FSD Pharma Stock: Why It Has Been a Top Cannabis Performer

Shares of FSD Pharma Inc. (CSE:HUGE), one of the Canadian marijuana stocks, have surged as much as 652% during the past six weeks

SmallCapPower | September 27, 2018: FSD Pharma Inc. (CSE:HUGE) shares have been on an impressive run during the past six weeks. Since presenting at the SmallCapPower Mid-Summer Cannabis Investing Event (see the presentations here) on August 13, 2018, the stock price of FSD Pharma has soared as much as 652% (from $0.125 to high of $0.94).

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In a recent interview with Capital ideas TV, contributor Fabrice Taylor said FSD Pharma has a preferred growing method, a food-grade facility, under-appreciated assets, and could eventually get taken out by a larger player.

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The past six weeks have been eventful for FSD Pharma, which, through its wholly-owned subsidiary FV Pharma, is a licensed producer of marijuana under the Access to Cannabis for Medical Purposes Regulations (ACMPR), having received its cultivation license on October 13, 2017.

On August 31, 2018, FSD Pharma reported its second-quarter 2018 results, indicating that the Company had $31.7 million in cash and equivalents and no debt. FSD Pharma plans to have one of the largest indoor grow facility, in Coburg, Ontario, with a total grow capacity in excess of three million square feet upon completion. Annual output from the facility is expected to be about 400 million grams, of which 200 million grams would be attributed to FSD Pharma

As well, on September 13, 2018, FSD Pharma announced a strategic partnership with JJAMACANN Inc. to pursue opportunities in the Jamaican cannabis market. FSD has signed a Letter of Intent (LOI) with JJAMACANN Inc. to form a joint venture operating as FSD Jamaica, effective September 10, 2018. As part of the LOI, FSD Jamaica will establish an experimental centre for the development of cannabis and cannabinoid genetics suitable to cultivate in Jamaica with the intent to create a genetics and seed bank of innovative cannabis and hemp products for the Jamaican market and the Canadian market. FSD Jamaica will partner with a local player named Nature’s Purest Limited (NPL), a Jamaican corporation with a cultivation license and existing operations in Jamaica. FSD Jamaica plans to commence sales by 2019.

And, on September 18, 2018, FSD Pharma’s wholly-owned subsidiary, FV Pharma, signed a definitive agreement with Canntab Therapeutics Limited (CSE:PILL). As per the agreement, FV Pharma will assist Canntab in obtaining a license to process and sell cannabis products and will provide Canntab with up to 10,000 square feet of space at its facility in Cobourg, Ontario. At this facility, Canntab will set up its operations and produce a suite of novel cannabis oral dose delivery platforms, such as gel capsules and tablets, and other types of cannabis-based products, such as sleep aids and pain relievers.

According to the terms of the collaboration, Canntab will provide FSD Pharma with 50% of the profits that Canntab receives on any retail sales of Canntab Products through channels that are established by FSD Pharma and FSD Pharma will be entitled to retain 50% of the profits on FSD Pharma’s sales of the Canntab products. In addition, Canntab will pay FSD Pharma a royalty of 3.5% of Canntab’s sale price for all Canntab products that are manufactured and sold from the Canntab premises. Canntab may also purchase the oil that it requires for the Canntab products from FSD Pharma.

FSD Pharma trades at a market capitalization of C$954.2 million with a price-to-book multiple of 18.0x.

Disclosure: Neither the author nor his family own shares in the company mentioned above.

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