Emerald exiting Canada’s cannabis industry after losing over CA$200M

Emerald Health Therapeutics plans to exit Canada’s recreational and medical cannabis sectors after racking up more than 200 million Canadian dollars ($156 million) in losses since its inception.

The Victoria, British Columbia-based business is the first mass-producer to choose to exit the cannabis industry.

The move comes after Emerald Health reported years of losses, underscoring how challenging the industry is to navigate for some executive teams.

The company plans to sell off its recreational and medical cannabis assets and pivot to a focus on pharmaceutical development, where its board has more expertise, Emerald Health announced Monday.

Emerald Health grew rapidly with Canada’s burgeoning cannabis industry but ultimately never made a profit in the sector.

The company lost a total of CA$224.6 million between 2015 and June 2021.

In that time, the company’s workforce grew from a couple of dozen employees to 166 in 2019, then fell to 111 this year.

Emerald Health, which once was known by the corporate names T-Bird Pharma and Thunderbird Biomedical, owns various cannabis assets, including:

• 100% of the shares of EHTC, a British Columbia-based license holder.
• 100% of the shares of Verdélite Sciences, a Québec-based license holder.

At one time, Emerald Health owned 41.3% of Pure Sunfarms, arguably Canada’s most successful mass-producer of cannabis.

However, after relations soured between the two parties, Village Farms International bought out Emerald Health earlier this year for CA$79.9 million, which included CA$60 million in cash and the remainder due six months from the closing date.

Emerald Health has had a turbulent year.

The former CEO, Avtar Dhillon, was arrested in the United States on Aug. 3 and charged with conspiracy to commit securities fraud as well as two counts of obstruction of a proceeding before the U.S. Securities and Exchange Commission (SEC), according to a Glacier Media news report.

Emerald said in a statement it became aware of Dhillon’s arrest on Aug. 5 but was “not aware of any improper trading in Emerald securities, and no allegations have been made against any other person associated with Emerald.”

Dhillon resigned as Emerald chair on Aug. 6.

He had been a director of the company since April 23, 2015, and also helmed the industry body Cannabis Canada Council in 2018.

The company’s CFO, Jenn Hepburn, stepped down in October.

In November, Emerald signed an agreement to co-launch, sell and distribute cannabis beverages. It’s unclear where that partnership will go with Emerald’s planned exit from cannabis.

Cannabis beverages have been a flop so far in Canada, with industrywide sales amounting to only CA$23.6 million, or just 1.3% of the Canadian cannabis market, in the first half of this year.

In March, Emerald Health withdrew a registration statement relating to securities to raise up to CA$150 million.

Earlier this year, Emerald Health delisted from the TSX Venture Exchange and listed its common shares on the Canadian Securities Exchange (CSE) in an attempt to try to capitalize on the American cannabis industry.

No progress appears to have been made to that end.

Emerald’s revenue in the latest quarter was CA$3.78 million with a net loss of CA$13.96 million.

The company’s shares, which are traded as EMH on the CSE, are down 99% from their peak in early 2018.