Liberty Health Sciences Surges As Florida Cannabis Operators Remain Hot

Benjamin A. Smith
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Liberty Health Sciences Inc (CSE:LHS) (OTCQX:LHSIF) broke to an 8-month high in morning trade today, building off the bullish momentum it has accrued recently. So far, today’s break has pierced the September 25th closing high, on volume which will likely best anything witnessed since April.

Of course, the current run in Liberty Health Sciences began along with the sector at-large on August 15th, after Constellation Brands’ massive $5 billion directly-equity investment in Canopy Growth Corp. However unlike many licensed producers, its run is still ongoing. While LHS hasn’t disseminated any material news in the last week, its recent spat of events has investors excited.

On September 6th, LHS announced today an 95% increase in sales revenue in the three-month period ended August 31, 2018 compared to the previous three-month period which ended May 31, 2018. Aggregate quarterly revenue chimed-in at $2.2 million, versus the $1.1 million for the previous quarter. Keep in mind, this QoQ revenue growth the company is reporting, not year-over-year numbers, in which such growth is relatively common throughout the industry. 

Besting the impressive revenue increase described above was Liberty Health’s boost in medical enrollments. Patient counts surged to almost 10,000 patients at the end of August, from 4,600 at the end of May—a 112% increase QoQ. Easy comps or not, the tremendous growth provides outstanding visibility for the company.

Liberty Health Sciences CEO George Scorsis provides an update on the company’s recent activities, including its recent stock surge, its deal with PAX, and company performance in the Florida market

Also providing a catalyst for LHS is the peer performance of another Florida based vertically-integrated operator, Trulieve Cannabis Corp. (TRUL). The $1.8 billion company with a tiny 7.5 million float has been receiving much attention in retail investor circles lately, owing to its large net revenue (currently larger than Canopy Growth), dominant market position (83,000 medical enrollments vs. LHS [see above]) and relative valuation.

At publishing time, Trulieve is trading up $2.65 to $17.94/share (↑17.33%) despite the issuance of an aggregate of 10,927,500 subscription receipts at a price of $6.00/SR during its last financing round on August 29th. Today’s performance represents a 299.01% increase in a little over a month, and ↑79.75% in less than four trading days since its inaugural trading session on the Canadian Securities Exchange. Certainly, the hype surrounding the company’s relative peer valuation—along with memories of Tilray’s illiquid-fueled historic ramp—have kept a firm bid under the stock.

Keep in mind, however, that Trulieve’s operations may be restricted by state law limiting the amount of retail outlets each company can operate—set at 25 with further limited expansion possibilities based on medical enrollment counts. Trulieve is currently fighting the constitutionality of that law in state court (Trulieve v. DOH Case No. 2018-CA-000698), with the case set for trial in late-August. No decision has been rendered yet, however the outcome will of course be very material in nature. An exact timeline for the issuance of the upcoming summary decision has not been disclosed.

Midas Letter will have further coverage of both Liberty Health Sciences and Trulieve Cannabis as further events warrant.

Benjamin A. Smith

Benjamin A. Smith

Ben is a research analyst and capital markets professional with nearly 20 years of experience. His areas of expertise are broad-based, and include extensive knowledge of macro economics, stock/derivative trading, commodity complexes, cryptocurrencies and technical/quant analysis. He also maintains an particular affinity for U.S. politics and the macro-regulatory environment facing...
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