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TerrAscend Corp (CNSX:TER) First Cannabis Company Licensed for Sales in Canada, US & EU

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Midas Letter is provided as a source of information only, and is in no way to be construed as investment advice. James West, the author and publisher of the Midas Letter, is not authorized to provide investor advice, and provides this information only to readers who are interested in knowing what he is investing in and how he reaches such decisions.

Investing in emerging public companies involves a high degree of risk and investors in such companies could lose all their money. Always consult a duly accredited investment professional in your jurisdiction prior to making any investment decision.

Midas Letter occasionally accepts fees for advertising and sponsorship from public companies featured on this site. James West and/or Midas Letter may also receive compensation from companies affiliated with companies featured on this site. James West and/or Midas Letter also invests in companies on this site and so readers should view all information on this site as biased.

TerrAscend Corp (CNSX:TER) (OTCMKTS:TRSSF) CEO Michael Nashat joins Midas Letter to discuss becoming the first and only global cannabis company licensed for sales in Canada, the US, and the EU. TerrAscend has received EU GMP certification for its manufacturing facility and recently received approval from Health Canada for an expansion at the facility. The CEO details a number of acquisitions the company have made, its forecasted revenue guidance this year and what the effect cannabis 2.0 has on the company.

Transcript

James West: I’m joined now by Michael Nashat, CEO of TerrAscend Corp., trading on the CSE under the symbol TER. Michael, welcome.

Michael Nashat: Thank you, James. Thank you for having me.

James West: Yeah, sure! Michael, why don’t we start with an overview what exactly is Terr Ascend’s business.

Michael Nashat: Well, TerrAscend is a global cannabinoid company. We’re the first North American operator. We have substantial businesses in Canada, where we operate in our facility from Mississauga, servicing both the adult use and the medical markets. We’re also GMP certified by the German authorities, so we already have the capability and the ability, and have already sold products, to the German markets where we exported our first shipment, and looking to do additional shipments as well as exploring additional international opportunities. 

In the US, we’re also operating, where we have four businesses now with THC-touching entities in the states of California, Nevada, Pennsylvania, and New Jersey. New Jersey and Pennsylvania are facilities that are on the east coast and attached to each other, and we’re leveraging each of the strengths that we have over there to build the businesses, and the California and Nevada businesses, through the Apothecarium and Ryan Hudson and his team, working to establish the West Coast presence over there.

In addition, we also have a hemp-based cannabinoid business that we distribute hemp-based cannabinoids to a number of national retailers, independent stores, pharmacies, natural health food stores. We do that through Arise Bioscience through two brands: Funky Farms and Original Hemp.

James West: Oh, wow, you’ve got a lot going on.

Michael Nashat: We definitely do.

James West: Okay, so tell me about your financial picture – what does that look like?

Michael Nashat: So we have been growing very, very quickly and we have made a number of acquisitions. We forecasted that we’d have 140 million in guidance this year, in revenue. This is driven by many of the acquisitions that we’re making, and we’re going towards that, and it’s been an exciting times, and the company has been growing very, very fast.

James West: Sure. That makes you one of the largest revenue producers in the industry.

Michael Nashat: We will be, yes.

James West: Wow. Well, that’s fantastic. Okay, so where is the, how is the business divided in terms of revenue significance? Which is the most important markets, in order of towards which is the less significant?

Michael Nashat: Well, I think the most important and the most profitable market will be in the US, and especially on the THC space that’s growing. Our businesses in California are very strong; when we bought the Apothecarium, $45 million of revenue that we have. That’s across four dispensaries and cultivation and a processing facility. We’re excited about additional markets that are coming online in the East Coast; I believe New Jersey will be a great market to be in. we were granted a license from there, from the New Jersey Department of Health, that we’re building out and hope to have operational by Q4 of this year. This is mainly a medical market, but there is a lack of products for patients; more products are needed, more product formats are needed, and we’re looking to use New Jersey as the platform for the products that we are bringing along from Pennsylvania, from California, and the ones that we’re developing in Canada.

The Pennsylvania market will also continue to grow. The current facility is 67,000 square feet – we’re adding over 100,000 square feet of cultivation and processing over there. Again, it’s a medical market. Anxiety was just added as one of the conditions approved for treatment in New Jersey; that’s a big medical conditions, and a big opportunity to help patients with anxiety. It has about 22 percent prevalence rate in the patients over there, and we’re expecting that recreational market will come to New Jersey and Pennsylvania over the next couple of years.

James West: Wow, okay. So, you’ve got so much revenue coming in, and you’ve got such a global presence already. The one thing that really has not been able to deliver in terms of investor expectations is profitability. And how does that sort of picture look for TerrAscend?

Michael Nashat: So profitability is very, very important. We’ve kind of stayed under the radar for many years, and the companies that we are purchasing in the US are all profitable. We’ve made sure that any acquisition that we make has profitability built into it, to help us build an accretive business for the shareholders.

In terms of the business that are currently being built, so our Mississauga facility is currently being completed; we’re expecting licensing for the additional 43,000 square feet of our 67,000 square foot facility, this year, before the year is over. And in New Jersey, we’re still building it from scratch. So that is a market that we believe that will be operational also by the end of this year.

So profitability is very, very important, so fundamentals and everything that we do. We do want to be a sustainable business. We will be looking to do more acquisitions, of course, but any acquisition that we do is going to be profitable businesses that we are able to capture.

James West: Okay, and so, how does the advent of cannabis 2.0 in Canada affect TerrAscend?

Michael Nashat: It’s great. So we have very advanced pipeline and stage. Our facility, even though it’s 67,000 square feet, it’s primarily dedicated to processing, and we’ll be looking to launch new product formats, including the edible formats that is going to be allowed. So we have teas coming, we have chocolates coming, we have cookies, we have macarons coming in Canada. We also have our own vape technology that we’ve developed and bringing into Canada. We have the Valhalla gummie that we make in California, that we’ll be bringing to the Canadian market by next year, and the Alera line that has formulations including topicals, including its own faith formulations that are made from different technologies, we’re looking to bring those in the Canadian markets, as well.

So we have a very robust pipelines of US brands and US formulations that we own, that we look forward to bring forward in Canada, and we’ll give our Canadian brands that we’ve built here, and our Canadian formulations, to bring to the markets into the US that are allowed to be sold. Pennsylvania has no edible program yet; all the other states do.

James West: Wow. You’ve got it going on. What does the next 24 months look like in terms of global expansion for you?

Michael Nashat: 24 months, I think, is a long time to look out in this industry. I think our plan over there is to establish those launch platforms in these states. So we have states like California and Nevada, New Jersey and Pennsylvania now, where we’ve established a nice platform to launch new products and launch new formulations. And cross-pollinate the brands and the formulations that we’ve acquired or have developed, in those markets. So we’ll be looking forward to add more platforms to launch in additional US states, expand our international presence not by acquisition, but by partnerships with local companies in those markets. Because in Germany, for example, we know cannabinoids are distributed through pharmacies, so we’ve worked with Ayuval Health Care Pharmaceuticals (phon) to be able to get our products through their distribution channels to be distributed to pharmacies.

And we have a multiple of international markets that we’re working with right now to be able to get our products to be distributed through their markets, without us putting the CapEx dollars in those markets and focusing on developing our home base in North America.

James West: Right. Okay, well, that’s interesting. So you’re really focusing on the US, though?

Michael Nashat: The US and Canada are the primary focus for us to develop a platform for our business.

James West: Okay. And so, do you see yourself being categorized as a US MSO at some point, besides also being Canadian and European?

Michael Nashat: So we see ourself as a North American operator, which is the only company in its class right now.

James West: Huh. A multi-continent operator.

Michael Nashat: The first multi- we have reached, definitely, a multi-continent. We have a global reach, but focusing our operation, expertise and excellence in the Canadian and US markets, which we believe are going to be the most important markets right now.

James West: So which of the segments of the various cannabis markets would you say is going to be the most attractive from a margin perspective?

Michael Nashat: I think that complex formulations, or brands, are going to have the most, be the most profitable. Whether that is a tea formulation, whether it’s a complex edible or a complex nanotechnology that can actually work in the cannabinoid place, that’s where the margins will be. I do believe that eventually, commoditization will come, but as in every other industry, there is commoditizable parts and there’s non-commoditizable parts, like coffee, for example, would be a good example of brands that they’re still making a premium presence and things that can be done very, very cheaply.

It’s important to create standardized products, create quality products, and to make sure that you have brands that make sense for the customers and consumers, and they will be the ultimate chooser of what succeeds or not. I do think that sometimes we tend to tell customers this is what they want, and we’re learning a lot through our Apothecarium platform in California, where we have dispensaries in the San Francisco Bay area, and because a lot of brands are born in California, we have a lot of insight of what brands work, what formulations work, what customers want, and that will help educate what brands we bring to the markets in all the markets that we’re in.

James West: There’s been a real explosion of outdoor grown hemp and cannabis in Canada, and next year’s probably going to be twice as much. Obviously has a cheaper cost input, or input cost, rather. And so how do you see that affecting your operation? Are you planning to get into sourcing more from outdoor, or is it just a feedstock for you and you don’t care where it comes from?

Michael Nashat: So we’re looking at quality cannabis products; garbage in is garbage out. So anything you put in your products has to be quality products. The issue that we have with outdoor cultivation right now is that quality measures are not in place yet to get a good crop out. But genetics work. Science has changed a lot of that for many other crops. The tomatoes that we have today, the other outdoor crops that we have today, are not like the crops we had 10, 15 years ago, and that work has started already.

And over time, you will see that the quality of outdoor will start to improve and rival and match what we’ve seen some indoor and some greenhouse facilities. It will take some time to get there, but I do believe that eventually will get there. Will Canada be the largest outdoor producer of cannabis? Probably not, because of the climate. But we will see, I believe, more quality outdoor products coming in.

We have made a choice not to invest in large cultivation facility; we believe that other people can do that a lot better than we are. We believe it’s a very hard business, it’s a very tough business. But we’d rather focus on creating a higher value in the supply chain, looking at creating brands, products and formulations, and working with cultivation partners to bring quality products into our supply chain and help transform that product to the end customer.

James West: Sounds great. All right, Michael, we’ll leave it there for now. That’s a great introductory conversation; I’ll be happy to have you back, because I’m really intrigued by how quickly you’ve sort of grown into a global presence. Thanks for joining me today.

Michael Nashat: Thank you for having me. I really appreciate it.

Midas Letter is provided as a source of information only, and is in no way to be construed as investment advice. James West, the author and publisher of the Midas Letter, is not authorized to provide investor advice, and provides this information only to readers who are interested in knowing what he is investing in and how he reaches such decisions.

Investing in emerging public companies involves a high degree of risk and investors in such companies could lose all their money. Always consult a duly accredited investment professional in your jurisdiction prior to making any investment decision.

Midas Letter occasionally accepts fees for advertising and sponsorship from public companies featured on this site. James West and/or Midas Letter may also receive compensation from companies affiliated with companies featured on this site. James West and/or Midas Letter also invests in companies on this site and so readers should view all information on this site as biased.

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