Canopy Growth Corp. (NYSE: CGC) reported second-quarter fiscal 2019 results before markets opened Wednesday. The marijuana grower and distributor reported a quarterly net loss per share of C$1.52 (about US$1.15) on revenues of C$23.33 million ($17.63 million). In the same period a year ago, the company reported a net loss per share of C$0.01 on revenue of C$17.57 million ($13.28 million). Analysts had estimated a net loss of C$0.12 ($0.09) on sales of C$61.68 million ($46.6 million). The Canadian company was listed on the New York Stock Exchange in late May and is also listed on the Toronto exchange (WEED).

The company reported an expense of C$223.4 million related to a mark-to-market increase in the fair value of senior convertible notes from C$101.875 to C$149. Nearly C$96 million in operating expenses were related to share-based compensation.

Canopy Growth scored a C$5 billion investment from beverage giant Constellation Brands during the quarter. The company plans to invest the funds in strategic objectives such as the development of intellectual property and replicating its platform in a “large number of international markets.” The United States is at the top of the list.

In the second quarter, Canopy Growth sold 2,197 kilograms and kilogram equivalents at an average sale price of $9.87, up from 2,020 kilograms and kilogram equivalents at an average price of $7.99 in the prior year period, up 9% and 24%, respectively. The higher average price was due to changes in the mix of product sold, principally a higher percentage of Softgel sales and sales to Germany.

CEO Bruce Linton commented:

With substantial product inventories on hand, new product formats coming to market as planned, a captive sales force driving increased demand through physical retail stores and increasing internal and channel efficiencies, we believe based on market conditions today that we will attain significant and sustainable market share of the Canadian recreational market. … With global management infrastructure in place, the Company is building an international platform in order to drive medical market growth, which will in turn drive innovation applicable to recreational cannabis markets. This approach requires large-scale production capacity, value-add processing, diversified intellectual property, and clinical research – all things we have prioritized and invested heavily into this past quarter.

Until October 17, Canopy Growth and its peers were essentially medical marijuana growers and suppliers. Now that recreational use is legal in Canada, things are going to change. The company noted that compared with the period between October 17 and 31, the average number of kilograms shipped daily to provincial and territorial partners during the period November 1 to 12 has more than doubled.

The massive loss has not gone down well with investors, however, who took the stock down nearly 9% Wednesday morning to $35.15, in a post-IPO range of $16.74 to $59.25.

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