Strategic review realises quarterly cost savings for Epsilon Healthcare

Epsilon Healthcare ASX EPN medicinal cannabis Tetra Health
Epsilon continues to expand the capabilities of its Southport facility and plans to launch new in-person Tetra clinics across the eastern states.

Diversified pharmaceuticals company Epsilon Healthcare (ASX: EPN), formerly THC Global Group, has posted its first quarterly report since finalising a major strategic review of its operations late last year.

The company said it has realised the bulk of the cost savings implemented following the review and reported a further reduction in net cash used in operating expenses of 23% compared to the fourth quarter of 2020.

It also posted a strong growth in revenue, with cash receipts for the three months to end March increasing by 43% on the previous corresponding period to $1.76 million.

The company retains a strong cash position of $4.62 million.

Epsilon chief executive officer Jarrod White said the strategic review was paying early dividends.

“The initiatives which were implemented throughout the last quarter of 2020 are now [positioning] Epsilon to be seen as a true market participant in the global medicinal cannabis space,” he said.

Tetra Health results

Epsilon’s telehealth medicinal cannabis clinic group Tetra Health reported positive results at the end of the period, with January and March recording the highest number of initial patient consultations to date.

The company expects continued growth to be driven by increased patient demand for dried flower products and increased awareness surrounding the accessibility of medicinal cannabis.

In March, Tetra Health launched physical clinics for in-person consultations in partnership with Melbourne’s Astrid Healthcare.

Epsilon said plans were underway to expand the model across other sites in Victoria, New South Wales and Queensland.

Southport equipment

During the quarter, Epsilon completed the installation of new high-volume equipment including a conveyor system for the filling and torquing of cannabis oil bottles at its production facility in Southport, Queensland.

The equipment is scheduled to commence operations this month following an on-site inspection by the Therapeutic Goods Administration (TGA).

It is expected to significantly increase Epsilon’s output of finished product for sale as TGA and EU GMP-compliant medicine for Australian and export markets.

Dried flower packaging

The Southport facility is also in the final stages of validation and licencing to meet growing demand for primary and secondary packaging of dried flowers and has secured equipment including an induction sealer to advance this side of its business.

“We have been successful in materially increasing the volume of requests for pricing and quotes for purchase orders which is aligned with our strategic vision to place the Southport facility as a true toll manufacturer and essential participant in the medicinal cannabis sector,” Mr White said.

Executive performance

Last year’s strategic and financial review of the company’s operations also saw Mr White, Epsilon’s joint company secretary and chief financial officer at the time, take the reins as chief executive officer in the interim while a search continued for a permanent appointment. Joint company secretary and head of corporate strategy Sonny Didugu was also appointed as group chief operating officer.

Since their appointment, Epsilon has reported a more than $700,000 improvement in the normalised run rate of the company compared to about $450,000-$500,000 per month.

Mr White and Mr Didugu were also responsible for transitioning the company away from own-brand production into toll and contract manufacturing, increasing the Southport facility’s capabilities by both production volume and dosage forms, and attracting significant interest from local and international partners looking to access the company’s production capacity, Epsilon said.

This week, Epsilon has confirmed these appointments and the board has opted to suspend the search for a replacement chief executive.

As such, the company has revised remuneration packages for both roles, since neither Mr White nor Mr Didugu had received any additional remuneration for taking on these roles since appointment. This will include performance options, vesting on the achievement of certain targets on or before 31 December 2022.

Mr White and Mr Didugu will also respectively receive 1.25 million and 1 million shares at an issue price of $0.25 as consideration for their unremunerated work since their appointment to 30 June 2021.

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