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WeedMD on a pathway to profitable growth as it accelerates its Cannabis 2.0 efforts

Snapshot

  • 158-acre Strathroy, Ontario facility includes both indoor and outdoor grow capacity
  • Aylmer, Ontario facility being converted and optimized into a focused extraction and processing hub
  • Continues to report strong financials, with significant revenue boosts 
WeedMD facility

Quick facts: WeedMD Inc

Price: 0.32 CAD

TSX-V:WMD
Market: TSX-V
Market Cap: $68.34 m
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  • Best-in-class infrastructure and expertise
  • High-quality cannabis products
  • Unique high margin direct-to-consumer medical platform

What WeedMD does:

WeedMD Inc (CVE:WMD) (OTCQX:WDDMF) (FRA:4WE) is making the most of its opportunities in Canada’s burgeoning cannabis sector.

The company owns, leases, and operates: a 158-acre property in Strathroy, Ontario with up to 550,000 square feet of greenhouse footprint and up to 100 acres of outdoor cultivation area; a 26,000 square foot indoor facility in Aylmer, Ontario, which specializes in cannabis extraction and processing and; a 14,850 square foot indoor facility in Bowmanville, Ontario that focuses on product research, processing, and fulfillment.

WeedMD is the publicly-traded parent company of WeedMD Rx Inc and Starseed Holdings Inc, both of which are Canadian federally licensed producers (LPs) and distributors of cannabis products under the Cannabis Act.

The Starseed medical marketplace is built around a virtual pharmacy system that takes online orders and completes the claims management process seamlessly with insurance carriers. Starseed partners with benefit plans and insurers to launch customized insured medical cannabis programs to uniquely pair a care service model with medical-grade cannabis.

The company also owns the North Star Wellness platform, which connects healthcare professionals with patients and provides medical management, education and streamlined access to clinical services. The platform, which launched in 2017, now offers its Virtual Patient Care Program as the sector transitions into virtual healthcare.

As well, its wholly-owned subsidiary CX Industries specializes in cannabis extraction and processing.

WeedMD also owns the Color Cannabis brand, which includes cultivated cannabis products for the adult-use market such as Pedro Sweet Sativa and Ghost Train Haze.

The company has a long-term strategic investor in LiUNA Pension Fund of Central and Eastern Canada, which owns an approximate 29% stake in WeedMD. LiUNA manages pensions for the largest construction union in Canada.

WeedMD is led by CEO Angelo Tsebelis, who has more than 16 years of experience in pharmaceutical and healthcare strategy and pricing, including positions at Shoppers Drug Mart and GlaxoSmithKline.

The company is focused on its high-margin model with a strong balance sheet and prudent infrastructure investments, which has positioned it for profitable growth. It maintains strategic relationships in the seniors’ market and supply agreements with Shoppers Drug Mart as well as seven provincial distribution agencies.  

How is it doing:

In the middle of October, WeedMD said it expects to accelerate the growth of its Cannabis 2.0 product strategy following a supply agreement partnership with Pax Labs Inc, a leader in premium cannabis vaporizer technology. WeedMD will become a brand partner and supplier for the PAX ERA Collection in Canada, which includes the closed-loop PAX ERA and ERA PRO devices.

The company also recently began shipping its Color Cannabis-branded 510 vaporizer cartridges to the Ontario Cannabis Store (OCS), Canada’s largest retail distributor. It noted that Color vapes landed in the “Top 5” status when compared to over 30 available vape brands during its first week of availability, according to Ontario Cannabis Store-provided data.

And in November, WeedMD said it had expanded its North Star Wellness Virtual Patient Care Program and access to its Starseed Medicinal products into Atlantic Canada, under the leadership and medical guidance of well-known cannabis educator Dr Julie Hildebrand.

On the financial front, in December, the company reported that its 3Q revenue rose 8% quarter over quarter to $6.3 million.

Notably, WeedMD said its cultivation cost per gram for the quarter came in at $0.34, compared to $0.72 during the same period last year, while its adult-use kilograms sold increased 24% from 2Q 2020.

The company noted that its gross margin in 3Q, excluding non-cash items, improve to 42% from 39% in 2Q 2020, which management attributed to its continued focus on optimization.

WeedMD ended the quarter with $31.1 million in cash and equivalents as at September 30, 2020.

The company also recently closed a C$30 million credit facility from its strategic investor LiUNA Pension Fund of Eastern and Central Canada, which it said strengthens its liquidity and allows it to boost brand awareness and distribution channels.

Inflection points:

  • Strong balance sheet and liquidity
  • Additional partnership opportunities in cannabis derivatives  
  • Positioned for continued growth and margin expansion

What the boss says:

Commenting on the company’s 2Q 2020 financial results, WeedMD CEO Angelo Tsebelis said in a statement: “During the second quarter, we advanced our integration with Starseed to drive direct-to-consumer revenue and made significant operational progress in ramping up production.”

He added: “Our unique medical service platform and growing brand recognition for our Color Cannabis adult-use products contributed to our revenue for the quarter.”

Contact Sean at sean@proactiveinvestors.com

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