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WeedMD CEO says company focused on profitability after Starseed acquisition

The new CEO said the firm was 'trending towards profitability' thanks to its lean business model and concentration on higher-margin products

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WeedMD has 17 cultivation rooms that are all cycling through various stages of production in its Strathroy facility

WeedMD Inc (CVE:WMD) (OTCMKTS:WDDMF) CEO Angelo Tsebelis told shareholders on Wednesday that the medical cannabis company is focused on executing its commercial plan in 2020.

The new CEO said the firm was “trending towards profitability” thanks to its lean business model and concentration on higher-margin products.

Tsebelis’s comments come as the Toronto-based company is completing the integration of Starseed Medicinal Inc, a transformative deal announced in December.

READ: WeedMD subsidiary Starseed Medicinal becomes preferred supplier of cannabis to major union group

Starseed provides medical cannabis as a fully covered drug benefit for union members and their respective dependents. The acquisition gives WeedMD a built-in partnership with Canada’s largest construction union, the Laborers’ International Union of North America, which boasts over 100,000 members.

“WeedMD is widely lauded for its focus on high-quality cultivation, processing and product development, which remains intact today,” Tsebelis said in a letter to shareholders.

“Our infrastructure and operations are some of the most impressive operations I have seen.”

WeedMD’s business model historically centered on wholesale product distribution, which generally carries a lower margin, according to Tsebelis. With the addition of Starseed, the firm now has new and direct channels to a patient base with insurance coverage for medical cannabis.

Captive consumer audience

Tsebelis told investors that the company’s access to a substantial, captive and direct consumer audience of over 350,000 individuals will drive growth, margin expansion and set it on a path to profitability.

The CEO said that the company was on the path to profitability by sustaining and operating a lean business model across its cultivation sites, capturing higher-margin products rooted in low-cost cultivation platforms and securing nearly C$10 million in selling, general and administrative expenses reduction run rate by the end of 2020.

Tsebelis outlined the firm’s 2020 commercial plan, which includes:

  • Scaling its medical distribution business model via paid benefits
  • Delivering quality cannabis to the adult-use market via Color and Saturday brands
  • Launching quality, customer-focused cannabis products in traditional and new formats to drive greater revenue across all markets

Health and safety paramount

Tsebelis also said that the company had established protocols and risk mitigation strategies in response to the global coronavirus outbreak. “Our top priority is ensuring our employees have the information they need to remain healthy so they can continue providing our customers with the outstanding products and service upon which we have built our reputation,” he wrote.

Outside of the pandemic, Tsebelis said it is “clear” that the cannabis market in Canada has experienced growing pains for several other reasons, including pricing inconsistencies, retail outlet constraints in some provinces, and limited quality supply in certain consumer product segments.

'Formidable leader'

“While these factors have tempered short-term market expectations – creating pressure on equity valuations across the board, longer term we are confident that WeedMD will emerge as a formidable leader in Canada’s ever-evolving cannabis space,” he wrote.

“As both the CEO and as a shareholder, I look forward to working with our talented team in leading the Company through our next phase of growth. I am very excited about WeedMD’s strong prospects and the many opportunities ahead to build further value for our shareholders.”

Contact Angela at [email protected]

Follow her on Twitter @AHarmantas

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Price: 0.58 CAD

TSX-V:WMD
Market: TSX-V
Market Cap: $121.55 m
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