Vireo Health Could Lead the Way in Marijuana Pharma

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On the surface, Vireo Health International may look like another medical cannabis company. Like most U.S.-based cannabis companies, it works to build a multi-state despite onerous Schedule I regulations at the federal level.

However, the company’s financial condition compares well with peers. Moreover, its medical focus could lead to a breakthrough that could someday make Vireo Health a household name.

Vireo Focuses Primarily on Pharma

The Minneapolis-based firm bills itself as a “science-focused, multi-state cannabis company.” Thus far, its home state of Minnesota has legalized cannabis use for specific medical purposes only. Consequently, it operates exclusively in the medical cannabis space.

This likely helps the company from a regulatory standpoint. Like most cannabis companies in the U.S., it must contend with the Schedule I designation that has held back both Vireo and most of its U.S.-based peers. Vireo recently filed for a patent on its multichannel vaporizer. This can vaporize two or more strains of cannabis. This benefits users by allowing them to create custom blends and adjust potency according to their needs.

The stock quietly launched its IPO in Canada in March. Like most cannabis equities, it has steadily declined since that time. However, on Aug. 2, it began trading in the U.S. on the OTC market under the ticker VREOF.

Financials, Patents Could Drive Vireo Health Stock

At first glance, VREOF stock may not look impressive. Many will not touch OTC stocks, particularly when they trade near the $2 per share level. The company suffers from a lack of name recognition, particularly when Canadian companies such as Canopy Growth  or larger U.S.-based names such as Curaleaf Holdings  garner more attention.

In a world where some cannabis stocks sell for over 100 times sales, VREOF looks like a safer bet trading at two times sales.

However, for investors who can overlook these challenges, one can find a lot to like. First, it only trades at about two times sales. In a world where some cannabis stocks sell for over 100 times sales, VREOF looks like a safer bet.

Moreover, its financial condition compares well to most other marijuana stocks. In its previous quarter, it reported a loss of $3.4 million. However, the company holds about $40.4 million in cash. Even if the profit picture does not improve, it has about two years before it needs to turn to investors for more money. However, with quarterly revenue growth of 57.1%, its burn rate should fall and eventually disappear.

Furthermore, its medical focus could lead to a research breakthrough. Last year, the Food and Drug Administration (FDA) approved Epidiolex, a cannabis-based drug for the treatment of seizures. This has boosted the stock of U.K.-based GW Pharmaceuticals , an equity that has risen 17-fold since 2013.

The vaporizer awaits FDA approval. However, if it gains mass-market appeal, VREOF stock could see the same kind of meteoric rise.

The Bottom Line

Amid a low stock price and a lack of name recognition, Vireo Health looks poised for a possible breakout. With all the upstart marijuana companies and the burden of U.S. regulations, investors could easily overlook Vireo.

However, it benefits from massive revenue growth and enough cash to stay in business in the near term. Even better, if it could achieve breakthroughs with its vaporizer or other patented treatment, it holds the potential to become the next GW Pharmaceuticals.

The opinions provided in this article are those of the author and do not constitute investment advice. Readers should assume that the author and/or employees of Capital 10X hold positions in the company or companies mentioned in the article. For more information, please see our Content Disclaimer.

 

The opinions provided in this article are those of the author and do not constitute investment advice. Readers should assume that the author and/or employees of Capital 10X hold positions in the company or companies mentioned in the article. For more information, please see our Content Disclaimer.

Will Healy
Will Healy is a freelance business and financial writer based in the Dallas area. In addition to marijuana, energy, and mining stocks, he has also written about real estate, insurance, personal finance, and macroeconomics.In addition to Capital 10X, his articles have appeared on sites such as InvestorPlace, Yahoo! Finance, MSN Money, Kiplinger’s Personal Finance, GOBankingRates, and Seeking Alpha.Will holds a B.S. in Journalism from Texas A&M University, an M.S. in Geography from the University of North Texas, and an MBA from the University of Texas at Dallas.Phone: 416-721-8257. Address: 682 Indian Road Toronto, Ontario M6P 2C9.

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