Weekly Roundup on the Cannabis Sector & Psychedelic Sector

Key Takeaways; Cannabis Sector

  • CA marijuana operator Harborside to acquire Urbn Leaf, Loudpack.
  • Marijuana industry lender Chicago Atlantic plans to become REIT with IPO.
  • Schwazze borrows $95 million, acquires New Mexico cannabis operations.
  • Cannabis retailer Fire & Flower consolidating shares for Nasdaq listing.
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Key Takeaways; Psychedelic Sector

  • Awakn Life Sciences Strengthens Executive Leadership Team.
  • MindMed and Liechti Lab Explore Interactions Between SSRI and Psilocybin.
  • ATAI Increases Ownership Position in COMPASS Pathways.

It wasn’t that long ago that investing in the cannabis space was mainly about choosing between Canadian operators, American operators and CBD companies. Today, those choices still exist, but the industry has scaled, and more companies have gone public. And, as the cannabis industry matures, we are likely to see more companies look to expand beyond their initial area of focus.

With cannabis companies increasingly diversifying within and beyond the industry, here is a weekly roundup on the companies that had some significant announcements in the cannabis and psychedelic sectors.

Top Psychedelic Stocks for Week

#1: MindMed

Mind Medicine (MindMed) Inc. (NASDAQ: MNMD) is a public company seeking to apply psychedelics to societal problems, including anxiety, ADHD, cluster headaches and addiction.

Earlier this week, MindMed issued a press release on the publication of a study by the Liechti Lab that investigates the interaction of the SSRI antidepressant escitalopram with the acute response to psilocybin. The research was published earlier in November and presented at INSIGHT 2021 conference prior to that.

The study appears to refute received wisdom that chronic administration of serotonergic antidepressants (such as SSRIs) dampens the subjective effects of psychedelics (e.g. Bonson and Murphy, 1996, in the case of LSD). This has also been documented in case reports, with some suggesting that co-administration of antidepressants and serotonergic psychedelics are increasing the risk of adverse events.

Bonson and Murphy’s study looked at subjects who had taken an SSRI for over three weeks, of which there were 32 participants. Interestingly, they had one subject who had taken the SSRI fluoxetine for just one week, who reported an increased response to LSD.

The present study pretreated participants with the SSRI escitalopram for 14 days (7 days at a 10mg dose, followed by seven days at a 20mg dose) or placebo pretreatment and then administered psilocybin.

The study found that pretreatment with escitalopram had “no relevant effect on positive mood effects of psilocybin but significantly reduced bad drug effects, anxiety, adverse cardiovascular effects, and other adverse effects of psilocybin compared with placebo pretreatment.”

#2: ATAI

Atai Life Sciences N.V. (NASDAQ: ATAI) is a global biotechnology ‘company builder’ seeking to acquire and develop mental health treatments. With tentacles in Berlin, New York and Amsterdam, ATAI has raised large amounts of backing to finance research into psychedelic medicines for depression and other mental illnesses.

As retail investors appear bearish on COMPASS Pathways plc. (NASDAQ: CMPS) since its Phase 2b results were published, its largest shareholder Atai Life Sciences, has increased its ownership in the company to 20.8%.

The 1.4% increase in ownership by atai should be viewed as a vote of confidence in the company’s progress. Founder and Chairman Christian Angermayer said: “In my personal opinion, the market doesn’t seem to appreciate the full upside potential given these impressive COMP360 data, the size of the unmet patient need and the potential of COMPASS’ broad patent portfolio.”

Sources close to Atai suggest that this is just the beginning, with the company seeking to increase its stake in COMPASS up to around 29%.

On paper, things are looking positive for COMPASS Pathways in the months ahead, following a sharp dip earlier this month following the readout. Analysts are rating CMPS a buy, and now its largest shareholder has increased its position.

The company also announced further results from its Phase 2b study. The additional results showed patient improvements beyond the reduction of depression symptoms, such as reductions in anxiety and increases in positive affect.

#3: Awakn

Awakn Life Sciences (NEO: AWKN) (OTCQB: AWKNF) is a UK-based company working to develop and deliver treatments for addictions and substance use disorders (SUDs). The company is committed to creating effective psychedelic-assisted psychotherapies, leveraging several classical and novel compounds. Additionally, Awakn is building a network of treatment clinics to provide patients with immediate care.

On November 30, 2021, the company announced the execution of an agreement to appoint Kate Butler as new Chief Financial Officer (“CFO”) and Jonathan Held, current Chief Financial Officer, to transition to Awakn’s Chief Business Officer.

Under the terms of the agreement, Kate has joined Awakn effective immediately. However, Jonathan Held shall remain as the CFO for a transition period of up to three months (or such a shorter period as may be agreed by the parties), upon which Kate and Jonathan shall each assume their new roles.

Kate Butler is a highly skilled finance leader with extensive experience in the biotechnology industry. Ms Butler joins Awakn from Vectura Group plc, where she was the Group Financial Controller leading the teams’ strategic, finance and M&A activity. Prior to that, she was Head of Finance for EMEA Cell Therapy (Kite Europe) and EMEA Controller for Gilead Sciences Inc from April 2016 to December 2019. Previously, she also spent four years at Anglo American plc and nine years at Ernst & Young LLP.

Top Marijuana Stocks for Week

#1: Harborside

Harborside Inc. (OTC: HBORF) engages in the cultivation, manufacture, distribution, wholesale, and retail of cannabis and cannabis products for the adult-use and medical markets in California.

The California vertical marijuana operator company is making a big move to expand in the state with definitive agreements to acquire Urbn Leaf, a San Diego-headquartered retailer, and Loudpack, a cultivator, processor and distributor based in Los Angeles.

The combined company will be renamed StateHouse Holdings after the stock transaction, according to a Monday, November 29 news release.

StateHouse will become one of the largest marijuana operators in California, with 15 retail locations and 230,000 square feet of greenhouse cultivation space, according to the release. The retail locations include expected openings in the next 12 months. Harborside shareholders will vote on the transactions and name change at a special meeting in the first quarter of 2022.

Harborside also announced on Tuesday that it was raising $10 million of capital through a private placement and signed a letter of intent with Newport Beach, California-based Pelorus Equity Group to complete a $77.3 million real estate debt financing deal.

According to the news release, the additional capital will help support the UrbnLeaf and Loudpack transactions and future growth.

“Since reconstituting the company’s board of directors last year, our team embarked upon an ambitious mission to create a unique platform capable of consolidating California and driving significant growth through added scale. With these transactions, we are working to create a West Coast cannabis powerhouse,” Harborside Chair Matthew Hawkins said in the release.

Hawkins will become chair of StateHouse after the transaction. Urbn Leaf CEO Ed Schmults is expected to be appointed StateHouse CEO, while Loudpack CEO Marc Ravner is expected to become StateHouse president.

According to the release, the transaction is structured based upon the relative enterprise values of Harborside, Urbn Leaf and Loudpack. Consideration will include issuing $151.4 million Harborside shares, $2 million warrants and the assumption and restructuring of debt. After the transaction closes, existing Harborside, Loudpack, and Urbn Leaf shareholders will own approximately 35%, 39% and 26% of StateHouse, respectively.

Harborside said the combined revenue for Harborside, Urbn Leaf and Loudpack is roughly $165 million for the first nine months of 2021. The company said it had gross revenue of $57.8 million for that period, while Urbn Leaf and Loudpack posted revenue of $45.9 million and $61.4 million, respectively.

In March, Harborside made a $5 million “strategic investment” in Loudpack.

#2: Fire & Flower

Canadian cannabis retail chain Fire & Flower Holdings Corp. (TSE: FAF) is consolidating its shares as part of a plan to list on the Nasdaq exchange in the United States. The share consolidation is being implemented on a 10-to-1 basis, according to a Monday news release.

Fire & Flower announced its Nasdaq ambitions in February.

The share consolidation for a Nasdaq listing will let the company “expand its shareholder base which, in turn, provides the Company with increased flexibility and enhanced liquidity to accelerate its strategic growth plans,” Fire & Flower CEO Trevor Fencott said in the release.

The company currently lists on the Toronto Stock Exchange, where it trades as FAF. Its shares will continue to be listed on the TSX, where the consolidation is expected to take effect around December 1. The company said that Fire & Flower’s Nasdaq listing remains subject to approvals.

The Toronto-based retailer said it has more than 95 brick-and-mortar cannabis stores in Canada. Earlier this year, Fire & Flower announced a U.S. brand-and-technology licensing deal.

#3: Schwazze

Colorado cannabis company Schwazze (OTC: SHWZ) raised $95 million in capital and struck a deal worth $42 million for acquisitions in New Mexico.

The $95 million capital raise includes $93 million worth of convertible notes that carry a 13% annual interest rate over a five-year term and are secured against company assets, according to a news release issued Friday, December 3, 2021.

Denver-based Schwazze “anticipates using the proceeds from the (notes) to fund the cash consideration of recently announced acquisitions and other growth and expansion initiatives,” the company said in the release.

Schwazze’s planned New Mexico acquisitions include “substantially all the operating assets” of Reynold Greenleaf & Associates, described as “a licensed medical cannabis provider with ten dispensaries, four cultivation facilities – three operating and one in development – and one manufacturing location.”

The deal includes the equity of Elemental Kitchen & Laboratory, described as a “manufacturing asset,” as well as the right to acquire the licenses of not-for-profit medical cannabis licensees Medzen Services and R. Greenleaf Organics.

According to the release, Schwazze’s New Mexico acquisitions will be worth $42 million, including $25 million in cash and a seller’s note worth $17 million. The acquisitions are expected to close “within the next quarter,” subject to closing conditions and regulatory approvals.

“With this acquisition, Schwazze will become a multi-state operator with a total of 32 announced and acquired dispensaries, seven cultivation facilities and two manufacturing operations located in either Colorado or New Mexico,” Schwazze said in the release.

Schwazze has acquired a series of Colorado cannabis assets over the past year, including retail stores and cultivators.

Schwazze is the parent company of a portfolio of leading cannabis businesses and brands spanning seed to sale. The company is building the premier vertically integrated cannabis company in Colorado and plans to take its operating system to other states to develop a differentiated leadership position.

Medicine Man Technologies, Inc. was Schwazze’s former operating trade name. And the corporate entity continues to be named Medicine Man Technologies, Inc. and trades as SHWZ on the over-the-counter markets.

 

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