Canada House Wellness’ (CHV.C) acquisition of IsoCanMed (ICM), privately-owned Louiseville, Quebec based cannabis company that will give them the production capacity to meet their current demand and drive growth.
This increase when added to their production capacity through their Abba Medix subsidiary will give CHV the ability to increase the supply of medical cannabis they’ll be able to offer through their clinic network. The network primarily focuses on servicing military veterans and taking advantage of its previously established agreements with provincial distribution channels with the Alberta Gaming, Liquor & Cannabis Commission, BC Liquor Distribution Branch, Société Québécoise Du Cannabis (SQDC), and European distribution partners.
“At ICM, we have concentrated our efforts on completing and operating our wholly owned licensed facility in Louiseville, Quebec to achieve our ultimate goal of supplying more than 6,000 kg of dried flower production to the “buy local” market of Quebec. We are excited about the clear and immediate synergies that this alliance will bring, specifically as it relates to the acceleration of our distribution to the SQDC. This newly formed group is fully licensed and will be able to ensure our presence in every market. Once again, we are very satisfied and look forward to having Canada House move its head office to Louiseville, Quebec,” said Erik Bertacchini, president of IsoCanMed.
ICM’s 64,000 square foot facility is capable of producing over 6,000 kg of low-cost dried flower annually, using aeroponic grow methods. ICM also owns 450,000 square feet of adjacent land for further expansions, adding an incremental production capacity of 50,000 kg once it’s fully developed. ICM has also signed an LOI with the SQDC for 3,000 kg of cannabis products, which should add more revenue for CHV.
For the uninitiated, aeroponics is a process of growing plants in air or mist environment without any soil. It differs from both conventional hydroponics, aquaponics and in-vitro (or plant tissue culture) growing. Hydroponics uses liquid nutrient solution as a growing medium, while aquaponics uses water and fish waste, and aeroponics uses conducts without a growing medium.
The first delivery under the supply agreement is expected somewhere in the second half of 2020. The transaction also ensure supply security to Abba’s medical patients and the growing demand from provincial distributors across Canada. It’s part of CHV’s strategy to have the SQDC become a cornerstone distribution channel and preferred partner, and CHV intends to relocate its head office to Quebec.
“As the cannabis industry continues to advance, companies are being evaluated based on their ability to provide and distribute high-quality products and formats, and their ability to deliver strong financial performance. The acquisition of IsoCanMed addresses these attributes immediately,” according to Chris Churchill-Smith, chief executive officer of Canada House.
Canada House should immediately start to benefit from improved gross margins as it replaces supplemental wholesale product with that produced by ICM. The company will use Abba’s multiple sales licenses to cultivate, process and sell Abba and ICM products concurrently to end users.
The takeaway from this is that the SQDC represents a long term, stable and recurring revenue stream for CHV, which can work to build either a useful foundation or a safety net on which CHV can peg their growth trajectory. Even if other avenues fail, they have one big client in the bag to prop them up.