Cannabis trading: The month that was - Monthly cannabis trading update June/July 2019 (published 8 August) - Edison Investment ...
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Cannabis trading: The month that was Monthly cannabis trading update June/July 2019 (published 8 August) Published by Edison Investment Research
Cannabis trading update
W
Issue 1
In this issue elcome to the inaugural edition of
our cannabis trading update. Even
Month in review 3 with a number of institutional trading
impediments limiting the investability for many
Cannabis earnings 5
US institutions, we have seen an explosion in
Upgrades, downgrades 8 the number of cannabis companies accessing
and initiations the public markets, as well as increases in
Short interest 9 trading volume. As our involvement in the
Clinical pharmaceutical- 10 cannabis space grows, both on the investor
stage cannabis relations side and the cannabis research side,
Medical clinical-stage 11 we thought it would be helpful to consolidate
cannabis what we find interesting on the trading side of
the investment equation. We hope you enjoy
Cannabis newsflow 13
this issue and find it helpful.
Latest research 15
OTCQX cannabis price return
Last price: 704.09 52-week high: 1,037.14 (18/04/19)
Monthly net: -80.07 52-week low: 667.68 (24/07/19)
Monthly %: -10.20
Source: www.otcmarkets.com/index/.OTCQXMJ
2Month in review
The S&P Index finished June and July up 9.47%, making a 52-week high close of 3,027.98 on 26
July 2019. The Cannabis Index lagged the S&P, down -10.20 for June and July, making a 52-
week low of 667.28. But although we saw weakness in the overall trading in May, the majority of
the cannabis names are holding onto very nice gains on a ytd basis. Of the 125 cannabis names
that Edison is currently following, 20 finished in positive territory for June and July, and 105 in
negative territory.
Notable movers for June/July ($250m market cap+ )
Up Down
Charlottes Web CWEB TILT Holdings TILT
Market cap C$2.475bn +28.64% Market cap C$322m -54.65%
Tilray TLRY MariMed Inc MRMD
Market cap US$3.99bn +8.08% Market cap US$281m -53.19%
Auxly Cannabis Grp CBWTF Greenlane Holdings GNLN
Market cap US$393m +7.89% Market cap US$340m -46.75%
Kushco Holdings KSHB CannaRoyalty OH
Market cap US$388m +4.30% Market cap C$380m -38.55%
Cronos Group CRON HEXO Corp HEXO
Market cap US$4.69bn +1% Market cap C$1.43bn -35.75%
iAnthus Capital Hldg IAN
Market cap C$543m -35.32%
. Columbia Care CCHW
Market cap C$1.34bn -30.31%
Cresco Labs CL
Market cap C$2.73bn -29.83%
Harvest Health & Rec HARV
Market cap C$2.04bn -27.73%
Acreage Holdings ACRGF
Market cap US$1.5bn -27.43%
Green Thumb Ind GTII
Market cap C$3.17bn -22.14%
3Month in review (continued)
Notable movers for June/July (sub $250m market cap )
Up
Botanix Pharm BOT
Market cap A$201m +147%
Auscann Group ACNNF
Market cap US$111m + 43.26%
GrowGeneration GRWG
Market cap US$120m + 36.93%
Exactus EXDI
Market cap US$43m + 24%
Cardiol Therapeutics CRDL
Market cap C$122m +17.08%
Tinley Beverage TNYBF
Market cap US$55m +15%
Mjardin Group MJARF
Market cap US$66m +$13.63%
As we noted earlier, the majority of the cannabis names are in negative territory for June and
July. Incredibly, 67 names are down over 15% for the two months that we are looking at. We left
Intec Pharm (NTEC) off our decliners list even though it was down 91% over the two months.
NTEC was down on poor data in its Parkinson’s trial, and not cannabis related. Thematically,
June/July led off with two poor earnings reports. Both HEXO Corp and Canopy Growth reported
worse than expected earnings, which has many cannabis investors holding their breath as
August readies 66 cannabis industry company earnings releases. Too add insult to injury,
CannTrust was cited for hiding illegal growing rooms, which cost the CEO his job.
4Cannabis earnings
As noted previously, August is a very busy earnings reporting month in the cannabis industry.
With 66 companies reporting over the month, and some previous, poor reports from Canopy and
HEXO, investors will be nervously awaiting these results. The table below shows the consensus
earnings estimates, as well as consensus revenue estimates, courtesy of Bloomberg.
Ticker Lng co nm 3M pct change Exp rep dt Cons earns Cons revenue est (m)
APHA US Aphria Inc -36.1881 8/1/2019 -0.067 112
ARNA US Arena Pharmaceuticals Inc 29.8334 8/6/2019 -1.079 2.908
GWPH US GW Pharmaceuticals plc 2.2345 8/6/2019 -0.003 49.311
CVSI US CV Sciences Inc -27.3345 8/7/2019 0.025 17.45
CANN US General Cannabis Corp -49.4904 8/8/2019
MDCL US Medicine Man Technologies Inc 21.9424 8/8/2019
CRON US Cronos Group Inc -16.2559 8/8/2019 -0.025 7.171
CRBP US Corbus Pharmaceuticals Hold- -4.8711 8/8/2019 -0.165 9.107
ings Inc
ZYNE US Zynerba Pharmaceuticals Inc 60.2123 8/8/2019 -0.495 0
GNLN US Greenlane Holdings Inc -62.34 8/8/2019 -0.03 49.75
TRTC US Terra Tech Corp -38.4979 8/8/2019
GRWG US GrowGeneration Corp 13.6213 8/9/2019
NINE US Nine Energy Service Inc -30.1395 8/12/2019 0.256 238.375
ALEAF US Aleafia Health Inc -27.925 8/13/2019
TLRY US Tilray Inc -17.042 8/13/2019 -0.259 40.164
STEM CN Stem Holdings Inc -45.0909 8/13/2019
ZDPY US Zoned Properties Inc -25.5 8/13/2019
ACB US Aurora Cannabis Inc -21.9764 8/14/2019 -0.048 112.68
AXIM US Axim Biotechnologies Inc -29.6479 8/14/2019
CCHW CN Columbia Care Inc -45.77 8/14/2019
CWEB CN Charlottes Web Holdings Inc -18.2226 8/14/2019 0.045 26.267
EMBI US Emerald Bioscience Inc -60.7143 8/14/2019
FIRE CN Supreme Cannabis Co Inc/The -31.7949 8/14/2019 -0.018 12.725
CGC US Canopy Growth Corp -16.5524 8/14/2019 -0.385 109.618
MGWFF US Maple Leaf Green World Inc -44.4027 8/14/2019
Source: Bloomberg
5Cannabis earnings cont...
Ticker Lng co nm 3M pct change Exp rep dt Cons earns Cons revenue est (m)
PHVAF US Phivida Holdings Inc -54.9447 8/28/2019
CBWTF US Auxly Cannabis Group Inc -19.2537 8/29/2019 1.6
KLY CN Kalytera Therapeutics Inc -38.4615 8/29/2019
GTBIF US Green Thumb Industries Inc/CA -31.1765 8/29/2019 -0.02 20.8
GTII CN Green Thumb Industries Inc/CA -30.6253 8/29/2019 -0.02 20.8
IAN CN iAnthus Capital Holdings Inc -40.9385 8/29/2019 -0.044 25.15
INDS CN Indus Holdings Inc 135900 8/29/2019
ITHUF US iAnthus Capital Holdings Inc -40.5983 8/29/2019 -0.044 25.15
JUJU CN International Cannabrands Inc -42.8571 8/29/2019
MJARF US Mjardin Group Inc -31.5676 8/29/2019 -0.05 10.9
PLTH CN Planet 13 Holdings Inc -20.0647 8/29/2019 0.007 20.75
ACNNF US Auscann Group Holdings Ltd -11.6719 8/30/2019
CURA CN Curaleaf Holdings Inc -31.5136 8/30/2019 -0.013 50.81
EMHTF US Emerald Health Therapeutics -48.6025 8/30/2019
Inc
TIUM/U CN Cansortium Inc -11.9205 8/30/2019
VIVO CN Vivo Cannabis Inc -44.3182 8/30/2019 -0.05
VREO CN Vireo Health International Inc -46.6179 8/30/2019
VRNDF US Delta 9 Cannabis Inc -37.8608 8/30/2019
VVCIF US Vivo Cannabis Inc -40.9657 8/30/2019 -0.05
Source: Bloomberg
6Cannabis earnings cont...
Ticker Lng co nm 3M pct change Exp rep dt Cons earns Cons revenue est (m)
MMEN CN MedMen Enterprises Inc -21.3333 8/14/2019 -0.1 55.5
MRMD US MariMed Inc -50.5263 8/14/2019
ROMJF US Rubicon Organics Inc -0.8333 8/14/2019
SLNG CN SLANG Worldwide Inc -43.9516 8/14/2019 -0.013 7.26
SPRWF US Supreme Cannabis Co Inc/The -32.2259 8/14/2019 -0.018 12.725
TGODF US Green Organic Dutchman Hold- -23.8579 8/14/2019 -0.06 4.6
ings Ltd/The
TILT CN TILT Holdings Inc -65.9664 8/14/2019 -0.02 45.9
TRUL CN Trulieve Cannabis Corp -28.7547 8/14/2019 0.126 53.2
VFF US Village Farms International Inc -30.0526 8/14/2019 0.04 46.6
ZENA CN Zenabis Global Inc -22.6131 8/14/2019 -0.01 41029
CRDL CN Cardiol Therapeutics Inc -24.1497 8/14/2019
NTEC US Intec Pharma Ltd -38.7147 8/15/2019 -0.304
NRTH CN 48North Cannabis Corp -21.6981 8/20/2019
DYME CN DionyMed Brands Inc -63.6656 8/21/2019 -0.08 11.9
OH CN CannaRoyalty Corp -32.3077 8/22/2019
ORHOF US CannaRoyalty Corp -30.9897 8/22/2019
LABS CN MediPharm Labs Corp -4.5553 8/23/2019 0.01 29.95
TRSSF US TerrAscend Corp -23.2618 8/27/2019 18.8
WDDMF US Weedmd Inc -20.0962 8/27/2019 5.7
ACRGF US Acreage Holdings Inc -28.5131 8/28/2019 -0.16 34.375
ELLXF US Elixinol Global Ltd -16.4345 8/28/2019
EXL AU Elixinol Global Ltd -18.6312 8/28/2019
Source: Bloomberg
7Upgrades, downgrades and initiations
Tilray Inc (TLRY; market cap US$4.8bn)
Initiated with market perform at Oppenheimer, 6/4/19 – analyst Rupesh Parikh
Initiated with hold at Stifel 6/5/19 – analyst W Andrew Carter
Aurora Cannabis (ACB; market cap US$7.5bn)
Initiated with hold US$7.45 target – 6/5/19 – analyst W Andrew Carter
Cronos (CRON; market cap US$5.4bn)
Big BofA upgrade, from underperform to buy. Price target goes from US$13 to US$20.
There is potential for a near-term launch of CRON’s US business with the help of its partner
Altira Group (MO). BofA analyst Chris Carey says Cronos is likely to leverage Altria’s
existing US distribution network of over 230,000 stores, to launch its own products.
HEXO
Downgraded at Oppenheimer, from OP to MP 6/25 – analyst Rupesh Parikh
Downgraded at CIBC from OP to N 6/14. Analyst – John Zamparo
Compass Point initiations:
GTII buy US$18 target
CL buy US$16 target
ACRG buy US$27 target
NBEV buy US$9 target
CURA buy US$13 target
KSHB buy US$8 target
TLRY neutral US$41/ price target cut on 6/17 to US$38
WEED neutral US$57 target
All initiated on 6/10/19 – analyst Rommel Dionisio
8Short interest
When following companies on an institutional trading basis, we always pay attention to the short
interest in a security. It can give a sense of the sentiment surrounding the company’s prospects.
However, we have to pay attention to potential hedging scenarios to get a true read on the
sentiment. If a company has a convertible bond as part of its capital structure, investors may
have a short position against their convert long position as a hedge. In addition, if there are listed
options in a security, there may also be a short position as a hedge against options. In general,
listed options will only be found in the larger-cap cannabis names. As of now, we are only seeing
active option trading in APHA, CGC and ACB (all US).
Notable short interest as a percentage of float
Company Ticker Percentage short Comment
Tilray TLRY 6.78m shares short/ 31%/6.02 Tilray has both Converts/Options. 1.3% increase over previous reporting period.
days to cover.
Corbus CRBP 16.78m share short/ 27.53%/ 33.5 Corbus has options. 16.15% increase over previous reporting period.
days to cover.
Greenlane GNLN 2.64m shares short/ 27.42%/ 12 Greenlane has converts. 7.41% increase over previous reporting period.
days to cover.
Cronos CRON 37.66m shares short/21.88%/ Cronos has options. 1.46% increase over previous reporting period.
10.04 days to cover.
Canopy CGC 34.84m shares short/ 14.92% / Canopy has both converts and options. -1.6% decrease over previous reporting period.
5.96 days to cover.
Zynerba ZYNE 5.07m shares short/26.77%/ 3.48 Zynerba has options. Although 1.1m shares were added to the short, a 5m share follow-
days to cover. on mutes the increase in the short interest ratio to a 1.13% increase over the previous
period.
Village Farms VFF 4.54m shares short/ 11.77%/ 4.69 A 1.44% decrease over the previous period. Has been mentioned negatively by Citron
days to cover. Research.
Aphria APHA - 20.51m shares short/ 8.87% / Aphria has both a convert and options. 1.93% increase over previous reporting period.
4.77 days to cover.
Aurora ACB 87.2m shares short/9.0%/ 9.4 days Aurora has both converts and options.
to cover.
Arena ARNA 3.42m shares short/6.92%/7.45 Arena has options. 1.36% increase over previous reporting period.
days to cover.
Kushco Hldg KSHB 3.73m shares short/ 7.18%/ 3.66 A 1.0% decrease over the previous reporting period.
days to cover.
Hexo Corp HEXO us 19.63m shares short/8.15%/ 7.6 Great example of what can happen when you throw an earnings miss in there.
days to cover. HEXO short interest on 3/15/19 was 3.1m shares.
Source: Bloomberg
9Clinical pharmaceutical-stage cannabis
We feel it is important to differentiate between the cannabinoid clinical programs and the
recreational/nutraceutical cannabis names. The clinical cannabinoid companies need to move
through the traditional FDA drug approval process. At the moment, most of the studies are being
carried out around the pain, inflammatory and CNS indications.
As with other FDA clinical programs, we will be paying attention to the catalysts of clinical trial
results, PDUFA dates. There are six therapies approved by regulators:
Cannabis therapeutics currently authorized by regulators
Brand name Originator Description Indications Form Location of approvals
Sativex (nabiximols) GW Extract of cannabis: mix of Multiple sclerosis-related Sublingual 25 countries in Europe, Latin America,
delta-9-tetrahydrocannabinol spasticity spray North America and Australasia. Not
(THC) and cannabidiol (CBD), approved in the US
1:1 ratio
Marinol (dronabinol) Unimed Synthetic delta-9-THC Loss of appetite in people Capsules US, Canada, Germany, Australia and
with AIDS and nausea and New Zealand
vomiting caused by chemo-
therapy
Syndros (dronabinol) Insys Synthetic delta-9-THC Loss of appetite in people Liquid US
with AIDS and nausea and
vomiting caused by chemo-
therapy
Cesamet (nabilone) Lilly Synthetic cannabinoid similar Nausea and vomiting Capsules US, Canada, Europe, Australia
to THC caused by chemotherapy
Bedrocan (dried cannabis Bedrocan Medical-grade cannabis Various Cannabis Certain countries within Europe where
flower tips) flower tips medical cannabis is legal
Epidiolex GW Cannabidiol (CBD) Dravet and Lennox- Liquid US
Gastaut syndromes
(pediatric epilepsies)
Source: European Monitoring Centre for Drugs and Addiction, FDA, drug labels, company reports
10Medical clinical-stage cannabis
Current
Current clinical-stage cannabis
clinical-stage programsprograms
cannabis include: include:
Select clinical-stage cannabis programs
Company Product Generic name Phase Indication
Insys Therapeutics Cannabidiol Cannabidiol III Epilepsy, Prader-Willi syndrome
Tilray Cannabidiol oil capsule Cannabidiol; III Anxiety
Corbus Lenabasum Ajulemic acid III Systemic sclerosis, dermatomyositis, lupus, cystic fibrosis
Tetra Bio-Pharma PPP005 Cannabidiol; tetrahydrocannabinol II/III Cancer pain
Zynerba ZYN002 Cannabidiol II/III Fragile X
Arena APD371 Olorinab II Gastrointestinal pain
Therapix Biosciences THX-110 Dronabinol; palmitoylethanolamide II Tourette syndrome, obstructive sleep apnea and pain
CMXTwenty CMX-020 CMX-020 II Pain
Tilray Cannabis (vaporized) Cannabidiol; tetrahydrocannabinol II PTSD
Tilray TN-TC19LM Cannabidiol; tetrahydrocannabinol II HIV
Tetra Bio-Pharma PPP001 Cannabidiol; tetrahydrocannabinol II Cancer pain
GW Pharmaceuticals GWP42006 Cannabidivarin II Epilepsy, autism, Rett syndrome
GW Pharmaceuticals GWP42002 Cannabidiol; tetrahydrocannabinol II Glioblastoma
GW Pharmaceuticals GWP42003 Cannabidiol II schizophrenia, neonatal hypoxic-ischemic encephalopathy
Kalytera Therapeutics CBD Cannabidiol II GvHD
Botanix BTX 1503 Cannabidiol II Acne
Botanix BTX 1204 Cannabidiol II Atopic dermatitis
Tilray TN-TC11G Cannabidiol; tetrahydrocannabinol I/II Glioblastoma
Intec Pharma AP-CBD Cannabidiol I Pain
Intec Pharma AP-THC Tetrahydrocannabinol I Pain
Artelo Biosciences ART27.13 ART27.13 I Anorexia
Bird Rock Bio Nimacimab Nimacimab I NASH, diabetic kidney disease
Veritas Pharma CTL-X Undisclosed I Acute pain
Source: EvaluatePharma, company reports, clinicaltrials.gov
11Medical clinical-stage cannabis
(continued)
Cannabinoid pipeline in pain
Current clinical-stage cannabis programs include:
Company Product Generic name Phase Comments
Tetra Bio-Pharma PPP001 Cannabidiol; tetrahydrocannabinol II/III Smokable cannabis pellets for cancer pain. Only data so far
have been Phase I study in healthy volunteers. Phase III
program ongoing.
Arena APD371 Olorinab II CB2 agonist for the treatment of GI-based visceral pain. In a
Phase IIa in 14 patients, 79% had clinically relevant reduc-
tions in pain at weeks four and eight. Preparing for Phase IIb.
Therapix Biosciences THX-110 Dronabinol; palmitoylethanolamide II Dronabinol and PEA for chronic low back pain. No data yet.
Phase IIa ongoing.
CMXTwenty CMX-020 CMX-020 II Oral and intravenous cannabinoid. Current status uncertain.
Tetra Bio-Pharma PPP005 Cannabidiol; tetrahydrocannabinol II Cannabis oil for cancer pain. No data so far.
Intec Pharma AP-CBD Cannabidiol I Sustained release CBD for low back pain, neuropathic pain
and fibromyalgia. In Phase I.
Intec Pharma AP-THC Tetrahydrocannabinol I Sustained release THC for low back pain, neuropathic pain
and fibromyalgia. In Phase I.
Veritas Pharma CTL-X Undisclosed I Undisclosed cannabinoid product for acute pain.
Source: EvaluatePharma, company reports, clinicaltrials.gov
We will be following closely the progress of these therapeutic pipelines.
12Cannabis newsflow
Probably the most important factors surrounding the investment in the cannabis space are the
legislative process surrounding legalization and banking, as well as the FDA and DEA
determinations. As we know, cannabis is still a Schedule 1 narcotic on the Federal level, which is
greatly hampering financial service access in the banking arena, as well as research programs.
According to New Frontier Data, ‘While cannabis is legal for adult use in 10 states and the District
of Columbia (DC) and legal for medical use in a total of 33 states plus DC, there are more than
1,100 cannabis-related bills under consideration in 2019 agendas throughout state legislatures
and Congress’.
Progress is being made as in response to the banking associations from all 50 states the House
Financial Services committee has approved its version of the bill in a bipartisan vote of 45 to 15 in
March.
We are also following the Texas legislature as it has filed a bill that would add multiple sclerosis,
epilepsy and spasticity to the list of conditions that would qualify for approved medical exemptions
for CBD oil. Currently the Texas compassionate-use program only allows the sale of CBD for
patients with intractable epilepsy.
We will continue to watch for ease of access and pharmaceutical clinical trial progress as
catalysts for investment in the cannabis space.
Articles
Canadian governments raked in $186m in taxes on cannabis trade in first five months of
legalization, Financial Post
Canadian federal and provincial governments raked in $186m in tax revenue from the sale of
cannabis in the first five and a half months following legalization, according to new Statistics
Canada data. This is the first report of such data, and should be closely watched.
Cannabidiol shows promise against superbug infections, FierceBiotech
Over-supply on the horizon should Federal Interstate transportation regulations lessen, Wall St
Journal
Congressional bill would allow marijuana imports and exports between legal states, Boston Globe
Scientists sue DEA over marijuana cultivation application delay, MarijuanaMoment.net
Cannabis approval continues to maintain momentum in numerous States, Ill house votes to
approve rec cannabis, CBS News
AZ Supreme court votes 7-0 on availability of Marijuana resin extracts, Phoenix New Times
The four biggest cannabis question marks for the second half of 2019, yahoo.com
Barron’s looks at Aphria vape deal with Pax Labs and interviews Jefferies analyst on cannabis
space.
13FDA public hearing
We spent a few hours on the FDA Cannabis Public Hearing webcast on Friday 31 May. The
event brought together consumers, agriculture and manufacturers, lawyers and health
professionals to offer their opinions of the state of the recreational and medical cannabis
industries. There were over 100 presenters who offered a number of differentiated opinions. With
the OTC Markets Group Cannabis Index grinding lower to 747.38 close, down 5.19% on the day,
it briefly touched an all-time low of 736.25. We are not surprised as it was evident early on that
the FDA hearing was not going to be a cannabis/CBD lovefest. There were a number of concerns
put forth over the day, even by clear supporters of the cannabis industry. Negative commentary
came from some former cannabis workers, regarding company production behavior, as well as
some parents of children that they feel were exposed to negative cannabis effects. The majority
of concerns surrounded highly variable potency and contamination, with the majority of the
commentators urging the FDA to standardize testing and labeling with much haste. The scientific
community was in uniform step that there needed to be greater access to cannabis products for
research products and that the DEA is not moving quickly enough. The FDA has set a deadline of
2 July for written comments on the issues. Many of the presenters indicated they would be
furnishing written commentary, with data included.
14Latest Edison cannabis research
From Edison’s Maxim Jacobs, Edison’s head of healthcare research in New York:
MGC Au
Cannabis sector report (April 30)
Bitesize Briefing, Cannabis sector report (May 16)
Investment Themes: Cannabinoid Therapies – Therapeutics (May 22)
Investment Themes: Cannabinoid Therapies – Retail (June 10)
Edison Talks: Interview with CEO of InMed (June 17)
Bitesize Briefing: Cannabis sector teach-in (July 8)
As trading in cannabis-related securities matures from a retail-dominant market to a larger,
institutional trading market, we will add some traditional metrics to our cannabis trading update.
As with our traditional healthcare trading metric coverage, we expect to find notable additions to
13g/13f and Form 4 filings as investment keys. We expect to see investment in this space track
healthcare investment, where much of the ‘oomph’ could be provided by what many would call
‘vanilla generalist investment’. As legalization and acceptance progress, we anticipate more
institutional block trading emerge and we hope that our eye on the ball will help you monitor these
investments. Cannabis investing is entering an exciting, dynamic and fluid time, and we expect
this piece to be free flowing. We look forward to hearing what you like, what you don’t like and
what you think would help.
Looking forward to the next edition of cannabis trading update, as August is a very busy earnings
reporting period for the cannabis industry and we will have a lot to look at post earnings. We will
also revisit the FDA commentary submissions that were due by 2 July 2019.
Christopher Beyer
1185 Ave. of Americas
2nd Floor
New York, NY 10036
+1 646 653 7040
CBeyer@edisongroup.com
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