Acknowledging @JPPiccard & @Vandelay and other wise elders of VIT. Smoking ceremony with VIT product et al.

On paper VIT looks okay to good, but take a peek above the bunker top and it ain't so rosy.

The discension at board & management level isn't a good look and is very distracting from the real business of growing the biz.

The grab for performance shares has a taint of 'it's my private swimming pool...piss off retail investor' about it. This is backed up by the first strike on salary arrangements.

The CEO has a 'dubious to very ordinary' past - not ideal for an industry which struggles to get public social recognition at the best of times.

Growth has definitely slowed and the competition is coming at a pace.

Margin compression is all but guaranteed

They overpaid for DoD and as @JPPiccard did say (or inferred), this industry is a graveyard of failures. And so it is, Check out DOC (a somewhat similar biz to DoD) and think about the poor investors who ponied up $1 and up to $1.45 in 2021 to see their investment valued at 5c today.

Yes, it might give them entree to an addiitonal 120 doctors. But doctors are like a bag of marbles, there's good and not so good among them. I'm betting there will be a disproportionally high number of baby boomer country type doctors, whose last drag of a Mary Jane (that's what we called the big M) was back in the summer of '69! A bit of education required here. Nope, there's better ways to spend $25m.

The concerns about Vitura's current situation pointed out by @JPPicard are valid. However, I thought i might add some counter thoughts. Obviously I have the contrarian view to the market judging by the SP performance of late!

It's essential to consider that FY23 was a year focussed on investment for the future of the company. While stagnation in volume growth is not great, Vitura has significantly invested in both infrastructure and technology, notably with the launch of a new distribution facility in Melbourne and the introduction of the CanView 2.0 app.

The company has also made several strategic business decisions, such as the closure of physical CDA clinics, closure of its Asian business and the rebranding from Cronos to Vitura. These moves are part of the larger strategy to streamline operations and focus on more profitable areas. Furthermore, the establishment of a 50:50 joint venture to become a leading supplier of psychedelic medicines in Australia positions Vitura in an emerging market, diversifying its product portfolio, and in line with highly regulated pharmaceutical distribution business core.

The company has pointed out that their initial focus onboarding pharmacies, now at 4000+ is established. As part of their growth strategy, they are now switching to prescribers and patients. The acquisition of Doctors on Demand, while initially seeming misaligned with Vitura's core business, it does bring over 120 additional doctors/prescribers to the Canview platform, potentially boosting prescription volumes, benefiting the core distribution business. I don’t believe this move is about becoming a telehealth business, but rather about enhancing the prescriber base and distribution volume.

Despite the potential red flags, the acquisition of Doctors on Demand could strategically save on future marketing and sales efforts, instantly adding to prescriber numbers and consultation volumes, which could have taken a long time to acquire organically.

After a year focused on investment and restructuring, I want the management to return its focus to growth. The market currently values the company, at a PE of 11. Any indication that growth has returned may see the multiple expand again. Holding onto the stock could be prudent for those not needing immediate capital, given the uncertainties around the best time to re-enter the market.

While I acknowledge the uncertainty and potential for flat growth or margin compression in the short term, I will be maintaining a position in Vitura for now. This reflects a watchful optimism, balancing the need for caution with the recognition of Vitura's strategic initiatives and their possible long-term benefits is tricky for me. Luckily the severe fall in share price means that Vitura is now one of my smaller positions… hah

Today's announcement from Vitura, confirming the shipment of the 2 millionth unit through CanView, indicates a clear slowdown in growth. Connecting the dots, the evidence becomes apparent. 

The last milestone of the millionth unit was achieved a year ago, with a run rate of approximately 1 million units per year already established then. This is consistent with the release from December 2022, revealing sales of nearly 215,000 units in the first quarter of FY2023 alone, suggesting they were already there at the time, and now not much as changed. 

Also, this year's release lacks the useful revenue figures and forecasts provided in the previous update. The absence of these key metrics raises concerns and diminishes the clarity around Vitura's financial performance. There were positive aspects from the release, such as an increased product count (280 vs. 200) and a successful transition to CanView 2.0. However my thesis for them was based primarily on growth; I was assuming sustained growth above 20% minimum. This is now compromised.

The straw that broke the camel’s back for me though was the acquisition of Doctors on Demand. What the f**k is that all about? Isn’t there someone on that board or the leadership team that’s seen that no Telehealth company out there seems to be able to make the business model work? 

The acquisition, coupled with the growth stagnation, led to my decision to divest. 

Another one to add to my pile of mistakes. You live and you learn. On to the next one. 

The Chair Dr Simone Scovell has resigned. Stating it's to focus on personal business interests.

It's not a great look, yellow flags are starting to stack up. If growth doesn't return this half, I'll probably sell out.

Slowly coming back to life with our newborn now past the 4 weeks mark. I've been dead slow in turning into reporting season.

As always, @Vandelay covers this one very well. Grateful to you for sharing the insights from the results call which I missed.

The big points seems to have been covered here. In short, results looking amazing at quick glance, and a little less amazing if you dig deeper into them.

I put my thoughts on the full year report in my article this week : https://www.goforgrowth.co/p/10-growers-in-fy23-part-1

The half on half decline is worrying, but management may be honest when they attribute this to pivot to full online and closure of clinics. Only time will tell here.

Also, question for everyone else here; do you know anyone that uses their platform? I have a few friends that are into their cannabis, and every time I ask what service they use, I don’t hear Cannadoc. I hear Cannatrek, HelloMello, Polln, and Honahlee, balnce, etc... It seems to me competitors are growing fast. I also mention this in the article.

I hold and am happy with the results, but I’m not rushing to add to the position too quickly, I’d love to see proof that they can grow again.

Vitura Health has announced the sale of its 1.5 millionth unit through their Canview platform. To put this into perspective, the platform was launched in June 2020. By December 2021, they had sold 190,000 units. By December 2022, the sales reached 1 million units within a span of six months. Now, we have reached the milestone of 1.5 million units.

In my opinion, this company is often overlooked because people associate it with the "cannabis stock" label and tend to ignore it. However, it's important to note that Vitura Health is not simply a cannabis product, a farm or a factory. They are genuine network and distribution business in a rapidly expanding industry and genuine market leaders. Despite this growth, they have managed to remain profitable and even pay a dividend. As a very satisfied shareholder, I still believe that the company is currently undervalued.

The JV announced by Vitura is a potential partnership with PharmAla, as long as they obtain the necessary approvals. The TGA recently announced that MDMA can be prescribed for PTSD and Psilocybin can be prescribed for depression starting July 1, 2023. Through their JV called Cortexa Vitura has the exclusive rights to purchase and distribute PharmAla's products in Australia and has a strong sales network for cannabis products. All revenues from product sales in Australia will go to this JV. This integration seems like a logical move to capitalise on this new drug class, given their focus on onboarding doctors and pharmacies to their Canview platform. By doing so, they can distribute these new products to patients in need through their established network.

The traffic on Vitura's Canview platform dropped off significantly in Feb after some good growth in the preceding months. I'll be watching to see if this bounces back next month. I'd like to hear from management about the average frequency that patients order from the platform.

Cronos Group (CAU). Changed their name during the week to Vitura Heath (VIT). This announced at the AGM in November. Vitura has rapidly evolved over the last 2 years and the name change does separate them from the Cronos Group brand listed on the Nasdaq (who are a major holder). To me the name change makes sense, they aren't just a medical cannabis company anymore, since the reverse takeover from CDA health, they are a platform and distributor of medicinal cannabis products. With their main focus the Canview online platform, which has been growing rapidly.

Cronos released an announcement today around midday that they will be closing their physical clinics and their dispensary on the Gold Coast. The market sold off aggressively on this announcement. I believe the sell off was due to this announcement coming out of the blue with no prior communication or warning that management was looking at closing down their clinics. This isnt a great look.

However, after digesting the news I feel, it is in line with the company's broader strategy. The company's main growth engine is the CanView platform. Their goal is to build out their market lead as the go to online marketplace and distributer for cannabis medications and products. One of the main ways to grow the platform is to onboard prescribers (doctors), which was a focal point highlighted by management for FY23. Onboarding more prescribers is the best way to increase their sales growth by driving patients to the platform. Their existing clinics have a ceiling to how many patients they can prescribe. By eliminating their own overhead costs, continuing with their telehealth offering through their platform and leveraging other prescribers, they should increase margins allow the company to scale even faster. The dispenser closure makes the most sense considering they already have 50%+ of all pharmacies in Australia dispensing their product, it had become a bit redundant.

The above is great to hypothesize about, but I will be watching intently to confirm this is a purely strategic move and not signs of trouble.

See announcement here

Cronos released an announcement this morning that appears nice at first. Revenues are on track to exceed the $100m guidance given at the start of the FY. But it does seem a bit random to announce "millionth product sale". I can't help but feel sceptical that the board are trying to pump the stock with announcements prior to release of shares from escrow... It has approx. 75% of shares coming out of escrow on Dec 16th.

Cronos Q1 4C was released during the week. Receiving $26m of cash receipts. $9.5m of which came in September alone.

The quarterly cash receipts up 13% on previous quarter FY22 Q4. And remaing cashflow positive.

On track early to meet/exceed FY23 guidance of "at least $100m", with an annualised run rate of $104m.

Pleasingly the number of units sold on its flagship CanView platform seems to be accelerating as more doctors, patients and pharmacies are onboarded.

Cronos group has secured the required Victorian licensing and commissioned its second distribution facility in Melbourne. The new facility more than doubles the company’s distribution capacity, increases productivity, and reduces delivery times. 

See announcement here

History

Cronos Australia (CAU) listed in late 2019 and was originally a distributor of the CBD oil brand PEACE NATURALS. It was listed as a 50/50 joint venture with Cronos Group (which is a $1.5B company listed on the Nasdaq CRON) and private equity. They hold the necessary Australian licenses to import and export CBD and THC products. The company planned to leverage the IP of Cronos Group to take advantage of the emerging cannabis industry in Australia, develop distribution channels and develop their own range of brands through partnerships and subsidiaries. The model is asset light, outsourcing cultivation and manufacturing, focusing heavily on distribution, branding and developing IP.

Following the IPO, Cronos Australia acquired a 51% interest (later increasing to 75.5%) in Cannadoc health, a medicinal cannabis clinic business that undertakes face-to-face and telehealth consultations with patients seeking access to medicinal cannabis, they launched their own brand of medicinal CBD and THC products called Adaya, established operations in Asia, established Cannadoc operations in NZ, and launched several other branded product lines such as Bathing Shed, SAIPH and FCTR.

The sales grew from virtually nothing to a respectable $1.6m in the first full year of operations for FY21. However, the company was still operating cashflow negative, burning through $4.2m for the year.

In September 2021, announced that it had entered into a binding agreement to acquire 100% of QLD based CDA Health. At the time CAU was only a $20-$30m market cap company acquiring a much larger, cashflow generative business which already had over $21m in revenue and over $2m EBITDA positive for FY21. Upon completion CDA shareholders would own 73.7% of CAU and be given $5m in cash, essentially making this a reverse takeover.

This transaction transformed the company into a fully integrated network and platform marketplace for the medicinal cannabis industry. The integrated CDA Health business owns and runs CDA Clinics (to add onto the existing Cannadoc clinics), Burleigh heads Cannabis which owns Canview, one of the largest online platform wholesalers of medicinal cannabis in Australia.

The merger/acquisition has accelerated the company into profitability and as a market leader in the Australian medicinal cannabis space. The company has successfully diversified its revenue stream away from developing its own brands, into a network and platform business of cannabis related products. Canview partners and leverages of some of the most well-known international and domestic producers (such as little green pharma, greenlab, pharmacann, gamma biomedical etc.) to provide pharmacies, doctors and patients a one stop online prescribing and ordering platform.