Note: Canopy Growth completed its acquisition of Mettrum Health Corp. in early 2017.
Mettrum Health Corp. saw sales of its medical marijuana jump 192.5% in the quarter ended December 31, 2015. At the same time, its acquisition and expansion costs led to deeper losses, coming ahead of any government legalization.
METTRUM HEALTH CORP. (symbol MT on Toronto; www.mettrum.com) began trading on the Toronto venture exchange on October 2, 2014.
The company is a licensed producer of medical marijuana in Canada. Its only production site is a plant in Bowmanville, Ontario. It is now building a second facility in the area. A third operation is planned for Creemore, Ontario.
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Mettrum has the potential to produce 12,000 kilograms of medical marijuana a year. Its current licensed capacity is 3,550 kilograms.
The company began producing marijuana in January 2014. As a result, its revenue jumped from $170,349 in 2014 to $3.1 million in 2015 (fiscal years end March 31). Its losses also expanded, from $0.07 a share (or a total of $830,314) to $0.27 a share (or $7.1 million).
On April 30, 2015, Mettrum acquired Oilseed Works Inc., a Barrie, Ontario-based producer of hemp flour, cooking mixes, lip balm and oil. The company paid $250,000 for business. Under the terms of the agreement, the seller gets 15% of gross profits for each of the next five years.
Penny Stocks: Sold 5.75 million shares to fund expansion
In the three months ended December 31, 2015, Mettrum’s revenue jumped 192.5%, to $2.0 million from $689,478 a year earlier. But its losses worsened to $0.06 a share (or a total of $1.9 million) from $0.04 a share (or $1.2 million). That’s because the company continues to invest in its operations, including spending more on marketing and facilities.
Mettrum ended the quarter with cash of $11.1 million, or $0.33 a share. Its long-term debt of $7.0 million is a low 11% of its market cap.
In May 2016, the company sold 5.75 million shares at $1.50 a share for a total of $8.6 million. The cash will help it build the two new facilities it has planned.
Mettrum sells into a limited and highly regulated market. As well, there are very low barriers to entry for new medical marijuana producers. If the market grows large and profitable enough, big producers, such as tobacco companies, will likely become competitors and take sales away from small growers like Mettrum.
Longer term, the possible legalization of marijuana in Canada remains a considerable threat to licensed producers that depend on a heavily regulated market.
Let’s see if they get into the business as has been suggested. They would certainly need operations like Mettrum from the supply side. But I think investing in the big pharma retailers would be doing what TSI recommends in terms of investing in alternative energy through larger, established mainline companies that are adding those alternatives to their operations.
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I think the better way to profit from med marijuana is with drug dispensers, like Shoppers DM/Loblaws.
Let’s see if they get into the business as has been suggested. They would certainly need operations like Mettrum from the supply side. But I think investing in the big pharma retailers would be doing what TSI recommends in terms of investing in alternative energy through larger, established mainline companies that are adding those alternatives to their operations.