iAnthus Outlines Entry into 3 US Cannabis Markets

Shares of iAnthus Capital Holdings (CSE:IAN) soared on Wednesday (August 29) after reporting US$4.9 million in revenue for the second quarter of 2018.

The US-focused cannabis operator highlighted its acquisition path during the quarter in emerging cannabis markets in the US like Florida and New York.

During a conference call on Wednesday to discuss these results, Hadley Ford, CEO of iAnthus, said the company has three significantly larger markets that excite him, notably in Massachusetts, Florida and New York.

Recreational options for all three of these regions are arriving soon or are expected to come in the short term. Momentum in Florida has particularly increased to add a vote on recreational marijuana for its upcoming federal election.

Ford previously told the Investing News Network (INN) the company evaluates an addressable market defined by the state itself and inspects the general population for its entry. The company also has operating assets in Vermont, Colorado and New Mexico.

iAnthus projects it will own three cannabis dispensaries by the end of the year in Florida and expects to own between five and seven by the end of Q1 2019. In its report, the company said starting in 2019 it anticipates it will open two dispensaries per quarter.

Ford explained his view on the adult-use legalization for New York is that state officials are not going to want potential consumers heading to New Jersey, a state looking to open the market. The executive described the legalization process as a “rock rolling downhill now.”

At the beginning of August New York Gov. Andrew Cuomo (D) announced the creation of a working group to draft a bill for legalization and regulation of cannabis for the state.

Julius Kalcevich, CFO of iAnthus, said New York is the most eagerly anticipated cannabis market in the US, and the company plans on opening a dispensary across the Barclays Center sometime in mid Q4.

Sales of recreational cannabis in Massachusetts kicked off in July and the company already estimates the market in this state to grow over US$1 billion in annual revenue by 2020.

iAnthus CEO says to be successful companies will need to acquire acquire and partner with operators

Alan Brochstein, cannabis analyst with 420 Investor, asked during the call what iAnthus’ biggest competitive advantage is n a landscape filled with several public US cannabis operators.

Ford highlighted the company’s ability to integrate new acquisitions into its own books and having access to capital.

The operator reported a total asset value of US$142 million at the end of June 2018. According to company documents, iAnthus had US$27.1 million in cash at the end of the quarter. The company also reported a net loss of over US$35 million in Q2.

“Given that the biggest multi-state operators cover nowhere near 25 percent, let alone 50 percent, let alone 100 percent of the US market, it’s clear to be successful you’re going to need to be able to acquire and partner with operators,” Ford said.

During his initial remarks on the call, Ford delivered a passionate commentary of what investors should look for when evaluating these multi-state operators.

Ford provide shareholders with a cannabis market projection breakdown, which he said could be worth US$200 billion at the register 10 years from now:

To give some context beer, wine and spirits are about US$230 billion today. The US multi-state operators control the entire vertical stack of that delivery, the grow, the process, the brand, the sell. That sounds very much like the typical adult beverage company and those are trading at an average of multiple five times the revenue, five times 200, 1 trillion dollars at the register for vertically integrated multi-state operators.

Ford told shareholders they need to be in communication with the management team for their picks and make sure the little things are being done correctly.

Investor takeaway

Shares for the company increased 10.39 percent at market closure on Wednesday, reaching a price point of C$7.44 on the Canadian Securities Exchange (CSE). Over a year-to-date period to its most recently closing price, iAnthus stock has soared 130.82 percent.

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