It’s not terribly earth-shaking for $META (we declared their medical arm as a terminal business line in July 2019). And aside from shedding a money loser, the news is insightful because it implies that medical segments are meaningless to all but a small subset of customers. The type of customer who prefers to deal within a ‘formal’ health care setting rather than walk into a weed store. And probably one who doesn’t have a large consumption rates given how little profitability has been shown by any outfit doing ‘medical’.
$ACB is the envy of the medical space in terms of volume, but they also aren’t funding clinics: they intake and deal with their own customers/patients. Now that Shoppers is ramping, the end of the clinic – aside from a narrow wedge of inter-company profit sharing – is nigh.
It’s both a feature and a bug of Health Canada regulations, and we’ll see other producers take the write-offs soon enough. $META got $800k (plus a possible $300k more in paper) for the $9MM they put into it just over a year ago. Aleafia ($AH) faces a harder hit, their pickup of Canabo (the medical side) cost them $26MM, with $8MM of that price attributed to goodwill, and $12MM of it as intangible for the ‘patient list’.
Ultimately, recreational access has rendered the medical path redundant for the majority of potential consumers. It’s hard not to note the irony in that. At our Lift charity event, we met and spoke with many of the sector pioneers from medical that got us to where we are today. Several of them expressed feelings about being somewhat left behind in Oct 2018.
As it stands, not only did the regulators/legislators reduce the viability of the medical stream during legalization, the underlying economics has cinched it. It’s a shame.
The preceding is the opinion of the author, and is in no way intended to be a recommendation to buy or sell any security or derivative. The author holds no position in $AH or $META.
Ads Blocker Detected!!!
We have detected that you are using extensions to block ads. Please support us by disabling your ad blocker.