The cannabis industry is simultaneously one of the oldest and youngest industries in the world. On one hand, cannabis has been used for centuries as a medicine to treat a wide variety of ailments. On the other hand, the drug has only recently been legalized by Uruguay and some parts of the United States. The result is an immensely popular industry with very little infrastructure and regulation.
The legalization of cannabis has created an overnight spike in demand for infrastructure and regulatory solutions. On the regulatory side, strict requirements on CBD/THC content for medical cannabis has created demand for effective breeding and testing solutions. On the infrastructure side, legalization has created an enormous opportunity for large-scale cannabis cultivation.
BreedIT Corp. (OTC: BRDT) aims to capitalize on both of these trends with its iBreedIT®, an intelligent decision support software (“IDSS”) for breeders developed at the Hebrew University of Jerusalem. By helping breeders quickly and effectively to plan, manage and analyze breeding data, the system reduces time to market, eliminates costly errors, enhances product quality, and reduces cost.
In the cannabis industry, commercial growers must balance first-mover advantage with producing high-quality cannabis for target end markets. In addition to consistently producing the right mix results it is also important to minimize waste. These dynamics are similar to those in the food industry where premiums for the right seeds are justified by a higher yield and greater product quality at harvest.
Breeders commonly spend millions of dollars and several years developing new plant varieties and hybrids. Often times, the process involves tracking thousands of different plants across multiple locations. Despite the complexity, many breeders use tools like Microsoft Excel and lack effective centralization of data, basic planning tools, intelligent decision support and rapid reporting that could make the process much more efficient and almost error free.
BreedIT’s proprietary iBreedIT® IDSS is designed to solve these problems by standardizing the collection of data, making it easily accessible via the cloud, and analyzing the data to extract key data points. Most importantly, the software also eliminates possibilities and advises the breeder on the best path to take. As a result, breeders can avoid crucial mistakes and researchers are able to free up more time to work on important issues and waste less time on mundane tasks, while collaboration across multiple locations is greatly simplified.
Many large companies, including a leading breeder of “Daniela” tomatoes, are already using the software in the field. BreedIT will license its software to breeders in exchange for a one-time sale and an ongoing service and support fee or pay per use agreements (“software as service”), which generates high-margin recurring income for shareholders. Over the long-term, the business model could unlock significant value.
Transition to a Licensing
The institutionalization of the cannabis industry has opened the doors to entirely new opportunities in the breeding space. For example, regulatory requirements for specific CBD/THC levels in medical cannabis have created a demand for optimized strains of the plant that can be reproduced on a commercial scale. BreedIT’s innovative software could help expedite and enhance that process.
On April 14, 2014, the company announced a key implementation of its business model with its partnership with Sheifa Le’Haim, an established cannabis grower. Under the terms of the agreement, in the new JV, BreedIT Ltd.’s Chief Scientist Professor Haim Rabinowitch will work closely with Sheifa Le’Haim’s Dr. Barry Nadel to determine the best and most efficient breeding strategies, breed unique and hybrid non GMO cannabis strains, and sell seeds or licenses to those strains around the world.
The idea of licensing or selling of seeds is nothing new: Companies like Monstanto Company (NYSE: MON) and Agrium Inc. (NYSE: AGU) already license proprietary seeds that produce greater yields and are resistant to pesticides in the agricultural industry. The seed industry as a whole is estimated to be worth more than $45 billion per year and legalized cannabis could add significantly more value to the industry.
BreedIT trades with a market capitalization of under $40 million and stands at the cusp of its commercialization phase. Through its new JV with Sheifa Le’Haim, the company aims to complement its existing IDSS with seed licensing, while its IDSS solutions are starting to gain traction in traditional markets. Investors may want to take a closer look at the stock over the coming months as a result.
BreedIT Ltd. has a great management team at the helm working on the underlying technology, including CEO Dr. Oded Sagee, Chief Scientist Professor Haim Rabinowitch of Hebrew University of Jerusalem. BreedIT Corp. is led by Chairman Itschak Shrem, a pioneer of Israel’s high tech industry, and CEO Yoel Yogev, a successful manager and a prominent angel investor in Israel.
Dr. Ben-Zion Weiner – a former Vice President of R&D at Teva Pharmaceuticals Inc. (NYSE: TEVA) – has also joined the company’s board with the goal of directing the pharmaceutical side.
All of these individuals are significant investors in the company’s stock, providing them with great incentive to unlock long-term shareholder value.
For more information, see http://ibreedit.com/.
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