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SMEs are driving the cannabis sector, but funding their growth isn’t easy

Despite the growing importance of middle-market cannabis companies, raising the investment needed to scale can prove difficult. 



SMEs are driving the cannabis sector, but funding their growth isn’t easy
Home » News » Markets and industry » SMEs are driving the cannabis sector, but funding their growth isn’t easy

Cannabis Wealth spoke with Kevin Bush of Sweet Leaf Madison Capital – a major lender in the US cannabis sector – about his passion for supporting the little guys.  

According to Kevin Bush – CFO of Sweet Leaf Madison Capital – the cannabis space is like pizza.

On one side of the spectrum, there are Domino’s and Pizza Hut; huge brands turning over millions or more each year. They’ve created a winning formula that works. Their products aren’t exceptional, but they’re consistent, cheap and powered by technology. On the opposing side is the local family-owned pizza place around the corner. Somewhere in the middle is the small to medium-sized independent businesses producing authentic pizzas in wood-fired ovens. They’ve made it their mission in life to make the best pizza in the area and they’ve put their life savings on the line to make it happen. 

A similar structure can be seen in the cannabis industry with individual, self-funded dispensaries at the bottom of the rung and huge multi-state operators (MSOs) at the top. It’s often the companies in the middle who are driving real innovation and producing consistently high-quality products. But in spite of the importance of lower middle-market companies, they are often overlooked when it comes to financing. 

“If you’re awarded a licence for a dispensary, it is going to [cost] anywhere between $800,000 and $1.2m,” Bush explained. “People can finance those dispensaries. They put together friends’ and family’s money to come up with it.

“Then, once a company is doing $50m in sales, lenders will step up. These are large, proven organisations, institutional investors, hedge funds [and] private equity. They will show up and back them.

“But what happens is somewhere between the individual ‘Mom and Pop’ shops that raise a million dollars from friends and family, and the MSOs that are doing 50 million-plus in sales is this huge market that is massively underserved.”

Sweet Leaf Madison Capital was born from the marrying of two firms; major equipment lender for the cannabis sector, Sweet Leaf Capital and private equity firm Madison Ventures which has raised in the realm of $1.6bn since its formation in 1996. The firms joined forces to fund and consult companies that fall in the middle, with top-line sales in the region of $2m to $5m. 

These companies are generally too small for major institutional lenders and too large to raise enough investment to expand. Sweet Leaf Madison Capital aims to fill this gap, financing primarily craft producers with an ambition to scale. For most companies Bush and his team work with, it’s the first institutional raise their clients have gone through as they transition from a micro-business to a middle-market company. 

An institution like Sweet Leaf Madison Capital requires significant due diligence, books and records need to be in order and policies and procedures in place. But thanks to the sector’s infancy and a lack of regulation, it remains a wild west, Bush said. “We’ll look at an operator making $7m a year and then you look at their books, and you think ‘who the heck put this together?’”

Clearly, there are challenges in funding new businesses in a young and emerging sector, but these barriers are outweighed by the excitement and financial reward of backing an emerging company. 

“Not only are you working with really enthusiastic and exciting entrepreneurs […], but you’re working in a situation where the sky’s the limit and you have a large amount of influence in terms of how you can help them,” Bush said.

“These entrepreneurs are all so passionate about what they do. They’re doing everything they can to get to the next level and that’s the fun part; they’re big enough to finance innovation […] and they’re able to be more responsive than a larger organisation.

“It’s tough to replicate that once you become a certain scale.”

As the influence of these craft producers continues to grow, Bush believes that cannabis could be headed in a similar direction to the beer industry which has undergone a revolution in recent years thanks to the emergence of a flourishing global craft beer scene. 

“One of our founders worked for Molson Coors and saw what happened to big beer when the craft movement came in,” Bush continued. “The craft providers maintained pricing power, whereas the generic stuff was a race to the bottom. There are lots of reasons to think that this will happen to cannabis at some point.

“The [businesses] that we think will have pricing power longer term are the ones that we favour.”

A potential danger to the burgeoning ‘craft cannabis’ sector is federal legalisation. Although US-wide legalisation would help operators and producers by bringing the cost of capital down, the introduction of cross-state transportation and distribution could lead to medium-sized companies being swallowed up. 

Growing operations are likely to move to states where crops are easier and cheaper to grow, like California and Colorado while established growers in states with less favourable climates are at risk of being stubbed out. 

But it’s Bush’s view that members of Congress will push to keep their state’s cannabis micro-industry autonomous, allowing them to keep cannabis professionals in work and continue to collect taxes from an increasingly lucrative sector. 

As federal legislation creeps closer, it may feel that the gobbling up of small and medium canna-businesses is inevitable. However – as with the craft beer scene – there is a fierce independence amongst the SME of the cannabis space. 

For those that want to scale their company, Bush said “don’t be arrogant, it’s a tough business. 

“Don’t be afraid to work with outsiders that have experienced it. Don’t hand them the keys, but don’t hesitate to bring in money or advisors who have been there and done it. There’s not a lot of it because it’s such a new industry, but don’t be a hero and [think] you have to figure this out on your own.”

Markets and industry

Roundup of Q1 2022 financial results in the UK medical cannabis space



financial results

Companies across the cannabis industry announce financial results for the first quarter of 2022, Cannabis Wealth rounds up the results of six major firms expanding within the UK medical cannabis space.

2021 was a positive year for cannabis businesses with 165 per cent year-over-year growth in cannabis equity capital raises and a series of high profile mergers and acquisitions. Compared to 2020, which was characterised by plunging investment and struggling businesses, the future of the UK industry is looking bright. With the first quarter of 2022 coming to a close on 31 March, companies are now releasing financial results from the first three months of the year.

Jazz Pharmaceuticals reveals financial results one year after GW Pharmaceuticals acquisition

In February 2021, Dublin-based firm Jazz Pharmaceuticals announced its acquisition of GW Pharmaceuticals, developer of the UK’s only licensed cannabis-based medicines, Sativex and Epidiolex.

In its financial results for the first quarter of 2022, the firm reported that its net product sales of Epidiolex increased by 6 per cent to $157.9 million in 1Q22 compared to the same period in 2021, on a proforma basis.

Epidiolex is now commercially available and fully reimbursed in four European markets: United Kingdom, Germany, Italy and Spain, with an anticipated launch in France in 2022. The company said it has made “significant progress” on its European rollout with launches in Spain, Italy and Switzerland in the third quarter of 2021 and Ireland and Norway in the first quarter of 2022.

The Company expects to initiate a Phase 3 pivotal trial of Epidiolex for Epilepsy with Myoclonic-Atonic Seizures (EMAS), the fourth target indication for Epidiolex, in the first half of 2022.

Khiron Life Science achieves 240 per cent sales volume growth in the UK

Toronto-based international medical cannabis company Khiron Life Sciences has reported a sales volume growth of 240 per cent in the UK market in Q1 2022 compared to the entire year of 2021.

In late 2021, Khiron opened its first European Zerenia Medical Cannabis Clinics in the UK, offering telemedicine service to patients around the country, and contributing to the company’s patient acquisition and retention growth.

“[Our] KHIRON 20/1 THC-predominant strain is one of the best-selling medically prescribed products in the UK market,” Franziska Katterbach, President of Khiron Europe, said. “In Q1 2022, we expect to surpass our first 1 million CAD in revenues in the UK, and as we expand our portfolio, and increase our patient base, Khiron will consolidate its market leadership within the country.

“In 2021, Europe accounted for 33 per cent of Khiron’s medical cannabis revenues, at more than 1.5 million CAD. In Q1 2022 and beyond, Europe will represent over 50 per cent of Khiron’s cannabis revenues.”

MGC Pharma selling cannabis-based epilepsy drug into the UK through new distribution agreement

Australian firm MGC Pharmaceuticals reported sales of $625k in the first quarter of 2022 The majority of sales came from the Australian market, but the company said it is making further inroads into the European market.

In its March 2022 quarterly financial results, MGC Pharma highlighted a new strategic EU and UK distribution agreement for its epilepsy medication CannEpil and Dementia treatment CogniCann. The agreement was signed with “at home” medicine supplier, Sciencus Rare and will initially focus on four EU countries and the UK. An additional distribution partner, PCCA, will assist in selling Cann Epil into the UK.

In the report, MGC said it is “confident that these new European partners, along with a substantial presence in both Ireland and Australia, will contribute significantly to the MGC phytocannabinoid revenue stream for the remainder of 2022 and beyond”.

Following its listing on the London Stock Exchange in February 2021, MGC Pharma last month appointed London based CFO, Angela-Marie Graham. The appointment is part of its business strategy to establish a corporate office in the UK to support its European operations.

Aurora reports increased revenue in the UK market amidst net loss of $1 billion

Canada-based international cannabis company, Aurora Cannabis reported net revenue of $50.4 million in the period ending 31 March, down 17% sequentially but up 8 per cent compared to the prior year period.

Aurora said its international medical revenue hit $14.6 million, up 55 per cent year over year but down 26 per cent sequentially. The company is currently selling medical cannabis products in seven EU countries: Germany, Malta, Poland, Czech Republic, UK, Denmark and France.

The company stated that this decrease was due to the previous quarter including $8.5 million in net sales to Israel as part of a supply agreement. Excluding the Israeli market, its net international medical sales increased sequentially by 29 per cent, driven by markets including the UK, Germany and Poland.

In the UK, Aurora’s revenues increased by 60 per cent compared to last year’s first quarter. The company said “growth was driven by a rapid increase in patient numbers as more evidence has come out and more physicians prescribe cannabis”.

Despite growth in Europe, the firm reported a net loss of more than $1 billion, up by more than $160 million in the same quarter last year. It said the loss was primarily a result of increased pricing pressures and the continued impact of Covid-19. The company announced yesterday that it would be closing its Aurora Sky facility in Edmonton, Canada where it employs 13 per cent of its workforce.

Curaleaf sees small dip in revenue compared to Q4 2021 but celebrates year-on-year growth of 20 per cent

Curaleaf International, one of Europe’s major vertically integrated cannabis companies, reported a 2 per cent dip in revenue compared to the previous quarter but has seen a year on year growth of 20 per cent. Curaleaf produces two ranges of medical cannabis flower for patients in the UK.

Highlights from its first quarter of 2022 include the addition of 11 new retail dispensaries in the US, bringing its total number of locations to 1128, the acquisition of Arizona-based cannabis operator Bloom Dispensaries and the launch of a new product in Florida.

Following its entry into New Jersey’s recently legalised recreational cannabis market, Boris Jordan, Executive Chairman, said Curaleaf’s month-over-month growth from March has boosted confidence in its ability to hit full year revenue guidance of $1.4 billion to $1.5 billion.

“Given renewed optimism surrounding federal banking reform, a record-breaking 4/20, the exciting launch last month of New Jersey adult-use sales, and the prospect of New York following suit, 2022 is shaping up to be another milestone year,” Jordan said.

STENOCARE expands into the UK market: financial results indicate “a strong start for 2022”

Following its recent expansion into the UK medical cannabis market in February 2022, Danish producer of medical cannabis products STENOCARE reported that its net sales more than doubled compared to the fourth quarter of 2021.

In March, the company had three of its medical cannabis oil products approved for use in the UK. STENOCARE said it considers the current timing to be good given that industry analysts have projected that the UK will become one of Europe’s largest markets in five years. Delivery of the first products to the UK market is expected in the second quarter of 2022.

By the end of the year, the company said its expected sales run rate is set at 15 to 20 million DKK (approximately £1.7 to £2.3 million), up from total sales in 2021 of 1.9 million DKK. The majority of the uptake in sales is expected to materialise in Q3 and Q4 2022.

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Markets and industry

Expanding the full digitisation of COAs in the cannabis supply chain

Lucid Green has announced three new partnerships to support the digitisation of certificates of analysis (COA). 



Expanding the full digitisation of COAs in the cannabis supply chain
Home » News » Markets and industry » SMEs are driving the cannabis sector, but funding their growth isn’t easy

Lucid Green has partnered with with CannaSafe, Cannalysis, and LabLynx to bring COA digitisation to over 400 labs across the US.

The intelligent UPC platform, Lucid Green has entered into partnerships with the cannabis testing labs and lab information systems (LIMS), building on its existing partnerships with Confident Cannabis and Sonoma Lab Works.

A digital COA reveals much more information to the consumer and brands gain more insight into how their products are being consumed, enabling them to modify offerings to best suit the needs of their consumers.

Co-founder and CEO of Lucid Green, Larry Levy, commented: “Lucid Green is committed to increasing trust and transparency at every point of the cannabis supply chain and with consumers.

Read more: New platform aims to transform US cannabis supply chain

“By expanding our partnerships with cannabis testing lab systems, we are cutting time and money inefficiencies, while ultimately giving consumers additional information to allow them to have a better cannabis experience. 

“This industry is not growing because stoners are smoking more weed. It’s growing because your spouse, neighbour, parents are beginning to see the benefits of using cannabis and want more information to feel confident about and inform their experience.”

Digital COAs that reflect full lab test results, including terpenes and cannabinoids, do not currently exist in the industry. As a result, point-of-sale, online menuing and ecommerce platforms are only receiving basic information that’s captured as part of the track and trace system. 

This limited data set reinforces the current purchasing behaviour which is fixated on THC levels and basic classifications like Sativa, Indica or hybrid.

Lucid Green is also modernising the cannabis industry with LucidIDs – QR codes that make the cannabis supply chain more efficient by allowing for true truck-to-shelf inventory intake, reducing manual labor and human errors and eliminating data cleanliness issues.

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Markets and industry

Curaleaf appoints Matt Darin as new CEO

Curaleaf’s current CEO Joe Bayern will launch and run a new division of Curaleaf.



Curaleaf Matt Darin CEO

International provider of consumer cannabis products, Curaleaf has appointed Matt Darin as Chief Executive Officer as exiting CEO Joe Bayern prepares to launch and run a new division of Curaleaf.

Curaleaf has announced that Matt Darin has stepped into the role of Chief Executive Officer at the international cannabis company, effective yesterday (9 May).  As a founder of the Chicago-based cannabis company Grassroots, Darin was a first entrant in some of the United States’ key cannabis markets, including Illinois and Pennsylvania. Since joining Curaleaf in July 2020, he led the central US region which the company said is its largest region by footprint and revenue. In 2021 he added the southeast region to his responsibilities, helping increase Curaleaf’s market share by 55%.

The announcement was made in conjunction with the company’s quarterly earnings call, during which Curaleaf reported first quarter revenue with year-over-year revenue growth of 20% to $313 million, and year-over-year adjusted EBITDA growth of 16% to $73 million with operating cash flow of $57 million.

“I firmly believe we are building the best team in cannabis and I’m energized and humbled to lead Curaleaf at this pivotal moment,” Darin said in a statement. “We’ve built the foundation to continue to be the industry leader for the long term with a focus on operational excellence in every aspect of our business. We are leveraging the power of our 131 highly productive dispensaries and the accelerating distribution of our brands in 2,200 wholesale accounts throughout the U.S.  I’m grateful to the board for their confidence in me as we move to the next phase of our journey.”

Curaleaf’s current CEO Joe Bayern will launch and run a new division of Curaleaf developing a new consumer packaged goods (CPG) based business model while working closely with Darin during the transition period through the second quarter. Executive Charman Boris Jordan said the company is “incredibly grateful” for Bayern’s tenure as CEO stating that he brought the firm into a “new way of working and thinking strategically as a CPG company”.

“I’m thrilled to begin this new chapter with Curaleaf,” Bayern said. “Working with this team has been an amazing ride and we’re just getting started. I’m deeply grateful to Boris, Joe Lusardi, the board, and every team member at Curaleaf; I am proud of what we’ve built together, and I know that our new venture will be another strong asset in Curaleaf’s undisputed leadership of our exciting industry.”

Boris Jordan added: “This move positions us well on several fronts; we will benefit from Matt’s proven track record of building winning teams and cannabis industry experience, and Joe Bayern’s extensive experience driving CPG strategy to launch our new division. I have the utmost confidence that this change is the natural next step in Curaleaf’s journey as the leading global cannabis company serving both the adult use and health and wellness markets. In fact, we’ve never been more bullish about our future.”

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