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Bedrocan Cannabis delivers on commitment to patient care

Bedrocan Cannabis (CVE:BED), which recently received a marijuana producer's license for its 52,000 square foot facility in the GTA, has established a patient advisory board and appointed one of the founders of Canada's first ever compassion club as director of patient and community services.

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Bedrocan Cannabis (CVE:BED), which recently received a marijuana producer's license for its 52,000 square foot facility in the GTA, has established a patient advisory board and appointed one of the founders of Canada's first ever compassion club as director of patient and community services.

Dundee Capital Markets, which has a buy rating and a C$1.20 target price on the company, said that while the news is neutral to Bedrocan's valuation, it reinforces its "strong commitment" to patient care.

In February, Bedrocan was given a second license from Health Canada for the production of medical marijuana under the country's MMPR regime instituted last year, propelling it into a new stage of growth. Under the terms of the license, effective February 17 for a period of one year, Bedrocan can begin domestic production in the first six grow rooms at its new 52,000 square foot facility in the Greater Toronto Area, with first production harvest and sale slated for the second quarter.

When fully licensed, the facility is capable of producing some 4,000 kilograms of medical cannabis per year. The site has a total of 34 grow rooms.

"Management is trying to distance itself from the stigmas associated with marijuana and has made a concerted effort to demonstrate that Bedrocan product is a pharmaceutical-quality medicine aimed at helping patients in need, not 'weekend warriors'," wrote Dundee analyst Aaron Salz of the news announced today.

"This continues to be a key differentiator between Bedrocan and its peers."

The news could serve as a boost to the company's stock, which is down some 5 percent since the licensing news was announced on February 20. Pre-license, Bedrocan's stock price was 79 cents.

"Part of this might have to do with the stock pricing in the license prior to the official announcement but we believe the weakness is driven largely by a misunderstanding of the granted licensed capacity and see an opportunity for investors to get into the name," said Salz.

"As a reminder Bedrocan was licensed for 6/34 grow rooms, ~705 kg pa or ~18% of its potential max capacity of 4,000 kg pa."

The Dundee analyst emphasized that the initial license does not represent a capacity constraint, as Bedrocan is likely to see an amendment to higher levels in the next 1 to 2 months, with Health Canada only licensing the company for enough capacity to get started.

In fact, the broker is modelling expansion to 4,000 kilograms capacity by the first quarter of next year, with management anticipating an amendment to its license before annual renewal in February 2016.

The patient advisory board added Wednesday is set to complement Bedrocan's existing medical advisory board. The newest board will include nine patients with a wide range of chronic conditions, from neuropathic pain to a mother of a child with extreme pediatric epilepsy. 

"We see the board as a talking piece for Bedrocan when trying to onboard new patients along with physicians yet to prescribe medical marijuana," Dundee opined.

In addition to the board, Bedrocan's move to hire Hilary Black as director of patient and community services should be seen as a way to bring quality and disgruntled patients under the old Canadian regime into the MMPR (Marihuana for Medical Purposes Regulation) system, which came into effect last April.

The MMPR program in Canada immediately replaced the previous Marihuana Medical Access Regulations (MMAR) regime, creating conditions for a highly regulated commercial industry with a limited amount of suppliers vetted extensively by Health Canada.

Black helped set up Canada's first ever compassion club in the late 1990s, when MMAR was first established. While the clubs are well known in Canada as operating in a "grey zone" of the law, Dundee said "Black has always seemed to be a dissenting voice compared to other dispensaries."

Dundee is estimating Bedrocan will sell 630 kilograms of medical marijuana this year, at $7.50 per gram. Before its newest license, Bedrocan was already importing 240 kg of medical marijuana for sale via Bedrocan BV and the Dutch Ministry of Health, having already built a strong brand and a 1,500 patient base.

Quick facts: Bedrocan Cannabis

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TSX-V:BED
Market: TSX-V
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