SmallCapPower | April 27, 2018: Isodiol International Inc. (CSE:ISOL, $0.80) announced on April 26, 2018, that the UK Medicines and Healthcare Products Regulatory Agency (MHRA) has granted government approval to manufacture commercial cannabidiols (CBD) extracted from hemp strains as an Active Pharmaceutical Ingredient (API). For reference, the MHRA is an executive regulatory agency of the UK Department of Health, similar to the U.S. Food and Drug Administration (FDA). In terms of importance, the approval remains a significant step forward for the Company, granted a year ahead of expectations.
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According to the management, Isodiol is the second company that has API approval for commercial sale of CBD products. The first company that obtained approval was Bedrocan, a cannabis plant grower based in the Netherlands, and subsidiary of Canopy Growth Corp. (TSX:WEED, $27.23). Bedrocan produces isolate on demand and has the ability to export globally because its isolate is considered an API. In turn, APIs are advantageous for newly-formed cannabis regulations across the world, as APIs are considered high-standard pharmaceutical-grade, which may not require additional regulatory necessities.
Commercial capacity anticipated to increase by 10x to 20,000 kg of CBD oil. Under international law, the approval allows Isodiol to export its CBD products globally (subject to pharmaceutical regulation). This approval could significantly improve the Company's growth outlook in the near-term, as it gives the green light for other R&D labs, who otherwise could not proceed with clinical studies with APIs, to partner with Isodiol for use of its CBD-pharmaceutical and nutraceutical products. Currently, Isodiol is at a run-rate of 2,000 kg of CBD-oil/year. The Company anticipates completion of its new 20,000 kg facility by Q1/19.
Figure 1: Nutra99TM (Available in orders ranging from 1 gram to 1 kilogram)
Revenue opportunities in 2019 are compelling. As shown in the figure below, the Company has been improving revenues over the last three quarters, now at a rate of $2M/month. According to the management, 60% of its revenues are sourced from bulk CBD isolate (pharmaceutical), and the other 40% from finished CBD nutraceutical products. To put the growth in perspective, Isodiol currently sells a kg wholesale for $7-$10K. This would imply the new facility could generate $140M in annual revenues using the lower end of this range, assuming prices are static at $7K/kg, though the Company believes prices could improve to $25-$50K/kg with a more demand in the future.
We continue to watch Isodiol to track its growing revenues QoQ. FQ4/17 and annual financials for F2017 (ending March 31, 2018) are anticipated to be released in June 2018. We also anticipate further announcements from its CBD portfolio and additional acquisitions.
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