Custom Search 1
The cannabis industry has made incredible strides over the last two years as scientific research continues to support the plant’s vast medical applications.
Although the biotech sector will be one of the greatest beneficiaries of the burgeoning cannabis industry, companies levered to the health and wellness side of the business will also be a major beneficiary as they continue to develop new products and supplements that support healthy living.
One of the most significant movements over the last decade has been the shift in consumers’ preferences and a greater focus on healthy living. From the expulsion of trans fats to the birth of super foods, new trends within this multi-billion-dollar industry have created countless opportunities for companies to capitalize on.
An interesting anecdote to highlight this view is Chobani, a limited liability food company that sells Greek yogurt. Chobani was able to improve an ordinary product by using non-GMO ingredients, real fruit and natural sweeteners, and implementing sustainability practices.
Through innovative practices and a focus on providing a quality product, Chobani was able to revive the United States yogurt market. In 2015, domestic yogurt sales amounted to approximately $7.7 billion of which Chobani accounted for $1.6 billion.
A Health and Wellness Company Flying Under the Radar
We are still in the early innings of a multi-decade growth cycle within the global health and wellness industry and for that reason we have been monitoring a number of companies levered to this trend.
One such company is NeutriSci International (NU.V) as we believe the market is just starting to recognize the company’s potential as its shares are up more than 16% so far this year.
NeutriSci was founded in 2009 and the company is focused on developing innovative products and increasing market share within the multi-billion-dollar health and wellness industry. The company specializes in the production and formulation of nutraceutical products and has established relationships with retailers throughout Canada.
Neuenergy is one of the company’s core products and is a natural supplement that provides energy and focus. This patented product contains a unique blend of blueberries and naturally derived caffeine. Neuenergy offers consumers an alternative healthy, functional caffeine solution. Due to the nature of the company’s proprietary ingredients, Neuenergy offers the same energy-related benefits as traditional caffeine but with a smaller amount of the active ingredient.
The number of health conscious consumers continues to increase every day and caffeinated products have been under the limelight as the face scrutiny from several leading health agencies across the world. The increased scrutiny has led to an increase in demand for products like Neuenergy whose efficacy has been demonstrated in both animal and human clinical studies.
Levered to Cannabis Industry Through Joint Venture
In late November, NeutriSci signed a Memorandum of Understanding with Lexaria Bioscience (LXRP) to produce a line of edible cannabinoid products. Under this joint venture, these products will utilize Lexaria’s patented technology and NeutriSci’s proprietary pterostilbene tablet formula. The products developed under this joint venture will be distributed through NeutriSci’s distribution network.
The companies will develop new cannabinoid formulas through the combination of NeutriSci’s proprietary sublingual pterostilbene tablet formula and Lexaria’s patented technology that will improve both the bioavailability and the taste of orally ingested cannabinoids.
Under the joint venture, the companies will develop its edible product using cannabidiol derived from full spectrum hemp oil, which is legal throughout the United States. The companies will then focus on the development of edibles with other cannabinoids such as tetrahydrocannabinol (THC).
The desired end result of these companies will be the commercialization of these potentially unique and proprietary edible products.
Newly Issued Patent Positions the Partnership for Success
In late October, Lexaria announced that it had been issued United States Patent No. 9,474,725, Cannabinoid Infused Food and Beverage Compositions and Methods of Use Thereof, pertaining to Lexaria's method of improving bioavailability and taste of certain cannabinoid lipophilic active agents in food products.
Its first patent granted or awarded by the United States Patent and Trademark Office (USPTO) was a significant milestone for the company. The patent protects Lexaria’s intellectual property related to the primary focus of its business, the infusion of cannabinoid compounds in edible products.
Lexaria’s technology makes cannabis edibles taste better and causes the active ingredients to enter the bloodstream more quickly and much more effectively.
A Global Growth Story
We are favorable on this partnership due to the number of synergies that can be created between the two businesses. Not only do we expect this partnership to lead to significant revenue growth but we also expect to see margin expansion as the companies will be able to lower the cost of goods sold as they recognize these synergies.
The combination of Lexaria’s technology with NeutriSci’s proprietary products and formulas has the ability to develop a leading healthy cannabinoid edible product line.
These potential products will appeal to consumers on a number of levels. From health conscious consumers to regulatory groups, these products will be attractive to anyone looking for a product that is safe, dosage controlled, effective, and tastes great.
A Relationship to Watch
When this partnership was announced, NeutriSci President Glen Rehman said that he expected to complete the joint venture agreement in the next four weeks. We expect the market to receive an update on this partnership in the near future and recommend that investors keep an eye on both LXRP and NU.V.
NeutriSci has fallen approximately 24% from its mid-November highs and we see value in the shares at current levels. Lexaria recently plunged more than 36% last week and the shares are no longer in overbought territory.
We are favorable on this relationship and believe that the recent weakness has created a great opportunity for new investors. The companies both possess potential event-driven catalysts that make the shares attractive in both the short and long term.
Important Investor Disclosures
Disclosure. Compensated Affiliate. This report was authored by and is property of StoneBridge Partners LLC. All information and data relied upon in drafting this report is publicly available. The author believes and considers its sources to be reliable, but does not guarantee the accuracy or completeness of any information contained in this report. Any and all information, data, analyses and opinions are provided for informational purposes only and is not intended, in any manner, as investment advice. Any projections or other information generated by StoneBridge Partners LLC regarding the likelihood of various investment outcomes are hypothetical in nature, do not reflect actual investment results, and are not guarantees of future results. None of the material contained in this report is intended as a solution or offer to sell or purchase a specific stock or any other investment. This report is not directed to, or intended for distribution or use by, any person or entity that is a citizen, resident or located in any municipality, state, country or other jurisdiction where the distribution, publication, availability, or use of this report is contrary to any governing law or regulation. The securities discussed in this report may not be eligible for purchase and/or sale in certain jurisdictions or by particular individuals. It is important that you check any and all governing laws and/or regulations that may be applicable in your jurisdiction. Investing in securities of issuers organized outside of the United States, including ADRs, entail certain risks. The securities of non-United States issuers may not be registered with, nor be subject to the reporting requirements of the United States Securities and Exchange Commission. Please contact a Financial Advisor for professional advice regarding any and all securities investments. This report is intended for informational purposes only. StoneBridge Partners LLC’s officers, directors, employees, affiliates, or subsidiaries may have positions in securities covered by StoneBridge Partners LLC. StoneBridge Partners LLC receives compensation from the company and/or has a position in the securities mentioned in this report