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Cannabis Professional’s daily roundup of industry news. View archive here.

Valens GroWorks doubles revenue, makes a profit in Q3 ahead of new product legalization

Valens GroWorks Corp.’s third-quarter 2019 revenue nearly doubled that of the prior reporting period and lifted the cannabis extraction company’s net income to nearly $6 million, as the legal pot industry ramped up for the legalization of concentrated pot products this year.

Revenue at the Kelowna, British Columbia-based company jumped to $16.5 million during the three-month period ended Aug. 31, when it extracted 26,625 kilograms of biomass. This revenue was up 87 per cent from the second quarter when the company extracted 8,547 kg of biomass, GroWorks said in its quarterly financial report.

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Valens said it has processed another 13,423 kg of biomass in the first 45 days of its fourth quarter that started Sept. 1, and higher revenue-per-gram is expected for this period after working with clients to process smaller but higher revenue white-label products ahead of Canada’s legalization of cannabis products such as edibles and concentrates. These products require extracted cannabis.

“While we anticipate that our margins in future quarters will continue a strong upward trend from the levels seen in previous quarters, especially as our volumes continue to ramp and efficiencies are realized, margins in the third quarter were aided, in part, by a one-time contract opportunity which we do not anticipate recurring in future quarters,” said Tyler Robson, chief executive of Valens.

Valens’ net income reached $5.9 million in the third quarter, compared with a net loss of $10.5 million the prior quarter.

"In the near term we are focused on delivering on our existing contracts with industry leading partners, like Shoppers Drug Mart, to provide innovative white label product development and manufacturing services for vape cartridges, tinctures, gel capsules, beverages and topicals,” said Jeff Fallows, Valens president.

“Looking to the future, we will to continue to make strategic capital investments, both domestically and internationally, to improve our technical capabilities and grow our intellectual property portfolio as well as expand the Valens platform to new and strategic markets with the objective of creating long term value for our shareholders and all of our stakeholders."

– Marcy Nicholson

Ontario Cannabis Store considers private pot distribution

The Ontario Cannabis Store said Tuesday it will launch consultations aimed at getting the private sector more involved in marijuana storage and delivery. The Crown corporation’s CEO said in a statement that the agency will consult with federally licensed producers and retail store owners later this month on the possible change.

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Cal Bricker said the OCS will then make recommendations to the Ontario government to ensure sufficient distribution capacity is in place to combat the illegal market. “As the exclusive wholesaler and distributor of legal recreational cannabis in Ontario, the OCS remains focused on its primary objective of combating the illegal market and protecting our youth and communities through overseeing a safe and secure cannabis distribution network across the province,” Bricker said.

This OCS has been struggling to meet the demand for recreational cannabis, and earlier this month the agency said it lost $42-million in the latest fiscal year ended March 31. The government blamed the initial startup costs for the loss.

- Canadian Press

Strainprint says Health Canada subscribes to its cannabis research platform

Strainprint Technologies will now share its cannabis data and analytics with Health Canada, providing the federal government with information on Canadians’ use of marijuana.

The company said Health Canada has subscribed to use its Strainprint Analytics cannabis research platform to better understand cannabis use in the country, after recreational pot was legalized in October 2018.

Strainprint’s data comes from more than 1.4 million patient-reported outcomes on use and strain efficacy. The data will provide Health Canada with information on how methods vary by gender and age, the consistency and efficacy of specific products, and how patient use has changed since legalization.

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- Marcy Nicholson

Hexo to launch low-cost cannabis product

Hexo Corp. is moving to undercut prices in the illicit market with a new 28-gram product that costs consumers as much as one dollar less per gram than at the average illegal dispensary. The product, under the brand Original Stash, which will be on sale in Quebec cannabis stores starting Thursday for $125.70, or $4.49 per gram, including taxes, the company said.

That’s cheaper than the average cost of a gram of cannabis at $7.37 per gram during the third quarter, with the price of legal and illegal weed at $10.23 and $5.59 per gram, respectively, according to the latest Statistics Canada analysis of crowdsourced data.

Hexo is targeting the roughly half of Canadians who are still buying weed from the illicit market, its chief executive Sebastien St-Louis said. “That 51 per cent of Canadians that buys illegally, when they walk into their dealer, they don’t pay tax... Hexo is absorbing that cost for them. We’ve listened, we’re removing their reason for not shopping legal,” he said in an interview.

He said Hexo is able to offer a one ounce, or 28 gram, product at this relatively low price point for various reasons, such as less packaging needed for the bulk size rather than individual packaging for each gram or 3.5 gram product. St. Louis added that the licensed producer increased its production scale and lower hydroelectric costs in Quebec also allow the company to reduce its price.

Hexo worked with Quebec’s provincial cannabis corporation on this pricing strategy and it will be on sale exclusively at its shops starting tomorrow. The company is currently working with entities in other provinces, such as Ontario and Alberta, to do a similar low-cost product.

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St. Louis said that the cannabis used in its Original Stash products are only low price, but not low quality. “This is high-quality cannabis flower, it has more THC than what’s available on the black market,” he said, noting that it has between 12 and 18 per cent tetrahydrocannabinol, the compound that produces a high.

He added that it is not a loss leader, but would not talk about specific margins until Hexo reports its earnings on Oct. 24. The product launch comes after Hexo lowered its net revenues forecast for its upcoming fourth-quarter ended July 31, and it withdrew its $400 million net revenue guidance for its 2020 financial year.

- Armina Ligaya, Canadian Press

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