This producer keeps expanding its marijuana sales across Canada. It also has key linkups with a big Canadian pharmacy chain as well as with a leading U.S. lawn care and hydroponics firm.
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THE FLOWR CORPORATION, $3.13, symbol FLWR on the Toronto Venture Exchange (Shares outstanding: 89.3 million; Market cap: $279.51 million; TSI Cannabis Quality Rating (CQR): ; www.flowr.ca), announced earlier this year that it had entered into an agreement to supply medical cannabis to Shoppers Drug Mart (wholly owned by Loblaw Cos., symbol L on Toronto).
In March 2019, Shoppers began selling cannabis through its online medical cannabis site (shoppersdrugmart.ca/cannabis). Shoppers is now the exclusive direct-to-patient online provider of FlowRx products.
In July 2019, Flowr announced that it would join with Shoppers in its new blockchain plan. Shoppers has teamed up with California-based software developer TruTrace Technologies. It will use TruTrace’s blockchain technology to identify, track and verify the source of its cannabis-based drugs. Blockchain is essentially a decentralized database that records transactions and tracks the movement of assets.
For Shoppers, the software should make it easier for doctors to prescribe the correct cannabis strains to their patients. That should help convince more doctors and patients to consider cannabis-based treatments instead of regular drugs.
For Flowr, it will use TruTrace’s StrainSecure technology as a central hub for identity management, asset tracking, validation, and product authentication. StrainSecure will also serve as a master registry for standardized testing, product verification, and quality assurance. Under its StrainSecure program, TruTrace collects plant testing data and performs genomic verification in plant batches which are then registered in a blockchain-enabled database for intellectual property protection and strain validation. All information gathered from the plants, including their molecular and chemical makeup, can be tracked via the program.
Earlier this year, Flowr hired celebrity Canadian chef Ryan Reed to develop signature edible cannabis products for the Flowr brand. Reed, a past winner of Iron Chef Canada and Chopped Canada and Victoria’s 2011 Chef of the Year, will collaborate with Flowr to research and develop high-quality edibles. These are expected to be legal for sale in Canada later this year.
Flowr operates what is expected to be an 85,000-square-foot cultivation facility in Kelowna, B.C. Over time, the company aims to build out additional facilities and sites adjacent to what it calls its Kelowna Campus.
On April 23, 2018, Flowr began the harvest of its first crop of medical cannabis at the facility. The interior of the Kelowna Campus continues to be under construction and is being completed in stages. Flowr is now operating 16,000 square feet of growing area in the structure. In anticipation of the phased construction of the Kelowna Campus, Flowr has purchased, or has entered into agreements to purchase, several parcels of near or adjacent land.
Meanwhile, Flowr is one of 32 suppliers picked to supply the B.C. Liquor Distribution Board with recreational cannabis. As well, the Ontario Cannabis Store has entered into supply agreements with 26 licensed recreational producers including Flowr. The other provinces that Flowr supplies are Nova Scotia and Manitoba.
Flowr also operates a research and development facility dedicated to advancing cannabis cultivation techniques and systems. Its partner in that facility is Scotts Miracle Gro Company (symbol SMG on New York) and that company’s Hawthorne subsidiary.
In December 2018, Flowr acquired a 19.8% interest in European-based Holigen Limited for $6 million. Holigen is currently developing four cultivation facilities in Portugal and Australia along with production and research facilities
In the quarter ended June 30, 2019, Flowr produced 459,956 grams of cannabis, compared to 136,294 a year earlier. It has sold only a small amount of cannabis so far, so its revenue was just $2.1 million. The company made $11.0 million, or $0.13 a share in the latest quarter, compared to a loss of $3.6 million, or $0.04 a share. However, the gain was from financing transactions. It lost money on an operating basis.
The company held cash of $9.5 million on June 30, 2019. It just raised a further $43.5 million in a share issue.
Flowr aims to position itself as a producer of the highest quality medical and recreational cannabis, thanks in part to its research and development with Scotts Miracle-Gro as a partner.
However, startups are inherently risky, especially so in a new market with an evolving regulatory environment and low barriers to entry.
Still, the gap between Flowr’s market cap and its potential sales isn’t as big as it is for many of its competitors. That could also make the company a possible takeover candidate. While that alone is not reason enough to buy the stock, it adds to Flowr’s appeal.
The Flowr Corporation has a 2.5-Leaf Cannabis Quality Rating (CQR). The stock is a speculative buy for aggressive investors who want exposure to the marijuana industry.
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