The cannabis sector continues its steady shift toward big business and big money, with much of growth based on acquisitions, agreements and consistent research.
TransCanna Holdings Inc. (CNSX:TCAN.CN) (FRA:TH8) (Profile) is focused on creating a large operation with various licenses and recognized brands, with several key acquisitions, being part of that strategy. Medmen Enterprises Inc. (CNSX:MMEN.CN) (OTC:MMNFF) is in the process of acquiring PharmaCann, which recently received an extension to complete the development of its cultivation facility in Ohio. Cronos Group Inc. (NASDAQ:CRON) (TSX:CRON.TO) just entered into a multiyear supply agreement that will help the company provide high-quality products to consumers in anticipation of the derivative market launching in Canada this fall. Tilray Inc. (NASDAQ:TLRY) recently completed its acquisition of Manitoba Harvest, the largest hemp food company. GW Pharmaceuticals Plc (NASDAQ:GWPH) continues its march forward as a leader in cannabinoid prescription medicines sector with its recent announcement of positive, top-line results of a Phase 3 clinical trial of Epidiolex® in the treatment of seizures associated with a rare and severe form of childhood-onset epilepsy.
— Cannabis companies are engaging in multimillion-dollar acquisitions in growing numbers.
— This strategy supports a consolidation of the industry as it moves from scattered creativity to efficient large businesses.
— The trend is built in part on intangible assets, including brands, licenses and research.
To view an infographic of this editorial, click here.
A Very Different Business
The image of the cannabis industry varies significantly depending upon an individual’s point of view. To supporters, the market is a transformative sector aimed at bringing the world together. Detractors call the industry one more vice threatening public morals. For many standing in the middle ground, the sector is a space where hippies and stoners can thrive but not necessarily one that encourages the buzz and dynamism of mainstream business.
In reality, the cannabis sector fits none of these images. The industry is emerging from its early nascent steps into legality to become a significant business sector much like any other, with all the elements of modern capitalism. This growth appears to be reflected in the sector’s recent burst of mergers and acquisitions.
Certainly one of the most eye-catching aspect of mergers and acquisitions in the cannabis sector is the significant amount money involved. Take just two recent examples from a single company: TransCanna Holdings Inc. (CNSX:TCAN.CN) (FRA:TH8).
In the past few months, the Vancouver-based cannabis company has made announcements on two major deals. First came the acquisition of a 196,000-square-foot vertically integrated cannabis facility for a total purchase price of $15 million. Then came a letter of intent relating to Californian company Lyfted Farms outlining TransCanna’s plans to acquire Lyfted’s business and assets for $5.5 million.
By some standards, these might not seem like significant deals. But when a company is investing $20 million on expansion in the space of a couple of months, stability seems evident. That TransCanna can make these deals is a show not only of the strength of the company but also the strength of the industry.
The financial growth of the legal cannabis industry has been a positive move for everyone from company leaders to their lowest-paid employees. The legalized trade is pulling money out of the black-market economy and allowing those at the top to earn big bucks while also providing employees with a decent wage. Far from weakening the power of legal providers, paying employees properly is leaving them with enough money to go around buying up competitors, as TransCanna is doing.
Success has also brought funds from outside. From private individuals to big alcohol and tobacco companies, investors are pouring money into pot, allowing businesses to expand while keeping their employees happy. There are living wages at the bottom and big money at the top.
Tidying Up the Market
The progression of the legal cannabis industry started with a scattered approach. TransCanna is one of many companies that started in the market with a relatively small presence. Some began as entrepreneurs seeing a new industry within which to operate. Others were experienced cannabis cultivators moving from the illegal to the legal market. Still others were pharmaceutical companies dipping their toes into a new medicine and, from there, into the recreational industry.
As a result, the cannabis industry was initially made up of diverse and disconnected businesses. Now, however, the sector is moving toward a space of consolidation.
This doesn’t mean that the variety created in that early surge is being lost. When larger companies buy up smaller ones, the aim is often to continue supporting and growing the individual brands and styles the smaller companies have created. For example, TransCanna has announced the acquisition of GoodFellas, allowing TransCanna to take control of the Daily Cannabis Goods brand. TransCanna CEO Jim Pakulis has talked not in terms of absorbing the Daily brand into TransCanna’s existing identity but in terms of maintaining Daily and expanding its sales.
The consolidation of multiple brands and businesses into a smaller number reflects a dialectic process that’s common in new business areas. First comes a burst of creativity. With few precedents and no big players dominating the market, entrepreneurs and creatives have free rein. Some of their experiments fail, but the ones that succeed get consumers interested and fill the market with ideas.
While this creates plenty of exciting idea and products, it’s also inefficient. In the phase that follows, bigger companies step in or emerge from among the smaller ones. Consolidation creates efficiency, providing more reliable products for consumers and better value for companies.
The Power of the Immaterial
In the illegal market, product was the main focus for cannabis sellers. In the legal market, the focus is different. When a company relies on the full complement of marketing, intangible assets become important. That’s why GoodFellas is valuable to TransCanna — not just for its cannabis but for the Daily brand attached to it.
And while intangible assets are normally talked about in terms of brand and IP, there’s another sort of asset that gets much less publicity and that the cannabis industry is bringing to investors’ attention: legal licenses.
Licenses of various sorts are important for a wide range of industries, from food production to mining. But they have a particular prominence in the cannabis industry because tight regulation has created a scarcity of licenses. When TransCanna subsidiary TCM Distribution Inc. gained cannabis manufacturing and distribution permits from the City of Adelanto, California, it was an important step in the company’s growth within the state. And when a deal like TransCanna’s acquisition of Lyfted is announced, the target’s cannabis licenses are often mentioned. These licenses are a crucial asset and one that investors are concerned about. Without the licenses, the business can’t function.
The prominence of licenses is a new feature of investment for those going into cannabis. But it could be a feature that helps investors recognize these assets in other companies. Cannabis companies are increasingly about immaterial assets, and immaterial assets are increasingly about licenses as well as IP.
Keeping Profiles High
In such an atmosphere, cannabis companies are working hard on keeping their profiles high while building up their portfolios of products.
Last year Medmen Enterprises Inc. (CNSX:MMEN.CN) (OTC:MMNFF) soared 60% in one week when the company announced the deal to buy PharmaCann. PharmaCann is working to complete its $20-million cultivation center, which must be operational before the acquisition can be completed to comply with Ohio law, which requires a licensee to have operating certification before transferring a license to another owner. The deal will double the number of states where Los Angeles-based MedMen has licenses to operate – expanding the firm’s reach to 12 states with 66 retails stores and 13 cultivation facilities.
The agreement between Cronos Group Inc. (NASDAQ:CRON) (TSX:CRON.TO) and MediPharm Labs Corp. will supply Cronos Group with approximately $30 million of high-quality, private-label cannabis concentrate over 18 months and, subject to certain renewal and purchase options, potentially up to $60 million concentrate over 24 months. In addition, Cronos Group and MediPharm Labs have entered into a multiyear tolling agreement, where Cronos Group will supply bulk cannabis to MediPharm Labs’ state-of-the-art extraction facility in Ontario.
With the completion of the acquisition, Manitoba Harvest will operate as a wholly owned subsidiary of Tilray Inc. (NASDAQ:TLRY), leveraging the expertise of Tilray’s global cannabis industry expertise. “Tilray’s acquisition of Manitoba Harvest is a milestone for the cannabis industry,” said Tilray president and CEO Brendan Kennedy. “It builds on the strategic partnerships we have formed with consumer brand industry leaders and demonstrates our track record of disrupting the global pharmaceutical, alcohol, CPG, and functional food and beverage categories. We’re excited to work with Manitoba Harvest to develop and distribute a diverse portfolio of branded hemp-derived CBD food and wellness products in the U.S. and Canada.”
The newest test results from GW Pharmaceuticals Plc (NASDAQ:GWPH), the world leader in the science, development, and commercialization of cannabinoid prescription medicines, expands the company’s knowledge of Epidiolex and its potential use beyond the current indications. “Data from previous controlled clinical trials of EPIDIOLEX have shown clinically meaningful seizure reductions and consistent safety and tolerability in children and adults with Lennox-Gastaut syndrome and Dravet syndrome,” said Dr. Elizabeth Thiele, the lead investigator of the trial, director of the Herscot Center for Tuberous Sclerosis Complex at Massachusetts General Hospital, and a professor of neurology at Harvard Medical School. “Based on the positive results of this trial in TSC patients, Epidiolex, if approved for this additional indication, may become an important treatment option also in this disease state with significant unmet medical need.”
The cannabis industry is clearly evolving with big money, consolidation and growing intangible assets playing pivotal roles in the growing strength and consistency of the sector.
For more information about TransCanna Holdings, please visit TransCanna Holdings Inc. (CNSX:TCAN.CN) (FRA:TH8).
CannabisNewsWire (CNW) is an information service that provides (1) access to our news aggregation and syndication servers, (2) CannabisNewsBreaks that summarize corporate news and information, (3) enhanced press release services, (4) social media distribution and optimization services, and (5) a full array of corporate communication solutions. As a multifaceted financial news and content distribution company with an extensive team of contributing journalists and writers, CNW is uniquely positioned to best serve private and public companies that desire to reach a wide audience of investors, consumers, journalists and the general public. CNW has an ever-growing distribution network of more than 5,000 key syndication outlets across the country. By cutting through the overload of information in today’s market, CNW brings its clients unparalleled visibility, recognition and brand awareness. CNW is where news, content and information converge.
Receive Text Alerts from CannabisNewsWire: Text “Cannabis” to 21000
For more information. please visit https://www.CannabisNewsWire.com and or https://CannabisNewsWire.News
DISCLAIMER: CannabisNewsWire (CNW) is the source of the Article and content set forth above. References to any issuer other than the profiled issuer are intended solely to identify industry participants and do not constitute an endorsement of any issuer and do not constitute a comparison to the profiled issuer. FN Media Group (FNM) is a third-party publisher and news dissemination service provider, which disseminates electronic information through multiple online media channels. FNM is NOT affiliated with CNW or any company mentioned herein. The commentary, views and opinions expressed in this release by CNW are solely those of CNW and are not shared by and do not reflect in any manner the views or opinions of FNM. Readers of this Article and content agree that they cannot and will not seek to hold liable CNW and FNM for any investment decisions by their readers or subscribers. CNW and FNM and their respective affiliated companies are a news dissemination and financial marketing solutions provider and are NOT registered broker-dealers/analysts/investment advisers, hold no investment licenses and may NOT sell, offer to sell or offer to buy any security.
The Article and content related to the profiled company represent the personal and subjective views of the Author, and are subject to change at any time without notice. The information provided in the Article and the content has been obtained from sources which the Author believes to be reliable. However, the Author has not independently verified or otherwise investigated all such information. None of the Author, CNW, FNM, or any of their respective affiliates, guarantee the accuracy or completeness of any such information. This Article and content are not, and should not be regarded as investment advice or as a recommendation regarding any particular security or course of action; readers are strongly urged to speak with their own investment advisor and review all of the profiled issuer’s filings made with the Securities and Exchange Commission before making any investment decisions and should understand the risks associated with an investment in the profiled issuer’s securities, including, but not limited to, the complete loss of your investment.
CNW & FNM HOLDS NO SHARES OF ANY COMPANY NAMED IN THIS RELEASE.
This release contains “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E the Securities Exchange Act of 1934, as amended and such forward-looking statements are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. “Forward-looking statements” describe future expectations, plans, results, or strategies and are generally preceded by words such as “may”, “future”, “plan” or “planned”, “will” or “should”, “expected,” “anticipates”, “draft”, “eventually” or “projected”. You are cautioned that such statements are subject to a multitude of risks and uncertainties that could cause future circumstances, events, or results to differ materially from those projected in the forward-looking statements, including the risks that actual results may differ materially from those projected in the forward-looking statements as a result of various factors, and other risks identified in a company’s annual report on Form 10-K or 10-KSB and other filings made by such company with the Securities and Exchange Commission. You should consider these factors in evaluating the forward-looking statements included herein, and not place undue reliance on such statements. The forward-looking statements in this release are made as of the date hereof and CNW and FNM undertake no obligation to update such statements.
CannabisNewsWire (CNW) & NetworkNewsWire (NNW) are proud to be affiliated partners of the Investor Brand Network (IBN)
Over the past 10+ years we have consistently introduced new network brands, each specifically designed to fulfil the unique needs of our growing client base and services. Today, we continue to expand our branded network of highly influential properties, leveraging the knowledge and energy of specialized teams of experts to serve our increasingly diversified list of clients.
Please feel free to visit the Investor Brand Network (IBN) http://www.InvestorBrandNetwork.com
Corporate Communications Contact:
CannabisNewsWire (CNW)Denver, Coloradowww.CannabisNewsWire.com 303.498.7722 Office Editor@CannabisNewsWire.com
Media Contact:FN Media Group, LLCNNW@FinancialNewsMedia.com +1-(954)345-0611
View original content:http://www.prnewswire.com/news-releases/acquisitions-licenses-research-key-in-consistent-cannabis-market-growth-300871842.html