WeedMD Reports C$2.1 Million in Revenue for Q2 2018

On Tuesday (August 28) WeedMD (TSXV:WMD) issued its second quarter results for 2018, the first since a split in its business plan, reporting C$2.1 million in revenue for the quarter ending on June 30.

Keith Merker, CEO of the company, stated the producer has secured supply agreements with the provincial agencies tasked to gather cannabis product for the start of adult-use sales from Nova Scotia, Alberta and B.C.

The licensed producer (LP) also won a supply agreement with retailer Shoppers Drug Mart in June. The deal is set to come into effect if Health Canada approves the Shoppers’ licensed producer application.

WeedMD will supply the pharmacy with medical cannabis to be sold online based on current Canadian restrictions on the sale of medical cannabis in pharmacies.

“Our strains directed at seniors’ and women’s health will add a range of depth to Shoppers Drug Mart’s anticipated medical cannabis product offerings,” Michael Kraft, chairman of WeedMD said at the time.

According to company documents, the producer incurred in a loss of C$1.7 million for the quarter and a diluted loss per share of less than a dollar. The company also reported a cost of C$716,838 for production of its products.

The producer indicated its current C$43 million cash balance will allow it to fund its expansion and business development.

WeedMD also joined one of the latest trends to develop in the cannabis space by announcing a partnership to develop infused beverages with Phivida Holdings (CSE:VIDA). The partnership will see the creation of Cannabis Beverages, a new company which will receive exclusive product from WeedMD.

“WeedMD provides CanBev with solid infrastructure, strong management, world-class genetics and proven success in the Canadian healthcare market,” Jim Bailey, president and CEO of Phivida, said.

In July Canopy Growth (TSX:WEED,NYSE:CGC) swooped in with a surprising acquisition offer for Hiku Brands (CSE:HIKU), a company that was in the process of merging with WeedMD.

The two smaller cannabis companies were set to create a more complete company with expertise on the medical side from WeedMD and knowledge in brands and a potential retail play thanks to Hiku.

WeedMD ended up with a C$10 million termination fee, which Merker told shareholders strengthen the company’s cash position moving forward.

Investor takeaway

With the stage set for recreational sales beginning October 17 in Canada, WeedMD has secured key supply agreements to enter the space directly. Merker expects the company to count with 500,000 square feet of “fully-funded production space online by the end of this year.”

Following the drop from Hiku, Greg McLeish, an analyst with Mackie Research Capital, retained his “Buy” rating in WeedMD and his one-year price target of C$4 for shares of the company.

At the end of the trading session on Tuesday, WeedMD shares were valued at C$1.82, representing a marginal rise of 0.55 percent from its previous closing price.

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