Key Takeaways; Cannabis Sector
• Canopy Growth successfully concluded BioSteel sale.
• Jushi filed CA$600 million shelf prospectus for strategic flexibility.
• MTL Cannabis reported soaring Q2 revenue after merger.
• 22nd Century Group is streamlining operations by selling its hemp division for $2.25 million.
Key Takeaways; Psychedelic Sector
• Awakn’s recent regulatory and ethical approval for a Phase III clinical trial was highlighted.
• Numinus Wellness reported revenue surge for fiscal year 2023, despite margin challenges.
As we enter the last month of 2023, the cannabis sector remains in the spotlight, showcasing notable developments and market dynamics. In the aftermath of a turbulent October, cannabis stocks made significant strides in November, with the Cannabis Stock Index rebounding from a substantial loss. However, despite a promising start to December, the index still grapples with a 17.5% decline for the year. This year’s narrative has been dominated by the anticipation of potential rescheduling within the cannabis industry. The shift, which is expected to move cannabis from Schedule 1 to Schedule 3, carries significant implications for the industry. However, the timeline and certainty of this adjustment remain elusive.
Below is a weekly roundup on the cannabis and psychedelic sectors.
Top Marijuana Companies for Week
#1: Canopy Growth
Canopy Growth Corporation (CGC: NASDAQ) announced the successful completion of two significant sale transactions involving BioSteel Sports Nutrition Inc. and BioSteel Manufacturing, LLC. The proceedings were carried out under the Companies’ Creditors Arrangement Act (CCAA), resulting in combined gross proceeds of $30.4 million.
The first transaction involved the sale of BioSteel Canada’s assets to the Coachwood Group, as outlined in the asset purchase agreement dated November 9, 2023. Simultaneously, another sale transferred the assets of BioSteel Manufacturing to a third party, in line with a separate asset purchase agreement dated the same day.
The completion of these deals marked a crucial step in Canopy Growth’s restructuring strategy, as the company aims to streamline its operations, focusing more on its core cannabis business and adopting an asset-light operating model. The company stated that they plan to utilize a portion of the proceeds to repay debt, leading to a further reduction in interest expenses.
Judy Hong, Canopy Growth’s Chief Financial Officer, highlighted the significance of these transactions, emphasizing their role in improving the company’s balance sheet. “With the completion of these two sale transactions, we have completed another critical action to focus Canopy Growth’s business on our core cannabis operations and can now realize the proceeds of sale to further improve the Company’s balance sheet,” said Hong.
#2: Jushi Holdings
Jushi Holdings Inc. (OTC: JUSHF), a Florida-based cannabis multistate operator, submitted a preliminary short-form base shelf prospectus in Canada with the goal of raising up to $CA600 million (approximately $442 million). This filing allows Jushi to issue a variety of securities over a 25-month period, including subordinate voting shares, preferred shares, subscription receipts, debt securities, convertible securities, warrants, and units.
The primary purpose of this filing, as stated in the news release, is to maintain financial flexibility. Jushi said that they aim to be well-positioned to respond to significant regulatory improvements and pursue opportunistic acquisitions within the cannabis industry. The filing was made with the securities commissions for each of Canada’s provinces and territories. The terms of any future offerings of securities using this shelf prospectus will be outlined in a prospectus supplement, providing further details and specifications.
This move follows Jushi’s closure of a private offering almost a year ago, which successfully generated proceeds totaling $72 million. The latest filing reflects the company’s strategic approach to secure financial flexibility and capitalize on emerging opportunities in the evolving cannabis market.
#3: MTL Cannabis
MTL Cannabis Corp. (CSE: MTLC) announced impressive financial results for the quarter and half-year ending September 30, following a reverse takeover with Canada House Cannabis Group Inc. in July. Formerly known as Montréal Cannabis Médical Inc., the newly merged Canadian company reported a remarkable 366% increase in revenue, reaching C$23.15 million, compared to C$4.96 million in the same quarter the previous year.
Net revenue also experienced a substantial surge, reaching C$19 million for the quarter, up from C$3.89 million in the corresponding quarter of 2022. Additionally, the company reported a gross profit of C$6.3 million, a significant improvement from C$1.25 million in the same quarter last year.
Positive trends were also observed in operating income, which turned positive at C$843,359, a notable improvement from a loss of C$91,811 in the same period last year. Net income followed suit, with the company reporting C$1.99 million, a reversal from a loss of C$604,314 in the previous year’s quarter.
The positive financial changes were also evident in the company’s cash flow statements. Net cash inflows from operating activities amounted to C$7.3 million, compared to a net outflow of C$1.97 million in the same period last year. However, the company used C$162,255 in investing activities and C$4.64 million in financing activities during the quarter.
MTL Cannabis CEO, Michael Perron, attributed the success to the company’s focus on quality and dedication to providing excellent products and services to recreational customers and medical patients. He stated, “Our focus on quality and dedication to providing the best products and services to our recreational customers and medical patients has been the foundation for our business, and we are seeing that focus being reflected in our financial results.”
#4: 22nd Century Group
Biotech company 22nd Century Group, Inc. (NASDAQ: XXII) initiated the sale of its hemp operations, valued at $2.25 million, in a strategic move to streamline operations and reduce costs. The majority of its GVB Biopharma division is set to be acquired by Specialty Acquisition Corp., a Nevada-based entity with affiliations to current GVB employees. The deal comprises $1 million in cash and a further 12%, $1.25 million promissory note.
The decision to sell is aimed at deleveraging 22nd Century’s balance sheet, and the company stated that they plan to utilize the proceeds from the sale for this purpose. The Buffalo, New York-based company will also retain the right to recover an outstanding insurance payout related to a 2022 fire at a GVB manufacturing facility in Grass Valley, Oregon, currently valued at around $9 million.
The transaction is expected to conclude in December, subject to meeting closing conditions, including financing from the buyer and approval from 22nd Century’s senior lender.
Top Psychedelic Companies for Week
Awakn Life Sciences Corp. (OTC: AWKNF), recent regulatory and ethical approval for a Phase III clinical trial was highlighted by Benzinga, a leading newsfeed. Recently, Awakn received regulatory and ethical approval for a Phase III clinical trial of AWKN-P001, its lead program designed for the treatment of Severe Alcohol Use Disorder (SAUD). The approval was granted by the U.K. Medicines and Healthcare Regulatory Agency (MHRA) and the Health Research Authority in the UK. The Phase III trial will commence in Q1 2024 with the enrollment of 280 patients.
AWKN-P001 is a groundbreaking treatment that combines the NMDA receptor-modulating drug ketamine with psycho-social support, targeting the most severe form of alcohol use disorder. In prior Phase II studies, the treatment demonstrated promising results, achieving an 86% abstinence rate six months post-treatment, compared to 2% pre-trial and 25% in the current standard of care.
The trial, funded by Awakn, the University of Exeter, and a partnership between the National Institute for Health and Care Research (NIHR) and the Medical Research Council (MRC), marks a pivotal step in Awakn’s commercial journey. The company’s CEO, Anthony Tennyson, emphasized that the regulatory and ethical approval reflects Awakn’s commitment to scientific rigor and patient well-being; “Our Phase 3 clinical trial represents a crucial bridge between cutting-edge science and a commercially viable solution for addressing severe alcohol use disorder,” Tennyson said in a press statement.
#2: Numinus Wellness
Numinus Wellness Inc. (OTC: NUMIF) announced a significant surge in revenue for its fiscal year ending August 31, 2023. The company reported a 256.9% increase in revenue, attributing the growth to expanded services in North America, increased clinic appointments, and a practitioner-friendly licensing model.
In the fourth quarter of 2023, Numinus recorded a revenue of $6.1 million, marking a 1.7% increase from the previous quarter and a substantial 46.8% increase from the same quarter the previous year.
However, the positive trends were accompanied by a decline in gross margin to 29.5% in the fourth quarter of 2023, down from 34.5% in the previous quarter. Numinus attributed this decrease to increased investment in full-time practitioners and varying clinic performances. In response, the company implemented cost-saving measures, including the closure of an underperforming clinic, resulting in reduced operating expenditures of $7.9 million in the fourth quarter, down from $9.2 million in the previous quarter.
Despite the challenges, Numinus successfully lowered its monthly cash burn to under $1 million as of October. The company reported a total cash balance of $8.6 million and working capital of $7.4 million. Numinus expressed optimism about the anticipated approval of MDMA-assisted therapy by the FDA, which, if approved, would open additional opportunities for the company to deploy its unique service model using this alternative treatment modality.