Although the stock market has gotten off to a shaky start in 2014, there are still plenty of new investing opportunities. One company that has been a shining star thus far in 2014 is Plandai Biotechnology (OTCQB:PLPL). Investors looking for a small-cap company capable of participating in a fast-growing market that is riding a paradigm shift in government regulations should strongly consider Plandai Biotechnology.
Company Profile
The company develops highly bioavaiable, phytonutrient rich extracts that are being utilized to deliver a new family of drugs to safely and affordably treat a multitude of diseases and conditions. Plandai controls every aspect of the process, from growing the raw materials on its farms in South Africa to producing its patented Phytofare extracts-in-house, allowing the company to guarantee the continuity of supply as well as control throughout the entire process.
Entry into Cannabis
However, one of the primary reasons why Plandai Biotechnology stood out as a potential winning investment is because of the company's recent decision to form a new division called Cannabis Biosciences. The company announced on November 1, 2013, that it planned to create a new wholly-owned subsidiary to develop and test a new Phytofare botanical extract derived from cannabis. Given that the Plandai team already has specific and unique knowledge related to bioavailability and extraction capabilities, this is likely a wise decision as the company should have significant competitive advantages over its peers in the industry who simply want to ride the waves of the medical marijuana revolution. Following a series of studies and trials, Plandai's offerings have demonstrated the highest bioavailability in the industry. In some statistics, the absorption rate into the bloodstream was more than 8 times that of competing products. Moreover, competing products and approaches do not have the validation that Plandai has received via the recently formed relationship with Diego Pellicer. It is clear that the number one brand in the cannabis industry would seek out a partnership with the company that has produced the greatest bioavailability.
Diego Pellicer Deal - Growth Potential
In its first major step into the cannabis arena, on January 16th Plandai announced that it was forming a partnership with industry leader Diego Pellicer Worldwide. This partnership will allow Plandai Biotechnology to use the Diego Pellicer name for its Phytofare cannabis extracts in medical and pharmaceutical marijuana applications. For more than 100 years, Diego Pellicer has been one of the world's leading brands in cannabis products. The company's legacy began in the late 1800s when Diego Pellicer was the Vice Governor of the Island of Cebu in the Philippines. During this time, Diego was also the largest hemp grower in the world and supplied the Spanish Armada with Hemp during the Spanish American War.
Although Diego Pellicer was killed by the Americans during the war, his legacy lives on through his great grandson, Jamen Shively. Jamen Shively is the founder and executive director of Diego Pellicer. Mr. Shively has received a lot of recognition within the industry, not only for his work at Diego Pellicer, but for his past work experience. His track record includes:
- Background in engineering (U.C. Berkeley) and marketing with specialties in logistics, manufacturing, and the creation of new products and/or services.
- 6 years at Microsoft as the Corporate Strategy Manager. Mr. Shiveley focused on the creation and development of new categories of software products and online services.
- Founded Shively International - A company that operated both cybercafes and educational computer centers in Mexico.
- Currently the Founder and Executive Director of Diego Pellicer
Given his unique experience and educational background as well his entrepreneurial spirit and ties to Mexico, it would appear that Mr. Shively is the right man for the job.
Jamen Shively's goal is to turn Diego Pellicer into the Starbucks of cannabis. If successful, Diego Pellicer stands to gain a windfall. And thanks to the new partnership, so does Plandai Biotechnology. Investors debating whether to invest in Plandai should look at the Mr. Shively's success record and realize that the odds are in Plandai's favor.
Change In Regulation Coming
As mentioned, Jamen Shively's goal is to build the first national brand of retail marijuana. In addition, he wants to open up cannabis trade between the United States and Mexico. There will be significant legal hurdles to climb but it appears that the movement is beginning to gain steam. In two states, Colorado and Washington, the sale and possession of marijuana is legal for both medical and non-medical use. In addition, there are 19 other states that allow for medical marijuana use. Alaska, which is currently one of the 19 states that allow for medical marijuana use, just announced that the legalization of recreational marijuana will be on the ballot this year. Voters will be able to cast their vote in August.
NFL Could Be A Bonus
Another potential boon for the medical marijuana industry is the NFL's apparent willingness to use it to treat injuries. Roger Goodell, the NFL commissioner, recently stated that he was open to the idea of using medical marijuana as a pain reliever. He did say that the NFL's medical experts would have to reach the conclusion that the benefits of pain relief would have to outweigh the possible addiction issues. Pete Carroll, the coach of the Superbowl champion Seattle Seahawks, said that the NFL should explore using medicinal marijuana. His exact quote was: "I would say that we have to explore and find ways to make our game a better game and take care of our players in whatever way possible. Regardless of what other stigmas might be involved, we have to do this because the world of medicine is doing this."
Given the NFL's recent focus on safety (making head shots illegal), it would seem the question is not if medical marijuana will be approved, but when. Because of the focus on treating concussions, it would seem that medical marijuana could play a major role. Last August, the Cerebral Cortex (a respected journal published by the Oxford University Press), released results of a study that showed marijuana's ability to activate the body's cannabinoid receptors and lead to neuroprotective benefits. In other words, it can help treat the brain after a traumatic injury. If enough research comes out to support cannabis usage in this context, one would have to expect the safety concerns would trump all and lead to an eventual change in policy.
Medical Marijuana Health Benefits
One of the primary reasons why more organizations and legal entities are considering legalizing medical marijuana is because of the studies that have reported numerous benefits. Although he passed away in 2007, Dr. Tod Mikuriya was instrumental in taking the lead. Dr. Mikuriya was the former national administrator of the U.S. government's marijuana research programs. In a documentary called, "The Union", Dr. Mikuriya said the following: "After dealing with about 10,000 patients in the last 15 years, I'd say about 200 different medical conditions respond favorably to cannabis."
Some of the medical conditions which studies have shown that cannabis can improve include:
- Alzheimer's Disease
- Epilepsy
- Multiple Sclerosis
- Glaucoma
- Arthritis
- Depression
- Anxiety
- Hepatitis C
- Morning Sickness
Of the above conditions, Plandai Biotechnology is going to focus its research efforts on Alzheimer's, Parkinson's, and Multiple Sclerosis. Those are 3 areas of significant unmet medical need with significant market potential:
- Alzheimer's Disease Market Size - $10.2 billion in 2012
- Parkinson's Disease Market Size - $2.7 billion in 2010
- Multiple Sclerosis Market Size - Expected to reach $11.5 billion in 2015
Although it's extremely early, if Plandai can successfully navigate its way through trials, there could be significant potential for future revenue generation.
Fundamentals
As with any early-stage medical company, it's important to look at Plandai's financials to gauge the current situation. The company appears to be progressing as far as revenue generation is concerned. For the quarter ended September 30, 2013, Plandai generated $227,000 in total revenue, a meaningful increase compared to the prior three quarters. So while minimal in nature, the trend is impressive. With the new deal in place with Diego Pellicer, the trend should continue in Plandai's favor, but with much greater numbers.
On the balance sheet, the company ended the last quarter with approximately $376,000 in available cash and long-term debt of $11.8 million. However, the company just announced that it secured up to $15.3 million in funding from an institutional investor, Lincoln Park. Not only does that shore up the balance sheet, it ensures that Plandai will be at the forefront of the marijuana industry, since it has become well-capitalized overnight.
Technicals
The recent run that shares of Plandai Biotechnology have experience is impressive. Since the beginning of January, shares of Plandai have exploded higher by nearly 600% as of this writing ($1.56).
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