Key Takeaways; Cannabis Sector

• MariMed reported financial results for the second quarter ended June 30, 2023.
• Cannabis REIT Innovative Industrial Properties, beat expectations in Q2 with impressive results.
• Hawthorne’s sales decline dragged Scotts Miracle-Gro’s Q3 profits down; making the company report lower than expected earnings.
• Cresco Labs and Columbia Care terminated the hugely anticipated merger.

Key Takeaways; Psychedelic Sector

• Awakn has announced the sale of its clinic’s businesses in Norway.

Below is a weekly roundup on the cannabis and psychedelic sectors. In this ever-evolving landscape, we explore the major developments and groundbreaking initiatives happening among companies operating in these industries; from advancements in medical research, therapeutic applications to shifts in legal frameworks and current market trends.

Top Marijuana Companies for Week

#1: MariMed

Massachusetts-based multistate cannabis operator, MariMed Inc. (OTC: MRMD), recently reported its earnings for the second quarter of 2023, revealing both positive and challenging aspects of its performance.

MariMed’s second-quarter financial report showcased an upward trajectory in revenue, indicating the company’s ability to generate substantial sales within the cannabis industry. The company reported total revenues of $36.5 million for the three months ending June 30, which marked a significant increase from the $33 million recorded during the same period in the previous year. This growth highlighted MariMed’s capacity to attract consumers and capitalize on market demand, especially in the states where it operates.

Despite the impressive increase in revenue, MariMed’s financial statement revealed a surprising loss of $900,000 for the second quarter. This outcome was unexpected, particularly considering that the company was one of just a few profitable multistate operators in 2022. The shift from profitability to loss raised concerns within the industry and among investors, prompting a closer examination of the factors contributing to this setback.

For the first half of 2023, MariMed reported a total revenue of $70.9 million, marking a growth from the $64.3 million reported during the same period in 2022. While revenue saw an upward trajectory, the company reported a loss of $1.6 million for the first half of the year, which is a significant drop compared to the $6.1 million profit posted in the first half of 2022.

Despite the recent financial challenges, MariMed’s CEO, Jon Levine, remains optimistic about the company’s prospects; “Our balance sheet remains one of the strongest in the industry, and we were particularly pleased with the exponential growth of our Maryland operations that executed flawlessly to support the increased demand of adult-use sales,” Levine said in a press release.

In its updated financial guidance. anticipates breaking the $150 million revenue mark by the end of the year while maintaining a gross margin of approximately 48%, in line with the previous year’s performance. Additionally, MariMed expects to invest $30 million in capital expenditure.

#2: Innovative Industrial Properties

In a market that’s rapidly evolving, Innovative Industrial Properties, Inc. (NYSE: IIPR), a pioneering cannabis-focused real estate investment trust (REIT), once again showcased its resilience and growth potential. The company recently reported its financial results for the second quarter ending June 30, 2023, revealing a remarkable surge in revenue that underscored its steadfast commitment to innovation and adaptability within the dynamic cannabis industry.

IIP reported total revenues of approximately $76.5 million for the second quarter, showcasing an impressive 8% increase compared to the same period the previous year. Additionally, the company’s net income for the quarter stood at approximately $40.9 million, translating to a robust $1.44 per diluted share.

This financial achievement highlights the successful execution of IIP’s business model, which focuses on the acquisition and leasing of properties tailored to the needs of cannabis operators. By providing state-of-the-art facilities and resources to these operators, IIP ensures a reliable stream of rental income and sustained profitability.

While Innovative Industrial Properties experienced exceptional growth, it wasn’t without its challenges. The company disclosed that rent collections for its clients stood at an impressive 97%. However, a notable exception was a default from Parallel Cannabis, leading to approximately $2.1 million in uncollected rent. Such instances highlight the complexities and risks inherent in the cannabis industry.

IIP’s ability to navigate challenges, capitalize on growth opportunities, and adapt to evolving market dynamics is a testament to its enduring success. As the cannabis industry continues to evolve, Innovative Industrial Properties is poised to maintain its trajectory of growth and value creation.

#3: Scotts Miracle-Gro

Lawn and garden products manufacturer Scotts Miracle-Gro Co. (NYSE: SMG) reported disappointing third-quarter earnings for the period ending on July 1, 2023. The company faced challenges primarily due to a significant decline in its hydroponic business segment, known as Hawthorne.

Scotts, a major player in the indoor and hydroponic growing market, disclosed a revenue of $1.12 billion, reflecting a 5.9% decrease compared to the previous year. This decline fell short of the expectations set by Yahoo analysts by $50 million.

The drop in overall revenue was heavily attributed to a steep 40% decrease in sales from the Hawthorne division. Despite this setback, Scotts experienced a 1% increase in U.S. consumer net sales compared to the previous year. The company also reported an 8% increase in consumer point-of-sale dollars during the third quarter, with a growth rate exceeding 5% year-to-date.

As for the future outlook, the company stated that it expects its total net sales to decline by approximately 10-11% for the year. According to the company, this projection is primarily based on a 2-4% decline in the U.S. consumer segment and a more significant decrease of 30-35% in the Hawthorne segment.

In response to the disappointing earnings report, Scotts Miracle-Gro’s shares experienced a nearly 20% decline on Wednesday following the announcement. The company said it’s focused on addressing the challenges and uncertainties it faces in order to regain financial stability and sustainable growth.

#4: Cresco Labs

Cresco Labs Inc. (OTC: CRLBF) and Columbia Care Inc. (OTC: CCHWF) announced that they had mutually agreed to cancel their planned $2 billion merger. The merger, which had originally been seen as a significant move in the U.S. cannabis industry, faced challenges due to regulatory hurdles and shifting industry dynamics.

The companies had aimed to create a powerhouse cannabis brand comparable to the top dominant companies in the USA. However, the evolving regulatory hurdles and shifts in the cannabis sector led both companies to reconsider their positions.

The cancellation comes as both companies faced setbacks and declining share prices due to the deal’s uncertainty and the overall decline in cannabis stocks. Since the announcement that the merger was facing numerous challenges, Cresco Labs’ stock plummeted from $6.53 per share to $1.57, while Columbia Care’s shares dropped from $3.12 to 42 cents.

Columbia Care has been actively implementing a restructuring plan, including the closure of a facility in downtown Los Angeles and a reduction in the workforce. The company also raised funds through the sale of its Los Angeles facility and managed its debt to reduce interest expenses and extend note maturity.

Cresco Labs, on the other hand, said it’s now focusing on its “Year of the Core” strategy, which involves optimizing low-margin operations and expanding in preparation for growth in emerging cannabis markets.

Top Psychedelic Company for Week

#1: Awakn

Awakn Life Sciences Corp. (OTC: AWKNF) announced the completion of the sale of its clinics businesses in Norway, Awakn Clinics Oslo and Awakn Clinics Trondheim. According to the company, the sale is part of Awakn’s strategic decision to exit the healthcare services sector and concentrate exclusively on biotechnology research and development. The company’s focus is on developing therapeutics to treat addiction, with a current emphasis on Alcohol Use Disorder (AUD).

As part of the clinic sale, Awakn will receive compensation from the new owners for the acquisition of both clinics. Additionally, Awakn has forged an agreement with the new proprietors, entailing the licensing of select elements of the company’s healthcare services intellectual property (IP) and a license for Awakn Kare in Norway. This arrangement will also grant Awakn a share of ongoing revenue generated by the clinics.

Awakn’s CEO, Anthony Tennyson, highlighted the significance of this development, stating that the sale empowers Awakn to channel its resources and efforts entirely into its R&D projects, which are progressing rapidly. Tennyson also praised the expertise of Dr. Lowan Stewart and Dr. Ingrid Castberg, the pioneers behind the Awakn clinics, expressing confidence in their ability to ensure the clinics’ continued success.