News Roundup: February 2019

A monthly summary of the key events taking place in the Colombian medicinal cannabis industry

Finance and Acquisitions

PharmaCielo goes public on TSX:V

PharmaCielo Ltd (TSXV:PCLO), the Ca-adian parent company of Colombian producer PharmaCielo Holdings SAS, be- gan trading on TSX:V on January 18 with the ticker PCLO. PharmaCielo also announced changes to their management team, most notably that David Attard, former VP of President’s Choice Financial will replace Anthony Wile as CEO. The company is planning to grow its open air greenhouse cultivation area from 5.3 ha to 20 ha by the end of the year and reports it is well-capitalized to reach its objectives with USD$31.4 million in cash.

Chemesis International confirms the acquisition of La Finca
After signing a binding letter of intent in late 2018, Chemesis International (CNSX- :CSI) announced the confirmed acquisition of 100% of Colombian producer La Finca Interacviva-Arachna Med. To complete the acquisition, Chemesis is issuing CAD$8m in stock at CAD$1.25 per share, and will pay an additional CAD$5.5m in the next two years. La Finca has already submitted all required documents to the Ministry of Justice to expand its cultivation area to 430 ha.

Khiron Life Sciences completes acquisition of ILANS
Khiron Life Sciences (TSXV:KHRN) announced they have now completed the acquisition of the Latin American Institute of Neurology and the Nervous System (ILANS) after signing a definitive agreement in October 2018. The ILANS network represents 100,000 patients in Colombia, and could position Khiron with approximately CAD$10.5m in gross revenue. Kh- iron also launched its medical education program in Latin America with training events in Bogotá on January 21-23.

ICC International signs LoI to acquire 49.9% of Wayland Group
ICC International Cannabis (CNSX:WRLD) have signed a Letter of Intent to acquire 49.9% of Wayland Group’s international assets and license portfolio. Under the Definitive Purchase Agreement to be completed before March 1, 2019, Wayland’s international assets, including those in Germany, Switzerland, Malta and Argentina, will be held in a subsidiary owned by both Wayland and ICC International. In Colombia, ICC International will acquire a 49.9% interest in Gardina Pharmaceutical SAS. The Colombian-licensed company plans to build a 38,500m2 processing facility to cultivate outdoor THC cannabis on their 125 ha holding in Ibague.

Veritas Pharma signs MOU with Santa Marta Gold Holdings
Veritas Pharma (CNSX:VRT) and Santa Marta Gold Holdings have signed an MOU to share intellectual property. According to the MOU, both companies wish to collaborate in identifying and developing cannabis strains, as well as to commercialize and patent-protect medical products for specific pathologies. Santa Marta Gold Holdings has a fully owned subsidiary in Colombia, VDL Colombia, which has ac- cess to 35 ha, and is looking to cultivate outdoor hemp and indoor THC and CBD cannabis for the international medical market.

ICC International teams up with Estrella Verde
ICC International Cannabis (CNSX:WRLD) recently announced it entered a JV with Colombian licensed company Estrella Verde, providing access to more than 300 genetic strains. All strains have been registered with the International Cannabis Association (ICA) and have passed ICA characterization-testing protocols. Inter- national Cannabis has also passed the characterization protocols for its first ten cannabis strains and expects to receive final ICA production quotas in 2019.

Khiron to enter Uruguay cannabis market
Khiron Life Sciences have entered an agreement to give them cultivation capabilities in Uruguay and access to the Brazilian market. The deal will see them ac- quire 100% of NettaGrowth International who, by the time the sale is completed, will own all the outstanding shares of Dormul. Dormul is the holder of the first license to produce THC cannabis for commercialization in Uruguay and is also awaiting its extraction license.

Two Hands Corporation signs agreement to purchase Colombian cannabis cultivation license
Canadian hemp producer Two Hands Corporation (OTCQB:TWOH) has signed an agreement to purchase 100% of the CBD cultivation license held by Colombian producer Plantro Inc SAS. Under the terms of the agreement, Two Hands will pay ten million restricted shares of common stock and a 15% royalty based on net income. The purchase is expected to take place in mid-February, subject to SEC conditions and further approval.

Slow release capsule collaboration for Cannabics Pharmaceuticals and New- Canna Hub
Israel-based Cannabics Pharmaceuticals Inc (OTCQB:CNBX) have signed a LoI with Colombian cannabis think tank, New- Canna Hub to establish a joint venture to produce and market Cannabics’ Slow Re- lease (SR) capsules in Colombia. Accord- ing to the LoI, both parties will develop a joint business plan by February 24. The SR capsules are expected to be produced at NewCanna’s facility in Colombia, to later be distributed in relevant regulated jurisdictions.

Operations

Pideka kicks off operations with indoor cultivation

Pideka, a Colombian licensed cannabis producer with 20 years of experience in cannabis research, began its indoor cultivation project in early January 2019. With an initial investment of USD$3m, the company has built the first of five warehouses and launched the first indoor cultivation site with 100% controlled light and humidity conditions. The company estimates that their first harvest will be ready by the first semester of 2019, and the crop has already been snapped up by international buyers and investors. By the end of 2019, Pideka expects to have completed five warehouses of 1,200m2 each and reached a total investment of USD$15m.

Helix TCS expands and enters the Colombian market
Helix TCS (OTCMKTS: HLIX), a leading provider of ancillary services for the le- gal cannabis industry, has launched BioTrackTHC, its seed-to-sale tracking platform, in Colombia. The company has introduced a Spanish interface support- ed by Spanish-speaking technical sup- port staff, with a view to continue its Latin American expansion. BioTrackTHC is a Helix TCS subsidiary which provides critical software infrastructure to ensure cannabis producers are prepared to scale into high-volume production levels.

Colcanna SAS signs exclusive agreement with Colombian Medical Federation
Aphria’s Colombian subsidiary, Colcanna SAS, signed an exclusive agreement with the Colombian Medical Federation (FMC) to develop an academic curriculum on the medicinal use of cannabis. The FMC has nearly 2,000 affiliated doctors and a database of over 70,000 professionals who access the organization for re- search and educational resources. The curriculum will be accessible on a virtual platform that offers certified courses on a varied range of subjects, and will be sup- ported by scientific events for the medical community.

Foliumed starts hemp and cannabis cultivation in Colombia
Cannabis producer Foliumed has finished construction of its first greenhouse on a 16 ha site near Bogotá, where the compa- ny expects to produce over 70 tons of medicinal hemp and cannabis plants in 150 greenhouses. Their cultivation and manufacturing processes have been designed by Taproot Holdings, a USA-licensed cannabis producer, in order to take full ad- vantage of the favorable climate and low costs available in Colombia. Foliumed expects to invest USD$10m in its operations

Khiron Life Sciences expands to Chil- ean cannabis market
Khiron has completed its MOU with Daycann the holder of Chile’s first medical cannabis cultivation license, allowing them to participate in clinical trials and to develop and distribute medicinal cannabis products in Chile. The agreement, which was announced last year and is still subject to TSX approval, gives Khiron access to a cultivation capacity that can meet the needs of 45,000 patients annually for an initial two year term.

Digipath announces plans to expand cannabis testing internationally Colombia will be the first foreign market for Denver-based Digipath (OTCMKTS: DIGP) to open operations. The firm, which is focused on the cannabis and hemp markets, offers independent laboratory testing, data acquisition and media ser- vices. Digipath has already retained legal representation in Colombia, hired a local operations manager and is currently evaluating potential locations, so that it can provide cannabis testing for both exporters and local consumers.

PharmaCielo establishes joint venture with MINO Labs in Mexico
PharmaCielo Ltd has entered the Mexican market by teaming up with MINO Labs in an equity joint venture called Pharma- Cielo Mexico. According to the terms of the agreement, PharmaCielo will start delivering cannabis oil to the Mexican market in Q4 2019, though the deal is still subject to TSXV approval. MINO Labs is a Mexico-based specialty pharmaceutical company and medical supply distributor. PharmaCielo Mexico is equally owned by both parties, who are now required to develop a business plan within 90 days.

Dixie Brands signs Joint Venture agreement with Khiron Life Sciences Consumer packaged cannabis goods company, Dixie Brands (CNSX: DIXI.U) has signed a binding LoI with Khiron Life Sciences to establish a 50/50 joint venture to introduce a full line of cannabis-infused products to the Latin American market. Dixie will also manufacture and distribute Kuida, Khiron’s brand of CBD-based cosmeceuticals, in the United States. The joint venture agreement is still subject to TSXV approval.

Licensing

Organto Foods receives CBD cultivation license in Colombia
Medicannabis SAS, Organto Food’s (CVE:OGO) wholly owned subsidiary, has been granted a license by the Ministry of Justice to cultivate non-psychoactive cannabis at its facility in Guasca, Cundinamarca. The license further allows for grain and seed production for scientific purposes, giving the company the ability to make advances with high-CBD cannabis adapt- ed to tropical climates. Medicannabis has also filed registrations for 144 cultivars and breeding lines as Fuente Semillera with the ICA.

Security

On January 17, a Nisson Patrol loaded with 80kg of explosives entered a police cadet campus in Bogota. When a police dog detected the explosives the driver drove towards the dormitories, the bomb detonated killing 21 cadets and injuring 68 more. In the days after, the bomber – deceased in the blast – was identified as a member of the National Liberation Army (ELN), Colombia’s largest guerrilla group following the peace treaty with the FARC. Peace talks between the government and the ELN were suspended.

Following the August Security edition of CCI, we received feedback from a couple of executives who believed we had been alarmist in the article. January’s tragic events are a reminder that real security risks exist in certain regions of Colombia.

Public indignation at the attack has emboldened Ivan Duque, who looks set to remodel himself as a “war president” and use a hardline approach to the ELN the centre of his as yet shapeless and uninspiring mandate. This has two main consequences for cannabis investors. Those firms cultivating near the border with Venezuela, the ELN’s stronghold, can expect their risk profile to increase. Meanwhile, Duque’s political refocus will disappoint those expecting significant pro-business reforms.