A Pharma Cannabis Play with a Twist

The bloom and boom are back in the cannabis sector. Cannabis is now legal in 10 U.S. states, including recently in Illinois. Activists and legislators are working hard to get it legalized in more states with the possibility that it will become legal in Connecticut, Minnesota, New Hampshire, New Jersey, New Mexico, New York, and Rhode Island. In Canada, stocks have rebounded with …

According to a CIBC analyst forecast – the investment banking subsidiary of the Canadian Imperial Bank of Commerce – the cannabis adult-use market will have a retail value of 2.5$ billion in 2020 and $4.1 billion in 2021. Now, one company is positioning itself to

When Stockhouse Editorial last visited with Medcolcanna Organics Inc. (MCCN) (NEO: MCCN, Forum), our audience was introduced to a Calgary-based integrated medical cannabis Company with fully-licensed, pharma-based operations based in Colombia. Led by a proven and successful management team, Medcolcanna boasts a range of facilities in optimal growing locations which positions the Company to become a global leader in the medical cannabis market.

For investors, Medcolcanna is a science-based cannabis play that provides a full supply chain from farm to lab with exports to cannabis markets worldwide. This includes breeding, cultivation, post harvesting, extraction, and product development. Let’s take a deeper look at each of the Company’s verticals.

The man at the helm of Medcolcanna is Felipe De La Vega – a serial entrepreneur with a Masters in Finance and many years of experience founding and leading different companies. Along with starting up Medcolcanna, he is the former founder and CEO of Trenaco Holding Corporation – a commodity trading company with revenues worth USD$800 million in 2014. He led Trenaco to become the second largest exporter of coking coal in Colombia, the 17th largest global exporter overall, and 76th largest company in Colombia.

Stockhouse Editorial caught up with CEO De La Vega to tell us more about what Medcolcanna is working on and what it’s planning to accomplish in 2021 and beyond.

SH: For our investor audience new to Medcolcanna, can you tell us a bit about the history of the company?

FDLV: MCCN received licenses on July 2018. We started with our regulatory process to register genetics and trials on them. By April/May 2019 we got our financing by going public and therefore started construction of commercial infrastructure. Once phase 1 was ready we started commercial production.

Even with some delays in construction of our extraction facility due to Covid restrictions our facility was completed during Q2 2020.

As of today we have completed exports into Israel, Switzerland, UK, Germany, Czech Republic, Sweden and Netherlands.

Current infrastructure considers 8 hectares in El Candil Farm, 4 under Greenhouse owned 100% by MCCN, 2 under Greenhouse in JV with Dona Blanca where MCCN holds 30% and 2 hectares outside.

In addition to this, in order to compete in the commoditized CBD market, MCCN extended its license to a new farm located in Neiva with 32 hectares being approved. Currently 6 hectares on cultivation with first harvest done by the end of Feb.

Ramping up to 30 hectares will be happening during the following months expecting to have 30 hectares cultivated by Q4 2021. This will drive the cost of production down to USD 250 – 300 per kilo of isolate, with International markets being at around USD 800 in Europe and USD 400 in US. Making MCCN one of the lowest cost producers in the world.

In addition, GH MCCN has managed to reduce cost of production to around USD 0.045 per gram of dried flower, confirming our good position on low cost production.

This comes along with an expansion in extraction capacity which will leave the company at 800 tons of dried biomass capacity per year.

In addition MCCN has established a lab to produce magistral preparations on both THC and CBD and has received approval from Invima.

Quota of THC growing has been granted for 2021 for both domestic use and export market.

During 2020 MCCN also received GACP certification in El Candil farm confirming company commitment with high quality international standards.

SH: The boom and bust of cannabis companies has not affected your progress and growth. Why do you think that is?

FDLV: We have been focusing on developing our production capabilities. We received our financing in April 2019 and got the necessary funds to build the infrastructure that we mentioned.

Even if our stock suffered from the bust on cannabis, we have managed to accomplish all the milestones that we have forecasted and even larger capabilities with a very responsible use of funds.

If compared with our peers we have the largest capacity the dollar invested and one of the lowest G&A in the industry.

We have seen in advance what the industry was requesting and therefore took necessary actions to advance in that direction.

Now we have established a good capacity and good distribution contracts that makes us expect that we will have a great 2021 for the company and its investors.

SH: Medcolcanna recently announced it has entered into a distribution agreement with the company responsible for the Rappi app for the distribution of MCCN's magistral formulations. Can you walk us through this deal?

FDLV: Rappi is the largest marketplace in Colombia growing also in 8 different LATAM countries. Is the first Unicorn in Colombia now valued over USD 3 billion.

With more than 5 million users in the country, Rappi guarantees us access to more patients. Through Rappi they can access Telemedicine services focused on cannabis, as well to a digital pharmacy to obtain their prescriptions.

We are happy to have reached this agreement as Rappi has become not only the largest marketplace but the fastest growing one in the region.

SH: In a recent Stockhouse article, we discussed the company’s highly scalable production model with attractive margins and proven profitability. For investors, what is the upside here?

FDLV: By the Q4 of 2021, we will have a production capacity expected of around 14.000 kilos a year of CBD and CBG isolates combined, at the lowest cost available in the market.

In addition in El Candil we have approx. 6,6 hectares that will be focused in THC and flower export now that the government has announced the new regulation approving the dried flower export. This combined with the recently approved quota to grow THC placed MCCN as one of the largest and lowest cost suppliers in the world.

El Candil has additional 8 hectares to expand in case of being necessary that are already licensed and approved by the government, as well the infrastructure has been developed to sustain that expansion when necessary.

SH: You’ve just been granted a psychoactive quota for the production of THC derivatives by the Ministry of Health and Social Protection in Colombia. This sounds like big news…

FDLV: Yes, this is very important news because as I have stated will place us as one of the lowest cost THC producers and demonstrate the progress of the company achieving milestones.

The quota gives us approx. 990 kilos of flower for the local market and approx. 4.500 kilos of flower for the export market. This is approx. 10% of the total quota for Colombia.

SH: How do you see the federal reforms and decriminalization of cannabis in the U.S. impacting your business? Does it create more opportunity or more competition?

FDLV: It definitely creates more opportunity. We have recently received many inquiries and interest from US companies in partnering with MCCN to distribute products.

Our location, weather conditions, labor cost, and 12 hours of permanent sunlight places us as the best place to grow and creates an opportunity.

We have seen this happening before in the flower industry when Colombia replaced all the production in the US and Canada for flowers and became in a decade the second largest exporter of flowers in the world with the best growing conditions and cost.

SH: Can you walk us through your preparation for recurring commercial shipments into Europe in 2021?

FDLV: During the last couple of months we have been able to ship products into Europe and have sold them all. With the new production line that has currently started operations our production is increasing at a very high rate. We have more demand and we are expecting to start in April larger shipments that will increase profitability due to our reduced cost structure, will reduce shipping cost due to larger scale exports and will be landing for recurrent customers that the company already has and new customers that are asking for more product.

SH: Do you see the growth opportunities being greater in geographical diversification or new product development? What plans can you share with us for new markets and new products?

FDLV: We have structured the company along the value chain with different business, we have propagation where currently are attending other producers in Colombia and expanding to start exports by the end of the year, in extraction we are launching a very competitive proposal to process for third parties in Colombia starting in April 2021, and in products we are working to become one or the largest producer with low cost of commoditized products (CBD and CBG isolates), we are working to start offering during Q2 2021 GMP EU finished products and expanding to offer GMP EU APIs with some important alliances that we will be announcing soon, and on the medical side we are starting to distribute prescription meds in Colombia and working with an e-health platform to start distribution of some of our formulations in different countries, starting in US.

SH: I have to mention your stock has had a very nice bump over the last three months…nearly tripling in value since early December. What can you tell our investor audience regarding the current valuation of your stock and why you think it’s still a good buy right now?

FDLV: We strongly believe that given our current capabilities on production, certifications achieved and the revenue expected our company is completely under-valued. If we compare with our peer’s capabilities, valuation, G&A and milestones we are less than a tenth of their valuations, giving the possibility to MCCN investors to gain a very attractive valuation in the short term.

We expect to become self sustainable and even profitable in 2021, and with a 2022 with great expectations.

SH: Felipe, can you discuss the long-term strategy for the company moving into 2021 and beyond, and what retail and institutional investors should be looking out for?

FDLV: Our strategy is aggressive in short term 2021 to achieve self sustainability and some profitability with commoditized business and continue on the medical/pharma strategy in the long term that will bring us great valuation and a great potential exit.

We have seen deals as the one from JAZZ and GW and we have a strategy to bring to the market our proprietary formulations for CBD.


To find out more about Medcolcanna Organics Inc., visit medcolcanna.com.



FULL DISCLOSURE: This is a paid article produced by Stockhouse Publishing.