SeekingAlpha: Valens Leading The Cannabis CMO Movement ...https://seekingalpha.com/article/4352563-valens-company-leading-cannabis-cmo-movement
Extract:
As the dust settles, we find ourselves in the “Trough of Disillusionment” phase of the hype cycle where “get rich quick” investors have thrown in the towel and moved on to the next big thing. Despite all the negative press, this is good news for investors looking to enter what still is a growing industry. The sell-off in cannabis exposed equities has been broad based; and, there are certain companies that are the proverbial “baby thrown out with the bathwater”.
As the market evolves into the “Slope of Enlightenment” phase of the hype cycle, now is the opportune time to invest in a different set of companies. We think it is unwise to play Cannabis using the Cannabis 1.0 playbook by investing in acreage and dispensaries. Instead we are setting our sights on the next phase of the Cannabis 2.0 lifecycle.
Source: Bathala Capital Documents
Cannabis 2.0 Products
So, what is Cannabis 2.0? A core driver of our thesis is the evolution of the cannabis product. In Cannabis 1.0, the end-product was typically the cannabis flower or simple extract. The next phase, Cannabis 2.0 is characterized by second generation cannabinoid products and services within defined regulatory frameworks like Health Canada, the FDA, and the USDA.
We believe that cannabinoids will pass through a regulatory process, like the already well-established pharma process, as cannabis derivatives develop into intermediate ingredients and/or final products. Compliant R&D, manufacturing, and commercialization operations will create a moat and translate to protectible margins. With additional requirements for cannabis handling, we believe moderate barriers to entry exist and these will also translate to better margins for brands based on sourcing from validated suppliers. Regulatory environments are updating their requirements to enable compliant participation in these markets; and consequently, a protectable higher margin is created. ...
... We believe that VLNS is best positioned to be the best of breed C-CMO based on its strategic approach, technical capabilities, and operating discipline. VLNS has committed to a selective process of engaging clients as it grows into the white label industry. It has the widest range of capabilities enabling contracts with a diverse client portfolio. Most importantly, it is a well-run company having a conservative management team leading an organization of highly skilled professionals rarely found in the cannabis industry. This process surety, including compliance, drives an even stronger stickiness akin to the pharma CMOs. ...
... The shift in consumption towards derivative products will allow VLNS to benefit handsomely from this growth. In 2019 VLNS generated CAD$21 million in EBITDA. Consensus estimates are for this to grow to nearly CAD$55 million in 2020, CAD$83 million in 2021 and CAD$95 million in 2022. ...
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