August 31, 2025
Commentary
Introduction
August witnessed general market optimism as fund flows continued to support risk assets and equity growth. One area that stood out for the fund was the US cannabis sector, which continues to be buoyed by the prospects of federal reform. From the end of July to early September, markets continue to see renewed optimism for the US cannabis sector and the prospects for leading operators post-US federal reforms. For the month, top ten positions that performed well included TRUL 85.98%, GLASF +64.67%, CRON 33.33% and GTII 27.90%.
The FED is becoming more concerned about a slowing labor market than high inflation. CPI is expected to re-accelerate into year-end, complicating the FED’s path even as a September rate cut appears likely. Market is likely overpricing the number of cuts this year; post-inflation print, expect the September cut to hold, October odds to decline, and December to move closer to 50/50. In the near term, "Risks to inflation are tilted to the upside, and risks to employment to the downside- a challenging situation." Chair Powell, Jackson Hole Speech, August 22, 2025.
Fund Update
The Ninepoint Cannabis & Alternative Health Fund is focused on the key drivers affecting cannabis, health and wellness, pharma and consumer health sectors. We invest in companies that are embracing new modalities, innovative technology and effective distribution. We believe that people globally are becoming more aware of alternative treatments and seeking out the best providers of select services. Our goal is to invest in those companies best positioned to take advantage of these macro changes.
During August, the top ten position Glass House Brands (GLASF) reported strong Q2-25 results. The low-cost producer and greenhouse operator based in California once again delivered numbers that beat analyst estimates. Revenues for the quarter reached $59.9 million vs the estimate of $58 million, an increase of 11% from $53.9 million in Q2 2024 and up 34% from $44.8 million in Q1 2025. Gross margins reached 53.3% or $31.9 million, compared to $28.7 million in Q2 2024 and $20.1 million in Q1 2025. $27.7 million vs the street at 47.8%. Central to the business is GLASF's ability to cultivate biomass at scale, while selling products at stable prices in the challenging California market. Management noted that during the quarter, wholesale biomass production was 230,000 pounds, up 54% YoY, with the cost of production coming down to $91/lb from $148/lb YoY, a decrease of 39% compared to the same period last year.
The company continues to add revenues while it adds margin and stronger cash flows. The only negative for the company was the result of an ICE raid that saw production curtailed and many arrests pending identification and immigration checks. Management had previously relied on outside consultants to provide workers, however, going forward, that practice will need to be adjusted.
Another longer-term fund holding, Eupraxia (EPRX), the Victoria-based drug delivery company developing its lead candidate EP-104IAR for osteoarthritis pain and pursuing a new formulation, EP-104GI, for EoE. The company had positive news as it announced 1-year data from its ongoing RESOLVE trial in eosinophilic esophagitis (EoE), demonstrating strong efficacy and safety consistent with prior studies. The company announced that at 52-weeks post treatment, 67% of patients in different dosage regimens all remained in clinical remission. Other patients in the study demonstrated compelling improvements at week 36, with EoEHSS (EoE histologic scoring system) scores showing a 47% reduction in severity. Because patients with EoE typically undergo an annual biopsy to monitor disease progression, Research Capital analyst Andre Uddin suggests the one-year results provide support and validation for the drug delivery breakthrough that EPRX is developing. With the significant reduction in severity there is promise that this investigational procedure continues to gain interest.
RFK Jr. Reforms at HHS
From the beginning of the year, when Robert F Kennedy Jr. was nominated to lead the US Dept of Health & Human Services (HHS), there were many who questioned his focus and the legitimacy of his claims related to childhood chronic disease, vaccine policy and the lack of science supporting such claims. Fast forward eight months and the MAHA movement is in full swing. Food processing companies have removed certain ingredients found in cereals and snacks; food colouring has been reduced to meet standards of other countries; pharmaceutical companies have come under more significant scrutiny, and the approvals for funding related to medical research have had to go through more rigorous review than previously undertaken. Regardless of the personal views people may hold with respect to his position on various health-related matters, what is most important for this discussion is that equity markets have taken note. Healthcare stocks have generally been swimming against the current, and with continued broadening of the gains in equity markets, the healthcare sector stands out as a sector we remain cautious on, though we continue to see some pockets of opportunity, such as medical devices.
Options Strategy
Since the inception of the option writing program in September 2018, the Fund has generated significant income from options premium of approximately CAD$5.27 million. We will continue to utilize our options program to look for attractive opportunities given the volatility in the sector and to assist in rebalancing the portfolio in favour of names we prefer, as we strongly believe that option writing can continue to add incremental value going forward.
Ninepoint Cannabis & Alternative Health Fund - Compounded Returns* as of August 31, 2025 (Series F NPP5421) | Inception Date - August 4, 2017
1M |
YTD |
3M |
6M |
1YR |
3YR |
5YR |
Inception |
|
|---|---|---|---|---|---|---|---|---|
Fund |
17.33% |
1.79% |
18.08% |
4.52% |
-12.26% |
-11.09% |
-9.60% |
1.41% |
Statistical Analysis
Fund |
|
|---|---|
Cumulative Returns |
11.99% |
Standard Deviation |
27.32% |
Sharpe Ratio |
0.04 |
The Ninepoint Cannabis & Alternative Health Fund, launched in March of 2017 is Canada’s first actively managed mutual fund with a focus on the cannabis sector and remains open to new investors, available for purchase daily.
Charles Taerk & Douglas Waterson
The Portfolio Team
Faircourt Asset Management
Sub-Advisor to the Ninepoint Cannabis & Alternative Health Fund