CannTrust to Develop Cannabis Products for Pets

On Wednesday (April 18) the most recent Canadian cannabis licensed producer (LP) to join the country’s premier public stock exchange announced a venture to develop medical marijuana products for pets.

CannTrust Holdings (TSX:TRST) unveiled a deal in paper with Grey Wolf Animal Health, a private healthcare company working on a portfolio of products for pets.

“We look forward to launching, together with Grey Wolf, industry leading, high quality, standardized cannabis products specifically designed for pets,” Eric Paul, CEO of CannTrust said in the statement.

The proposal is for this partnership to create a new subsidiary of Grey Wolf, which will develop new products combining the two company’s expertise. Additionally, CannTrust will “become a substantial shareholder in Grey Wolf.”

The companies failed to offer more details on what kind of products they envision developing or what kind of ailments will be treated with these cannabis goods.

Cases with animals being given marijuana by their owners have provided mixed returns in the past. While some pet owners have successfully treated their mascots with cannabis products, for others it has put the animals in harm’s way.

Earlier this year in Calgary, the CBC reported an increase of sick dogs made by cannabis. CARE Centre Animal Hospital medical director Danny Joffe told CBC there is a concern for future once cannabis becomes legal in Canada.

The co-founder and CEO of Grey Wolf, Dr. Ian Sandler said CannTrust was the “ideal partner” for his company.

Analyst sentiment on recent TSX graduate

Experts in the industry have been bullish on CannTrust Holdings since the company upgraded to the Toronto Stock Exchange (TSX).

On the market research and price target prediction aggregator site TipRanks, CannTrust currently holds a “Moderate Buy” rating based on three analysts recommendations. The average price target for the company’s stock sits at C$17.25.

For his most recent research note on CannTrust, GMP Securities analyst Martin Landry decreased his price target on the company to C$16, while still keeping his “Buy” rating.

The main cause of concern for Landry was the company’s low returns during its fourth quarter. In his note Landry wrote:

The main disappointment came from production costs per gram, which increased significantly as some grow rooms in the Vaughan facility were dedicated to providing the Niagara facility with seedlings instead of producing sellable products. In addition, the company purchased third party products to bridge the demand gap as the Vaughan facility was capacity constrained, creating a $1.8m headwind.

However, he noted all of these issues could dissipate since CannTrust’s Niagara facility obtained a sales license from Health Canada. Landry also indicated the next catalyst for the company he’s tracking is a gel caps sales license.

“Management expects approval in the coming weeks which could re-accelerate patient acquisition, revenues and drive gross margin expansion as capsules typically enjoy higher prices,” Landry wrote.

Another recent research note on the company was issued by Echelon Wealth Partners analyst Russell Stanley in April, following a venture deal from the company with Stenocare, also maintained a “Speculative Buy” rating and a 12-month stock price target of C$18.50.

As part of the Investing News Network’s (INN) quarterly update on the cannabis industry, Greg Taylor, portfolio manager with Redwood Asset Management, said he was surprised CannTrust’s upgrade didn’t cause a bigger splash for the company.

“Once … the TRST was uplisted to the TSX–which I thought would be a major positive and the stock would see a re-rating higher, but it didn’t seem to be noticed by the market,” Taylor said.

Investor takeaway

Since its launch on the TSX on March 5, the company’s share price has decreased 28.44 percent in value. After markets closed on Wednesday TRST took a 0.93 percent drop in day trading and is valued at C$6.40 per share.

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