Emerald Health Therapeutics
The firm has a 50% stake in Pure Sunfarms, one of the world’s largest cannabis production facilities. It has 16 grow rooms and it is expected to yield 75,000kg per year once it is fully operational.
Pure Sunfarms received cultivation and sales licenses from Health Canada in 2018, but it has had to undergo a painstaking process to gain production approval. By July last year, it had managed to gain permission to produce cannabis on 550,000 sq. ft. of the facility, and it has been gradually pushing towards full approval.
On March 11 it announced that Pure Sunfarms is now licensed across all of its growing areas after gaining approval for 206,000 square feet of growing area in the fourth and final quadrant. Co-owners Emerald and Village Farms International, Inc. (TSX: VFF) now expect to have the entire facility under production by the end of April.
“With Emerald’s 50% stake in one of the largest fully operational cannabis production facilities in the world, we expect to realize significant economic value from Pure Sunfarms,” said Dr. Avtar Dhillon, president and executive chairman of Emerald. “We expect our supply agreement with Pure Sunfarms for 40% of its 2019 production, along with our Quebec and hemp operations, to support strong quarter to quarter sales growth this year.”
A Year of Volatility for Emerald Health
The company was formerly known as T-Bird Pharma Inc. and changed its name to Emerald Health Therapeutics, Inc. in June 2015, when it went public after raising an undisclosed amount. Its share price peaked at $8.45 in January 2018 after it completed a $15 million research and development deal.
Yet the stock tanked last year after it failed to secure supply agreements in Alberta and British Columbia, its home markets. By July 2018, the price had decreased to $2.59, a 69% loss in value.
It jumped back up again to $5.20 by September, as the sector geared up for the legalization of recreational marijuana in Canada and watched the global market for medicinal cannabis develop rapidly. It then hit another trough of $2.21 on Dec. 21, but it has rallied somewhat in 2019 and reached $3.78 on the morning of Monday, March 10 after the Pure Sunfarms announcement, before breaking through the $4 barrier in the afternoon.
Meanwhile, Village Farms International has seen its share price almost double since a NASDAQ listing was announced on Feb. 19.
The Pure Sunfarms facility is expected to yield a little north of 75,000kg of cannabis flower per year once it is at full capacity. Yet Emerald Health has plenty more ventures underway too.
It has a wholly-owned subsidiary in Quebec called Verdélite, which has an 88,000 sq. ft. facility. Emerald Health has invested $100 million in this project.
Further subsidiaries include Victoria and Avalite. It has also secured has a contract for up to 1,000 acres worth of hemp in 2019 to 2022 to provide low-cost CBD supply for extraction and product manufacturing.
Last month it completed the process of setting up Emerald Health Naturals, its 51:49 joint venture with San Diego-based Emerald Health Bioceuticals. It is also expanding into international markets and it entered a joint venture with Italy’s Indena for extraction technology and capabilities earlier this year.
It could be a risky stock to invest in due to its historical volatility and its limited success in securing supply agreements in Canada. If the market is heading for an eventual supply glut, it needs to become better at tying up deals in order to thrive in an increasingly competitive market. Yet Emerald Health is expanding rapidly, its production capacity is high and the health product line under Emerald Health Naturals should bring in additional revenue, so there are reasons for optimism among investors.
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