Extracts are the Future
The future of cannabis is undoubtedly one that leans toward cannabis derivatives, such as vaporizers, edibles and topicals. With derivatives anticipated to account for roughly half the multi-billion dollar cannabis market, the cannabis extracts that go into them are in high demand.
An entire industry is cropping up around cannabis extraction. Some companies are marketing their cannabis extraction machines to cannabis producers, for onsite extraction. Other companies have built out large extraction facilities with the intent to either extract cannabis for a processing fee (extraction as a service) or to buy cannabis on the open market and manufacture their own cannabis derivatives for sale to cannabis retailers (white label). Radient Technologies Inc. (CSE: RTI) is one such company that believes they have a unique advantage that will allow them to become the industry leader.
A Superior Extractor
Radient’s claim to fame is its use of Microwave Assisted Processing (MAP) to aid in their extraction efforts. MAP heats the cannabis biomass to precise temperatures for exact periods of time, allowing for a higher quality product. The technology also uses less solvent than the methods being used by other companies and has higher throughput, allowing for improved economies of scale.
Independent lab results have shown Radient’s extraction process preserved up to 99% of desired cannabinoids, while other extractors capture 70-80%. MAP also gives Radient better control to select for specific compounds, allowing them to better customize their product to meet customer needs. Unlike many other extraction technologies, MAP is also well suited for extracting CBD from hemp. This allows Radient to serve a wider variety of clients and produce a greater number of their own products.
Extraction is a Go
Despite being in existence for over twenty years, Radient only recently got into the cannabis industry. In 2017, the company signed an agreement with leading cannabis producer Aurora Cannabis (NYSE: ACB) to provide extraction as a service. They then set about building out extensive facilities with large throughput near Aurora’s Edmonton Sky facility, one of the largest and most advanced cannabis growing facilities in the world.
Since getting their first facility licensed last year, Radient has generated over $20 million in revenues from their Aurora partnership. After spending the year optimizing their production line, the company began to sign deals with additional partners.
Earlier this year the company announced a three-way extraction as a service deal with Allied Corp and the Dhaliwal Group. Allied will supply cannabis biomass to Radient for extraction and the resulting product will then be distributed to cannabis retailers by the Dhaliwal Group. A part of the deal allows Radient to accept biomass in lieu of cash. This gives the company the ability to acquire biomass at below market rates that they can then process into their white label products, boosting profit margins.
Radient’s first white label deal is with Cannabis by Shoppers Drug Mart. Radient will supply high quality medical cannabis products and Shoppers will sell them under exclusive in-house brands. The first brand is bioU and the first product is a high THC oral spray.
Most recently, Radient announced an initiative to study the possibility of using their cannabis extracts to prevent and/or treat COVID-19. Radient will partner with two other companies to develop proprietary formulations, run patient studies and potentially file a patent. If successful, this could put Radient into the global conversation and provide a huge boost to the company’s revenues.
There are two companies currently leading the extraction industry: MediPharm Labs and the Valens Company. Both of these companies have been in operation for the last year or more and have established substantial partnerships with several major cannabis producers.
While both MediPharm Labs and the Valens Company engage in extraction and a service and white label manufacturing, they differ in their chose extraction processes. MediPharm primarily uses Supercritical CO2 extraction, while Valens incorporates ethanol, hydrocarbon and solvent-less extraction technologies.
Each different technology is best-suited for producing a certain type of extract. Radient’s MAP gives them such precise control over their extraction that they are able to create a wider variety of products than any other extraction technology
Both MediPharm and Valens are ahead of Radient in terms of business development. They’ve been partnering with some of the largest Canadian cannabis producers, including Canopy Growth, Tilray, Hexo and Organigram. MediPharm has gone so far as to establish overseas operations in Australia. Already shipping finished product, the company is also in the process of building a local manufacturing facility.
Radient is rapidly catching up to the industry leaders. The company has finished 2 of their 3 planned Canadian facilities, with the 2nd receiving its license earlier this year. Construction is ongoing on their 3rd and largest facility, which should be completed later this year and in production in 2021. This facility should give Radient the highest throughput in Canada. Also under construction is a similar facility in Germany, where demand is expected to explode over the coming years.
2021 should see Radient with the highest throughput in both North America and Europe, the two largest cannabis markets in the world. Coupled with their ability to deliver a high quality product at a low price point, Radient stands to overtake Valens and MediPharm as the leader in cannabis extraction.
Disclosure: I have long positions in Radient Technologies, MediPharm Labs and Valens Company.