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iAnthus: THE INVESTMENT CASE
INVESTMENT OVERVIEW

iAnthus Capital eyeing big things as it closes Citiva deal

Today, the group closed the US$18mln acquisition of Citiva Medical and Citiva USA
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INVESTMENT OVERVIEW: IAN The Big Picture
iAnthus describes itself as a diversified US cannabis firm

Broker Canaccord recently said it reckons diversified US cannabis company iAnthus Capital Holdings Inc (CSE:IAN, OTCQB:ITHUF), which is now operating in six states, will have a banner year in 2018.

And so far the signs seem auspicious..

Big deals..

It has been closing big deals of late.

Today it  closed the US$18mln acquisition of  Citiva Medical and Citiva USA giving it access to New York state's population of 20mln people.

And earlier this month, it completed the acquisition of GrowHealthy Holdings LLC - marking its full scale entry into Florida, a market which, it says, could grow to US$1bn by 2020.

Today's Citiva news means the firm's regulated cannabis industry operations now span six US states, including three of the most populous on the East coast - New York, Florida and Massachusetts.

Citiva's licence includes a cultivation and processing facility and four dispensary locations to be located in Brooklyn, Staten Island, Dutchess County and Chemung County.

The flagship Brooklyn dispensary is slated to open in the fourth quarter of 2018, and will be one of only two dispensaries located in New York City's most populous borough, with 2.6 million residents.

Citiva's Staten Island dispensary is also slated to open in the fourth quarter. The Dutchess County and Chemung County dispensaries, serving a population of 300,000 and 70,000 respectively, are currently projected to open in the second quarter of 2019.

Meanwhile, turning to the other acquisition, GrowHealthy and its affiliate McCrory's Sunny Hill Nursery LLC is just one of 13 Florida medical marijuana treatment centres (MMTCs) at the moment licensed to provide medical cannabis.

The acquisition includes GrowHealthy subsidiary GHIAA Management, which holds an exclusive 40-year management contract to operate the medical cannabis business associated with the MMTC licence and an option to acquire 100% McCrory's.

Construction at GrowHealthy's flagship Palm Beach county dispensary is expected to be finished during the second quarter this year and the 4,500 sq ft facility is expected to open in July.

"We continue to hold the view that 2018 will be a banner year for the company as its crown jewel assets in Massachusetts and New York are expected to make meaningful contributions by the back half of the year," said Canaccord analyst Matt Bottomley has said.

Key drivers include the recreational market in Massachusetts expected to start by mid-2018,  plans to enter the growing New York medical cannabis market via Citiva, and potential optionality in Florida.

What does iAnthus do?

Legalised cannabis is the fastest growing industry in the US,  and the group provides a combination of capital and hands-on operating and management expertise.

It raises capital in Canada, where cannabis is legal for medical use at both the federal and provincial levels, and puts the funds to work in the US market.

A growing US market..

Currently, 29 US states have legalised the use of full-strength medical cannabis, with eight of those states allowing recreational use of the drug as well.

In all, 43 states allow some degree of cannabis use, meaning 93% of Americans live in a state that allows consumption.

According to industry data, direct legal cannabis sales totalled US$7bln in the US in 2016 and by 2020 will reach around US$22bln.

However, although this looks like a good opportunity for businesses, the fact that cannabis is still illegal on a federal basis in the US makes it difficult for entrepreneurs to finance their operations.

The firm was not overly concerned about the recent move by the Department of Justice to rescind the Cole Memorandum, which offered protection to states that have legalised marijuana as long as they follow guidelines.

It expects this to have little or no material impact on federal prosecution priorities in states that have adopted regulated medical and/or adult use marijuana programmes.

Poised to start growing..

Also this month (January), the firm  released significant cultivation news, saying it was poised to start growing cannabis imminently at its Holliston facility in Massachusetts  after it received the go-ahead.

Its affiliate Mayflower Medicinals Inc received the final certificate of registration (FCR) and certificate of occupancy (CO) on December 28, last year, it revealed.

iAnthus has also completed the acquisition of 80% of Pilgrim Rock Management, which will provide IP licensing, management services, real estate and equipment leasing, and certain other services to Mayflower with effect from  January 1. It also has struck a deal to potentially buy the remaining 20%.

So 2018 certainly has started with gusto and looks to continue.

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