Exclusive Interview with TerrAscend President Matthew Johnson and Chairman Jason Wild
TerrAscend (CSE: TER) (OTC: TRSSF) has a cultivation presence in Canada, a growing footprint in the United States and an entrance into the European market thanks to a recently granted GMP license. The company is aiming to continue its expansion and establish itself as the leading North American operator. Matthew Johnson, President of the company, and Jason Wild, Chairman of the company and founder of JW Asset Management, spoke with New Cannabis Ventures about TerrAscend’s market share, brands and growth strategy.
Before moving to fund management, Wild was a pharmacist. Finding he had an aptitude for stock picking, he launched a fund with $80,000 under management in 1998. The fund initially focused on public equities and pharmaceutical companies. In 2010, the fund purchased Arbor Pharmaceuticals, which took off. Today, Wild and his team have approximately $1.1 billion in funds under management – with Arbor and TerrAscend being big pieces of that total.
Johnson has spent more than 25 years in the medical device and pharmaceutical industries with experience in consumer products as well. He has worked with companies like Baxter Healthcare, Abbot Laboratories, and AbbVie. He and Wild have known one another for quite some time and mutually recognize the opportunity to build a successful business in cannabis that has significant patient benefits.
The TerrAscend Model and Market Presence
TerrAscend is a vertically integrated company in select markets. In Canada, the company has a 67,000-square-foot cultivation facility in Mississauga, Ontario and partnership with the University of Toronto and Ascendant Laboratories. The company is focused on creating premium brands and novel formulations of pharma-grade drugs in the Canadian market.
Canada will also serve as the company’s export platform to European markets. TerrAscend is one of 11 cannabis companies to have GMP certification, and the company was the first in the last 12 months to earn the certification, according to Wild. With a German distribution deal already secured, the company will be starting its first shipments to Europe within weeks.
In the United States, the company has a foothold in the California market (three operational dispensaries and two additional planned) through its acquisition of The Apothecarium. The second part of the acquisition, expected to close soon, will give the company a presence in Nevada as well – a Las Vegas dispensary and 47,000-square-foot cultivation operation. Additionally, the company’s CBD business Arise Bioscience has a strong presence in Florida. TerrAscend is also on the east coast with a cultivation operation and a dispensary – both opening in the second half of this year – in New Jersey.
TerrAscend is the first cannabis company with sales in Canada, the United States, and Europe.
Brand Portfolio
In Canada, TerrAscend’s Haven St. premium brand is a top 10 brand in all provincial markets where it is sold, according to Johnson. The company is also expanding its product line to include oils; it received its oils sales license earlier this month.
In the United States, the company has CBD brands Original Hemp, which recently launched and is gaining traction, and Funky Farms, which is in approximately 10,000 stores.
The Apothecarium acquisition also brings the Valhalla premium edibles brand to the TerrAscend portfolio. The Apothecarium is positioned as a leading California dispensary, and other brands are interested in being on the dispensaries’ shelves as well.
Given the company’s diverse brand portfolio, leadership sees the opportunity for cross-pollination. For example, the company could make a CBD formulation of a Valhalla product and sell it through the Arise distribution network.
Acquisition Strategy
The Apothecarium acquisition exemplifies the kind of deals TerrAscend is pursuing, according to Johnson. The company brings strong operations, great brands and people that align with TerrAscend’s values and strategy. TerrAscend will pursue revenue and EBITDA accretive assets with those features.
The Apothecarium transaction is also helping the company attract more interest for future deals. Ryan Hudson, Cofounder of The Apothecarium, is well-respected in the cannabis space and a powerful voice.
The company has a strong deal pipeline with a number of transactions currently under nonbinding LOIs.
Research and Development
The company’s research and development, which plays a significant role in the overall growth strategy, falls into four main categories:
Plant science. Initiatives in this category will focus on genotyping and understanding different strains.
Product format. The company will use product research to develop a diverse portfolio that can be scaled and replicated across its markets.
Cannabinoid and terpene profiles. Cannabinoid and terpene research will help the company develop proprietary formulations.
Clinical research. TerrAscend is conducting clinical research to understand and develop standardized applications for conditions such as anxiety, IBS, and insomnia.
The company’s overall goal for R&D is to enhance safety, efficacy, and continuity of supply while developing novel formulations that can be protected as intellectual property, according to Johnson. TerrAscend is also using data insights from The Apothecarium dispensaries to help inform its R&D strategy.
Strategic Partners
TerrAscend has strategic investors including Wild’s JW Asset Management, Canopy Rivers, and Canopy Growth. These partners bring value to the table beyond funding. A committed chairman, Wild has been a major asset as the company navigates the capital markets, according to Johnson. The partnership with Canopy Rivers has opened the door to deals like the 20 percent offtake agreement with PharmHouse, a Canopy Rivers portfolio company.
Though Bruce Linton departed Canopy Growth, TerrAscend’s relationship with the company remains strong, according to Wild. The partnership with Canopy Growth also opens the door to opportunities with Constellation Brands – Wild recently spoke with the company’s CFO.
Funding and Revenue Projections
TerrAscend recently completed a $69 million private placement to help fund expansion, a financing that included significant insider participation. TerrAscend’s management team and board like to think like owners when it comes to financing, and they are bullish on the company’s opportunities for growth, according to Wild. He points out that is approach is counter to many other MSOs where executives are participating in insider sales.
The company does not have a precise timeline for future capital raises, but it will likely have more deals in the future that require funding.
Recently, TerrAscend reiterated 2019 guidance of $135 million in sales. That guidance is driven by the company’s cultivation operations in Mississauga, its export business, The Apothecarium acquisition, and the Arise Bioscience business.
Targeted Growth
TerrAscend’s recipe for success is a blend of the right people, M&A targets with accretive revenue and EBITDA, expansion in limited license markets, and operational focus, according to Johnson. As the company continues to execute on that strategy, leadership sees TerrAscend as well-positioned to become one of the top five cannabis companies in the world.
TerrAscend is a client of New Cannabis Ventures. Listen to the full interview:
