CannabisNewsWire
Editorial Coverage: Revolutionary innovations and advancements
within the cannabis industry are drawing significant investment
from big corporations.
- Technology currently in development will make it easier to
consume active ingredients in cannabis.
- Advances have attracted investment for the technology’s use in
tobacco as well as cannabis.
- These improvements could move consumers to healthier forms of
consumption than smoking.
Lexaria Bioscience Corp. (CSE: LXX) (OTCQX: LXRP)
(LXRP
Profile) has benefited from recent investment by
Altria to support its innovative research and design work.
Canopy Growth Corporation (NYSE: CGC) (TSX: WEED)
has received substantial investment from a beverage company, which
will support the development of cannabis drinks. Within the sector,
Aurora Cannabis Inc. (NYSE: ACB) (TSX: ACB) is in
the process of acquiring an organic grower. Outside investment is
bolstering Cronos Group Inc. (NASDAQ: CRON) (TSX:
CRON), a cannabis company with global reach. And another
innovator, GW Pharmaceuticals Plc (NASDAQ: GWPH) (OTC:
GWPRF), has run successful trials on a new drug to tackle
a form of childhood epilepsy.
To view an infographic of this editorial, click here.
Finding Funds for Cannabis
The quest for finance is important in any industry, but for
cannabis businesses, which are going through a period of impressive
growth thanks to legal and social changes, this need for money is
particularly time sensitive. Those who find substantial funding now
may be in the best position to expand in the growing market.
Only a select few companies in the cannabis industry have
successfully attracted capital from — and built relationships with
— Fortune 500-type corporations. Though cannabis is growing, the
sector is still relatively small compared with those big names, and
the perceived reputational issues can be a deterrent. Even among
cannabis companies that have drawn big money, few have established
a partnership allowing them to retain control, much less receive
money in return for license rights and minority ownership in a
subsidiary. Instead, most of these companies aim to be bought out
by bigger businesses.
But there have been exceptions.
A Better Deal for a Cannabis Company
Lexaria
Bioscience Corp. (CSE: LXX) (OTCQX: LXRP) is an
example of one company that has built a big funding deal on its own
terms.
Biotech company Lexaria is perhaps most known for its
DehydraTECH technology, a revolutionary system for processing
molecular compounds to make them more suitable for human
consumption. Applicable to molecule such as THC and cannabidiol,
the active ingredients in cannabis, the technology makes these
compounds taste better, increases the body’s ability to absorb
them, and speeds up their impact on the body. Together, these
changes can increase the efficacy of both medical and recreational
drugs.
To provide the funding for further work on this technology,
Lexaria has struck a deal with
industry giant Altria, which will cover the use of DehydraTECH
to deliver nicotine.
The milestone deal is between Lexaria Nicotine LLC, a
wholly-owned subsidiary of Lexaria, and a subsidiary of Altria,
Altria Ventures Inc. Under the terms of the agreement, Altria will
initially provide $1 million of finance towards a Lexaria research
and development program, with the option for funding of up to $12
million.
Unlike so many other deals in the biotech sector, the
partnership won’t see Altria gain any ownership over Lexaria
itself. Instead, the company will receive minority ownership of the
Lexaria Nicotine subsidiary, with the option to increase its stake
in that company through multiple phased private financings. Lexaria
retains its independence while benefiting from the money that big
tobacco can provide. Critically, Lexaria’s shares have not been
diluted by this fresh source of finance.
In addition to a minority stake in Lexaria Nicotine, Altria has
received a license to use DehydraTECH technology in oral nicotine
delivery products, on an exclusive basis in the United States and a
nonexclusive basis elsewhere in the world. This will provide
Lexaria with a new revenue stream, as it is slated to receive
royalties for any DehydraTECH products Altria launches. The impact
on Lexaria’s financial statements of a Fortune 500-derived royalty
stream could be significant.
Tobacco companies are eagerly searching for alternatives to
traditional cigarettes, to reduce their damaging impact on health
and the reputational damage this brings. These factors give Altria
a strong motive to develop products using DehydraTECH, providing
profits for Lexaria and demonstrating the potential of DehydraTECH
to other interested parties.
Starting with a $1 million stake might seem small compared with
other big headline deals. But by gaining Altria’s buy in without
selling any part of its main company, Lexaria has struck a
profitable balance between raising finance and retaining its
independence. It’s a unique transaction that other cannabis
companies haven’t been able to achieve.
Applying the Technology
Though this recently announced deal is about tobacco, Lexaria’s
attention is very much on the cannabis market.
There are three main routes
for the active ingredients in cannabis to enter the body — by
inhalation, by being placed under the tongue, and by being eaten.
Each has its own drawbacks. Inhalation has the highest level of
bioavailability, or how much of the chemical is absorbed, but is
harmful to the consumer’s lungs. Consumption by under-the-tongue
methods has a moderate level of bioavailability but an unpleasant
taste. Eating cannabis products has a low level of bioavailability,
giving consumers a low bang for their bucks, plus flavor challenges
usually met through the addition of large amounts of sugar.
DehydraTECH transforms the situation by seriously reducing the
downsides of eating cannabis.
The technology involves combining active ingredients with fatty
acids such as those found in sunflower oil, which provide a
protective bond, with a patented dehydration process. The molecules
within the fatty acids are believed to keep active ingredients away from bitter taste
receptors, significantly reducing their unpleasant flavor, thus
vastly reducing the need to disguise them with sugar. Low-calorie
edibles that taste great are possible!
Fatty acids also help active ingredients in cannabis as they
pass through the digestive system. They protect cannabinoids from
damage while passing through the stomach, increase the extent to
which they’re absorbed by the intestines and can even bypass the
liver’s first attempts to filter them out. This leads to much
higher absorption, significantly increasing their
bioavailability.
This process makes cannabis edibles, which are already healthier
than smoking the drug, far more appealing and better value for
money. This has led to deals such as Lexaria’s licensing of DehydraTECH to Nuka for use in its
cannabis-infused chocolates.
To make the most of this potential, Lexaria has created subsidiaries specializing in the use of
DehydraTECH for cannabis. Lexaria CanPharm Corporation focuses
on the cannabis market, providing DehydraTECH and other
enhancements to the global cannabis industry. The company is in
discussions to license its technology in Canada, the United States,
and Europe.
Lexaria Hemp Corporation. operates within the related hemp
industry, which works with a specific form of cannabis that is low
in psychoactive THC but potentially rich in other active
ingredients. Lexaria Hemp is in discussions with a number of
companies about how its products is used to deliver cannabidiol
(CBD) derived from hemp.
With a groundbreaking technology, a carefully developed
corporate structure and now a new Fortune 500 source of funding,
Lexaria appears to be in a strong position within the cannabis
industry.
A Crop of Cannabis Companies
The dramatic growth of legal cannabis in recent years has
created a range of important companies focused on the sector.
Like Lexaria, Canopy Growth Corporation (NYSE: CGC)
(TSX: WEED) has had success in attracting finance from
bigger players outside the cannabis sector. The company has
received $4 billion in investment from an American beverage
company, which has bought a significant stake in the core company.
This will help to finance the development of cannabis-infused
drinks and is seen as part of a wider trend, as tobacco and
cannabis companies look to vary their product lines while health
concerns constrict their sales.
The expansion of the cannabis market has seen a string of
investments and purchases within the sector. Aurora
Cannabis Inc. (NYSE: ACB) (TSX: ACB), one of the big
players in Canada, recently signed a letter of
intent to acquire Whistler Medical Marijuana Corporation in a
deal valued at $175 million. This will give Aurora control of a
well-established organic cannabis brand, increasing its market
appeal.
Cronos Group Inc. (NASDAQ: CRON) (TSX: CRON)
has, like Lexaria, drawn investment from Altria, in the amount of
CA$2.4 billion. In this case, the funds have
come in exchange for shares in the core company, giving Altria a
great deal of influence at Cronos. Cronos already does business in
North America, Latin America, Europe, Australia and Israel, so this
will provide Altria with a way into global cannabis markets, as the
spread of legalization expands cannabis markets around the
world.
Other companies, such as GW Pharmaceuticals Plc (NASDAQ:
GWPH) (OTC: GWPRF), are strongly oriented towards the use
of cannabis for medical purposes. As well as selling strains of
medical cannabis, GW has been carrying out research to develop
medicines based on it. The company recently saw positive results from the second round of trials of an
oral solution created to tackle Dravet syndrome, a severe and
hard-to-manage form of epilepsy.
With more money coming in from big-value companies and new
technology in development, the cannabis industry looks set for a
bright year.
For more information on Lexaria Bioscience Corp., visit Lexaria
Bioscience Corp. (CSE: LXX) (OTCQX: LXRP)
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