Data Confirms Robust Cannabis Demand

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Friends,

Two weeks ago, when we assessed the outlook for the balance of 2020, we suggested that we expect to see very strong revenue growth for the industry. We indicated that in Q2, unit volumes grew 20% sequentially for extracted THC products and 47% for flower in Florida, as an example. This week, we gained additional data for Florida for the first part of July that supports an even more bullish outlook.

Florida does a fantastic job of publishing data on a timely basis, with weekly unit volume sales shared each Friday (by provider). Friday’s report saw a surge in patient growth, which has increased by more than 5% over the past 4 weeks and has grown by more than 51% over the past year. The weekly sales of medical cannabis products and flower both set records. One has to be careful to account for the 8-day reporting period, or the absolute numbers will look even more compelling. To adjust for this, we compare the most recent two-week period to the two-week period thirteen weeks ago. On that basis, THC products have grown 36% compared to the 20% growth rate the market saw in Q2. For flower, Q3 is off to a fast start as well, growing 39%.

Florida has been reporting units of THC products for 15 months now. This is the weekly two-week average (to smooth out the 4th of July, as the 8-day period ending 7/9 was 137.5 million):

Over the past year, THC product unit volume has gained 66%. At the same time, patient count has expanded by 51%. Flower has grown even more rapidly (it has likely more than quadrupled), but the state didn’t start releasing data until mid-July a year ago. Demand remains robust, outpacing patient growth.

Florida isn’t the only market seeing robust growth. BDSA data for the month of May showed extremely strong growth in several mature Western markets. In particular, Oregon grew a stunning 87% from a year ago during May, up 15% from April. Through May, sales have grown 51%. Given that the state has been legal for so long, the growth likely represents conversion from the illicit market or perhaps some additional demand related to the pandemic.

We remind our readers that some of the newer markets with substantial public company participation are growing rapidly, particularly Illinois and Pennsylvania, which is medical-only. Supply constraints are beginning to lift, and we expect to see strong growth ahead. Illinois released data this week for June suggesting 7% growth over May. Arizona, a mature medical-only market that has substantial public company participation, grew 58% in May compared to a year ago, according to BDSA.

We have been sharing several reasons to be optimistic over the next few quarters and beyond, and the accelerating demand reinforces our outlook. We expect some strong reports from public companies in August and November.


As a leading North American cannabis operator, TerrAscend has quietly built up its business in the U.S. On May 28th, the company pre-announced Q2 revenue at C$45M, which would be up 30% sequentially. The company also expects to increase its adjusted EBITDA, which was positive in Q1. Its narrow focus on fast growing states such as New Jersey, Pennsylvania and California and its continued financial commitment from Canopy Growth as a substantial indirect equity holder and a lender position it to expand its operations. Based on the number of readers following it at Seeking Alpha, TerrAscend remains relatively unknown compared to its peers. The company continues to fly under the radar despite increased coverage from analysts, who have upgraded their outlook in recent months.

Get up to speed by visiting the TerrAscend Investor Dashboard that we maintain on their behalf as a client of New Cannabis Ventures. Click the blue Follow Company button in order to stay up to date with their progress.


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Sincerely,

Alan & Joel

Exclusive article by Alan Brochstein, CFA
Alan Brochstein, CFA
Based in Houston, Alan leverages his experience as founder of online communities 420 Investor, the first and still largest due diligence platform focused on the publicly-traded stocks in the cannabis industry. With his extensive network in the cannabis community, Alan continues to find new ways to connect the industry and facilitate its sustainable growth. At New Cannabis Ventures, he is responsible for content development and strategic alliances. Before shifting his focus to the cannabis industry in early 2013, Alan, who began his career on Wall Street in 1986, worked as an independent research analyst following over two decades in research and portfolio management. A prolific writer, with over 650 articles published since 2007 at Seeking Alpha, where he has 70,000 followers, Alan is a frequent speaker at industry conferences and a frequent source to the media, including the NY Times, the Wall Street Journal, Fox Business, and Bloomberg TV. Contact Alan: Twitter | Facebook | LinkedIn | Email

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