Tilray shares soar as U.S. opens door to clinical trials

TORONTO Shares of British Columbia-based cannabis producer Tilray Inc. surged nearly 30 per cent on Tuesday after the marijuana company received a key approval related to a clinical trial in the United States.

While Tilray ’s stock has enjoyed a heady rise since its initial public offering in July, Tuesday’s staggering gains — shares closed up more than US$34 at US$154.98 on the Nasdaq — were alone equivalent to more than double the company’s IPO price of US$17.

The shares have now increased more than 800 per cent since the offering, propelling Tilray’s market valuation to about US$14.4 billion, well ahead of previous market leader Canopy Growth Corp., which closed Tuesday with a market cap of around US$11.5 billion.

Tilray’s U.S. footprint is likely having an effect on the stock, with the company’s Nasdaq listing being a differentiating factor.

“I think that … one of the big drivers behind the run in that name is perhaps a bit of scarcity appeal, in that it’s one of a small number of cannabis companies listed on a major U.S. exchange,” said Russell Stanley, analyst at Echelon Wealth Partners, who does not formally cover the stock.

And while the Canadian market for legalized cannabis is one thing, it pales in comparison to the potential one that lies south of the border. Tilray’s announcement that the U.S. Drug Enforcement Administration had given it the green light to import a drug needed for a clinical trial at the University of California San Diego appeared to trigger Tuesday’s run.

Cowen analyst Vivien Azer said in a note that the news was “a positive” for both Tilray and the broader cannabis sector, “as additional medical applications and improved government support add another domino to future legalization in the U.S.”

“Further, the new clinical trial supports TLRY’s medical cannabis prospects (both in the U.S. and globally) as it competes with WEED (Canopy Growth, which has 39 U.S. patents and 15 clinical trials) in an IP-arms race,” Azer added.

According to Bloomberg data, a majority interest in the company is still owned by U.S. privateequity firm Privateer Holdings Inc., which touts Tilray as “the only American-owned, federally licensed commercial producer of medical cannabis in the world.”

Tilray reported a net loss for its second quarter ended June 30 of US$12.8 million, up from US$2.4 million a year ago. Tilray said this “was primarily due to the increase in operating expenses related to continued growth, expansion of international teams, and costs related to financing and the initial public offering.” But Tilray’s shares have continued to gain ground ahead of Canada’s planned legalization of cannabis on Oct. 17, on a steady stream of positive news.

That includes an earlier deal to work with a division of Swissbased pharma giant Novartis on creating and selling “co-branded and co-developed non-combustible medical cannabis products.”

Shares of Aurora were halted Tuesday morning, pending news, and then resumed trading after the licensed producer said it “engages in exploratory discussions with industry participants from time to time,” but that there was no deal in place “with respect to any partnership with a beverage company.”

Aurora shares gained approximately 10.4 per cent on Tuesday, closing at $11.02.