After about two years of building relationships with exceptional partners and positioning itself in Canada and Europe, XPhyto Therapeutics (CSE: XPHY) was ready to become a public company. That happened Tuesday morning, with trading beginning on the Canadian Securities Exchange, checking off one more box on management’s list of accomplishments.
The company was founded in 2017 to pursue the next wave of business opportunities in cannabis, such as medical applications, proprietary formulas and emerging European markets. More precisely, XPhyto, through its wholly-owned subsidiaries, is developing a testing, manufacturing, and research business in Canada, as well as a cultivation, import, manufacturing, and distribution business in Germany.
To that end, the parent company has several subsidiaries, including XPhyto Labs in Canada and Bunker Pflanzenextrakte GmbH in Germany.
Jump Start on Canadian Expertise
Thanks in large part to XPHY Director Dr. Raimar Löbenberg, XPhyto has two, separate 5-year agreements with the University of Alberta’s Faculty of Pharmacy and Pharmaceutical Sciences. Dr. Löbenberg founded the Drug Development and Innovative Centre at the university and is now sharing his wealth of experience and impressive resources with XPhyto. In exchange for all he provided, Dr. Löbenberg is now one of XPHY’s largest shareholders.
XPhyto is immediately in a position to be a leading player in cannabis science in Canada, owing to UofA already being considered an authority. Management made a savvy decision to go the collaborative route in Canada to jump start operations, which saved tens of millions of dollars in capex to build the type of facilities at its disposal now, without mentioning the scientists and staff at UofA.
Per the one agreement, the Faculty of Pharmacy and Pharmaceutical Sciences will manufacture cannabis-based extracts and isolates in its ISO certified clean room for XPhyto for the purposes of research and clinical trials.
According to the other agreement, the university and XPhyto will work together to co-develop a commercial grade analytical lab at UoA for the purpose of testing cannabis and other plant-based medicines. XPhyto has fully funded the development and construction of the analytical testing facility.
First Mover in Germany
Late in July, XPhyto’s Bunker announced that it received a licence for cannabis cultivation and extraction for scientific purposes in Germany, one of the first licenses of its type in the country.
Bunker’s name is quite appropriate given that it has a long-term lease on a former avionics station and nuclear bunker in Bavaria, previously used by the German Bundeswehr Tornado fighter bomber squadron. The nearly 11,000 square-foot facility (with room to expand) is located nearby Munich West airport.
The bunker was built to withstand a nuclear disaster, including radiation-proof doors, thick concrete double walls, back-up power, air filtration and a dedicated internal water well. To that end, some of the infrastructure is already in place for a cannabis business and the building certainly is secure.
XPhyto will need to put about $900,000 into a first phase of renovations to the Bunker facility in order to further additional cannabis licenses and opportunities for storage, import/export, manufacturing and other planned operations catering to the European markets.
Big Market Opportunities
XPhyto is a startup that is moving quickly and with focus as it sees opportunities in its home country in cannabis science rather than fighting for share in the congested cultivation space. Arcview Market Research and partner BDS Analytics estimate that the Canadian cannabis market will reach $5.2 billion within five years.
In Germany, the market is still young, but it is one of the fastest growing in the world on a year-over-year basis. Arcview forecasts Germany’s cannabis market to grow at 77% compounding annual clip to reach $1.6 billion in the next three years. The market is the flattest of playing fields right now with the German health authority holding its first tender process for cultivation licenses late last year.
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