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Emerald Health: A Clinically-Focused & IP-Driven Licensed Producer

Ryan Allway

February 1st, 2017

News, Top Story

Canada’s cannabis industry could exceed $22.6 billion per year, which makes it an important market for investors. Licensed producers represent a compelling opportunity given their high barrier to entry (e.g. strict and lengthy licensing process) and the projected shortfall of supply heading into the recreational market come 2018. Some licensed producers already command billion-dollar market capitalizations, but others provide a great value opportunity for investors.

In this article, we will look at Emerald Health Therapeutics Inc. (TSX-V: EMH) (OTC: TBQBF), its plans to become a leading licensed producer, and why investors may want to consider it for their portfolios.

Expansion Opportunities

Canada has been a pioneer of legal cannabis since the Marihuana Medical Access Regulations (MMAR) was enacted in 2001 to enable qualifying patients to access the drug. Under the leadership of Justin Trudeau, the country has set the wheels in motion to legalize recreational cannabis later this year. Deloitte, a business services firm, believes that this could create a market worth upwards of $22.6 billion per year.

Emerald Health is one of only 38 licensed producers under the Access to Cannabis for Medical Purposes Regulations (AMCPR) – the current regulations, pursuant to the MMAR and MMPR programs. After a lengthy approval process, the company began selling dried medical marijuana during the third quarter of 2015 and cannabis oils in September 2016. Revenue reached around $50,000 during the third quarter of 2016, but is poised to quickly accelerate in 2017 and 2018.

In November, the company signed a letter of intent to lease up to 32 acres of land in Metro Vancouver, British Columbia, which it will use to significantly increase its production of cannabis and cannabis oils. In 2017, management plans to complete a 100,000-square foot expansion in two phases at a cost of $10 million. The expansion will increase production capacity to about 10,000 kilograms per year.

Focus on High Margins

Emerald Health differentiates itself from competing licensed producers with its focus on high-margin opportunities in the space. Rather than simply producing marijuana, the company leverages a very large and diverse library of strains to develop medical products that are backed by clinical studies. The company also continues to allocate funding to research and development activities to ensure that it remains on the cutting-edge of cannabinoid science.

In June 2015, Canada’s Supreme Court paved the way for the legalization of cannabis oils and extracts as an alternative to smoking the drug. This could significantly expand the market given the high number of individuals that would prefer not to smoke anything. When recreational cannabis is enacted, edibles could also become a high-margin opportunity for licensed producers, judging by the demand seen in the United States for such products.

Emerald Health quickly obtained a license to produce these oils and extracts and launched new products in the space. The company was the first licensed producer to offer THCA extracts, for example, which is a precursor to THC with no psychotropic effects. These products could help significantly boost profitability given their higher margins relative to dried cannabis, while management’s focus on clinically-proven products could set it apart from the competition.

Proven Leadership

The value of large companies is often dependent on their earnings and cash flow, but investors in smaller companies must rely on management’s ability to execute.

Emerald Health’s management team has over 100 years of combined experience in cannabis, agriculture, and life sciences industries. For example, President and CEO Bin Huang, PhD, MBA has over 20 years of experience in life sciences; VP of R&D Frey Garabagi, PhD, has over ten years of experience in plant molecular genetics and medtech; and, VP of Production Traviss Graham has over 15 years of experience in cannabis production, processing, and development.

The company’s board of directors has also helped raise over $500 million with clinical trials all over the world. For instance, Avtar Dhillon, MD, is Chairman and former CEO of Inovio Pharmaceuticals (NASDAQ: INO); Jim Heppell, BSc, LLB, is Director and former CEO of Sophiris Bio Inc. (NASDAQ: SPHS); Bob Rai, BSc, is Chairman and CEO of Canadian Pacific Global Pharmaceuticals; and, Punit Dhillon, BA, is CEO of Oncosec (NASDAQ: ONCS).

Looking Ahead

Emerald Health Therapeutics Inc. (TSX-V: EMH) (OTC: TBQBF) represents a unique opportunity in Canada’s large and growing cannabis industry. With a focus on clinically-proven, high-margin products, the company sets itself apart from the competition. Management’s plans to expand by 100,000-square feet in 2017 should also help accelerate revenue. With its modest ~$100 million market capitalization, investors can acquire the stock for a fraction of the ‘big five’ companies that are worth upwards of $600 million a piece.

For more information, visit the company’s website at www.emerald.care.

This article was published by CFN Enterprises Inc. (OTCQB: CNFN), owner and operator of CFN Media, the industry’s leading agency and digital financial media network dedicated to the burgeoning CBD and legal cannabis industries. Call +1 (833) 420-CNFN for more information.

About Ryan Allway

Mr. Allway has over a decade of experience in the financial markets as both a private investor and financial journalist. He has been actively involved in the cannabis industry since its inception, covering public and private companies.

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