The cannabis space has been one of the most closely watched, if not the most closely watched, space at the smaller end of the US equities markets across the last twenty-four months. The late 2016 recreational legalization vote thrust recreational consumption into the mainstream and – in doing so – drew a vast wave of speculative volume towards the sector, across companies of all shapes and sizes.
Here at Insider Financial, we tracked the industry both heading into the November ballots and in their wake, and our readers enjoyed some considerable winners across the period. During the subsequent months, we’ve been on the lookout for potential cannabis plays that are, right now, under the radar but that could start to run near term as markets become increasingly aware of their potential.
We’re looking at one right now and it’s called Skinvisible Inc (OTCMKTS:SKVI).
At core, this one’s not a cannabis stock and that’s not a bad thing. It’s a biotech/healthcare company that sells a portfolio of products based on a proprietary (and patented) technology called Invisicare. The technology is rooted in the combining of already approved active ingredients (generally, skin care/dermatology type drugs) with a specific combination of polymers. The polymers allow for a resistant to wash type product that has an improved skin adherence (in many cases) to the generic products that are sold OTC in competition, but that’s just half of the tech. What’s most interesting (and for us, what really matters) is that the technology allows for far more control over the speed with which the active ingredient is released and absorbed by the skin of the patient.
Right now, then, Skinvisible has a product portfolio that comprises all of the sorts of creams and lotions that you might expect would benefit from this advantage – eczema, fungal infections, inflammation, warts, dermatitis, etc. The company also seeks to license out the technology to established companies looking to expand their own portfolio or newer entrants looking to get a product to market that has a competitive advantage over an existing OTC.
There’s real potential in this model alone. These sorts of generic assets can generate tens of millions of dollars’ revenues in the US and the patents that cover Invisicare (US, Canada, Europe and China) mean that Skinvisible can offer any licensee a competitive edge in the market on a product they develop without said licensee having to meet the huge capital outlay that’s associated with developing a competitive advantage-type tech in-house.
So why are we highlighting this one as a cannabis play?
Well, Skinvisible announced back on July 7, 2017, that it is now able to apply its Invisicare technology to hemp derived cannabidiol products. Through a license agreement with an entity called Cannaskin, the company has developed a range of products that can deliver both CBD and THC transdermally at a volume of more than four times that of competing products (this is where the Inviscare technology comes into the picture) and that the lead product candidate has a penetration rate of 81%. That’s far above that of current products and means that not only could Skinvisible and Cannaskin put out their own product in the space (and have said product be marketable at a significant competitive advantage over peer products), but that Skinvisible could operate under the same model described above and license out the tech to a company looking to bring their own product to market.
Sure, doing the latter could mean a company can bring a competing product to market and hurt the sales of any Skinvisible own-brand asset, but there’s probably far more potential in terms of dollar volume in having, say, twenty companies all licensing the technology than there is in a single product launch and a ring-fencing of the tech. With that said, the single launch provides proof of concept with which Skinvisible can then take the concept to potential licensees.
So that’s the model in a nutshell right now. Cannabis is big and getting bigger. Dermatology is a billion-dollar industry in the US. Whether Skinvisible wants to combine cannabis and Skincare to treat dermatological conditions (very possible, potentially very profitable) or use its technology to provide recreational or medical cannabis users with a newer, more effective delivery method (probable, again very profitable) there’s considerable potential for long term growth for the company from its current market capitalization.
Standard risks apply, of course. This is an already proven technology but any pharmaceutical product is going to have to go jump some degree of regulatory hoops (variable depending on the type of product/indication being sought) and this is going to cost money. Cash is something that Skinvisible doesn’t have right now, so dilution risk is very real. If the company can use any capital raised to execute on a strategy as outlined above, however, it should easily be able to offset the impact of dilution for shareholders with overall value appreciation.
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Image courtesy of David Gach via Flickr
Disclosure: We have no position in SKVI and have not been compensated for this article.