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Recreational and Medical Cannabis Markets Synergize to Drive the Industry's Growth
NEW YORK, May 31, 2019 The rapid emergence of the cannabis industry has caught the attention of Wall Street as a handful of analysts from firms such as RBC Capital Markets, Cowen, Piper Jaffray, and Bank of America Merrill Lynch have all initiated their coverage on the industry. The analysts highlighted various growth factors such as continued clinical trials, lower levels of binge drinking and the use of cannabis as an alternative to opioids, as further propelling the industry growth. Additionally, RBC Capital Markets analyst Nik Modi noted that the cannabis marketplace is primarily being accelerated by the recreational sector, largely due to concentrates and edibles that are on sale now in various regions. Modi also mentioned that investments from other public sectors like the tobacco and beverage industries are also contributing to the growth of the cannabis industry. Currently, the medical cannabis sector accounts for the majority of the overall cannabis market share. However, as the North American adult-use market continues to mature, analysts expect the recreational sector to overshadow the medical sector. Moreover, the recreational market is most prevalent within the North American region, in large part due to its widespread usage in the U.S. and Canada. On the other hand, medical cannabis is much more readily available and accessible globally due to the numerous countries that have adopted medicinal cannabis legislation, as medical cannabis is available to specific patients in countries such as Australia, Argentina, Brazil, France, Germany, Israel and South Korea. Many market analysts project that the proliferation of medical cannabis is expected to complement the growth of the recreational market. And as a result, according to data compiled by ArcView Market Research and BDS Analytics, worldwide consumer spending on legal cannabis was valued at approximately USD 12.2 Billion in 2018. By 2022, consumer spending is expected to reach USD 31.3 Billion while exhibiting a CAGR of 26.7% from 2017 to 2022. WeedMD Inc. (OTC: WDDMF) (TSX-V: WMD), Pyxus International Inc. (NYSE: PYX), HEXO Corp. (NYSE-A: HEXO) (TSX: HEXO), Cresco Labs Inc. (OTC: CRLBF) (CSE: CL), The Green Organic Dutchman Holdings Ltd. (OTC: TGODF) (TSX: TGOD)
Now, large tobacco and beverage corporations have invested billions of dollars into the cannabis industry to produce cannabis-based products while further accelerating clinical research. Cowen analysts have highlighted that binge drinking has declined in recent years in the U.S., and as a result, many alcohol manufacturers have seen their revenues slide. 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. As a result, Cowen expects binge drinking rates to continue to fall as cannabis consumption maintains its grow. Moreover, the tobacco industry has also taken an interest in cannabis because of the declining tobacco usage 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, the National Health Interview Survey reported that the largest increase in quitting among adults ages 25 to 44-year-olds was recorded during that time period. "The entry of one of the largest alcohol and one of the largest tobacco companies into the cannabis sector as well as the Congressional passage of a Farm Bill legalizing growing hemp in the United States, were key to making 2018 a year of historical importance," said Troy Dayton, Chief Executive Officer of The ArcView Group. "This year, we also saw two of the world's three largest legal medical markets – California and Canada – transition to legal regimes that allow all adult consumers to buy cannabis, while voters in the other top-3 market – Michigan – approved a ballot measure to do the same."
WeedMD Inc. (OTCQX: WDDMF) (TSX-V: WMD) is also listed on the TSX Venture Exchange under the ticker (TSX-V: WMD). Earlier last week, the Company announced that, "it is converting its fully-licensed 26,000 sq. ft. Aylmer, Ontario facility to a large-scale cannabis extraction and processing operation.
'WeedMD is optimizing its two licensed facilities to allow each to focus on a core vertical and to streamline our operations. We are transitioning the Aylmer site to produce a wide range of extracts and concentrates,' said Keith Merker, CEO of WeedMD. 'All cultivation has been consolidated to our greenhouse and outdoor Strathroy facility, which is delivering consistently improving yields at increasingly competitive costs.'
About the Aylmer Extraction Facility
WeedMD is retrofitting its Aylmer operation into a purpose-built cannabis oil extraction facility that will be operational by summer 2019. Additional details:
- WeedMD is building on its experience in extract production, having processed oils onsite at Aylmer since June 2017
- The site is fully licensed for cannabis oil production and sale
- The Company will have four extraction lines in operation with the ability to process over 200,000 kgs of biomass annually
- WeedMD will utilize various extraction methods in order to meet the demands of the market
- The Company will provide formulation capabilities for wholesale and white label manufacturing
- The facility is being built to GxP* standards to support compliance for both domestic and international markets
- The existing fully-licensed 26,000 sq. ft. facility is located on an expandable four-acre site wholly-owned by WeedMD
- WeedMD will supply a large quantity of input material for cannabis extraction from the greenhouse and outdoor production from its Strathroy site
*GxP encompasses a broad range of compliance-related activities such as Good Laboratory Practices, Good Clinical Practices and Good Manufacturing Practices.
As recently announced, WeedMD's Strathroy cultivation facility is expected to yield more than 150,000 kgs of dried flower per year in 2020. Outdoor grow video here (https://www.youtube.com/watch?v=QnApYAnXDtw).
For more information, access WeedMD's investor presentation here (https://www.weedmd.com/investing-in-weedmd/) and recently updated corporate video here (https://www.youtube.com/watch?v=ktgJ_BQtBCs&feature=youtu.be).
About WeedMD Inc: WeedMD Inc. is the publicly-traded parent company of WeedMD Rx Inc., a federally-licensed producer and distributor of cannabis products for both the medical and adult-use markets. The Company owns and operates two facilities: a 26,000 sq. ft. indoor facility in Aylmer, Ontario and a 158-acre state-of-the-art greenhouse and outdoor facility located in Strathroy, Ontario. The Company currently has 136,000 square feet of licensed production space across its facilities and is expected to have a total footprint of more than 550,000 square feet of indoor and greenhouse production in addition to more than 25 acres of outdoor cultivation space online in the first half of 2019. WeedMD has a multi-channeled distribution strategy that includes selling directly to medical patients, strategic relationships across the seniors' market and supply agreements with Shoppers Drug Mart as well as six provincial distribution agencies."
For our latest "Buzz on the Street" Show featuring WeedMD Inc. recent corporate news, please head over to: https://www.youtube.com/watch?v=AqV5iDMOx0c
Pyxus International Inc. (NYSE: PYX) is a global agricultural company with 145 years' experience delivering value-added products and services to businesses and customers. Criticality, a North Carolina-based agricultural hemp company, recently announced the expansion of its consumer products under its brand name Korent with the launch of its line of cannabidiol (CBD) e-liquids. The announcement follows the brand's launch of CBD oils in December 2018. Criticality partners with Pyxus International, Inc., a provider of responsibly produced, independently verified, sustainable and traceable agricultural products, ingredients and services, to source, process and produce industrial hemp and hemp products under North Carolina's Industrial Hemp Pilot Program. The Korent e-liquids are featured in Mango Pineapple, Watermelon and Fresh Mint and come in two concentrations in each flavor – 600mg of CBD/60ml and 100mg of CBD/10ml. Additionally, a natural, unflavored booster is available for purchase in 100mg of CBD/10ml. These THC-free products feature flavors designed specifically to pair with, and enhance, Korent's CBD e-liquids, and are compatible with any open tank e-liquid module. "Korent's CBD products are expertly crafted and designed to help consumers effectively restore balance to their lives. Our new line of CBD e-liquids uses high-quality, verifiable ingredients," said Brian Moyer, Chief Executive Officer of Criticality. "Criticality provides unparalleled transparency into the production of our industrial hemp and hemp-derived products. The company's expertise in extraction and purification technologies enables us to produce superior hemp products that adhere to the highest quality standards."
HEXO Corp. (NYSE-A: HEXO) (TSX: HEXO) is an award-winning consumer packaged goods cannabis company that creates and distributes prize-winning products to serve the global cannabis market. HEXO Corp. recently completed the first harvest in its 1 million sq. ft. expansion, marking an important execution milestone in the Company's continuous growth. Since early January, plants have been moving into the greenhouse and the first plants have now been harvested. The Company continues to ramp up to full harvest capacity using the continuous harvest methodology, the latest step towards reaching the full annual production capacity of 108,000 kg of dried flower per year. "Completing the first harvest in our 1,000,000 sq. ft. greenhouse expansion showcases the dedication and hard work of the entire HEXO team," said Sébastien St-Louis, HEXO's Chief Executive Officer and Co-Founder. "We are very proud of our continued ability to execute on our plans, creating value for our shareholders and demonstrating our commitment to our customers. This cultivation milestone means that an expanded HEXO product offering will be available to more Canadians shortly."
Cresco Labs Inc. (OTCQX: CRLBF) (CSE: CL), based in Chicago, is a leading U.S. cannabis company with experienced management, access to capital and a demonstrated growth strategy. Cresco Labs Inc. recently announced that the Hope Heal Health, Inc. (HHH) cultivation facility and dispensary in Fall River, Bristol County, Massachusetts has received provisional approvals for adult-use cannabis cultivation, manufacturing, and retail licenses. Cresco Labs entered into a definitive merger agreement with HHH for its Massachusetts cultivation, manufacturing, processing, and dispensary operations at the end of 2018. An application for approval of the merger will be submitted to the Massachusetts Cannabis Control Commission, and the change of control of HHH is subject to such approval. The Fall River dispensary is currently approved for medical-use cannabis sales and offers medical-grade vape cartridges, edibles, tinctures, topicals, concentrates, and flower. Upon completion of inspections and other final steps in the licensing process, the Fall River dispensary expects to begin selling cannabis products for adult-use in 60-90 days. "The receipt of this provisional adult-use licenses for HHH's Fall River dispensary is another example of our strategic business approach to partner with professional and responsible operators," said Cresco Labs Chief Executive Officer and Co-founder Charlie Bachtell. "With only 15 adult-use cannabis dispensaries currently open in Massachusetts, we anticipate that there will be strong demand in the Fall River dispensary given the robust growth being seen in this market. The receipt of the adult-use licenses is well timed with the first medical pilot harvest coming in from the HHH cultivation facility in Fall River. The harvest will provide the dispensary with superior quality cannabis to meet the volume of sales that we expect going forward."
The Green Organic Dutchman Holdings Ltd. (OTCQX: TGODF) (TSX: TGOD) is a publicly traded, premium global organic cannabis company, with operations focused on medical cannabis markets in Canada, Europe, the Caribbean and Latin America, as well as the Canadian adult-use market. The Green Organic Dutchman Holdings Ltd. recently announced that it had secured a cannabis supply agreement with Alberta Gaming, Liquor & Cannabis ("AGLC"), further expanding its footprint in Western Canada. AGLC, under the brand Alberta Cannabis, is Alberta's legal, non-medical online cannabis store. "Alberta is an important market for us as we continue to expand our distribution channels across Canada," commented Brian Athaide, Chief Executive Officer of TGOD. "With our production facilities in Hamilton, Ontario and Valleyfield, Quebec coming online in phases, we are thrilled to start distributing TGOD's premium certified organic cannabis to AGLC."
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