This is a copy of the August 5th edition of our weekly Newsletter, which we have been publishing since October, 2015.
Cross-industry and cross-border investments have been on a rise since Constellation Brands forged its strategic partnership and investment into Canopy Growth last October. Just these past few weeks we have seen another strategic partnership between Big Alcohol, Molson Coors and Canadian cannabis producer, Hydropothecary, as well as the acquisitions of private LPs by public LPs, with both Emblem and VIVO Cannabis (formerly ABcann) acting as consolidators.
Prior to the Constellation deal with Canopy Growth, the only notable M&A had been Canopy Growth buying Bedrocan in late 2015 and then Mettrum in early 2017. More recently, the company is in the process of acquiring Hiku Brands, which has a retail focus. Since October, Aurora Cannabis has acquired two of its largest competitors, CanniMed and MedReleaf, to create a platform that has the highest current revenue run-rate of the entire sector. Aphria bought Broken Coast in early 2018, extending beyond its singular focus on greenhouse production in Ontario to pick up a high quality BC indoor grower. We saw also earlier this year a global tobacco company, Alliance One International, acquire 75% of a privately held LP, Canada’s Island Garden.
So, what’s next? We expect to see more consolidation, though most likely not by Aurora or Canopy Growth. Instead we anticipate more cash-rich public LPs consider adding existing capacity through M&A rather than using their cash to build out new capacity. This appeared to drive Emblem’s decision to acquire Natura Naturals. Buying rather than building could also provide diversity geographically or by mode of production.
We also believe that Big Pharma will inch forward soon. Pharmaceuticals displacement by cannabis is going to happen with or without Big Pharma, and we expect the industry to be proactive in Canada, where it is free to easily conduct clinical trials. Several LPs are pursuing this currently. We are aware of relationships between two larger LPs and pharmaceutical companies, but there is no equity investment yet. This will likely change, and we think there could be a full acquisition over the next few months, though this would likely not involve one of the larger LPs.
Perhaps the consolidation we envision in the coming months will be a catalyst to end the recent slump in stock prices.
Canadian LP INDIVA, on the cusp of commencing sales, has formed several key strategic partnerships that will bring successful U.S. IP and brands into Canada.
To learn more about INDIVA, visit the company’s Investor Dashboard that we maintain on its behalf, and then click the blue Follow Company button.
New Cannabis Ventures publishes curated articles as well as exclusive news. Here is some of the most interesting business content from this week:
- Aphria Q4 Sales Grow 81% to $12.1 Million
- Guest Post: Aurora’s Anandia Labs Acquisition Signals the Start of a Cannabis Biotech Arms Race
- Exclusive: Canadian Cannabis Producers Decline 13% in July
- Consolidation in Canada Continues with ABcann Buying BC-Based Canna Farms for $133 Million
- CV Sciences Generates 31% Adjusted EBITDA Margins as Sales Triple in Q2 to $12.35 Million
- Exclusive: Global Cannabis Stocks Drop 10% in July
- Exclusive: Greenhouse Cannabis Grower Acquisition Puts Emblem on Track for Aggressive Growth
- Exclusive: How Luxury Cannabis Company Canndescent is Winning in California
- Molson Coors to Form Cannabis Beverage JV with Canadian Producer Hydropothecary
- MPX Bioceuticals Sales Rise 78% to $8 Million in Q4
- Breaking: Ohio Awards Just 7 Provisional Cannabis Processing Licenses
- Organigram Q3 Sales Grow 93% to $3.7 Million
- Exclusive: Public Cannabis Company Revenue Tracker Provides Updates through August 1, 2018
The Benzinga Cannabis Capital Conference is a must-attend event for investors focused on the global cannabis markets. Taking place in Toronto in less than two weeks, the conference has some compelling panel discussions as well as 27 presentations from public and private companies.
We look forward to seeing you there!
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Alan & Joel