During the last year, we have noticed a significant increase in the number of companies that are focused on the cannabidiol (CBD) market and this is a trend that we have been highly focused on. Demand for cannabis oil, especially high CBD oil, continues to increase and this is a trend we expect to continue as researchers learn more about the therapeutic value cannabinoids provide.
When it comes to understanding the therapeutic value provided by cannabinoids, we have barely scratched the surface. Over the next year, we expect to learn about the therapeutic value associated with additional cannabinoids and we find this to be significant. One company that has been focused on cannabinoids besides for CBD is Hemptown USA and this is an opportunity that we have been excited about.
Hemptown has been laser focused on the cannabigerol (CBG) opportunity and plans to cultivate more than 500 acres of this rare cannabinoid in 2019. When compared to CBD, the price point of CBG is much more attractive and we find this to be a significant differentiator for the business. Although we have heard a lot about CBD, only a few companies understand the opportunity associated with CBG, which is the pre-cursor cannabinoid to CBD and THC.
CBG has been observed to have anti-fungal and anti-microbial properties and is being explored as a potential treatment for Psoriasis and Eczema. The mass market opportunities associated with CBG are significant and we are favorable on the way that this differentiates Hemptown from other hemp companies. Outside of the applications associated as a cosmetic additive, there is a lot to learn about CBG and we are favorable on the leverage that Hemptown has to this cannabinoid.
Completes the Vertical Integration Process by Acquiring Kirkman
Earlier this month, Hemptown expanded on its position is the US through the acquisition of the assets that make up the FDA pharmaceutical manufacturing licensed, cGMP (Current Good Manufacturing Practice) certified nutraceutical business of the Kirkman Group which is based in Lake Oswego, Oregon. When looking at how this transaction impacts the Hemptown opportunity, there is a lot to be excited about.
Since inception, Kirkman has been in good standing with the FDA and has been recognized as a leader in the development and manufacturing of pure nutraceuticals and nutritional supplements for individuals with autism and special needs for more than 70 years. The transaction includes strategic assets and significant human capital as the company will be acquiring the entire management team, all of the production equipment, proprietary intellectual property, current sales channels, and fulfillment centers.
Over the next year, we expect this acquisition to quickly prove to be accretive as it should significantly enhance Hemptown’s overall growth prospects. We want to highlight some of the most significant aspects of this acquisition so our readers can better understand the impact it will have on the entire business.
Included in the acquisition is a fully operational state-of-the-art FDA licensed, cGMP 25,000 sq. ft. nutraceutical manufacturing facility. This is a significant asset that can generate a significant amount of revenue and we are bullish on the growth prospects associated with this. Kirkman has been generating $6 million of revenue per year and has been reporting solid growth. The facility is comprised of best-in-class formulations and equipment to allow for the precision dosing of liquid fill tinctures (CBD & CBG), creams and topicals, gel caps, and edibles.
Kirkman’s former Chairman David Humphreys will help guide Hemptown’s direction within the community of doctors who focus on cannabinoid medicine. The addition of Humphreys will improve the company’s position in the world of cannabinoid doctors that are researching, developing and testing formulations for consumers with imbalances in their cannabinoid systems. The Kirkman Group includes a team of world class formulation experts that will help Hemptown develop CBD/CBG infused products for consumers at scale. By retaining the management team and these experts, Hemptown will be able to have a seamless transition and will be able to quickly bring CBD/CBG product formulations to market.
Hemptown will immediately leverage Kirkman’s Ultra Tested protocols for testing every raw ingredient used in all its products. Ingredients are tested for more than 950 environmental contaminants while finished products will be tested for 24 heavy metals, bacteria, yeast, mold and common allergens. Ultra Tested is the highest standard of purity testing in the nutritional supplement industry, and no other supplement company in the world offers this degree of purity testing. Hemptown will be one of the first companies to offer product liability insurance on all future consumer packaged goods (CPG) produced at the facility and we find this to be significant.
With the Kirkman Group being fully operational and FDA licensed, this acquisition completes Hemptown’s vertical integrations plans with the immediate entry into the CPG space. We are bullish on the growth prospects associated with this opportunity and expect to see this acquisition play a key role in the long-term success of the company.
Hemptown recognizes the nutraceutical industry standards for producing finished goods and operates to these standards. Once these standards become a requirement for all cannabinoid products that are being sold to consumers, there will be a major shakeout of operators that do not meet these standards. Hemptown will benefit from a future shakeout and we are bullish on the growth prospects associated with this acquisition.
Hemptown is positioning itself to be one of the largest producers of CBG in North America. CBG is the precursor to all cannabinoids and is commonly known as The Mother of All Cannabinoids. Hemptown is growing over 500 acres focused exclusively on these rare genetics in an effort to become a dominate North American supplier of CBG by the end of 2019 and will monitor how the team is able to execute on this.
Attractive Leverage to a High-Value Cannabinoid
Hemptown is focused on the soil to oil opportunity associated with CBD and CBG and we are favorable on the strategy in place. This company extracts cannabinoids from its state-of-the-art cGMP facility and ISO standard clean rooms which provides a significant competitive advantage when it comes to looking at Hemptown as a strategic partner. The company is currently developing a secondary extraction facility to complement the existing facility in Oregon, and we are bullish on the growth prospects associated with this.
When looking at the Hemptown opportunity, the focus on the CBG opportunity represents the most important aspect of the story. Currently, it costs around $20,000 per kilogram of CBG and this is significantly higher than the $4,000 price tag associated with a kilogram of CBD. Next year, the cost per kilogram for both CBG and CBD are expected to decrease and Hemptown will benefit by focusing on the production of hemp that is high in both cannabinoids.
Cannabis oil represents the most attractive vertical of the cannabis industry and Hemptown is highly levered to this opportunity. Over the next year, we expect to see the cannabis oil industry to record massive growth and expect edibles and vape pens to be the primary drivers of this growth. Cannabis oil is the primary input product that is used to create these products and we are favorable on Hemptown’s plans to increase production and extraction capacity.
From a geographical standpoint, Hemptown is well positioned to capitalize on the US market and is the process of constructing a primary extraction facility in Kentucky that will mirror the operation in Oregon. Following this, the company plans to invest in a pharmaceutical production facility for the development of CPG products.
An Opportunity with Catalysts for Growth
Over the next year, we expect to see Hemptown record strong growth and will monitor how the team continues to execute. When you combine the growth, prospects associated with the Kirkland acquisition with the increasing production and processing capacity, you have an attractive recipe for growth and this is an opportunity that we are excited about.
The acquisition of Kirkman will play a key role in Hemptown’s vertical integration strategy on a going-forward basis and we are bullish on the impact that it will have on revenues and margins. We are favorable on the CPG opportunity and believe that this aspect of the business will prove to be a significant value driver for the overall company.
Hemptown is a company that has several major potential catalysts for growth and will monitor how the team continues to execute. To learn more about this leading cannabis company, please contact email@example.com.
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