Canada made history in October 2018 becoming the second country (after Uruguay) to legalize cannabis for adult-use.
The Canadian cannabis (r)evolution is not completed, however, as Health Canada is delaying the legalization of edibles, beverages, and other alternative delivery systems based on cannabis extracts for one year. With the widely recognized negative health effects of smoking, consumers are looking for more healthy and pleasant ways to access cannabis, both for recreational and medical purposes. As a result, there has been an influx of investment throughout the industry in research and development of extract-based products.
Valens GroWorks (CSE:VGW), based in the Okanagan region of British Columbia, is one of the leaders in the charge to develop attractive, brandable, high margin, and healthy products derived from cannabis. Holding three licenses from Health Canada and boasting some of the most advanced facilities in the market, Valens has been actively building the infrastructure and relationships to succeed both in Canada and internationally as cannabis-derived products take over the market.
Recent deals point the way
Valens received a license to cultivate and produce oils under the ACMPR in October. The company’s 25,000 square foot facility had previously been licensed under the Narcotics Control Regulations, and with the two sets of regulations merging as part of the new Cannabis Act, the company has all of the bases covered. Utilizing this facility to research, develop, and perfect its extraction services, Valens is now pursuing European Union GMP certification. These are the strictest standards in the world, and the anticipated certification in 2019 would position Valens for export to most any legalized market.
The company is concurrently building out what will eventually be a 400,000 square-foot greenhouse facility that would supply large volumes of cannabis grown specifically for Valens’ extracts. This in-house supply will allow Valens to develop and commercialize its own brands of products, giving the company complete control throughout the product life cycle.
Until that project is complete and licensed, Valens is pursuing deals like the one it recently announced with GTEC Holdings (TSXV:GTEC). Through an initial four year term, GTEC will ship bulk dried cannabis to Valens. Valens will then derive the requested extracts and oils, sending them back to GTEC for sale. Arrangements like this provide a revenue stream for Valens and offer other licensed producers an avenue to access Valens’ expertise to develop their own products. Future deals could go a step further in this direction, with Valens actually developing the final products for partners on a white label basis.
Valens has also entered into a multi-year extraction agreement with Canopy Growth (TSX:WEED) under which Valens will use its proprietary technology and methodologies to process Canopy’s whole flower and trim into high-grade cannabis resin. The first shipment for extraction processing is expected by the end of December 2018.
In the interview below, Valens GroWorks CEO Tyler Robson provided further insight into what the company is doing, the technology it is developing and what its next steps are in terms of international expansion.
Below is a transcript of our interview with Valens GroWorks CEO Tyler Robson. It has been edited for clarity and brevity.
Investing News Network: Please give our investor audience an overview of Valens and its vertically-integrated business model.
Valens GroWorks CEO Tyler Robson: Valens is a British Columbia-based cannabis company that focuses on proprietary extraction services for other licensed producers while bringing premium oil-derived products to the Canadian and international retail markets. We have been working diligently to perfect our trade, walking the walk before bringing everything to market. When looking at the trending sales in the United States, flower is on the decline and oils are aggressively rising in each legal state. We believe oils are the future of mass cannabis consumption and Valens has strategically positioned itself to be a key player in the extraction sector with the best equipment and an integral operations team. And I think it’s showing, with our preferred partners and clients being some of the best in the sector, committing to us for years to come before we even put a dollar on the books.
INN: What does it mean to be an ISO 17025-accredited testing laboratory, and a GMP compliant processing facility?
TP: Accreditation is very important to us, because we put consumer safety at the forefront of everything we do. Leading up to legalization, quality is something we knew would suffer as a result of the scaling of indoor and greenhouse cultivation facilities in an attempt to meet significantly larger demand levels in the Canadian market. ‘Growing pains’ is a very real term in this industry. Having said that, it’s extremely important to us at Valens that we continue to set the bar for producers and processors in the industry, to ensure the consumers are getting the products they want.
By being ISO 17025 accredited in our lab, it means we’re not only certified and know what to do, but we’re continuously audited to ensure we’re doing what we say we’re doing. When a product is tested at our facility, you can consider it to be the most accurate and transparent test results available in the sector. Our ISO 17025 accreditation also helps us to hold our industry peers to a standard of quality and transparency we believe the consumer deserves. We want to make industry players accountable for their product, and this is the best way we know how.
By being GMP compliant, it ensures our facilities are on par with some of the best pharmaceutical manufacturers in the world. That means that by having your product processed in our facility, or buying Valens branded products, whether for recreational purposes or medical, your product is handled with the utmost care throughout the entire process. Additionally, being EU GMP certified will allow us to be a player in the international market, by being able to export to essentially any country accepting legal cannabis in the world.
INN: What markets does Valens plan to serve through its products and strategic partnerships?
TR: Valens’ main focus, and what we’ve been so hard at work on, is the production of high-quality cannabis oil to service the future market of edibles, beverages and concentrates (including vape market, etc). As mentioned before, the demand is very steadily increasing in already-available markets, and I am certain Canada will follow closely behind this once these products come online. We will service these markets by providing unparalleled oil extraction and refining services to other companies, as well as creating Valens-branded products that will be sure to stand out against competitors for a variety of reasons.
INN: Please tell us about the SōRSE™ technology. What does it mean for Valens to have access to this via its partnership with Tarukino holdings?
TR: This is a huge opportunity for Valens, as well as for the emerging Canadian ingestibles market (edibles and beverages). Our exclusive agreement to bring Tarukino’s SōRSE™ technology to Canada is a game changer.
SōRSE™ is essentially an emulsion technology that breaks down cannabis oil into protected molecules while making it completely water soluble. When you put oil into water, it doesn’t mix, right? What this technology does is preserve all of the extracted compounds that make up the oil, but formulate it to mix effectively in water. So, much like adding food coloring to water and shaking it up, products using SōRSE™ will be completely homogenous in nature.
What a lot of people don’t understand is that when you ingest cannabis in edible form, your bioavailability (how your body receives the cannabis and its overall effect on you) is so volatile that it cannot be consistently applied. So a lot of people have a hard time trusting edibles. By using the SōRSE™ technology, that bioavailability is significantly increased, meaning our products require less cannabis input (minimizing cost as this is the highest input cost) and users get a much better and more consistent experience. The onset is accelerated from 30 minutes to two hours to just 15 minutes and the offset is decelerated. Usually edibles can last up to 5 hours causing panic in users, but with the SōRSE™ technology the high is limited to 1-2 hours. This allows users to have multiple drinks in one night while trusting the effects of that drink, much like users use alcoholic beverages.
The top selling cannabis-infused beverage in Washington state is Tarukino’s Happy Apple cider. The consumer update of SōRSE™ has already been proven in the market, so the product really speaks for itself. Beyond the IP technology, we also have exclusive rights to Tarukino’s line of cannabis beverages, and we’re very excited to introduce these proven products to the Canadian market.
INN: How is Valens developing an international footprint? Has there been any shift in thinking after seeing the deficit of product in Canada?
TR: Valens is looking internationally for a variety of reasons. Collaborative minds are a winning approach here at Valens, and for that reason, we are working closely with countries like Australia to bring their markets online. This includes service agreements and supply agreements to bring oils to the medical market, and to provide expertise in extraction as things start to grow, specifically with a partner of ours, MediGrowth Australia.
With regards to the shift in thinking, supply, and even more importantly, good quality supply, is in a massive shortage here in Canada. We are looking at markets like Colombia, specifically licensed producer Eticann, to import cannabis to the Canadian market once that avenue opens up. In the meantime, we will continue to complete the construction of Valens Farms while partnering with other quality licensed producers in our sector to ensure consumers receive the quality products they are after.
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