NetworkNewsWire
Editorial Coverage: With the expected legalization of
recreational cannabis use in Canada just months away, the Canadian
cannabis industry is experiencing a frenzied flow of capital that
is only likely to accelerate. While this capital rush won’t affect
every company in the space, the overriding sentiment supports
global aspirations and trickle-down opportunity for innovators like
Lexaria Bioscience Corp. (OTCQX: LXRP) (CSE: LXX)
(LXRP
Profile). This unprecedented cash flow is
already fueling the construction of the largest grow facilities the
world has ever seen, as well as increasingly hectic merger and
acquisition strategies undertaken by companies like
MedReleaf (OTC: MEDFF) (TSX: LEAF), Aurora Cannabis, Inc.
(OTC: ACBFF) (TSE: ACB), Cronos Group, Inc. (OTC: PRMCF) (CVE:
MJN) and Organigram Holdings, Inc. (OTC: OGRMF)
(TSXV: OGI).
Reuters has reported that the value of cannabis deals this year
has already reached $1.2 billion, more than double the total for
2017, which was itself a record (http://nnw.fm/14nLi). For these pioneers of pot,
halcyon days lie ahead in 2018. For perspective, contrast Canada’s
revenue outlook with the U.S.-based Arcview Group, which bills
itself as the largest cannabis-focused investment network in the
world. It has taken Arcview members several years to raise a total
of US$150 million, which is no small accomplishment in a country
where federal cannabis regulations can still put you in prison, but
not remotely competitive against the billions being raised north of
the 49th parallel.
It may be inevitable that some portion of the billions of
Canadian cannabis money find their way into either developing,
licensing, or buying the technology necessary to dominate the
rapidly developing global legal cannabis market, and Lexaria
Bioscience Corp. (OTCQX: LXRP) (CSE: LXX) has positioned itself
squarely in the midst of this trend.
Lexaria’s Golden Nugget: Drug Delivery
Technology
Innovators in the field of drug delivery engineer technologies
to improve the targeting of therapeutic agents and their controlled
release. In general, drug therapies have vastly enhanced
Hippocratic practices but many come with pernicious side effects,
since active agents very often cannot discriminate between healthy
and unhealthy cells. Some others, although rather more benign,
require large dosages or prolonged treatment since, with current
delivery methods, much of the active agent is simply not absorbed
by the body and goes to waste.
However, Lexaria has developed an oral digestion technology,
DehydraTECH™, which improves the absorption rates of nicotine,
non-steroid anti-inflammatory drugs (NSAIDs), vitamins and
cannabinoids, by as much as five to 10 times. The significance of
this edible technology is that this improved absorption may
translate into lower dosages and shorter treatment regimens.
DehydraTECH also improves delivery times, delivering payload
molecules to the bloodstream in 15-25 minutes, as opposed to 60-90
minutes for current methods. The new patented, disruptive drug
delivery platform changes the way Active Pharmaceutical Ingredients
(APIs) enter the body orally. The technology eliminates the need to
add high concentrations of sweeteners, since it masks unwanted
tastes. But, more importantly, it avoids first-pass liver
metabolism, which mitigates side effects and improves the
bioavailability of its client drug.
Ingestion of a medication, typically, follows a prescribed path.
After the digestive system absorbs the ingredients, they are moved
to the hepatic portal system en route to the liver. The liver,
which among other things converts foods into the nutrients that can
be used by the body, dutifully embarks on its routine of
metamorphosis. Unfortunately, many therapeutic agents are
neutralized in the process, which is why those that bypass the
liver, using DehydraTECH for instance, tend to be more
effective.
Edible Integration
DehydraTECH has already proven its mettle as Lexaria has
deployed the innovative delivery platform to its product line. This
consists of distinct brands: ViPova and TurboCBD. ViPova is a
delicious Chinese black tea from the province of Yunnan, made from
hemp oil infused within dried evaporated non-fat milk. Introduced
in January 2015, the tea is available in a variety of flavors. In
addition, there is Lexaria’s TurboCBD, a brand of technologically
enhanced, high absorption hemp oil capsules that came to market in
March 2017. TurboCBD’s cannabinoid content is fortified with
high-quality American ginseng and ginkgo biloba to support enhanced
focus and memory while reducing stress and fatigue.
Lexaria’s Engine of Growth is its Drug Delivery
Platform
Despite the refreshing range of products, what’s under the hood
matters more. Since the DehydraTECH technology can be used to
improve the delivery of a wide range of substances, including
ibuprofen, nicotine, fat-soluble vitamins, THC and CBD, this puts
Lexaria in the enviable position of being a natural partner to
cannabinoid biotech companies as their star rises, situated as an
enabler rather than a competitor. Moreover, at present, Lexaria is
the only company in the world that has been awarded a patent for
the improved delivery (oral or ingestible, including capsules and
pills) of all non-psychoactive cannabinoids.
Patents have been awarded in the United States and Australia and
are pending in 40 more countries, as well as transnationally under
the Patent Cooperation Treaty, as Lexaria’s patent portfolio grows.
The company has filed 19 patent applications that include both
method and composition of matter claims. The patents issued in the
United States and Australia include “Food and Beverage Compositions
infused with Lipophilic Active Agents and Methods of Use
thereof.”
This puts the company in the unusually advantageous position of
owning proprietary technology that can deliver a vast range of
non-psychoactive cannabinoid-based drugs. Lexaria has already had
discussions with major pharmaceutical and other Fortune 500
companies regarding its technology. The smallest deal with any one
of these could increase revenues by over $1 million; the largest by
much, much more, according to CEO Chris Bunka in a recent interview
(http://nnw.fm/jY9gG). Moreover, Lexaria’s
licensing model will generate revenues at very little cost, leaving
90 to 100 percent of revenues as profit.
Key Developments
On Jan. 25, 2018, Lexaria announced it had entered one such
technology licensing agreement with Cannfections Group Inc., which
produces cannabis-infused chocolates and candies (http://nnw.fm/qLBl3). Cannfections Group has been
newly established by one of Canada’s leading chocolate companies,
which has over 85 years of experience in producing high quality
chocolate and confectionary products. The parent company currently
manufactures chocolate retail products for several leading
international and domestic chocolate brands.
“By licensing our technology to Cannfections, Lexaria can now
offer its commercial clients the expertise of one of Canada’s
oldest and most established chocolatiers utilizing next-generation
DehydraTECHTM technology,” Bunka stated in the press
release. “This is a long term strategic relationship meant to offer
technology, value and expertise to Licensed Producers wanting to
offer the highest quality chocolate edibles available in Canada
once permitted under Health Canada regulations.”
Canadian Cannabis Wheeling & Dealing
Cannabis market leaders are providing their investors with
unheralded liquidity while other leaders are hot on the investment
and acquisition path. And in recent weeks and months, governments
in Australia, Italy, the Netherlands, Germany and elsewhere have
begun to open their markets to cannabis imports and exports for the
first time in history, allowing for the beginnings of a global
market in cannabis trade.
MedReleaf’s (OTC: MEDFF) (TSX: LEAF) recent
Initial Public Offering (IPO) of approximately $75 million is thus
far the largest marijuana company IPO in North America. MedReleaf,
the first and only ISO 9001 certified cannabis producer in North
America, was founded just four years ago and is one of less than
four dozen licensed producers and retailers of medical cannabis
products in Canada. Its focus is on the supply of dried cannabis,
cannabis oils, and cannabis oil capsules to qualified medical
patients in Canada but it also sells various accessories, such as
vaporizers and grinders. Earlier this month, the company released
details of further possible capital inflows. It announced an
agreement with Canaccord Genuity Corp. and GMP Securities L.P
(http://nnw.fm/g1GgG) under which the two
underwriters will purchase the company’s common stock in a deal
valued at C$100.7 million (US$85.8).
Some of that cannabis cash is also likely to pay for
Aurora Cannabis’ (OTC: ACBFF) (TSE: ACB)
800,000-square-foot state-of-the-art Aurora Sky project and help
Canada’s No. 2 marijuana producer take over smaller rival CanniMed
Therapeutics Inc for C$1.1 billion (US$852 million). Aurora had
originally made a hostile bid capped at C$24 (US$20.45) per share
for CanniMed, but this new offer was priced at C$43 (US$36.64). The
deal marked the world’s biggest marijuana M&A transaction to
date.
Meanwhile, the Cronos Group, Inc. (OTC: PRMCF) (CVE:
MJN) is doing deals too. In January 2018, the company
announced the closing of its C$46 million bought deal public
offering (http://nnw.fm/Qdc3S), the proceeds of which the
company has allocated toward expanding production capacity,
research and development initiatives, and for general working
capital purpose. Cronos Group is a geographically diversified and
vertically integrated cannabis company that operates two wholly
owned licensed producers (LPs) regulated under Health Canada’s
Access to Cannabis for Medical Purposes Regulations (the ACMPR) and
holds a portfolio of minority investments in other licensed
producers. The company’s flagship LPs, Peace Naturals Project Inc.
(Ontario) and Original BC Ltd. (British Columbia), are collectively
situated on over 125 acres of agricultural, licensed land. Peace
Naturals Project Inc. recently obtained a Dealer’s License pursuant
to the Controlled Drugs and Substances Act under Health Canada.
This enables the Cronos Group, through Peace, to export medical
cannabis extracts, including concentrated oil and resin products,
internationally.
Organigram Holdings (OTC: OGRMF) (TSXV: OGI) is
also cashing in on investor optimism. The company made public its
agreement with Eight Capital under which Eight Capital and others
will purchase 100,000 convertible debentures at a price of $1,000
per debenture for a total of $100 million (http://nnw.fm/39euQ). The company said it intends to
use part of the net proceeds of that offering to expand its
domestic and overseas market presence.
Anticipated Supply Shortfall
As legalization looms in Canada, investors are opening their
checkbooks to a wide range of cannabis companies. With
legalization, demand for cannabis is expected to surge. There are
indications that, at present, a supply shortfall could occur. In
the short term, it looks like a seller’s market and the volume of
funds flowing into the industry is clear evidence of that.
For more information on Lexaria, visit Lexaria
Bioscience Corp. (OTCQX: LXRP) (CSE: LXX)
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