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Tilray - not enough pot

B.C.-based cannabis producer Tilray Inc. says product has been selling out in the first few weeks of legalization and while it has explored buying wholesale to bridge the supply gap, there is "far less" pot available than expected.

Despite companies touting large production capacities over the past year, upon inspection there was less pot available and a lack of high quality product up for grabs, said the Nanaimo-based president and chief executive officer Brendan Kennedy.

"People tended to exaggerate their capacity and tended to exaggerate the metric tonnes that they were going to be producing... Both of those things have been very surprising," he said on a call with analysts Tuesday to discuss the company's third-quarter earnings.

Tilray's comments come after Canada legalized cannabis for adult use on Oct. 17 — becoming the second country to do so after Uruguay — and product shortages continue to loom at bricks-and-mortar stores and online.

Some government entities responsible for the sales and distribution of adult-use cannabis in various provinces have said they are receiving less product than expected and have warned that these shortages could last for months. Tilray has signed agreements to supply recreational pot to eight provinces and territories.

"With the imbalance we have today, with more demand than supply, everything is selling out," Mark Castaneda, Tilray's chief financial officer told analysts on the conference call.

Another factor complicating the product shortages at government and territorial distributors was the timing of licences, the company said.

At the end of the quarter, Crown corporations didn't have licences to receive packaged products, he said.

Tilray did not make any shipments of recreational cannabis during its latest quarter, ended Sept. 30, Kennedy said.

Still, the cannabis producer reported an 85-per-cent jump in revenue year-over-year to US$10 million, driven by increased patient demand, bulk sales to other licensed producers, and accelerated wholesale distribution in export markets.

However, Tilray posted a wider net loss of US$18.7 million during the quarter, compared with US$1.8 million during the same period a year ago, as it ramped up for legalization and expanded its global operations.

Analysts had expected revenues of US$10.1 million and a loss of US$12.7 million, according to Thomson Reuters Eikon.

The marijuana producer, which has a market capitalization of roughly US$10.2 billion, said the higher net loss was due to higher operating expenses related to growth and international expansion.

Tilray says other factors driving up its net loss include costs related to financing and its initial public offering on the Nasdaq in July.



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