EDITORIAL May 7, 2019 • 11:08 AM GMT+0000 BY ANTHONY VARRELL
During the last year, the Latin American cannabis market has been a major area of interest and this is a trend that we are excited about. When you compare the cost of cultivating cannabis in North America to Latin America, the economics associated with the Latin American opportunity are much more attractive and we are bullish on the growth prospects associated with this emerging market.
Over the next year, we expect to see further interest in the Latin American cannabis opportunity as companies that are levered to this market prove that there is significant value associated with this market. Currently, there are only a handful of companies that have legitimate leverage to this emerging cannabis market and investors need to be aware of this. We are most excited about the companies that have a first-mover advantage on the Latin American cannabis market and want to highlight an early-stage opportunity to be aware of.
The company, Blueberries Medical Corp. (BBM.CN) (BBRRF) (1OA) has significant leverage to the cannabis oil opportunity in Latin America and has set up operations in Colombia and Argentina. Going forward, the name of the game for this Latin American cannabis company is execution and expansion. Over the next year, we expect to see Blueberries Medical significantly expand its reach and enter new emerging cannabis markets.
When it comes to Blueberries Medical, there are a number of factors that make us excited about this opportunity and we have highlighted these below:
- The company has attractive leverage to the Latin American cannabis market and is focused on producing high-margin premium cannabis oil
- With operations in Colombia and Argentina, the company has significant growth prospects and is in the middle of a major expansion
- The company has made significant additions to the management team and we are favorable on the team’s ability to execute and create value for shareholders
- Blueberries Medical has secured strategic relationships to support growth and find this partnership to be significant when it comes to the company’s long-term opportunity
- When compared to its peers, Blueberries Medical has an attractive valuation and is trading at a fraction of their market caps
An Emerging Latin American Cannabis Opportunity
2019 has already proven to be a banner year for Blueberries Medical and we are not even at the mid-point. So far this year, the company has advanced operations in a number of ways and we are excited about the recent developments. From a larger production footprint to strategic additions to the management team, the company has significantly improved its position in the Latin American cannabis market and we are favorable on its growth prospects.
Blueberries Medical is a fully licensed producer of medical cannabis flower and oil products in Colombia that has recently expanded into Argentina through a binding agreement to acquire cannabis cultivation, processing, manufacturing, export and other rights in Argentina from BBV Labs Inc., which has entered into a joint venture with the Argentinian state-owned company Cannabis Avatara, S.E., to develop and cultivate cannabis on a 3.2 million sq. ft. agricultural property. The Latin American cannabis company has been focused on expanding its state-of-the-art facilities that are going to be Good Manufacturing Practices (GMP) compliant and we are bullish on the growth prospects associated with this. Being GMP compliant is necessary when it comes to being able to export medical cannabis to international markets and we are favorable on this focus.
One of the reasons we are excited about Blueberries Medical is due to its focus on the cannabis oil opportunity. Demand for cannabis oils continues to increase and this is a trend that we expect will continue as researchers learn more about the therapeutic value of cannabinoids. We believe that the cannabis oil vertical represents one of the most significant markets and are favorable on Blueberries Medical’s leverage to this opportunity. When compared to cannabis flower, the margins and the prices associated with cannabis oil are much more profitable for the company and we find this to be important.
Attractive Leverage to the Colombian Cannabis Market
Blueberries Medical has attractive leverage to the Colombian cannabis market and its current facility (Guatavita Farm) is located in the Bogota savannah, a major production center in Colombia. The company has secured 3 hectares of land for the first facility and plans to build-out half of this property (1.5 hectares) in 2019. This facility is strategically located in one of the safest regions of Colombia and is in an area that has scalable cultivation infrastructure.
The Latin American cannabis company is also focused on expanding at its Zipaquira Farm and this represents a massive opportunity. This initiative has a much larger land package and provides the company with 15 hectares to operate on. Blueberries Medical has the ability to increase the size of this land package to 40 hectares and this would be a massive farm.
Earlier this year, Blueberries Medical entered into a letter of intent for a joint venture with Harmony and Life S.A.S., operating as El Manantial medical centers. The joint venture will further the development and commercialization of Blueberries Medical’s products through El Manantial’s rapidly growing patient base and through a collaboration with its team of physicians, pharmacists and technicians. The joint venture provides a direct distribution channel to an established and rapidly growing patient base by exclusively selling Blueberries’ cannabis-derived products.
We believe that this relationship significantly enhances Blueberries Medical’s ability to distribute products in Colombia and will monitor how this initiative adds value. El Manantial represents a strategic partner and is one the fastest growing networks of medical centers in Colombia. The medical centers are currently representing over 7,000 patients and this number is expected to increase to more than 50,000 patients over the next 36-month period as four new centers are expected to come online.
Announces Strategic Additions to the Management team
One of the most significant developments that Blueberries Medical has announced pertains to the additions to the management team and we believe that the market under-appreciates this. Last month, we met with the management team while we were in Toronto and left this meeting feeling confident and impressed with the team’s ability to execute.
Earlier this year, Blueberries Medical appointed Dr. Patricio Stocker as CEO and we found this addition to be very significant. Dr. Stocker served as PharmaCielo’s CEO from 2015 to 2018 and has a proven track record of success in the Latin America cannabis market. While serving as PharmaCielo’s CEO, Dr. Stocker was actively involved in the development of the company’s Colombian operations and helped the team establish a scalable and competitive cultivation and oil production strategy. We found this addition to be significant and are favorable on the experience that he brings to the Blueberries Medical team.
Last month, the Latin American cannabis company appointed Eduardo Molinari as Chief Marketing Officer and we are favorable on this addition. He is a former executive of Abbott Laboratories (ABT) and AbbVie Ltd. (ABBV) and will lead the development and implementation of Blueberries Medical’s marketing strategies, directing these initiatives in local and international markets. This was a significant addition to the team, and we are favorable on his track record. When it comes to investing in a cannabis company, it all starts with the management and we find these recent additions to be significant when it comes to the company’s ability to execute.
A South American Cannabis Opportunity to Watch
So far this year, Blueberries Medical has been a strong performer and the shares continue to trend higher. Although the recent rally has been significant, the company is trading at a massive discount to PharmaCielo (PCLO.V) (PHCEF) and Khiron Life Sciences (KHRN.V) (KHRNF), which are the two best known Latin American cannabis companies. Blueberries Medical has a market cap of approx. $85 million while PharmaCielo is valued at more than $830 million and Khiron is valued at more than $330 million and we find this difference to be significant.
We have been closely following PharmaCielo and Khiron Life Sciences to better understand the Latin America cannabis opportunity and believe that this is an area where investors need to be focused. These companies had a first mover advantage on the Colombian cannabis market and we believe that this bodes well for Blueberries Medical. The company has been quickly catching up with PharmaCielo and Khiron Life Sciences and we believe that this opportunity has been flying under the radar. When you look at the valuation disparity between these two operators and Blueberries Medical, it is tough to not get excited about the latter.
So far this year, Blueberries Medical has been nothing short of an execution story and has been executing flawlessly on its expansion plan. The company is targeting Latin American countries like Mexico and Uruguay as well as countries like Italy. We are monitoring how the team executes on this and recommend keeping an eye on this opportunity.
The Latin American cannabis opportunity is an exciting part of the cannabis industry and Blueberries Medical is a company to be watching.