The medical use of marijuana has become well established over the past few years as clinical studies continue to demonstrate its potential in a number of areas. In fact, the U.S. government itself owns a patent titled Cannabinoids as antioxidants and neuroprotectants, which acknowledges the drug’s potential in limiting neurological damage following ischemic insults like stroke and trauma.
Many companies, including GW Pharmaceuticals plc (NASDAQ: GWPH) and Cannabis Science Inc. (OTC: CBIS), have been working hard on developing cannabinoid-based therapies to treat these conditions and others. While additional companies like Earth Science Tech. (OTC: ETST) have turned their focus towards becoming a wholesale supplier of CBD’s.
Lexaria Corp. (OTC: LXRP) has taken a hybrid approach to the market by operating as a potential licensed producer under Canada’s MMPR program, and subsequently expanding into the alternative health sector via its recent PoViva investment.
Making Progress in Becoming a Producer
Lexaria began its life as an oil and gas exploration company, but expanded into Canada’s emerging medical marijuana market back in March of 2014 via its joint venture Enertopia Corp. (OTC: ENRT) (CNSX: TOP). After replacing its MMAR with its MMPR program, Canada’s regulated medical marijuana market was opened up overnight to both public and private companies looking to get involved.
In July, the joint venture announced the submission of their application to become a Licensed Producer under Canada’s MMPR program. Management has been in frequent contact with Health Canada regarding the status of its application, and during these conversations, the company has received guidance in terms of security upgrades and other requirements that must be completed before approval.
The joint venture – of which the company owns 49% – has applied to produce 10,000 kilograms of medical marijuana each year under the MMPR program. At a baseline price of $5 per gram, these production levels could generate some $50 million per year in revenue. The company would be eligible to receive about half of that amount – or roughly $25 million in revenue per year via their partnership with Enertopia Corp.
Targeting the Alternative Health Sector
Health Canada has been inundated with over 1,000 applications to become licensed producers, which means that many projects are experiencing delays in responses and approvals due to Health Canada simply being overwhelmed. With this delay in mind, Lexaria decided to diversify into the alternative health care sector in November 2014 with its investment in PoViva Corp. in order to mitigate these risks and speed up its commercialization timeline.
PoViva has two pending patents that govern the process of infusing CBDs into food products by binding the active ingredients with a lipid. Since these CBDs are fat-soluble – which is why marijuana remains in the body for so long – the process offers an advantage over traditional CBD-based products that try to ineffectively combine the active ingredients with water-based products or foods.
The company plans on initially launching CBD-infused black teas, which are the second most consumed beverage in the world after water. To sell these teas and other upcoming products, management has commissioned an e-commerce website that will begin accepting orders in the near future. Additional sales channels will also be explored in order to open up the market to as many individuals as possible.
Management Team Committed to Success
Lexaria’s management team continues to progress the company through both of these fronts, while maintaining its existing oil and gas assets. In September, these Belmont Lake oil well assets began producing roughly 120bpd, which should generate near-term revenue for the company at no significant cost, given that it’s working with an operational partner on the ground.
The company’s management team also remains committed to success. CEO Chris Bunka owns a little over five million shares of stock that were purchased largely in open market transactions as opposed to stock grants. By purchasing the stock, the CEO has clearly demonstrated his confidence in the company, while management’s long track record speaks for itself when it comes to compliance.
Finally, investors in the cannabis industry may want to take a look at the company sooner rather than later. With a relatively small float, positive news could send shares higher in short order, while management’s diversification beyond Canada’s MMPR sets it apart from many competitors in the space.
For more information, visit the company’s website at www.lexariaenergy.com.
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