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GB Sciences Inc (OTCMKTS:GBLX) Has A Fresh Focus: Here's What It Means

GB Sciences Inc (OTCMKTS:GBLX) Has A Fresh Focus: Here's What It Means
Written by
Chris Sandburg
Published on
May 11, 2017
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GB Sciences Inc (OTCMKTS:GBLX) is a different company from what it was when we first covered it last year. It's still a cannabis play, sure, but management has tried to inject a certain degree of focus into its operations, and in doing so, has basically changed the operational model. This isn’t a bad thing, as we'll look at in with more detail shortly, but it does mean we have to revisit it and put forward a fresh bias taking into consideration the latest developments. So, here goes.The core of this company is a technology that it has developed that allows it to produce strains of cannabis that are genetically identical to one another across an essentially unlimited number of generations. Variability has historically been a huge problem in the medical cannabis space. It is not difficult to produce a strain of cannabis. What is difficult is reproducing this strain to a degree of similarity that gets past the FDA’s stringent regulations when it comes to pharmaceutical grade plants.GB Sciences claims to overcome this problem, which has opened up two clear business opportunities for the company in the US: take contracts from larger companies for the manufacture of batches of cannabis plants that can then form the basis of a drug development platform, and second, grow its own plants, and initiate its own drug development programs.The latter of these two operational arms looks to be what is going to drive value (at least the lion’s share of it) going forward. The first is a bread and butter type driver, which is also going to be a value driver, but more likely just in terms of funding the dev-platforms. The company takes a particular mix of cannabinoids, engineers a strong opponent that can grow to contain said mix, and – concurrently – applies for a patent that covers the use of this particular mix in a target healthcare indication. The majority of the most recent communication from management (and a spate of CNF Media PRs) have focused on this strategy, with the patent applications taking front and center. Since the end of last year, GB has filed two patents and licensed another, for indications ranging from Parkinson's and Alzheimer's disease to chronic arthritis and inflammatory bowel syndrome to cardiac hypertrophy. It’s picked up a grower's license for a facility in Nevada, which it’s working to expand, and has signed an agreement with an entity called Kush Cups to produce a product designed for the brewing of cannabis-infused teas. There’s plenty going on, or so the news stream suggests. Exactly what all this activity means from a dollar value perspective is unclear, and that’s our issue with the stock. The pivot has allowed for a stream of PRs that promise treatments in billion dollar markets, but as things stand, there’s nothing to support these statements (outside of the above-mentioned patent applications). We’re not saying that GB isn't going after the big name diseases, just that it’s going to be a long time (half a decade) before it can get a drug on the shelves if (as management has claimed) said drug is going to pass through the traditional drug-dev pathway to get there. So here is where we are with GB: it has the potential to appreciate in value near-term if it continues to put out (and markets continue to absorb) the billion-dollar press releases. In this sense, it could be a nice news-driven trade for a quick in-out position. Longer term, however, there’s practically nothing we can use as supportive of a bias; be it bullish or bearish. With that said, for some, it might be worth a long-term punt. If the contract manufacturing type operations play out, there are bread and butter revenues on tap to support the more ambitious drug development plans. For anyone thinking of playing in line with this thesis, and as ever at this end of the market, cash is going to be a near term issue, so be ready to shoulder some dilution.We will be updating our subscribers as soon as we know more. For the latest updates on GBLX, sign up below!Disclosure: We have no position in GBLX and have not been compensated for this article.

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