Avicanna Q3 2026 Earnings Call Transcript
Avicanna (TSX:AVCN) reported third-quarter financial results on Thursday. The transcript from the company’s third-quarter earnings call has been provided below.
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Summary
Avicanna Inc. marked its 10th anniversary, highlighting its journey from inception to becoming an international biopharmaceutical company with proprietary technologies and 68 commercial SKUs.
The company turned adjusted EBITDA positive in Q3 2026, attributed to P&L improvements and cost management, despite a 10% year-over-year revenue decline due to changes in Veterans Affairs Canada reimbursement and lower licensing revenue.
International revenue grew by 21%, driven by flower and API sales from the majority-owned subsidiary SMGH.
Gross margin improved to 51% year-over-year, with proprietary products on the MyMEDI platform increasing their share of sales from 19% to 31%.
The company launched the QUICKs portfolio, utilizing rapid onset nanotechnology to improve cannabinoid absorption and onset time, with initial products including Nano Drops, gummies, and capsules.
Management emphasized strategic initiatives such as expanding MyMEDI’s reach through institutional partnerships and leveraging automation and AI for operational efficiencies.
The company closed a non-brokered private placement of debenture units for gross proceeds of 2 million CAD, aiming to use proceeds for working capital and general corporate purposes.
Future outlook includes scaling operations, expanding internationally, and exploring M&A opportunities, with a focus on leveraging the company’s scientific platform and low-cost supply chain.
Management expressed optimism about the company’s financial position and growth potential, despite a disconnect between market valuation and company fundamentals.
Full Transcript
Aras (Chief Executive Officer)
For other folks that might be joining a minute late, we’ll get started. Okay, so we’ll get started. Thanks for joining us this morning for quarterly earnings and a corporate update. Before we get into the quarterly results, I did want to take a moment to reflect on something that’s particularly meaningful to me as the founding CEO. Next week, Avicanna turns 10 years old. Ten years ago, we started with a vision. We started with a dream to advance cannabinoid-based medicine through science and innovation.
With a commitment to bringing standardized, evidence-based products to patients and ultimately integrating these products and therapies into the standard of care, we set out to be pioneers in an emerging field at a time where the medical and regulatory landscape was vague and still evolving. We had the unique opportunity to build that vision in Canada, which was the first G7 country to federally legalize cannabinoid-based medicine and allow such activities to take place. What started as an idea has evolved into an international biopharmaceutical company with proprietary technologies, 68 commercial SKUs, pharmaceutical products, several clinical programs, and established commercial operations internationally.
More importantly, over the past decade we’ve built what we believe is the most comprehensive, integrated medical cannabis solution in the industry, bringing together research, development, proprietary products, pharmaceutical innovation, patient support, medical affairs, and of course, all of this is done through our MyMEDI platform as well. It certainly hasn’t been an easy journey. We’ve had to adapt, persevere through an emerging industry, challenging regulations, COVID, difficult capital markets, and substantially more challenging conditions than what we imagined when we started. But through it all, we remain consistent and committed to the original vision of standardized cannabinoid-based medicine. As a founder, I’m incredibly proud of what we’ve endured, but even more proud of what we’ve accomplished today.
When I look at what we’ve built, the patients we’ve reached, the scientific and commercial milestones we’ve achieved, I feel an enormous sense of pride and also gratitude. And while I recognize that the capital markets and the market valuation do not reflect the progress we’ve made as a company, I can confidently say that I believe Avicanna is in the strongest position it’s ever been. That is a testament to the resilience, dedication, and conviction of our team, our partners, and our shareholders, many of which have been with us from the beginning.
Some of you that are attending the call this morning, I thank you all. What makes this milestone even more meaningful is that we’re entering our second decade with a more mature business, improving financial performance, a stronger foundation, and very exciting opportunities ahead of us. Our first decade was about pioneering, persevering, and building. I believe the next decade will be about scaling, executing, and realizing the potential of what we’ve created. Our third quarter results are a reflection of that progress and I’m pleased to be sharing those with you this morning with Nick.
So just a forward-looking statement disclaimer, but let’s get into it, Nick. So very high-level highlights in terms of the quarter, what we’ve accomplished, where we’re going forward, and we will get into the specifics of these, and then we will leave a few minutes at the end also for Q&A. We did turn adjusted EBITDA positive in the quarter. Nick will expand on the details of that, and we did so with relatively flat revenue. This is mainly attributed to P&L improvements, cost management, and discipline.
We did launch the QUICKs portfolio, so I will expand on what the QUICKs portfolio means both commercially and scientifically. We launched the first initial 10 SKUs towards the end of the third quarter. While it did not have significant impact on revenue because of the timing, we did have pretty important milestones and things to celebrate and discuss. And in terms of MyMEDI, we made significant operational efficiencies, but something that I’m very proud of is the improvement of Avicanna’s proprietary product sales on the platform, which have now increased to 31%, which is a massive difference in comparison to when we took over Medical Cannabis by Shoppers, which was at about 6%. We are making significant advancements on our R&D, but also on the clinical programs that I will also discuss briefly.
But as we get to the financials, Nick, do you want to take over the next few slides?
Nick (Chief Financial Officer)
Thank you, and good morning everyone. As mentioned, I’ll briefly walk through our financial results for the third quarter of 2026 before turning it back to Aras for a corporate update and closing remarks. Please note that all figures are in Canadian dollars. Revenue for the third quarter was 5.7 million, down 10% from the third quarter 2025, but up 2% sequentially from the second quarter. The year-over-year decline was driven primarily by the Veterans Affairs Canada reimbursement changes that took effect on April 1, which reduced the reimbursement amount for veteran patients by 29%, along with lower licensing revenue. The sequential increase is an encouraging sign that MyMEDI revenue has stabilized following the VAC changes.
Management believes the company has navigated the VAC changes exceptionally well, especially in comparison to other Canadian medical platforms where revenue decline ranged from 18% to 25% based on publicly disclosed information. The decline at MyMEDI was partially offset by 4% year-over-year growth through our proprietary products and portfolio expansion across the retail and medical B2B channels. International revenue also grew 21% year over year, led by flower and API sales out of our majority-owned subsidiary SMGH, which together achieved their highest API and flower quarterly revenue to date.
Gross profit was 2.9 million, down 232,000, or 7% year over year, on lower revenue from MyMEDI and lower high-margin licensing revenue. Despite this, gross margin improved from 49% to 51% year over year. This is driven largely by the success of Avicanna’s proprietary products on MyMEDI, which grew from 19% of platform sales in Q3 2025 to 31% by the end of this quarter. On a year-to-date basis, gross margins were 55%, up from 52% in the same period last year.
Sequentially, gross margins declined from 57% in Q2 to 51% in Q3. This reflects a shift in revenue mix from licensing towards product sales along with higher inventory impairment during the quarter. As a reminder, licensing revenue can be lumpy from quarter to quarter as it’s tied to the timing of larger contract deliverables. G&A expenses declined by 1 million, or 27%, year over year and by 777,000 from the second quarter. Roughly two-thirds of the year-over-year decrease resulted from cost reductions, including lower professional fees, reduced human resources in Canada as a result of automations, lower clinical education linked to MyMEDI revenue, and lower insurance and IT costs. The remaining savings are attributed to a refundable Scientific Research and Experimental Development (SR&ED) tax credit of 348,000.
While some of these savings are seasonal or timing-related, we expect the majority to be recurring and, barring changes in legislation, we expect to file an SR&ED claim every year going forward. Adjusted EBITDA was positive 222,000 for the quarter, an improvement of 1 million year over year and 577,000 from the second quarter of 2026. This was driven by stronger margins and lower G&A expenses, including the SR&ED credit. Management notes that adjusted EBITDA is a non-IFRS measure. Operating loss improved by 1.1 million, or 80%, year over year and 790,000, or 74%, from the second quarter. In addition to better margins and lower G&A, this reflects lower share-based compensation in the quarter.
In total, operating expenses were down 30% year over year, and net loss before tax narrowed to 301,000 from 1.4 million in Q3 2025. I’ll turn to the next slide where we’ll look a little bit deeper at the balance sheet and high-level cash flow. Accounts receivable is relatively flat quarter over quarter. Inventory decreased by 650,000, or 15%, as we right-sized inventory levels at MyMEDI following the VAC reimbursement changes. Accounts payable and accrued liabilities decreased significantly by 1.4 million, or 16%, as we used available capital to bring payables down to a more manageable operating level.
This remains a priority for management heading into Q4. As a result, net working capital improved to a surplus of 114,000 from a deficit of 276,000 at the end of Q2 and from a deficit of 1.3 million at the end of 2025. The improvement reflects stronger operating results and the proceeds from our August private placement, which together allowed us to reduce payables. Operating cash flow was negative 691,000, an improvement of 474,000 from Q2, driven by improved operating results and the inventory reduction, partially offset by the significant paydown of payables.
Financing activities provided 595,000 in the quarter, primarily from our August private placement, while investing activities were minimal. Lastly, subsequent to quarter-end on October 29, we closed a non-brokered private placement of debenture units for gross proceeds of 2 million. The debentures carry a 13% annual interest rate and mature in one year. Each unit includes warrants exercisable at $0.20 per share. The improved financial performance, better working capital position, and this additional injection of capital have all contributed to a substantially improved financial position for the company, which we believe will enable our business plan and growth initiatives.
Full details are in the subsequent events notes to our financial statements. We intend to use the proceeds for working capital and general corporate purposes. With that, I’ll turn it back to Aras.
Aras (Chief Executive Officer)
Thank you, Nick. Nick and his team have done a great job in terms of the financial discipline, as you guys can see. And as Nick alluded, we wrapped up Q3 in what is relatively the strongest position we’ve been from a balance sheet perspective. And of course the additional capital is what’s going to enable sort of the rest of the discussion and the progress that we have had. I just want to take a quick minute to explain the QUICK’s rapid onset nanotechnology.
This is a platform that we built in house as part of our own scientific platform and it’s also a proprietary formulation that has been filed for patents. It’s part of an existing patent portfolio that we have as well. The basic principle here is that cannabinoids are hydrophobic. Cannabinoids have low absorption, they don’t dissolve well in liquids and therefore the bioavailability and the onset is often delayed. Meaning formulations of products that are basic cannabinoid formulations, which is what’s 90% of the Canadian market, is just MCT oil.
The concept of the QUICK’s nanotechnology is to deliver nano cannabinoids within a nano emulsion which provides stability, but it provides rapid onset and enhanced absorption. And the technology was originally delivered through the Nano Drop formulation that’s in the market. We then since then have modified, expanded the portfolio into gummies, capsules, beverages and a number of other pipeline formulations. This is, in my opinion, one of the, if not one of the most advanced drug delivery technologies for cannabis in the market today.
And we’re very excited about its rollout and its potential moving forward. Thanks, Nick. So the initial formulations that we’ve launched, as I discussed, are the Nano Drops. These are beverage infusers. These are basically a very simple way to dose and titrate cannabinoids into water, tea, coffee and allows patients and consumers to be able to use these products in a much more standardized way. And given the fast onset, the immediate absorption, it’s avoiding first pass metabolism and some of the metabolites that typically cause adverse events when it comes to THC.
As I mentioned, through our R&D department we were able to translate this technology into rapid onset capsules. These are soft gel capsules that are now commercial across the Canadian market as well with I think five different SKUs. In addition to that, we converted into the food category within the Canadian regulations and we were able to modify it and deliver fast onset gummies. So again, one of the major reasons why patients and consumers are inhaling or using combustible type of products that has its own harm and risk is because they want fast onset.
And any type of oral edible product typically means an hour and a half to two hours in terms of onset. This technology is designed to deliver and have onset much faster within a 15 to 20 minute window. Again, very excited about the potential of this technology not just for the Canadian market but also internationally. And this is part of Avicanna’s harm reduction or treatment optimization plans in which we’re trying to. We are not trying. We are delivering options to physicians and to patients and to consumers in the sense of alternatives for combustible products, which is something that I think will allow us to then expand the market opportunity beyond sort of the traditional kind of cannabinoid based patients or even consumers.
So so far we’ve had some early wins with QUICK’s and as I mentioned, we launched QUICK’s towards the end of Q3. We were able to launch the initial gummy SKUs. The strategic approach here has been to launch with THC products first because, you know, while there’s enhanced bioavailability, stability, things that matter to us as an R&D company, to the patient, to the consumer, what they really have is the sensory experience in terms of the taste, but also they have the experience of onset.
So by taking a THC-first approach, onset is something that a consumer and a patient can feel. So we started with the gummies. We then were able to launch the initial SKUs of the capsules. Since then, since going into Q4, we’ve been able to launch a significant number of other SKUs, including a day-night version of the capsules, a couple of other sort of multipacks of the gummies as well. And then as we go into 2027 and later 2026, there are other SKUs that are launching.
So the portfolio in total is about 33 SKUs so far. And we believe there’s going to be a number of other ones we’ll be adding. Of course through the MyMEDI platform we can test these products and see what performs the best and from there enhance, add additional flavors in the cases of the gummies and add additional delivery systems across different markets. What’s exciting here is that given the potential of these formulations and products as a replacement or as an alternative option to combustible products due to their fast onset technology, we’ve actually been able to expand across retail channels. We’ve had a significant amount of interest from even Ontario, Alberta and B.C. for the first time. Pretty excited to have launched those products. They’re doing quite well in the earlier stages, but also we’re expanding these formulations and products across other medical channels.
And again we’re seeing competing medical channels pick up these SKUs which I think is a good signal towards the uniqueness and sort of the entry barriers of the technology that we have. In terms of MyMEDI. While we’ve had to deal with the change in reimbursement, as Nick alluded to, that was a significant reduction of reimbursement from veterans. We can see evidently that the performance of our team and the tactics that we utilized to navigate this has given us the best relative results versus our peers even. But with that we did have a significant revenue decline coming out of MyMEDI.
What we’ve done since then is we’ve lowered costs, we’ve increased automation and AI to be able to raise efficiencies, deal with patient documentation in a much more efficient way, lower human resource costs where possible, lower clinical education fees where possible. And we’ve been able to do this at a quite rapid rate and to be able to achieve stability within the MyMEDI platform. With that, we’re seeing incredibly high patient satisfaction rates.
We’ve conducted a 1,500-patient survey where the satisfaction rates were 90% above. This is, I think, leading to things such as record retention rates that we’re seeing. So now as we expand MyMEDI and we have initiatives to expand MyMEDI, which I will expand on, higher patient retention rate satisfaction rates are obviously important. And when you combine that with the performance of Avicanna’s own proprietary portfolio within MyMEDI, we see the combination of our comprehensive sort of medical platform and portfolio performing quite well.
And this is something that I really wanted to see. It took us 10 years to get here and something that now we’re quite confident and ready to take into other international markets as well. So this is just a chart up to Q3. I can tell you that we expect this trend to continue. I can also tell you that when we initially took over, we were in the 6 to 10% range at Shoppers Drug Mart, right before we took over. Since then we’ve been able to improve the portfolio on MyMEDI and of course the performance of Avicanna’s portfolio on MyMEDI. Why that’s important for the audience is that we have a wholesale margin that’s attributed to our products that are delivered to MyMEDI and then there’s a retail margin.
So the higher, you know, the proportion of Avicanna’s products that are being sold on MyMEDI, the better. And we’re not doing this by eliminating competing SKUs or by removing other brands. MyMEDI still has 230 SKUs, carries about 50 to 60 brands. We’re doing this simply by putting out better products that are competing through performance. We’re also doing this through patient support. You know, our patient support team are providing treatment plans, clinical guidelines for our patients; our medical affairs, where we’re educating physicians, we’re providing them with clinical guidelines. These are all helping as well as obviously our education efforts within the platform. But again, I think there’s a lot of credit to be given here to the operations and marketing team as well in terms of the type of products that we continue to test within the MyMEDI platform that are giving us these incredible signals.
In terms of the MyMEDI growth initiatives. The most important one for me, something that I’m personally involved with, is the institutional partnerships or what we refer to as the integrated healthcare program. This is really going beyond the existing medical cannabis physicians or medical cannabis trained physicians, the medical cannabis clinics who we obviously continue to have the relationships with. But this is going into active healthcare institutions that are beyond that sort of market opportunity.
This is training and educating pain institutions, sleep institutions, hospitals on how to integrate medical cannabis into their standard of care. And over the last year we’ve optimized that process. We are now embedding the medical documentation process into existing EMRs, so into the existing sort of platforms of these medical institutions. We’re taking most of the burden away from physicians who are very limited in time. This is where our pharmacist-led patient support program is quite important, because our pharmacists are the ones that are doing the treatment planning and therefore the physicians in the medical community have the comfort that their patients are being steered the right way. We then have a feedback loop with these physicians and medical institutions where we’re keeping them updated in terms of the treatment plans of their patients. So far we’ve been able to activate this in pilot programs across three different partners.
We’ll be speaking about those more so during the quarter and there’ll be more of that to share as we go. But this is a very interesting proof of concept because today about 1% of the Canadian population is using medical cannabis or accessing medical cannabis through medical documentation and HCP healthcare provider involvement. We believe that number has significant room for growth and we believe that it’s better for patients to have pharmacist-led support and the support of their healthcare providers in their medical cannabis treatment.
This leads to better outcomes, this can lead to less adverse events and this is something that we’re trying to incorporate into other healthcare institutions through again the institutional partnerships. I’ll quickly touch on some of the scientific and medical affairs efforts. This is led by Carolina and our team. She’s done an amazing job in advancing the clinical research programs and I will touch on the specific studies. But we are making advancements with the Phase 2 pilot study with UHN, which is a really exciting study led by Dr. Hans Clark mainly out of Toronto General Hospital. We are in the process for the Phase 1 dose finding escalation study at the University of Calgary.
We are involved in a number of other preclinical projects that are being conducted as well as a real world evidence study that recently obtained a publication in the Canadian Journal of Pain through UHN as well. Most of these studies, as our long-term shareholders know, are being funded by Canadian grants. But the company is still supporting these projects in parallel with the commercial and business operations that we have. This has led to a much more advanced pharmaceutical pipeline that I will allude to.
But one more note. Nick talked about the SR&ED, but I do want to also give credit to our R&D team for the continual development. You know, we’re putting out innovative products in the Canadian market and expanding beyond that shortly. But we’re in a position to continue to put out superior formulations and advanced formulations within the Canadian market through our own internal platform that has been built throughout the years. You’re seeing the fruit of that, you’re seeing a translation from the lab to the market with what is now 68 SKUs.
So I do believe we have one of the most advanced scientific platforms related to this industry. So in terms of our pharmaceutical pipeline, as you can see we continue to make progress. This is all being done with internal resources and government grants, so non-dilutive financing. But many of these studies are being led by principal investigators. So these are some of the key opinion leaders within the Canadian market. Another one of the benefits of being in a federally legal jurisdiction of Canada where we’re able to conduct such studies. The programs, I won’t get into the details, but the programs are quite advanced.
And what’s unique about these formulations and products is that we have tested these products within MyMEDI, within the medical cannabis. So these proprietary formulations or drug delivery systems are not only going or have gone through preclinical or going through real world evidence studies, but are being commercially tested before we advance them into later stages of clinical development. What’s really exciting for me is the randomized control trials that we’re enrolled in today.
Our sets, capsules, they’re similar to the QUICK’s technology, a little bit different. Those particular formulations are now enrolled in the Phase 1 study at University of Calgary and a Phase 2 osteoarthritic pain study that I was alluding to earlier. We expect to have some early results of those next year and we expect to see these formulations go into further development, the clinical development next year as well, all done in a very efficient and rapid way.
Again leveraging off of the Canadian infrastructure and relationships. So as we look forward, as I said earlier on, very excited about the results. We’re also very excited to have achieved that sort of in this milestone of 10 years. As you guys know, it’s been a tough 10 years for the industry, specifically for us as a small company and we’ve seen the impact of that in capital markets. But again, as I said earlier, I believe we’re in the strongest position we’ve ever been.
I believe with the more improved balance sheet and working capital we can now execute on the business plan that we have, execute on the opportunities that we have tested, we have optimized in Canada and basically take those into both Canadian scale up, but also international expansion. We are assessing mergers and acquisition opportunities, but we’re assessing it from more of a tuck-in strategy into Avicanna. We believe that our scientific platform, our management, our infrastructure, our low-cost supply chain coming out of Colombia, the combination of which gives Avicanna a unique position to be able to now add other assets and partners, specifically in the world where we can add revenue and market opportunity. So we are looking at those and then in terms of the pharmaceutical platform that we just discussed, I believe there’s substantial value in that IP, in the formulations and the drugs that are approved like Truenorex and other drugs that are in various stages of development with Health Canada.
We believe those drugs ultimately can be co-development opportunities, licensing opportunities and even FDA pathway. Long way to go. But I believe we’re going to see significant milestones related to the pharmaceutical side going into 2027 as well. When I look at the Canadian market, I see the early signals of QUICK’s and the QUICK’s portfolio as very promising. I believe we’re solving a major issue with the type of formulations we’ve delivered, which is again the delayed onset of the formulations that are in the market. I believe that combustible products and smoking alternatives are going to be something of the future. We’ve seen that within the tobacco world and we’re going to see that, I believe, within the cannabis market as well.
So the early signals are great. The fact that we’ve had a number of commercial listings already and that’s with the initial stages of the portfolio rollout is great. How fast we’re rolling this out is also another good signal. We have made significant efforts in terms of our margins but we are going to be making further consolidations related to our manufacturing in Canada. Previously we’ve discussed we have 10 manufacturing partners in Canada. We’re going to consolidate those efforts to improve margins in the process as well.
And then I’m very excited about the MyMEDI integration into standard of care. I think it’s taken us years, but we figured the right pathway to integrate into the standard of care into other medical institutions in a way that’s feasible for the physicians, but in a way that we can support further patient population beyond the existing medical market. Internationally, I think we’re finally ready. We’ve spent the last two and a half years at SMGH to prepare for a flower opportunity.
Given the cost advantages that we have, we believe we’ll have early signals of that this year and next year. Our focus is on scaling that up and sort of further advancing the opportunities that arise from SMGH, not just on flower, but also on API. We are also seeing significant interest for the QUICK’s and the rest of Avicanna’s intellectual property internationally. The same trends that we’re starting to see in Canada and that we expect in Canada are going to take place, I believe, in international markets where clinically differentiated and single-dose formulations and products that, you know, avoid or are an alternative option for combustible products we believe are going to be unique. Of course that’s exciting for us given that we have, you know, the intellectual property to protect that and therefore entry barriers.
Something that’s very important for us, it’s a very positive signal, is the recent support we’ve been able to get from the Canadian government on that front. We’ve been working with Global Affairs and the Trade Commissioner’s Office in Canada that are now supporting specifically Avicanna and some of our peers within the industry in opening doors and helping sort of the company expand. I think that’s truly important given the significance that, you know, or the credibility that comes with the Canadian Trade Commissioner’s Office supporting in a stigmatized industry.
But it’s also a validation of the maturity of the company and also, of course, our industry here in Canada. And then finally internationally. And this is something that’s in parallel with the QUICK’s and other discussions, is the licensing and pharmaceutical opportunities. We are seeing more and more countries and more and more companies and more and more countries have interest in Avicanna’s technology, whether it’s the MyMEDI platform, the patient support or our finished products such as the QUICK’s portfolio, our drug like Truenorex or even our pharmaceutical pipeline.
We’re starting to see more and more interest and I think that’s in line with the expectations we have from the United States. We still believe the U.S. rescheduling is going to take place. You know, I think the U.S. Government’s been busy for the last while, but I still believe it’s going to take place towards the end of this year or early next year. And of course everything that was presented today has tremendous opportunity in the United States.
So I’ll pause there. I know we typically go fast, but the point of this is also to leave about 15 minutes or so for Q&A before the market opens. I’ll give it another minute or so. So I have a question for Mark.
Mark
I’m aware of how hard you’ve all been working and appreciate it. It’s really encouraging to see the gross margin SG&A progress. Thank you. Mark. Can you explain you were comfortable taking on debt at this time?
Aras (Chief Executive Officer)
So Mark, I think there’s a disconnect in terms of the company’s valuation and the reality of the company in terms of its fundamentals. I think the assets, where we’re trading, how we’re operating does not really tie up with the current stock price trading at all-time lows. So while we do want to progress the company, advance and execute on our business plan, we did not want to be further dilutive in this range. So with that we felt much more comfortable taking on debt and we’re much more comfortable with our projections and the trajectory we have to be able to service that debt rather than be dilutive.
And as you can see there was a small warrant coverage but that warrant coverage is at $0.20 which is more than 100% above our stock price. So we felt like that was the right step to take at the time. Okay, I’m just trying to read our ticker symbol. Someone was asking, is AVCN TSX. That’s also on the slide in front of you. The status of the shares of Avicanna are, this is all available in our MD&A, on our financial statements, but also on Yahoo Finance or any of the websites that are covering typical stocks. We are on the TSX Senior Exchange. So the information related to the stock and the symbol are quite easy to find. But more information is also available on our Avicanna website.
I tend to agree and, you know, I think we have avoided debt for the last several years. We’ve had an extremely supportive group of shareholders that have supported the company. And I can tell you it’s not fun to conduct half a million or a million dollar private placements, but we’ve been prudent to ensure that dilution is limited to what we need to just to essentially get to the next milestone. But today where we stand, again, the reason why we took the debt was because we believe that we’re in a better place to service that rather than be dilutive.
And I believe we’re in a position to now put our head down and execute over the next year or so and allow the company to grow, allow the company to execute, allow the fundamentals to further improve and put out signals that I think are going to create further confidence. And doing that in parallel with not issuing shares in the market or doing private placements or public placements, I think, is going to have a positive impact. And that’s the purpose of that.
So I think your read is correct. We believe this is the trajectory that we’re on today. Today. I think that’s a great question. You know, and I think what we built was really a scientific platform initially that turned into advanced formulations and drug delivery systems and products. Those products were then delivered to patients through, originally through Shoppers Drug Mart and later, when we took over Shoppers Drug Mart, it was turned into patient support and medical affairs. I believe medical cannabis is a solution, it’s not a product.
And I’ve said this on several occasions, but medical cannabis is something that needs to be delivered with patient support, with patient education, with treatment planning. It’s something that needs to be delivered with medical affairs, which is also educating the physicians about the harms, the benefits, clinical guidelines. So what we’ve done in Canada is really build that package. I believe we built that package in the most comprehensive way I have seen in the industry.
And now we’re in a position to expand. How we would expand internationally is going to be likely through strategic partnerships. We don’t have the size or scale to go and set up MyMEDI and Avicanna and the portfolio everywhere in every market. We believe the right pathway is through strategic partnerships and those are the type of discussions we’re having in emerging markets, the key ones being England, Australia, Brazil, but also potential markets such as the United States.
So the growth opportunities within Canada are going to be in a very simple fashion through three channels within the short term. MyMEDI. And we believe MyMEDI growth is something that we’ve always focused on. But now, through the integrated partnerships or institutional partnership model, we expect that to grow beyond the existing cannabis or medical cannabis opportunity. We believe through our products. So our products are not just sold on MyMEDI, but they’re expanding across retail and the MyMEDI platform, but also other medical B2B.
And then third, we believe the opportunity in Canada is going to be through licensing and formulations. So we are providing access to some of our formulations to some of our strategic partners where they can benefit from perhaps in adult use, where they have a larger commercial platform than we do. So I still believe Canada is a growth engine. So far it’s been a proof of concept phase for the company, but we are now in a place where we can also expand in Canada.
In terms of the Veterans Affairs question, it was quite difficult to navigate an immediate, very, very short notice change. Something that should have resulted in about 30% of the sales. What our strength has been across a number of different tactics that we were able to deliver on. One was the portfolio. We were able to change the portfolio in very short notice to be able to maintain margins and to share some of the revenue reduction or margin reduction with our suppliers.
So because MyMEDI is a platform that carries products from many other licensed producers, we were able to share that burden on one end. On the other end, we’d be able to reduce operating costs, human resource costs. But also incorporating automation and AI has really helped us. On the other end, it’s been dealing with a patient population that’s beyond veterans. So I think most of the medical platforms in the Canadian market are 90 to 99% veteran-centric.
We have a huge insurance patient population that aren’t veterans. We have a huge sort of elderly patient population and other patient populations that are coming from our medical partners that are not veterans. So we weren’t as impacted as well from that side. Do I anticipate further changes? We were expecting Veterans Affairs to make further administrative changes to the process, but they have canceled that for now. So we don’t see near-term sort of risks.
That’s why what we’re referring to is more of the stability of MyMEDI. And now time for focus on regrowth. So there’s a lot of questions here, so I’m going to answer one at a time. So our expectations for Q4 is to continue to progress with the cost discipline that Nick was alluding to. We do expect, as you saw, further SKU launches across the Canadian market on QUICK’s. We expect the trend of MyMEDI’s percentage of sales, Avicanna’s percentage of sales on MyMEDI, to improve. But we also expect to have some early signals of international revenue growth as well through some of our international projects.
They always tend to take longer because of the regulatory process, import-export quotas specifically coming out of Colombia. But we’ve been working very hard on that process. Nick, you want to tackle that?
Nick (Chief Financial Officer)
Yeah, no, definitely. I think the company’s done a great job of looking through contracts that we’ve had with a number of vendors for a significant period of time and revisiting and renegotiating. I’d say the big rock items are insurance — we reduced that significantly. Our ERP provider was a significant reduction. And then just taking a fulsome look at where we can save across the board, not just in those big rock items but really digging into the details and in every potential savings line we can.
And then also, I’d say the automation that Aras touched on earlier has really saved human resources. We’ve had a little bit of turnover, particularly in Canada, but we’ve been able to fill those positions that previously would have been taken up by efficiencies earned through automation within the team here. So yeah, from an expense G&A side, really, really positive signs that we see as recurring into Q4 and going into next year.
Aras (Chief Executive Officer)
Thanks, Nick. Mark asks, what are your thoughts about further potential gains from MyMedi mix versus Q3 2026, 2027? I expect that trend to continue, Mark. Again, this is not because we’re, you know, like some of the other platforms, we don’t carry other brands — we do carry other brands — and we’re seeing the performance of other brands also, particularly Auxly, Organigram, others do quite well on MyMedi as well. But we’re also seeing us competing with some of these more adult-use focused brands from a medical side and in many ways winning market share.
So I think that trend is going to continue with the expansion of the AvaQik’s portfolio, specifically with the Healthcare Integrated Partnership. As we go into these medical institutions and our team are the ones that are doing the treatment planning and we’re educating the physicians, we’re naturally going to provide the evidence and training that’s related to our products because of the standard and quality that they come with as well. So we think that trend is going to continue, and I think with the pipeline there’s more AvaQik’s SKUs, but there’s also the PowderX technology that we’ve now optimized. This is also a fast-onset nanoemulsion technology in powder form that is going to be filled into capsules, tablets, sublingual tablets, oral tablets, but also Zyn-style pouches. So as that type of pipeline of products continues to expand, we expect that trend to continue. I still would like — we love the concept of having options for patients.
So you’re never going to have a MyMedi where the only brands available are Avicanna’s, but we do expect to see that trend go towards the 40% to even 50% of the sales, and that’s something that again will expand. And as that goes international, it’s going to be much more difficult in an international market, if we launch the MyMedi platform, to have 60 brands — that level of diversity, number of brands just doesn’t exist in international markets. So in other markets I expect the percentage of the Avicanna SKUs on the MyMedi platform internationally to be substantially better as we go as well.
Marcos asks, is there further gross margin opportunities for MyMedi mix and other parts of the business? Absolutely. Look, we’re still in small scale, right? If we’re in the 50% above gross margins, I think that’s a very good sign, probably industry-leading in terms of where we stand. And that’s, I think, credit to both the diligence in terms of cost management, but it’s also credit to the proprietary nature of our products and their high entry barriers.
So of course, as we scale, as these numbers grow, there’s economies of scale, there’s consolidation in terms of selecting contract manufacturers that are better at particular things — there are some that are very good at gummies, or some that are very good at capsules — and as we pivot towards those strategic manufacturing relationships, I think we’re going to see further improved margins. As your sales mix continues to increase on MyMedi, you’re going to see further sort of consolidated margin improvements, and so we are seeing that across the board.
I think in terms of SG&A, there’s always going to be room for improvement. I think, again, Nick and the team have done a great job in reductions as is, but I think we have a good foundation now. And really the focus for me specifically is going to be on growth and margin efficiencies rather than just SG&A reduction. And that’s something that I think you will start seeing signals of going into Q4. Can you explain SR&ED — the opportunity, terms, magnitude? Yeah, good question. So SR&ED — we used to receive SR&ED as well. But SR&ED is basically a government incentive for research and development. And of course we still do a significant amount of research and development, and the Canadian government reimburses 30% of the research and development expenditure of a company. However, they removed — from the beginning, SR&ED was only for private companies.
So when Avicanna began to get its IPO, we were excluded from that option. In 2026, the government extended and allowed SR&ED to be available for public companies as well. So we were able to basically obtain about $330,000 of credit. This not only is something that’s going to be replicated next year, but this further incentivizes Avicanna Canada to conduct research and development, which I think is not only leading to immediate-term products like AvaQik, but it’s also leading to long-term value for shareholders in terms of intellectual property and pharmaceutical pipeline.
So this is, you know, that plus the Global Affairs and Trade Commissioner’s Office support are two massive incentives that this year have sort of emerged from the Canadian government. I imagine a lot of the tariffs and trade war discussions have incentivized them to care more about the opportunity within the cannabinoid space. But more specifically for us as an R&D-focused company, significant opportunities for cost recovery but also growth. Marcus is asking about volume trading yesterday. I think that has to do with tax-loss selling, Marcus, is my best bet. We typically see this at the end of the year. At the end of the year, given the share performance, given that we’ve had two significant large shareholders of the company publicly exited into the market over the last few months and putting the stock at its all-time lows, I’m sure somebody saw that as an opportunity for tax-loss selling given the performance of other stocks, particularly in the tech sector — that’s my best bet.
Any other questions? Try to answer those as fast as possible. Okay folks, we’ll take it from here. Wrap it up. Thank you very much for your time. Thank you very much for your questions. As I said earlier on, for some of you that have been with us from the beginning, thank you very much for your support. We are in the best place we’ve ever been. We feel great about the future and we expect that the fundamentals, the potential of the company will be reflected in its market price.
But for now, we’re head down, execute, wrap up the year, and we’re very excited about next year as well. Thanks again for joining.
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