FSD Pharma (CSE: HUGE) shareholders received some much awaited news this past weekend in the form of a sales license for the Cobourg-based operation. While it was announced late Thursday before the long weekend by Health Canada, the company elected to release its press release on the news yesterday morning, prompting some much needed positive movement on the equity.
FSD Pharma shares on the Canadian Securities Exchange closed up $0.055, or 24.44% on the news, to close at $0.28.
While it received its sales license, this applies only to that of plants and seeds currently. The company is still awaiting the go-ahead to sell dried and fresh flower to medical consumers as well as provincial regulators. Like all other licensed producers, they can only sell direct to medical consumers.
Despite its ambitions to have one of the largest indoor grow operations in the world, the company is currently only licensed to cultivate cannabis within a 25,000 square foot sector of the former Kraft plant. Given the fallout between FSD Pharma and Auxly in relation to the joint venture to expand the plant, the company has yet to give a revised definitive timeline for the completion of Phase I of the planned expansion at the location.
Outside of any planned expansions, the company is licensed to produce up to 4,000 KG of cannabis per year. At current market wholesale rates of roughly $5 per gram, this equates into approximately $20mm in revenues per year at full capacity. Although not a staggering figure, consider that as of September 30, the company was nearly debt free while sitting on cash of $33m.
To further this point, the firm currently has a memorandum of understanding in place with High Tide Ventures, wherein High Tide has agreed to purchase up to 5,000 KG of cannabis on a wholesale basis over the next year for use in the Sask. market from FSD Pharma. Given current capacities imposed by Health Canada, this could be a purchase order that covers the firms entire annual capacity.
Addressing the success of obtaining the sales license, Zeeshan Saeed, President and founder, stated, “In addition, our sales license opens the door for our partner Canntab Therapeutics to commence sales of its suite of novel cannabis oral dose delivery platforms, including CBD and THC capsules, in Canada and global markets. We expect that this will provide an immediate benefit to both parties, since FSD is entitled to a share of Canntab’s revenue from sales as a result of the collaboration and profit sharing agreement that we entered into this past fall.”
However, this is questionable as the license does not pertain to Canntab Therapeutics – only FSD Pharma. Previous news releases indicate that FSD Pharma will be assisting Canntab with obtaining its processing licenses for the facility, to enable the production and sale of Canntab’s products. It doesn’t directly state that FSD will be producing Canntab’s products, thus causing some inconsistencies.
FSD Pharma currently has two harvests in its vault as per company filings, however none of it has been listed in inventories likely as a result of not previously having the appropriate sales license. The first harvest of which had completed testing in August 2018, with the second harvest completed more recently in January 2019. It is presumed that these inventories can not be sold until the advent of FSD Pharma’s sales license being amended to include dried and fresh flower.
FSD Pharma expects the required amendments to its sales license to occur in the near term.
Information for this briefing was found via Sedar, and FSD Pharma. The author has no securities or affiliations related to this organization. Not a recommendation to buy or sell. Always do additional research and consult a professional before purchasing a security. The author holds no licenses.
As the founder of The Deep Dive, Jay is focused on all aspects of the firm. This includes operations, as well as acting as the primary writer for The Deep Dive’s stock analysis. In addition to The Deep Dive, Jay performs freelance writing for a number of firms and has been published on Stockhouse.com and CannaInvestor Magazine among others.