Pure Extracts: An Experienced Team with an Attractive Model
September 15th, 2020
Psychedelics, Top Story, Uncategorized
The cannabis industry has matured into a multi-billion-dollar business over the past few years, but growing interest in psilocybin and functional mushrooms has opened the door to a new horizontal business opportunity. Like cannabis, mushrooms are a natural product with medicinal properties that could address multi-billion-dollar end markets.
Pure Extract Technologies Inc. (CSE: PULL) (listing pending) is already in a great position within the cannabis industry. With falling input prices and rising demand for extracts, the Company will be able to acquire raw materials at spot pricing and convert it into high-value extract-based products. The Company’s entrance into the functional mushrooms and psilocybin space could create enormous value.
Let’s take a look at what makes the Company’s business model attractive and some upcoming catalysts for investors.
What Makes the Business Model Attractive?
Pure Extracts CEO, Ben Nikolaevsky discusses efficiencies
Pure Extracts provides white label production and toll processing services to cannabis companies. From sourcing raw materials to designing packaging materials, the Company is a one-stop shop for companies licensed to sell specialized oil extracts and CPG brands seeking licensed manufacturing partners, as well as a contract processor for Licensed Producers.
There’s a key benefit to this model: The Company doesn’t have to produce any of its own biomass, which translates to far less cultivation-related overhead and no inventory risk. With dried cannabis prices hitting new lows in Canada, the Company has access to cheap raw materials at spot prices that it can use to create in-demand products for cannabis consumers.
Extraction is still relatively new in the Canadian market and extraction-related products still sell at a significant premium to traditional cannabis products. For instance, extracts are used to create everything from vape cartridges to edibles. Pure Extracts will be rolling out its own proprietary line of high-margin products into Canada’s market in Q4 2020.
Finally, the Company’s business model is diversified with exposure to cannabis, hemp, and soon, mushrooms. Investors have access to all three lines of revenue in a single business model that provides high-margin recurring revenue, low capital expenditures, and a high barrier to entry when it comes to both equipment costs, expertise and licenses.
What Are Some Upcoming Catalysts?
Pure Extracts CEO, Ben Nikolaevsky discusses extraction catalysts
Pure Extracts is quickly entering the functional mushroom space and has plans to enter the psilocybin space. By repurposing its existing equipment, the Company has a competitive edge when it comes to developing functional mushroom products built with extracts, including both functional mushroom products and psilocybin extracts for medical purposes.
“Even though people have been utilizing the therapeutic benefits of mushrooms for centuries, it is really only now starting to become a trend that Main Street and Wall Street are recognizing,” said Doug Benville, Founder and COO of Pure Extracts, in a phone conversation with CannabisFN. “We’re leveraging our experience in carbon dioxide and ethanol extraction for full spectrum cannabis products to take a leadership position in mushrooms, first with functional and then psychedelic.”
The Company is applying for a Natural Health Products site license from Health Canada for functional mushroom products which could open the door to creating psilocybin extracts on a commercial scale. Its science team, bolstered by Dr. Alex McGregor, Founder of the Toronto Institute of Pharmaceutical Technology, is developing methods to extract psilocybin that could be used by researchers and pharmaceutical companies to address multi-billion-dollar mental health end markets.
The Company plans to start with tincture and soft gel products from functional mushroom extracts with plans to move into beverages and nasal sprays during the fourth quarter of this year and psychedelics in the second half of 2021.
The rise of psychedelics could be a game-changer for cannabis companies that already have the infrastructure in place for plant-based medicine, such as Pure Extracts (CSE: PULL) (listing pending). As a first-mover in the space, investors may want to take a closer look at the Company as it prepares to list on the CSE under the ticker symbol “PULL” in the near-term.
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