Avicanna is on the right path, says Raymond James

Raymond James analyst Rahul Sarugaser likes the news coming from cannabis company Avicanna (Avicanna Stock Quote, Chart, News TSX:AVCN), which includes a partnership with MediPharm Labs. In an update to clients on Thursday, Sarugaser reviewed the events and reiterated his “Market Perform 3” rating for Avicanna.

With headquarters in Toronto, Avicanna is an internationally-oriented cannabis platform with four main business lines: cannabis and hemp extracts sold to the international markets including non-THC products into the United States; CBD products under the Pura Earth brand of skincare formulations, currently being commercialized in Colombia, the US and Europe; THC product line Rho Phyto with topical, capsule, tincture and sublingual spray formats to be sold in Canada (through a Shoppers Drug Mart deal), Colombia, Latin America and Europe; and a clinical development wing undertaking trials in dystrophic epidermolysis bullosa.

Avicenna has been chosen by Johnson and Johnson Innovation’s JLABS biotechnology accelerator network for product development and has a comprehensive partnership with global organic agriculture company El Grupo Daabon to cultivate high-quality, low-cost hemp and cannabis.

AVCN announced on Thursday a strategic manufacturing agreement (with an initial three-year term) with Canadian extraction company MediPharm Labs that involves the production and distribution of AVCN-branded products along with the licensing of key AVCN intellectual property for the production of white-labeled and LABS-branded products.

“This best-in-class partnership combines years of our leading R&D, pre-clinical development and intellectual property with MediPharm Labs’ unparalleled quality and pharmaceutical-level manufacturing capacity. This alliance will provide the medical community, and more importantly patients, with the most advanced product offerings backed by scientific rigour, data and world-class quality standards which the cannabis industry has yet to see,” said Aras Azadian, AVCN’s CEO, in a press release.

Sarugaser called the deal “fundamentally different” from others in the cannabis space, as MediPharm will be paying royalties to AVCN on sales of any products developed using AVCN’s intellectual property, thereby underscoring that IP’s strength, Sarugaser argued.

“As we see it, IP will be one of the core drivers of durable margins as the cannabis industry matures, setting AVCN up well for the long-term,” Sarugaser wrote.

Also recently announced was an approval received by AVCN from the Colombian government for the industrial export of hemp seeds to the United States, with the export expected to start over the next two weeks, in time for the US hemp planting season, Sarugaser noted.

“This marks the first ever export of cannabis sativa seeds from Colombia, an achievement accomplished with the support and coordination of the Colombian Institute of Agriculture, and the Ministries of Agriculture and Justice for Colombia,” Sarugaser said.

“We see this as a big, commercially-oriented step for AVCN and for the Colombian cannabis sector as a whole. We are keen to see the scale of forthcoming demand for these seeds, especially that for AVCN’s CBG-dominant hemp cultivars.”

Avicanna, which debuted as a public company last July, has seen its share price drop from an initial $7.40 to below $1.00 in March. Currently trading at $1.87 per share, the stock is down 26 per cent year-to-date.