Post by
subaru1i on Aug 05, 2023 8:06am
It Is Our Time: A personal and historical perspective of the
cannabis industry.
Some may ask, why is it our time? Grab a cup of coffee and at your leisure carry on reading to find out, how through market dynamics and differentiation that "it is our time".
Let's go back a bit in time to discuss a few parallel events that mimic the new cannabis industry in Canada even though their mechanisms of coming into society are different, they behaviors are really very similar.
The gold rush era was brought forth by the mechanism of discovery, the discovery of gold be it in the Yukon or California. People's emotions were elevated by the prospect of discovering large amounts of gold and becoming wealthy. Gold fever ensued and a horde of investors risked everything to strike it rich. Some did become very wealthy, most likely those that made the discoveries early on but many more ended up financially devastated with nothing to show for their efforts. Emotional euphoria followed by emotional demise for many prospectors.
Fast forward over one hundred years into the future from the 1800's into the 1990's to relive the dot.com boom era. It was brought forth by the mechanism of advancements in technology that brought us another form of communications called the internet. Many businesses thought it was a gold rush to establish themselves online with a thing called a web page. Suddenly you had companies listed on the NASDAQ month after month that were internet based companies. A company could IPO their stock and within a year have a multi-billion market cap and zero earnings or even any type of real manufacturing base. Like the gold rush, investors saw gold in this new form of business model and everyone rushed in enjoying their dot.com stocks surge $5 or more in one day, the sky had no limit. The form Fed Chairman, Allen Greenspan used the phrase irrational exhuberance to quantify the emotions of investors that lost touch with reality and fundamentals of valuing a company. Those that were not greedy or stupid and realized it's a gold rush scenario got out and did become wealthy while others with less life experience saw the crash of the go go days of the dot.com boom. Emotional euphoria exceeded reality.
Fast forward about 30 years from those heady days of 1990's to the cannabis industry today. It was brought forth by the mechanism of government legislative changes to the law. A new industry was born and many businesses rushed into the cannabis industry thinking the legalization of cannabis would make everyone wealthy. Even the media glorified this new industry showing everyone partying on the Parliament lawn. Investors flooded into this new gold rush, recreational cannabis industry is going to make a killing for me. Everyone rushed into buy stock of the cannabis companies and at the time Medipharm Labs was working with cannabis and was grouped in with everyone else. Look at the historical stock charts of Canopy, Aurora, Tilray, Medipharm, and on and on...they all show the same pattern. Investors rushing in, stock prices surging to atmospheric levels and none of them being able to show a penny in earnings.
An investor with life experience and understanding of history saw the same pattern of the gold rush and dot.com era repeating itself. They waited until the time was ripe and the entire industry segment was being shorted making many people very wealth if they got out when they realized there is nothing left to squeeze down. Medipharm Labs stock chart as well as other companies involved with cannabis showed the same stock chart pattern.
Today we have stock prices of cannabis companies litterally destroyed but yet reflecting reality and not irrational exhuberance. This is seen now in the condition of the balance sheets of those recreational cannabis companies, still bleeding cash, trying to slash costs as fast as possible trying to remain a going concern. But there is at least one standout within this general field of cannabis companies. That company is Medipharm Labs and it was nor is by dumb luck but by carving out a new sub segment within the general segment of the cannabis industry. Recreational vs pharmaceutical even though LABS was involved with the recreational market, they saw profit margins shrinking in the industry, everyone was cutting each other's throats to get market share in the hope they would survive the period of consolidation. LABS reviewed their product SKU's and simply eliminated those products that were not meeting their profit margin expectations as well as being aggressive in managing their costs and that is reflected in their balance sheet today along with the pharmaceutical segment of the cannabis industry.
There is one big difference today. Medipharm Labs does not have an entire playing field cutting each other's throats within the pharma segment because everyone took the faster and easier path into the recreational market while, as Mr. Pidduck said, the pharmaceutical applications have a longer path because of clincial trials, regulations, etc.
One thing we have NOT yet seen? We saw the gold rush into the recreational cannabis market, recalling personally Canopy sitting at $7 and thinking to myself, it's going to run up hard because everyone was talking cannabis stocks and then reality will set in. Do I want to go through the nail biting, teeth grinding of the dot.com era again...nope! So I was patient, identifying two potential candidates in the pharma segment and those were NEPT and LABS. For whatever reasons, NEPT decided to change course and I took a bit of a hit on that company but did not give up and rolled everything into LABS, after reading up on the company some more and after that reading, simply by reviewing their press releases I came away with the opinion that this company has stayed the course when it came to pharma applications within the cannabis industry. The growth opportunity opened up even more when the U.S. passed legislation enabling medical research work on cannabis but still keeping the recreational market closed at the Federal level.
What haven't we seen yet? Well...we saw the gold rush into the recreational cannabis market segment but we have NOT yet seen the investor rush into the pharmaceutical cannabis segment and the way I see things today, Medipharm Labs is a pure play in that specific segment. Unless of course you want to buy Pfizer stock after they dropped some $50 billion + on two cannabis pharma companies that are developing new cannabis based pharma drugs but they need the cannabis API's to commercialize them.
The recent FDA activity with LABS and their 20+ cannabis drug pipeline is telling me, It Is Our Time now.
Side note: Give it some thought, a drug pipeline with over 20 strong candidates. I hope everyone can appreciate that is a HUGE pipeline for such a small company which should tell everyone something else. A global pharma partner because a pipeline that big is very expensive to sustain that many clinical trials for a company the size of Medipharm.
So now reset your thinking, throw away the bad memories of the boom and bust of the recreational market and focus your thinking more clearly and correctly....I am invested in a pharmaceutical cannabis company with very few competitors (only FDA approved cananbis company in North America). I am in early and waiting for this new segment to flourish.
That is my personal and historical perspective of why I own Medipharm Labs.
Time for a coffee now with Athea.
Comment by
Starkicker on Aug 05, 2023 11:35am
Comparing cannabis to alcohol after prohibition might be more approriate. It took alcohol 10 to 15 years to shake off the stigma, have proper banking channels, government support, etc. Still too many restrictions stepping on the throats of cannabis businesses, especially research in the US. Another 5 years at least
Comment by
Olaf123 on Aug 05, 2023 12:05pm
That's why the most compelling Medipharm value proposition narrative revolves around establishing pharmaceutical company that sustain itself within both the recreational and medical markets. Once this goal is accomplished, in my opinion, a realm of possibilities opens up. Their adeptness at successfully navigating the complex regulatory landscape is a testament to their capabilities.
Comment by
Olaf123 on Aug 05, 2023 12:38pm
Thus, for the next year, the only thing that really matters is their EBITDA. Each Q, they need to show it has significantly improved. The rally will be gone if EBITDA is around -8 mil. - 6-7 mill it might hold. Under -6 it is a very good Q. If they have good guidance, the rally will resume.