Over the last month we have been looking for undervalued and differentiated cannabis opportunities as the market has been under pressure. This weakness is not surprising as we have seen the market pullback during this time over the last several years.
One company that we have been watching which has been under considerable pressure is Relevium Technologies Inc. (RLV.V) (RLLVF). The Canadian based nutraceutical company has been focused on executing on a multi-faceted growth strategy and has been producing solid revenues.
In 2018, Relevium has made some significant announcements and is in the early innings of a major growth cycle. We have highlighted some of the recent developments and we believe this is a company to keep an eye on.
Relevium Expands Reach and Secures Strategic Partner
Last week, Relevium expanded its reach via the execution of a supply agreement with Plena Global Holdings Inc., to supply full spectrum CBD oil to the company’s supply chain partners in Europe starting January 2019.
This represents an important milestone for the company as it will improve its brand awareness internationally and create a new revenue stream. Relevium has already defined an initial product line and is in the process of finalizing formulations of its first CBD based nutraceuticals for the European Market.
Relevium is leveraging its current market expansion initiatives into Europe to accelerate the introduction of CBD based nutraceutical supplements in this burgeoning market. The agreement with Plena is significant as it ensures a steady supply of superior quality full spectrum CBD oil for the company’s nutraceutical retail brands currently being launched in Europe
Plena Global Holdings Inc. is a Canadian holding company that has been accumulating medical marijuana cultivation assets across legalized countries in South America. Plena is focused on developing large-scale production of GMP grade medical marijuana products for export to countries with supply shortages, such as Canada, Germany and Italy. We are favorable on this relationship as it provides Relevium with a strategic partner.
An Emerging Organic Cannabis Producer
Last month, Relevium’s wholly-owned subsidiary Biocannabix (BCX), selected a 93,000 sq. ft. facility in Montreal, to cultivate premium organic cannabis. BCX is pursuing a cultivation license through Health Canada’s ACMPR application process and will be leveraging PipeDreemz and lead consultant George Routhier who has a remarkable 100% success rate with ACMPR licensing from Health Canada. PipeDreemz Inc. also played an instrumental role for the design of H2 Biopharma facility, a late-stage ACMPR applicant located in Lachute, Québec. The H2 Biopharma facility in Lachute, QC was eventually acquired by Aurora Cannabis Inc.
With the assistance of PipeDreemz, Relevium has conducted an initial assessment of the facility, an industrial building next to the TransCanada Highway, Trudeau International Airport and about 20 minutes from downtown Montréal. The building has been selected as a desirable location when it comes to distribution to other provinces as well as to retailers and consumers in Québec.
The company intends to develop the project in stages and expects to retrofit the building with an initial phase of 10,000 sq. ft. of cultivation. Upon the completion of the first stage, successful operations and licensing, the company will then proceed with phases 2 and 3. Construction of the project is subject to financing and customary approvals.
Focused on the High-End Consumer
Relevium’s strategy is to cultivate high quality organic strains for use in exclusive, high-end consumer packaged goods primarily for health and wellness. The company has no intentions on competition with large scale producers and plans to focus on custom niche and organic products with established partnerships for processing and ongoing research in cannabis derivatives.
There is a significant and burgeoning market for high-end products and we think this is a differentiated focus. If BCX can create market share and develop brands that resonate with high-end consumers, this can be a significant growth driver for both the company and its shareholders.
BCX’s focus on producing high end products will be attractive for other Canadian cannabis producers. Over the next year, we expect to see significant consolidation within the Canadian cannabis market and Relevium could be a beneficiary of this. Being differentiated is very important when it comes to receiving investments or being acquired and the focus on the high-end market positions the company well for this.
We will monitor how BCX continues to execute and will keep an eye on how this market evolves. With Canada’s recreational market set to open, it will be interesting to see how the market develops. We expect to see several types of consumers and expect the high-end side of the market to be massive. This is something that will be a positive for companies focused on this side of the business.
Reports $1+ Million in Quarterly Revenue
In late May, Relevium announced quarterly financial results and Bioganix generated $1 million in revenue during the period (recorded $3.15 million in revenue and $1.8 million of gross profit, 57%, in the last 9 months).
During the quarter, Relevium initiated a market test for the eventual launch of a complete line of aloe vera based health support products and cosmetics. The company revealed a new brand architecture for Bioganix and conducted the initial joint-launch of Planet Hemp with HEMPCO.
They recorded a positive development when they signed a partnership with Amazon that is focused on the European market and increased the number of product offerings by 17% (plans to offer 50+ SKUs by the end of 2018).
Relevium reported a $1.7 million net loss during the quarter and this a result of high expenses. The company has been reinvesting in the business to expand its operations and represents an execution story. Management needs to execute on these investments and we are monitoring how they continue to do so.
Although quarterly expenses increased significantly, the strong revenue growth is exciting, and we are bullish on this. The management team has been executing on previously announced initiatives and has created a brand, launched new products, and is looking to expand into new markets.
The management team believes that the additional investments will prove to be accretive once the company has a strong presence in Amazon UK and Walmart.com and has connected with its customer base. There is a significant market for these products and now the company just needs to deliver.
Initial Softgels Production of Omega 7 Formulations
In mid-June, Relevium reported a milestone and commenced production of 920,000 soft-gels of its Cardio-Metabolic Syndrome and Dry-Eye Syndrome. These softgels use Provinal, a patented ultra-purified Omega 7 fatty acid blend. This product is focused on improving health and is targeting a multibillion dollar market.
Relevium has put the team in place to try and capitalize on this market by gaining market share on-line. In late 2017, Relevium announced an exclusivity agreement with Tersus Life Sciences to formulate and distribute exclusive products with Provinal Omega 7. The first two formulations in production are aimed at servicing two critical markets, Heart and Eye Health. The products will be marketed by BioGanix Platinum and Bioganix Gold labels and sold online through Amazon, Walmart and Native Website.
A Stock to Watch
Relevium represents a differentiated and undervalued opportunity and we are monitoring how the company continues to execute. The management team is embarking on several new high-growth initiatives and are monitoring how they deliver on these initiatives. The management team is laser focused on creating value for shareholders and this is an attractive aspect of the story.
In 2018, the share price has seen some pressure, which we are keeping an eye on but with its current market cap valuation, we believe this can provide investors with a good opportunity as Relevium continues to execute its international growth strategy during the summer months.