Key Takeaways; Cannabis Sector
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Tilray reported improved financial performance in Q1 2024.
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Organigram plans CA$500 million fundraising through securities offering.
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Aurora Cannabis secured CA$34 million in stock deal to address debt and potentially explore expansion through acquisitions.
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Curaleaf announced a CA$16 million offering of subordinate voting shares at C$6 per share.
Key Takeaways; Psychedelic Sector
The third quarter just ended, and it appears that most cannabis companies had a good quarter. The cannabis sector saw a boost starting on August 30th when news came out that the Department of Health and Human Services had made recommendations to DEA, urging them to move cannabis from Schedule 1 to Schedule 3. This news caused many companies in the sector to rally throughout August and September. However, the rally slowed down in the first week of October, and most companies have seen a drop from their peak around September 11th. This drop seems to be because many companies in the sector announced stock offerings to improve their weak finances. Nonetheless, many investors believe that cannabis companies are undervalued and could perform better if rescheduling happens faster and the 280E taxes are reduced.
In this article, we’ll provide a weekly roundup on the cannabis and psychedelic sectors, covering major developments and initiatives in these industries, from medical research to legal changes and current market trends.
Top Marijuana Companies for Week
#1: Tilray
Canadian cannabis producer Tilray Brands, Inc. (NASDAQ: TLRY) showed significant improvement in its financial performance for the first quarter of fiscal year 2024, narrowing its loss to $56 million (equivalent to $77 million Canadian dollars). This positive development came on the back of record-breaking sales, with the company reporting $177 million in revenue, representing a 15% increase compared to the same period in the previous year.
According to the company, these results were primarily driven by the strong performance of its cannabis business, which now commands an industry-leading 13.4% market share in the recreational marijuana sector.
Tilray’s revenue improved across various segments in the first quarter. The cannabis business saw a revenue increase of $70.3 million, a 20% growth compared to the same period last year. Other segments, including distribution and beverage alcohol, also showed growth.
Additionally, Tilray’s international cannabis revenue experienced a substantial 37% increase over the previous year, reaching $14.3 million for the three months ending Aug. 31. As of the end of August, Tilray held $177.5 million in cash and cash equivalents.
Adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) for the first quarter were $11.4 million, down from $13.5 million in the prior year’s quarter. This decrease was due to revenue generated from advisory services related to the HEXO acquisition.
In terms of corporate developments, Tilray closed several key transactions during the quarter, including the acquisition of Hexo Corp., a settlement package with MediPharm Labs Corp. (OTC: MEDIF) related to the Hexo dispute, and the completion of the Truss Beverage Co. deal. Furthermore, the company successfully finalized the acquisition of eight beer and beverage brands from Anheuser-Busch for $85 million.
Looking ahead, Tilray anticipates an adjusted EBITDA between $68 million to $78 million for the fiscal year ending May 31, 2024, and it remains optimistic about achieving positive adjusted free cash flow within the year. These targets will be significant milestones in the cannabis industry, especially considering the current challenges of tight capital markets.
#2: Organigram
In a move aimed at bolstering its financial resources, Canadian marijuana producer Organigram Holdings Inc. (NASDAQ: OGI) filed a preliminary short-form base shelf prospectus with Canadian securities regulators, intending to raise up to CA$500 million (approximately $370 million USD) through a securities offering that will span a 25-month period. Additionally, the company submitted a registration statement to the U.S. Securities and Exchange Commission (SEC).
The company views this prospectus as a strategic step to provide financial flexibility and support its overarching objectives. The finalized base shelf prospectus will enable Organigram to issue various securities during the 25-month period, including common shares, debt securities, warrants, and subscription receipts. Specific terms for each offering will be detailed in a prospectus supplement that will be issued by the company.
It’s noteworthy that Organigram had previously reported having CA$75 million in cash as of July in their third quarter fiscal 2023 financial results, indicating a substantial financial position before this fundraising initiative.
This announcement has sparked interest among investors and industry observers, who speculate about the company’s intentions. Some believe that Organigram is gearing up for potential mergers and acquisitions (M&A) activities. In a previous earnings release, the company mentioned significant progress in research and development, both in terms of scientific advancements and revenue-generating capabilities. These efforts have led to the creation of valuable intellectual property assets that could play a crucial role in the company’s M&A strategy.
However, investors should be aware that such fundraising activities can lead to share dilution, potentially impacting the voting power and economic interests of existing shareholders. Furthermore, an increased supply of common shares, if exercised by option holders, could potentially affect the company’s stock market price.
#2: Aurora Cannabis
Aurora Cannabis Inc. (NASDAQ: ACB), a Canadian cannabis company, recently announced a significant financing agreement with investment bank Canaccord Genuity Group Inc. (CF.TO). This agreement aimed to raise funds for debt reduction and potential strategic initiatives, including acquisitions.
Under the terms of the agreement, Aurora sold 46,250,000 of its common shares to Canaccord Genuity at C$0.73 each, generating approximately C$33.8 million in gross proceeds. Additionally, Canaccord Genuity holds an option to purchase up to an additional 6,937,500 shares, potentially increasing the total proceeds to an estimated C$38.8 million.
According to Aurora, the primary objective behind this capital injection is to alleviate a significant portion of Aurora’s debt burden, which currently stands at around US$25 million. The company stated that the funds raised from the stock deal will be used to retire the outstanding convertible senior notes, providing the company with greater financial stability.
Furthermore, Aurora stated that they remain open to utilizing any remaining funds from the deal for strategic initiatives, with a strong focus on potential acquisitions within the cannabis industry. This approach aligns with the company’s vision of expanding its presence and market share in the ever-evolving cannabis sector.
The deal closed on October 3, 2023. This development marks a significant step for Aurora Cannabis as it seeks to strengthen its financial position and explore growth opportunities in the cannabis market.
#3: Curaleaf
Curaleaf Holdings, Inc. (OTC: CURLF), a prominent player in the U.S. cannabis industry, made a significant announcement regarding its financial operations. The company, which is well-known for its extensive range of consumer cannabis products, announced the pricing details for its underwritten offering of subordinate voting shares, which will amount to C$16 million in total gross proceeds.
The offering consists of subordinate voting shares, which have been priced at C$6.00 per Offered Security. Canaccord Genuity Group Inc. (CF.TO), which will act as the sole underwriter and bookrunner for the operation, agreed to purchase 2,700,000 Offered Securities from Curaleaf, generating total gross proceeds of C$16,200,000 for the company.
Curaleaf stated that this operation would involve the sale of Offered Securities in several Canadian provinces, excluding Québec. Additionally, the company said that it will also be offered to “qualified institutional buyers” in the United States through a private placement method, utilizing exemptions from the registration requirements of the U.S. Securities Act of 1933, and adhering to applicable state securities laws.
The closing date for the Offering is set for October 3, 2023, subject to meeting market conditions and customary requirements, including those of the Canadian Securities Exchange.
Curaleaf said that they intend to use the proceeds from this offering to fulfill conditions necessary for a potential listing of its subordinate voting shares on the Toronto Stock Exchange (TSX) and to support the working capital requirements of its international business operated by Curaleaf Holdings International. Additionally, the company said that funds will also be allocated for general corporate purposes.
Top Psychedelic Companies for Week
#1: Awakn
Awakn Life Sciences Corp. (OTC: AWKNF) completed a groundbreaking feasibility study exploring a novel method for delivering MDMA using Catalent Pharma Solutions’ orally dissolving tablet (ODT) technology. The study, which commenced in February 2023 at Catalent’s Swindon, UK facility, sought to determine if MDMA could remain stable and be optimally absorbed in the mouth before reaching the stomach when delivered using Zydis ODT technology.
The results of the research were highly positive, demonstrating that MDMA absorption in the mouth is viable using this innovative approach.
Anthony Tennyson, the CEO of Awakn, expressed optimism about the results and the potential benefits this innovative delivery method could bring to patients. “We look forward to the results, and my hope is the testing will demonstrate that MDMA on Catalent’s Zydis ODT technology will improve the performance of MDMA and provide significant benefits to patients in the clinic compared to MDMA in oral capsules,” Anthony Tennyson said in a statement Wednesday.
David Nutt, Chief Research Officer at Awakn, also conveyed his satisfaction with the study’s progress, emphasizing the positive data regarding the stability and suitability of Catalent’s Zydis technology for their novel MDMA formulation. He also highlighted the importance of this research in their product development strategy, “This is an important part of our product development strategy, which aims to optimize the delivery of MDMA,” David Nutt said.
Moving forward, Awakn plans to conduct further testing, comparing the performance of their proprietary MDMA formulation using Zydis ODT technology against traditional oral capsule. This development holds the potential to improve the overall effectiveness of MDMA and revolutionize the way it is administered to patients in clinical settings.
#2: Numinus Wellness
Numinus Wellness Inc. (OTC: NUMIF), a Vancouver-based psychedelics company, announced its intention to raise CA$10 million through the sale of common shares as part of an at-the-market equity program. The exact number of shares to be sold will be determined by Stifel Nicolaus Canada Inc., Numinus’ financier, which has an “equity distribution agreement” governing the program.
The company outlined in the press release, that the proceeds generated from the sale of shares will serve various purposes, including general corporate use, funding ongoing operations, addressing working capital requirements, repaying outstanding debts, supporting discretionary capital programs, and potentially financing future acquisitions.
Numinus has faced financial challenges based on its recent financial reports. In the quarter ending on May 31, the company reported operating expenditures of $9.2 million, a net loss of $7.2 million, and had $13 million in cash remaining. Despite these financial hurdles, the company anticipates a significant breakthrough if its MDMA-assisted therapy receives approval from the U.S. Food and Drug Administration in the coming year. According to Numinus, this approval could potentially pave the way for substantial growth and advancement for the company.
