Weekly Roundup on the Cannabis Sector & Psychedelic Sector

Key Takeaways; Cannabis Sector

  • Turning Point Brands’ growth is being driven by Zig-Zag, as Q3 sales increased 23% sequentially to $52.1 million.
  • Canopy and Acreage entered into new U.S. strategic arrangement, as the company accelerates entry into the U.S. cannabis market.
  • Verano refinanced its $350 million credit facility.
  • The Green Organic Dutchman and BZAM Cannabis entered into a binding agreement to merge.
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Key Takeaways; Psychedelic Sector

  • Awakn obtained funding to increase its commercial operations in the Nordic region.

The price of cannabis stocks skyrocketed this week following the publication of poll results from Monmouth University, which indicated that more than two-thirds of Americans support the legalization of the possession of small amounts of marijuana for personal use. The marijuana sector, which is still in its infancy, appears to be benefiting significantly from Americans’ positive attitude toward the legalization of marijuana. As a result, more investors are beginning to participate in the sector, as the industry’s competitive climate continues to develop.

Below is a review of the top companies in the cannabis and psychedelic industries that dominated the news this week.

Top Marijuana Companies for Week

#1: Turning Point Brands

Turning Point Brands, Inc. (NYSE: TPB) announced financial results for the third quarter ended September 30, 2022. According to Turning Point, net sales declined 1.9% to $107.8 million, but net sales for Stoker’s Product and Zig-Zag rose 10.0% and 23.3%, respectively.

According to Turning Point Brands, Zig-Zag and Stoker’s Segments maintained solid double-digit growth during the quarter, despite a difficult economic environment and consumers still feeling the effects of inflationary pressures. The company stated that Zig-Zag benefited from strong growth in the U.S. papers and Canadian businesses during the quarter as well as the successful introduction of CLIPPER lighters.

For the quarter, the gross profit for the Zig-Zag Products segment rose 18.3% to $28.0 million. Additionally, the Company estimates that $5 million in sales throughout the Zig Zag portfolio were carried over from the fourth quarter. This results clearly indicate that Turning Point Brands’ growth is being driven by Zig-Zag brand.

For the full fiscal year 2022, the company forecast Zig-Zag Products sales of $186 to $191 million.

#2: Canopy Growth

Tuesday morning saw a sharp increase in the price of Canopy Growth Corp. (TSX: WEED) (NASDAQ: CGC) shares, after the company announced a strategy to accelerate its entry into the U.S. cannabis industry and unleash the value of its full U.S. cannabis ecosystem through the creation of a new U.S.-domiciled holding company, Canopy USA, LLC. and the execution of a deliberate and highly structured process.

The Smiths Falls, Ontario-based company made an announcement on Tuesday regarding the launch of Canopy USA, which will enable the acquisitions of the American cannabis companies that Canopy had committed to buy once recreational marijuana usage became legal in the United States. These agreements include the whole acquisition of the multistate operator Acreage Holdings, Inc. (OTC: ACRHF), as well as the acquisitions of Jetty Extracts, a producer of extracts, and Wana Brands, a producer of edibles. All deals are subject to shareholder approval.

“This footprint is expected to enable Canopy USA to accelerate market expansion as key states across the country continue to allow adult-use cannabis,” CEO David Kline said on a conference call with analysts.

#3: Verano Holdings

Verano Holdings Corp. (CSE: VRNO) (OTC: VRNOF), a marijuana multistate operator, and Chicago Atlantic, a cannabis sector real estate lender, entered into a credit agreement to renew Verano Holdings Corp.’s current $350 million credit facility, extending the maturity date to October 30, 2026. The credit facility was initially signed in July 2020, and according to regulatory filings, it has been modified several times since then.

According to Verano, the decision to refinance the debt would provide the company more flexibility in how it manages its debt. According to a Thursday news release, the senior secured loan now bears a fluctuating annual interest rate, which is now at 12.75%.

“The ability to incur an additional $120 million in indebtedness secured by real estate that is currently unencumbered is expected to enable the company to lower its blended total cost of debt,” Verano said in the release.

#4: The Green Organic Dutchman

Two licensed cannabis producers are coming together in Canada’s latest cannabis industry merger. This follows the announcement that The Green Organic Dutchman Holdings Ltd. (OTC: TGODF), located in Mississauga, Ontario, and privately owned, BZAM Cannabis, with headquarters in Vancouver, had entered into a legally binding agreement to merge their businesses.

The merger is an all-stock transaction. And shareholders of BZAM will ultimately own around 49.5% of the combined business. The merger is anticipated to close on November 8, 2022.

Based on retail sales from June to August 2022, the combined company is projected to rank as the sixth-largest cannabis producer in Canada. Furthermore, the merged company forecasts to have adjusted EBITDA that is positive by the middle of 2023 and net revenue of at least $100 million for the calendar year 2023.

In calendar year 2021, TGOD and BZAM generated net revenues of $30.2 million and $32.2 million, respectively; from January to September of the current year, 2022, TGOD and BZAM have recorded net revenues of and $31.6 million and $32.7 million, respectively; this is already an increase from the prior year, despite there being more months left in the year.

Following this disclosure, shares of The Green Organic Dutchman increased by 30%, closing at about six and a half cents by the end of the trading day.

Top Psychedelic Companies for Week

#1: Awakn

Awakn Life Sciences Corp. (NEO: AWKN) (OTC: AWKNF), a biotechnology company that generates revenue through the research, development, and commercialization of therapeutics to treat addiction with a near-term focus on Alcohol Use Disorder (AUD), announced that its wholly-owned subsidiary, Awakn Oslo AS, had signed a financing agreement with TD Veen AS, a family-owned Norwegian investment company, that is also a shareholder in Awakn.

The company said it plans to expand its clinics operation in the Nordic region, following a recent management forecast that indicated a great performance and an increasing demand for Awakn’s treatments, since debuting in Norway late last year. Under its expansion plans, Awakn intends to open a second Norwegian clinic in Trondheim, making it the company’s fourth clinic overall, and relocate its current clinic in Oslo to a larger location with a big capacity for treating more patients. Awakn anticipates that both of the Norwegian clinics will be able to conduct clinical trials and perform research on-site.

Additionally, Awakn stated that, Dr. Lowan Stewart, a prominent specialist and forerunner in ketamine-assisted therapy in Norway, will continue to serve as the executive director of Awakn’s Nordic operations, and be in charge of the anticipated expansion.

Anthony Tennyson, Awakn CEO, commented on this significant announcement saying; “We are excited to be pushing into our next phase of growth in the Nordics. We have been very happy with the reaction to Awakn and our offering in Norway and the growing demand backs that sentiment up.”

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