis, depending on the number of pre-harvest plants, the strains being grown and where the pre-harvest plants are in the growth cycle at the end of the reporting period. Cost of sales during the three months ended July 31, 2017 includes depreciation of $0.4 million (YTD Q3 2017 $1.3 million) for both the POD and BGC facilities. Growing activities in the larger POD facility were ramping up gradually throughout the year to date. For the three and nine-month periods ended July 31, cost of sales was composed of the following:

Three months ended July 31, 2017 2016 Unrealized gain from changes in fair value of biological assets $(1,450 ) $(1,344 ) Inventory expensed to cost of sales 2,232 1,355 Production costs 1,345 527 Cost of sales, net of the unrealized gain on changes in fair value of biological assets $2,127 $538

Nine months ended July 31, 2017 2016 Unrealized gain from changes in fair value of biological assets $(3,850 ) $(4,059 ) Inventory expensed to cost of sales 5,829 3,461 Production costs 3,106 1,655 Cost of sales, net of the unrealized gain on changes in fair value of biological assets $5,085 $1,057

General and Administrative Expense

For the three months ended July 31, 2017, general and administrative expense was $1.4 million (Q3 2016 – $0.7 million); year-to-date, this expense was $3.5 million (YTD Q3 2016 – $1.8 million). For the quarter and year to date, this increase was primarily attributable to higher salary and benefits attributable to more personnel and higher accounting, legal and consulting expenses related to building capacity for rapid sales growth.

Sales and Marketing Expense

Sales and marketing expense consists of expenditures on advertising, promotion, sales and customer service. For the three months ended July 31, 2017, sales and marketing expense was $1.1 million (Q3 2016 – $0.8 million); year-to-date, sales and marketing expense was $3.0 million (YTD Q3 2016 – $2.4 million). Period over period and year-to-date, increased sales staff levels and higher expenditures on advertising materials contributed to the increase in this expense.

Freight and Distribution

Freight and distribution expense consists of expenditures on the shipping of product to customers. For the three months ended July 31, 2017, freight and distribution expense was $0.5 million (Q3 2016 – $0.2 million); year-to-date, freight and distribution expense was $1.1 million (YTD Q3 2016 – $0.6 million). Period over period and year to date, these expenditures have increased in conjunction with increased sales levels (Q3 2017 – 463 kg equivalent of sales volume (Q3 2016 – 255 kg equivalent sales volume); YTD Q3 2017 – 1,177 kg equivalent sales volume (YTD Q3 2016 – 658 kg equivalent sales volume).

Research and Development

Research and development work is directed primarily towards plant-based materials for pharmaceutical, agricultural and environmental applications. Research and development costs for the three months ended July 31, 2017 were $0.2 million (Q3 2016 – $0.3 million). Year-to-date, research and development costs were $0.8 million (YTD Q3 2016 – $1.1 million).

(Gain) Loss on Derivative Instruments

For the three months ended July 31, 2017, gain on derivative instruments of $0.1 million was comparable period over period. Year to date, loss on derivative instruments was $2.3 million (YTD Q3 2016 – gain of $0.1 million). The year-to-date loss on derivative instruments is attributable to the increased value attributed to the embedded derivative liability relating to a conversion to equity option contained within the convertible debentures, resulting in a $2.4 million derivative loss during the first quarter of 2017. The majority of the debentures were converted during the first quarter of 2017 and, for the remainder of the debentures, the option to convert into equity of CanniMed expired at the end of the first quarter of 2017.

Loss

For the three months ended July 31, 2017, the Company recorded a loss from continuing operations of $1.4 million, or $0.06 per share, net of tax. This compares to a loss from continuing operations of $0.5 million net of taxes, or $0.03 per share, for the three months ended July 31, 2016. This increase was largely attributable to increased general and administrative expenditures, sales and marketing expenditures and higher freight and distribution costs as the Company increased its capability to support growing sales levels. Year-to-date, net loss of $6.5 million ($0.31 per share) was a $5.2 million increase over the loss of $1.3 million for the same period in 2016. Year-to-date, the major components of the increase were a loss on derivative instruments of $2.3 million, and other non-cash expenditures including foreign exchange loss of $0.4 million and share-based compensation of $0.8 million.

About CanniMed Therapeutics Inc.

CanniMed is a Canadian-based, international plant biopharmaceutical company and a leader in the Canadian medical cannabis industry, with 15 years of pharmaceutical cannabis cultivation experience, state-of-the-art, GMP-compliant production process and world class research and development platforms with a wide range of pharmaceutical-grade cannabis products. In addition, the Company has an active plant biotechnology research and product development program focused on the production of plant-based materials for pharmaceutical, agricultural and environmental applications.

The Company, through its subsidiaries, was the first producer to be licensed under the Marihuana for Medical Purposes Regulations, the predecessor to the current Access to Cannabis for Medical Purposes Regulations. It was the sole supplier to Health Canada under the former medical marijuana system for 13 years, and has been producing safe and consistent medical marijuana for thousands of Canadian patients, with no incident of product diversion or recalls.

For more information, please visit our websites: www.cannimed.ca (patients) and www.cannimedtherapeutics.com (investors).