NanoSphere Health Sciences (CSE:NSHS) is a Cannabis Nanoparticle Delivery Leader: Ubika Research

    Equity Research Healthcare Technology and Cannabis | Small Cap August 29, 2018
    Patrick Smith | Analyst | Ubika Research Patrick@UbikaResearch.com | 1 (647) 444-5506
    Richard Waxman | Associate | Ubika Research Richard@UbikaResearch.com | 1 (647) 770-2185

    NanoSphere Health Sciences, Inc.’s (CSE:NSHS, OTC:NSHSF) patented cannabis nanoparticle delivery system improves the effectiveness and onset time of cannabinoids

    Market Data (CSE:NSHS)

    Price (August 28, 2018)$0.49

    52 Week Range $0.30 – $1.16

    Market Cap (M)$47.1

    Current Shares Outstanding (basic, M) 96.1

    Current Shares Outstanding (fully diluted M)109.0

    Free Float38%

    Average Daily Volume (30 Days)91K

    Last Reported Cash (M)* US$2.3

    Total Assets (M)* US$2.8

    Total Debt (M)*US$0.0

    Headquarters Vancouver, BC., Canada

    Website www.nanospherehealth.com

    Management

    Robert Sutton CEO & Chairman

    David SuttonPresident, COO & Director

    Dr. Richard KaufmanCSO & Director

    Dr. Terry GrossmanCMO

    Victor GoncalvesEVP

    Jim EwingCFO (US)

    Bennet LiuCFO (CAN)

    Kate WellsCMO

    Stephanie Hopper Director

    Michael Iverson Director

    Toby Lim Director

    *as of March 31, 2018 All figures in CAD unless otherwise stated. Source: Company Reports, Thomson Reuters

    Price Performance

    NanoSphere Health Sciences Inc. (CSE:NSHS, OTC:NSHSF)

    Company Description

    NanoSphere Health Sciences is a healthcare technology company specializing in the controlled, rapid delivery of therapeutic agents via patented smart nanoparticles. The Company is developing various applications for its proprietary delivery system platform for use with cannabinoids, nutraceuticals, pharmaceuticals, cosmeceuticals and animal health

    Company Highlights

    • The Company’s patented cannabis nanoparticle delivery system improves the effectiveness and onset time of cannabinoids and other therapeutic compounds. The NanoSphere Delivery SystemTM carries precision-metered dosages of bioactive compounds to the bloodstream and target receptors with increased potency, greater therapeutic potential and decreased risk of adverse effects. The tangible results are more effective medical and recreational cannabis products, producing a predictably powerful and longlasting effect that requires a lower dosage of THC CBD.
    • Growing brand and product pipeline in a developing market. No single brand has established itself as the dominant player in the cannabis space yet. For cannabis products other than dried flower and oil, there remains even less brand establishment. NanoSphere’s Evolve brand has the opportunity to gain first-mover market share through its transdermal product platform. We expect enhancement of its presence upon the launch of the intranasal and intraoral products.
    • Broad patent protection that includes the future opportunity to expand into non-cannabinoid therapeutics. The Company plans to pursue opportunities in the nutraceutical, pharmaceutical, over-the-counter medication, animal health and skin care markets.
    • High-margin business model includes revenue sharing and royalty agreements with local operators. The Company currently generates revenue from operating partners in Colorado, with sales in California and Arizona slated to begin before the end of Q3/2018. Sales from Canada and at least six other states are anticipated to begin in 2019.

    Financial Highlights & Valuation

    We are initiating coverage of NanoSphere with an estimate of $0.75/share. We utilize the EV/EBITDA methodology for our valuation. Our valuation is derived using a 10x multiple applied to our 2020E adj. EBTIDA estimate, adding our year-end 2020E cash estimate of $8.9M and all ITM warrants and options for $1.1M, equating to a market value of $118.2M. We utilize a fully-financed share count.

    Trades at a discount to peers. NSHS currently trades at 13.6x our 2019E EBITDA estimates of $3.3M, a discount to Intermediate and Junior cannabis companies, which trade at an average of 18.2x and 52.5x, respectively.

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