FSD Pharma Buildout Could Be HUGE for its Stock

FSD Pharma Inc. (CSE:HUGE) wants to construct the largest hydroponic indoor cannabis facility in the world

SmallCapPower | July 5, 2018: FSD Pharma Inc. (CSE:HUGE) Tuesday announced an expansion update regarding the joint venture between its wholly-owned subsidiary, FV Pharma Inc., and Auxly Cannabis Group Inc. (TSXV:XLY). Located in Cobourg, Ontario, the first phase of the buildout of FV Pharma’s facility has been approved through updated construction and development budget given by Auxly Cannabis. The total available building space is 620,000 square feet, of which 220,000 square feet will be developed and fully funded. Auxly Cannabis will provide $55 million to construct the facility.

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The first phase of the facility will include a Research and Development lab focused on advancements in LED lighting, nutrient testing, breeding and genetics research. It will also include a dedicated space for large-scale extraction capabilities.

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FSD Pharma President and CEO Thomas Fairfull remarked, “We are pleased to be working in partnership with Auxly to build out our facility in Cobourg. The first phase of our expansion plans sets the foundation for the continued development of a potential 3,800,000 square feet at the former Kraft plant. We have taken a significant step forward in delivering low-cost high-quality pharmaceutical grade cannabis at scale, and to achieving our company mission to build the largest hydroponic indoor cannabis facility in the world.”

FSD Pharma expects completion of the first phase of the facility, ready for approval by Health Canada, by December 2018-end. The Company anticipates planting the first harvest by January 2019-end. FSD Pharma retains a 50.1% stream (after all operating expenses are recovered plus a 10% profit is paid to FSD) of all cannabis and cannabis-derived products produced at the Facility, under partnership with Auxly, in perpetuity.

Auxly Cannabis Group Chairman and CEO Chuck Rifici said, “Our investment in this significant project in Cobourg demonstrates our commitment as a company to cultivating the highest quality cannabis at scale while effectively managing operating costs in a competitive marketplace. The market opportunity in Canada is sizable and Auxly is well positioned to secure a market leader position.”

Through the updated construction budget provided by Auxly Cannabis, the facility will implement several technological advancements so as to increase energy efficiency and post-harvest process automation. Such advancements are believed to benefit the environment and the community of Cobourg through less demand on the local electricity grid and will reduce operating expenses to the company.

FSD Pharma owns, through its wholly-owned subsidiary FV Pharma Inc., a license to produce marijuana under the Access to Cannabis for Medical Purposes Regulations (ACMPR), which was originally granted on October 13, 2017. FSD Pharma trades at a market capitalization of $224.34 million on CSE with a price-to-book multiple of 10.0x.

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

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