Is M&A Heating Up In The Cannabis Industry?

Federal authorities charged another doctor with health-care fraud after receiving kickback from Insys Therapeutics (INSY) in return for prescribing one of its highly addictive opioid products.

In mid-2015, we reported on this story and urged caution with shares of INSY due to our expectation for future legal headwinds. Our prediction proved to be accurate and INSY has fallen by more than 75% since we published this article.

Although we continue to forecast increased volatility with INSY in the near-term, we expect to see the company acquired by a larger biotech firm interested in the cannabis industry this year and see significant upside to current levels.

Biotech Bets Continue to Pay Off

The biotech sector will be one of the greatest beneficiaries of legal cannabis and companies focused on this opportunity have outperformed the market over the last quarter.

We highlighted Vinergy Resources (VIN.CN) (VNNYF) as a stock to watch after its acquisition of MJ Biopharma in mid-December and the market responded very favorably to this all-stock purchase.

Yesterday, Vinergy announced that it signed a letter of intent to acquire up to 51% of a European multi-national plant breeding company that has $14+ million in annual sales and adjusted EBITDA $2+ million.

Becoming a Global Cannabis Opportunity

The target acquisition has been providing customers with commercial agriculture services for more than 25 years. During 2016, the company shipped 35+ million plant products to its customers and it continues to see incremental growth opportunities.

Through Vinergy, the company will be able to expand into the European cannabis industry. As part of the acquisition, Vinergy will now have access to 2,000+ hemp and cannabis strains with the ability to supply those strains to global customers.

The terms and conditions associated with the transaction were not disclosed but management expects the transaction to close in tranches with the first being it the first quarter of 2017.

A Stock to Watch

We continue to be bullish on Vinergy’s long-term outlook and are favorable on this development as we view it as a major development for the company’s long-term strategy.

This announcement further improves the fundamental story as Vinergy will be able to recognize synergies between the businesses through this deal.

The day before this announcement, Vinergy announced that it started trading on the OTCQB under the symbol VNNYF and this will help improves the stock’s United States exposure. Stay tuned for updates throughout the day as we monitor the market’s response to this.

Important Investor Disclosures

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