Canopy Growth Corporation, TSX:WEED.TO, is a publicly-traded Canadian company licensed to produce and sell medical cannabis.
Canopy Growth, an early mover in the Canadian cannabis market, is evolving a brand-centric strategy with promising international horizons and a healthy R&D program. The company believes its focus on and investment in brands, market and product differentiation, increased cannabis supply through company and partner cannabis production platforms, and education will create a dominant global business in a rapidly expanding market.
The company’s current market cap is about US$2 billion – U.S. investors can purchase the stock in the U.S. (OTCPK: TWMJF).
In Canada, Deloitte estimates the cannabis market has a retail value of US$4.9 billion-$8.7 billion, which would rival the size of the $5 billion Canadian spirits market. Vivien Azer of Cowen & Co. said in a recent report, “When you consider ancillaries such as growers, testing labs, security, etc., the economic impact could range from $12.7 to $22.6 billion. Of note, these numbers do not include the impact of tourism, business taxes, licensing fees and paraphernalia sales, which could drive the economic impact higher.”
In 2001, Canada became the second country in the world to legalize medical cannabis use. Important to Canopy is Canada’s plan to legalize recreational/adult cannabis by July 2018.
ArcView Market Research shows an estimated $46.4 billion in North American marijuana sales in 2016 – 87% of total weed sales were likely derived from the black market. The shift from black market to legal will be a major driver of sales growth for regulated companies, including Canopy.
Canopy’s market is a lot more than stoners seeking to get high. The future cannabis market will likely experience a greater impact from medicinals as patients discover the benefits of easier delivery methods (ie. edibles like candies and baked goods) and by greater social acceptance. For example, in the past two years, the rolls of Canada’s registered patients have grown six-fold, from about 24,000 in June 2015 to nearly 168,000 by March 2017. In some cases, there are ways to develop medical products from cannabis without the psychoactive substance (THC) that we associate with easy laughing, elation and heightened awareness.
According to a report published by New Frontier Data, U.S. medical marijuana sales in 2017 are forecast to grow to $5.3 billion, accounting for 67% of total cannabis sales, and by 2025, medical sales in currently legal states are forecast to grow to $13.2 billion, at which point medical sales will account for 55% of all sales. Comparatively, adult-use sales in 2017 are forecast to reach $2.6 billion, rising to $10.9 billion by 2025.
In a report from GreenWave Advisors, cannabis sales in the U.S. are expected to be $6.5 billion for 2016. They also forecast revenues of about $30 billion by 2020, assuming that cannabis will be legal in most U.S. states for either medical or recreational use or both.
Estimates of total market and growth rates vary, but the overriding factor is that there are few multi-billion dollar opportunities on the horizon with the scale and global reach of cannabis – and that’s why Canopy is a great way take advantage of this unique period.
The Tweed brand has been a key focus for Canopy Growth since its inception. Tweed is currently positioned as a premium medicinal cannabis brand offering high-quality cannabis in multiple product forms – dried, oil and easy-to-consume, softgels. According to the company, the Tweed brand will evolve towards an adult lifestyle brand to best serve the needs of the future adult recreational market in Canada.
Other brands include Tweed Farms, Mettrum and Spectrum Cannabis.
Through its wholly owned-subsidiaries, Canopy Growth operates numerous state-of-the-art production facilities with over half a million square feet of indoor and greenhouse production capacity. The company has eight licenses to cultivate and sell cannabis under the Access to Cannabis for Medical Purposes Regulations (ACMPR) program. The company’s subsidiaries are licensed to produce and sell annually, 21,100 kilograms of dried cannabis and 9,800 kilograms of cannabis oil and has a combined licensed vault monetary capacity of $437,500. The company’s wholly-owned subsidiaries operate licensed cannabis production facilities across Canada.
The company experienced 214% revenue growth last year with a very high gross margin. Gross margins fell year-over-year, but this is expected with any fast-growing company. Here are the details in $CDN:
In September 2017, Canopy Health reported that Canopy Health Innovations, the partly-owned biopharmaceutical R&D subsidiary of Canopy Growth, has filed nine provisional patents pertaining to the applications of cannabis and cannabinoid-based therapeutics in sleep and related nervous system disorders.
“The cannabis industry is an industry with centuries of anecdotal evidence, but limited in deep and credible scientific research, ” said Bruce Linton, Chairman & CEO, Canopy Growth. “By enabling world – class research, we are confident that we can contribute to an increased understanding of cannabis as an effective and safe method of treatment and create products that will improve lives. Sleep presents a first opportunity for Canopy Health to advance in this direction, with more soon to follow.”
In tandem with the recent provisional patent filings, Canopy Health, including its wholly owned subsidiary Canopy Animal Health, has closed additional funding through sales of common shares bringing total funds raised to date for Canopy Health to over $CDN 15.8 million. Capital was secured through new and existing shareholders, including $CND 4 million from Canopy Growth. These funds will be used to advance research and product development with the objective of ultimately bringing them to patients and healthcare providers worldwide.
Image source: Canopy Growth Corp.
Disclosure: I am long Canopy Growth Corp
As of October 2018: