According to Health Canada, the Canadian medical cannabis market currently contains 320,000 registered patients, and an estimated total of 8 million Canadians experience chronic pain. An Israeli pharma-tech, Syqe Medical, which specializes in inhalation devices for therapeutic drugs, has developed an innovative medial cannabis inhaler -- touted as a first of its kind -- to help treat these patients. During its announcement of regulatory approval in Canada on April 28, the company did not name a licensed producer. However, there is reason to believe that the licensed producer could be a North American cannabis operator headquartered in Canada called TerrAscend (TRSSF -1.11%).

The Syqe Inhaler is devised to provide metered doses of aerosolized cannabinoids to the lungs with minimal patient training. The inhaler allows for self-administered doses effective in relieving pain while strongly limiting unwanted side effects such as psychoactivity, which comes from high levels of tetrahydrocannabinol (THC). The company's clinical trials show that its inhaler usage has homed in on what's called a therapeutic window of 500 micrograms of THC per dose. By comparison, patients who smoke medical cannabis as a treatment are at risk of administering 300 times those levels, which can lead to unnecessary side effects.

Young lady holding a marijuana leaf in a field of plants.

Image source: Getty Images.

Syqe Medical's approval in Canada follows its European regulatory certification. The company is currently looking at ways to introduce the product, along with accompanying cannabis cartridges, into the acceptable groups of health services covered by healthcare organizations in Israel. For example, in Canada, synthetic cannabinoids are used for neuropathic and cancer pain, HIV-related anorexia, and chemotherapy-associated nausea. The costs for such products are covered by health insurance companies. In Israel, health insurance coverage is more widespread for medicinal cannabis and covers areas such as vaporizers. As Syge Medical continues with those plans to fit the product into a group that is covered by health insurance in Canada, it is looking to start marketing the inhaler in the country at some point in 2021.

The licensed producer that ends up working with Syqe will not only get a first-of-its-kind product, but will also be working with a company listed as one of the top 10 most innovative biotechs of 2020 by Fast Company. It's worth noting that Syqe was listed as No. 7 on that list, which was led by Merck and Sage Therapeutics at Nos. 1 and 2, respectively.

As mentioned, no licensed producer has been named in Syqe's recent announcement of plans for sales to the Canadian market. But Syqe and TerrAscend did announce an exclusive distribution agreement in September 2019 to bring the Syqe Inhaler to Canada. That agreement states that TerrAscend will lead the marketing, distribution, and sales efforts across Canada.

TerrAscend can provide retail and distribution through its branded portfolio, which includes Ilera Healthcare, the Apothecarium Dispensary, and Arise Bioscience. In addition to its Canadian operations, the company has established itself in the U.S. cannabis market with vertically integrated operations in California, New Jersey, and Pennsylvania, where  it recently doubled its number of dispensaries through acquisition.

Management's strategy to expand the company's footprint and develop into a market leader is progressing well, though revenue isn't quite up to the numbers brought in by competitors such as Curaleaf, which rang up over $250 million in the first quarter of 2021 alone.

TerrAscend's full-year 2020 net sales came in at $198 million, amplified by fourth-quarter results of $65 million, for a sturdy 28% growth rate quarter over quarter and 152% year over year. Fourth-quarter margin of 40% also expanded sequentially, compared with 35% and 24% for the third and second quarters, respectively.

At the end of 2020, management called for an increase in net sales of 87%, to $270 million, for full-year 2021. So far, the company is on its way to hitting -- and possibly topping -- that guidance. First-quarter sales came in at $53.4 million, an increase of 106% over the same quarter in 2020, while gross profit margin increased by 20% over last year. And while 2020 saw a net loss of $87.8 million for the year, after one quarter of 2021 the company is looking at a current loss of $12.7 million. Now management has once again raised their full-year guidance for sales to exceed $300 million, driven by increased capacity across each of its U.S. facilities, in addition to contributions in Canada from a streamlined product portfolio and cost-cutting measures.

TerrAscend's success has not gone unnoticed in the industry. In February, Canopy Growth (CGC -10.45%) closed on a purchase of additional shares of TerrAscend, bringing its total ownership to 20% of outstanding shares.

This connection could potentially provide Canopy with an inside track to a piece of the Syqe Medical Inhaler sales. Canopy Growth already serves the Canadian medical market, and has international distribution agreements for medical cannabis. Given its investment relationship with TerrAscend and its robust distribution channels, Canopy could provide investors with sleeper potential to form licensing and distribution relationships with TerrAscend or possibly Syqe Medical directly over time.

If TerrAscend can make things happen with this top biotech company, it could be a boost that helps catapult the company into the sales universe of competitors like Curaleaf. But if it doesn't, the company is still supported by sturdy numbers and momentum to show what it can do with what it already has. Tremendous revenue and margin speaks volumes across the young and competitive cannabis market. If TerrAscend can hit the guidance numbers presented to the public, and carry its momentum into the second quarter, it might be a good idea for investors to take notice, and consider saving a spot in their portfolio.