Abattis Completes its Fully Vertically Integrated Downstream Cannabis Business
May 16th, 2018
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For those paying attention to the Canadian cannabis market, the most obvious trend ahead of this year’s expected full legalization is that of licensed producers dramatically increasing cultivation capacity to meet a projected short-term shortfall in supply. For those thinking about longer-term implications, the writing is on the wall: cannabis flower will follow, at some point in the not too distant future, every other commodity and the prices will go down as supply meets and exceeds demand. At that point, low cost and consistent production will likely win the day with some room in the market for premium cannabis lines differentiated largely by branding.
All of the focus on flower production leaves out the fastest growing and most profitable segment of the emerging market. Merchandise derived from cannabis, like oil extracts, edibles, nutraceuticals, and personal care products, are increasingly popular with consumers who are interested in the benefits of cannabis but not interested in smoking the flower. Vancouver, BC based Abattis Bioceuticals Corp. (CSE: ATT) (OTCQB: ATTBF) is intently focused on these downstream cannabis products and is executing its plan to become a full service, vertically integrated cannabis company in the space.
Licensed Producer as Enabler
Abattis recently commenced construction of a 26,000 square foot production and extraction facility for Gabriola Green Farms, its 100% wholly owned subsidiary and late-stage licensed producer applicant. The new facility will produce cannabis flower to be sure, but the main goal is to turn that flower into high-margin consumer products rather than attempt to compete with the really large cannabis producers. The development of such products is not a simple task, but Abattis has all of the complementary components in place to make the plan a reality.
One hurdle that companies have in developing cannabis-derived products is the legality of sourcing, handling, and storing the plant for research and development. In short, it’s tremendously helpful to have access to a laboratory with a dealer’s license from Health Canada. The dealer’s license is historically intended to allow researchers the ability to test narcotics for the purposes of drug development and understanding of the drug’s effects. Over the past few years, laboratory testing of medical marijuana has become one of the most common services offered by the few licensed dealers that are not laser-focused on drug research.
Abattis co-owns Northern Vine Laboratories, holder of a dealer’s license, with Emerald Health Therapeutics (TSXV: EMH) (OTCQX: EMHTF). The lab offers cannabis testing services, but Abattis is much more focused on the research and development capabilities afforded by the license. The company intends to create its own products, already demonstrated by its CBD-based sunscreen and potentially enabled by research arrangements like its recent partnership with University of British Columbia researchers. It also intends to formulate and manufacture products for other companies, and its partnerships with Kanabe, Canadian Artesian Ice, and Faculty Brewing are great examples of that type of arrangement.
Securing Gabriola Green Farms and commencing construction are huge steps toward maximizing the value of Abattis’ lab and enabling the downstream products strategy. If Abattis can secure its own supply of cannabis, and have freedom to create and modify strains for its own purposes, it puts cannabis-based product development on much more stable footing.
Beyond Licensed Producer and Licensed Dealer
Some companies might be satisfied to achieve licensed producer and licensed dealer status and go from there. Abattis has several other aspects of its business, however, that provide even greater potential for flexibility, integration, and revenue diversity. For starters, the company owns Vergence Naturals, a producer and distributor of natural health products. Vergence provides existing distribution channels for any products that Abattis may create, and also allows the company to offer distribution to product partners looking for ways to move their merchandise.
Any good cannabis-derived product requires a clean, efficient, affordable source for its active cannabinoid ingredients, and Abattis has this base covered as well. The company has exclusive distribution rights over a highly advanced column chromatography extraction technology capable of recovering 99% of all cannabinoids from the biomass material on an industrial scale. It can cleanly separate THC, THCA, and CBD, and demonstrates the ability to produce a 98%+ pure form of crystallized THCA, removing impurities like pesticides along the way. These pure extracts can be sold to other licensed dealers, licensed producers, and qualified legal entities under Canadian regulations. They also form the basis of Abattis’ downstream product development.
How does one go about partaking in some pure cannabis extract? Abattis has the answer with its recent acquisition of Green Tree Therapeutics and its line of vaporizers which are sold throughout North America. The product line is distributed through brick and mortar retail stores as well as through the Vergence Naturals online retail store, a perfect example of Abattis’ full circle approach to the cannabis industry.
Abattis is also on the cutting edge of the disruptive blockchain technology with a 49% stake in CannaNUMUS Blockchain Inc., a company that is developing a cryptocurrency for the cannabis space. The coin is designed to be a medium of exchange for the industry, between cannabis companies as well as between consumers and businesses. In addition to a potentially significant windfall from the coins ICO, Abattis is also able to leverage its position to be a leader utilizing blockchain technology for in the cannabis sector.
Abattis developments have been coming fast and furious over the last several months as recreational legalization approaches. The company’s focus on diversification of revenue streams throughout the high value chain of downstream cannabis product development could pay off handsomely, long after the coming consolidation and commodification of the cannabis flower market.
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