When you’ve got something great, it may take a little bit of time for people to learn about it, but once word starts getting around, it can yield a windfall of interest. That’s the case with Lexaria Bioscience Corp. (CSE: LXX) (OTCQX: LXRP) and its DehydraTECH
technology that enhances qualities and uptake of all sorts of lipophilic (fat-based) molecules. As such, companies from diverse businesses have partnered with Lexaria recently, including Hill Street Beverage last week.
So What’s the Big Deal with DehydraTECH?
The human body has a natural digestive process that is quite proficient at filtering molecules to ensure safe delivery of only beneficial substances. In scientific nomenclature, a molecule (an oral medicine for example) actually reaching the human bloodstream is referred to as “bioavailability” and it can be a real challenge to do so.
Click on the Video for Education on Lexaria’s DehydraTECH technology.
DehydraTECH is an efficient Trojan horse for getting molecules delivered in oral form around the filtering process of liver metabolism and into the bloodstream. Lexaria accomplishes this by joining the payload – albeit a vitamin, active pharmaceutical ingredient, nicotine, cannabinoid, etc. – with a microscopic particle of a special type of fat known as LCFA’s (long chain fatty acids). Upon ingestion, the body detects the LCFA, not the molecule hidden alongside. There are a multitude of positive results from this technology, which have been verified through lab and human studies.
Click Here to View Lexaria’s Investor Presentation
For starters, many beneficial molecules taste and smell horrible. DehydraTECH eliminates that problem, making them palatable without using sugar like most competitors do today. Even more importantly, the bioavailability profile changes dramatically. The time it takes to feel the effect can be shaved to as little as 10 minutes (as little as 2 minutes in animal testing) from the natural metabolic process that typically takes around 90 minutes. Furthermore, bioavailability can surge as much as 10-fold, meaning the consumer is getting more of what they want and need faster.
Opportunities Abound
The beauty of the DehydraTECH technology is that it is easily and cost-effectively implemented into existing manufacturing operations. It appeals to a diverse group of customers because of the many different types of molecules for endless applications. As detailed in the company’s presentation, from pills to coffee, DehydraTECH is a highly versatile drug delivery method.
Some of the initial targets being focused on are cannabinoids, NSAIDs such as ibuprofen (non-steroidal anti-inflammatory drugs), vitamins and nicotine. The opportunity to genuinely disrupt the nearly $1 trillion market with the world’s first ingestible nicotine product did not escape Marlboro owner Altria (NYSE: MO). In January, the international tobacco behemoth agreed to put up $12 million for R&D and product development for oral, reduced risk nicotine consumer products using DehydraTECH and agreed to pay Lexaria a royalty on products sold with DehydraTECH technology.
July Big Month for New Partners
The cannabis market is booming, as more health conscious consumers look to the plant for all of its therapeutic effects. In particular, people are looking to cannabidiol (CBD), a prominent cannabinoid found in hemp and cannabis trumpeted for its benefits for treating everything from dry skin to epileptic seizures.
The legalization of hemp at the start of the year thanks to the passage of the U.S. Farm Bill has the hemp market abuzz and Lexaria is in the thick of it. Early in July, the company’s subsidiary Lexaria Hemp Corp. entered a 5-year agreement to provide DehydraTECH technology to Nic’s Beverages Ltd for use in CBD-based beverages to be produced and sold throughout America.
Nic’s is the fourth company (3 in the U.S. and 1 in Canada) to license the technology for beverages. Nic’s plan is to begin making ready-to-drink cold brew coffees enhanced with CBD from multi-spectrum hemp oil.
“DehydraTECH technology is perfect in allowing us to deliver CBD from hemp oil with zero impact on our cold brewed coffee’s outstanding aroma or flavor,” commented Nic’s CEO John Goodpasture.
A day after the Nic’s deal was disclosed, Lexaria said it inked a 5-year deal to provide DehydraTECH to B2B manufacturing company Universal Hemp LLC. Universal Hemp will be using the technology for its hemp-derived CBD bulk ingredients it supplies to the nutraceutical and consumer packaged goods industries throughout the U.S. and Canada.
“In terms of bioavailability, shelf stability and taste, [DehydraTECH] is the best performing technology in the market, hands down,” said Chad Kahunahana, CEO and Founder of Universal Hemp about the partnership.
Future royalties and other financial terms were kept confidential, but it was revealed that the deal has minimum down payments over the life of the contract of US$3.75 million.
Lexaria kept the momentum going all month, announcing a 10-year joint manufacturing partnership (JMP) with Hill Street Beverage Co. (TSX-V: BEER) to create commercial products utilizing DehydraTECH. Per the pact, the companies will work together to make THC cannabis and/or CBD hemp powder for all new (and yet unnamed) consumer products in the form of tablets, capsules and packets.
Click Here to View Lexaria’s Investor Presentation
The JMP will also produce similar powders as a bulk ingredient for manufacturing processes for sale to other licensed producers seeking to use Lexaria’s advanced infusion technologies to create their own wide variety of products for sale within Canada.
Hill Street is in the midst of completing the acquisition of OneLeaf Cannabis. Manufacturing of the new goods, which will be handled by Hill Street and utilize DehydraTECH in the process, is expected to be done at OneLeaf’s cultivation and processing facility in Regina, Saskatchewan, pending all Health Canada approvals.
For its part in bringing DehydraTECH to the table, Lexaria is entitled to 50% of the new company’s profits.
The companies are making the moves now to be properly positioned when cannabis-infused edibles become legal throughout Canada later this year.
The JMP may be new, but the relationship between Hill Street and Lexaria is not. Hill Street had previously licensed the DehydraTECH technology for CBD-infused beverage sales in Canada. Last week, a new 10-year agreement was forged giving Hill Street global rights on a semi-exclusive basis.
It seems that CEO’s of consumer product companies are enamored with DehydraTECH: “Lexaria has proven themselves time and again to be the ideal infusion platform for our products,” commented Hill Street’s Chairman and CEO, Terry Donnelly.
Under the terms of the agreement, Hill Street is paying Lexaria US$1.8 million in BEER stock, most up front, with the remainder owed upon meeting milestones for entering new international markets.
Lexaria announced in August that they’ve received a cannabis R&D license from Health Canada that does not expire until August 2023, allowing the company for the first time ever to place its state-of-the-art laboratory into operation and accelerate a truly impressive research program.
“Lexaria has evolved so rapidly and achieved so much in the past eight months, that we are nearly unrecognizable compared to the end of 2018,” said Chris Bunka, Chief Executive Officer of Lexaria. “We’re signing new customers at ten times the rate of previous years; we’ve partnered with one of the largest companies in North America; additionally, we’ve just completed construction of one of the most advanced labs in the industry. 2019 has been a fabulous year so far and we think it will only get better, and drive strong new revenues and advances into 2020 and far beyond.”
The most recent sign of those advances is the appointment of Mr. Brian Quigley to their board of directors. Mr. Quigley most recently spent 16 years at Altria Group, 7 of those years were spent as President and Chief Executive Officer for U.S. Smokeless Tobacco and Nu-Mark, Altria’s innovation company. It was during that period of time that the existing business relationship between Altria and Lexaria was negotiated.
“I am thrilled to be joining the already strong team at Lexaria Bioscience. From my first engagement with Chris, it was clear to me that Lexaria and its leadership team is positioned to create change through innovation in both the Cannabis and Nicotine space. It is an honor to join this team after forging such a strong partnership with them during my time with Altria.”
Consumer Products Company? Licensing Company? Try Both.
Because Lexaria has two brands of its own: ViPova (a beverage lineup of teas and coffee) and both TurboCBD capsules and ChrgD+ powdered drink mix, they sometimes get lumped in with other CBD consumer brands companies. Adding in the new venture with Hill Street adds to that assumption.
Fact is though, technology licensing is at the core of Lexaria’s business. Candidly, it is a far more lucrative business too, with margins generally 90+%. With a robust patent estate of about a dozen issued patents and more than 60 additional pending, management has built itself a strong position with a better solution than sweeteners and chemicals for any and all ingestible products by merely adding one step to the manufacturing process.
When more companies continue to learn that they can add DeyhydraTECH to their operations to make lipophilic compounds palatable with superior bioavailability for only a fraction of a penny per product serving, there is likely going to be more companies knocking on Lexaria’s door.
Click Here to View Lexaria’s Investor Presentation
Click Here For More Information on Lexaria Bioscience Corp.
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