Neptune Wellness Solutions (Nasdaq: NEPT) is selling its cannabis business to PurCann Pharma, a subsidiary of Groupe SiliCycle, a Quebec-based company with more than 27 years of experience with extracting and purifying active ingredients from natural biomass, for C$5.15 million to be paid in cash.
The assets include a cannabis plant in Sherbrooke, Québec, the Mood Ring, and PanHash brands, and related assets. It’s a big discount from the price the company touted in June when it said it was appraised at C$21 million.
“The complete divestiture of our cannabis business is a critical milestone in executing upon our strategy to become a leading CPG company,” Ray Silcock, chief financial officer of Neptune, said. “We are nearing an inflection point with our flagship brand Sprout Organics and expect it to serve as the key growth driver for Neptune going forward. In addition, the divestment of the cannabis assets will allow us to realize significant cost savings and operational streamlining from redirected resources towards our simplified corporate structure.”
PurCann Pharma is already present in the Canadian cannabis market with its therapeutic brand OOVIE and its recreational cannabis brand OLLOPA. PurCann Pharma President Hugo St-Laurent said, “With this transaction, PurCann Pharma consolidates its position in the cannabis market and is also aligned with our mission to provide pharmaceutical-grade ingredients and cannabinoids to the life science market.”
Neptune said it plans to use the net proceeds from the sale of these assets to for working capital and other general corporate purposes. Neptune said earlier this year that it was focusing on its Sprout Organics business and its CPG brands. Just last week the company announced it had raised $6 million in an offering.
In August, Neptune Management said, “We reported revenue of $16.3 million, an increase of 61% year-over-year, led by Sprout, which had its largest net sales quarter yet, and our personal care and beauty products, which generated the largest quarter of revenue in two years. Since our strategic review in late 2021, and including our most recent payroll reductions at cannabis and corporate, we have now reduced expenditures by approximately $18 million. This figure includes $7.6 million of reduced payroll expense across corporate and business units, with total headcount decreasing from 170 to 56, a 67% reduction. While it has been a year of tough strategic decisions, we are laser-focused on a path to growth and profitability and believe we are well-positioned to create value going forward.”