Now that hemp-derived cannabidiol (CBD) is legal in the United States, the scramble is on to secure market share.
It's legal because hemp contains little Tetrahydrocannabinol (THC) - the stuff that gets you high.
As of December 20, 2018, as long as it's less than 0.3% THC, Uncle Sam says it's ok.
The money is moving in.
Last fall, Canopy Growth (NYSE: CGC)(TSX: WEED) paid C$429 million to acquire Ebbu, a Colorado firm with a hemp-specific intellectual property portfolio that contains more than 40 cannabis-related patent applications representing over 1500 inventions.
Canopy has also been granted a license to grow hemp in New York state, and is spending up to $150 million to build its first production facility there.
This week, biotech company Amyris (NASDAQ: AMRS) announced a $300 million deal to develop "fermentation-based cannabinoid products." Details were scant, but it was signed with LAVVAN, Inc., described only as "a newly-formed company backed by leaders across the pharmaceutical, cannabis, and financial sectors. LAVVAN is focused on spearheading bio-based disruption of the cannabinoid sector."
Amyris and LAVVAN say their products will have "consistent purity and dosage" and be "Sustainably-sourced products derived from rainfall-hydrated, natural sugarcane feedstock that results in less water and land usage relative to growing cannabis plants."
Now things are starting to get interesting.
It would seem the pair are trying to circumvent the cannabis plant entirely.
This is something we've been writing to you about.
You see, one of the major problems with plant-based CBDs is that they are inconsistent. The plants don't always yield the same quality CBD, and can contain things like pesticides or other organic material.
That may have been acceptable up until recently, when CBD was still a small market with relatively few products.
But now that the CBD market is booming and legal, consistent products are needed. Even more so when you think about trying to develop CBD-based drugs.
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Capitalism, of course, is solving the issue.
CBD is a molecule. It isn't written in stone that it has to come from cannabis.
And the company that comes up with a THC-free formulation of CBD that is consistent and scalable is going to be worth billions.
We've been telling you about such a company.
It has inked a deal to provide pure synthetic CBD at the lowest prices in the industry.
As far as I know, no other company can achieve these levels of purity.
It may literally be impossible to do it with plant-sourced cannabidiol.
Commercial sales are expected to begin next quarter.
And the company is working on drug therapies based on it as well.
The stock just recently began trading, but hasn't attracted significant attention yet.
Call it like you see it,
Nick Hodge
Nick is the founder and president of the Outsider Club, and the investment director of the thousands-strong stock advisories, Early Advantage and Wall Street's Underground Profits. He also heads Nick's Notebook, a private placement and alert service that has raised tens of millions of dollars of investment capital for resource, energy, cannabis, and medical technology companies. Co-author of two best-selling investment books, including Energy Investing for Dummies, his insights have been shared on news programs and in magazines and newspapers around the world. For more on Nick, take a look at his editor's page.