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Emerald Health Takes a Scientific Approach to Cannabis

Ryan Allway

September 25th, 2017

Exclusive, News, Top News

Canada’s cannabis industry is projected to exceed C$22.6 billion over the coming years, according to Deloitte, which has many licensed producers scrambling to ramp up production. For example, Canopy Growth Corporation (TSX: WEED) acquired Mettrum Health Corp. earlier this year for $430 million to expand its production capacity to 665,000 square feet with nearly 40,000 registered patients as it targets both the recreational and medical side of the market.

Emerald Health Therapeutics Inc. (TSX-V: EMH) (OTCQX: EMHTF) is taking a scientific approach that involves developing proprietary products designed for specific medical conditions while building a Scientific Advisory Board with substantial expertise. At the same time, the company has tremendous expansion potential, which gives investors the best of both worlds when it comes to exposure to the rapidly growing industry.

In this article, we will take a look at Emerald Health’s unique approach to the cannabis industry and why investors may want to pay close attention to the stock.

Science-Driven Approach

Emerald Health Therapeutics is focused on developing high margin products that are backed by rigorous clinical trials and are uncompromising in quality. Executive Chairman Dr. Avtar Dhillon, MD, is a seasoned executive and chairman of five public life science companies, having successfully led the turnaround of Inovio Pharmaceuticals Inc. (NASDAQ: INO) from a $10 million micro-cap to a $550 million late-stage biotechnology company.

Members of the company’s Scientific Advisory Board also recently made a novel discovery highlighting the potential of tetrahydrocannabinolic acid (“THCA”) in treating Huntington’s disease and other metabolic, neurodegenerative, and neuroinflammatory diseases. These results were published in the British Journal of Pharmacology in a peer-reviewed article titled, “Tetrahydrocannabinolic acid is a potent PPARγ agonist with neuroprotective activity.”

“We are pleased to be one of the first and few companies to offer THCA cannabis oil and look forward to generating human data from clinical research we are planning for this product in the near future,” said Emerald Health VP of R&D Frey Garabagi, PhD. In its investor presentation, the company indicated that it plans to begin human clinical trials designed to prove the efficacy of its growing product line-up in treating numerous medical conditions.

New Product Launches

Emerald Health also recently announced the release of Island Mist, a proprietary high-cannabidiol (CBD) and high CBD-to-THC ratio dried flower product. The Indica-dominant strain contains 15.9% CBD and just 0.4% THC, which represents a 40:1 CBD-to-THC ratio. The product can be purchased by individuals holding a medical license registered with Emerald Health Botanicals – the company’s wholly-owned subsidiary and ACMPR licensed producer.

With the new product launch, Emerald Health Botanicals offers a full line-up of six dried flower products, including four high-THC strains, a high CBD strain, and a combination strain. The firm also provides eight cannabis oils with varying levels of THC, THCA, CBD, and THC-to-CBD ratios. Management believes that one of these products – CBD-50 – contains the highest amount of CBD per milliliter on the ACMPR market today.

“Emerald’s team has a depth of experience in life sciences and product development which is complementary to our focus on scaled cultivation,” said Supreme Pharmaceuticals CEO John Fowler following a deal for Supreme to provide Emerald with cannabis flower. “We see this transaction as the first step in building an ongoing relationship where each party can focus on its core competencies to develop competitive advantages.”

Expansion Potential

Emerald Health has tremendous expansion potential, but has committed to a demand-driven approach to preserve shareholder value. With a 32 acre property in Metro Vancouver, the company can build up to one million square feet of capacity on demand with each $10 million in spending generating 10,000 kilograms of product per year. Management’s proven ability to raise capital means that it can expand on an as-needed basis as the market grows.

At the same time, the company recently announced a joint venture with Village Farms International Inc. (TSE: VFF), which provides an existing 25-acre property in Delta, BC that is being retrofitted for added capacity. Each company will have a 50% stake in the joint venture, called Pure Sunfarms, with initial plans to convert a 1.1 million square foot greenhouse capable of producing 75,000 kilograms of product per year once it’s completed and fully licensed by the government. This unique collaboration combines decades of large-scale greenhouse growing expertise with deep cannabis cultivation experience and offers the prospect of scaling growing capacity rapidly and cost effectively. Perhaps more importantly it increases the prospect of more readily managing the operating challenges of growing any plant at large scale and, in this case, growing cannabis in a facility well positioned to deliver significant volumes at extremely low cost over the long term. Managing execution risk well will be an important differentiating factor among the various licensed producers.   

Looking Ahead

Emerald Health Therapeutics Inc. (TSX-V: EMH) (OTCQX: EMHTF) represents a compelling opportunity in Canada’s cannabis industry. With its scientific approach to the industry, the company is highly differentiated from other companies focused primarily on scaling up capacity. Emerald is clearly focused on the longer term growth of the value-added, downstream end of the product spectrum. However, the company’s 32-acre property in Metro Vancouver and Village Farms joint venture on 25 acres in Delta, BC means that it can also quickly and cost effectively scale production to meet the demand of the growing existing medical demand and the imminent recreational market expected to open in 2018.

Emerald is not being recognized today, in terms of market valuation, as one of the bigger players as it does not today have the production capacity that is capturing investor attention. However, investors may want to take a closer look at the stock as Canada’s cannabis industry heats up and Emerald executes on its significant steps to gear up production capacity to meet demand.

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

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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