During the last year, we have seen an increase in the number of companies that are levered to the cannabis industry but do not touch the actual plant. Some of these ancillary cannabis companies represent legitimate opportunities and are capitalizing on underserved markets within the cannabis industry.
We are favorable on the opportunities that the cannabis industry has created for ancillary businesses and believe that this is an area where investors should be focused. Today, we have highlighted 3 companies that are focused on the cannabis industry but do not actually touch the plant.
Premier Health: A High-Growth Opportunity
One ancillary cannabis company that we have been favorable on is Premier Health Group (PHGI.CN) (PHGRF). The company is strategically poised to take advantage of business opportunities in the global healthcare industry and is developing innovative healthcare approaches that combine human skill-based expertise with emerging technologies, with the goal of setting the gold standard for services in locations of interest worldwide.
Premier Health’s subsidiary, HealthVue, is focused on developing proprietary technology to deliver quality healthcare through the combination of connected primary care clinics with telemedicine and artificial intelligence (AI). HealthVue currently has an ecosystem of over 100,000 active patients and have plans to rapidly increase that number both domestically and internationally.
Earlier this year, we highlighted Premier Health as a healthcare technology company to watch following its acquisition of Cloud Practice. This acquisition was a game-changer for the healthcare technology company, and we are bullish on the growth prospects associated with this.
Cloud Practice processes upwards of $30,000,000 in payments to over 3,000 health providers on a monthly basis and we expect this acquisition to prove to be immediately accretive to Premier Health. Cloud Practice generates significant cash flow and will immediately make Premier Health a major player in the cannabis industry since it already services 60+ cannabis clinics that has more than 120,000 active patients. We are favorable on this aspect of the business and consider it to be a major growth opportunity due the significant amount of cash flow that is being generated and the large amounts of valuable data that is being captured by this network.
During the two years, Canada’s medical cannabis market has gained significant traction and has become a major market. Although the industry has significantly advanced during this time, there is still a major gap between the patient’s need for medical cannabis and the doctor’s knowledge and comfort level in prescribing it.
This gap has created a significant opportunity for companies like Premier Health to fill the void with technology and various forms of clinics and services to help its patients and health care workers. We have been closely monitoring Premier Health and believe that its acquisition of Cloud Practice will make it a major player in the cannabis industry.
Going forward, Premier Health has massive growth prospects, and this is primarily due to the acquisitions it has made. The company has been focused on acquiring businesses that are generating positive cash flow and we are favorable on this focus. We believe that Premier Health is still flying under the radar and this is an opportunity to be watching.
ParcelPal: An Emerging Ancillary Opportunity
Last month, we highlighted a company that is well positioned to capitalize on the cannabis industry. The company, ParcelPal Technology Inc. (PKG.CN) (PTNYF) is in the early innings of a major growth cycle and provides on-demand local delivery services in North America. The company has strategic relationships with leading global conglomerates as well as leading Canadian cannabis retailers.
ParcelPal represents an attractive ancillary cannabis investment opportunity and we are favorable on it due to the relationships it has in place, the valuation, the growth prospects, and the management team. 2018 was a banner year for the company and we expect to see it build upon this success. ParcelPal closed the year with a run rate of over 3.5 million and has been continuously executing on its strategic plan, attracting potential partnerships, and looking at further city expansions.
In late January, ParcelPal Technology formed a strategic partnership with MADD Canada to aid in the continuous fight to prevent impaired driving. MADD Canada has endorsed ParcelPal as their official delivery service in Canada and we think this relationship will prove to beneficial to the company.
As part of the ParcelPal’s national rollout campaign, advertising for ParcelPal’s service will be seen across the country in various educational forms. MADD Canada and ParcelPal will launch a national awareness campaign focused on educating Canadians on the dangers of impaired driving and the options they have for getting items they want or need without having to drive for it. Customers who order cannabis or alcohol through the ParcelPal platform will be required to upload and verify their identities.
Last year, ParcelPal announced a strategic distribution agreement with Choom Holdings, Inc. (CHOO.CN) (CHOOF), a leading cannabis retailer in Canada. Under the agreement, the companies will jointly develop a roadmap for distribution within various provinces for recreational cannabis, will use their respective platforms to enhance user experience, and will create a delivery platform that complies with the regulations set forth by all regulating bodies in Canada.
We are favorable on this relationship and believe that each company adds strategic capabilities to the partnership. ParcelPal wants to be the Uber of cannabis for Canada and believes that Choom will enhance its national cannabis distribution and delivery strategy. Choom has a strategic relationship with Aurora Cannabis (ACB.TO) (ACBFF), whereby Aurora owns a significant portion of Choom and this could be a major catalyst for ParcelPal.
When looking at cannabis companies, there are a number of factors we look into before becoming interested. Some of the factors that we look for include: the strength of the management team, the type of products or solutions offered, the financial structure and valuation, and the growth prospects.
When it comes to ParcelPal, we believe that the company possess these traits and is well positioned for growth. The company is led by a strong management team that has been laser focused on execution and we are favorable on the recent developments. ParcelPal has secured several strategic relationships to help facilitate growth and we think the market underappreciates this opportunity.
CB2 Insights: An Opportunity that is Flying Under the Radar
CB2 Insights (CBII.CN) recently commenced trading on the Canadian Stock Exchange and is a company that is on our radar. CB2 represents a differentiated opportunity and is a medical clinic and data company that has three business lines:
- Canna Care Docs (CCD): A leading cannabis evaluation and education group, with 28
- medical clinics operating in 11 states and D.C. On an annual basis, CCD serves 60,000 patients and is expanding through organic and inorganic growth initiatives
- Sail: A comprehensive cannabis-specific EMR platform and data collection tool to support clinics and clinicians across multiple countries.
- TokeIn: An app-based customer loyalty and engagement platform that is used by cannabis retailers. Through TokeIn, CB2 is able to capture patient-specific POS data after their patients leave their medical clinics and make purchases at dispensaries.
One of the reasons why we are favorable on CB2 is due to the smart money that is backing the company. Merida Capital has been a cornerstone investor in the medical clinic and data company, and we believe that this is significant. Based on our experience, Merida has a very extensive due diligence process and companies must meet specific criteria if they are to receive an investment. We are favorable on the firm’s involvement with CB2 and believe that is a testament to the company’s opportunity. Other significant investors in CB2 are cannabis specific funds Phyto Partners, CB1 Capital and Cannabis Growth Opportunity Corp.
With CB2, the company is generating huge amounts of data and we believe that the monetization opportunity is massive. When it comes to our long-term thesis on the company, we believe that the data will be the most significant value-driver, and this is something we are watching. In the near-term, CB2 is attractive due to the amount of revenues it is generating as well as the margins associated with this revenue. Insurance companies are keenly aware of the potential changes they may need to consider with respect to reimbursement of cannabis-based medicines and should be downstream consumers of any epidemiological data they can source that assists those decisions. It should be noted that several Canadian plans already offer reimbursement and numerous administrative law and Worker’s compensation decisions in the U.S. has compelled coverage of cannabis-based medicines including cases in New Mexico, New Jersey, Connecticut, and Maine. To make these decisions thoughtfully, insurance companies will need data and CB2 provides it.
CB2’s goal is to be the largest hub of medical-cannabis focused data and plans to monetize this data with medical practitioners and health associations, regulatory bodies, drug manufacturers, and data aggregators. We are favorable on the company’s opportunity and believe that the market under-appreciates the growth prospects. CB2 is a company that investors need to be watching and is one that is high on our radar.