There’s a growing and increasingly vocal body of researchers showing that cannabidiol (“CBD”) – the non-psychoactive component of the cannabis plant – could provide substantial health benefits. While GW Pharmaceuticals plc (NASDAQ: GWPH) has pioneered clinical trials in the space, this research suggests that the company is just scratching the surface of what may be possible using natural phytocannabinoids.
According to Project CBD, an advocacy group, CBD could serve as a potential treatment in areas like pain management, oncology, neurological disorders, cardiovascular disease, antibiotic resistance, and more. Studies focused on cannabinoids are being conducted by a number of different companies, including Cannabis Science Inc. (OTCQB: CBIS) and Cara Therapeutics Inc. (NASDAQ: CARA).
Peak Pharmaceuticals Inc. (OTCQB: PKPH) is aiming to become a sector leader focused on delivering the potential health benefits of CBD and other phytocannabionds to humans and animals. While the FDA prohibits companies from making health claims without clinical trials, the HIA v. DIA court decision cleared the way for hemp-based foods to be sold as nutritional supplements throughout the United States.
Starting with Pets
Peak Pharmaceuticals began its venture into hemp-derived CBD supplements through its agreement with Canna-Pet, LLC, a developer of CBD-infused pet treats and capsules. After acquiring worldwide rights to the complete product line-up, management quickly expanded production capacity, ramped up online sales and established distribution agreements with companies like Amazon.com Inc. (NASDAQ: AMZN).
On April 2nd, the company launched its all-new MaxCBD dog biscuits, which offer up to six times the CBD of its popular ‘standard’ Canna-Biscuit line. The limited edition product run sold out in less than 72 hours, suggesting a large pent-up market demand for consumers seeking the highest CBD and cannabinoid content for their pets. . A recent Quartz story highlights why cannabinoids have become a preferred solution for sick and elderly dogs (and Canna-Pet’s participation is notably mentioned).
Management plans to continue growing its Canna-Pet business with a combination of new distribution agreements into retail stores and veterinary clinics, as well as with new product launches aimed at diversifying its product line-up and reaching into new pet markets over time. In the meantime, efforts to scale up manufacturing should help meet increasing demand for these unique products.
Last quarter, the company reported initial revenue of $161,360 due primarily to the launch of its Canna-Pet product line-up. These revenues were generated at a strong 73% gross margin, which is higher than many nutraceutical and pet supply companies, including PetMed Express, Inc’s. (NASDAQ: PETS) 35% gross margin, Heska Inc.’s (NASDAQ: HSKA) 41% gross margin, and VCA Inc.’s (NASDAQ: WOOF) 23% gross margin.
Moving to Humans
Peak Pharmaceuticals’ long-term goal is to bring the benefits of CBD and other phytocannabinoids to humans using the animal sector as a springboard to the larger human market. According to a recent press release, the industrial and commercial intelligence gathered from veterinary product activities are “positively impacting” the timeline for testing and launching its first hemp-based products for humans before the end of this year.
While there are a handful of CBD supplements on the market marketed toward humans, the lack of interest by national brands like GNC Corporation (NYSE: GNC) or Vitamin Shoppe Inc. (NYSE: VSI) in selling CBD supplements has created a large opportunity for a leader to emerge in this growing segment. The company plans to establish a leadership position within the industry and capitalize on this market opportunity by using established biopharma manufacturing processes to develop top of the line, cutting edge CBD supplements.
Peak Pharma plans to leverage its extensive background in the bio-pharma industry as well as its newly acquired operational expertise, gained from the veterinary sector, to bring similar success to humans. According to Persistence Market Research, the nutritional supplement industry reached $104 billion globally in 2013 and continues to grow at a 6-7% compound annual growth rate, making it a substantially larger industry than the pet industry.
It’s difficult to predict the long-term market opportunity for human CBD supplements, given the industry’s early stage and lack of established competition, but it wouldn’t be a stretch to say it’s an opportunity likely to approach a billion dollars or more – particularly if research continues to support the potential health benefits associated with CBD through rigorous clinical studies.
Peak Pharmaceuticals has been highly successful in the development and commercialization of its Canna-Pet line-up. By leveraging its success in veterinary products, the company hopes to release a line-up of human CBD supplements potentially as early as the fourth quarter of this year. These supplements target a much larger market that could easily exceed $1 billion in size over the coming years.
In the meantime, the pet industry continues to show promise, as evidenced by the recent Quartz story, which highlights both the potential efficacy of cannabinoids in treating pet ailments and the market potential for such products. These dynamics could create significant growth opportunities in its existing vertical, where it has already become a recognized market leader with its Canna-Pet brand.
For more information, visit the company’s website at www.peakpharma.com.
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