Debra Borchardt
Canopy Growth Corporation (CGC) reported that its fourth-quarter revenue rose 55% to C$22.8 million versus last year’s C$14.7 million for the same time period. Still, the company recorded a net loss of C$61.5 million or C$0.31 per basic and diluted share, which was dramatically higher than last year’s net loss of $12.0 million, or $0.08 per basic and diluted share for the same time period.
Aside from the net loss, Canopy old a record 2,528 kilograms at an average sales price of $8.43 per gram for an increase of 45% and 5%, respectively over fourth quarter fiscal 2017. The company also said that it will no longer report on the weighted average cost per gram metric. This has been a key piece of data for cultivation analysis. Management said in a statement, “There are three reasons for this. First, a gram is a measurement of the weight of the plant only. Management believes it will be more meaningful in the future to consider milligrams of THC or CBD cannabinoids representing ingredients to new, evolving product formats as they are introduced beyond the traditional cannabis flower, including oils and capsules. Second, management believes other key performance indicators will evolve as the legal recreational and retail market takes hold in Canada. Lastly, there is no industry standard for cost per gram components or classification to draw a meaningful comparison.”
Oil sales were flat at 23% for the quarter. Overall sales expenses grew in the quarter. The statement said that sales and marketing expenses in the fourth quarter fiscal 2018 were C$14.8 million, or 65% of revenue versus C$4.1 million or 28% for the same time period in 2017.
“With the recent launch of our Spectrum Softgels, strong sales in Canada and Germany and the expansion of our global footprint into Africa and further into Europe and Australia, we continue to drive our global leadership position in medical cannabis forward,” said Bruce Linton, Chairman & Chief Executive Officer. “The efforts of Canopy Growth and Canopy Health Innovations to develop a range of patented, insurance coverage eligible cannabis-based medicines took a critical step forward with the recent receipt of approval to conduct its first in a planned series of clinical trials. Believing that combining Canopy Health’s growing intellectual property portfolio with our production and advanced manufacturing platform will speed time to market of disruptive medicines, we made the decision to pursue full ownership of Canopy Health Innovations.”
Fiscal Year Results
Revenues jumped 95% in the fiscal year ending March 31, 2018, to C$77.9 million over revenue of C$39.9 million for last year. For the fiscal year 2018, Canopy sold 8,708 kilograms at an average price of C$8.24 per gram compared to 5,139 kilograms at an average price of C$7.40 per gram for the previous year, representing an increase of 70% and 11%, respectively.
The net loss in the fiscal year 2018 came to C$70.4 million, or C$0.40 per basic and diluted share this compares to the previous year’s loss of C$7.5 million or C$0.06 per share. The statement read, “Including the net fair value effects of the IFRS accounting for biological assets and inventory and other inventory charges which combined to a gain of $34.0 million and net other income of $31.2 million primarily consisting of fair value changes in financial assets of $78.2 million offset by an impairment loss of $28 million related to the settlement agreement reached with Bedrocan International BV as announced on June 11, 2018, and other non-cash fair value increases on BC Tweed and Vert Mirabel put liabilities of $21 million, and non-cash share-based compensation expense and depreciation together amounting to $71.7 million.”
Preparing For Recreational Market
Canada will begin sales of adult-use cannabis on October 17 of this year and Canopy Growth has been busy getting ready. That included “The re-purposing of 4 of the 24 flower rooms to provide additional mother/clone rooms for the purpose of cultivating 200,000 clones that helped plant over 1.7 million sq. ft of greenhouses in British Columbia and Quebec in the fourth quarter of fiscal 2018 and in the first quarter of fiscal 2019; and the re-purposing of an additional 3 flower rooms to build a large footprint pre-pack room that will help the company ready a significant amount of product for shipment to provincial and territorial agencies beginning in the second quarter of fiscal 2019.” Canopy did note that the changeover led to a decline in the amount of cannabis that was harvested and that combined with higher overheads in the fourth quarter led to decreased gross margins in the fourth quarter of fiscal 2018.
Linton said, “Inventories on hand today, which will be used to fill a nationwide sales channel that does not yet exist, will determine early market share. Producing sites and distribution capability in place today, not next year or the year after, will keep the channel full, build consumer affinity and maintain market share. With the largest inventory and capacity today, Canopy Growth is uniquely positioned to go beyond our current commitments to provincial agencies and cannabis retailers in order to successfully open the regulated recreational cannabis market in Canada as a producer of choice nationwide.”
Since Year End
As of March 31, 2018, the company’s cash and cash equivalents totaled C$322.6 million, representing an increase of C$220.8 million from March 31, 2017. In addition to that solid footing:
- Canopy announced agreements to acquire the remaining shares of BC Tweed Joint Venture Inc. and Canopy Health Innovations Inc. not currently owned.
- Received new or expanded cultivation licenses at BC Tweed Aldergrove, BC Tweed Delta, Vert Mirabel and Tweed Farms, bringing the total Canadian licensed footprint to over 2.4 million sq. ft. with another 3.2 million sq. ft. of expansion underway in Canada
- Was selected by the Saskatchewan Liquor and Gaming Authority (SLGA) to apply for five cannabis retail permits and operate an online store serving the entire province
- Canopy Health received written notice from Health Canada to proceed with Phase IIb “in-human” clinical trials to evaluate the use of medical cannabis in the treatment of insomnia.
- It closed the acquisition of Annabis Medical s.r.o. Pursuant to federal licenses, Annabis Medical currently imports and distributes cannabis products through the Czech Republic’s legal pharmacy channel.
