Tilray, Inc. (TLRY) Q1 2019 Earnings Call Transcript

These increased investments are in addition to our expansion efforts in Portugal, which is expected to receive its GMP certifications over the course of the next several months. This will allow the product that we produce in Canada to stay in Canada, as our Portugal production will be used as a hub to serve international medical markets.

As we have discussed previously, our global growth strategy remains focused on six top-line performance drivers that we expect to generate strong returns as the business continues to grow. First, increase our production and manufacturing capacity to serve the rapidly growing global medical market, as well as the adult-use market in Canada and other markets over time. Second, maintain a rigorous focus on quality as we scale. Third, partner with established distributors and retailers to scale distribution of our products further and faster. Fourth, build a differentiated portfolio of brands and products that appeal to a diverse set of patients and consumers. Fifth, expand the addressable medical market by fostering mainstream acceptance with the medical community and governments. And finally, sixth, pioneer the future of our industry by investing in innovation, R&D, and clinical research.

In the first quarter, we announced partnerships and acquisitions that align with our growth strategy. Our strategic partnership with Authentic Brands Group (ABG) announced in January will leverage ABG's portfolio of more than 50 of the world's most iconic brands, as well as their North American distribution network. We expect our co-branded products to come to market in the second half of this year in the U.S. and Canada, focused mainly on CBD products.

We also completed the acquisition of Manitoba Harvest, the world's largest hemp natural foods producer, and Natura Naturals, a licensed cannabis cultivation facility in Leamington, Ontario. We have made significant progress integrating Manitoba Harvest and Natura Naturals, accelerating our entry into the U.S. and furthering our operational capabilities in Canada. We closed Manitoba late in the first quarter yet we have already begun to leverage their existing relationships with over 16,000 retail locations and sharpen our plans for the U.S. market opportunity. We are excited about the future potential we have with new and existing retail partners over time and our early progress with this transaction are on track with our expectations.

We will continue to deploy capital in the most promising markets where we see the greatest potential to pursue multiple paths to grow. Our vision has always been to be a global leader in the cannabis market, which is why we are judiciously planning for expansion in two of the largest markets: the United States and Europe. We believe our strategic global partnerships and acquisitions demonstrate our focus on the diversification of our global opportunities for long-term growth.

Going forward, we will continue to pursue strategic M&A that opens new territories, increases our capacity, increases our brand offerings through innovative form factors, brings us R&D technologies, and provides us access to strategic retail distribution channels.

Building a portfolio of trusted brands and products is a key piece of our strategy to capitalize on the estimated $22 billion hemp-derived CBD industry in the United States. With Manitoba, Authentic Brands Group, and Live Well, we believe we are well-positioned for long-term leadership in the market. While we expect Manitoba Harvest and ABG U.S. CBD product sales to ramp in the second half of this year, Live Well will begin shipping supply in the second quarter.

Focusing on Europe, we have been disciplined in our approach and chose not to participate in the German tender process. Instead, we focused on our EU campus in Cantanhede, Portugal, where we completed a successful medical harvest in March and held an inauguration ceremony to celebrate the company milestone. This campus will be our international hub for operations and includes indoor, outdoor, and greenhouse cultivation sites, as well as research labs, processing, packaging, and distribution sites for medical products.

As we are awaiting our GMP certification, we will continue to build inventory in Q2 and we expect to recognize revenue in the second half of 2019. We believe we are well-positioned to serve the European market from Portugal, as more companies legalize medical cannabis.

While the Canadian market remains challenged with quality supply, we are confident supply/demand dynamics will become more balanced over time, as additional production capacity becomes available. We believe clinical research will help the cannabis industry by fostering mainstream acceptance with the medical community and governments.

In the first quarter, we announced our support of two new clinical studies: a pilot study led by Murdoch Children's Research Institute in Melbourne to evaluate the feasibility and acceptance of a larger randomized placebo controlled trial of cannabis extract as a form of treatment for reducing severe behavioral problems in pediatric patients with intellectual disabilities and a study with McGill University Health Center's Division of Infectious Disease and Chronic Viral Illness to examine the effectiveness of medical cannabis on immune activation in people living with HIV.

For the balance of the year and into 2020, we continue to anticipate the following corporate milestones: launching Tilray and Manitoba Harvest CBD products in the United States as regulations permit; signing additional adult-use supply agreements in Canada -- we started delivering product to Alberta during this quarter; shipping Tilray products to pharmacy chains in Canada -- we do have products available on Shoppers Drug Mart today; exporting Tilray medical products to new countries; expanding Tilray's medical cannabis product offerings in the international markets we currently serve -- we did start selling flour in addition to oil in Germany; extending our existing pharmaceutical partnerships to additional countries and regions; completing the build-out of our facility in Portugal -- we did have our grand opening and completed multiple harvests; obtaining a manufacturing license and GMP certification in Portugal, a process that is already under way; obtaining production and sales licenses for High Park's processing facility in London, Ontario; initiating additional clinical trials -- we added two during Q1; recruiting additional executives from outside the industry to further strengthen our management team -- we added several during the first quarter; and, finally, adding additional strategic partnerships.

In summary, we are executing on our strategic growth initiatives as planned and I am proud of the progress we have made. We are positioning the company for long-term sustainable growth globally and are confident in our ability to drive shareholder value through our multiple avenues for growth.

With that, I would like to turn the call over to Mark.

Mark Castaneda -- Chief Financial Officer

Thanks, Brendan. Good afternoon to those of you joining us on today's call and webcast. It is a pleasure to be speaking with you today. Please note all the financial information we discuss today is prepared in accordance with U.S. GAAP and is in U.S. dollars unless otherwise indicated.

We had a strong start to the year and we believe we'll continue to gain momentum as we progress throughout the year.