Key Takeaways; Cannabis Sector

• Tilray plummeted 21% on Friday, after announcing a registered offering of $150 million worth of convertible notes.
• SNDL reported growth in sales over last year as acquisitions helped build the company.
• Ayr Wellness revenues rose 3% sequentially in the first quarter.
• Curaleaf first quarter of 2023 revenue exceeded expectations.

Key Takeaways; Psychedelic Sector

• Awakn is working on a groundbreaking ketamine study that will help reduce gambling addictions.
• Seelos Therapeutics provided critical clinical update and financial reports in the first quarter 2023 financial release.

Unlike the prior three quarters, where we started strongly and ended weakly, the cannabis sector isn’t doing well in Q2. April was a down month, and May has been too. One significant contributing factor to this turmoil has been the continued interest rate hikes by the Federal Reserves, which have not only affected the cannabis sector but also impacted the broader markets. However, amidst the adversity, there remains a glimmer of hope and a sense of optimism fueled by the ongoing wave of decriminalization and legalization efforts taking place across various states and countries.

In this weekly roundup, we delve into the first-quarter earnings reports of prominent cannabis companies and provide a comprehensive overview of the key and noteworthy developments amongst major players in the cannabis and psychedelics sectors.

Top Marijuana Companies for Week

#1: Tilray

On Friday, Tilray Brands, Inc. (NASDAQ: TLRY) experienced a significant drop in its stock price, declining by over 21%. This decline followed the announcement of another round of capital raising by the company. While the broader market enjoyed gains on Friday, Tilray’s stock faced downward pressure due to concerns about its ongoing need for funding and potential dilution of existing shares.

In the new round of capital raising, Tilray launched a registered offering of $150 million worth of convertible senior notes. The notes have a maturity date of June 15, 2027, and carry an annual interest rate of 5.2%. Interest on the notes will be paid semi-annually.

Under the terms of the agreement, the notes are convertible into Tilray common shares at any time, with an initial conversion rate of approximately 376.6 shares per $1,000 principal amount, which translates to a conversion price of approximately $2.66 per share. Tilray also retains the option to redeem the notes for cash after June 20, 2025.

Additionally, the underwriters of Tilray’s note issuance were granted a 30-day option to purchase up to $22.5 million worth of the notes.

According to the company, they intend to utilize the proceeds from this offering primarily to redeem previously issued convertible senior notes, with a portion allocated for general corporate purposes, although specific details were not provided by Tilray.

This move follows Tilray’s ongoing struggle with weak cash flow and consistent losses. As a result, there’s a growing concern regarding the sustainability of Tilray’s financial position and its ability to achieve profitability. Irrespective of this, investors will continue to monitor Tilray’s performance, seeking signs of improved financial stability and a sustainable path towards profitability.

#2: SNDL

SNDL Inc. (NASDAQ: SNDL), a prominent player in the cannabis industry, recently reported a substantial increase in sales for the first quarter of the year. Although there was a sequential decrease in net revenue compared to the previous quarter, the company experienced significant growth when compared to the same period last year. SNDL attributed this success to strategic acquisitions, including those of Alcanna, Valens, and Zenabis.  According to the company, these acquisitions have not only bolstered SNDL’s revenue but have also positioned the company as one of the largest adult-use cannabis manufacturers and retailers in Canada.

The financial results for the first quarter ending March 31 indicated that SNDL’s net revenue fell to C$202.5 million, compared to C$240.4 million in the previous quarter. However, this was a remarkable increase from the C$17.6 million reported in the first quarter of the previous year. SNDL explained that the decrease in revenue compared to the fourth quarter of 2022 was primarily due to seasonal trends in the liquor retail segment.

Furthermore, SNDL managed to reduce its net losses to C$36.1 million for the first quarter, a significant improvement from the C$161.6 million net loss in the fourth quarter of 2022 and the C$38 million net loss in the first quarter of 2022. SNDL attributed this positive trend to various factors, including the integration of Valens, which is progressing well, and the identification of new revenue streams and cost reduction opportunities.

In terms of cannabis expansion, SNDL reported gross revenue of C$67.4 million from the cannabis retail segment in the first quarter of 2023. This represents a modest decline compared to the fourth quarter of 2022 but a substantial increase from the first quarter of 2022.

#3: Ayr Wellness

Ayr Wellness Inc. (OTC: AYRWF), a leading cannabis company, recently announced its financial results for the first quarter ending March 31, revealing a significant loss stemming from its exit from the Arizona business. While the company experienced overall revenue growth and exceeded expectations in certain areas, the substantial loss incurred highlights the complexities and challenges of operating in the cannabis industry.

Despite growing revenue by 18% to $117 million compared to the previous year’s $99.5 million, Ayr Wellness faced a staggering net loss of $197 million for the quarter. The loss was primarily attributed to discontinued operations related to the sale of the Arizona business, amounting to $185 million, net of taxes. Operating losses remained flat at $21 million, indicating ongoing challenges within the company’s operations.

The decision to exit the Arizona business was a strategic move by Ayr Wellness, demonstrating the company’s commitment to optimizing its operations. However, the financial implications of this decision were significant, resulting in a substantial loss for the quarter. It is worth noting that the company’s revenue still managed to surpass expectations, growing by 3% sequentially from the previous quarter’s $114 million.

Despite the substantial loss incurred, Ayr Wellness remains optimistic about its overall performance. David Goubert, the president and CEO of Ayr, highlighted the company’s achievements, including the growth in revenue by 18% year-over-year and a significant expansion of adjusted EBITDA margin. He also emphasized the generation of positive operating cash flow for the third consecutive quarter.

#4: Curaleaf

Curaleaf Holdings, Inc. (OTC: CURLF), a prominent international provider of consumer products in the cannabis industry, recently reported impressive year-over-year growth in net revenue for the first quarter of 2023.

Curaleaf’s net revenue for the first quarter of 2023 reached $336.5 million, reflecting a $40.5 million increase compared to the same period in 2022. The company stated that the primary drivers behind this growth were the continued expansion of retail stores and a dedicated emphasis on research and development. Notably, the company surpassed revenue expectations by nearly $5 million, showcasing its ability to deliver strong financial results.

Despite reporting a net loss attributable to the company of $54.4 million, or a net loss per share of $0.07, the company’s adjusted EBITDA stood at $73.2 million, equivalent to 22% of revenue, indicating a positive trend toward profitability.

Curaleaf also revised its full-year outlook, projecting a robust growth trajectory for 2024, 2025, and 2026. The company said that this expectation is based on the acceleration of cannabis adoption throughout Europe. Furthermore, the company also stated that it’s maintaining a strong cash position, with $116 million on its balance sheet at the end of the quarter. Additionally, it reported that it had generated $31 million in operating cash flow from continuing operations.

Top Psychedelic Companies for Week

#1: Awakn

Awakn Life Sciences Corp. (OTC: AWKNF), in collaboration with the University of Exeter, is embarking on a groundbreaking research project to investigate the potential of ketamine in reducing the gambling problem.

The study is being led by Professor Celia Morgan, who is a Professor of Psychopharmacology at the University of Exeter, and the Head of Ketamine Assisted Psychotherapy for Addiction at Awakn.

The study draws inspiration from Project Kestrel, Awakn’s previous successful research, which explored ketamine’s impact on alcohol misuse. By re-writing maladaptive reward memories linked to substance abuse, ketamine has shown promise in breaking the cycle of addiction. In the context of gambling addiction, the researchers hypothesize that ketamine may weaken the memory trace associated with impulsive gambling behavior, providing individuals with a greater chance of breaking free from the cycle of addiction.

Awakn’s collaboration with the University of Exeter to investigate the potential of ketamine in reducing the rising gambling problem represents a groundbreaking research endeavor. And as the study progresses, its outcomes could potentially revolutionize the treatment landscape for individuals struggling with gambling addictions, leading to a brighter future for those in need of support and intervention.

#2: Seelos Therapeutics

Seelos Therapeutics, Inc. (NASDAQ: SEEL), a clinical-stage biopharmaceutical company focused on developing therapies for central nervous system disorders and rare diseases, recently provided a clinical update and reported its financial results for the first quarter of 2023. The company is working on various therapeutic programs targeting different diseases, including MDD, ALS, Parkinson’s disease, and neurodegenerative disorders like Huntington’s disease.

The CEO of Seelos, Raj Mehra, highlighted the significance of 2023 for the company, stating that it is the most important year in Seelos’ history thus far. He mentioned that the registration-directed study of their intranasal ketamine program, SLS-002, will be completed by the end of June 2023, with top-line data expected to be released in the third quarter of 2023. The company believes that if successful, this therapy could provide help to a significant number of people globally who experience suicidal ideation.

Seelos also provided updates on other programs. The enrollment for the SLS-005 study in ALS has been completed, and the company expects to release top-line Phase II/III data in late 2023. Additionally, Seelos announced the initiation of their first internally created gene therapy program, SLS-009, which focuses on the one-time treatment of neurodegenerative disorders such as Huntington’s disease.

Regarding the financial results for the first quarter of 2023, Seelos reported a net revenue of $808,000, primarily from grant revenue earned through their Expanded Access Program. Research and development expenses decreased compared to the same period in the previous year, mainly due to the completion of enrollment in the SLS-005 study. General and administrative expenses slightly increased. Other expenses resulted in a loss due to the issuance of common stock and warrants in a registered direct offering.

Additionally, Seelos ended the first quarter with $14.1 million in cash and cash equivalents, which represented a decrease compared to the previous quarter.