Cannabis Weekly Round-Up: Ontario Cannabis Shops Arriving in 2019

During the past trading week (August 13 to 17), the US alcohol producer behind Corona beer announced it will be increasing its stake in a Canadian cannabis producer, further legitimizing the growth of the industry.

A report on the market and reactions following the decision by Ontario to open the recreational cannabis retail market to private companies complete this cannabis weekly round-up.

The decision by Constellation Brands (NYSE:STZ) on Wednesday (August 15) to increase its stake in Canadian licensed producer (LP) Canopy Growth (TSX:WEED,NYSE:CGC) sent the cannabis public markets off to the races thanks to another vote of confidence from an established market.

The alcohol company will invest C$5 billion in Canopy and obtain 104.5 million shares, effectively gaining a 38-percent stake. The two will continue to work on the development of infused cannabis beverages and the actual capital will be used by Canopy to fund its international expansion.

Charles Taerk, president and CEO of Faircourt Asset Management, told INN this move was a much-needed “shot in the arm to remind [investors] that it’s not just about the short term.”

He added, “it legitimizes the Canadian businesses and it legitimizes global recreational and medical opportunities, and then you ask the question ‘ok who’s next?’ … that is really a list of companies that we feel are well positioned, have capacity and don’t have a dance partner, so it’s potential.”

The Horizons Marijuana Life Sciences Index ETF (TSX:HMMJ) and the Horizons Marijuana Growers Index ETF (NEO:HMJR) both shot up with rises of 11.65 and 7.25 percent, respectively, on Wednesday.

Ontario gives green light to private cannabis retail

After weeks of speculation, Ontario’s newly elected Progressive Conservative government announced it will privatize the retail cannabis market set to open following the legalization of adult-use cannabis on October 17. However, actual retail shops will not open in the province until the spring next year.

Between legalization and next spring, consumers will only be allowed to buy legal pot for recreational use through an online system — a move that will lead to the continued use of the black market in Ontario, according to several experts and observers of the industry.

“Ontario will begin to consult on a number of rules all retailers will be mandated to follow including set hours of operation and staff training,” the province said.

This process will include conversations with Ontario municipalities, indigenous communities, law enforcement, public health advocates, businesses and consumer groups and provincial representatives.

Nearly the entire Canadian cannabis stock market took a hit in reaction to the Ontario delay on Tuesday (August 14). Taerk said at the time that the short-term moment of weakness could offer investors a chance to “add to certain positions.”

Show notes from MJBizCon INT’L

The Investing News Network (INN) covered three days of action at MJBizCon INT’L in Toronto. Talks covered valuations, risks investing in the cannabis space, new markets and general advice for investors.

On Tuesday, attendees got a crash course on the finer details of cannabis investing. Canopy Ventures Managing Director Micah Tapman told INN that investors need to be aware of the baseline risk involved with the space and how different the risk is compared to other investments.

Jason Zandberg, cannabis equity analyst for PI Financial, said during a presentation at the show that he is expecting the market to change rapidly with specialization entering the picture in the Canadian landscape. The analyst also expressed bullish sentiment for the growing retail side of the business. “If we do see this overcapacity situation, we believe retailers will be in great position to capitalize on the lower price,” he said.

Jennifer Sanders, CEO of equity firm CNS Equity Partners, spoke at MJBizCon INT’L on the challenges companies are facing when attempting to move brands or products into foreign markets. Sanders told INN capitalization plays a massive role in the expansion she described.

“If someone does not have or they don’t have access to someone who has that international advisory, international council auditing, tax … there’s really no way that they are going to be able to navigate properly, it’s extremely expensive to bring these people on,” Sanders told INN.

Market update

Following Ontario’s decision, a variety of cannabis companies unveiled strategies to make a run at getting retail licenses in the province. One is Second Cup (TSX:SCU), which has a partnership with National Access Cannabis (TSXV:META). On Thursday (August 16), the duo unveiled a plan to apply for a retail license and potentially revamp existing Second Cup locations in Ontario to become Meta Cannabis Supply-branded shops.

“Second Cup has exceptional quality real estate in locations throughout Ontario and we plan to leverage this to provide safe and responsible access to legal cannabis,” Mark Goliger, CEO of National Access Cannabis, said in the release.

Due to the decline and rapid rush following both the Ontario and Constellation Brands announcements, most of the cannabis public sector was turbulent this past trading week. CannTrust Holdings (TSX:TRST) managed to find some stability and gains boosted by its second-quarter results for 2018. The Canadian LP reported a 99-percent rise in its revenue during the quarter.

Following the opening of its 450,000-square-foot Niagara Perpetual Harvest Facility, the company has already started work on the 600,000-square-foot expansion. CannTrust expects the finalized version of its facility to produce 100,000 kilograms of cannabis per year.

Aurora Cannabis (TSX:ACB) is another producer that has started unveiling its retail strategy through a partnership with alcohol retailer Alcanna (TSX:CLIQ). The partnership announced an evaluation is underway for over 100 locations in Ontario to set up Aurora-branded shops.

Don’t forget to look for our coverage of MJBizCon INT’L, with show notes from the floor and exclusive interviews on INN. You can also follow us @INN_Cannabis for real-time news updates!

Securities Disclosure: I, Bryan Mc Govern, hold no direct investment interest in any company mentioned in this article.

** This article is updated each week. Please scroll to the top for the most recent information**

Cannabis Weekly Round-Up: Aurora Makes Retail Play in Alberta

By Bryan Mc Govern, August 10, 2018

During the past trading week (August 6 to 10), one of the biggest Canadian licensed producers (LP) announced its entry into the retail space in Alberta.

A new market report highlighting the shortfalls of the legal recreational cannabis market in California and market updates complete this Cannabis Weekly Round-Up.

The Investing News Network (INN) reported on Aurora Cannabis’ (TSX:ACB) planned retail presence in Alberta through its partnership with Alcanna (TSX:CLIQ), an alcohol retailer. The two companies will work on the development of 37 cannabis shops in the province following the legalization of adult-use cannabis in Canada on October 17.

The shops will be branded under the Aurora name and will carry products from the LP and its recent acquisitions, CanniMed Therapeutics and MedReleaf. Aurora has obtained a supply contract with Alberta worth 25,000 kilograms of product during the first six months of sales in the western market.

Alcanna will manage and operate the chain of retail shops, and announced that outside of Alberta it plans to enter each Canadian market as it is allowed.

Alberta Gaming, Liquor and Cannabis (AGLC) says Aurora is allowed to carry Aurora-branded cannabis exclusively; however, the producer is not allowed to buy back all of its supply from the province.

“Any [licensed producers] that become affiliated or have stores that want to carry their products exclusively they can, but they can’t be in the position that they are going to purchase all the product outright,” Heather Holmen, spokesperson for AGLC, told INN.

Eaze, a cannabis delivery company in California, issued a report on the challenges the adult-use market in the state still faces due to the continued presence of illicit options for consumers. The report indicates that one in five Californians polled have bought a black market product in the past three months, despite general satisfaction with legal venues.

The biggest criticisms identified for legal adult-use cannabis shopping were a lack of electronic payments and taxes raising prices above the desired purchasing point.

“Simply stated, California has done a great job of telling consumers that cannabis is legal but has a long way to go in making it easy to get safe, legal and affordable cannabis,” the Eaze report says.

Canadian producer acquires rights for patented drug delivery method

Delta 9 Cannabis (TSXV:NINE) announced a partnership with NanoSphere Health Sciences (CSE:NSHS), a drug company that has developed and patented a new delivery system for cannabis medicines.

The system operates involves applying a lotion that carries a combination of Tetrahydrocannabinol (THC), cannabidiol (CBD) and tetrahydrocannabinolic acid (THCA) through the skin in a way that keeps them concentrated and treats pain better than smoking cannabis.

David Sutton, president and chief operating officer of NanoSphere, told INN this partnership is key to getting the product approved by Health Canada. Delta 9 holds a strong relationship with the agency having gone through the inspections needed to become an LP.

“The lack of a standardized delivery system has been the single greatest impediment for doctors who would otherwise prescribe cannabis for various medical conditions,” said John Arbuthnot, CEO of Delta 9.

Since the partnership was unveiled on July 31, Delta 9’s share price had risen 7.44 percent as of the closing bell on Thursday (August 9). After enjoying an initial rise, NanoSphere’s share price has declined since the agreement, with the cannabis producer down 11.9 percent and reaching a closing price of C$0.37 on Thursday.

Market updates

Tetra Bio-Pharma (TSXV:TBP), a cannabis company working on the development of its PPP001 drug, announced it has obtained approval for a trial to challenge the effectiveness of opioid drugs compared to its candidate. Health Canada agreed on Thursday to the terms for a new study comparing PPP001 in the management of breakthrough cancer pain.

“We’ve taken a pharmaceutical pathway of drug development involving collaborative dialogue with Health Canada and the FDA to bring cannabis and cannabinoid products to market so that physicians, who have been hesitant to recommend it, will have a new, trusted therapeutic option for their patients,” said Guy Chamberland, interim CEO and chief scientific officer.

Following this announcement, Tetra Bio-Pharma dropped 20.21 percent from its previous close of C$0.94 a day before to C$0.75, representing a C$0.19 loss for shareholders.

Cannabis operator Liberty Health Sciences (CSE:LHS) announced on Tuesday (August 7) that it will be increasing its production capacity for the Florida market thanks to the start of production at its 360 Campus facility in Gainesville.

As part of the expansion, Liberty Health will also set up five new medical centers across the state. All of its delivery hub services will have a turnaround of 24 hours or less across the state.

Don’t forget to follow us @INN_Cannabis for real-time news updates!

Securities Disclosure: I, Bryan Mc Govern, hold no direct investment interest in any company mentioned in this article.