WeedMD Inc (CVE:WMD) (OTCMKTS:WDDMF) announced Tuesday it has launched CX Industries Inc, a wholly-owned subsidiary that will specialize in extraction, toll processing and third-party product formulation.
In a statement, the company said CX Industries will have the capacity to process more than 200,000 kilograms of biomass at its peak production in 2020 from WeedMD’s facility in Aylmer, Ontario.
“The launch of CX Industries represents the next step in the evolution of WeedMD,” said CEO Keith Merker. “The marriage of consistent low-cost input material from our cultivation platform with our fully-licensed extraction hub in Aylmer truly sets us apart.”
Part of that evolution, he added, is “to provide a platform for entrepreneurs and seasoned brands to enter the concentrates market.”
READ: WeedMD becomes first licensed producer in Shoppers Drug Mart's new pilot program to authenticate medical cannabis
In addition to its 26,000 square foot extraction and processing facility in Aylmer - where it is also headquartered - the company owns and operates a 158-acre state-of-the-art greenhouse and outdoor facility located in Strathroy, Ontario.
WeedMD said it currently has 136,000 square feet of licensed indoor and greenhouse production space and is expected to have a total footprint of more than 550,000 square feet of indoor and greenhouse production online in 2019. Additionally, 27 acres of outdoor cultivation is licensed and fully operational with the first harvest expected in October 2019.
The firm has a multi-channeled distribution strategy that includes selling directly to medical patients, strategic relationships across the seniors’ market and supply agreements with Shoppers Drug Mart as well as six provincial distribution agencies where WeedMD’s adult-use brand, Color Cannabis is sold.
Ability to broaden revenue base
In a note to clients, Haywood Capital Markets analyst Neal Gilmer commented: “With the launch of CX Industries, WeedMD has large-scale cannabis extraction capabilities to support its 136,000 sq. ft. of greenhouse and 27 acres of outdoor cultivation, which is expected to increase next year. In addition, it provides an ability to broaden the Company’s revenue base through toll-processing and white label products.
“We believe this is a positive strategy development for the Company that allows it to handle its own biomass but also positions it as a potential partner for other LPs looking to capture market share when the new product formulations are available later this year.”
Haywood Capital reiterated a Buy rating and $3.50 price target on WeedMD shares which in Toronto trading were up 1.3% at $1.62.
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