Neptune Wellness is Selling Its Canadian Cannabis Business

Neptune Wellness Solutions Inc.  (NASDAQ: NEPT) (TSX: NEPT) announced the launch of a new Consumer Packaged Goods (CPG) focused strategic plan to reduce costs, improve the company’s path to profitability and enhance current shareholder value. Neptune is also selling its Canadian cannabis businesses.

The sale of the cannabis business would include the sale of the Mood Ring and PanHash brands, along with the company’s Sherbrooke, Quebec facility, in one or more transactions. The value of the facility was recently appraised at C$21 million by a third-party appraisal company. In order to accelerate its cost savings, Neptune said it will focus on winding up its cannabis operations pending a transaction.

Layoffs

This divestiture will result in a 50% reduction in workforce, over 30% reduction of total payroll costs and an estimated annual cost savings of C$5.8 million. In addition, the company said it expects to see additional cost savings from corresponding reductions in corporate overhead costs and professional fees.

“This is the final stage of our transition to a pure play, purpose driven consumer packaged goods Company. This strategic divestiture greatly simplifies our overall structure, enabling us to hyper-focus on those areas of the business we believe are best positioned for profitability and growth,” said Michael Cammarata, President and CEO of Neptune. “Of course, the most difficult part of the Company and Board making this decision is the impact on our workforce. We are committed to working with those employees to ensure they are supported throughout this transition.”

Finally, the exit of the Canadian cannabis business may impact the amount and structure of financing the company is currently seeking. It is expected to reduce the amount of financing the company seeks, given a lower anticipated expense structure, along with anticipated cash inflows from the planned divestiture. Additionally, the divestiture is expected to facilitate working with a broader set of financing sources – including traditional banks and financial institutions that have policies restricting dealing with businesses exposed to regulated cannabis operations.

Sprout Organics

As part of the company’s renewed focus on its CPG brands and Sprout Organics, in particular, Neptune announced Sarah Tynan, current Sprout Chief Customer Officer, is promoted to CEO of Sprout, effective immediately. Tynan has been instrumental in garnering big distribution gains for Sprout, including Walmart and Target, and leading the highly successful CoComelon partnership.

Debra Borchardt

Debra Borchardt is the Co-Founder, and Executive Editor of GMR. She has covered the cannabis industry for several years at Forbes, Seeking Alpha and TheStreet. Prior to becoming a financial journalist, Debra was a Vice President at Bear Stearns where she held a Series 7 and Registered Investment Advisor license. Debra has a Master's degree in Business Journalism from New York University.


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