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viewValens GroWorks Corporation

Valens GroWorks aims to capture a higher-level market in the cannabis extract space

Snapshot

The firm offers a range of services, including various proprietary extraction, analytical testing, formulation as well as white label product

cannabis extract

Quick facts: Valens GroWorks Corporation

Price: 3.39 CAD

TSX-V:VGW
Market: TSX-V
Market Cap: $419.79 m
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  • Largest third-party extraction company in Canada
  • Offers proprietary extraction, analytical testing, formulation as well as white label product development
  • Has multiple agreements with a number of leading producers across Canada

Who is Valens: 

Valens GroWorks Corp (CVE:VGW) (OTCMKTS:VGWCF) is a cannabis processor, formulator and product developer. The Kelowna, BC-based firm offers a range of services, which include numerous types of proprietary extraction, analytical testing, formulation as well as white label product development. On the extraction side, Valens offers CO2, ethanol, hydrocarbon, solvent-less and terpene extraction. 

The firm is the largest third-party extraction company in Canada, with an annual capacity of 425,000 kg of dried cannabis and hemp biomass. Valens has extraction processing and supply agreements with a number of leading producers across Canada.

READ: Mackie boosts price target on Valens GroWorks to C$8 after strong quarterly results

Valens has a number of wholly-owned subsidiaries:

 - Valens Labs is an accredited testing laboratory with a Health Canada Dealer’s License, as well as also being ISO 17025 accredited, the gold standard for lab testing. It has been named the “Center of Excellence for Plant Based Science” by $80 billion science instruments company, Thermo Fischer Scientific (NYSE:TMO).

 - Valens Agritech is a high capacity cannabis extraction and research and development facility.

- Valens Farms is a 400,000 sq/ft greenhouse cultivation facility that’s currently in development.

How is it doing: 

It’s been a busy few months for Valens, with a host of deals and accomplishments.

In August, Valens was added to The Cannabis ETF (NYSE:THCX), which trades on the New York Stock Exchange and tracks the Innovation Labs Cannabis Index. 

Another boost to increasing the firm's profile in the US was its uplisting to the OTCQX Best Market in August, having graduated from the OTCQB Market. Valens was also accepted for listing the common shares and warrants on the TSX Venture exchange as a Tier 1 life sciences issuer in the scond quarter of 2019.

READ: Valens boosts revenue, brings in C$8.8 million in revenue in 2Q financials

Valens opened new offices in Toronto, as well, to complement its operational platform in Kelowna, as it pushes forward its geographic expansion. 

The firm recently boosted its annual extraction capacity to 425,000 kg of dried cannabis and hemp biomass, thanks to increasing customer demand. The firm has plans to boost capacity further, to more than 1,000,000 kg annually, with the buildout of its adjacent facility in Kelowna, BC, which is anticipated to be completed in early 2020.

It gained three new extraction partners in the second quarter of 2019, including The Green Organic Dutchman Holdings Ltd (TSE:TGOD) (OTCMKTS:TGODF) HEXO Corp (NYSEAMERICAN:HEXO) (TSE:HEXO) and Tantalus Labs, and expanded contracted extraction capacity with Tilray Inc (NASDAQ:TLRY) by 300% to 60,000 kg per year, while adding contract manufacturing services.

With the global legal marijuana market expected to reach US$146.4 billion by 2025, Valens said it is in a position to capitalize on international opportunities. 

Unlike cultivators, Valens has a range of revenue streams available, that appear to be reasonably low risk, with quick turnover and high margins.

In its 2Q financials, revenue rose to C$8.8 million, while gross profit increased to C$5.1 million, or 58.0% of revenue, for the second quarter of 2019 compared to C$0.9 million or 38.3% of revenue in the first quarter. 

Mackie Research Corporation upped its price target on Valens GroWorks Corp to C$8 from C$6.75 following the group's' strong quarterly numbers. 

What the boss says: 

With the second quarter results in July, Valens' CEO Tyler Robson commented: “With the recent increase in annual production capacity to 425,000 kg, and significant interest from our industry partners in white label product development and manufacturing for vape cartridges, tinctures, gel capsules, beverages and topicals, we remain focused on the expansion of our footprint in Kelowna to capitalize on these significant opportunities.

"With this and other strategic investments, we expect to continue to strengthen Valens' position as the world's leading production partner in the cannabis industry and for growth to accelerate throughout the remainder of fiscal 2019 and beyond."

Contact Katie Lewis at [email protected]
Follow her on Twitter: @kelewis

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