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Canada’s cannabis industry has experienced tremendous growth over the past several years, following the legalization of medical and adult-use cannabis. In addition to growing domestic demand, the country’s move to federally regulate cannabis has opened the door for its licensed producers to export products around the world. These dynamics have made licensed producers a valuable addition to growth investment portfolios.
FSD Pharma Inc. (CSE: HUGE) (OTCQB: FSDDF) (FRA: 0K9) became the latest licensed producer to possess both cultivation and sales licenses on April 22 after securing its cannabis sales license from Health Canada. With nearly four million sq. ft. of space in a former Kraft Foods plant in Cobourg, Ontario, the company is uniquely positioned to scale up and become one of the largest licensed producers in the country over the coming quarters.
Securing a Sales License
FSD Pharma has spent the past several years retrofitting a nearly four million sq. ft. former Kraft Foods facility that sits on 70 acres of land—including 40 acres primed for development. After securing its cultivation license on October 13, 2017, the company was awarded a cannabis sales license on April 22, 2019 by Health Canada. The move paves the way for the company to produce and sell cannabis grown at its facility.
The company’s business model hinges on strategic partnerships that operate within its massive facility. For example, the company’s partnership with Canntab Therapeutics Ltd. (CSE: PILL) provies 10,000 sq. ft. of space at its facility in exchange for a profit-sharing and royalty agreement. Canntab’s proprietary technology enables standardized medical cannabis extracts in extended release pill formats that are ideal for physicians
“The granting of our sales license allows FSD to serve the growing medicinal use markets in Canada,” said FSD Pharma President Zeeshan Saeed. “We intend to quickly scale up production at our current facility, while continuing to build out the plant to add additional grow capacity. In addition, our sales license opens the door for our partner Canntab Therapeutics to commence sales of its suite of novel cannabis oral delivery platforms.”
Near-term & Long-term Potential
FSD Pharma’s new cannabis sales license creates a near-term revenue opportunity for shareholders. Under its partnership with Canntab and others, the company is entitled to a share of revenue that could begin in the very near-term. The company’s wide range of strategic partnerships could help diversify revenue and limit capital expenditures compared to many other licensed producers that invest in their own equipment and operations.
In addition to this near-term potential, the company has made a number of blue sky investments in the cannabis industry. A great example is the company’s recent letter of intent with Solarvest (TSX-V: SVS) to develop and test a way to create pharmaceutical-grade cannabinoids out of algae. If successful, this approach could dramatically increase production capacity without nearly as much overhead as conventional growing operations.
The company also announced an entry into the lucrative hemp industry with a 3-way supply agreement to purchase up to 1,000 kilograms of hemp crop for CBD extraction. The deal could open the door to hemp-based CBD products that can be more widely distributed across numerous different countries that haven’t legalized medical or recreational cannabis, including parts of the United States and Europe.
FSD Pharma Inc. (CSE: HUGE) (OTCQB: FSDDF) (FRA: 0K9) reached a critical milestone by securing a cannabis sales license. With the potential for near-term revenue, investors may want to take a closer look at the stock over the coming months. At the same time, the company’s long-term investments could prove game-changers in the rapidly evolving industry.
For more information, visit the company’s website at www.fsdpharma.com.
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