Amid a continued boom in the growing cannabis sector, Canada is moving rapidly toward legalization as the U.S. continues to foot drag at the federal level, leading many sector analysts to conclude that it’s the Canadian companies who might benefit the most as an underlying shift toward medical and recreational use continues. Out of a tiny handful of just 58 Health Canada-licensed producers, vertically integrated Emblem Corp. (TSX.V: EMC) (OTC: EMMBF) stands out as a one of the fastest growing cultivators and pharma developers, having also obtained authorization to produce cannabis oils. While sales of dried marijuana intended for smoking in Canada increased around 44.6 percent from Q1 to Q2, according to official Health Canada records (http://dtn.fm/ypK5J), cannabis oil sales shot up over 278 percent. It’s a sustained industry trend, which is continuing to evolve as cannabis medicine developer demand increases and consumers flock to edibles and/or vaporizing. This trend is also clearly evident from U.S. data (http://dtn.fm/mx4LH), as consumers in states like Colorado, Oregon and Washington continue to fuse their love of candies and chocolates with a growing taste for cannabis.
Landmark legislation introduced by Canadian Prime Minister Trudeau in April, fulfilling one of his campaign promises, put Canada squarely on the road to a legalized (over 18) recreational use market, with a projected implementation date as early as July 1, 2018. Intelligent companies like Emblem aren’t wasting any time in trying to get out ahead of this curve and are making every effort to rapidly expand production while maintaining the kind of quality control that translates directly into end-market loyalties. For Emblem, which is focused on medical and pharmaceutical R&D, in addition to production/distribution to patients and patient/physician education via the company’s three different business segments, successful doubling of the company’s production capacity is seen as essential to ensuring long-term capacity to capture this sector’s astounding growth.
Emblem is just getting warmed up. The company recently entered into agreements to acquire some 80 acres of industrially zoned land for $7.7 million (http://dtn.fm/2lyCl), in close proximity to the existing, custom-built 23,500 sq. ft. Paris, Ontario, facility, that utilizes the latest in indoor grow science. Once completed (Q4 2018 target date), the three new state-of-the-art 100,000 sq. ft. production facilities should bring Emblem’s annual production capacity up to around 154,000 pounds. For a company that did $398,260 in sales during Q2 2017, with 118.8 pounds sold at an average price of $7.39 per gram, this new projected production figure would translate into over $516.2 million in revenues per year, not too shabby for an operation that ended Q2 with $33.0 million in cash on hand and has around another $34 million of “in-the-money” warrants (part of which is callable).
Emblem can obviously read the handwriting on the wall here and is anticipating that the dried flower and derivative products space will blossom under the new regulatory framework being spearheaded by Trudeau’s government. Emblem had 2,154 active patients as of August 24 and anticipates continued success on the strength of its marketing platform and patient registration pace. Emblem’s cannabis healthcare vertical, GrowWise Health, continues to see considerable expansion of the clinic network, driven by receptivity to the company’s comprehensive patient and physician medical cannabis education programs. The educational effort is marketing gold for Emblem, and the care taken by the company’s Patient Educators, who are knowledgeable about both healthcare and cannabis, helps a great deal when it comes to ensuring continued patient enrollment growth.
As of June of this year, there were some 201,400 client registrations (http://dtn.fm/ypK5J) with a licensed producer operating under the auspices of ACMPR (Access to Cannabis for Medical Purposes Regulations), according to Health Canada’s figures. An Ipsos poll conducted for Global News earlier this year indicated that 61 percent of Canadians now support the legalization of recreational marijuana (http://dtn.fm/1diqI), with that number being as high as 73 percent among millennials (ages 18 to 34). This polling data underscores the validity of the growing trend in Canada toward common sense cannabis regulation, which is increasingly focused on handling cannabis in the same manner as alcohol or tobacco and thus opening the door to a sizeable tax haul on what is potentially an $8.7 billion base domestic retail market (http://dtn.fm/Wt4kA).
It’s a compelling figure that underwrites how Canada is setting itself up to be a major exporter to a global market, estimated by Grand View Research as climbing to $55.8 billion by 2025 on the strength of medical alone. Troy Dayton, CEO, noted that industry analyst firm Arcview Group confirmed this outlook recently, citing medical marijuana legalization in Germany as a key indicator. With the North American market up 30 percent year-over-year to $6.7 billion in 2016 according to Arcview (http://dtn.fm/HI1Nk), running white-hot on a projected 27 percent CAGR in sales through 2021, we are looking at an estimated $20.2 billion market within a handful of years. Moreover, Arcview analysts suggest that the figure could triple as broader recreational markets come online in Canada, or in U.S. states such as California, where Proposition 64 has put the legal market for marijuana on track to exceed $5 billion.
This trend is music to Emblem’s ears, and with the new facility set up to function off natural gas infrastructure, the company has every intention of reaching for the brass ring, going “off grid” and realizing a long dreamt-of goal to become one of the lowest cost “closed box” producers in Canada. Key partnerships, such as the one signed in late 2016 with Lift Cannabis to offer a limited edition strain (“Liv by Lift”), are a solid example of why Emblem is able to command prices for certain of its carefully cultivated strains that are as high as $12.00 per gram. The company’s purpose-built Paris, Ontario, facility, featuring a Canadian-made Argus controlled system, is something to behold, and Emblem is able to legitimately pride itself to customers on the value of the company’s regulated environment indoor grow rooms, where positive pressure helps immensely in controlling external contaminants. This is mission critical stuff when it comes to commanding robust prices for product, and when it comes to meticulously cultivating and testing strains that are then rigorously tested for the targeted cannabinoids and terpenes which will provide the greatest amount of patient relief.
Emblem is hard at work identifying which of the over 100 different types of cannabinoids offer the best therapeutic values and is systematically cultivating the proper strains at medical grade in order to empower the company’s development of advanced dosage forms that are not only consistently high quality, but easy and convenient to use.
For more information, visit the company’s website at www.EmblemCorp.com
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