“Cannabis 2.0” is here. 
The wave of recreational and medical cannabis products is finally legal in Canada and now allows manufacturers and retailers to provide consumers with a wide range of new cannabis products, including high-quality (and safe) vape cartridges, edibles, concentrates and other oil products.
At the forefront of this new movement is Canadian cannabis Company Westleaf Inc. (TSX-V: WL, Forum). Just days prior to legalization, the vertically-integrated operation announced that its large-scale cannabis extraction, processing and product formulation facility, The Plant by Westleaf Labs, received its standard processing licence from Health Canada. This means that it is ready to start operations immediately. Under the Standard Processing Licence, Westleaf is allowed to process bulk cannabis to create and sell derivative products through a variety of commercial arrangements.
Company President and CEO, Scott Hurd called this a major catalyst for Westleaf. He explained that the Company can generate material revenue through the sale of derivative cannabis products, while offering contract manufacturing services.
This will be happening at its 60,000 square foot Calgary facility where the 15,000 sq. ft. Phase 1 has been built to European Union good manufacturing practice (GMP) specifications and is designed to process up to approximately 65,000 kgs of dried cannabis a year. This is anticipated to be turned into high-quality edibles, concentrates, vape and oil products, including Westleaf's first in-house product, a line of vape pens under the brand General Admission. Other offerings coming down the pipeline include products under the Company's other house brands, Backstage, and wellness brand, Loon. The Plant has an additional 45,000 sq. ft. of space to expand extraction capacity, as well as the potential to add additional product lines based on consumer preferences.
(Product Formulation Reactors at The Plant by Westleaf Labs in Calgary, Alberta, October, 2019. Photo by Todd Korol. (CNW Group/Westleaf Inc.)
The work happening at Westleaf is comparable to other Canadian cannabis companies in this space, such as
Valens GroWorks Corp. (TSX-V: VGW),
MediPharm Labs Corp. (TSX: LABS) and
Neptune (NASDAQ:NEPT) who offer similar services such as bulk production of cannabis oil, tolling and white labelling for third parties. Notably, on October 15, 2019, Valens GroWorks Corp. reported their fiscal Q3 earnings which generated $16.5 million in revenue for the quarter and $9.8 million of EBITDA (~59% EBITDA margin).
Now that cannabis-derivative products are legal in Canada, Westleaf is expecting strong industry-wide demand for efficient extraction, processing and formulation capacity. The Plant is a scalable facility and well positioned to capitalize on the potential for the expected demand growth for contract manufacturing, tolling arrangements, as well as white labeling and in-house product formulation.
In
July 2019; Westleaf signed its first extraction contract with
Delta 9 Cannabis Inc. (TSX: CN) for white label cannabis-derivative products worth at minimum, approximately $4 million a year, with an option to increase up to $16 million a year.
Delta 9 President and CEO John Arbuthnot stated at the time that Westleaf stood out to his company when they were looking at options for white-labeled cannabis-derivative products.
“Given Westleaf's large menu of existing product formulations and distribution capabilities through their cannabis retail chain, Prairie Records, we view this agreement as positive step in expanding our Delta 9 branded product offerings and distribution footprint.”
WL CEO Hurd added that this contract is the first of what his Company hopes will be a number of similar arrangements between licensed producers, product developers and others who are preparing for the coming legalization of derivative cannabis products such as vapes, edibles, topicals and beverages.
“We are preparing Westleaf to be in a strong position to capitalize on the expected spike in consumer demand for these products later this year and into 2020 and beyond.”
FULL DISCLOSURE: This is a paid article produced by Stockhouse Publishing.