Canopy Rivers Inc (CVE:RIV) Enters AgTech Space with BioLumic Deal

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Midas Letter is provided as a source of information only, and is in no way to be construed as investment advice. James West, the author and publisher of the Midas Letter, is not authorized to provide investor advice, and provides this information only to readers who are interested in knowing what he is investing in and how he reaches such decisions.

Investing in emerging public companies involves a high degree of risk and investors in such companies could lose all their money. Always consult a duly accredited investment professional in your jurisdiction prior to making any investment decision.

Midas Letter occasionally accepts fees for advertising and sponsorship from public companies featured on this site. James West and/or Midas Letter may also receive compensation from companies affiliated with companies featured on this site. James West and/or Midas Letter also invests in companies on this site and so readers should view all information on this site as biased.

Canopy Rivers Inc (CVE:RIV) (OTCMKTS:CNPOF) President Narbe Alexandrian shares details of the company’s strategic investment in BioLumic Ltd, a company that has created a sustainable ultraviolet crop yield enhancement system. Alexandrian explains that the company’s investment in BioLumic is its first move into the agricultural technology space and highlights BioLumic’s photomorphogenesis UVB process as an IP differentiator. Alexandrian notes that as the price of cannabis decreases, cost advantages like those provided by BioLumic can provide significant value. He discusses the company’s recent announcement that its minority investor, Canopy Growth Corp (TSE:WEED) (NYSE:CGC) (FRA:11L1), has entered into a supply agreement with Canopy Rivers portfolio company, PharmHouse Inc. He explains that the offtake agreement with Canopy Growth has de-risked the PharmHouse facility conversion in Leamington, Ontario. Alexandrian emphasizes the importance of the cosmetics space and addresses Rivers’ investment in High Beauty Inc, makers of cannabis beauty brand, high.

Transcript:

Narrator: Canopy Rivers is the investment and operating platform of Canopy Growth Corporation. The company has developed an investment ecosystem of cannabis operating companies across the Cannabis sector. Canopy Rivers works collaboratively with Canopy Growth to identify strategic counter parties seeking financial and or operating support and affiliation with a Canopy Growth group of companies. Canopy Rivers trades on the TSX Venture under the ticker symbol RIV.

James West:   I’m joined now by Narbe Alexandrian. He’s the president of Canopy Rivers trading on the TSX Venture under the symbol RIV. Narbe, welcome back.

Narbe Alexandrian: Thanks for having me really happy to be here.

James West:   You bet. Narbe you’ve been really making some bold moves here. Let’s start with the most recent development. You’ve acquired a strategic or you’ve executed a strategic investment from Canopy Rivers into BioLumic limited. Tell me about BioLumic.

Narbe Alexandrian: Yes. So BioLumic is Canopy Rivers is first foray into the agricultural technology space. So we’ve been looking at the space in depth. There’s a lot of technologies that are being applied to traditional vegetables that could be also applied to cannabis. One of those is BioLumic. So BioLumic tinkers with the photosynthesis process of what a plant sees. So naturally photosynthesis from a basic point of view, you have a plant the plant likes to take that sunlight and then pulls that sunlight and gives it energy to grow. What BioLumic does is it uses biological developments to tinker with the photosynthesis through a process called photomorphogenesis.

James West:   Photomorphogenesis. There’s one that’s not going to become a household word anytime soon. Okay. So photomorphogenesis sounds like more or less, as you say, tinkers with the plant, but it increases like the metabolic photosynthetic rate?

Narbe Alexandrian: Absolutely. So what it does is it allows the plant to take in more sunlight and it gives it a different type of light in order for it to grow. So think of it as light recipe. So using UVB technology, it sends UVB light onto the plant and the plant through that process can grow faster and can grow more. So early tests have shown that on lettuce, tomatoes, and cucumbers the actual yield and the growth of the plant increased by 20 percent using the UVB light recipes versus the sample size of typical normal lights.

James West:   Okay, so is the value in BioLumic then in the IP surrounding this process?

Narbe Alexandrian: Yes, so we co-invested with two new partners on this one, which are pretty big deal for us. We co-invested with the Venture Capital arm of Rabobank. Rabobank is the largest agricultural financier in the world. They find it’s about 80 percent of all agricultural projects. $12 billion revenue. Gigantic bank located out of the Netherlands. That was their first foray into something that touched cannabis.

As well as we partnered with Finistere Ventures, which is the Venture Capital arm of Bayer CropScience. Again, a $50 billion dollar company. This is their first foray into agricultural technology in the cannabis space. So really happy with the group that we brought in they bring a lot of specialty on the traditional plant side. We came in with our own domain expertise on the cannabis side and it’s a it’s a match made in heaven. It’s our first foray into the New Zealand market too, which we’re really proud of.

James West:   Wow. That’s spectacular on so many levels. Okay. So what’s to stop me from just emitting UVB rays into my garden?

Narbe Alexandrian: It’s not as simple as the UVB rays. It’s the light recipe that comes with it.

James West: I see.

Narbe Alexandrian: And that recipe is where the IP lies. So it’s not easy to copy. It’s not easy to really under to reverse engineer as well. But what they’ve shown is that they’ve repeatedly grown traditional plants. Our scientists looked at how lettuce and cucumbers and tomatoes biologically mimicked what cannabis actually looks for as well and there’s a clear linkage between the two. So theoretically they should work and this is a game changer and in an environment where the cost of cannabis is going down day by day and you’re looking for this cost advantages. I’m sorry, the price is going down. You’re looking for this cost advantages BioLumic can really come in and lower the cost increase the yield of production.

James West:   Wow, that’s fantastic. Okay. Well, I congratulate you on that, that’s like pretty awesome. So now tell me about on May 9th you announced that you had your portfolio investment PharmHouse has entered into a second off take agreement with Canopy Growth Corporation. A skeptic is going to say Well wait a sec, Canopy Rivers is part of Canopy Growth, aren’t you? Just saying that you’re basically watering your own grass with your your own hose.

Narbe Alexandrian: So because we share the same name people think that were part of the same company. Canopy Rivers is completely autonomous from Canopy Growth. Canopy Growth is our largest investor into Canopy Rivers, they own about 27 percent of us. So the rest of that ownership is by public flow, ESOP, and some other angel investors from the company.

James West:   So Canopy Growth is a minority shareholder of Canopy Rivers?

Narbe Alexandrian: Yes, our largest shareholder at 27 percent but still a minority shareholder from the start. PharmHouse was a project that we kick started with, we were looking for in an environment where cultivation was slowly becoming commoditized, we were looking for the best players to partner with in terms of capturing the global economy in terms of cultivation. So we bumped into the producers of the largest greenhouse operations and all of North America. So they do majority of the tomatoes that you find in supermarkets all over Canada the US. They have operations in Canada, Mexico, Europe, Latin America, all over the world and we signed an exclusivity partnership with them.

They’re growing a 1.3 million square foot facility located in Leamington, Ontario, which they’ve retrofitted one of their tomato plants into creating cannabis. There’s going to be about 100,000 kilos of cannabis being created per year. And so we partnered, originally when we did the deal, Canopy Growth took 10 percent offtake agreement on that. Then we signed a 20 percent offtake agreement with TerrAscend and now we just signed an additional 20 percent offtake with Canopy Growth as well. So 50 percent of that the entire 1.3 million square foot facility has already been spoken for which really did de-risk this project for us and allows that runway for the other 50 percent of external sale.

James West:   Okay. How do you arrive at the pricing for buying, for selling cannabis from PharmHouse to those two entities?

Narbe Alexandrian: Yeah. Well, we don’t disclose the pricing. The pricing is based off of what market prices would be and there’s a gradual decrease of as that happens over the years as we expect that the cost of cannabis to go down in the price of canvas to go down on a wholesale level. We put that all into it, but it’s pretty similar to what market rates are expected to be over time.

James West:   Mmhmm. Just to be devil’s advocate for credibility sake, at what point, at what price I should say, for cannabis does the commitment to take off take this cannabis from PharmHouse become voided or are or these take-or-pay kind of contracts in perpetuity?

Narbe Alexandrian: This contract is over the three years, period of time, so beyond that we’d probably have to get into another contract again, but at least it mitigates that first piece of cultivation.

James West:   Okay. Well, that’s great. That’s awesome for PharmHouse and PharmHouse is going to become a public company on its own right at some point?

Narbe Alexandrian: We don’t have any place to make it a public company anytime soon. The founders of the company, our partners, and the entity they are private greenhouse cultivators. They’re multi-billion dollar company, privately owned, multiple generations of ownership in the past. So great-grandfather all the way up to current currently. So there’s no plan to take public anytime soon.

James West:   Fantastic. Okay, and now let’s talk about High Beauty. You announced on April 16th that you’ve done an investment into High Beauty, the company that has created the brand high. And what does high do?

Narbe Alexandrian: So, we really believe that the cosmetics and beauty industry is going to be a big deal. And one of the things we do to go into an investment is we landscape the entire value chain all the sub-segments underneath it. So we looked at all 97 different identified sub-segments in the cannabis space, we have about 20 that we’re going after, one of them was beauty products. We think beauty products is going to be a big deal. We canvassed all the beauty product companies that you could think of in Canada, the US, and Europe that were touching cannabis in some which way, pretty much all the names you can think of, and we spoke to all of them and we kept bumping into High Beauty. High Beauty is founded by one of the founders and formulators of Goop Cosmetics, which is Gwyneth Paltrow’s is multi-billion dollar cosmetics line. She founded two other companies after that as well, which were sold in Sephora, Barney’s, and Bloomingdale’s, and she was a 25-year veteran in not only formulation but also in the cosmetics industry.

Her strategy was instead of creating a CBD product, she wanted to create a brand, this is before the Hemp Bill, she want to create a brand that could go international, between states, between countries, between continents, and really grow fast and then she would add this the controlled substance onto it as well. So it’s called High Beauty. It says cannabis moisturizer on it. It’s sold in Sephora stores in Canada, the US, and Europe, and the plan was that now that she had that distribution all over the world, she would think of getting a partner to come in to help her with that CBD formulation. What better partner than Canopy Rivers and all the IP that we own around that area or that we have access to in that area to help her out with that. So it was a match made in heaven. With a small team, she was in dozens of publications. She was in the Oscars swag bag for products to give it to celebrities as well as featured in Coachella. So great publicity on the company and brand building on their end.

James West:   Well, that is incredible. So even though I’ve never heard of high, it’s really quite an advanced story, very cool. So what’s next for Canopy Rivers?

Narbe Alexandrian: So we’re looking all over the world. I think the US and Europe presents some interesting opportunities for us from everything from brands to plant science as well. And those are the two key areas really focused in right now. We find on the science side there’s a lot that cultivators can do on the cannabis end. Pure-play cannabis companies aren’t really as sophisticated as we see on the plant science side as we do see on the traditional plant side. So we’re finding some really neat partners such as Finistere Ventures or Bayer CropScience, Rabobank that understand the traditional crop area and can apply those knowledge and that understanding on to the cannabis side. So instead of finding one unicorn cannabis life sciences company, which we still haven’t been able to really capture, we think there’s about three to four that are doing some unique things including BioLumic that we can kind of put together and create a better package for how we can take the cultivation into the next generation of science.

James West:   Well, fantastic, Narbe. We’re going to leave it there for now because we’ve used up our time, but that’s amazing. I’m really impressed with how Canopy Rivers is not just resting on its laurels, but it seems to be quite aggressive and you guys are doing a great job. Thanks very much for joining me today.

Narbe Alexandrian: Thank you for having me.

Midas Letter is provided as a source of information only, and is in no way to be construed as investment advice. James West, the author and publisher of the Midas Letter, is not authorized to provide investor advice, and provides this information only to readers who are interested in knowing what he is investing in and how he reaches such decisions.

Investing in emerging public companies involves a high degree of risk and investors in such companies could lose all their money. Always consult a duly accredited investment professional in your jurisdiction prior to making any investment decision.

Midas Letter occasionally accepts fees for advertising and sponsorship from public companies featured on this site. James West and/or Midas Letter may also receive compensation from companies affiliated with companies featured on this site. James West and/or Midas Letter also invests in companies on this site and so readers should view all information on this site as biased.

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