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Canada has become a hotbed for marijuana investments and we do not expect this trend to end anytime soon.
Over the last two years, more than $1.5 billion has been investment in the Canadian marijuana industry and a lot of this capital has come from United States investors. While many investors have focused on companies levered to the Canadian marijuana market, some of the Canadian firms have been investing in the United States marijuana market.
iAnthus: Expands its Portfolio of U.S. Investments
One Canadian marijuana firm focused on the United States market is iAnthus Capital Holdings (IAN.CN) (ITHUF) and it is levered to the Colorado, Massachusetts, New York, New Mexico, and Vermont markets.
In the first half of 2017, iAnthus expanded its portfolio to include The Green Solution (TGS) in Colorado. iAnthus initiated a strategic partnership with TGS through a $7.5 million loan facility that will be used to further expand the business. In addition,
Following this loan, TGS entered an advisory agreement to provide iAnthus with operational expertise and advice in support of its investments in Massachusetts, Vermont, New Mexico, and Colorado.
Breaking Down iAnthus’ Portfolio of High-Quality Assets
Today, iAnthus released its second quarter financial results and provided an update on existing operations and strategic partnerships. We are favorable on this report and highlighted iAnthus’ investments and updates below.
New York: Citiva Medical, LLC and Citiva, LLC
- Signed Letter of Intent to acquire Citiva NY and Citiva USA for $18 million ($14.4 million in stock and $3.6 million in cash) which has 1 of 10 licenses granted in New York. The acquisition is expected to close this fall. Citiva was granted dispensary locations in Brooklyn and Staten Island as well as Dutchess County and Chemung County
- Citiva's Brooklyn dispensary is expected to be 1 of 3 competitors operating in the borough (2.6 million people) and its Staten Island dispensary is expected to be the only licensee in the borough (500,000 residents)
- The company is in final stages of securing 4.4 acres of shovel-ready land, with an option to purchase an additional 10.1 acres of adjacent land, for the development of a cultivation and processing facility. If the option is exercised, the total purchase price is expected to be $1.1 million for 14.5 acres
- Citiva is in the final stages of securing leases for its four dispensary locations;
- New York’s medical cannabis market has continued to expand with additional proposed enhancements (announced on August 10th). Some of the proposed changes include: allowance of chewable tablets, lozenges, ointments, and metered ground plant preparation, as a form of patient use and broadening the capability for registered organizations to advertise
- Once the transaction closes, Citiva expects to open its Brooklyn and Staten Island dispensaries within next 4-6 months and the cultivation facility is expected to be operational within 9-12 months
Massachusetts: Mayflower Medicinals
- Massachusetts has recorded 10% growth in the number of patients so far this year (43,653 registered patients) and there are currently 11 dispensaries in Massachusetts. iAnthus believes that at least three open dispensaries are generating more than $10 million in revenues
- Mayflower's Boston dispensary build-out is expected to be finalized by November 1st. This will be one of only three current locations in the city, with a half mile non-compete zone mandated by Boston city ordinance. Mayflower's second and third dispensary locations are in the final process for local approvals and have yet to be publicly disclosed
- Mayflower's Holliston 36,000 square foot cultivation and processing location received approval for Phase 1 of the FCR (Final Certification of Registration) on July 28th. The company expects to plant seeds in the fourth quarter with product ready for sale in the first quarter of 2018.
- Mayflower Chief Operating Officer Jaime Lewis was recently appointed to the Massachusetts Cannabis Advisory Board (25-person board that will have significant influence over how regulators will implement and govern the state's medical and recreational cannabis programs). The group will provide recommendations to the Cannabis Control Commission which is responsible for the implementation and oversight of the legal cannabis market
- As of June 30th, iAnthus had extended a $7 million loan toward the build-out of the Mayflower project. The current balance of the loan for the project is US$9.7 million. iAnthus is working with Mayflower and its management company, Pilgrim Rock, to finalize iAnthus' 79% equity ownership in Pilgrim Rock, which will provide a broad range of real estate and equipment leasing, IP licensing and professional services to Mayflower. iAnthus expects this to be completed in the third quarter.
Colorado: Organix, LLC
- In the first half of the year, Organix generated $1.6 million in revenue and has an approximate 29% share of the local market in Breckinridge.
- Organix is serving approx. 4,500+ recreational customers and patients per month.
- The average sale per recreational customer is lower than a medical customer ($51.25 and $60.77)
- Cultivation upgrades have been completed and the company expects yields to improve in the upcoming ski season
- iAnthus owns the two Colorado subsidiaries, which acquired Organix’s non-cannabis assets and provide a broad range of real estate and equipment leasing, IP licensing and professional services.
Vermont: Grassroots Vermont
- The company recorded $465,000 in revenue through June 30th and second quarter run rate revenue is $930,000 (60% higher on a year-over-year basis)
- Recently submitted proposal to open an additional dispensary location which is allowed due to recent legislative changes and much larger than the current location.
- Grassroots recently completed upgrades to its cultivation facility which is expected to meet increased supply for the new proposed location, raise yields, support consistent harvest cycles, and improve product quality.
- Recent legislative changes allow for Grassroots to convert from a non-profit organization into a for-profit entity. iAnthus is working with Grassroots to convert its $775,000 loan and services contract into a controlling equity position in a for-profit management company later this year.
New Mexico: Reynolds Greenleaf & Associates
- So far this year, Reynolds has generated $3.9 million in revenue across its three managed licenses, a 34% increase over the same period in 2016.
- The company opened a sixth dispensary (fifth in the Albuquerque metro area) and during the first fourth months of being open, the newest dispensary generated $321,000 in revenue.
- Through June 30th, the average revenue per dispensary was over $111,000 a month.
- In the second quarter, over 6,000 unique patients made purchases per month, a 29% increase over the first quarter (average sale per patient was $44)
- iAnthus currently owns 29% of Reynolds Greenleaf & Associates
A Company to Watch
We are favorable on this report and will monitor how the market responds to these results. iAnthus has been under pressure recently and the shares have fallen more than 12% from its mid-August highs. Momentum has been trending lower and the shares are trading below its 20-day and 50-day moving average.
While we continue to be cautiously optimistic with the United States marijuana market, the stance that the White House administration has taken is concerning. While we believe that it would be impossible to roll back a multi-billion-dollar market that employs more than 250,000 people, we continue to monitor this situation closely.