Health Canada’s allocation of updated cultivation licenses to LPs like Heritage Cannabis (CANN.C) has opened up a new revenue stream for companies yet to receive their sales licenses.
Although these licenses allow holders to sell to nurseries, researchers and other LPs, some industry insiders have been left wondering what to do with them.
One of Heritage’s subsidiaries, PhyeinMed, received its updated cultivation license earlier this week.
Clint Sharples, the interim CEO of Heritage, said PhyeinMed’s ability to conduct B2B sales will allow for the generation of revenue and the fulfillment of distribution agreements.
What the updated license allows for:
– The sale and distribution of dried cannabis, fresh cannabis, cannabis plants and cannabis plant seeds to any qualified license holders.
– The sale and distribution of cannabis plants and cannabis plant seeds to licensed nurseries.
– The sale and distribution of cannabis plants and cannabis plant seeds, that are cannabis products to: a holder of a license for sale, or a person authorized to sell cannabis.
Khurram Malik feels differently. The CEO of Biome Grow (BIO.C), said he doesn’t believe these new licenses will provide an effective revenue stream, only a lifeline for struggling companies which need some instant capital.
Besides allowing for the quick-sale of plants and seeds, Malik said he doesn’t see them being much use to many companies within the industry which are trying to establish their own consumer sales.
“If you are running out of money and need to generate cash quickly then go ahead, but if your sales license is weeks away then you’ll wait to sell it at full margins.”
Malik said he felt the license update was on its way after it was hinted at during a recent conference call with Health Canada.
He said he believes Health Canada is automatically granting these licenses to companies in good standing which are already on their way to obtaining a sales license.
“In theory you can start generating sales which is fine, but we’re not really in that business and I don’t think most LPs are. So we’re all waiting for the sales authorization,” Malik said.
He added that updated licensing will do little to alleviate the recreational cannabis shortage, which provincial stores have been stricken with since legalization.
“I think we have one too, but we weren’t quite sure what to do with it. It just doesn’t move the needle so we didn’t disclose it,” Malik said.
CannaCure makes waves
Today, Heritage Cannabis announced that another of its subsidiaries, CannaCure received its own updated cultivation license.
On November 14, Heritage announced that CannaCure had executed a supply and purchase agreement with CannTrust (TRST.T).
The one-year agreement says CannaCure will purchase cannabis clones of one of CannTrust’s most prominent strains at market rates. CannTrust retains the right of first refusal to purchase all bulk dried cannabis cultivated with the material it has provided its partner at a pre-determined rate.
The agreement also grants CannaCure the right to request an increase to the number of clones it receives from CannTrust, if it chooses.
This agreement is another step in achieving a significant presence in the Canadian cannabis market, and it puts us on a path to obtaining our sales license.
– Patrick Gagne, director of CannaCure
CannTrust operates a 450,000 square foot cultivation facility in Ontario which is currently undergoing a 600,000 square foot build-out.
The company’s products are packaged and prepared at a 60,000 square foot manufacturing centre in Vaughan, Ontario.
CannTrust’s product portfolio ranges from medical and recreational flower to beverages, beauty products and even a line of CBD drops for pets.
In Q3, CannTrust recorded revenues of $12.6 million and increased their patient count to over 50,000, an increase of 61 per cent.
Full disclosure: Heritage Cannabis is an Equity Guru marketing client.