As we roll deeper into 2021, it's clear the 2020 trading mentality isn't going to dissipate quickly. Given the love for small-cap and micro-cap names, it seems only fitting to dive into the pile in an attempt to find one that is a company with truly big potential rather than a low float piece of junk that might squeeze but won't last.
I believe such potential exists in a little-known company named Juva Life (JUVAF) . Juva Life operates in the cannabis sector, a sector I believe should be part of any growth portfolio in 2021 and beyond.
While we've seen huge progress made in legalization on the recreational side, the medical treatment side still exists in the Dark Ages. Yes, marijuana is medically legal in many states, but it languishes as a Schedule 1 drug restricting its application. Even worse, the marijuana available for medical studies is one step above garbage.
Thanks to the Drug Enforcement Administration, researchers and scientists are required to get a 30-year old strain of marijuana grown at the University of Mississippi. The net quality available for use is questionable at best and essentially can't be manipulated in any way. So, the DEA and FDA still stand in the way of medical cannabis progress in the United States.
Juva may have found a partial solution to this problem.
The company was founded by Doug Chloupek, the man who literally received the first cannabis license in California.
Juva has two stated missions:
1. Be the lowest cost product by using a vertically integrated model to sell cannabis.
2. Develop "precision cannabis" products that deliver the right formulation to the right individual at the right time.
The company operates six divisions: Cultivation, Processing, Research, Manufacturing, Distribution, and Retail/Delivery.
That means growing cannabis, operating a network of retailers to sell/deliver brands and white-label products, distribute their products, and conduct therapeutic and medical research.
While some may immediately conclude this is just another cannabis company, the retail portion of the business is a side hustle. It should generate around $15 million to $18 million in revenue for 2021, growing to around $40 million by 2022. That would create positive cash flow for the business.
By employing a vertically integrated cannabis model, Juva can offer higher quality, fresher, and more affordable product. They can also manage costs and the supply chain better. That's not something unique to their model, but it's a nice bonus.
So, while we know vertical integration doesn't set Juva apart, the upside for this company exists in its planned precision products and the data gathering surrounding that. This is what sets the company apart from virtually every other cannabis business. It's their dedication and approach to answering the question why cannabis works, who it works for, and how it works.
The FDA isn't helping. We know that. To date, one drug based on cannabis has FDA approval and that's for a treatment of two rare forms of epilepsy. We also know the FDA is not making cannabis something easily done, so Juva is taking a different path for answers: The Institutional Review Board (IRB).
Juva will combine IRB-approved patient research investigations with testing along with verifying product integrity through a network of doctors and clinics along with its own $5 million Class 5 clean room.
This won't lead to phase I trials with the FDA. Instead, Juva will gather loads of patient-reported data. These patient-reported outcomes per Juva-formulated precision cannabis products will allow the company to show that X produced used by Y patients generated Z responses/outcomes. The most common target/goal for Z is a reduction of a symptom by a specific percentage.
For instance, say I reported a daily pain level of 7 on a scale of 1 through 10 before I started using a specific dosage/precision Juva cannabis formulation. Then, after using that product for three weeks, I reported a new pain level of 2 on that same scale, something worth nothing. Now imagine if 10 people or 100 people or 1,000 people reported similar results.
No, Juva can't make a medical claim, but they could say something like, "Well, Mr. or Ms. Patient, 85% of the people with similar symptoms as you reported a reduction of pain using this specific strain of cannabis."
The short-term result: Working with doctors, Juva can steer customers in the direction of strains based on user-reported results.
The long-term hope is that physicians will be more likely to adopt recommending cannabis based on real-world patient data.
With every patient report, Juva's data set grows, and we know how valuable data are in today's world. This will help it build a marketable and valuable medical database. It could appeal to others in the cannabis world to partner with Juva and piggyback on the idea.
Since big pharmas won't risk studies or trials until a federal path is clear, the data they can obtain from Juva would give them a huge head start against competitors when the path is clear. Imagine what you could do to jump start your trials knowing what strains may work better for certain symptoms.
The current targets of study for Juva right now revolve around inflammation, oncology, neurology, pain management, and opiate reduction. Any possible replacement for opioids would be a huge benefit to society and a huge financial risk to big pharma.
Like other small companies, Juva has risks. Cash is often a problem for smaller companies but after a successful Reg A offering paired with the expected free cash flow generated by the retail cannabis business, that risk should be somewhat low here, especially compared to peers, in my view. The biggest risk in this story is that the studies fail to produce useful or necessary data.
While I would consider this to be an aggressive name to own, I find it a must own for anyone wanting aggressive or speculative growth potential or simply exposure to the cannabis industry. Juva offers a unique model not dependent upon simply selling the most cannabis or creating a popular recreational brand. This is one cannabis-related model that sheds the commodity moniker and actually is a life sciences company. It may require some patience, but I eventually see Juva being bought out at four to six times the current price in the next two years.
Please note that due to factors including low market capitalization and/or insufficient public float, we consider JUVAF to be a small-cap stock. You should be aware that such stocks are subject to more risk than stocks of larger companies, including greater volatility, lower liquidity and less publicly available information, and that postings such as this one can have an effect on their stock prices.
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