CBD-Rich Hemp Biomass: a NEW Profit Generator in the Cannabis Space

CBD-Rich Hemp Biomass: a NEW Profit Generator in the Cannabis Space
CBD-Rich Hemp Biomass: a NEW Profit Generator in the Cannabis Space

Is hemp biomass the quicker, surer path to becoming profitable in the cannabis sector?

That’s the reasoning of MYM Nutraceuticals Inc (CAN:MYM / US:MYMMF). The Company has just announced an LOI for the sale of CAD$25 million of its “CBD-rich hemp biomass”. More on that later.

MYM is already executing on a global cannabis strategy. Its focus is establishing CBD-rich hemp (and cannabis) cultivation facilities around the world.

The Company is currently active in Canada, the United States, and Colombia. It has near-term plans to expand into the cannabis markets of Mexico, the EU and Australia.

The heart of MYM’s operations is its hemp cultivation in the province of Saskatchewan. Its (50% owned) subsidiary, BioHemp Naturals Growing & Farming Ltd. currently has 450 acres of hemp under cultivation. BioHemp Naturals also has CBD extraction operations.



Through the 2019 grow season, the Company is projecting CAD$13.9 million as MYM’s share of biomass profits for 2019. By 2020, MYM sees this rising to CAD$70.8 million.

At full production, MYM’s 3,000 acres of land for hemp cultivation can yield 4,500,000 lbs of CBD-rich hemp. That’s a lot of biomass.

Some investors will require more context. Why hemp? Why CBD-rich hemp?

Hemp is a sub-species of cannabis and arguably the most commercially versatile plant on the planet. Industrial hemp has thousands of known uses. More recently, the cultivation of CBD-rich hemp is opening up much more profit potential for this crop.

A recent report from a respected industry source, BDS Analytics says that the collective market for CBD sales is expected to exceed $20 billion in the United States by 2024. This pretty much supports the reports from another industry respected source,  The Brightfield Group, has previously projected that the: "Hemp CBD Market to Reach $22 Billion By 2022: Outpacing the Rest of the Cannabis Market Combined".  

Importantly, hemp has near-zero levels of tetrahydrocannabinol (THC), the mildly psychoactive cannabinoid in the cannabis plant. Because of this, it has a clearer path to commercialization.

The most obvious signal of this was the decision by the U.S. government to legalize hemp nationally. For the cannabis industry, this was the proverbial “green light”.

CBD, or cannabidiol, is the most-plentiful cannabinoid in the hemp plant. In the medicinal cannabis industry, CBD has been used in the treatment of hundreds of medical conditions. As a nutraceutical, it offers equal potential to promote health.

MYM’s mission is to supply the market with CBD-rich hemp (and cannabis) – at the wholesale level. Here investors may look to another parallel in the cannabis industry: cannabis extraction.

Cannabis companies with exposure to cannabis retail have been struggling recently, on both sides of the U.S./Canada border. The problem is at the government end.

Over-taxation, over-regulation, and simply inefficiency in opening up cannabis retail to consumers has been impacting revenues and profits. An exception to this under-performance has been Canada’s extraction specialists.

They operate at the wholesale end of the cannabis industry. These companies supply cannabis oils as an input for cannabis companies wanting to bring value-added cannabis products to market.

They can supply the industry at the national level. But they have no direct exposure to retail cannabis (or hemp) products.

MYM Nutraceuticals is taking this same approach to commercializing its CBD-rich hemp. It is supplying CBD-rich hemp “biomass” (the raw plant input) to cannabis companies across Canada. This leads to the Company’s latest announcement.

On July 23, 2019; MYM announced a Letter of Intent (LOI) for the sale of CAD$25 million of CBD-rich biomass, via BioHemp Naturals. MYM’s CEO, Howard Steinberg framed this news for investors.
 
“I am truly excited to share that our sales team has secured a LOI for $25 million, representing nearly half of our remaining forecasted CBD-rich hemp biomass. The recipient of the biomass represents a consortium of Canada's largest cannabis LP's and is a great vote of confidence to the quality of BioHemp's Canadian grown CBD-rich hemp.”

Supplying Canada’s cannabis industry leaders. Generating sales that (by itself) represents roughly half of MYM’s remaining hemp biomass inventory. Encouraging for both the near and longer term.

As already noted, hemp-based cultivation to produce CBD-rich biomass faces a smoother regulatory path. This is true in both North America and around the world. MYM Nutraceuticals has the capacity to dramatically scale its own production to capitalize on this emerging opportunity.

Operating at the wholesale end of the industry presents fewer operational minefields to navigate. That should translate into both larger and more reliable revenue streams.

As MYM’s latest deal shows, it’s a path to strong revenue growth and near-term profitability.



DISCLOSURE: MYM Nutraceuticals is a paid client of The Seed Investor.