fbpx Medical cannabis exporter sees an opening before market floods

Medical cannabis exporter sees an opening before market floods

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Medical cannabis producers have a five-year window to reap high prices for their products before supply floods the market, according to Jordan Lewis, whose firm became Uruguay’s first commercial exporter of marijuana this month.

“The EU right now represents the single largest market in the next five years,” Lewis, chief executive officer of Silverpeak Life Sciences Uruguay Inc., said in an interview in Montevideo. Lewis added he’s also bullish on Asian and Latin American markets in the mid-term.

Prices for dried flowers and oils that are high in THC, the plant’s main psychoactive ingredient, should remain elevated for the next three to five years, Lewis said. Non-psychoactive CBD products will probably see price declines much sooner, he said.

Silverpeak subsidiary Fotmer Corporation SA, which handles the company’s operations in Uruguay, shipped 10 kilograms of high-THC medical cannabis flowers to Australia this month. Lewis expects shipments to reach 100 kilograms a month by early next year. His company is also preparing a major shipment of THC flowers to a buyer in the European Union before the end of 2019, he said.

Uruguay is joining a small but fast-growing club of medical-cannabis exporting nations such as Canada and the Netherlands. These countries want to cash in on a market that PI Financial Corp predicts could be worth more than $50 billion by 2025. More than 20 nations, including Germany and Australia, have approved the use of medical marijuana. The drug remains banned by the U.S. federal government, however, while Europe has its own domestic producers including subsidiaries of Canadian companies such as Tilray Inc.

Canadian producers in particular are banking on exports to Europe and other burgeoning medical marijuana markets to boost growth as they struggle to turn a profit in their domestic market. Aurora Cannabis, the world’s second-most valuable weed company, exported C$4.5 million of dried cannabis to EU markets in the three months ended June 30, a small fraction of its total revenue of C$98.9 million.

Fotmer has asked the Uruguayan government for approval to expand its annual production limit to 150 tons (136,000 kilograms) of dried flowers with an increase in oil output, Lewis said. It currently is allowed to produce 10 tons of dried flowers and 5 tons of oil a year.

Silverpeak’s revenue will hit about $5 million this year, before rising to about $45 million in 2020 as production ramps up, according to Lewis.

Fund Raising

Uruguay’s cannabis industry has been slow to develop even though it was the first country to legalize most uses of the plant in 2013. Investment can be measured in the tens of millions of dollars, far from the eye-popping sums flowing to marijuana in the U.S. and Canada.

British Columbia-based Silverpeak started raising funds in mid-2018 and is on track to reach about $25 million through the end of this year from individual investors, family offices and small hedge funds, Lewis said. The company will need at least $60 million of additional capital during the next two years to fund its expansion.

Lewis wants to start selling active pharmaceutical ingredients to drug makers and his own brand of value-added products before flower and oil prices fall.

“I anticipate that, in order to meet our capital needs, we are going to have to find a large strategic partner,” said Lewis, who is also exploring other funding options such as private placements or tapping public markets.

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