Cannabis Market Proving To Be Recession Proof (Podcast)
- Cannabis stocks continue their climb this week and look to be in the same category as other recession proof industries.
- We talk to Howard Lee, CEO of SōRSE Technology about the medical possibilities in CBD emulsion, partnering with Pascal Biosciences, and the innovation and opportunity that lured him to cannabis.
- We also discuss what shape the U.S. recovery will have, creating a 'businessman's high', doubling revenue every year, why it's easier for cannabis business to pivot in this climate and the importance of giving back during COVID.
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Prior to becoming CEO at Seattle-based SōRSE Technology, a food and beverage tech company using emulsion technology, Howard Lee founded two successful startups, served as CEO for Photo Works, a NASDAQ-listed company, and was a senior vice president at Disney.
With the SōRSE emulsion, CBD, other cannabinoids, and terpenes can be added to any food, beverage, or topical product with even distribution, predictable onset, and without the cannabis taste or smell. The emulsion is also easily incorporated into any manufacturing process.
- 8:00 - Howard came from the world of startups; didn't expect to be in the cannabis industry. Was approached by a Microsoft executive, a neighbor, to help procure a license for his cannabis business. Through that process, got bit by the cannabis bug; felt like the start of something big, like tech did 30 years ago. Interested by the medicinal benefits; potential uses of cannabis to deal with dementia. In less than 10 months the cannabis retail business in Washington state went from $0 to $1 billion - hard to ignore the potential.
- 10:50 - Meeting Chief Science Officer at SōRSE, Scott Riefler - who made the glue that literally keeps planes together - was key. The first he met that could truly make cannabis water soluble. Didn't initially understand the impact, but knew the technology would solve a product need - there was no good way of dosing edibles and beverages or masking the taste. Bioavailability was a problem; nano-technology isn't approved by the FDA isn't necessarily safe. This became #1 drink in Washington state in 90 days; this was without much capital behind it. Explaining the technology and benefits of the products for people who don't like smoking or sugar found in wine or alcohol.
- 17:30 - Not sure who the winners in the equity markets are; the capital used to be there has dried up; why SōRSE got into the CBD market. They're behind some of the more popular CBD drinks. Working with regulators; SōRSE provides regulators with data to understand how dosing is efficient; how their products are truly effective, with data to back it up. Separating truth from bad faith players in the field.
- 22:00 - COVID period - will it be a V shaped recovery or a dragged out recovery? Stimulus will allow V shaped recovery; it's about how fast we recover. If that happens, we'll be ok by the end of the year; if it's more of a trough shaped recovery, could be a number of years before things bounce back. In the states, THC has been deemed essential; cannabis market has proven to be like alcohol market - recession proof, or at least better than off than most industries. Sales are booming on that side. Hard to keep product in stock. Good time to be a retailer and product manufacturer space right now, harder to be a CBD or THC grower because of the glut in supply.
- 27:00 - Supply chain issues. Longer lockdowns go on, the more issues arise - late deliveries; shortages, etc. Worldwide, supply chains will be affected, but THC and CBD is all domestically grown, along with Canada so not worried about shortages there.
- 31:00 - Partnering with Pascal Biosciences; Patrick Gray, co-founder - helped develop Hep B vaccine; involved with bringing Cialis to market. Also found that CBD helps T cell receptors find tumor cells. Been working on it for a few years. Enhancing CBD to make it more receptive. SōRSE gave them their CBD emulsion to test; SōRSE's was the best delivery vehicle they had seen - 5-10% better. Term sheet now to acquire the company; have already invested in them, but also want them to be partners to evangelize the medical benefits of CBD emulsion; might also help with COVID-19. Pandemic put a dent in funding they were counting on, so working around that challenge now.
- 38:30 - How much COVID is affecting funding and capital crunch. SōRSE was profitable last year, may not be this year because of deal with Pascal and other issues, but cash positive. COVID has put a dent in raising 'easy money' and sales for Q2, but already have 4-5 investors that want to invest - if the technology and story are there and there's a potential for momentum once business markets go back to normal - it will eventually happen.
- 43:00 - Plans to go global, already shipping to EU and UK; looking with Valens at South America and Australia. Dedicated to global business development. Due to pandemic, many regulatory decisions are delayed at least 6 months. Managing difficulties during this time, but easier to do with as a cannabis business; easier to make a pivot. The importance of donating blood right now.
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On The Cannabis Investing Podcast, host Rena Sherbill provides actionable investment insight and the context with which to understand the burgeoning cannabis industry. Interviews with C-level executives, analysts and sector experts give you investment ideas to consider, help you think through your investing approach and provide you a new lens with which to understand this ever-growing sector.