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Will McKesson Make Maricann Canada’s Next Unicorn Stock?

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Now you can add McKesson to the list of major corporations taking a stake in the legitimate marijuana industry with a recent deal to partner with medical marijuana grower Maricann (CNQ:MARI).

Suddenly, the formerly quiet grower that didn’t even have a stock market listing until this April is becoming the most talked about company in Canada’s medical marijuana universe.

The McKesson deal is just one of the major events pushing it into the spotlight, but it’s the one that has immediate upside potential.

McKesson, with $199 billion in annual sales, is the largest pharmaceutical distributor in the US and Canada. Its McKesson Canada division controls about 20% of Canada’s pharmacies. Ultimately the Maricann deal, which was announced quietly in August, will make Maricann the exclusive grower to supply medical marijuana products in McKesson’s five retail pharmacy chains.

Maricann Prepares to Take a Big Slice of the Market

Dundee Capital predicts that Canada’s medical marijuana sales will reach $3 billion by 2024.

Maricann is already selling direct to patients. That was a $4 million business last year, when the company first got approval from Health Canada. The company projects sales at $23 billion business next year (2018).

Now, with the McKesson venture, Maricann is preparing to sell product through regular pharmacies as well. This is likely to attract patients who prefer to buy medical marijuana near where they live, just as they do with their other medical supplies. With the two strong distribution channels at its command, you can see why Maricann stands ready to take a sizeable slice of Canada’s medical marijuana market.

The McKesson deal wasn’t the only startling news lately.

This fall, Canaccord Genuity named Maricann as its “Top Pick” among marijuana stocks

In the young marijuana business, a Canaccord blessing is like having angels proclaim its greatness. Canaccord is one of the three most influential investment banks in Canada’s marijuana industry. Its in-depth industry reports are widely read and followed. In the past, Canaccord has thrown its weight behind companies like Canopy Growth, Aurora Cannabis and Aphria—all of which have reached “unicorn” status, as companies with $1 billion or higher market caps.

That the Cannacord “Top Pick” rating came before news of the McKesson deal should give you an idea how strongly industry insider feel about Maricann’s outlook.

The real hint that Maricann was about to join the big leagues, though, came in June.  That was when MJIC added Maricann to both the North American Marijuana Index (35 public companies) and the Canadian Marijuana Index (18 companies). That’s very high profile.

And all this was hardly digested before news broke the next bombshell….

Maricann Is Fast approaching a 10X Canadian Expansion  

Maricann is definitely taking its place among the big growers already.

At present, it is operating from a 46,000 sq. ft. facility in Langton, Ontario that can produce about 2,200 kg of marijuana per year. But this is increasing rapidly.

Maricann is another 800,000 sq. ft. of growing space at that site. At full expansion, the Langton facility will be capable of producing 100,000 kg of marijuana.

The first phase of this expansion should be completed this winter.  That means that within six months, Maricann will be capable of adding another 25,000 kg to its annual production—about 10X what it’s growing now.

All systems are go. On Nov. 8, Health Canada lifted Maricann’s growing limitations at the Ontario operation and the new Maricann license increases its permitted capacity to 6,250,000 grams of marijuana on site at any one time.

This upgrade presents a 480% increase in production capacity for Maricann—above the full extent of the expansion that is currently being built, that is.

Germany Is Maricann’s Differentiator

Maricann stands out from the pack on several counts, but none more than its foray into the European markets.

In Germany, MARI has an option to buy an existing facility near Dresden that it will  convert to an indoor grow house. It’s a huge space—a 1.5 million sq. foot building in excellent condition that was formerly a Cargill meat packing plant.

The new German facility is almost twice as large as the Ontario expansion plans, and it should be ready to use within months.  If Maricann can achieve the same yields per square foot it is getting in Canada, the German operation could add another 47,000 kg to annual production–more than 20X what MARI produced last year.

Germany only recently approved medical marijuana, but there were no German companies ready to produce. Maricann, with its experience will likely be the first approved company to produce medical marijuana in Germany. This is a lead it’s likely to keep, too, because Germany only plans to issue 11 growing licenses. One of them will certainly have Maricann’s name on it.

Maricann Competes Hard on Cost, Too

As it builds out its added capacity, Maricann is perfecting its growing system so that it will be able to position itself as one of Canada’s lowest-cost producers. The company expects it will be able to produce high-grade medical marijuana at just  $1.34 per gram ($38 per ounce).

Even as medical marijuana prices fall, Maricann will easily remain profitable and very capable of undercutting most, if not all, its competitors.

 

Looking Ahead… A New Drug, More Growth, Enormous Value

The McKesson deal, Cannacord’s blessing, approval for more production…. All that should be more than enough to interest any investor, but the news just keeps coming.

In August, Maricann agreed to acquire NanoLeaf Technologies, a biotech that holds a number of licenses for pharmaceuticals and cosmetics. What that brings to MARI is the potential to market the first ever marijuana in a gel cap with verified standard dosages.

Nobody else has that. Maricann expects that the gel caps will be ideal for medical delivery of cannabis oils, which it produces at its Ontario facility.

But perhaps the most compelling reason for investors to load up on Maricann is that this well-financed, strongly growing company is also deeply undervalued. Based on revenues, it is selling at a 50%-60% discount to its marijuana industry peers.  On earnings to economic value basis, it’s at a 47% discount.

Cheap stock, strong growth, and industry respect—there’s a lot to love about Maricann.


 

 

DISCLOSURE: The views and opinions expressed in this article are those of the authors, and do not represent the views of journaltranscript.com. Readers should not consider statements made by the author as formal recommendations and should consult their financial advisor before making any investment decisions. To read our full disclosure

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