The transition from December to January was a season of feasts for many people, but none had it like the shareholders of Easton Pharmaceuticals Inc (OTCMKTS:EAPH).
The period was one of share price upticks and increases in the traded volumes, so much so that the traded volumes rose by over a factor of seven. Previously, the company had been trading just under 2.5 million shares per day. Over the transition period, however, this number had risen to nearly 20 million which exhibited confidence in the investors’ outlook towards the company. Their share price then rose almost to $.04 nearly doubling its initial price of $.02.
Have a look at the above price and volume action in the chart below:
With such increased movements being exhibited, we decided to take a closer look at EAPH and establish the reason behind it. This piece is, therefore, an analysis of the drivers of this movement and an assessment of the feasibility of their value proposition – as had been done during our last piece on the company.
EAPH: Looking Back
Easton Pharmaceuticals Inc was founded back in 1997 and headquartered in North York, Ontario in Canada.
The company has since then grown into a diversified entity with an incline towards the pharmaceutical sectors. However, it is also taking part in the growth of other lucrative industries within the USA.
Their array of products ranges from wound-healing drugs to cancer treatment medication as well as other therapeutic products. Furthermore, the company has entered numerous trading partnerships that allow them to distribute specific medicines from entities such as CommonSense of Israel to places such as Mexico. Through this, the company sees its revenues rising. Therefore, it makes one step closer to their goal of being the industry leader in the pharmaceutical field.
The Canadian marijuana market serves as one of the largest markets in the world and is due to become a significant player in this field upon the legalization of recreational marijuana in July this year.
So far, Easton Pharmaceuticals has seen the opportunity that lies in this field and decided to capitalize on it. It has finally crossed the final hurdle in the approval phase for the cultivation of medical and recreational cannabis within Canada. This has been done in conjunction with their partners Alliance Group – who they currently have about 50% ownership in.
Through this, the company can capitalize on the over $5 billion market and benefit from having a piece of the pie.
Through the above steps made towards venturing into a new field coupled with the benefits the company is expected to accrue from their partnership with Alliance Group – such as the current 50% revenue split from contracts entered into which gives EAPH about C$8 million over the 2018 period – the company seems to be benefiting on all ends as they walk into their growth phase.
In line with the above, EAPH finalized their C$1.3 million payment, a payment which would give them ownership interests to the 135-acre property owned primarily by Alliance Group as well as 20-70% ownership interests in various businesses which include cannabis cultivation. Currently, as part of these companies is a C$6 million contract which began generating revenues in November 2017. Furthermore, the latter is expected to grow to C$20 million in gross revenues on their second operational year.
With their deal standing as is, EAPH is already in the money and isn’t about to stop on this journey they have embarked on to success.
The above news was followed swiftly by the report that EAPH had agreed to acquire 100% of the vaporizer business of iBliss Inc, a Toronto based company which was previously generating about C$15 million in revenues three years ago. The entity is currently producing about €6 million in revenues and has healthy profit margins. It is, therefore, a strong statement, in our view, by EAPH who are now venturing into the cannabis space.
Vaporizers will soon be significant within this segment – they already are – therefore it will be a strong move by EAPH if they acquire iBliss Inc as this will serve them by ensuring the company’s synergies are boosted going forward.
While on the synergies topic, EAPH continues to benefit from their distribution agreement with Gedeon Richter which will see them grow their reach within Mexico.
Their newest delivery package – AmnioSense (AL-Sense) – will be a vital part of the company’s vision towards meeting their target of $3 million in sales from this market. This is in addition to the benefits accruing to them courtesy of their entry into the Mexican market.
All in all, EAPH has been growing significantly over time through deals and strategic moves. It is therefore expected that the company will continue to follow the same trend as we tread into 2018. With such high number targets being set, we expect nothing more than growth from them.
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Disclosure: We have no position in EAPH and have not been compensated for this article.