Like many stocks in the cannabis patch, Emerald Health Therapeutics Inc (OTCMKTS:EMHTF) shares have been caught in a sell-the-news move following final and actual legalization in Canada last week. The trade is being monetized. But there’s still plenty of growth ahead, and this pullback may represent a very important opportunity for the companies that continue to push and expansion narrative. For EMHTF, a case in point is the company’s recent announcement that it has entered into a Cannabis Concentrate Program Agreement with MediPharm Labs Corp. (TSXV: LABS).
According to the release, “Pursuant to the Agreement, signed on October 5, 2018, Emerald will provide MediPharm with dried cannabis to create premium quality cannabis oil. The Program will be for an initial term of three years. The Agreement enables Emerald to provide pharmaceutical grade cannabis concentrate products produced by MediPharm to its large base of registered patients, as well as provide adult-use recreational consumers with premium quality cannabis concentrates commencing October 17, 2018.”
Emerald Health Therapeutics Inc (OTCMKTS:EMHTF) trumpets itself as a licensed producer of medical marijuana under the Access to Cannabis for Medical Purposes Regulations, which allows the company to produce and sell medical marijuana and cannabis oils to clients and other licensed producers.
Individuals may become clients of the company by registering with the company through its secure online portal or via telephone after the individual has received a medical document signed by a licensed health care practitioner setting out the daily quantity of dried marijuana, in grams, that the practitioner authorized for the person.
According to company materials, “Emerald Health Therapeutics Inc (OTCMKTS:EMHTF) operates through Emerald Health Botanicals Inc., a wholly owned subsidiary and Licensed Producer under the Access to Cannabis for Medical Purposes Regulations. Botanicals is authorized to produce and sell both dried medical cannabis flower and medical cannabis oil in Canada. Botanicals currently operates an indoor facility in Victoria, BC, and is progressing on expansion plans for a 32-acre property in Metro Vancouver and a partnership with Village Farms, called Pure Sunfarms, utilizing a 25-acre existing greenhouse complex in Delta, BC. Botanicals is one of Canada’s most medically focused licensed producers, with a team highly experienced in life sciences product development and large-scale agribusiness. Its vision is to be a leading provider of cannabis products through its production capabilities, proprietary genetics, value-added products and branding, and superb customer experience. Emerald Health Therapeutics is associated with the Emerald Health group, which comprises multiple companies advancing diverse botanical, nutraceutical and pharmaceutical products that may provide wellness and medical benefits by interacting with the body’s endocannabinoid system.”
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As noted above, EMHTF just announced that it has entered into a Cannabis Concentrate Program Agreement with MediPharm Labs Corp. (TSXV: LABS). Pursuant to the Agreement, signed on October 5, 2018, Emerald will provide MediPharm with dried cannabis to create premium quality cannabis oil.
Shares have been pulling back in a likely and foreseeable sell-the-news reaction to the final announcement Canada. This trade has sunk most stocks in the space, and we would expect it to run its course without endangering the longer-term upward trend in the sector.
“We are very pleased to have MediPharm as our partner,” said Rob Hill, CFO of Emerald. “Their large processing capacity and ability to produce high purity cannabis extracts and isolates increases our flexibility and capabilities in bringing to market high-value and unique products.”
Traders will note -20% during the past week in terms of shareholder losses in the company. Furthermore, the stock has witnessed a pop in interest, as transaction volume levels have recently pushed 20% over what the stock has registered over the longer term.
Pat McCutcheon, MediPharm’s President and Chief Executive Officer said, “We are very excited to begin this relationship with one of Canada’s leading cultivators. This partnership further highlights MediPharm’s commitment to work as a trusted, agnostic value-add supplier to Licensed Producers across Canada to better serve the cannabis market. Our geographic location also serves as a strategic asset to the relationship with our ability enable Emerald to provide their consumers in central and eastern Canada with premium quality pharmaceutical grade cannabis oil.”
Earning a current market cap value of $412.11M, EMHTF has a significant war chest ($72.7M) of cash on the books, which is balanced by about $26.3M in total current liabilities. One should also note that debt has been growing over recent quarters. EMHTF is pulling in trailing 12-month revenues of $1.1M. In addition, the company is seeing major top-line growth, with y/y quarterly revenues growing at 15.7%. As more color becomes clear on the name, we will review the situation and update our take. Sign-up for continuing coverage on shares of $EMHTF stock, as well as other hot stock picks, get our free newsletter today and get our next breakout pick!
Disclosure: we hold no position in $EMHTF, either long or short, and we have not been compensated for this article.