🌿Aurora Cannabis CEO predicts a “Monsanto” of cannabis will emerge

AWH IPO ends week +12%. Sundial Growers acquires Inner Spirit Holdings for $131M. Tilray merger closes. Pabst Labs launching THC-infused “Not Your Father's” Root Beer.


🌿Industry

Cannabis Goes Corporate: Lobbyists, Unions Seek to Shape Marijuana Industry. A decade ago, a handful of pro-pot companies and interest groups spent less than a half-million dollars on federal lobbying. By 2019, there were dozens of supporters, and they spent more than $8 million to hire about 130 registered lobbyists, according to a Wall Street Journal analysis of public lobbying disclosures. Federal lobbying on cannabis declined last year amid the coronavirus pandemic and presidential election, but this year’s first-quarter reports show spending is rebounding. Banks including Morgan Stanley, as well as tobacco and alcohol companies, are beginning to weigh in on federal cannabis policy, according to lobbying records. The industry’s increasing legitimacy at the state level has attracted a diverse set of corporate players, union advocates, personal-use supporters and social-justice activists, reflecting the industry’s widening base even if its participants are sometimes at odds with each other.

The CEO of cannabis giant Aurora explains why he's laser focused on plant genetics and predicts a “Monsanto” of cannabis will emerge. Aurora Cannabis CEO Miguel Martin thinks the cannabis industry, and those who pay close attention to it, aren't talking enough about the value of plant genetics. "There's going to be a cannabis company that looks more like Monsanto." By that, he means companies that want to dominate the emerging industry will need to create cannabis strains with specific genetic profiles that give users the desired taste, smell, and psychoactive effects — and be sure that the product can be replicated consistently across different markets. These types of products can command higher prices on the dispensary shelf, and offer producers higher margins as well, analysts say. Martin says genetics matter in every agricultural product, and the cannabis industry is no different. Martin said that cannabis consumers, at least according to Aurora's sales in Canada and market data, prefer their Cannabis with specific chemical profiles. That can include levels of active cannabinoids like THC and CBD or the lesser-known CBG and CBN, as well as specific terpenes and other compounds that give marijuana its flavor or dictate the type of high a consumer will feel.

Martin says biotechs like Ginkgo Bioworks — which has a partnership with Aurora competitor Cronos Group — and others that own IP around synthesizing these compounds in a consistent way for use in food and beverage products could become attractive acquisition targets. Prior to Martin's tenure at the company, Aurora purchased cannabis biotech Anandia Laboratories for ~$94Min 2018.

"If everybody that drank alcohol all wanted the cheapest, strongest thing, they'd all drink moonshine. People will pay more for higher-quality, lower potency products with the desired taste, smell, and high.” — Aurora Cannabis CEO Miguel Martin

Skittles owner sues THC-laced copycat Zkittlez for trademark infringement. Mars Inc.’s Wrigley unit, the owner of Skittles, Starburst and Life Savers candies, filed complaints against Terphogz, the maker of THC-infused candy Zkittlez, on the grounds of trademark infringement. Lawsuits were filed in U.S. federal courts Illinois and California and in Canada seeking to halt the sale of Zkittlez goods, drug paraphernalia, clothing and merchandise. “At Mars Wrigley we take great pride in making fun treats that parents can trust giving to their children and children can enjoy safely. We are deeply disturbed to see our trademarked brands being used illegally to sell THC-infused products, and even more so to hear of children ingesting these products and becoming ill,” a Mars company spokeswoman said in a email. Wrigley said it is concerned the similar product names are confusing to consumers, and it could hurt the company’s reputation.

Retail cannabis gets the green light in Costa Mesa as council passes new law. Six months after Costa Mesa voters resoundingly approved Measure Q — a move to legalize retail cannabis sales and delivery — city officials on Tuesday adopted legislation intended to regulate such businesses while weeding out bad actors. The ordinance that will allow dispensaries in commercial zones but institute a 1,000-foot barrier from sensitive uses, such as K-12 schools, playgrounds, child daycare centers and homeless shelters. The law will also prohibit pot shops from opening within 600 feet of youth centers, where children socialize; buffer distances will be measured, in a straight line, even through what some claim is the impenetrable barrier that is the 405 Freeway. Costa Mesa will impose a 7% tax on all cannabis goods — a move that’s estimated could bring in $3 million to the city annually but which, on top of sales tax and a state excise tax, will constitute a 30% levy customers will have to pay. While no cap will be placed on the number of businesses in town, any property where an illegal business has operated in the past cannot be granted a retail permit until at least one year has passed.

A Religious Community and the Weed Farm in the Middle of It. The Latter-day Saints temple looms over the landscape, its smooth granite exterior bright in the high desert sun. At the top, a golden angel glimmers in the light. Across the quiet highway from the temple is a 40-acre greenhouse that locals refer to as “the marijuana farm.” Phoenix is a three-hour drive away. They call it “the Valley” here, 5,600 feet above sea level. Though only around 6,000 people live in Snowflake, the temple draws more than six times that number, from as far away as New Mexico. Officially, the cannabis company is called Copperstate Farms. It is partly owned by Fife Symington IV, the son of a former governor of Arizona, and it bills itself as the largest wholesaler of cannabis in the state. It may be the biggest greenhouse dedicated exclusively to cannabis in North America. In 2015, Mr. Symington heard that the greenhouse’s owner at the time, NatureSweet, was having a tough time with its local tomato-growing operation and had opted to leave Snowflake. Mr. Symington decided the greenhouse had to be his. But before he could grow anything, Mr. Symington had to convince the locals. Resistance ran deep. Lynn Johnson, now the mayor of Snowflake and a member of the church, was on the City Council at the time. “A lot of people were very upset,” Mr. Johnson said. “Here we are, an L.D.S. community, and we have the biggest marijuana farm in the world. That was a little bit rough.”

Zig Zag CFO ready to capitalize on cannabis. When Louie Reformina traded in his 20-year Wall Street career for his first operational role, he joined a company, Turning Point Brands, that had a long history of distress. Although it had a highly recognized and successful brand in Zig Zag rolling papers, the company had been built through a series of leveraged buyouts and, for many years, was struggling with a weak balance sheet that left it unable to invest in growth. The company’s turnaround began in 2016, when it gained access to public capital through an IPO, enabling it to clean up its balance sheet and broaden its product reach into growth areas. As CFO, Reformina’s focus will be on deploying some $160M in cash on its balance sheet to leverage what’s expected to be a surge in demand for rolling papers, vapes, and other products as more states legalize cannabis. 

“It was operating at six times its leverage. At one point, they were at $40M of EBITDA and $40M in cash interest payments, and that doesn’t allow you to invest properly. The company had IPO'd in 2016 but it’s still hard for companies and management teams to pivot from survival mode to growth and often you need an outside catalyst or a change agent to do that” — Turning Point CFO Louie Reformina

Other highlights:

Credit Suisse stops custodian service for some U.S. cannabis stocks, sources say

America’s most conservative states are embracing medical pot

Illinois Cannabis Sales Grow 120% in April to Reach Record $150M

Cannabis Sales Show Strong Growth in March

Alabama Medical Marijuana Bill Heads To Governor’s Desk Following Approval

Cost of Capital Differences Deepen (Looking at GTI’s difference in Debt)

GTI claims social equity mantle as it quits Illinois cannabis trade group,


💵Deals

Ascend Wellness Holdings — IPO. The Company ended the week at $9.50, up 12% after closing up 22% on it’s first day of trading (IPO price of $8.50).

Sundial Growers — Acquires Inner Spirit Holdings and Spiritleaf Retail Cannabis Network. Total consideration of total ~$131M ($0.39/share). Inner Spirit's shareholders will receive, for each Inner Spirit common share held, (i) $0.30 in cash and (ii) 0.0835 of a Sundial common share, The Transaction will be carried out by way of a court-approved plan of arrangement under the Business Corporations Act (Alberta), pursuant to which Sundial will acquire all of the issued and outstanding common shares of Inner Spirit.

IM Cannabis — Prices $35M Unit Offering. IM Cannabis Corp. (IMC) (CSE:IMCC) (NASDAQ:IMCC), medical and recreational cannabis operator in Israel, Germany and Canada. The Offering is for up to 6,086,956 Offered Shares at a price of $5.75/Share and, for no additional consideration, up to 3,043,478 Warrants. Each Warrant will entitle the holder to purchase one common share of the Company at an exercise price of $7.20 for term of 5 years from the date of closing of the Offering. The gross proceeds to the Company from the Offering, before deducting the agency fees and other estimated Offering expenses, are expected to be ~$35M. In addition, the Company has granted the agents a 30-day over-allotment option to purchase up to an additional 913,044 Shares and 465,522 Warrants on the same terms and conditions.

Other highlights:

TilrayCommences Trading on the Toronto Stock Exchange Under Symbol “TLRY”

Jazz PharmaceuticalsCompletes Acquisition of GW Pharmaceuticals

Hydrofarm Closes Public Offering of Common Stock and Full Exercise of Underwriters’ Option to Purchase Additional Shares ($310M Net Proceeds)

Trulieve — Completes acquisition of Mountaineer Holding LLC ($6M)

TerrAscend Completes Acquisition of Maryland-Based Grower Processor

JushiCloses Acquisition of Dalitso LLC Facility and Land in Prince William County, VA

Jushi HoldingsCompletes Palm Springs and Grover Beach Dispensaries Acquisition

Curaleaf Completes Acquisition of New, Larger Cultivation Site in Taneytown

Flower OneModification to Loan Agreement and Issues Warrants to its Lender

Mercer Park Brand Acquisition Corp.Files Final Prospectus and Management Information Circular for Proposed Qualifying Transaction with Glass House Group

VibeCloses Palm Springs Dispensary Acquisition

AFC Gamma$22M Senior Secured Credit Facility to fund Justice Cannabis NJ Expansion

AFC GammaServes as Lead Investor in Cansortium’s $71M Senior Secured Credit Facility to Fund Operations in Three States

XS Financial $20M Upsized Facility for Columbia Care

Acreage Holdings x Medterra Joint Venture


📄Earnings

Lowell Farms — First Quarter 2021 Financial Results

  • Revenue: $11.0M; up 17% Y/Y and up 20% Q/Q. Continued to be impacted by lower yields experienced from cultivation as a result of plant stress from the wildfires and extreme temperatures in the late summer.

  • Gross Margin: -13% compared to -18% in the first quarter of last year

  • Adjusted EBITDA: ($4.6M)

  • Cash: $13.6M (as of 3/31/21)

Cronos Group — 2021 First Quarter Results

  • Revenue: $12.6M, up $4.2M from Q1 2020. The increase was primarily driven by continued growth in the adult-use Canadian cannabis market, sales in the Israeli medical cannabis market, and an increase in sales in the U.S. segment driven by new U.S. hemp-derived CBD products introductions, partially offset by strategic price reductions on various adult-use cannabis products in Canada in the second half of 2020.

  • Gross loss (profit): -$3.0M in Q1 2021 decreased by $3.5M from Q1 2020. The decrease in losses was primarily driven by an increase in net revenue and a decrease in inventory write-downs in the ROW segment.

  • Adjusted EBITDA loss: -$37.1M in Q1 2021 increased marginally from Q1 2020. The marginal increase in losses was primarily driven by an increase in sales and marketing costs due to brand development in the U.S. segment, and an increase in R&D costs driven by increased spending on product development and developing cannabinoid IP. Partially offset by decreases in sales and marketing spend in the ROW segment, gross loss and G&A expenses.


🧔People

Fyllo — adds CFO, CLO, and Head of People. Mamta Patel (CFO) most recently served as Executive Director of Finance, Business Development & Corporate Development at OneSource Virtual. Travis Moyer (CLO) most recently served as VP Business Development at Curaleaf where he managed organic and acquisition-based growth initiatives and joined through Curaleaf’s acquisition of Grassroots Cannabis where he served as VP of Legal and Strategic Initiatives. Tracey Felter (Head of People) joins from local Chicago start-up, The Media eXchange (TMX) where she was Head of Human Resources.

Treez — adds Josh Glantz as Chief Revenue Officer. Josh joins Treez after being CEO of SinglePlatform for the past 4 years and leading its sale to Tripadvisor. Prior to its sale, SinglePlatf7orm was a subsidiary of Endurance International Group (recently acquired by PE firm ClearLake). Previously, Josh served as SVP of Strategy and Business Development for Mobiquity Networks, repositioning the company from a consumer-focused, push notification provider to a data and audience management platform. He’s also worked at the digital business at Publishers Clearing House, ideeli, ePrize, USWeb and RareMedium and Israeli venture fund BRM Seed Ventures.

The Valens Company — adds CFO and CCO. Sunil Gandhi, CFO, brings 25 years of corporate and operational finance experience largely in the CPG and alcohol beverage industries. Most recently, he served as CFO of Trophy Foods. Adam Shea, Chief Commercial Officer, brings over 16 years of experience in commercial strategy with various consumer-focused organizations in the food, beverage, tobacco and cosmetics industries. Most recently, he served as the VP, GM - North American Foodservice of leading bakery company Weston Foods Ltd.

Organigram — CEO Steps Away From Role. Greg Engel is stepping away from his role as CEO. Peter Amirault, current Board chairman, has been appointed by the Board to serve as Executive Chair on an interim basis, to oversee day-to-day management of the Company until a new permanent CEO is appointed.


🏬Retail

How Sweet Flower, A Celeb-Favorite Cannabis Boutique, Is Raising The Retail Bar In California. Tim Dodd went from corporate (Technicolor, Warner Bros, Time Warner) to acquiring Sweet Flower with his colleague of more than two decades, Mike Thomson. Together, they reorganized, rebranded and then opened Sweet Flower’s new, adult-use concept on Melrose in April of 2019 and expanded the original Studio City location with a grand reopening later that same month. In March, Sweet Flower announced its initial external raise — a $15 million Series A round led by AFI Capital Partners with other investors from the retail, media, entertainment and finance sectors.

Dispensary Design Trends for 2021. Open plans and modularity (open floor plans with glass cabinets and shelving units), integrating brands and merchandising (incorporating dedicated places or good signage and graphics to be replaced, added, and refreshed), education-driven design (carve out space for consultation area, especially those with medical customers), social media placemaking (make spaces Instagram-able), digital and omnichannel strategies (create the fastest path to the product), experiential retail (engaging, immersive “moments).

Trulieve Osprey, FL (87th dispensary nationwide)

TerrAscend Maplewood, NJ (2nd in NJ and 13th nationwide)

Verano (Zen Leaf) Chicago West Loop

Harvest — Olympia Heights (7th in FL) & West Palm Beach (8th in FL)


🎙️Interviews

The Cannabis Investor: Investing in American Cannabis

High-rise: Sundial + Inner Spirit, OrganiGram CEO, lending rates for GTI

Cannabinboid Connect: Kellen O’Keefe, Interim CEO, Flower One

New Cannabis Ventures: GABY Founder, President and CEO Margot Micallef


🌱Product

Pabst Labs x Tinley’s — Manufacture Cannabis-Infused “Not Your Father's” Root Beer in California. ‘Not Your Father’s Root Beer’ is a hard root beer distributed nationally by Pabst Brewing Co. The cannabis-infused, non-alcoholic version of the product will be produced in Tinley’s facility in Long Beach, California together with Pabst Labs. It will contain a 10 mg dose of THC in each 12 fl oz bottle, and it will be made available in cannabis dispensaries throughout the state of California. Pabst Labs is also working with Tinley’s to plan the launch of additional products from the Pabst Labs brand portfolio.


💻Hiring

Old Pal Brand Ambassador (SF)

Dutchie Director, Business Intelligence (Remote)

springbig — FP&A Manager (Boca Raton, FL)


👋 Newsletter curated by Dai Truong.