The cannabis landscape is changing, and not necessarily for the betterment of the industry as a whole. Too many investors have gotten in on the game looking for quick buck in a quick M&A and leveraging market share away from innovative small caps and start-ups.
Now, many believe the smart money has left the space with ‘Giant Cannabis’ cannibalising the market the same way its potential competition ‘Big Pharma’ has done. But there is still value and opportunity for retail investors looking for companies that truly provide pioneering solutions in a crowded marketplace. And the medical cannabis clinic market, along with the collection of big data that will provide future insights for the medical market, is an intriguing vertical of the cannabis space that’s less saturated than cannabis LP’s, retailers, and extractors.
CB2 Insights (C.CBII, OTC:CBIIF, Forum) appears to be one such company. And they say they’re on a mission to mainstream medical cannabis into traditional healthcare. The Toronto-based data analytics company owns and operates the largest multi-state group of cannabis clinics in the US and has developed proprietary technology to collect clinically-validated, uniform data sets at the point-of-care.
CB2 says they are on a mission to simplify the medical cannabis journey across the value chain through a suite of three healthcare technology products and services delivered through three distinct sub-brands – each serving a unique vertical:
- Sail offers a comprehensive cannabis electronic medical record (“EMR”) platform and patient engagement tools to support clinics and clinicians across multiple countries.
- Canna Care Docs is a leading cannabis evaluation and education group operating in 12 jurisdictions. Canna Care Docs has served more than 265,000 patients looking to integrate cannabis into their treatment regimen.
- TokeInis a mobile phone application designed to help dispensaries build their business with clients through loyalty (repeat purchases) and referrals (new clients). The TokeIn platform features virtual stamp cards (where allowed, buy X, get one free), text-based promotions to clients, referral rewards, and in-store deals and specials. The dispensary is supported with powerful analytics and visualization from the app.
About CB2 Insights
Using clinical management and data collection software at the point-of-care, CB2 Insights and its group of sub-brands has become a leading force behind bringing traditional healthcare protocols to the rapidly evolving global cannabis industry.
By gathering data and creating objective real world evidence through their proprietary software and clinical service brands, CB2 is now able to mainstream medical cannabis into traditional healthcare.
To date, the Company has collected millions of data points from more than 300,000 patient interactions.
Founded in 2014, the Company posted revenue of $11 million in 2018 and is forecasting revenue of $20 million in 2019. With 28 clinics serving 12 states (with eight more on the horizon), the CB2 has built the largest patient registry of those seeking medical cannabis as a treatment. That patient registry is the foundation for producing comprehensive, real world evidence to the cannabis industry.
The Company is also on an acquisition mission.
On April 10, CB2 announced it had acquired MedEval Clinic LLC, continuing to bolster its presence in southwestern US.
MedEval Clinic runs a network of health centres in Colorado and Arizona that offer cannabis evaluation and educational services. The company reported around $1 million in total revenue last year.
Prad Sekar, Chief Executive Officer of CB2 Insights, commented:
“With the completion of this additional 2019 acquisition, CB2 continues to solidify our position as the leading group of multi-state medical cannabis evaluation and education centers in the US. We continue to focus on executing against our clinical consolidation strategy. These acquisitions not only bring meaningful lift to our top line revenue, they are key to growing our data pool as more and more stakeholders are looking for clinically-validated, evidence-based data to assess the true efficacy of cannabis treatment globally.”
Less than a week earlier, CB2 announced it had bought Colorado-based medical cannabis clinic group Rae of Sunshine Health Services, operating as Relaxed Clarity. Relaxed Clarity currently operates four clinics in Colorado including Denver, Colorado Springs, Pueblo, and Broomfield.
And last, but not least, the Company’s major acquisition of Canna Care Docs from December 2017 and the integration of its clinical operations into the organization.
FY2018 Financial Highlights: A “Transformative Year”
2018 was a not a great year for a lot of oversold and undervalued small caps in the cannabis sector. Such was not the case for CB2.
- Total revenue for FY2018 was $10.8 million, up from $280 thousand from the prior year; the increase was driven primarily from the December 2017 acquisition of Canna Care Docs and when normalized, including 2017 full year of revenue from Canna Care Docs, would illustrate a 2018 revenue increase of 23.0% YoY;
- Gross profit of $7.9 million in FY2018 compared to $218 thousand from the year prior; and
- Adjusted EBITDA loss of $1.1 million in FY2018 versus adjusted EBITDA loss of $718 thousand in FY2017.
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Mr. Sekar had this to say about the positive news regarding the Company’s fiscal year:
“Fiscal 2018 was a pivotal year for our company, as we executed on our strategy to build the world’s most comprehensive source of clinically-validated real world data focused on medical cannabis. Through our growing portfolio of 34 medical clinics, we are now providing services to 85,000 medical cannabis patients across the US on an annual basis. We believe that the future direction of medical cannabis will be driven by reliable data sets that provide the basis for understanding real patient outcomes. At CB2 Insights, our business model is to profitably operate a large portfolio of medical clinics, which will in turn feed our data asset. That data asset, we believe, will be a critical resource to key stakeholders such as pharmaceutical companies, government agencies and insurance companies as they focus their attention to real world evidence when making critical decisions about the future direction cannabis-based medicines.”
CB2 Insights commenced trading on the Canadian Securities Exchange (CSE) under the ticker “CBII” on March 7, 2019. On February 22nd, MVC Technologies Inc., operating as CB2 Insights, announced the completion of its non-brokered private placement for gross proceeds of CDN$5.74M. The raise was conducted concurrently with the Company’s final steps in its previously announced reverse takeover transaction (see previous releases for transaction details – January 23, 2019 and September 7, 2018). CB2 also announced that the private placement was oversubscribed from the original offering of CDN$5 million.
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More from the CEO on CB2’s acquisition strategy:
“In the coming weeks we plan to deploy a portion of the proceeds from the financing to continue our acquisitions of US-based medical cannabis evaluation clinics. With our background as clinical practice management operators, our team has proven our ability to increase the revenues and profitability of acquired clinics while reducing patient churn. The scale we are building is not simply for a roll-up; we are using the data we gather within our operations to bring real-world evidence to the medical cannabis space and to develop new predictive analytics tools for all industry stakeholders.”
Predictive Analytics for the Global Cannabis Industry
While it sounds complicated, it really isn’t. CB2 Insights, through its clinical arm in the US, operates 28 medical cannabis evaluation centers staffed with physicians and healthcare practitioners. In turn, these centres create both access for patients who qualify for medical cannabis, as well as a center of excellence to study and understand the clinical outcomes of cannabinoid therapy. CB2 gathers data at the point-of-care in a HIPAA-compliant manner, both aggregated and anonymized, to study trends and outcomes that work to educate and support stakeholders including but not limited to physicians and other healthcare professionals.
Studying the Efficacy of Medical Cannabis
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Conventional treatments for mood disorders include psychological therapies, mood stabilizers, and antidepressants. Over time, more and more people suffering from mood disorders turn to drugs (both illicit and legal) for help. With the legalization of cannabis for medical use in 33 States plus the District of Columbia, more and more patients are choosing cannabis-based therapies over traditional pharmaceuticals.
According to the Bradford & Bradford (chart below), cannabis is displacing Big Pharma’s products.
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CB2 Insights: Creating a Data Lake Through Clinic Consolidation
CB2 Insights is already an effective consolidator of clinics. In December 2017 the Company acquired Canna Care Docs, a 28-clinic chain that had posted revenue of $9 million for the year. By deploying its proprietary clinic operations software throughout the chain and by transferring much of the overhead to its central office, within one-year Canna Care Docs produced substantial increases in revenue, operating profit, and patients.
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Meet the Team
CB2’s experience management team is leveraged from healthcare operations to medical cannabis to world-class technology solutions.
Catalysts
Management has set an aggressive agenda for profitable, topline growth and anticipates providing investors with acquisition-related news in the coming weeks. In addition, while it is still early days for the data-driven analytics side of Company’s business, there have already been expressions of interest in engagements with complementary firms that wish to help educate and enable practitioners to recommend cannabis to their patients.
Recent Capital Raise and Valuation
CB2 Insights is uniquely positioned. There is no other company solely focused on building a data asset via the consolidation of US-based cannabis clinics. The Company is well capitalized, having raised $5 million in its most recent capital round. This round is noteworthy because of the involvement of Merida Capital Partners, a private equity fund based out of New York, whose investment focus is cannabis-related businesses. Merida accounted for $4.5 million of the $5 million raised at $0.50 per share, valuing CB2 Insights at 2X 2019 revenues. By comparison, many companies engaged in cannabis-related activities have valuations above 4X estimated revenues.
In Closing
CB2 Insights said it's on track to reach in the neighbourhood of CDN$12.2 million in revenue in 2019 and expects to achieve its revenue goal of CDN$20 million through organic growth from existing operations and its active pipeline of acquisition targets. Savvy investors know that cannabis disruption of traditional pharmaceuticals is underway and is already costing billions of dollars in revenue to some of the world’s largest pharmaceutical companies. At the same time, the US federal government, with the passage of the Hemp Farming Act of 2018, is better understanding the wide swath of health benefits of CBD and its efficacy as a potential cost-saving drug by way of allowing physicians to recommend its use.
“If medical cannabis wants to play in the same sandbox as traditional pharmaceuticals, then it needs to start acting like a traditional medicine.”
Prad Sekar, CEO of CB2 Insights
The Company says they are uniquely positioned to gather the data captured at the clinic level, to standardize the data, and to then produce analytical information that can benefit patients, practitioners, cannabis producers, pharmaceutical companies, governments, and other interested parties.
To this end, CB2 Insights appears to be a well capitalized, undervalued asset in the burgeoning cannabis / life sciences data-tech sector.
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www.cb2insights.com
FULL DISCLOSURE: This is a paid article produced by Stockhouse Publishing.