Cannabis review
Yesterday, Secretary Xavier Becerra commented that the U.S. Department of Health and Human Services is in the process of reviewing cannabis as a Schedule 1 drug and will have a decision on the substance by the end of 2023. HHS has been carrying out an eight-step scientific review into cannabis to determine whether it should be rescheduled, descheduled or remain in Schedule I. “What I can tell you is that the president instructed us at HHS—FDA in particular—to take a look at how we treat marijuana to see if we can update our review of marijuana as a drug and how we can make sure how we treat it going forward on the federal level,” Becerra said. “Places like California have already changed the laws, the federal government has not, and so we’ve been instructed and we’re underway with that review as we speak.” HHS has been working with the DEA in this process. This lines up with what we have been saying, the administration would like to go into the 2024 campaign trail with some sort of cannabis victory, and it has become clear that a cannabis victory will not come from Congress. We anticipate for the HHS to reschedule cannabis as a Schedule 3 drug by the end of the year.
Bleeding cash in Canada
Hexo, a Canadian cannabis producer, reported net losses of $98M in 3Q24. Since 2016, the company has now lost over CA$2B. Wow, a cannabis company that is losing money and continues to lose money. Shocking. Better yet, in the report, Hexo said that they have entered into a definitive agreement for Tilray to acquire all of Hexo's outstanding shares. This is just another example of how poorly Tilray is managed. Why would they want an asset that has not been cash flow positive since 2016 and has lost over $2 billion since then? This also strengths our view on Cronos, which has the best balance sheet of any cannabis company in Canada if not all of North America.
Acreage management changes
Acreage Holdings, a New-York based operator of cannabis cultivation and retailing facilities in the US, said today that it had implemented further changes to its leadership and oversight in preparation for the completion of its strategic arrangement with Canopy Growth. Katie Bayne, Patricia Lopez, Douglas Maine, and Steven Strom have elected to resign from the Board immediately. The Board will now consist of Kevin Murphy, Founder and Chair of the Board; Bill Van Faasen, who will chair the Audit Committee; John Boehner, who will chair the Compensation and Corporate Governance Committee; Brian Mulroney; and Peter Caldini, who will step down as CEO on June 30, 2023, as previously announced, and will resign from the Board on the same date. Dennis Curran, current COO of Acreage, will assume the roles of CEO and Board member on July 1, 2023
