05 Mar 2021 BY MICHAEL BERGER
Last month, we featured Pure Extracts Technologies Corp. (CSE: PULL) (OTC: PRXTF) (XFRA: A2QJAJ) in a series of articles that highlighted the business as a leading plant-based extraction company that is levered to a variety of high-growth markets.
We are favorable on the diversified nature of the business due to the expertise and track record associated with the leadership and advisory team that is driving the business forward. Pure Extracts is highly focused on cannabis, hemp, functional mushrooms, and the psychedelic sector. The Company operates out of a purpose-built state-of-the-art processing facility that has been constructed to European Union Good Manufacturing Practice (EU-GMP) standards which we consider to be a key pillar of the story.
By operating out of an EU-GMP certified facility, Pure Extracts will be able to export cannabis products and formulations into emerging EU jurisdictions where they are legally allowed. We are favorable on the opportunity in the EU due to the size of the market, the better economics due to the higher costs to the consumer, and the sector’s lack of saturation.
Last year, Pure Extracts was granted its Standard Processing License from Health Canada and we believe the story is in the early innings of a major growth cycle. Today, we want to issue an update on the opportunity after the Company reported several important developments in the last month.
Submitted Application for a Notice of New Cannabis Products
A few weeks ago, Pure Extracts reported an important milestone after its wholly owned subsidiary, Pure Extracts Manufacturing Corp., announced that its distribution partner submitted a Notice of New Cannabis Product (NNCP) application to Health Canada. The application requests approval for more than 20 Stock Keeping Unit (SKU) product identifiers as it relates to the Company’s retail products (i.e., cannabis extracts and cannabis infused edible products).
The Company submitted over 20 Stock Keeping Unit (SKU) product identifiers for approval that include tetrahydrocannabinol (THC) and cannabidiol (CBD) vapes, 1:1 blended vapes, and three different flavors and formulations of gummies. In the near future, the Company plans to launch these products under its Pure Pulls Vapes and Pure Chews Gummies branded product lines and is looking forward to having them listed for sale with provincially authorized distributors and retailers nationwide.
One of the reasons for our favorable view on this application is related to how the management team continues to execute and advance the business. Pure Extracts has continued to be laser focused on the development of its portfolio of cannabis 2.0 products. We believe that the continued execution is a testament to the strength of the team and expect 2021 to be a banner year for the business.
Since inception, the management team has put a major emphasis on the development and commercialization of its 34 proprietary formulations of Pure Pulls full spectrum oil (FSO) vape products as well as its line of Pure Chews edible gummies that are being manufactured under a license from Taste-T, LLC who is the manufacturer of Fireball cannabis gummies.
Pure Extracts CEO Ben Nikolaevsky expects to commence selling its proprietary product line of premium FSO products and edible products in the second quarter. Based on the amount of demand from provincially authorized distributors and retailers, we expect the launch of the product line to prove to be the most significant near-term catalyst for Pure Extracts and believe that our readers need to be aware of this.
Pure Extracts is Executing on a Series of Major Agreements
Prior to this announcement, Pure Extracts Manufacturing reported to have submitted an application to Health Canada to amend its license to allow for the sale of cannabis extract products to provincially authorized distributors and retailers nationwide. Less than a week before a license amendment was submitted to Health Canada, Pure Extracts reported to have entered into a cannabis 2.0 distribution agreement with Canada House Wellness Group (CSE: CHV), a fully integrated medical cannabis company. Under the terms of the agreement, Canada House’s wholly owned subsidiary, Abba Medix, will distribute Pure Extracts’ proprietary line of concentrate products through its established distribution channels.
This relationship with an important Canadian LP could prove to be a major revenue generator for Pure Extracts and we will monitor how this aspect of the story evolves. So far this year, the Company has reported to have entered into several strategic processing agreements with CBD and THC cultivators and we are bullish on the growth profile that is associated with the operation.
The agreement with Canada House will allow Pure Extracts to quickly and efficiently launch its best-in-class line of FSO vape and edible products to retail buyers across Canada as its sales amendment application is being processed. We are favorable on the relationship and expect to see Pure Extracts enter into a large number of similarly structured agreements.
An Execution Story to be Aware of
Although we are less than three months into 2021, Pure Extracts has been executing at a high level and has been reporting important developments as it relates to a variety of key growth initiatives. We are favorable on the management team’s focus on being granted key licenses, forming strategic partnerships, and bringing products to market.
Going forward, we are bullish on the amount of revenue that can be generated through the tolling and processing agreements that it has already entered into. Over the next year, we expect Pure Extracts to continue to report strategic processing and white label agreements and believe the story is in the early innings of a major growth cycle.
During the last month, the entire psychedelic sector has come under pressure and Pure Extracts has been impacted by this. We believe the weakness is transitory and are of the opinion that Pure Extracts has a favorable risk-reward profile at current levels. When compared to other extractors, Pure Extracts is trading at a considerable discount and we find this to be of significance. Since Pure Extracts is focused on several key markets, we believe it has greater growth potential and are of the opinion that the market is not taking this aspect of the story into account.
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