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WeedMD Inc.

WeedMD continues rapid growth as it boosts cannabis production and taps into extracts

Snapshot

The firm has had a busy 2019, expanding its production capacity more than 20-fold, aiming to have an annual production capacity of 150,000 kg by 2020

WeedMD facility

Quick facts: WeedMD Inc.

Price: $1.37

Market: TSX-V
Market Cap: $156.72 m
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  • 158-acre Strathroy, Ontario facility includes both indoor and outdoor grow capacity
  • Aylmer, Ontario facility being converted and optimized into a focused extraction and processing hub
  • Continues to report strong financials, with significant revenue boosts 

What WeedMD does: 

WeedMD Inc (CVE:WMD) (OTCMKTS:WDDMF), under its parent company WeedMD Rx Inc, is a Canadian cannabis producer for both the medical and adult-use markets. The firm's 158-acre Strathroy, Ontario facility includes a state-of-the-art greenhouse and outdoor facility.

The firm is aiming to have an annual production capacity of 150,000 kg by 2020. 

The firm also operates a fully-licensed 26,000 sq/ft production facility located in Aylmer, Ontario under subsidiary CX Industries, which specializes in cannabis extraction and processing. 

READ: WeedMD shares rise after revenue soars in record second-quarter results

The firm has also been successful at securing multiple distribution channels, leading to agreements with six provinces in Canada and also has agreements with Canadian pharmacy behemoth Shoppers Drug Mart.

WeedMD has multiple brand offerings under its belt, which include Color Cannabis (adult-use), WeedMD (medical) and Pioneer Cannabis (retail). 

How is it doing: 

WeedMD has been busy pushing forward both of its facilities.

At its Strathroy facility, the firm completed planting more than 20,000 clones in early June, making it one of the first licensed producers to introduce outdoor cultivation in Canada. Early in August, WeedMD received Health Canada approval to expand the facility into 10 additional 10,000 square foot cultivation rooms and 10 new processing rooms.

The firm currently has 220,000 sq/ft of licensed greenhouse production, in addition to 26,000 sq/ft of indoor processing. 

WeedMD's Aylmer, Ontario facility is being converted and optimized into a focused extraction and processing hub. The firm is scaling to 200,000 kg of biomass extraction capacity. 

 In June, the firm launched Color Cannabis, a premium adult-use brand available to certain distributors and retailers.

This summer, the firm announced the launch of CX Industries, which will specialize in extraction, toll processing and third-party product formulation. At the end of July, the firm announced CX Industries had inked a pact with Ignite International Brands Ltd (CSE:BILZ) to exclusively license cannabis and CBD products. The licensing agreement will cover an initial term of two years, with an option to extend it for a third year. The firm also has a partnership with Phivida Holdings Inc (CSE:VIDA) to develop cannabis-based beverages. 

The firm recently posted 2Q financial results that showed a notable jump in revenue as successful harvests boosted cannabis supply and operational strength pushed progress forward.

For the quarter ended June 2019, the Toronto-based company recorded record revenue of C$8 million, representing a quarter-over-quarter increase of 139% and a 282% increase from the same period last year.

The company sold 1,979 kgs of dried cannabis, representing an increase of 150% from the previous quarter, and improved its gross profit margin to 46%, up from 15% in the previous quarter

WeedMD holds $29.5 million of inventory and biological assets as of June 30, 2019, an increase of $15.6 million or 113% from the prior quarter.

Inflection points:

Going forward, the firm plans to increase its extraction capabilities with the installation of supercritical C02 extractors in two phases in the second half of 2019. 

What the boss says: 

In a statement with the group's second quarter results, WeedMD CEO Keith Merker commented: “In the past year we have successfully expanded our production capacity more than 20-fold, and brought online an efficient quality-driven production platform that is recognized across Canada as a trusted source of medical-grade cannabis". 

“The scalability of our production, together with our extraction capabilities at CX Industries, gives us the platform to continue delivering the results that our stakeholders expect.”

What the broker says:

In note in September, analysts at Haywood Capital Markets said that they view the cannabis producer as “undervalued when compared to its peer group," pointing to strong 2Q results with "revenues well above expectations." 

"WeedMD is fully-funded for over 600,000 sq. ft. of indoor and greenhouse production as well as 27 acres of outdoor cultivation in 2019," noted the analysts, who maintained a Buy rating and $3.50 target price on the shares.

Mackie Research Corporation also reiterated its Buy recommendation and maintained a price target of C$4 in a note also publisged at the start of September. The firm called WeedMD’s future outdoor cultivation capacity a “game changer” for the company.

Contact Katie Lewis at [email protected]

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