The company aims to become the number one provider for the long-term care industry and seniors market, which is large, growing and under-served.
The deal is with three providers - peopleCare Communities, Arbour Heights and the Belmont Long Term Care Facility, totalling over 1,000 beds across the state.
Broker Eight Capital rates shares a 'buy' and reckons there will be similar announcements to come as the group continues to capture this market.
It estimates that 1050 beds consuming one gram per day on average creates a demand for about 380 kg of cannabis per year and a potential C$2.7mln in revenue.
"We also believe that this is only the beginning as WMD focuses on securing more supply contracts to LTC and retirement facilities," it added.
What does WeedMD do?
Private capital backed the company enabling it to obtain approval from Health Canada in April 2016 for the start of growing at its 26,000 sq ft of growing space in Aylmer, Ontario.
And in June, it received a supplemental licence from Health Canada to produce medical cannabis oils, an important milestone to broaden its offering.
The same month it revealed an agreement with Aurora Cannabis, where the firm will supply Aurora with its surplus cannabis once all of its clients' current and future needs have been met.
In return, WeedMD can leverage Aurora's unit that deals with patient counselling.
Also in June it unveiled a partnership with Van der Pop to bring a leading female-focused brand to Canada and WeedMD expects to deliver medical cannabis under the Van der Pop brand to its Canadian patients starting in late 2017.
Hitting development goals...
Last month, the group said it was hitting the development goals it had promised, and posted revenue of $235,659 in its first quarter of sales - the three months to end June.
Revenues were mainly from the sale of dried medical cannabis and live cannabis plants.
A difficult but large market..
Broker Eight Capital noted that supplying clients in LTC (long term care) facilities was a difficult market to penetrate because of the complexity of patient care, but that client retention was "very strong".
It also reckons WeedMD could become a M&A (merger and acquisition) target to another group wishing to add a recurring revenue stream or another part of the value chain.
Seniors are increasingly looking for alternative therapies for illnesses like cancer, dementia and multiple sclerosis and there has been more science published on the benefits of cancer, notes the broker.
According to official numbers, Canada now has more people over 65 than children under 15.
"The growth rate of the population aged 65 years and older was 3.5% in 2014/15, which was around four times that of the total population.
"With the baby boomer generation now reaching 65 years old, this demographic will only increase in size going forward," it says.
What's it worth..?
Eight Capital has a target price of C$2.25 on the shares, which is a long way from the current price of C$0.87.
This is based on a multiple of six times' enterprise value/ EBITDA to 2021 estimates of underlying earnings (EBITDA) of C$35mln.
"The 6.0x multiple is at the lower end of our peer group range of 4.0x - 10.0x, due to WeedMD's earlier stage operation," the broker notes.