NEW YORK, May 10, 2019 /PRNewswire/ -- The emergence of the cannabis industry has finally caught the attention of Wall Street as a handful of analysts from reputable firms such as RBC Capital Markets, Cowen, Piper Jaffray, and Bank of America Merrill Lynch have all initiated their coverage on the industry. Notably, Cowen analysts Vivian Azer, Brian Nicholas Velez, and Gerald Pasacarelli, see strong upside for the cannabis industry. In a report, the Cowen analysts suggest that U.S. cannabis sales are expected to reach approximately USD 75 Billion by 2030. The analysts said that numerous factors, such as continued cannabis trial and use, lower levels of binge drinking, and cannabis being considered as a solution to opioids, are expected to bolster the market. On the other hand, RBC Capital Markets analyst Nik Modi believes that the cannabis industry is being propelled by the increasing recreational usage, particularly within the concentrates and edibles segments. Furthermore, Modi noted that investments from other private and public sectors are also expected to drive the cannabis industry growth. On the other hand, Bank of America Merrill Lynch analyst Chris Carey predicts that Canada reaching oversupply by 2021 and ongoing the U.S. legalization efforts are the major events expected to shift the market. No matter the reason, the collective insight from all three analysts highlights that the industry is positioned for attractive growth. According to data compiled by Zion Market Research, the global marijuana market was valued at approximately USD 16.71 Billion in 2017. By 2024, the market is expected to generate revenue of USD 62.96 Billion while growing at a CAGR of 21% from 2018 to 2024. Canopy Rivers Inc. (OTC: CNPOF) (TSX-V: RIV), Canopy Growth Corporation (NYSE: CGC) (TSX: WEED), GW Pharmaceuticals plc (NASDAQ: GWPH), Tilray, Inc. (NASDAQ: TLRY), Innovative Industrial Properties, Inc. (NYSE: IIPR)
The medical cannabis market currently accounts for majority of the global market share. However, the recreational sector is expected to overshadow the medical sector as the U.S. and Canadian markets continue to mature. Cowen analysts noted that binge drinking has fallen within recent years in U.S. states that have legalized recreational cannabis. In 2016, states that legalized adult-use cannabis witnessed binge drinking intensity rates fall by 9%, below the national average, and 11% below non-cannabis states. However, states like California and Nevada had recorded higher binge drinking rates and lower cannabis consumption, even though Cowen expects a shift between the two categories. As a result, companies within the beverage industry have begun to take interest within the cannabis marketplace. These major beverage corporations have moved to partner with cannabis companies in an effort to manufacture and commercialize cannabis-infused beverages. Moreover, the tobacco industry has also taken an interest in cannabis because of the declining tobacco use rates. According to the Centers for Disease Control and Prevention, cigarette smoking among U.S. adults declined from 20.9% in 2005 to 15.5% in 2016. Additionally, according to data by the National Health Interview Survey, the largest increase in quitting among adults ages 25 to 44 years old was recorded during that time period. The U.S. alcohol and tobacco industry are amongst the biggest marketplaces, as in 2017, beer sales equaled USD 111.08 Billion, while cigarette sales ran up to USD 80.38 Billion, according to Marijuana Business Daily. The cannabis industry delivered revenues of approximately USD 6.6 Billion, but as U.S. marketplace begins to take off, the industry is expected to rival other large sectors such as the firearms and ammunition industry. Nevertheless, the future of the cannabis industry is still heavily dependent on the outcome of ongoing legalization efforts. "We believe further US decriminalization of cannabis including for recreational use is very likely over time," RBC Capital Markets said. "It ultimately starts with US voters who across demographics are supportive of cannabis legalization."
Canopy Rivers Inc. (OTC: CNPOF) (TSX-V: RIV) is also listed on the TSX Venture Exchange under the ticker (TSX-V: RIV). Yesterday, the Company announced breaking news that, "its portfolio company PharmHouse Inc. ("PharmHouse") has entered into a second offtake agreement (the "Agreement") with Canopy Growth Corporation ("Canopy Growth") (TSX: WEED,NYSE: CGC) for the purchase of cannabis from its 1.3 million square foot greenhouse facility upon licensing. The Agreement commits an additional 20% of PharmHouse's flowering space to Canopy Growth for the next three years, in addition to the 10% that was originally committed in May 2018. The Agreement provides for the delivery to Canopy Growth of a minimum of 25,000 kg of cannabis per year and a maximum of 45,000 kg of cannabis per year.
'PharmHouse continues to show tremendous progress at the facility, and the joint venture is quickly developing as a key pillar for value creation and synergy within the Canopy Rivers portfolio ecosystem,' said Olivier Dufourmantelle, Chief Operating Officer of Canopy Rivers. 'Thanks to the collaborative contributions of our joint venture partners, the ongoing support and guidance of Canopy Rivers, and the strategic insight of Canopy Growth throughout the licensing process, we are excited to announce an incremental supply partnership that mutually benefits all three parties.'
This new supply arrangement provides PharmHouse with additional revenue visibility and financial de-risking for a significant portion of the expected production from the flagship facility. Canopy Rivers holds a 49% equity interest in the PharmHouse joint venture and has played an active role in sourcing and negotiating production and supply agreements, which now cover approximately 50% of expected annual output. The incremental 50% of output remains unencumbered for the development of PharmHouse's own suite of brands and products.
'This offtake agreement represents a significant step forward for PharmHouse. By effectively committing and selling 50% of our near-term cannabis production, we favorably position PharmHouse for the development of a proprietary suite of products and brands and/or the pursuit of incremental contract manufacturing agreements,' said Tony Abbas, General Manager of PharmHouse. 'The fact that we are executing yet another agreement with an industry titan like Canopy Growth sends a strong signal about the quality of our operations and the confidence in our team's ability to deliver.'
The 1.3 million square foot facility in Leamington represents the first stage of a planned global strategic relationship between Canopy Rivers and its PharmHouse joint venture partner, a company formed by the leading principals and operators of a North American agriculture conglomerate. The parties seek to leverage their relationship networks and respective strengths in cannabis, global commercial agriculture, marketing, and distribution to pursue regulated cannabis opportunities together on a global scale.
About PharmHouse: Formed by Canopy Rivers and a company formed by the leading principals and operators of a North American agriculture conglomerate, the PharmHouse joint venture operates out of an ultramodern 1.3 million greenhouse facility in Leamington, Ontario, constructed in 2017 using the latest in commercial agriculture technology and featuring state-of-the-art automation systems. Canopy Rivers, along with its PharmHouse joint venture partners, are actively upgrading and supplementing the facility in preparation for licensing. In January 2019, PharmHouse entered into a syndicated credit facility providing up to C$80 million of secured debt financing. PharmHouse has secured multiple offtake agreements for an aggregate 50% of the production capacity upon licensing.
About Canopy Rivers: Canopy Rivers is a unique investment and operating platform structured to pursue investment opportunities in the emerging global cannabis sector. Canopy Rivers works collaboratively with Canopy Growth Corporation (TSX: WEED,NYSE: CGC) to identify strategic counterparties seeking financial and/or operating support. Canopy Rivers has developed an investment ecosystem of complementary cannabis operating companies that represent various segments of the value chain across the emerging cannabis sector. As the portfolio continues to develop, constituents will be provided with opportunities to work with Canopy Growth and collaborate among themselves, which Canopy Rivers believes will maximize value for its shareholders and foster an environment of innovation, synergy and value creation for the entire ecosystem."
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Canopy Growth Corporation (NYSE: CGC) (TSX: WEED) is a world-leading diversified cannabis and hemp company, offering distinct brands and curated cannabis varieties in dried, oil and Softgel capsule forms. Canopy Growth Corporation recently announced that has signed an offtake agreement with PharmHouse Inc., a 49% owned joint venture of Canopy Rivers Inc. Under the terms of the agreement, PharmHouse has agreed to allocate high quality cannabis flower from an additional 20% of the flowering space available at its Leamington greenhouse facility over the next three years. Boasting 1.3 million sq. ft. of greenhouse grow space, and leveraging the resources of Canopy Growth, Canopy Rivers and its joint venture partner have worked diligently since October 2018 to prepare the facility for licensing. PharmHouse will leverage Canopy Growth's genetics – selected and supplied by the Company – and flower will be returned to the Company to be sold under Canopy Growth's diverse brands and banners. Under the terms of the new offtake agreement, PharmHouse is committed to producing GMP-certified, high quality cannabis flower within 18 months of its cultivation license and the flower must comply with the Company's high standards for cannabis quality. GMP, or Good Manufacturing Practices, certification is the internationally recognized system to ensure all produced goods meet the highest consumer health and safety standards, allowing the Company to export the flower to its international divisions. Including this new agreement, 30% of PharmHouse's total flowering space has been committed to Canopy Growth.
GW Pharmaceuticals plc (NASDAQ: GWPH), founded in 1998, is a biopharmaceutical company focused on discovering, developing and commercializing novel therapeutics from its proprietary cannabinoid product platform in a broad range of disease areas. GW Pharmaceuticals plc and its U.S. subsidiary Greenwich Biosciences Inc. recently announced positive top-line results of a randomized, double-blind, placebo-controlled Phase 3 clinical trial of EPIDIOLEX® (cannabidiol or CBD) CV in the treatment of seizures associated with Tuberous Sclerosis Complex (TSC), a rare and severe form of childhood-onset epilepsy. In this trial, EPIDIOLEX met its primary endpoint, which was the reduction in seizure frequency compared to baseline of the Epidiolex 25 mg/kg/day dose group vs placebo (p=0.0009). Results for both the 25 and 50 mg/kg/day dose groups were similar, with seizure reductions of 48.6% and 47.5% from baseline respectively, vs 26.5% for placebo (50 mg/kg/day vs placebo, p=0.0018). All key secondary endpoints were supportive of the effects on the primary endpoint. The safety profile observed is consistent with findings from previous studies, with no new safety risks identified. "The positive results from this trial represent the fifth positive Phase 3 trial for EPIDIOLEX and follows the recent U.S. launch of EPIDIOLEX for the treatment of seizures associated with Lennox-Gastaut syndrome and Dravet syndrome. These new data show EPIDIOLEX reduced TSC-associated seizures, which include both focal and generalized seizures types, expanding the body of reliable science supporting the use of EPIDIOLEX," stated Justin Gover, GW's Chief Executive Officer. "With these data, we look forward to submitting an sNDA to the FDA in the fourth quarter with the goal of expanding the product label in 2020 to help the lives of patients suffering with TSC."
Tilray, Inc. (NASDAQ: TLRY) is a global pioneer in the research, cultivation, production and distribution of cannabis and cannabinoids currently serving tens of thousands of patients and consumers in twelve countries spanning five continents. Recently, Natura Naturals Inc., a wholly-owned subsidiary of Tilray, Inc. and High Park Holdings Ltd., has received a standard processing license under the Cannabis Act. The Natura greenhouse facility, which previously held a standard cultivation license, will now be able to manufacture a wide range of cannabis form factors from cannabis starting material, including oil, pre-rolls, and novel formats such as topicals and edibles. Natura, which will operate under High Park Gardens Inc., was acquired by Tilray in February 2019 to serve the adult-use and medical cannabis market in Canada alongside Tilray's existing operations. The site is a 662,000 sq. ft. greenhouse facility with 155,000 sq. ft. licensed for cultivation. The addition of a standard processing license means that High Park Gardens will be able process cannabis raw material cultivated on site – as well as raw material sourced from other cannabis licensees – into a variety of value-add product formats. This development provides Tilray's facilities additional flexibility in the manufacture of products for the Canadian cannabis market, and in the development of novel products in preparation for legalization of additional cannabis products, including tinctures, concentrates and edibles, in Canada later this year. "The acquisition of High Park Gardens in February allowed us to significantly increase our production footprint," says Greg Christopher, EVP Operations, Tilray. "With this additional licensing, we're pleased to have expanded Tilray and High Park's capacity to develop and manufacture high-quality branded products for the Canadian market."
Innovative Industrial Properties, Inc. (NYSE: IIPR) is a self-advised Maryland corporation focused on the acquisition, ownership and management of specialized industrial properties leased to experienced, state-licensed operators for their regulated medical-use cannabis facilities. Innovative Industrial Properties, Inc. recently announced that it had closed on the acquisition of a property in Pittsburgh, Pennsylvania, which comprises approximately 51,000 sq. ft. of industrial space. The purchase price for the Pennsylvania property was approximately USD 6.3 Million (excluding transaction costs). Concurrent with the closing of the purchase, IIP entered into a long-term, triple-net lease agreement with Maitri Genetics, LLC (Maitri), which intends to operate the property as a licensed medical-use cannabis cultivation and processing facility upon completion of redevelopment. Maitri is expected to complete tenant improvements for the building, for which IIP has agreed to provide reimbursement of up to USD 10 Million. Assuming full reimbursement for the tenant improvements, IIP's total investment in the property will be approximately USD 16.3 Million. "We are thrilled to partner with Maitri," said Paul Smithers, President and Chief Executive Officer of IIP. "The Maitri team has quickly distinguished itself in Pennsylvania as an industry leader with their dedication to compassionate care for their patients and commitment to the local communities where they operate. We look forward to supporting the Maitri team in their redevelopment of this property into a state-of-the-art medical cannabis cultivation and processing facility, and helping them in the expansion of their platform to address serious patient needs."
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