Emblem Corporation

  • Target Price
  • $3.00
  • Market Sentiment
  • Cautiously Bullish
  • Analyst Consensus
  • Hold
About Emblem Corporation

Emblem Corp. is a licensed producer (LP) and distributor of medical marijuana. The Company is working to develop three verticals, including marijuana production, healthcare services (through GrowWise), and pharmaceuticals. It is currently producing at an annualized rate of approximately 660 kg. The Company was originally incorporated as KindCann Holdings Limited in October 2014, changed its name to Emblem in September 2016, and completed its qualifying transaction in December 2016

Production

Emblem operates a purpose-built indoor facility in Paris, Ontario. The Company’s fully funded Phase 2 expansion plan should triple annual capacity to 2,100 kg with commissioning expected in April 2017. The Phase 3 and 4 expansion plans could take annualized capacity to 21,100 kg.

Strong Balance Sheet Supports Expansion to 11,600 kg Annual Capacity :

Including the recently completed special warrant financing, we estimate that EMC has approximately $40M in cash available to fund expansion. Its facility in Paris, Ontario, is currently producing at an annualized rate of almost 700 kg. The Phase 2 expansion should triple capacity with commissioning expected in April, and the Phase 3 expansion should take total capacity to 11,600 kg (almost 16x current levels). The Company also has in-themoney warrants/options outstanding that could generate an additional $36.5M in proceeds, which could be used to fund a Phase 4 expansion to 21,100 kg. That capacity could bring run-rate revenue to approximately $180M.

Pharmaceuticals

 Emblem is working to develop pharmaceutical formulations that use cannabinoids as the underlying active ingredient, and expects to submit multiple pharma formulations for Health Canada approval by Q417. This business is headed by Mr. John Stewart, who is the former President and CEO of Purdue Pharma Canada and Purdue Pharma USA. Purdue is one of the largest privately held pharmaceutical companies in the world, and we believe Mr. Stewart brings a wealth of experience in drug development to the Company.

 Vertically Integrated Model with Strong Management Depth :

Emblem owns a 50% stake in GrowWise, which operates education centres where patients receive personalized advice on product selection, including varieties offered by other LPs. Mr. Harvey Shapiro, the CEO of GrowWise, was the Co-founder and CEO of Dynacare, the third largest provider of clinical laboratory services in North America, which was acquired in 2002 for almost US$500M. Emblem is also developing a Pharmaceuticals division headed by Mr. John Stewart. He is the former President and CEO of Purdue Pharma Canada and Purdue Pharma USA, one of the largest privately held pharmaceutical companies in the world. We estimate that management and the board own a combined 14% of the basic shares outstanding, having invested $6M out-of-pocket to date.

Healthcare Division: GrowWise