InterCure Ltd (INCR) 2022 Q4 法說會逐字稿

Thank you for standing by, and welcome to InterCure's Fourth Quarter 2022 Earnings Call. (Operator Instructions)

感謝您的耐心等待，歡迎參加 InterCure 的 2022 年第四季財報電話會議。 （操作員說明）

I would now like to hand the call over to (inaudible), Investor Relations. Please go ahead.

我現在想將電話轉交給（聽不清楚）投資者關係部門。請繼續。

Thank you, (inaudible), and good afternoon, everyone, and welcome to InterCure's Fourth Quarter and Full Year 2022 Results Conference Call and webcast. A copy of the company's earnings press release is available on the News & Events section of our website at www.intercure.co.

謝謝（聽不清楚），大家下午好，歡迎參加 InterCure 2022 年第四季和全年業績電話會議和網路廣播。您可以在我們網站 www.intercure.co 的新聞與活動部分取得該公司收益新聞稿的副本。

With me on today's call are Alex Rabinovitch, InterCure's Chief Executive Officer; and Amos Cohen, the company's Chief Financial Officer. Today, we will review the highlights and financial results for the fourth quarter and full year ended December '22 as well as more recent developments. Following these formal remarks, we will be prepared to answer your questions.

與我一起參加今天電話會議的是 InterCure 執行長 Alex Rabinovitch；以及公司財務長阿莫斯·科恩。今天，我們將回顧截至 22 年 12 月的第四季度和全年的亮點和財務業績以及最新進展。在這些正式發言之後，我們將準備好回答您的問題。

But before we begin, please let me remind you that during this conference call, InterCure management may make forward-looking statements made within the meaning of applicable securities law. Forward-looking statements may include, but are not necessarily limited to financial projections or other statements of the company's plans, objectives, expectations or intentions.

但在我們開始之前，請允許我提醒您，在本次電話會議期間，InterCure 管理層可能會做出適用證券法含義內的前瞻性聲明。前瞻性陳述可能包括但不限於財務預測或公司計劃、目標、期望或意圖的其他陳述。

These forward-looking statements are based on current expectations that are subject to a number of risks and uncertainties that may cause actual results to differ materially from those expressed or implied in such statements. Also, please note that unless otherwise indicated, all amounts discussed in this call and expressed today are in Canadian dollars or new Israeli shekel.

這些前瞻性陳述是基於目前的預期，這些預期受到許多風險和不確定性的影響，可能導致實際結果與此類陳述中明示或暗示的結果有重大差異。另請注意，除非另有說明，本次電話會議中討論和今天表達的所有金額均以加幣或新以色列謝克爾為單位。

Additionally, please note that the results mentioned pertain solely to the company's operation in the cannabis sector unless otherwise specified. And with that, I will turn over the call to Alex Rabinovitch, InterCure's CEO. Alex, please go ahead.

此外，請注意，除非另有說明，否則所提及的結果僅適用於該公司在大麻行業的運營。接下來，我會把電話轉給 InterCure 執行長 Alex Rabinovitch。亞歷克斯，請繼續。

Thank you, (inaudible). Hello, everyone, and thank you for joining us for our fourth quarter and full year 2022 earnings call. 2022 was another successful year for InterCure as we continue to solidify our position as the largest, fastest-growing and profitable cannabis company outside North America. In line with our profitable growth strategy, we executed well on all fronts. This resulted in the strong financial and operating results, while further positioning InterCure for continued growth.

謝謝你，（聽不清楚）。大家好，感謝您參加我們的 2022 年第四季和全年財報電話會議。 2022 年對 InterCure 來說又是成功的一年，我們繼續鞏固作為北美以外最大、成長最快、獲利能力最強的大麻公司的地位。根據我們的獲利成長策略，我們在各方面都表現良好。這帶來了強勁的財務和營運業績，同時進一步為 InterCure 的持續成長奠定了基礎。

In 2022, our revenue exceeded $150 million with adjusted EBITDA of $22 million, a significant achievement considering pharmaceutical grant regulation was only introduced less than 5 years ago, and our first GMP-prescribed product was dispensed in the pharmacy only in late 2019. Our remarkable profitable growth is a proof of our team's ability to execute with strong dedication to excellence as demonstrated by our successful implementation of key operational decisions, capital investments and strategic legal and regulatory victories.

2022 年，我們的收入超過1.5 億美元，調整後的EBITDA 為2,200 萬美元，考慮到藥品補助監管僅在不到5 年前推出，這是一項重大成就，而且我們的第一個GMP 處方產品僅在2019 年底才在藥房配發。

I'm very proud of our team's delivering continued solid performance. These strong results are especially impressive when you take into account the slowdown of new patient recruitment in Israel during the first half of 2022. This was mainly due to the loss of physicians responsible for more than 20,000 market prescription (inaudible) license to prescribe medical cannabis.

我對我們團隊持續穩定的表現感到非常自豪。考慮到 2022 年上半年以色列新患者招募放緩，這些強勁的業績尤其令人印象深刻。

In the early days, we choose to focus first on leading the Israeli market as we believe that any global leader has to dominate its home market before expanding internationally. Although Israel is well known for its medical cannabis research, it's also developed and implemented the most advanced medical cannabis regulation to become today the biggest and most advanced pharmaceutical-grade market globally with about 45 tons dispensed yearly. After 4 years, (inaudible) pharmaceutical cannabis represents about 15% of all prescribed pharmaceuticals in Israel with a clear runway for this growth to continue.

在早期，我們選擇首先專注於領導以色列市場，因為我們相信任何全球領導者在進行國際擴張之前都必須主導其國內市場。儘管以色列以其醫用大麻研究而聞名，但它也制定並實施了最先進的醫用大麻法規，成為當今全球最大、最先進的醫藥級市場，每年分配約 45 噸。 4 年後，（聽不清楚）藥用大麻約佔以色列所有處方藥品的 15%，並且有明確的跑道可以繼續這種增長。

We expect market growth to resume as the Ministry of Health announced a new reform dose as the prescription reform that will cater the need for a special license and will allow any physician to prescribe medical cannabis under the public health care system. Of the latest INCB U.S. guidance, the Israeli Ministry of Health is expecting major growth of the market in 2023 to 85 tons, up from 49 tons in 2022, marking expected growth of over 70%, assuming this reform implemented.

我們預計，隨著衛生部宣布新的改革劑量，即處方改革，將滿足特殊許可證的需要，並允許任何醫生在公共衛生保健系統下開出醫用大麻處方，市場將恢復成長。根據 INCB 美國最新指導意見，以色列衛生部預計 2023 年市場產量將從 2022 年的 49 噸大幅增長至 85 噸，假設這項改革得到實施，預計增長將超過 70%。

If the new government in Israel assemble, the new Ministry of Health stated that the new reform would be implemented soon. And while patients suffering from current bottleneck or lack of prescribing doctors, many companies in the industry are struggling from continued losses and lack of capital. Companies are exiting the market and liquidizing their products with some short-term effects, especially on long- and mid-quality product, which Amos will elaborate more on the financial results.

如果以色列新政府組成，新衛生部表示很快就會實施新的改革。儘管患者面臨當前的瓶頸或缺乏處方醫生的困擾，但該行業的許多公司卻因持續虧損和缺乏資金而苦苦掙扎。公司正在退出市場並清算其產品，這會產生一些短期影響，尤其是中長期品質的產品，阿莫斯將在財務業績中詳細闡述這一點。

Eventually, for 2022, patient count grew only 18%, while InterCure grew 77%, emphasizing the strength of our leading platform and we believe these conditions represent an opportunity to grow our leading share organically and inorganically even before barriers are lifted and the market growth will resume.

最終，到2022 年，患者數量僅增長18%，而InterCure 增長77%，這凸顯了我們領先平台的實力，我們相信，即使在障礙解除和市場增長之前，這些條件也代表了有機和無機增長我們領先份額的機會將恢復。

During 2022, we've also scaled up our upstream operation by upgrading the southern facilities post our nursery and growing areas. This further solidifies cannabis southern cultivation site as one of the largest and most advanced facilities of its kind in the industry. Our expert teams have also successfully added and produced tens of new highly (inaudible) into their growth cycles, including premium (inaudible) and some of the industry's top shelf products.

2022 年，我們也透過升級苗圃和種植區後的南部設施來擴大上游業務。這進一步鞏固了大麻南部種植基地作為業內最大、最先進設施之一的地位。我們的專家團隊也成功地在其生長週期中添加和生產了數十種新的高度（聽不清楚）的產品，其中包括優質（聽不清楚）和一些業界頂級的貨架產品。

In the total GMP, we successfully launched more GMP products than any other company in the industry. To meet the demand, we remain focused on increasing not only our local cultivation in Israel, but also our global exclusive strategic partnership. During the year, we have been able, once again, to be the first company to meet the strict new 109 protocol and resume importation from (inaudible) to Israel.

在整體GMP方面，我們成功推出的GMP產品比業內任何其他公司都多。為了滿足需求，我們不僅繼續致力於增加在以色列的本地種植，而且還致力於加強我們的全球獨家戰略合作夥伴關係。今年，我們再次成為第一家滿足嚴格的新 109 協議並恢復從（聽不清楚）以色列進口的公司。

Although the Israeli regulators are constantly hardening the importation process, we are well prepared for future evolving regulations with the best teams and pharmaceutical labs globally. As our core markets are growing and evolving, we are also increasing the high-quality supply of our existing strategic partners and evaluating new potential strategic partnerships.

儘管以色列監管機構不斷強化進口流程，但我們擁有全球最好的團隊和製藥實驗室，為未來不斷變化的法規做好了充分準備。隨著我們的核心市場的成長和發展，我們也在增加現有策略合作夥伴的高品質供應，並評估新的潛在策略合作夥伴關係。

We have extended our successful exclusive partnership with Organigram, a world-leading (inaudible) to supply us with up to 20 tons of our chosen genetics, extending its reach into our core markets in Europe and U.K. We also announced expansion of the company's partnership program, forming a collaboration with the leading cannabis brand (inaudible) to develop and offer a range of non-flower cannabis products, which we believe will significantly enhance our product portfolio and further strengthen our market position.

我們擴大了與Organigram 的成功獨家合作夥伴關係，這是一家世界領先的公司（聽不清），為我們提供多達20 噸我們選擇的基因，將其影響力擴展到我們在歐洲和英國的核心市場。市場地位。

Both the Ministry of Health in Israel and the Ministry of Economics have eased the process of exportation, enabling us to ship pharmaceutical-grade cannabis products in any format to any legal market in the world. I'm happy to update that our teams have made great achievement and successfully completed export of InterCure's products to our EU hub, preparing for EU GMP commercial launches in U.K. and Germany.

以色列衛生部和經濟部都簡化了出口流程，使我們能夠將任何形式的醫藥級大麻產品運送到世界上任何合法市場。我很高興地宣布，我們的團隊取得了巨大的成就，成功完成了 InterCure 產品向我們歐盟中心的出口，為在英國和德國的歐盟 GMP 商業啟動做準備。

We expect commercial export shipments to ramp up in the coming quarters. We have built a unique international supply chain that can supply every core market with our winning branded product portfolio, and we will continue to scale up our upstream operations in the coming quarters. Moving on to downstream. Keeping with our (inaudible), we've expanded our one-of-its-kind dedicated medical cannabis dispensing operation during 2022. At the end of 2020, our specialized medical cannabis (inaudible) was comprised of only 3 locations. As of December 2020, (inaudible) 28 of those. We have developed 26 locations across Israel's major cities, out of which 20 are actively dispensing medical cannabis and 6 are in the process of obtaining the license to dispense. Growing our cannabis dispensing footprint more than 9x in the last 3 years has positively impacted our businesses, while ensuring patients receive the highest quality service from more than 90 highly trained, specialized pharmacists.

我們預計未來幾季商業出口出貨量將增加。我們建立了獨特的國際供應鏈，可以為每個核心市場提供我們獲勝的品牌產品組合，並且我們將在未來幾季繼續擴大我們的上游業務。繼續往下游移動。與我們的（聽不清楚）一致，我們在 2022 年擴大了我們獨一無二的專用醫用大麻配藥業務。截至 2020 年 12 月，（聽不清楚）其中 28 個。我們已在以色列主要城市開發了 26 個地點，其中 20 個正在積極分發醫用大麻，6 個正在申請分發許可證。在過去 3 年裡，我們的大麻配藥足跡成長了 9 倍以上，這對我們的業務產生了積極影響，同時確保患者從 90 多名訓練有素的專業藥劑師那裡獲得最優質的服務。

In 2023, we expect to add several more locations, and with that all currently 26 will be fully running and operational, our leading pharmacy chain will have a full national footprint. During 2022, we have developed 2 new locations outside Israel, which included Cookies branded shop in Vienna, Austria, which is up and running and the pharmacy under development in the heart of London, U.K.

到 2023 年，我們預計將再增加幾個網點，目前所有 26 個網點都將全面投入運營，我們領先的藥房連鎖店將覆蓋全國。 2022 年，我們在以色列境外開發了 2 個新地點，其中包括已投入營運的奧地利維也納 Cookies 品牌店和位於英國倫敦市中心正在開發的藥局。

International expansion is one of our main goals ahead. As most of the world has taken a medicalized approach towards cannabis, a rapidly growing number of countries are adopting our unique and strict pharmaceutical cannabis regulations. In fact, the lease includes more than 40 countries that are in various stages of adoption. Pharmaceutical-grade cannabis regulation is indeed becoming a world standard. Improving by avoiding other company's mistakes, we're carefully expanding our reach by duplicating our winning model in the U.K., Germany and Austria.

國際擴張是我們未來的主要目標之一。由於世界上大多數國家都對大麻採取了醫療方法，越來越多的國家正在採用我們獨特且嚴格的藥用大麻法規。事實上，該租約涵蓋了 40 多個處於不同採用階段的國家。藥品級大麻監管確實正在成為世界標準。透過避免其他公司的錯誤來改進，我們正在英國、德國和奧地利複製我們的成功模式，小心翼翼地擴大我們的影響力。

All of these markets are in early stages, a few years behind Israel market in product quality, but with similar competition and regulation. Our 15 years of know-how and execution, proven model and leadership position sets us up to succeed in every territory with supportive regulatory framework.

所有這些市場都處於早期階段，產品品質落後以色列市場幾年，但競爭和監管相似。我們 15 年的專業知識和執行力、經過驗證的模式和領導地位使我們能夠在支持性監管框架的每個領域中取得成功。

Before I hand over the call to Amos, I want to know that 2022 has concluded 15 years of organic growth and one of our best years to date. During 2022, InterCure achieved record revenues of approximately $150 million, 77% more than the revenues of 2021. Our gross profit increased to over $60 million, representing 41% of revenue and adjusted EBITDA increased to $32 million, representing 22% of revenues.

在我把電話交給阿莫斯之前，我想知道 2022 年已經結束了 15 年的有機成長，也是我們迄今為止最好的年份之一。 2022 年，InterCure 實現了約1.5 億美元的創紀錄收入，比2021 年的收入增長了77%。美元，佔收入的22%。

Net profit after tax were just under $70 million, generated $20 million cash flow from operations and we ended the year with $95 million of cash on hand and a solid balance sheet. As our target markets are evolving, we remain focused on execution with financial discipline, while navigating full regulatory barriers and market challenges. While favorable regulatory cannabis reforms are on the horizon in Israel, Germany and many other markets, we expect our growth journey to continue as we remain focused and committed to expand our leading platform, building shareholder value and improving quality of life for patient communities across the world.

稅後淨利略低於 7,000 萬美元，營運現金流達 2,000 萬美元，年末我們手頭現金為 9,500 萬美元，資產負債表穩健。隨著我們的目標市場不斷發展，我們仍然專注於財務紀律的執行，同時克服全面的監管障礙和市場挑戰。儘管以色列、德國和許多其他市場即將實施有利的大麻監管改革，但我們預計我們的成長之旅將繼續下去，因為我們將繼續專注並致力於擴大我們的領先平台，為股東創造價值並改善患者社區的生活品質。

And now I will turn the call over to our CFO, Amos Cohen, following which we will open the line for Q&A. Amos, the floor is yours.

現在我將把電話轉給我們的財務長阿莫斯·科恩，然後我們將開通問答熱線。阿莫斯，請發言。

Thank you, Alex, and good afternoon, everyone. I'm very pleased to be sharing with you today our financial results for the first quarter and year-end of 2022. Our focus continues to be execution, expansion and building our unique vertically integrated model, centered on our high-quality branded products while keeping financial discipline.

謝謝你，亞歷克斯，大家下午好。我很高興今天與您分享我們 2022 年第一季和年底的財務業績。 。

We delivered record full year revenue of $150 million or ILS 389 million, increase of 77% compared to $85 million in 2021, an impressive growth as patient count grew only by 13%. During 2022, we continue to expand our vertically integrated platform. We scaled up our cultivation production facilities, expanded our logistics at capacity and added 8 new locations to our leading medical cannabis dedicated pharmacy chains, exiting the year with an industry-leading platform of 28 locations, out of which 20 are actively dispensing medical cannabis and for the first time, 2 international locations.

我們實現了創紀錄的全年收入1.5 億美元（即3.89 億新謝克爾），與2021 年的8500 萬美元相比增長了77%，在患者數量僅增長13% 的情況下，這一增長令人印象深刻。 2022 年，我們將繼續擴展我們的垂直整​​合平台。我們擴大了種植生產設施，擴大了物流產能，並在我們領先的醫用大麻專用藥房連鎖店中增加了8 個新地點，今年結束時擁有28 個地點的行業領先平台，其中20 個正在積極分發醫用大麻和首次有 2 個國際地點。

We also reported another record fourth quarter revenue of $41 million or ILS 106 million, an impressive growth, over 30% greater than the fourth quarter of 2021 revenue of $31 million or ILS 80 million and up by 6% sequentially compared to the third quarter of 2022. Revenue growth during the fourth quarter of 2022 reflects increased market share and growing patient demand for our branded products and expansion and the strength of our medical cannabis dispensing operations.

我們也公佈了第四季營收再創新高，達到4,100 萬美元（即1.06 億以色列新謝克爾），成長令人印象深刻，比2021 年第四季營收3,100 萬美元（即8,000 萬以色列新謝克爾）成長了30% 以上，與2021 年第三季相比，環比成長了6%。成長，以及我們醫用大麻配藥業務的擴張和實力。

Our gross margin for the year 2022, reached 41% compared to 44% in 2021, while for the fourth quarter, the gross margin was 35%. During the fourth quarter, we have witnessed financial weakness affecting many players in the industry, (inaudible) companies and companies exiting the market, sold low- to medium-quality products at lower prices, liquidating their inventory. This had an impact primarily on our ultra-medical and legacy products, while the prices for our top-selling high-quality products remain stable.

我們2022年的毛利率達到41%，而2021年為44%，而第四季的毛利率為35%。在第四季度，我們目睹了財務疲軟影響了該行業的許多參與者，（聽不清楚）公司和公司退出市場，以較低的價格出售中低品質的產品，清算庫存。這主要影響了我們的超醫療和傳統產品，而我們最暢銷的高品質產品的價格保持穩定。

In the first quarter of 2023, we continue to see strong demand for our high-quality products and continued shift from legacy mid-quality to value products. We believe that these market conditions and completing the licensing of the pharmacies, which are yet to dispense medical cannabis, position us to further increase our leading market share and will (inaudible) in the coming quarters as the market will consolidate and the prescription reform will pass through.

2023 年第一季度，我們繼續看到對我們高品質產品的強勁需求，並持續從傳統的中等品質產品轉變為價值產品。我們相信，這些市場條件和完成尚未發放醫用大麻的藥房的許可，使我們能夠進一步增加我們的領先市場份額，並將在未來幾個季度（聽不清），因為市場將整合，處方改革將通過。

Turning now to adjusted EBITDA. We believe adjusted EBITDA of the cannabis sector, a non-IFRS measure provides valuable insight into our operating performance. Adjusted EBITDA excludes from net income as reported, interest, tax, depreciation, amortization, noncash expenses, share-based compensation, acquisition and transaction costs, share value step-up of inventory and other income or expenses.

現在轉向調整後的 EBITDA。我們相信大麻產業的調整後 EBITDA（一項非國際財務報告準則指標）為我們的經營績效提供了寶貴的見解。調整後的 EBITDA 不包括報告的淨利潤、利息、稅收、折舊、攤提、非現金費用、股權激勵、收購和交易成本、庫存股票價值增值以及其他收入或費用。

For the full year of 2022, adjusted EBITDA was $32 million or ILS 84 million, which is 22% of revenue compared to $22 million or ILS 57 million for 2021. For the fourth quarter of 2022, adjusted EBITDA was $7 million or ILS 19 million, which is 18% of revenue. A slight decrease compared to $9 million or ILS 22 million for the third quarter of 2022, demonstrating the strength of our platform and our ability to execute.

2022 年全年，調整後EBITDA 為3,200 萬美元或8,400 萬以色列新謝克爾，佔營收的22%，而2021 年為2,200 萬美元或5,700 萬以色列新謝克爾。後EBITDA 為700 萬美元或1,900 萬以色列新謝克爾，佔營收的 18%。與 2022 年第三季的 900 萬美元或 2,200 萬以色列新謝克爾相比略有下降，證明了我們平台的實力和執行能力。

As we continue to invest in scaling up our platform, CapEx in 2022 totaled $18 million or ILS 48 million. We expect 2023 CapEx will be at least 50% lower than 2022, and we'll mainly focus on our global expansion as we expect launching our branded products in Germany, U.K. and other territories and continued development of our leading medical cannabis dedicated pharmacy team to about 35 locations.

隨著我們繼續投資擴大我們的平台，2022 年的資本支出總計 1800 萬美元或 4800 萬以色列新謝克爾。我們預計2023 年的資本支出將比2022 年降低至少50%，我們將主要關注我們的全球擴張，因為我們預計在德國、英國和其他地區推出我們的品牌產品，並繼續發展我們領先的醫用大麻專用藥局團隊約35個地點。

We are very proud with our third consecutive year with a positive cash flow for operations generating in 2022, $20 million or ILS 51 million, proving our financial discipline. We ended the year with a solid cash on hand of $75 million or ILS 246 million compared to $83 million or ILS 217 million in 2021.

我們非常自豪，我們連續第三年在 2022 年實現營運現金流為 2000 萬美元或 5,100 萬以色列新謝克爾，證明了我們的財務紀律。截至年底，我們手頭現金為 7,500 萬美元（即 2.46 億新謝克爾），而 2021 年為 8,300 萬美元（即 2.17 億新謝克爾）。

In addition, our balance sheet includes $25 million of loans granted to companies mainly associated with several uncompleted M&A transactions. We are financing about 70% of our CapEx with long-term loans from Tier 1 banks in Israel. These are strategic relationships built during years of execution. As interest rate environment is changing, we are constantly revising our financing structure. With the strength of our balance sheet and our solid performance, including cash flow generation, we are well positioned to continue executing our profitable growth strategy, leveraging the foundation and leadership we have built to capitalize on global expansion and consolidation opportunities.

此外，我們的資產負債表還包括向主要與幾項未完成的併購交易相關的公司發放的 2,500 萬美元貸款。我們透過以色列一級銀行的長期貸款為我們約 70% 的資本支出提供融資。這些是在多年的執行過程中建立的策略關係。隨著利率環境的變化，我們不斷調整融資結構。憑藉我們的資產負債表實力和穩健的業績（包括現金流生成），我們有能力繼續執行我們的獲利成長策略，利用我們為利用全球擴張和整合機會而建立的基礎和領導力。

For further information on our financial and operating performance, I encourage you to review the company's financial statements and management discussion and analysis, which are available under the company's profile on SEDAR and through EDGAR. This concludes our prepared remarks. We would like to thank everybody for joining us today's call and would now like to open the line for questions. Operator, please open the line for questions.

有關我們財務和經營業績的更多信息，我鼓勵您查看公司的財務報表以及管理層討論和分析，這些信息可在 SEDAR 上的公司簡介下以及通過 EDGAR 獲取。我們準備好的演講到此結束。我們要感謝大家參加今天的電話會議，現在請撥打電話提問。接線員，請開通提問線。

(Operator Instructions) Our first question comes from the line of Vivien Azer of Cowen.

（操作員說明）我們的第一個問題來自 Cowen 的 Vivien Azer。

I wanted to talk about the dynamism that you guys referenced in the Israeli market, please. Understanding that some of the wholesale discounting that you were seeing from competitors as going to be short-lived in nature. Can you offer some color on what the mix for the category looks like today by price point and how that compares to your own portfolio?

我想談談你們提到的以色列市場的活力。了解您從競爭對手那裡看到的一些批發折扣本質上是短暫的。您能否提供一些關於目前該類別的價格組合情況以及與您自己的產品組合相比如何的資訊？

Vivien, thanks for the question. Basically, we don't have official numbers for the Israeli market categories. I mean, we have some BI and internal evaluation. We think the market is probably about 70% on the high quality, some people call it premium. And about 30% is on a more discounted product.

薇薇安，謝謝你的提問。基本上，我們沒有以色列市場類別的官方數據。我的意思是，我們有一些商業智慧和內部評估。我們認為市場大概70%左右是在高品質上，有些人稱之為溢價。大約 30% 是折扣更大的產品。

And I mean, yes, I must elaborate about it. I mean we've seen a trend of struggling companies exiting their market, selling their inventories in lower than cost sometimes and affecting the market. We are seeing this trend since Q4, affecting the market prices and movement towards those more value products.

我的意思是，是的，我必須詳細說明這一點。我的意思是，我們已經看到了陷入困境的公司退出市場的趨勢，有時以低於成本的價格出售庫存，從而影響了市場。自第四季度以來，我們看到了這一趨勢，影響了市場價格並向更有價值產品的發展。

Eventually, the mix didn't really change. I mean the mix is still about 70-30, but this reflects on our portfolio. I would say our portfolio is close to the market portfolio. About 70% of our product is on high quality and about 30% are more on the side of what we call ultra-medical or legacy product.

最終，混合並沒有真正改變。我的意思是這個組合仍然是 70-30 左右，但這反映在我們的投資組合上。我想說我們的投資組合接近市場投資組合。我們大約 70% 的產品具有高品質，大約 30% 屬於我們所謂的超級醫療或傳統產品。

And basically, I also stated that we have seen this trend also into 2023. Eventually, we expect those inventories either to sold out or to expire as eventually the market will clean up. We have exploration date of pharmaceutical products. And also we are seeing most of those players exiting the market. So basically, we are expecting the clean-up to occur towards the mid of the second half of 2023.

基本上，我還表示，我們在 2023 年也看到了這種趨勢。我們有醫藥產品的勘探資料。而且我們也看到大多數參與者退出市場。因此，基本上，我們預計清理工作將在 2023 年下半年中期進行。

That's helpful. And certainly, that helps to explain some of the margin degradation that you guys saw sequentially in 4Q. But as I reflect on kind of the evolution of your gross margin on a multiyear basis, it would seem reasonable to think that there's also a margin drag from your international operations. So can you just talk about your perspective on gross margin from here? How much of a recovery can we see as the Israeli market gets cleaned up and then (inaudible) of course, being what kind of incremental gross margin headwind should we expect from your international expansion efforts?

這很有幫助。當然，這有助於解釋你們在第四季連續看到的一些利潤下降。但當我思考你們的毛利率在多年的基礎上的演變時，認為你們的國際業務也對利潤率產生拖累似乎是合理的。那麼您能在這裡談談您對毛利率的看法嗎？隨著以色列市場的清理，我們可以看到多大程度的復甦，然後（聽不清楚），當然，我們應該從你們的國際擴張努力中期待什麼樣的增量毛利率逆風？

So yes, we think, again, like it's hard to speculate right now. I mean, there's a couple of trends that may affect the gross margin. We expect the prescription reform to be implemented. And once this happens, this might have a crucial effect -- crucial positive effect on the gross margin, and it's really hard to speculate when this reform will be implemented.

所以，是的，我們再次認為，現在很難推測。我的意思是，有一些趨勢可能會影響毛利率。我們預計處方改革將會實施。一旦發生這種情況，這可能會產生至關重要的影響——對毛利率產生至關重要的積極影響，而且很難猜測這項改革何時會實施。

Regarding our international expansion, as we will -- I mean prices in Germany and in the U.K. are much higher than the Israeli market. We are seeing prices that are sometimes doubling with much lower quality. So we expect margin -- positive impact on our gross profit margin as we will scale up and announce more products in those territories.

關於我們的國際擴張，我的意思是德國和英國的價格比以色列市場高得多。我們看到價格有時會翻倍，但品質卻低得多。因此，我們預計利潤率將對我們的毛利率產生積極影響，因為我們將在這些地區擴大規模並推出更多產品。

Okay. That's helpful. And then just my last question (inaudible) with international. I think it's been our experience that progress in international, in this instance, European cannabis market has certainly been slower to progress that clearly informs what your differentiated strategy is to be sure. But can you just reflect back on what your expectations were for international progress heading into 2022 and how you may have tempered your expectations around regulatory change in Europe for 2023?

好的。這很有幫助。然後是我對國際的最後一個問題（聽不清楚）。我認為根據我們的經驗，國際大麻市場的進展肯定較慢，在這種情況下，歐洲大麻市場的進展肯定較慢，這清楚地表明您的差異化策略是什麼。但您能否回想一下您對 2022 年國際進展的預期，以及您如何調整對 2023 年歐洲監管變化的預期？

Yes. As I stated, we are taking careful steps toward our international expansion, learning from basically the market and other companies' mistakes. Yes, there are some niche markets at the moment (inaudible) at the moment, and we are expecting a new reform there.

是的。正如我所說，我們正在採取謹慎的步驟進行國際擴張，基本上從市場和其他公司的錯誤中學習。是的，目前有一些利基市場（聽不清楚），我們期待在那裡進行新的改革。

So for us, Germany is a nice target market where we are competing there basically with the same competition with the same companies that are playing here in Israel, supplying the market in Israel. But the quality in the German market, I would say, it's where Israel used to be about 2 years ago, Israel is much more competitive in terms of quality.

因此，對我們來說，德國是一個很好的目標市場，我們在那裡基本上與在以色列競爭、供應以色列市場的相同公司進行相同的競爭。但我想說，德國市場的質量，大約是兩年前以色列的水平，以色列在質量方面更具競爭力。

U.K. market is in an infant stage, but growing fast, representing a good opportunity for us also. But again, it's a small market yet. We are launching the first pharmacy in the heart of London to actually have a physical inventory. We've seen a big change in Israel. Once we launch a high-quality product in the market, we've seen the market grew because of that offering.

英國市場正處於起步階段，但成長迅速，對我們來說也是一個很好的機會。但話又說回來，這仍然是一個很小的市場。我們將在倫敦市中心開設第一家擁有實體庫存的藥局。我們看到以色列發生了巨大變化。一旦我們在市場上推出高品質的產品，我們就會看到市場因該產品而成長。

And yes, we believe that once medical cannabis products and high quality will be offered in the U.K. market in decent prices, of course, comparing to the local market conditions, we will obtain a good market share. And eventually, the market will grow because of the same trends we've seen in Israel in the early days.

是的，我們相信，一旦醫用大麻產品和高品質以合理的價格在英國市場提供，當然，與當地市場條件相比，我們將獲得良好的市場份額。最終，由於我們早期在以色列看到的相同趨勢，市場將會成長。

Our next question comes from the line of Matt Bottomley of Canaccord.

我們的下一個問題來自 Canaccord 的 Matt Bottomley。

I'm just wondering with respect to the -- particularly on the gross margin side of things, I know you sort of explained some of the dynamics that are happening in the market that are causing some headwinds. But given that sort of Q1 already in the rearview mirror here. Typically, when we see some of this price erosion or some just difficult dynamics with respect to pricing, it's not typically a one-quarter event. And I know you expanded on this a little bit more, but I'm just wondering whether it's on margins or maybe any other sort of guidance, quantified or not, if you can give us indications of how Q1 has trended? And any sort of expectations into the back half of the year with respect to the cadence of pricing in Israel?

我只是想知道，特別是在毛利率方面，我知道你解釋了市場上正在發生的一些動態，這些動態導致了一些阻力。但考慮到這種 Q1 已經出現在後視鏡中了。通常，當我們看到一些價格侵蝕或定價方面的一些困難動態時，這通常不是一個季度的事件。我知道您對此進行了更多的擴展，但我只是想知道它是否是在利潤率上，或者可能是任何其他類型的指導（無論是否量化），如果您能給我們指出第一季的趨勢如何？今年下半年以色列的定價節奏有何預期？

Matt. So as I said, it's really hard -- and again, we are not giving any guidance. So I can give some color and try to speculate a little bit about the trends. So as we stated, we are seeing the trend into the first quarter of 2023. And again, it's hard to speculate when the market will clean up and when the new reform will be implemented. The best guess of ours right now, this is the best we can give is the second half of 2023.

馬特。正如我所說，這真的很難——而且我們沒有提供任何指導。所以我可以給出一些顏色並嘗試推測一些趨勢。正如我們所說，我們看到了 2023 年第一季的趨勢。我們目前最好的猜測是 2023 年下半年。

As we are seeing companies exiting the market, and some consolidation process already started, eventually leaving more room for us to grow our market share. But again, it's hard to speculate right now about in what quarter we will see the inflection point.

隨著我們看到一些公司退出市場，一些整合過程已經開始，最終為我們留下了更多的空間來擴大我們的市場份額。但同樣，現在很難推測我們將在哪個季度看到轉折點。

Okay. Got it. And then my other question just relates to the potential for pretty significant growth profile into next year on legislative changes for prescription. So one, can you just give us any description of how this process relates relative to other legislative endeavors in the past. So I know for the last couple of years, there's speculation of maybe adult use that's kind of been kicked down the road, and there's been various sort of elections in the interim that have probably delayed that. But sort of how concrete is the actual catalyst of sort of an easier access to patients when it comes to those that can prescribe?

好的。知道了。然後我的另一個問題與明年處方立法變化可能帶來相當大的成長。那麼，您能給我們描述一下這一過程與過去其他立法工作的關係嗎？所以我知道在過去的幾年裡，有人猜測可能是成人使用，但這種猜測已經被擱置了，而在此期間發生的各種選舉可能推遲了這一點。但是，當涉及到那些可以開處方的人時，更容易接觸患者的實際催化劑有多具體？

And the second is just the ability to service that, assuming that it does happen, an overall 70% increase in market demand, is that something that would require more capital investment? Is it something that you think although might alleviate pricing pressure, something that the operators in general overall in Israel can support that level of growth in one year should it occur?

第二個是服務能力，假設它確實發生，市場需求整體成長 70%，這是否需要更多的資本投資？您是否認為這可能會減輕價格壓力，但如果發生的話，以色列的營運商總體上可以支持一年內的成長水平？

Okay. Thanks for the question. So the prescription reform has built after probably 2 years in the Ministry of Health. They've examined the biggest bottleneck in medical cannabis market, which is the doctor prescribing licenses. In Israel, the physicians need to have a license to prescribe, also the patient need the license, but the main bottleneck is this license to prescribe that has given to about 200 physicians. Out of them, we have about only a couple of (inaudible), which are actively prescribing. So we have about 123,000 patients, and that means doctors have to prescribe 240,000 prescriptions per year, divide it into 45, 50 physicians, you get a huge (inaudible).

好的。謝謝你的提問。因此，衛生部大概花了兩年才進行處方改革。他們研究了醫用大麻市場的最大瓶頸，即醫生開處方許可證。在以色列，醫生需要有處方才能開藥，病人也需要有處方，但主要的瓶頸是大約200名醫生獲得了這種處方許可。其中，我們大約只有幾個（聽不清楚）正在積極開處方。所以我們有大約 123,000 名患者，這意味著醫生每年必須開 240,000 張處方，將其分為 45、50 名醫生，你會得到一個巨大的（聽不清楚）。

Also, the regulation (inaudible) maximum cost for each prescription for -- which is about $70, while the actual price, again, because of, of course, other demand and supply, the actual price is sometimes triple that price. And that caused a lot of constraints. Many doctors charge much more than the regulation.

此外，每個處方的規定（聽不清楚）最高成本約為 70 美元，而實際價格，當然，由於其他需求和供應，實際價格有時是該價格的三倍。這造成了很多限制。許多醫生的收費遠高於規定。

And from time to time, the Ministry of Health has halted and canceling their licenses in the first half of 2022. The Ministry of Health has canceled the license of several doctors who were in charge of 20,000 patients that basically brought the market to stabilize without growth, and we see this happen again in the beginning of 2023.

而且衛生部不時在2022年上半年叫停和吊銷他們的執照。年初看到這種情況再次發生。

And this will continue to happen unless we'll solve this bottleneck. So the committee was called, and the committee is unpolitical. It's totally professional. And the committee concluded and the Ministry of Health has announced this reform. And then we went into elections. And in the new government, the new Ministry of Health in the first day, stated that this reform will be implemented. So again, it's a huge suffering for patients. Of course, it's also a big constraint on the industry. But again, the patient community in Israel is also a big political power. And yes, we have all the -- we have the reason to believe that this reform will be implemented soon. Again, no crystal ball for the timing. But this is a big constraint and a big setback for the patient community.

除非我們解決這個瓶頸，否則這種情況將會繼續發生。於是就召開了這個委員會，而這個委員會是非政治性的。這完全是專業的。委員會得出結論，衛生部也宣布了這項改革。然後我們進行了選舉。而在新政府上任的第一天，新衛生部就表示將實施這項改革。再說一遍，這對患者來說是巨大的痛苦。當然，這對產業來說也是一個很大的限制。但以色列的病人群體也是重要的政治力量。是的，我們有所有的東西——我們有理由相信這項改革將很快實施。再說一次，沒有水晶球可以預測時間。但這對患者群體來說是一個很大的限制和一個很大的挫折。

Got it. Appreciate it. And just on the part of the question with respect to the ability to service the market. If there's a 70% increase, I know you have relationships for various import arrangements out of Canada, but just how you're situated should that growth come in faster than you're anticipating relative to your own capacity internally?

知道了。欣賞它。就服務市場能力的問題而言。如果成長 70%，我知道您與加拿大以外的各種進口安排有關係，但如果成長速度比您對自己內部產能的預期要快，那麼您的處境如何？

Okay. I didn't explain also that the reform will cancel the need for a specific license. And basically, every physician under the public system, usually health care system would be able to prescribe at least the second and go on prescription. So this, of course, will eliminate the bottleneck and the market. I mean the Ministry of Health is expecting the market to grow by the 70%. This is official number. So yes, I have to say that we are preparing ourselves for this reform.

好的。我也沒有解釋說改革將取消對特定許可證的需要。基本上，公共系統（通常是醫療保健系統）下的每位醫生都能夠至少開第二個處方並繼續處方。所以這當然會消除瓶頸和市場。我的意思是衛生部預計市場將成長 70%。這是官方號碼。所以，是的，我不得不說，我們正在為這項改革做好準備。

We scaled up our operations -- cultivation operations here in Israel. We signed up with third parties also, and we scaled up also our supply agreements with Organigram and other international partners. So I would say we are basically ready for this reform. And I hope that this reform will be implemented soon so we can exercise on everything we've built here.

我們擴大了我們的業務—在以色列的種植業務。我們也與第三方簽約，並擴大了與 Organigram 和其他國際合作夥伴的供應協議。所以我想說我們基本上已經為這項改革做好了準備。我希望這項改革能夠盡快實施，這樣我們就可以充分利用我們在這裡建立的一切。

Our next question comes from the line of Pablo Zuanic (inaudible).

我們的下一個問題來自 Pablo Zuanic（聽不清楚）。

Look, just one question regarding this prescription reform. Obviously, it sounds like a big catalyst for the industry, but I guess I'm thinking in case of Germany, all the doctors there are able to prescribe, but very few do, right? And in the case of Israel, we are calling this a bottleneck, but these doctors there that didn't have a license (inaudible) license to prescribe cannabis, right? So explain to us why is this different and why would it be such a big catalyst?

聽著，只有一個關於處方改革的問題。顯然，這聽起來像是該行業的一大催化劑，但我想我在想德國的情況，那裡的所有醫生都可以開處方，但很少有人這樣做，對嗎？就以色列而言，我們稱這是一個瓶頸，但那裡的這些醫生沒有開大麻處方的許可證（聽不清楚），對吧？那麼請向我們解釋為什麼會有所不同以及為什麼它會成為如此重要的催化劑？

Okay, Pablo, thanks for the question. So there's a big difference between the Israeli regulation and the German regulation and also regarding the doctors, I would say, enthusiastic to prescribe cannabis. Basically, the huge difference is that Israel has a clinical practice where the doctors can use this green book and use this clinical practice and be, I would say, protected.

好的，巴勃羅，謝謝你的提問。因此，以色列的法規和德國的法規之間存在很大差異，而且我想說，對於熱衷於開大麻處方的醫生來說也是如此。基本上，最大的區別在於以色列有臨床實踐，醫生可以使用這本綠皮書並使用這種臨床實踐，我想說的是受到保護。

We have to understand that most of the doctors, they didn't learn about pharmaceutical medical cannabis in the universities. So yes, the big difference is this clinical practice that Israel is using. And again, I mean, Israel is much more advanced in terms of accepting medical cannabis. We -- by the Ministry of Health, medical cannabis has become a first-line treatment in some indications, not like in Germany where you have to, first of all, use many other pharmaceutical and only if that doesn't really help you, the doctor can prescribe you medical cannabis. So there's a big difference. I think eventually, Germany, not only Germany, a lot of other countries probably even including the FDA, will look into the Israeli regulation and the Israeli clinical practice. And actually, we are expecting a new book that will be issued very soon by the Ministry of Health that will be more scientific. And this time, it would be in English. And I know that many regulators around the world in Australia, in Germany and even in the U.S. are waiting for this book.

我們必須明白，大多數醫生並沒有在大學裡了解藥用大麻。所以，是的，最大的區別是以色列正在使用的臨床實踐。我的意思是，以色列在接受醫用大麻方面要先進得多。我們——根據衛生部的規定，醫用大麻已經成為某些適應症的一線治療方法，不像在德國，你必須先使用許多其他藥物，而且只有在這對你沒有真正幫助的情況下，醫生可以開給你醫用大麻。所以有很大的差別。我認為最終，德國，不僅是德國，許多其他國家甚至可能包括 FDA，都會調查以色列的法規和以色列的臨床實踐。事實上，我們期待衛生部很快就會發行一本更科學的新書。這次，它將是英文的。我知道，澳洲、德國甚至美國的世界各地許多監管機構都在等待這本書。

And basically, this is, I would say, the most advanced regulation in the world. So Israel is, as I said, is a few years ahead of any other markets in terms of accepting and developing this regulation.

基本上，我想說，這是世界上最先進的監管。因此，正如我所說，以色列在接受和製定這項法規方面比其他任何市場領先幾年。

And I think you said that there's only 200 doctors in Israel that had this license? Why do you think the number was so low? I mean was it very difficult or expensive to get the license (inaudible) time they have spent to get the license? Can you explain that?

我想你說過以色列只有 200 位醫生擁有這個執照？您認為為什麼這個數字如此之低？我的意思是，獲得許可證是否非常困難或昂貴（聽不清楚），他們花了很多時間來獲得許可證？你能解釋一下嗎？

Again, it's hard to explain why are there only 200 physicians that they got the license. Probably it's because of the process. The Ministry of Health says that you need to go for a special clearance and then to go to exams. And we are seeing the young generation of physicians accepting that. And the old generation usually won't follow those variance. And eventually, physicians in Israel are expecting medical cannabis, but to prescribe medical cannabis, as I said, you need this specific license. You need to report. It's -- again, it's (inaudible) process. It's not like prescribing regular narcotics. You have to be connected to the Ministry of Health with a special system.

同樣，很難解釋為什麼只有 200 名醫生獲得了執照。大概是流程的原因吧。衛生部表示，您需要獲得特殊許可，然後才能參加檢查。我們看到年輕一代的醫生接受了這一點。老一輩通常不會遵循這些差異。最終，以色列的醫生期待醫用大麻，但正如我所說，要開醫用大麻，你需要這個特定的許可證。你需要報告。這又是一個（聽不清楚）過程。這與開立常規麻醉藥不同。您必須透過特殊系統連接到衛生部。

So all those (inaudible) market and not only the market, it's basically -- this is basically why a lot of patients are suffering from (inaudible) from prices that are much higher than the regulation stated.

因此，所有這些（聽不清楚）市場，而不僅僅是市場，這基本上就是為什麼許多患者遭受（聽不清楚）遠高於規定的價格的原因。

Sounds like a big analyst. So just to be clear in terms of the stores, you are at 18% in Israel, and I think you aim to finish with 26 by the end of '23. Is the opening of the stores going to depend a bit on when the prescription reform comes in? Or you have already pretty much the schedule lined up for the year?

聽起來像個大分析師。因此，需要明確的是，就商店而言，您在以色列的比例為 18%，我認為您的目標是到 23 年底達到 26 家。商店的開張是否會在一定程度上取決於處方改革何時進行？還是你已經把今年的行程安排好了？

So we have -- in Israel, we have 20 actively dispensing stores. It's not stores, it's dedicated pharmacies. And another 6 that are in development. The development phase of those pharmacies actually does not depend on the reform. It's again, it's a very (inaudible) process.

因此，我們在以色列有 20 家活躍的配送商店。這不是商店，而是專門的藥局。另外 6 個正在開發中。這些藥局的發展階段其實並不取決於改革。再說一次，這是一個非常（聽不見）的過程。

Sometimes it can take 6 months, sometimes it can take 2 years, depending on the district in Israel. So yes, this reform might open also the bottleneck for the pharmacies. That's part of the reform. But again, it's not the biggest constraint. And actually, we expect to end up the year with more than 26 actively dispensing pharmacies.

有時可能需要 6 個月，有時可能需要 2 年，具體取決於以色列的地區。所以，是的，這項改革也可能會打開藥局的瓶頸。這是改革的一部分。但同樣，這不是最大的限制。事實上，我們預計今年底將有超過 26 家積極配藥的藥局。

And one last one. I saw you canceled a deal in Australia with (inaudible). Can you just remind us of what was the original logic of that deal? And what could you be doing in Australia in the future?

還有最後一張。我看到您取消了與（聽不清楚）在澳洲的交易。您能否提醒我們交易的最初邏輯是什麼？您將來會在澳洲做什麼？

Yes. Right now, the issue (inaudible) because, again, we loaned some $2 million, $2.5 million to (inaudible) is right now in court (inaudible). So it's kind of hard to me to get into details. Yes, I would say we had a very good logic in turning into this M&A. Some of it is better presentations about Australia and the license they had the second active license in Australia. Unfortunately, this did not mature because of many reasons not related to InterCure. And I don't want to dive into it because it's right now in court.

是的。現在，這個問題（聽不清楚），因為我們再次向（聽不清楚）借了大約 200 萬美元、250 萬美元，現在正在法庭上（聽不清楚）。所以我很難了解細節。是的，我想說我們進行這次併購有很好的邏輯。其中一些是關於澳大利亞和他們在澳大利亞擁有第二個有效許可證的許可證的更好介紹。不幸的是，由於許多與 InterCure 無關的原因，該技術並未成熟。我不想深入探討它，因為它現在正在法庭上。

And ladies and gentlemen, that does end today's Q&A session and concludes today's conference call. Thank you for your participation. You may now disconnect.

女士們、先生們，今天的問答環節和電話會議到此結束。感謝您的參與。您現在可以斷開連線。