Bedrocan Cannabis Corp (
TSX:V.BED,
Stock Forum) is a unique beast in the Canadian medicinal cannabis market.
Unlike others, it has been given permission to import dried cannabis from its Dutch parent, Bedrocan BV, and that has allowed it to focus almost entirely on the sales and business development phases of its business plan, while others are building facilities, dealing with government agencies, waiting for police to do background checks and raising money to keep the lights on.
Not that Bedrocan isn’t doing those things – it has a 52k sq. ft facility that is being put together in the Greater Toronto area, and will be ready for pre-license inspection any day now. And when that’s done, the company plans to have domestic production of 4,000 kilos of product per year.
But Bedrocan refers to that plan as ‘phase II’, while others are sitting waiting for their ‘phase I’ equivalent to get started.
For now, Bedrocan is crushing it just re-selling product from Vader Bedrocan van Nederland. They’re a drop-shipper, and it’s working for them.
Over $1 million in revenues as of Oct 31, one of the first to hit that mark. Tweed had first mover advantage earlier this year, but Bedrocan has surged past without even planting a seed.
And its patient numbers are moving in the right direction too. 1500 and growing. Organigram tells me if they take 2000 patients, they’re in solid steady profit. At the current rate of sign-ups, Bedrocan hits that mark in less than six months.
Marc Wayne, President and CEO of Bedrocan, doesn’t give much away at the best of times. And these are seemingly the best of times.
"Patients are responding positively, customer retention is excellent, our customer care and fulfillment process is operating smoothly, and product quality control has been flawless," he said in a recent news release.
Tweed, at the same time, has had issues. Lots of issues. Enough issues that a second facility was needed to straighten things out. The company was open enough in talks with me earlier this year to admit as much. Management realized they were failing on their promise, but had the money to work through it and the political connections to fast-track a second MMPR.
As a result, Tweed has been resurgent of late, as up-top moves have brought in new blood and taken out folks that, according to rumour anyway, were not necessarily seeing eye to eye with others. The stock has ramped up to not-seen-in-months levels and the company is finally shifting away from being the industry whipping boy. No longer does every conversation with a competitor start with, “Yeah, Tweed asked us to come look at their facility to help fix problems but.. man.. I don’t know..”
That’s a good thing for everyone. A rising tide lifts all boats. But at the same time Tweed has been repairing its hull, the good ship Bedrocan has a full sail, lots of passengers, and an increasingly full treasure chest.
Let’s not torture the metaphor too much, but that boat could also be sailing soon for areas new. They don’t like to talk about it much, but Bedrocan has previously hinted publicly that they’re planning to expand their reach to new markets in different countries that are moving toward setting up national medical marijuana systems. It looks like Bedrocan wants to be ready to move quickly to seize opportunities quickly as they arise in different jurisdictions – and they’ve got the years of international experience no one else can boast.
Tweed boss Bruce Linton touched on this new push briefly at the recent Marijuana Business Expo in Las Vegas, making a straight up plea to companies and potential partners in the US and beyond to talk to the company about how they can work together.
The unspoken point beneath all this talk: That the Canadian system has been a kiln in which future multinationals are being forged, and that the road forward for those companies doesn’t just deal in capturing 100 patients per month to rake in millions in revenue, it involves large scale international projects that could be ‘Phillip Morris’ in size and profits.
For Bedrocan, part of that equation simply walks away from the day to day of growing and selling cannabis, and moves into what’s next for the substance.
And that means not just calling themselves medicinal, but actually instigating clinical trials to prove out the therapeutic benefits of their product. A lot of companies are talking about research, but actually going through the process of a full clinical trial is a big deal. It’s what doctors need to feel confident not just in prescribing weed, but prescribing a specific kind of weed aimed at a specific kind of ailment. From a specific company.
The company has told the market ‘phase II’ is about being able to have greater capacity to meet customer demand. Sure, okay, but it’s really about two things going forward:
1) Having a consistent, research-ready supply of their own local product
2) Improving margin
That first point is more important than you know, because you simply can’t perform real research on medicinal cannabis unless you have a crop that is standardized and identical from plant to plant. Every living thing has variations from its brethren, but Bedrocan says its years of experience in the Netherlands, where the parent company has the literal monopoly on medical supply to six European countries, has allowed it to find that crop consistency that is needed in medical trials.
And that nobody else can do that.
Wildflower, a small upstart outfit out of Parksville/Nanaimo BC, argues that it has a technology that can meet the consistency criteria at the DNA level. Bedrocan’s reps say that may be so, but if it is, they’re unaware of it.
And, frankly, if it is true, Bedrocan would be in a great financial position to swallow Wildflower whole.
Bedrocan wants to fast forward. Not to a time when its grow facility is ready, but to a time when it has trials under its belt, doctors increasingly open to marijuana as medicine, and is able to be a real pharmaceutical company in the Pfizer sense.
That’s the goal. Phillip Morris is fine. Pfizer is better.
Bedrocan stock has underperformed since it launched on the markets. No surprise: Most of the other public LPs have suffered a similar fate as sector investment cash has largely pulled out of ‘got our MMPR’ companies and chased ‘what’s next’ companies.
That’s not keeping Marc Wayne up at night. He’s surrounded himself with heavy pharma execs that don’t dance to Grateful Dead songs on Casual Fridays and hotbox on their way to the office. If you didn’t know the company was involved in marijuana, any collection of Bedrocan execs would be immediately suspected of being a delegation from the Lawyers and Accountants Union.
The point of Bedrocan is one that comes three years down the line. It’s making money now, which is great for investors, but V.BED isn’t for daytrading. It’s RRSP fodder.
--Chris Parry
https://www.twitter.com/chrisparry
FULL DISCLOSURE: Bedrocan is a Stockhouse Publishing marketing client.