During the last month, Blueberries Medical Corp. (BBM.CN) (BBRRF) (1OA) has been nothing short of an execution story and has significantly advanced its fundamental story. Through continued execution and strategic additions to the management team, the Colombian cannabis company has recorded some major milestones and we want to issue an update on this opportunity.
The market has responded favorably to the recent developments and Blueberries Medical was a top performing cannabis stock during the last month. Although the recent rally has been significant, the company is trading at a significant discount to PharmaCielo (PCLO.V) (PHCEF) and Khiron Life Sciences (KHRN.V) (KHRNF), which are the two best known cannabis companies in Colombia. Blueberries Medical has a market cap of approx. $84 million while PharmaCielo is valued at more than $1 billion and Khiron is valued at more than $330 million and we find this difference to be significant.
We have been closely following PharmaCielo and Khiron Life Sciences to better understand the opportunity in Colombia and believe that this is an area where investors need to be focused. These companies were the first movers on the Colombian cannabis market and Blueberries Medical is not too far behind. When compared to the operating environment in Canada, the Colombian cannabis opportunity is much less saturated and this creates a significant opportunity for Blueberries Medical.
Blueberries Medical is quickly catching up with PharmaCielo and Khiron Life Sciences, and we believe that this significant opportunity has been flying under the radar. When you look at the valuation disparity between these two operators and Blueberries Medical, it is tough to not get excited about the latter.
So far this year, Blueberries Medical has significantly advanced its fundamental story and is a fully licensed producer of medical cannabis flower and oil products in Colombia. The company represents a multi-faceted growth opportunity that is currently expanding its state-of-the-art facilities that are going to be Good Manufacturing Practices (GMP) compliant. When it comes to being able to export medical cannabis to international markets, the company must be operating out of a GMP compliant facility and we are bullish on this part of the Blueberries Medical story.
Hires PharmaCielo’s Former CEO to lead the Company
Last week, Blueberries Medical reported a significant development and appointed Dr. Patricio Stocker as CEO. He is an accomplished executive with extensive international experience, having served as PharmaCielo’s CEO from 2015 to 2018. During his tenure as PharmaCielo’s CEO, Dr. Stocker played a key role in the development of corporate strategies, the formation of strategic relationships, the cannabis licensing process, and capital raising initiatives.
While serving as CEO of PharmaCielo, Dr. Stocker was actively involved in the development of the company’s Colombian operations and helped the team establish a scalable and competitive cultivation and oil production strategy. We believe that Dr. Stocker adds significant experience to the Blueberries Medical team and find him to be a strategic addition. Blueberries Medical has been laser focused on the cannabis oil opportunity (which we will discuss later in the article) and believe that Dr. Stocker will play a key role in the company’s success.
Expands into Argentina Through a Strategic Acquisition
Earlier this week, Blueberries Medical reported a significant development in regards to its expansion strategy and signed a binding agreement to acquire cannabis cultivation, processing, manufacturing, export and other rights in Argentina from BBV Labs Inc. Pursuant to a definitive agreement with the Argentinian state-owned company Cannabis Avatara, S.E., BBV Labs has entered into a joint venture with Cannava to develop and cultivate cannabis on a 3.2 million square foot (74 acres or 30 hectares) prime agricultural property.
The property is located on the El Pongo agricultural property in the province of Jujuy. The area is located in an ideal, temperate climate that permits year-round cultivation and has a skilled and efficient agricultural labor force. The property is fed by multiple rivers that provide ample access to fresh water for irrigation. The power supply is modern and has capacity to scale as the team increases its production capacity. The property is located near an international airport which is an ideal hub for importing and exporting cannabis products. We are favorable on the growth prospects associated with this asset and will monitor how the team executes on this.
This is a significant relationship and we are bullish on the leverage to the Argentinian cannabis market. We are favorable on what both companies bring to this relationship and believe that is an important part of the growth story. Cannava will contribute the land as well as all required permits and authorizations necessary to import seeds, cultivate, grow and harvest cannabis, process cannabis and extract cannabis oil and other derivative products for scientific, medicinal and therapeutic purposes and to export cannabis and derivative products and import and export related equipment and products to the joint venture.
Under the agreement, Blueberries Medical will build a large-scale modern cultivation facility and processing center of excellence in Argentina. According to the agreement, Cannava will contribute all cooperation agreements with the National Institute of Agricultural Technology (INTA), Ministry of Security, Ministry of Public Health, National Council of Scientific and Technological Investigations (CONICET) and other regulatory and technological Argentinian authorities as required.
Blueberries Medical will acquire 75% of BBV Labs rights under the joint venture with Cannava in an all-stock transaction. Pursuant to the joint venture agreement, proceeds from the manufacture and distribution activities will be distributed 90% to BBV Labs and 10% to Cannava and proceeds from the cultivation and growth activities will be distributed 70% to BBV Labs and 30% to Cannava. Going forward, Blueberries will be responsible for providing the expertise and capital required to operate and develop the joint venture operation.
One of the reasons why we are excited by the Blueberries Medical opportunity is due to the leverage to the Latin American cannabis market and the growth prospects associated with this market. The economics associated with the property in Argentina are very attractive and we think this makes the opportunity even more exciting. We will be monitoring how the team executes on this opportunity and will provide updates as needed.
Highly Focused on the Burgeoning Cannabis Oil Market
One of the reasons why we are excited about Blueberries Medical is due to its focus on the cannabis oil opportunity. Demand for cannabis oils, especially high cannabidiol (CBD) oil, continues to increase and this is a trend we expect will continue as researchers learn more about the therapeutic value of cannabinoids.
We believe that the cannabis oil opportunity represents one of the most significant growth markets and are favorable on Blueberries Medical’s focus on this sector. When compared to cannabis flower, the margins and the prices associated with cannabis oil are much more attractive. Cannabis oil also has a longer shelf life and we are favorable on these attributes of the product.
When it comes down to it, cannabis flower is just an input product that Blueberries Medical is able to produce very cheaply. This creates a massive opportunity for the Latin American cannabis oil company to sell a product that is high in demand at a price that is very attractive to consumers.
An Attractive Growth Story
The reason why Blueberries Medical is able to produce cannabis for so cheap when compared to its peers is due to its strategic location. Blueberries Medical’s current facility, Guatavita Farm, is located in the Bogota savannah, which is the major production center of cut flowers in Colombia. This facility is strategically located in one of the safest regions of Colombia and is in an area that has scalable cultivation infrastructure.
The economics associated with cultivating cannabis in Colombia are very attractive and Blueberries Medical has been ahead of the curve with this burgeoning opportunity. In Canada, it cost approx. $1.50 to $2.50 to produce each gram of cannabis. In South America, it costs less than a tenth of that, providing a significant advantage to South American operators.
Blueberries Medical represents a multi-faceted growth opportunity that has significant catalysts for growth. The company is levered to one of the most attractive operating environments for cannabis producers and we find this to be an important part of the story. Over the next few months, we expect to see Blueberries Medical announce some significant updates and this is an opportunity to be watching.
Pursuant to an agreement between StoneBridge Partners LLC and BlueBerries Cannabis Inc. (BBM) we have been hired for a period of 180 days beginning February 1, 2019 and ending August 1, 2019 to publicly disseminate information about (BBM) including on the Website and other media including Facebook and Twitter. We are being paid $7,500 per month (BBM) for or were paid “ZERO” shares of unrestricted or restricted common shares. We own zero shares of (BBM), which we purchased in the open market. We plan to sell the “ZERO” shares of (BBM) that we hold during the time the Website and/or Facebook and Twitter Information recommends that investors or visitors to the website purchase without further notice to you. We may buy or sell additional shares of (BBM) in the open market at any time, including before, during or after the Website and Information, provide public dissemination of favorable Information.