Do you remember our coverage on Lexaria Bioscience Corp (OTCMKTS:LXRP)? My colleague, Alex Carlson, wrote an initial piece in January 2017 remarking the proper reaction of the market to the new cannabinoid sublingual tablets as well as the expected revenues.
In 2017, we studied the new developments delivered by the company and wrote an assessment in November. We continued to see a very interesting catalyst for the stock price including the news coming from the United States Patent and Trademark Office, the strong financial shape of LXRP, and the clinical studies on Lexaria’s high absorption TurboCBD™ product.
We need to admit that the stock returns after our article got published were above our expectations.
Let’s analyze the price action. The stock price increased from $0.5 to hit the $1.00 mark showing an incredible momentum. Then, in December, another impulse, even stronger than the previous one, made the price hit the $2.00 mark before pulling back to the psychological level of $1.75.
We believe that many in the market saw this volatility moment and tried to receive similar returns once again. The share price was pushed to $2.50 making 52-week highs and repeated the same previous pull back. Finally, the stock price remained moving at the level of $2.00, which, in our opinion, is quite critical. If longs can push up the share price once again, they will need to test the level of $2.50. Conversely, if the bears can control the market, the share price could fall to the $1.00 mark.
Check the stock chart and form your own opinion:
Let’s revisit the business model of Lexaria Bioscience Corp very quickly. The company was founded in 2004 and is headquartered in Kelowna, British Columbia, Canada. LXRP is said to be “a global leader in enhancing the flavor of edible cannabinoid consumer products while also working to expand the applicability of its technology.”
What has drawn the attention of the team are the valuable patents owned by the company:
They have been acquired thanks to agreements with other groups, such as Poppy’s Teas LLC, which signed a deal in 2014, or acquisitions like that of PoViva Tea, LLC.
These deals say a lot about LXRP. If you have not read our previous report, it is essential to understand that LXRP is very serious about growing its portfolio of patents. It is ready to acquire or sign with regardless of who it is if it will help build the business. Also, the company has a lot of financial resources to implement this aggressive strategy.
The November’s share price explosion – A new patent
On November 9, 2017, the company released a new patent application with the US Patent and Trademark Office utilizing the Lexaria DehydraTECHTM technology for delivery of phosphodiesterase type 5 (PDE5) inhibitors. This is what you need to read from the press release:
“In its new patent application, Lexaria has named the PDE5 inhibitors from the group consisting of avanafil, lodenafil, mirodenafil, sildenafil (or analogs thereof, for example, acetildenafil, hydroxyacetildenafil, or dimethylsildenafil), tadalafil, vardenafil, udenafil, acetildenafil, and thiomethisosildenafil. In addition, under the new patent application each of these named molecules may be combined with a cannabinoid such as cannabidiol (“CBD”), where the cannabinoid delivered in concert may provide complementary vasodilatory activity beneficial together with the PDE5 inhibitor.” Source
To tell a long story short, the new DehydraTECHTM technology will allow faster treatment and lower dosage quantities. This is very significant, not only for the products of LXRP but also for other operators, who will be able to use the new model for their chemical compounds.
In our opinion, this patent could be a game changer for the industry. That’s the only way that we can explain the massive stock returns that were seen in the market. The most critical that we need to assess is whether the company can sign agreements with other cannabis researchers. If it is true that this patent can be applied to other compounds, the expected revenues will be much higher.
The December’s share price explosion
It seems that the activity between the United States Patent and Trademark Office and LXRP have been frenetic in November and December. In a new press release received on December 13, 2017, we got to know a new patent granted to the company. In particular, the patent number 9,839,612 B2 is for the use of DehydraTECH™ technology as a delivery platform for all cannabinoids including THC, fat-soluble vitamins, non-steroidal anti-inflammatory pain medications, and nicotine.
Our readers should remember that we assessed this new patent in the article published in November. In that piece, we said that the United States Patent and Trademark Office had commenced the allowance process. The new press release noted that the company had officially received the patent:
“The title of the granted patent is “Food and Beverage Compositions Infused With Lipophilic Active Agents and Methods of Use Thereof.” This issued patent protects Lexaria’s intellectual property (“IP”) for the DehydraTECH™ delivery of all the active substances noted via nearly any kind of processed food or beverage, as well as capsules and pills.” Source
Once the process is finished in the US, the company is now looking to receive grants in other regions, such as China, the European Union, or Canada. These new processes should be assessed with attention. We know that the market pushed up the share price when the US regulator granted the patent. Thus, we will be expecting the same to happen in other countries. It is a clear catalyst for the stock price.
Additionally, the Chief Executive Officer, Chris Bunka, said that the new year 2018 could be full of new opportunities. Products such as nicotine edibles for the smokeless tobacco industry, new products for NSAID-derived pain management or the cannabis market were mentioned. We encourage readers to stay alert.
Currently trading with a market cap of $132 million, LXRP is an exciting story among small caps. A significant amount of cash, $2.2 million, and assets, $2.4 million, in contrast with a few liabilities, $95,000 shows that LXRP has sufficient resources to keep the innovations running for a long while. Additionally, the increase in revenues, 57% in the last year, is another exciting feature of LXRP.
We believe that those who have already made incredible returns on this name could start booking some profits. But overall, LXRP remains a company on the right trajectory.
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Disclosure: We have no position in LXRP and have not been compensated for this article.
Image courtesy of Ecoly Polytechnique via Flickr