Market share trends in Florida (TCNNF, CURLF, GTBIF, CCHWF, LHSIF)
The Florida Office of Medical Marijuana Use (OMMU) releases updated cannabis data every Friday.
For the week ending December 10th, the number of qualified patients in Florida’s medical marijuana program grew 0.8% WoW or 50.8% YTD to 450,983 qualified patients with active ID cards. Sales volume for THC and CBD fell to below-average levels. WoW, while flower had a more subdued decrease in line with average weekly sales volume. THC in mgs sold fell -14.6% WoW to 124.1 million mgs, CBD in mgs sold fell -21.1% WoW to 2.8 million mgs, and flower in oz. sold fell -9.7% WoW to 14,748 oz. sold. Four dispensing locations were approved by the OMMU, bringing the total to 298: AltMed, Liberty Health Sciences, and Trulieve (2).
Last week’s sales volume data was exceptional due to Trulieve’s technical issues backing up Thanksgiving holiday orders into the following reporting period. For this week’s reporting period, Trulieve drove the decrease in THC sales volume, capturing only 43.4% of THC market share where it typically averaged over 50%. The recent fiasco has pushed Trulieve’s 4WMA market share of THC down to 46% – still, a market-leading position.
Florida’s medical marijuana marketplace has strong potential – the state’s medical marijuana program still has a runway for population penetration, edibles were just introduced to the market in August, and there’s a broad range of qualifying medical conditions, notably ‘severe and chronic pain.’ The rising tide that is patient volume growth lifts all ships.
Arizona lays out draft rules for recreational (HRVSF, CURLF, AYRWF)
Arizona’s Department of Health Services (DHS) has laid out its draft rules for its adult-use marijuana program and opened a public survey for input on their proposed regulatory framework. The majority of the adult-use licenses will go to the approximately 120 existing medical marijuana dispensaries in the state. Twelve new adult-use licenses will be made available in rural counties with few medical retailers. The ballot approved measure mandates the state to begin accepting applications from medical marijuana dispensaries that want to have adult-use sales from January 19th to March 9th, 2021. Given that the DHS must issues adult-use licenses to applicants in good standing no more than 60 days after receiving applications, adult-use sales could begin as early as March 20th.
Harvest Health CEO Steve White commented, “My confidence level has been high. They will meet the deadlines. They have been given very aggressive timelines before and met them." Harvest Health has the most dispensaries of any company in the state, with 15 medical marijuana dispensaries in operation and licenses for three more.
Ayr Strategies upsizes capital raise to $110 million (AYRWF)
AYRWF is a Hedgeye Cannabis Best Idea LONG.
Ayr Strategies announced that it had increased the size of its previously announced offering of 12.5% Senior Secured Notes from $75 million to $110 million due to strong demand. Additionally, it has completed an oversubscribed incentive cash exercise of three million of the company’s share purchase warrants, resulting in gross proceeds to the company of over $25 million. In aggregate, following the debt offering's closing, the company will have raised gross proceeds of over $135 million. The company is one of a small number of cannabis companies to be able to issue public debt. The interest rate on the notes will be 12.5%. The high-interest rate reflects the difficult access cannabis companies have to financing and not the company's fundamentals. Ayr Strategies’ notes' interest rate is on the lower end of the range for cannabis companies. The company intends to use the proceeds to fund acquisitions in Pennsylvania, Ohio, and Arizona and the additional capital expenditures required for completion of the cultivation and processing facilities in those states. Following this capital raise, the company will have a war chest of $150 million in cash on its balance sheet.
Ayr also had a recent, significant operational milestone in their Massachusetts operation, receiving three host community approvals to expand its existing medical footprint meaningfully. The approvals for Host Community Agreements (HCAs) mark a significant first step toward the company’s entry into the adult-use market in the Greater Boston area, with a population of 4.9 million. There are several visible drivers of organic and acquisition-driven revenue growth over the next few years. The associated margins and cash flow should lead to years of compounding growth as the company grows in new markets. Ayr Strategies has one of the most compelling organic and acquisitive growth strategies in our covered universe.
