Columbia Care Inc: Why Cannabis Investors Should Give a Darn

Today we take a look at Columbia Care Inc.’s (NEO:CCHW) operations as well as catalysts for its stock price

SmallCapPower | July 5, 2019: Columbia Care Inc. (NEO:CCHW) (OTC:COLXF) is one of the largest U.S. cannabis MSOs in terms of market cap. The Company has had more than 750,000 successful patient interactions since its formation. As of 2018, Columbia Care has 54 facilities and operates with 35 licenses in 15 jurisdictions in the U.S. and EU.

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Columbia Care has cultivation operations in California, Arizona, Illinois, Florida, Ohio, Virginia, New York, Massachusetts, Malta, Puerto Rico and, New Jersey. The existing facilities allow for 730,000 sq. ft of cultivation. This allows for an annual capacity of 125,000 kg of dried flower. On November 15, 2018, Columbia Care was the first American company to be licensed in the EU with its fully-integrated license in Malta.

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Through its 12-year licensing agreement with Rhinomed, Columbia Care has gained exclusive rights to design, import, market, promote, distribute and sell Rhinomed’s nasally-delivered cannabis products in the United States. Rhinomed’s nasal medical delivery platform offers a wide range of applications that have the potential to capitalize on the global sleep apnea device market that is predicted to reach US$9.2B by 2024.

Figure 1: Rhinomed’s sleep apnea device

Source: (Investor Deck, 2019)

Columbia Care’s offering of the CNC Card, the only credit payment option available in the United States cannabis industry, is predicted to increase the Company’s sales. Although is the CNC Card is currently only available at Columbia Care dispensaries, the Company is looking at opportunities for partnerships for broader market penetration. This initiative aligns with the Company’s home delivery and eCommerce initiatives. We believe that the 18% increase in average basket size from in-store purchases that was experienced during the CNC pilot program shows that Columbia Care could be on the right path to continue growing sales with this increased ease of purchase.

Through partnered research studies on rheumatoid arthritis and epilepsy, the Company is expected to have scientific results that show the impact of its medicinal products as a treatment option. More specifically, with rheumatoid arthritis, the Company’s collaborative study with Westmed Medical Group that was announced on May 24, 2019, is reported to be one of the first of its kind to examine the effectiveness of using medicinal cannabis as a treatment. With no cure and limited treatment options for the ailment and varying professional opinions on the side effects of using cannabis as a treatment, this study has the potential to help change the way doctors view cannabis. In our opinion, these studies should help grow the Company’s market share in the US$61B Global Pain Management industry by educating people on the impact of using medical cannabis (Zion Market Research, 2018).

Overview of Financial Performance

Columbia Care reported Q1/19 revenue of US$12.9M, which represents year-over-year revenue growth of 45%. The increase in revenue can be attributed to organic growth and growing demand for Columbia Care’s products, its third-party products and its wholesale of manufacturing inputs to third-party medical cannabis retail dispensaries. As of March 31, 2019, the Company had US$170M of cash on hand and no debt. With the strong financial performance in 2018 and Q1/19, the Company has launched a line of industrial hemp-based CBD products and has signed lease agreements for dispensaries in Delaware, the District of Columbia, and 13 new facilities in Florida.

Distribution Network

The Company operates Columbia Care dispensaries and estimates that in 2019 it expects to have more than 50 stores across 14 states by the year end. Since 2017, the Company has offered home delivery in the state of New York. Currently, the Company offers a dispensary basket size for US$240 and a home delivery basket size for US$355. Columbia Care is planning to launch its home delivery into other markets throughout 2019. The Company’s products are also available for wholesale in dispensaries in 14 U.S. states and Malta. In May 2019, Columbia Care also began selling industrial hemp CBD products at traditional retailers.

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