Three years in and the cannabis sector is worn out. Most companies are inching along, adding dispensaries and square footage and reporting on it like it’s still 2018 and those movements still matter. They don’t. Nobody cares if a second-rate cannabis company adds another 14 square feet to their Delta, BC grow, especially if their balance sheet shows them drowning in debt.
What’s interesting is diversification. Cannabis may be dead but there’s something new coming that can, should and is invigorating investors and companies alike and that’s of course mushrooms. It represents not just another potential billion dollar market, but a chance for cannabis companies to escape the trap they’ve made for themselves and not make the same mistakes they’ve made in the past.
To that effect, Pure Extracts Technologies (PULL.C) is nestled in a valley about twenty minutes north of busy Whistler, B.C. They received their processing license from Health Canada two months ago and started trading on the Canadian Securities Exchange on November 5, so they’re still relatively new to the scene.
Don’t let the numbers fool you into thinking this is some weak-tea organization run by some former mining exec who thought to pivot into cannabis at the last minute, though, this company has been in business for ten years and comes complete with their own well-regarded legacy brand.
The company’s primary focus is on cannabis and hemp. They draw the oils from the plants to make cannabis 2.0 products, including edibles, CBD-distillate that we all know and plenty of others. But they’re not interested in stopping there. Most of the guys working on the site have years of experience working in this space, and the extraction business makes a good base, but they know what’s coming and have prepared for it.
Reports from ResearchandMarkets have the global market for functional mushrooms reaching $34.3 billion USD by 2024 and growing from there at a compound annual growth rate of 8%. To be fair, functional mushrooms aren’t the same as psilocybin-producing mushrooms. They’re an alternative health-product believed to improve memory, bolster the immune system and reduce stress. The three they’re working on are lion’s mane, turkey tail and reishi, and they’re expected to be available by the end of Q1 2021 through their direct-to-consumer e-commerce sales portal.
Pure has expanded its business model to include mushroom formulations using the same extraction processes they use with cannabis and hemp. Their working with a scientific advisor, Dr. Alexander MacGregor, the found of the Toronto Institute of Pharmaceutical Technology, to develop products with high bioavailability and delivery methods including pills, capsules and edibles. They’ve recently signed a letter of intent (LOI) with one of Canada’s mushroom wellness brands to develop CBD infused mushroom products.
“Our brand is an aspirational extension of our location in the mountains of British Columbia. As such, we are 100% focused on high quality ingredients, formulations, and processes in all our efforts. Moving into the field of mushroom extractions is an obvious and exciting opportunity to leverage our advanced technology and proven capabilities. We look forward to launching our functional products commercially within the next few months and can’t help but see the similarities to the cannabis sector regarding the pathways to both medical and recreational legalization. I believe our ability to immediately begin working in this burgeoning sector will create immense value for our business, our stakeholders, partners and shareholders alike,” said Ben Nikoaevsky, Pure Extracts’ CEO.
But the functional mushroom market is preparation for what’s coming next and that’s psilocybin mushrooms. Psilocybin right now is being studied as a potential treatment option for maladies such as depression, anxiety, post-traumatic stress disorder, bipolar disorder, Alzheimer’s disease and addiction. They’re already legal for use in large parts of Europe, and Pure Extracts has built their facility to meet European Union good manufacturing practices (EU-GMP) standards with the aim towards exporting sales of products and formulations, including products presently restricted in Canada, into Europe where they can take advantage of these markets.
The global market for psilocybin seems to be developing at more or less the same pace and following similar patterns as the one for cannabis. Prohibition falls beginning in Europe, but ultimately expanding to include the more liberal states in the United States before expanding towards the creation of a Canadian market. This summer Canada approved four terminally ill patients to use psychedelics to ease their anxiety, and there’s a developing political impetus towards allowing psilocybin as a potential option for more than just these four.
For Pure Extracts that means getting involved in a market as the market takes off and that’s good for everyone involved. They can have enough time to adjust to whatever restrictions Health Canada puts on the new market, and be ready to shelve their products on day one.
Full disclosure: Pure Extract Technologies is an equity.guru marketing client.