Cannabis markets continue to mature as the normalization of cannabis laws gathers steam, in Canada and (more gradually) throughout the rest of the world. As these markets have evolved, priorities have emerged for the private and publicly-listed companies who are pioneering this new industry.
Two of these priorities are virtually universal among cannabis companies:
- Better delivery systems for cannabinoids (i.e. more healthy than smoking)
- More consistent dosing, for both medicinal and recreational users
When the management team of newly-listed Sproutly Canada Inc. (CSE: SPR, Forum) connected for a conference call with Stockhouse Editorial, their message was clear. This vertically-integrated Company has engineered the best delivery system for cannabinoids, and along with this new-and-improved delivery system comes the capacity for reliable precision with cannabinoid dosing.
Naturally, this new-and-improved cannabis delivery system is derived from new technology. But Sproutly’s proprietary cannabis technology goes well beyond merely improving the delivery of cannabinoids and producing dependable consistency.
The Company is supporting its R&D and retailing initiatives with an ACMPR-licensed cultivation operation. More on that later. This extraction technology also boasts particular attributes that are certain to catch the eyes of both investors and other players in the cannabis industry.
- Greater bioavailability (of cannabinoids)
- Superior quality
- Greater cost/production efficiency
- Easily scalable
- Unlocking massive revenue potential (especially for the recreational market)
The Company is taking this technology to the marketplace, beginning with cannabis-infused beverages. Investors will be wanting more information on how one company can deliver this much blue-sky potential. Providing this information requires explaining the technology itself.
The President and CEO of Sproutly, Keith Dolo, laid this out to Stockhouse Editorial.
The acquisition of Infusion Biosciences Canada allows Sproutly to deliver to the market a truly water soluble cannabis product. It positions us as a leader in beverage and consumable products.
As many cannabis investors already know, cannabinoids are deemed as not being water soluble. This creates practical issues for both cannabinoid consumers and cannabis companies. So solving the “water solubility” factor alone is of great significance. But the Company’s proprietary technology goes beyond this. Chief Science Officer, Dr. Arup Sen elaborates further.
We all know that a water solution is the best way to deliver a nutrient to a living organism, so everyone is trying to make water-based beverages for cannabinoids. The problem is the body recognizes formulations designed by laboratory methods as unnatural. On the other hand, Mother Nature makes naturally water soluble forms of all oils so that they can circulate through the whole organism.
The challenge that had not been taken up by the cannabis industry is to find the water soluble forms that already exist in the cannabis plants. Drs. Brown and Goldstein discovered the water soluble forms of cholesterol - good (HDL) and bad (LDL) - that travel through blood in the human body. The Infusion Biosciences science team addressed the challenge. By using a gentle process to preserve the native state of plant tissue, Infusion's proprietary water reagent recovers naturally water soluble forms of bioactive molecules, including cannabinoids and terpenes (and many natural vitamins, minerals, and other plant oils).
We call these molecules “Infuz2O”. Unlike oils that are extracted by solvents and harsh conditions, Infuz2O can be directly added to virtually all beverages without any additional processing or formulation.
(click to enlarge)
That’s how Infusion Biosciences technology works. Currently, the cannabinoid-infused products that are available to consumers are either produced in oil-based mediums, or via other extraction methods that approach (but do not precisely achieve) true water solubility. In the case of cannabis-infused beverages and other orally ingested products, a particular issue presents itself.
As long as the cannabinoids remain attached to lipids (fatty oils), this subjects the cannabinoids to the full digestive process. This delays the absorption of cannabinoids into the bloodstream. While such ingestion leads to a more sustained effect, it is an inconsistent effect. This is because of the great individual (and day-to-day) variation in how our digestive tracts function.
By delivering true water solubility, Sproutly overcomes this issue. Water soluble cannabinoids pass into the bloodstream much more quickly. While they are also fully metabolized much more quickly, this method of ingestion produces an extremely consistent effect: pharmaceutical grade dosing.
(click to enlarge)
Sproutly’s Infuz2O cannabis-infused beverages produce rapid onset (less than 5 minutes), closely mimicking smoking/inhalation. They also metabolize rapidly, estimated to last in the bloodstream no more than 60 – 90 minutes. In contrast, ingesting an oil-based cannabis beverage may take one to two hours to approach maximum effect/efficacy, and then even after eight hours there is generally an elevated cannabinoid level.
For medicinal patients, Sproutly’s licensed technology will be a welcome innovation for two reasons, beyond the fact that an infused beverage is a very convenient and discrete consumption option. Rapid onset means rapid relief. Greater consistency means a more reliable form of therapy. However, when investors see what this implies for the recreational market, their pulse-rate will likely accelerate.
What does an oil-based cannabis beverage imply for the recreational consumer? A single-use social experience.
With slow onset of effects, a long time horizon to metabolize, and inconsistent (and sometimes very potent) effect, many responsible consumers will be reluctant to consume more than a single beverage per social occasion. This will be generally viewed as less-desirable from a consumption standpoint and is especially restrictive from a retail/commercial standpoint.
With broad market penetration, even a one-beverage-per-sitting product can generate lucrative revenues and margins. However, compare this with the alcohol market, more specifically, the beer market.
While many beer-drinkers will consume a single beverage when alone, in social settings the typical consumer will drink several beers. More units consumed = more units sold = more profit. Viewed from this perspective, the commercial potential of true water solubility for cannabinoids is revealed in full. Infuz2O infused beverages deliver a multi-unit consumption model for the recreational cannabis market.
(click to enlarge)
On the other hand, there will also continue to be a consumer market for single-use cannabinoid beverages or edibles, for both medicinal patients and recreational consumers. Sproutly isn’t vacating this market in order to capture the commercial potential of its Infuz2O product line. CEO Dolo pointed Stockhouse to the Company’s second line of products: Bio Natural Oils (BNO) that supply an established market – but with superior technology.
Our Bio-Natural Oil products will be the first to market that mimic the strains initially used in the extraction process. For example, a Girl Scout cookie plant will result in a Bio-natural Oil that mimics the same effect, feeling, smell and taste as the original plant/strain. This gives consumers the ability to consume strain-specific oils of their favourite varieties both from a recreation or medical standpoint.
Two product lines. One serves an already existing market for tinctures, edibles, and vape pens. The other pioneers a new consumption niche with (potentially) far greater commercial impact.
The Company plans to keep this valuable technology in-house, maximizing revenues and margins through direct retailing. Facilitating this, Sproutly’s operations are located in the GTA, a mere 8 kilometers from downtown Toronto. However, there is obviously great potential to capture additional revenue streams by making Infuz2O ingredients available to third-party producers, in the form of co-branded products.
This is also very efficient technology, in several respects.
Infusion Biosciences uses a gentle biochemical process with proprietary reagents that preserve the native state of the plant biomass. This is in contrast to the harsh conditions and/or chemical solvents used in standard extraction processes that strip the bioactive oils away from their natural context.
This extraction method means that no significant machinery or infrastructure is required. This makes Infuz2O technology both cost-effective to install, cheap to operate, and easy to scale up. Then there is the improved bioavailability.
True water solubility means a much higher percentage of cannabinoids ingested that actually reach the bloodstream. As noted, Infuz2O approaches the efficiency of inhalation (smoking) in terms of bioavailability. With a higher percentage of cannabinoids reaching the bloodstream, this means Infuz2O beverages will be “infused” with smaller doses.
Smaller doses = more units per raw kilogram = greater profit potential for each kilogram of cannabis used as an input. This leads directly into the other half of this vertically-integrated enterprise: Sproutly’s cultivation operations.
On June 13, 2018; the Company announced receiving its Health Canada cultivation license for its 16,600 square foot GTA cultivation facility. The announcement was released via Stone Ridge Exploration Corp. Sproutly Canada has just gone public (as of July 9, 2018) via a reverse take-over (RTO). Stone Ridge was the shell corporation that Sproutly combined with to acquire its listing.
The GTA cultivation facility is a closed-loop indoor growing operation, with pharmaceutical-grade grow rooms. This purpose-built facility incorporates the latest cannabis cultivation technology. It was designed specifically to be compatible with high-level cannabis research, such as what has been pioneered by Infusion Biosciences.
The 1,400 kilograms of annual cultivation capacity doesn’t compare with many of the industry’s larger cultivation operations, but this leads back to the efficiency of Sproutly’s extraction technology. Because of the increased bioavailability, each infused beverage will contain a lesser quantity of cannabinoids.
The Company estimates its annual cannabis harvest will generate 9.5 million 10 mg doses of cannabinoids in the form of Infuz2O beverages and another 19.5 million 10 mg doses of cannabinoids in its BNO products.
Sproutly’s informal research into infused beverages indicates that leading consumer brands currently offer 2 – 10 mg of cannabinoids per unit (and with lower bioavailability). At lower concentrations of cannabinoids, the Company’s current cultivation operation would generate proportionately more units per kilogram.
That’s the general market potential of Sproutly’s vertically-integrated operations. In terms of the markets themselves, the Company has acquired exclusive rights for this extraction technology for Canada, the European Union, Australia, Israel, and Jamaica.
This still leaves (current) cannabis markets with 100’s of millions of potential consumers. Canada’s cannabis market alone is projected to soon become a multi-billion market. The revenue potential of cannabis beverages alone is expected to swell to more than $4 billion by 2024.
(click to enlarge)
With industry leading technology, vertical integration, premium quality products, and high-efficiency/high-margin operations, Sproutly Infusion is going to attract a great deal of attention from cannabis investors. With a brand-new public listing and a brand-new ACMPR cultivation license, this is still a ground-floor opportunity.
(click to enlarge)
www.sproutly.ca
FULL DISCLOSURE: Sproutly Infusion Inc. is a paid client of Stockhouse Publishing.