The Canadian cannabis extraction stocks we’ve identified are poised to capitalize on what could be the next big cannabis investing trend – extracted products
SmallCapPower | March 22, 2019: Globally, many countries have considered legalizing cannabis for medicinal or recreational purposes. With more countries legalizing cannabis, extracts sales are likely to outpace the sales of dried flower once these markets mature. Extracts include cannabis products such as vape pens, oils, tinctures, edibles, beverages, capsules, and shatter. According to Health Canada sales data, dried flower sales fell from 2,354 kg in April 2018, to 1,755 kg in September of 2018, a decrease of 25%, while sales of cannabis extracts rose from 3,734 kg in April 2018, to 4,455 kg in September 2018, an increase of 19%. As a result, it is likely that cannabis companies are going to need to have their product extracted to meet consumer demands. In addition, Health Canada has reported that as of September 2018, there is 101,720 kg of dried flower stored in vaults of all the LPs across Canada. Dried flower has a shelf life of approximately one year. It is likely that much of this biomass might have to be sold to extraction companies for processing/extraction, as the LPs currently do not have enough extraction capacity. Today we have discovered four Canadian cannabis extraction stocks that are poised to capitalize on what could be the next big cannabis investing trend – extracted products.
*Share prices as at close March 21, 2019, data obtained from S&P Capital IQ
NextLeaf Solutions Ltd. (CSE:OILS) – $0.40
NextLeaf is a Canadian cannabis extraction company specializing in a propriety ethanol technology for the Canadian medical and recreational markets. As of March 14, the Company closed its reverse takeover (RTO) financing of $5.0M, which will be used to complete the build out of its 6,540 sq. ft. processing facility located in Coquitlam, B.C. Using one shift, OILS expects the Phase One buildout of its facility to have an estimated a production capacity of 100,000 kg of dry cannabis annually.
- Extraction Capacity (Biomass): 100,000 kg/year
- Extraction Type: Ethanol
- Market Cap: $40.9 Million
- YTD Return: N/A
MediPharm Labs Corp. (TSXV:LABS) – $3.39
MediPharm Labs operates a cGMP facility and ISO-9000-rated laboratory clean rooms in Barrie, Ontario. Due to its differentiated focused extracts-only business strategy, MediPharm acts as a strategic partner to any LP, providing both white-label production and contract processing. LABS is expanding globally and is currently developing an extraction facility in Australia, expected to be completed in H2/2019. The Company has signed multiple, multi-year extraction contracts, including agreements with prominent licensed producers (LPs) such as Canopy Growth, Supreme, and Up Cannabis. On February 12, 2019, MediPharm announced that it had signed a $35M private label extraction agreement, with an option for an additional $13.5M with an undisclosed LP. This follows a news releases from January 16, 2019, where the Company announced that its first oil shipments were sold in December for $10M.
- Extraction Capacity (Biomass): 150,000 kg/year
- Extraction Type: CO2
- Market Cap: $354.6 Million
- YTD Return: 98.3%
Valens GroWorks Corp. (CSE:VGW) – $3.14
Valens GroWorks is focused on specialized extraction methodology, distillation and cannabinoid isolation and purification. The Company has signed multiple extraction agreements with major LPs. On February 26, Valens signed a multi-year extraction agreement with Tilray for a minimum amount of 15,000 kg of dried cannabis per year. Additionally, on March 11, 2019, Valens signed another extraction agreement with The Green Organic Dutchman to process a minimum of 30,000 kg of cannabis in the first year, and 50,000 kg in the second year. The Company has other notable agreements with Organigram and Canopy Growth Corporation.
- Extraction Capacity (Biomass): 240,000 kg/year
- Extraction Type: CO2 + Ethanol
- Market Cap: $295.0 Million
- YTD Return: 111.9%
Radient Technologies Inc. (TSXV:RTI) – $1.07
Radient Technologies is a Canada-based company that provides industrial-scale extraction solutions for premium natural ingredients and products. The Company uses a unique and patent method of extraction called Microwave Assisted Processing (MAPs). Management believes this method of extraction provides cleaner and higher yields than conventional methods. On February 4, 2019, the Company announced that it had received its standard processing licenses from Health Canada allowing it to begin selling extracted cannabis.
- Extraction Capacity (Biomass): 56,000 kg/year
- Extraction Type: Microwave Assisted Processing (MAP)
- Market Cap: $284.1 Million
- YTD Return: 48.6%
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Disclosure: Neither the author nor his family own shares in any of the companies mentioned above.
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