The cannabis patch has been on the mend in recent action, and shares of Medicine Man Technologies Inc (OTCMKTS:MDCL) are among those that have been sparked further by that sector tailwind. But the stock has a bunch of catalysts of its own helping to forge a strong pattern and strong prospects of late. Most importantly, MDCL has been orchestrating a complex and aggressive M&A roll-up strategy that could spell accelerating top-line growth for the company.
To understand why this is such an interesting strategy, it’s important to also understand the context. The company is, in fact, capitalizing on recent changes in Colorado state law (namely, passage of HB 19-1090), which will take effect on November 1, and allow for outside investors, venture capitalists and private equity firms to gain investment access to Colorado’s cannabis industry.
Medicine Man Technologies Inc (OTCMKTS:MDCL) has been a well-respected and successful advisor and consultant to firms in the cannabis industry for many years.
But this shift in the legal context has created a new opportunity to consolidate production and distribution under the MDCL umbrella in a roll-up that could produce significant revenue growth for a stock that is already cheap relative to peers in the space. In fact, right now, the stock is trading at 14x sales, which puts it solidly in a sweet spot for momentum/growth strategies. If you look at many of the other names in the space, such as CGC, ACB, HEXO, OGI, or TLRY, it’s not even close. MDCL is by far the cheapest on a price-to-sales basis.
According to company materials, Denver, Colorado-based Medicine Man Technologies (OTCQX: MDCL) is a rapidly growing provider of cannabis consulting services, nutrients, and supplies. The Company’s client portfolio includes active and past clients in 20 states and seven countries throughout the cannabis industry. The Company has entered into agreements to become one of the largest vertically integrated seed-to-sale operators in the global cannabis industry. Current agreements will enable Medicine Man Technologies to offer cultivation, extraction, distribution, and retail pharma-grade products internationally. The Company’s intellectual property includes the “Three A Light” methodology for cannabis cultivation and pending acquisition candidate MedPharm’s GMP-certified facility, which has the first cannabis research license to conduct clinical trials in the United States. Management includes decades of cannabis experience, a unique combination of first movers in industrial cannabis, and proven Fortune 500 corporate executives.
Here’s the company’s CEO on the new bill: “At a time when cannabis is valued at $1.5 billion and is expected to grow to $2.1 billion by 2022 in Colorado alone, this legislation will serve to accelerate Colorado’s leadership position in the entire cannabis industry, and those entities fortunate enough to do business in our state – including our own. This was a tremendous win for the industry and for Medicine Man Technologies.”
In all, the company has entered into binding term sheet agreements to roll up some bread and butter in the Colorado cannabis marketplace, including 12 cultivation facilities, 7 proprietary extraction facilities, 7 manufacturers of infused products, 33 strategically located retail dispensaries, and a state-of-the-art manufacturing, research and development lab that represents Colorado’s first and only active cannabis research license in the state.
Medicine Man Technologies Inc (OTCMKTS:MDCL) managed to rope in revenues totaling $1.8M in overall sales during the company’s most recently reported quarterly financial data — a figure that represents a rate of top line growth of 24%, as compared to year-ago data in comparable terms.
In addition, the company has around $4.3M in cash on the balance sheet.