In this edition of "Rising High," The Fly conducted an exclusive interview with Everett Knight, executive vice president, corporate development and capital markets, of The Valens Company (VLNCF), a Kelowna-based company focused on end-to-end development and manufacturing of cannabinoid-based products:
PRODUCT MANUFACTURING: Valens is a cannabis company pursuing extraction, formulation, product development and testing that manufactures oil-based and white-label products. “Regardless of what industry you look at, when you look at the most valuable parts of the industry is usually in product manufacturing,” he said. “For cannabis in general, I think the same thing is going to happen where we view it really as an ingredient." The EVP noted that oil-based products made up around 29% of the market in the U.S. in 2016, according to Cowen, and has now become almost 50% of the market. Knight said consumers want more convenient methods like a vape pen or a beverage. “It’s becoming more social so we believe the future of cannabis is really in the oil-based products and what we focused on was kind of the higher-value added part of that chain,” he said.
COMPETITIVE EDGE: When asked about Valens’ key differentiators in the space, the EVP said the company separates itself from competitors through its “one-of-a-kind platform” as a one-stop shop. He noted Valens has five different types of extraction in-house including C02, ethanol, hydrocarbon, solvent-less and terpene extraction, adding that the company is the only one licensed in Canada for hydrocarbon. “The reason we do five types of extraction is that our focus has always been on the end products,” Knight said. “We, with our customers, work backwards so it really depends on what product you want.” He added the platform allows the company to customize any product to a customer’s needs and Valens has a wide range of products it manufactures for customers including vape pens, beverages, soft gels and concentrates.
POMMIES ACQUISITION: In November, Valens announced the acquisition of Ontario-based beverage company Pommies Cider Co. for C$7.5M and the EVP called the deal “huge” for the company. “To understand our platform in Canada before that transaction, we have a Kelowna-based manufacturing facility that we’re building out and also our white label manufacturing facility there,” he said. “As we look to do more products at bigger scale, we’re getting a lot of demand from our customers that is both beverages and edibles.” Knight said the company found a “mature application” with Pommies and saw benefits for shipping as well as being close to the Greater Toronto Area and where the demand is in general in Ontario. “If you look at that transaction, I think it’s very attractive for us to kind of get a foothold in the beverage and edibles space really close to the GTA.”
EXPANSION: Valens has said it is interested in key markets including the EU, Mexico, Colombia, Peru, Uruguay, Brazil, Australia and, in the longer-term, the U.S. “I don’t think cannabis is going to be grown in climates like Canada long-term as the industry expands,” he said. “I think you’re going to see it grown in lower-cost jurisdictions and obviously we have to open up around the globe to make sure that happens. Eventually it makes sense for us to have a hub where we can create high-quality oil in very cheap jurisdictions for example like South America.” The EVP noted cannabis can be grown for 5c-10c per gram in South America, while people in Canada are currently growing for $2-plus per gram. "As you look at the European Union there is 700M people there and I think it’s an attractive spot for us as we develop. I think in 2020, you start see our business plan expand internationally.” Knight added that regulations on a federal level are always changing but federal legalization in Luxembourg and Mexico could potentially take place this year. I think you’re going to see big change but there’s still a lot of rapid evolving cannabis legislation,” he said. “I think what people underestimate is a movement, especially towards medicinal, across the European Union.”
CHALLENGES: When asked about the biggest challenges facing the industry, the EVP said the biggest hurdles currently are consistency and overall quality. “As an industry in general we need to take testing to a whole new level and from a requirements standpoint, we need to make sure that our customers or patients can trust the product on the shelves,” he said, adding that Valens is the first ISO 17025 accredited lab in Canada for the cannabis matrix. Knight also noted the company’s partnership with analytical testing company Thermo Fisher Scientific (TMO) to develop a Center of Excellence in Plant Based Science. “The reason we went down that route, the Center of Excellence for Plant Based Science, is to actually publish methodologies so you can get that consistency for the entire industry that you can trust,” he said.
OPPORTUNITIES: As the cannabis space develops, Knight said he sees opportunities in the Cannabis 2.0 products coming to market. “This year is really our legalization,” he said. “When you look back at in 2012, when our CEO Tyler Robson created Valens, the main focus was launching oil-based products to the market. Everything we’ve done since that point is for this year but what we’re really excited to do is have our customers with products on the shelf that we helped create.” The EVP said he thinks that people in the Canadian markets underestimate how many products will come to market in the next six to twelve months and how innovative they will be as the 2.0 products expand. “I think you’re going to see a lot of cool products that consumers didn’t expect,” he said. “Even if you look at the launch of it on the OCS website, it was completely sold out on the first day. You’re already seeing the popularity and that play out for the marketplace. It’s definitely the most exciting thing in Canada both as a consumer and for us as a company.”
OTHER CANNABIS STOCKS: Other publicly-traded companies in the space include Akerna (KERN), Aleafia (ALEAF), Aphria (APHA), Aurora Cannabis (ACB), Biome Grow (BIOIF), CannTrust (CTST), Canopy Growth (CGC), Canopy Rivers (CNPOF), Cresco Labs (CRLBF), Cronos Group (CRON), CV Sciences (CVSI), Delta 9 (VRNDF), DionyMed Brands (DYMEF), Elixinol Global (ELLXF), General Cannabis (CANN), Greenlane (GNLN), GrowGeneration (GRWG), Harborside (HSDEF), Hemp Inc. (HEMP), Hexo (HEXO), India Globalization Capital (IGC), Indiva (NDVAF), ICC International Cannabis (WLDCF), Innovative Industrial Properties (IIPR), Khiron Life Sciences (KHRNF), Liberty Health Sciences (LHSIF), MediPharm Labs (MEDIF), MedMen Enterprises (MMNFF), MJardin (MJARF), Organigram (OGI), Origin House (ORHOF), Planet 13 Holdings (PLNHF), Real Brands (RLBD), Sproutly (SRUTF), Sunniva (SNNVF), Tetra Bio-Pharma (TBPMF), Tilray (TLRY), Trulieve (TCNNF), Vireo Health (VREOF), Wayland Group (MRRCF), WeedMD (WDDMF), Westleaf (WSLFF) and Zynerba (ZYNE).
Valens Company
+ (+0.00%)
Thermo Fisher
-14.13 (-4.23%)
APHA
+
Aurora Cannabis
+0.01 (+0.52%)
CV Sciences
+ (+0.00%)
Cronos Group
-0.225 (-2.99%)
Canopy Growth
-0.03 (-0.13%)
ZYNE
+
CannTrust
-0.03 (-2.68%)
Trees Corporation
+ (+0.00%)
IGC Pharma
-0.0006 (-0.09%)
Tilray
-0.07 (-0.37%)
Trulieve Cannabis
+ (+0.00%)