TerrAscend Corp. (CSE:TER) said it intends to pursue growth opportunities in the United States
SmallCapPower | November 1, 2018: TerrAscend Corp. (CSE:TER; OTCQX:TRSSF), incorporated in March 2017, is a Canadian company offering quality cannabis products, brands and services. The Company supports medical consumers via its wholly-owned subsidiaries Solace Health Inc., a licensed producer of medical cannabis under the Access to Cannabis for Medical Purposes Regulations (ACMPR), and Solace Health Network Inc., a clinical support program and education platform led by healthcare practitioners. Additionally, TerrAscend has a 50% stake in Solace RX Inc. and a 60% stake in Ascendant Laboratories Inc., both of which have yet to start their operations as the facilities are under construction.
While the construction of TerrAscend’s cannabis cultivation facility (at Solace Health) is underway, the Company hopes to produce ~2,000 to 2,500 kilograms of dried cannabis annually after completion. Also, TerrAscend has entered into strategic partnerships with Cistron Corp., Think AHLOT Corporation and Fire & Flower Inc. TerrAscend stock currently trades at market capitalization of C$885 million with a price-to-book multiple of 8.91x.
Investment thesis
- Ongoing facility construction
- Notable strategic partnerships
- Third-party processing and non-cannabis revenue sources
Ongoing facility construction
TerrAscend Corp’s cannabis production is driven primarily by Solace Health having a 67,300 square foot facility in Mississauga – 18,000 sq. ft. Phase 1 construction is completed and is in use for cultivation and processing of medicinal cannabis. Currently, the licensed space comprises two flower rooms, a mother/vegetation room, a trimming/drying room, a packaging room, an order fulfillment room, a level 10 vault, and extra areas for support such as mechanical and electrical rooms. Being in the development stage, Solace Health started sales in April 2018. The Company is building the vacant 41,000 sq. ft. area that will be divided into three zones – 6,500 sq. ft. drug preparation facility (DPP); 22,000 sq. ft. expansion of cultivation and support facilities; 12,000 sq. ft. Good Manufacturing Practices (GMP) post-cultivation processing space. Post completion of vacant area, the dried cannabis cultivation will be ~2,000 to 2,500 kilogram annually.
Notable strategic partnerships
TerrAscend formed a strategic joint venture with Cistron Corp. – Ascendant Laboratories Inc. – in June 2018. Ascendant Laboratories focuses on the advancement of cannabinoid expressing plant biology and provides common platform to experts in plant sciences as well as cannabis. 
Ascendant Laboratories has exclusive license over Cistron’s proprietary intellectual property rights and trade secrets pertaining to the cannabis plant and plant-derived cannabinoid research. On the other hand, TerrAscend will contribute C$1.25 million in cash, representing 75% stake in Ascendant Laboratories. The JV transaction is worth ~C$1.7 million.
Previously, TerrAscend made strategic investments worth C$1.5 million and C$2.5 million in Think AHLOT Corporation and Fire & Flower Inc., respectively. Its investment in AHLOT is through the issuance of convertible notes, whereas Fire & Flower is through shares and share warrants.
Recently, TerrAscend signed an agreement with Ontario Cannabis Retail Corporation (OCRC) for supplying premium cannabis products for the adult-use cannabis market to the province of Ontario.
Third-party processing and non-cannabis revenue sources
TerrAscend is offering Solace’s facility for third-party processing and distribution services to patients of other licensed cannabis producers located outside Greater Toronto area and out of the province. These services require approval from Health Canada.
Additionally, the Company is looking for non-cannabis alternatives for generation of its revenue. TerrAscend’s joint venture with Solace Rx, for construction of a DPP facility, is aimed at non-cannabis drug manufacturing. The DPP facility will reconstitute, dilute, prepare and/or combine non-cannabis drug preparations for health care practitioners.
Outlook
TerrAscend is constructing its cannabis cultivation facility (Phase 1 completed) and has entered into strategic partnerships with Cistron Corp., Think AHLOT Corporation and Fire & Flower Inc. TerrAscend currently trades at market capitalization of C$885 million with a price-to-book multiple of 8.91x. Catalysts that could move its stock price include its recently-announced intention to pursue growth opportunities in the United States as well as its shares being approved for trading on the OTCQX Best Market.
Disclosure: Neither the author nor his family own shares in the company mentioned above.
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