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Canadian cannabis stocks recorded a strong move higher and this rally came on the back of several significant company announcements.
The Canadian cannabis market continues to be one of the fastest growing markets in the world and it has benefited from continued deregulation across the globe. From Germany and Australia, Brazil to Denmark, Canadian licensed producers continue to enter new market and increase market share.
The last week has been very busy and we have highlighted some of the most important announcements during this time.
Canopy Growth Continues to Execute
After the market closed, Canopy Growth (WEED.TO) (TWMJF) announced that its wholly-owned subsidiary, Vert Cannabis, was granted a production license from Health Canada. Vert Cannabis is focused on producing craft cannabis out of its 7,000 sq. ft. production facility in Québec.
In November 2016, Canopy Growth acquired Vert as a part of the company's overall growth strategy. This move allowed the company to enter the cannabis market in Québec, which is the second largest province in Canada.
Canopy Growth continues to increase its potential production capacity and Vert Cannabis is the company’s seventh Canadian production license under the ACMPR. In the first quarter of 2018, Vert will begin production following the live transfer of starter plants from the Tweed facility.
Earlier this week, Canopy Growth and Canopy Rivers announced a definitive joint venture agreement to form a new company, Les Serres Vert Cannabis Inc., with Les Serres Stéphane Bertrand Inc., a large-scale tomato greenhouse operator in Mirabel, Quebec. Bertrand currently produces tomatoes and other vegetables under 700,000 sq. ft. of modern greenhouse. The entire greenhouse will be upgraded and retrofitted for cannabis production and Canopy expects the facility to be ready to begin production by May 2018.
MedReleaf Secures Distribution Agreement with Shoppers
Yesterday, MedReleaf Corp. (LEAF.TO) (MEDFF) rallied its lows after the licensed marijuana producer entered an agreement to become a medical cannabis supplier to Shoppers Drug Mart. Once Health Canada's approves Shoppers Drug Mart's licensed producer application, MedReleaf will supply branded medical cannabis products to Shoppers.
The market responded favorably to this announcement and shares of MedReleaf rallied off this development. After the market closed, PI Financial announced that it increased its price target on MedReleaf to $22 from $20.
Although MedReleaf saw a much more muted reaction, when compared to Aphria (APH.TO), after this announcement was made, we remain bullish on the shares. We continue to see upside to current levels and investors need to keep an eye one this company.
DOJA Surges on the Aphria-Tokyo Smoke News
DOJA Cannabis Company (DOJA.CN) (DJACF) surged higher after the company signed a binding letter of intent to acquire 100% of Tokyo Smoke. Once the merger is complete, the business will change its name to Hiku Brands. We are bullish on this development as it combines a craft cannabis producer with a lifestyle brand and retail-focused cannabis company.
Concurrently, DOJA entered a binding agreement with Aphria (APH.TO) (APHQF) where Aphria will make a $10 million equity investment into Hiku. Additionally, the companies agreed on the terms of a supply agreement, where Aphria will supply cannabis concentrates for Hiku's premium brand portfolio.
The investment in Hiku builds on Aphria's previous investment in Tokyo Smoke. On June 30th, Aphria purchased 140,845 common shares of Tokyo Smoke for $1,000,000. As part of an existing licensing agreement signed in September 2016, Aphria also produces and ships Tokyo Smoke branded cannabis in to registered Canadian patients. The existing licensing agreement also contains provisions for the agreement to apply to the anticipated adult recreational use market.
We are favorable on the combined company due to the strong cash position ($31 million in cash), the strategic relationship and investment from Aphria, the combined management team, the retail store presence (will have 7 operational stores when the merger is complete), and the growth opportunities.
Friday Night Announced $115 Million Acquisition
After Friday Night (TGIF.CN) (TGIFF) announced a major acquisition, the company is positioned to be one of the largest marijuana producers in Nevada. The market responded very favorably to this development and Friday Night continued to rally on this news.
Over the last month, Friday Night has rallied almost 300% and we continue to remain favorable after the company announced that it would acquire 100% of Body and Mind Inc. (BAMM.CN) (BMMJ) for $115,000,000 (all-stock transaction).
We are bullish on the combined company and the merger is expected to immediately be accretive. The combined company will benefit from economies of scale and should see its per unit costs decrease once the businesses have been integrated.
Once the merger is complete, Friday Night will have approximately 130,000 square feet of facility projects under development, making it one of the largest cultivation and production companies in Nevada.
When it comes to Friday Night and Body and Mind, we believe the whole is greater than the sum of the parts and are favorable on the combined company for the following: 1) The leverage to the Nevada marijuana market, 2) The synergies between the two businesses, 3) The improved and expanded product line, 4) The strategic partnerships, and 5) The long-term growth opportunity.
INDIVA Announces Strategic Agreement
INDIVA Limited (NDVA.V) recorded a strong move higher after the company entered a strategic cooperation agreement with Medropharm GmbH and Greenfields Health Care S.A. for the exclusive supply of cannabis strains for cultivation and sale by INDIVA in Canada. Subject to applicable regulatory approvals, INDIVA expects that the cannabis strains to be supplied in early 2018.
We are favorable on this agreement and believe the companies will add value to INDIVA. Medropharm GmbH specializes in the extraction, production and marketing of pharmaceutical grade cannabinoids and cannabinoid-containing products while Greenfields is focused the study and development of phyto-cannabinoid solutions for individuals with complex pathologies.
Pursuant to the agreement, Medropharm and Greenfields granted INDIVA the exclusive rights to import, cultivate and sell three high-CBD low-THC strains of cannabis in Canada. They will also identify the chemical composition and treatment uses of each strain supplied and will provide cultivation guidance from time to time.
INDIVA commenced trading on the TSX Venture Exchange earlier this week and the market has responded favorably to the opportunity provided by this licensed marijuana producer. We are monitoring INDIVA closely and investors should keep an eye on this one.
Emblem’s Cannabis Oil Business is Something to Watch
Although Emblem Corp. (EMC.V (EMMBF) had a very successful IPO in late 2016, the company’s share price has continued to decline in 2017. While this weakness has been concerning, we are favorable on this licensed medical marijuana producer due to its cannabis oils business and its valuation.
Over the last week, Emblem has made some significant announcements pertaining to its cannabis oil business. Demand for cannabis oil continues to increase and we are favorable on Emblem’s opportunity to capitalize on this demand.
Yesterday, Emblem traded slightly lower after the company announced a licensing agreement with Dosecann Inc. Under the agreement, the companies will immediately start to work on the development of a cannabis oil oral spray dosage form, followed by the development of two separate dose-controlled vaporizers.
Dosecann will begin developing a range of cannabinoid dosage formulations designed to ensure patients are better able to titrate and administer each dose the exact same way. The licensing agreement involves several research related aspects including research into pre-clinical formulations, clinical development, as well as regulatory approval, manufacturing and the commercialization and distribution of a range of cannabinoid dosage forms.
This development comes only days after Emblem launched four cannabis oils that can now be ordered online or by phone from its award-winning customer service team. We are favorable on the recent developments and continue to view Emblem as an acquisition candidate.
Reliq Health Continues to Deliver
Over the last quarter, Reliq Health Technologies (RHT.V) (RQHTF) has significantly advanced its story by on-boarding more than 4,000 paying subscribers to its platform and by strengthening its balance sheet.
We remain bullish on Reliq and continue to see upside to current levels. Earlier this week, the health care technology company signed an agreement with Texas-based B Golden Care Services to implement the company’s iUGO platform for its 1,000 complex continuing care patients.
Reliq expects to start on-boarding patients in the first quarter of 2018 and we are very favorable on this announcement. Last week, the company announced $7.5 million private placement at $1.12 per unit and the shares traded slightly lower on this development. Reliq has come off this lows and we remain bullish at current levels.
We are favorable on the healthcare technology company due to its improving fundamentals, its pipeline of pilot programs that can convert into major contracts, the significantly stronger balance sheet, the valuation, the management team which continues to execute on previously announced initiatives, and the long-term growth potential.