The Quebec-based Hydropothecary Corporation is eyeing the U.S. legal cannabis market as it ramps up production ahead of legal recreational marijuana this October, the company’s CEO told BNN Bloomberg.

Hydropothecary’s (HEXO.TO) CEO Sebastien St-Louis told BNN Bloomberg in a phone interview that the company expects revenue to skyrocket once marijuana is legalized in October. And, while the Quebec market is expected to generate north of $100 million in sales in its first year of legalization, St-Louis sees a bigger opportunity for Hydropothecary south of the border.

“Our belief is the medical market will pale in comparison to adult use,” St-Louis said.

He sees Hydropothecary supplying the legal U.S. market with products like elixirs, edible powders and water-soluble cannabis drinks with a formal announcement expected by the end of the year. That focus comes as St-Louis expects to see a “massive devaluation of cannabinoids” in the market, making the consumer packaged goods segment more attractive from a gross margin basis.

It is unclear how Hydropothecary will be able to sell its products in the U.S. without running afoul of a recent warning by the​ Toronto Stock Exchange that cannabis companies that do business or have operations in the U.S., where marijuana remains illegal under federal law, could face delisting reviews.  

St-Louis declined to provide specifics on how it will sell products in the U.S., citing the process is a competitive advantage. However, he noted the company has an approved structure in place to deal with any U.S. exposure.

“The key point is that we’re only going to operate legally, with regulatory oversight, both from the security [exchanges] and Health Canada,” he said.

The company signed an agreement with Quebec to supply 20 tonnes of recreational marijuana over the first 12 months of legalization, part of a bigger five-year contract to deliver 200 tonnes to the province.

“We've taken our focus off growing medical for the last few quarters and are stockpiling for recreational marijuana,” St-Louis said. Hydropothecary currently has 3.5 tonnes of marijuana in its inventory and expects to have enough supply to meet demand in Quebec once legalization occurs, he added. It recently completed an extension of its main greenhouse facility in Gatineau, Que. that added 300,000 square feet of space to its operations and is on track add another 1 million square feet by the end of the year.

Hydropothecary, which has recently rebranded its recreational brand to Hexo, announced fiscal 2018 third quarter results on Thursday, reporting a 5-per-cent quarterly revenue increase to $1.2 million compared to the same period a year earlier, and an industry-leading revenue-per-gram increase to $9.24 per gram, up from $8.62 in the third quarter of fiscal 2017.

St-Louis said he’s also eyeing the European market which has several countries that have legalized marijuana solely for medical use. He expects some of these countries to legalize recreational marijuana in the next three years, upon which it would license some of its more-consumer friendly Hexo-branded products to a local distributor.

“The idea is to build an experience that you can be wherever you are in the world, you’ll get a Hexo product and you know what you’ll get,” he said.

Editor's note: An earlier version of this story included an inaccurate description of the TSX's policy on cannabis companies with exposure to the U.S. BNN Bloomberg regrets the error.