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Alternate Health Shifts Focus to Burgeoning CBD Market

Omri Wallach Omri Wallach, Stockhouse
0 Comments| June 18, 2019

Many cannabis companies are finding themselves pulled between two markets. On one side is the emerging but uncertain cannabis industry, laden with ongoing legislation issues. On the other side is the promising CBD industry, aided by the passing of the 2018 Farm Bill, which fully legalized hemp and hemp-derived products.

The choice that companies face is simple: Do you split focus and resources to dabble in both simultaneously, or do you streamline and focus on one? Cannabis tech company Alternate Health Corp. (CSE: C.AHGOTCQB: AHGIFForum) is one company that has very clearly defined its stance: The CBD market is the way to go.

Over the last year, Alternate Health has made significant strides to grow its extraction and manufacturing capabilities, and is looking to capitalize on those moves. In a recent press release, Alternate Health CEO Howard Mann explained the Company’s shift in focus to investors as creating immediate value for shareholders and targeting the most opportune market.

“With our recently announced $20M transaction with Blaine Labs, an FDA-approved production facility, we are uniquely poised to capture market share in this emerging industry. Since joining Alternate Health in December 2018, I have evaluated the various courses of business, and I feel CBD opportunities represent the Company's most significant and attainable business model."

It’s no secret that the CBD industry is expected to balloon very quickly. Reports estimate that the CBD industry, currently valued at $591 million, is expected to eclipse $20 billion by 2022. The 2018 Farm Bill sped things up very quickly, as it mandated the free movement of hemp-derived and FDA-approved CBD products across state borders.

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On paper, that makes the Company’s pivot strategy a smart move, though investors familiar with Alternate Health will know that this is a big shift. The Company is a well-established provider of software solutions for manufacturers, retailers and doctors in the cannabis industry. Previously, Stockhouse covered the Company’s software-based growth in the California market.

But Alternate Health’s change of track isn’t an impulse decision. The Company has been making moves and aligning assets that put it in the perfect position for the CBD market. Its strategy also mirrors the current market sentiment: the greatest value in the cannabis industry lies not in cultivation, but in extraction, manufacturing and distribution.

The cornerstone of the Company’s pivot is its recent $20 million (USD) acquisition of Blaine Labs Inc., a California-based medical product manufacturer with experience in FDA-approved and cGMP certified products. The FDA recently began its public review process of CBD, and though formal guidance issuing could take anywhere from months to years, companies are already facing high demand for CBD products from retailers.

Blaine Labs gives Alternate Health a noticeable leg up on the competition. Through a combination of a direct doctor-to-patient sales network and distribution relationships with major retailers, including Walmart, Amazon, CVS and Walgreens, products manufactured by Blaine Labs are in prime position to move quickly in the market.

Further compounding the Company’s shift into the CBD market is another recent move. On May 5th, the Company announced a joint venture agreement with Oltecate Enterprises, a Mexican CBD distributor that holds four federal CBD licenses issued by COFEPRIS, the Mexican equivalent of the U.S. FDA. Though hemp cultivation and extraction are prohibited in Mexico, imports of CBD products are legal with a COFEPRIS license.

When you put all the puzzle pieces together, the image becomes crystal clear. Alternate Health has comfortably settled into a position from which it can tackle the CBD market by launching new products through Blaine Labs, and has access to both the United States and Latin American markets.

This is all without even considering Alternate Health’s existing experience in software distribution, another plus in their market-entry strategy. The Company’s Electronic Medical Records and Patient Management software systems have led it to build an extensive physician and patient base across North America. Combined with the direct doctor-to-patient sales network of Blaine Labs, the Company can quickly ramp up product deployment.

The immediate question is when these moves will start to reward investors. Alternate Health will need to assess whether its assets will need to be restructured or sold if they aren’t in line with a CBD-focused business. Still, the reposition is expected to bring significant cost-savings immediately. A tightened focus should let the Company sync its operations and achieve greater efficiencies.

All the while, Alternate Health’s base revenues from its extraction facilities, software distributions and Blaine Labs will more than tide it over. With renewed focus, the Company can put all its efforts on quickly making a mark in the growing CBD market. Looking at how stacked the deck is for Alternate Health, and where the chips lie for the CBD industry, it’s hard to bet against them.
FULL DISCLOSURE: This is a paid article produced by Stockhouse Publishing.

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