Canopy Growth is angling to dominate the US

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Welcome to Insider Cannabis, our weekly newsletter where we’re bringing you an inside look at the deals, trends, and personalities driving the multibillion-dollar global cannabis boom.


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Happy Friday readers,

Earnings were the dominant story in the industry this week. A slew of US cannabis companies, or MSOs, posted rock-solid financial results, in many cases outpacing their Canadian counterparts.

I asked Cresco Labs CEO Charlie Bachtell about why he thinks that is. In Bachtell’s view, it’s a convergence of factors: COVID — and the essential designation cannabis dispensaries received in some legal states helped — but he said it also has to do with the expanded marijuana supply from cap-ex projects many companies began in 2019 and have since completed.

“Those wheels have been in motion for some time,” Bachtell told me. “We were going to have a strong quarter regardless of COVID.”

He also pointed out that in Cresco’s home state of Illinois, Chicago Mayor Lori Lightfoot was able to avoid laying off 350 city employees thanks to tax revenues from legal marijuana sales. That, he said, is great motivation for other states to pass legalization.

“That’s found money,” he said. “Just dropped from the sky — it wasn’t a revenue source the year before.”

Beyond earnings, I moderated panels at CWCBExpo and Prohibition Live. If you caught those, let me know what you thought.

-Jeremy


Here’s what we wrote about this week:


The spread of legal cannabis is projected to create more than 20,000 jobs in the next 5 years. Here’s a look at how many roles are expected to be open for hiring in each state.

The cannabis industry is expected to hire for tens of thousands of new positions in the coming years as new programs in five different states roll out, according to data from the cannabis recruitment platform Vangst. In New Jersey, which recently voted to legalise recreational cannabis, more than 19,000 jobs could be created by 2025.


The world’s largest cannabis company is angling to jump into the US marijuana market after Biden’s win

Canadian cannabis giant Canopy Growth is positioning to enter the lucrative US market after Joe Biden won the US presidency. Canopy CEO David Klein told BI in an interview that the company is looking to bring more of its branding and IP over to the US through its partnership with Acreage Holdings.


The incoming CEO of the largest US cannabis company explains why he’s going all in on New York and the Northeast

Joseph Bayern, who will be stepping into the role of CEO at cannabis giant Curaleaf starting in January, told Business Insider that he’s bullish on the Northeast, now that New Jersey’s legalised cannabis for adult-use. New York could be “could be one of the most compelling markets in the US in the next couple of years,” Bayern said.

Kevin O’Leary of ‘Shark Tank’: Why I’m betting big on psychedelics, and how investors should be thinking about this opportunity

In this op-ed article, the “Shark Tank” investor Kevin O’Leary explains why he and other Wall Street investors are betting big on psychedelic mushrooms. Investors who were burned by bad bets on cannabis startups shouldn’t be afraid to gamble this time, O’Leary says. Psychedelics look different — in a good way — and the pitfalls that befell early cannabis investors aren’t likely.

Earnings roundup

Lots of the large multistate operators reported strong earnings this week. Here are the highlights:

  • Trulieve reported $US136.3 million in revenue, a 13% sequential increase.
  • Curaleaf reported a $US9.3 million net loss on $US193.2 million in managed revenue.
  • Cresco Labs reported $US153.3 million in revenue and $US4.9 million in net income.
  • Ayr Strategies reports $US45.4 million in revenue, up 61% sequentially.
  • TerrAscend reports $US51 million in sales, a 90% increase year-over-year.
  • Greenlane Holdings reports $US32.3 million in core revenue (non-tobacco), and a $US13.8 million net loss.
  • Neptune Wellness Solutions reports C$28.7 million in revenue and a C$23.3 total comprehensive loss.

Note:
Last week, we included incorrect financials for Green Thumb Industries. The company reported $US157.1 million in revenue and a net income of $US9.6 million

Executive Moves

Deals, launches, and IPOs

Policy moves

  • New Jersey postponed a planned vote on a bill to enact marijuana legalization in the state — which voters approved earlier this month — after lawmakers couldn’t agree on specifics like tax rate, social justice initiatives, and where the revenue will go.
  • Mexico’s Senate approved an adult-use cannabis bill on Thursday, bringing recreational cannabis one step closer to implementation. If the bill is approved both by the lower legislative chamber as well as President Andrés Manuel López Obrador, Mexico will become the third country — after Uruguay and Canada — to have a federal adult-use program.
  • Virginia Governor Ralph Northam says he supports legalizing marijuana after a study found the state could generate $US300 million in tax revenue from cannabis sales.
  • The city of Madison, Wisconsin voted to remove penalties around the possession and consumption of marijuana in both public and private.

Science and research

  • The Rothman Opioid Foundation put out a research brief that found cannabis can be an effective alternative to opioids for management of chronic pain and called for additional research.

Chart of the week

Cannabis M&A is moving East, according to the Viridian Capital Advisor’, which says it’s seeing “a key shift in year-to-date M&A activity by region.” At the same time, M&A activity in Western states (AZ, CA, CO and NV) is tapering down — from 63.2% of total industry M&A activity in 2019 to 40.6% in 2020.

Cannabis M&A is moving eastSawyer Click/Business Insider

What we’re reading and watching

Mexico may become the third country to legalise cannabis (The Economist)

Lightfoot cancels 350 layoffs tied to her ‘pandemic’ budget(Chicago Sun-Times)

Finally, New Jersey might be cooler than New York (The New York Times)

Fault lines emerge as New Jersey Democrats navigate cannabis legalization (Politico)

Smoke: Marijuana + Black America (BET)

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