Avicanna Launches into Adult-use Cannabis; Revenue Growth to be 5-10x Greater

Toronto-based biopharmaceutical cannabis company Avicanna announced its advanced cannabinoid formulations will be available through retail channels in early next year in Canada for the first time in its history, sending its shares as high as 30% on Wednesday.

Expansion to retail sales to provide consumers with low barrier access to the same industry-leading formulary of medical cannabis products. It has become evident that many consumers who seek cannabis for medical purposes are not going through medical channels, with nearly 44% purchasing from legal storefronts (adult-use).

“With broadened consumer exposure, and, specifically, low barriers to access (i.e., no medical cannabis registrations/”prescriptions” required), we expect Avicanna’s (AVCN) revenue to grow materially from 1Q21 onward, with first sales into provincial distributors commencing in January 2021,” said Rahul Sarugaser and Michael W. Freeman, equity analysts at Raymond James.

“Given Avicanna’s (AVCN) strong uptake among physicians, and, interestingly, older medical cannabis patients (47% of buyers in 51-75 age-range, and 55% women), the medical cannabis market’s size relative to adult-use, compounded by the adult-use market’s much larger (and rapidly expanding), we anticipate potential revenue derived from adult-use sales to be 5-10x greater than those derived from AVCN’s medical cannabis sales through Shoppers.”

According to the 2020 Canadian Cannabis Survey, 76% of medical cannabis users do not have a medical document – such as a prescription – from a healthcare professional.

The ease of access to store-fronts and systemic barriers to connecting with a health care professional who may provide a medical document have continued to impact medical user numbers year over year, which have remained largely the same around 350,000 active registered medical users in Canada since 2018.

“The existing stigma around medical cannabis and the barriers to obtain a medical document make it particularly challenging for some patients to access medical cannabis through the appropriate channels with the support of a health care practitioner,” said Aras Azadian, Avicanna’s Chief Executive Officer.

“We believe that by expanding the RHO Phyto portfolio into retail sales channels we will provide consumers with easier and low barrier access to standardized medical products they seek. For a biopharmaceutical company like Avicanna, this expansion of our medical products into retail channels is in many ways similar to accessing over-the-counter medical products.”

According to Tipranks, based on analysts offering 12-month price targets for Avicanna in the last three months forecast the average price at C$2.49 with a high of C$2.50 and a low of C$2.50. The average price target represents a 164.93% increase from the last price of C$0.94.

The biopharmaceutical cannabis company shares closed 17.02% higher at C$1.1 after surging as high as 30% to C$1.21 intraday on Wednesday. However, the stock is down over 50% so far this year.

“Avicanna’s (AVCN) entry into the $3.2 billion run-rate Canadian adult-use cannabis market comes after the successful launch of its RHO Phyto products through Shoppers, where the company saw >100%month-over-month sales growth in all product categories,” Sarugaser and Freeman added.

“According to our channel checks, AVCN’s brands made up Shoppers’ top-selling products during the last several months. AVCN remains committed to its medical cannabis patients and will maintain its exclusive, preferred supply relationship with Shoppers Drug Mart, which is slowly but surely building out a powerful nationwide medical cannabis platform.”