FSD Pharma Inc. (CSE:HUGE) looks attractive at current level given the business technique employed for cannabis production, strategic alliances with other firms, and its focus on research and development
SmallCapPower | November 13, 2018: FSD Pharma Inc. (CSE:HUGE), via its wholly-owned subsidiary FV Pharma, is a licensed producer of cannabis after receipt of its cultivation license under the Access to Cannabis for Medical Purposes Regulations (ACMPR) on October 13, 2017. The Company places emphasis on the development of the highest-quality indoor grown, pharmaceutical-grade cannabis as well as the research and development of cannabinoid-based treatments for several central nervous system disorders, including chronic pain, fibromyalgia and irritable bowel syndrome (IBS). FSD Pharma is one of many exciting cannabis companies presenting at the New Green Frontier Cannabis Conference on November 19, 2018. Investors can sign up for the free webcast or register to attend in person here
FSD Pharma has a vast area of land totaling 72 acres with 40 acres ready for development and an expansion capability of up to 3,896,000 square feet. The Company intends to transform its current headquarters in a Kraft plant in Cobourg, Ontario into the largest hydroponic indoor grow facility in the world. The Company is maintaining a tight grip on costs, having everything under one roof, resulting in greater economies of scale and less logistical issues. FSD’s building infrastructure is valued at a replacement cost of $78 million as per appraisal. Apart from having a parking lot of five acres, the 70-acre area has provision for a railway line into the facility (capacity for three rail cars to come inside the plant) and a separate area to construct a helipad.
Currently, FSD Pharma has a 25,000 sq. ft. facility with total production capacity of 4,000 kg. Expansion of the facilities will be carried out in two phases – Phase 1 at 820,000 sq. ft. and Phase 2 at 3,896,000 sq. ft. with no restriction on production capacity.
In September 2018, Auxly Cannabis Group Inc. (TSXV:XLY) made a $7.5 million strategic investment in FV Pharma, part of which will be used for construction of the initial 220,000 sq. ft. cultivation footprint. Auxly, formerly Cannabis Wheaton Income Corp., will retain a 49.9% stream of all cannabis and cannabis-derived products produced at the facility while 50.1% production will go to FV Pharma.
Additionally, the Company has made strategic investments in Cannara Biotech Inc., High Tide Inc. and SciCann Therapeutics.
FV Pharma will occupy over 105,000 sq. ft. of Cannara’s 625,000 sq. ft. facility on 27 acres of land with combined grow space of ~1.245 million sq. ft. of indoor capacity. Post approval, the Company plans to build this facility as the largest indoor cultivation facility in Quebec.
On November 13, 2018, FSD Pharma announced that its FV Pharma subsidiary has received a new cannabis license that includes the ability to sell cannabis to other licensed producers, which the Company said put it one step closer to obtaining of a full sales license from Health Canada.
Furthermore, FSD Pharma has placed $2 million in High Tide, a fully-integrated retail distribution company having 22 permits for retail cannabis stores in Alberta, with plans of extending it to 37 stores in province. High Tide is awaiting a wholesale cannabis permit in Saskatchewan, intends to establish eight retail cannabis stores in British Columbia as well as obtaining a large number of retail licenses in Ontario. Also, High Tide owns four prominent retail brands in Canada – RGR Canada Inc., Smokers Corner, Canna Cabana, and Famous Brandz.
FSD Pharma looks attractive at current level given the business technique employed for cannabis production, strategic alliances with other firms, and its focus on research and development. The Company’s stock currently trades at market capitalization of $611.3 million with a price-to-book multiple of 11.38x. The stock started trading on the CSE in May 2018 and has broken the Canadian all-time trading volume records for daily, weekly and monthly volumes on the exchange.
Disclosure: Neither the author nor his family own shares in the company mentioned above.
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