Innovate or die.
This is the harsh reality facing Canada’s industrial scale cannabis growers over the next couple of years.
It’s no secret that Canada’s fast-expanding cannabis marketplaces will soon face the prospect of a large supply-side surplus. Match this buzz killer with the inevitability of sliding wholesale prices and this all spells trouble for most of Canada’s growers.
Only a select few of the big boys — like Canopy Growth and Aurora Cannabis — are expected to be able to thrive. And they will only be able to make the grade by slashing production costs by way of achieving massive economies of scale and by having big enough inventories to satisfy their biggest customers — provincial governments.
One emerging company that is expected to be able to scale-up big enough to have some real muscle in the marketplace is Ontario-based
Maricann Group (CSE: MARI) (FRANKFURT:75M) (OTCQB:MRRCF). At full capacity, the company expects to produce 95,000 kilograms of dried flower on an annual run rate at some of the industry’s lowest operating costs.
This is all good stuff. But it’s not Maricann’s biggest value proposition by far. Instead, the company is fast making a name for itself as a serial innovator, and a good one at that.
Unfortunately, Maricann has been subjected to plenty of hot gossip on social media platforms lately that has shown little interest in the company’s long-term vision — which is getting largely overlooked.
So if investors have been so hung up on the past, let’s quickly recap what’s been going on and put it in a little perspective.
As a start-up that has only been around since 2014, Maricann has experienced plenty of growing pains and made some well-publicized mis-steps along the way, which most recently led to the resignation of two company directors. And in a downward trending market for cannabis stocks, any negative news has attracted short sellers like sharks smelling blood.
So yes, Maricann is bloodied. And it’s share price has taken a much bigger beating than most of the company’s peers in the 3cindex.ca (a “Who’s Who” of Canada’s cannabis industrial-scale cultivators) because some investors view Maricann as a company in crisis.
Yet, if Maricann is bloodied, so too is it unbowed. The company is shrugging off its critics and plowing ahead with big plans.
A high-profile fund manager (who is prohibited by his investment bank employer from speaking on-record with the media) recently confided to me:
“A lot of people have written Maricann off because the company’s expansion is viewed to be behind schedule and bashers in the chat rooms say they’re a lame duck that’s ripe for a hostile takeover.
But if Maricann only executes on half of what they have in the pipeline, they’ll do well by opening up new untapped markets and by doing some serious brand building in the process.”
And that’s the crux of the matter. Maricann is no different from any other leading publicly-traded cannabis company that is trading on the potentiality of tomorrow, rather than on the balance sheet metrics of today.
And each and every cannabis company has made mistakes along the way that have cost shareholders money and have had a dilutive effect on the company’s share structure. It’s called growing pains. These companies even include the likes of Canopy Growth and Aurora Cannabis.
Ultimately, it’s a company’s strategic vision of the future that matters most. Those who can differentiate themselves and capture downstream markets for cannabis products will thrive.
Among the rest, there will be plenty of collateral damage and dashed dreams for tens of thousands of investors. This is because very few players in the cannabis cultivation markets will do well in a race to the bottom for wholesale prices.
Ultimately, this is why there is considerable intangible value in all the trail-blazing deal-making that Maricann is doing, especially in Europe. And this promises to pay big dividends in the long-term.
Pictured above: High tech, state-of-the-art extraction apparatus used in a Maricann laboratory to produce contaminant-free cannabis oils – high margin products.
The Evolution of Tobacco-Free, CBD-Rich Cigarettes
Maricann has just completed its acquisition of Haxxon AG, a low-cost licensed grower of female cannabis plants (ones that are high in CBD and extremely low in THC) located in Switzerland.
This strategic acquisition allows Maricann to manufacture and market to EU nations a truly game-changing innovation — CBD-rich cannabis cigarettes that are virtually devoid of THC (the mind-altering chemical in cannabis) and completely free of tobacco.
Company president Ben Ward says:
“To put this deal in context, there is an existing Swiss competitor that already sells 1.5 million Swiss Francs worth of cigarettes each month that are a blend of tobacco and hemp, and that just started in the fall of last year.
We believe that our non-tobacco products will prove far more popular, thereby allowing us to capture the lion's share of a largely untapped market place for CBD-infused products that is estimated to be worth at least $2 billion Euros per annum. All told, we expect to open up markets for CBD-infused, tobacco-free cigarettes in around 18 European nations.”
Maricann Takes Cannabis Delivery to the Next Level
As Canadian cannabis producers scramble to find the ideal way to bring medicinal and recreational product to the masses, Maricann has also shown the foresight to invest in technology with the potential to change the entire cannabis delivery process.
The company is gearing up to launch in Europe its globally-patented VesiSorb drug delivery technology through a subsidiary called Mariplant. This solves the problem of a very slow uptake for CBD-infused products that are ingested, rather than smoked.
This game-changing breakthrough gives patients greater bio-availability of cannabinoids, meaning that they can be processed by the metabolism at a far faster rate than is normally the case when cannabis is ingested via oils, foods and/or other delivery mechanisms.
Of equal importance, these Vesisorb capsules offer an increase in bio-availability of cannabinoids to 60%, compared to the 5% ordinarily offered by other capsule formats. In other words, they will be far more effective than rival products that are ingested.
Ward says: “Our technology reduces this uptake process from around an hour or more to as little as ten minutes. We’re also able to deliver six to seven times more cannabinoids to the patient than with conventional ingestion of cannabis products. This offers a far more powerful therapeutic effect.”
Maricann is anticipating VesiSorb technology to be a huge game-changer in the industry. Not only is the globally patented technology expected to reduce costs to consumers, it may open the door to a whole new genre of ingested cannabis products, including food and beverages to target everything from pain to motion sickness.
In other words, Maricann will be able to launch CBD-rich edibles and drinks that can remedy patients’ aches and pains and other ailments within a few minutes of them getting out of bed each morning. This promises to make such products extremely popular within a very short time span.
How Does the Technology Work?
These days, a major challenge to the delivery of ingested cannabis is that it clumps together in a watery environment like the stomach, rather than dispersing in a consistent way.
First developed in Switzerland, VesiSorb technology overcomes that problem. It helps suspend fat molecules so they disperse rather than stick together. The rapid emulsification of the cannabinoids in water means they can then be more easily absorbed too.
Rather than going through a first pass via the liver — whose sole purpose is to break down the things we ingest — the technology allows the cannabis to go directly through the stomach and intestinal lining and into the blood stream.
In essence, VesiSorb gives the cannabinoids more of a chance to be absorbed before being degraded by the liver, which typically destroys up to 85% of active cannabinoids.
This increases the bioavailability of orally ingested product for better overall effect.
Additionally, VesiSorb has a very rapid onset --15 minutes compared to 60-90 minutes for competing products. Maricann says VesiSorb can therefore be effective at a dosage that only requires about 25% of the cannabinoids that competitors rely on. This also means, according to Maricann, that its manufacturing costs are only about 25% of the costs incurred by competitors.
Ultimately, the biggest appeal of VesiSorb is that it’s designed to give healthcare providers the ability to rely on more consistent, effective dosing. It’s essentially helping to transition medical cannabis into the world of pharmaceutical cannabis.
Becoming a Serious Player on the Home Front
Maricann is on-track to be one of the larger cannabis producers in the country, at arguable one of the lowest cost per gram rates possible.
In anticipation of the legalization of recreation cannabis in Canada this year, Maricann is expanding its production in Ontario with a new, state-of-the-art facility situated on 100 acres of land.
In total, the facility will consist of roughly 942,000 square feet of processing and growing space.
[MD1] The company’s ongoing expansion should be running at full capacity by Q2 of 2019. Ultimately, the company is targeting an annual production figure of roughly 95,000 kilograms of dried cannabis flower at a cost that will be as low as $0.60 at full production — making it one of the lowest cost production facilities in the country.
[MD1]
A well-established cannabis grower, Maricann is scaling up fast, as illustrated above
Becoming a Leader in Germany
A massive former meat processing factory in the Dresden area (Ebersbach) is on-track to eventually become one of the largest medical cannabis growing facilities in the world.
Certainly it will be by far the biggest in Europe once it is retrofitted. Once permits are in-place, Maricann will have the ability to scale-up to 820,000 square feet (76,180 square metres) of growing capacity.
In the near-term, Maricann intends to export pharmaceutical-grade cannabis to Germany and other European markets. When this happens, Maricann will distribute its world-class products — including high-margin cannabis oils — directly via a German national distributor of pharmaceuticals.
In fact, Maricann is one of only six cannabis producers in the world with the ability to market their products in Germany. Accordingly, it has earned EMA-GMP Certification for its Canadian production facilities.
Sales to German medical patients will be financed by German health insurance companies. This will prove to be far more cost effective than continuing to pay for patients’ expensive pharmaceutical drugs.
By becoming an early-stage entrant in Germany, Maricann is also at the vanguard of the legalization of medical cannabis all across Europe.
Investment Summary
As previously mentioned, Maricann is hard at work on a diversity of innovative business ventures that separate it from a herd of Canadian cookie-cutter cannabis-growing business ventures.
Most importantly, these ground-breaking market verticals all offer the prospect of near-term monetization. Several other high-impact projects will also be discussed in upcoming articles as they come to fruition.
Once again, Maricann’s future is underpinned by a very solid Canadian business model for domestic large-scale production. It has plans to scale-up big enough to compete with Canada’s dominant growers. And that should allow Maricann to become one of Canada’s most competitively priced growers in an increasingly crowded marketplace.
If this constitutes the steak, then the sizzle comes in the form of its diversity of dynamic European business ventures. This allows the company to leverage off its early-entrant advantage by earning the lion’s share of a number of lucrative new market segments. They even include a burgeoning multi-billion-dollar market for CBD-based products, such as tobacco-free cigarettes.
All told, the company’s ability to continue to execute on all if its key initiatives will be the ultimate validation of its raison d’être. And sooner or later, Maricann’s share price should start to reflect the company’s rising fortunes.
So a cheap share price may have some of Maricann’s investors singing the blues -- for now. But for other speculators, this probably represents a great opportunity to leverage off the company’s future successes at present-day over-sold prices.
About the Author:Marc Davis has a deep background in the capital markets spanning 30 years. He is also a longstanding financial journalist, having worked for leading digital financial news agencies in North America and in London’s financial centre. He is also a former business reporter for CBC Television.
Over the years, his articles have also appeared in dozens of digital publications worldwide. They include USA Today, CBS Money Watch, Investors’ Business Daily, the Financial Post, Reuters, National Post, Google News, Barron’s, China Daily, Huffington Post and AOL.
Disclaimer: The principals of M. Davis & Associates Capital Inc. own shares in The Green Organic Dutchman and some of the costs of researching this Company on an ongoing basis are defrayed by nominal payments from the Company.