The latest play on the booming global cannabis market may not be a cannabis company at all.
Biotech tracking platform Applied DNA Sciences Inc (NASDAQ: APDN) shares soared more than 50 percent Friday after the company announced a new cannabis tracking deal.
The microcap company announced a deal with cannabis consultancy TheraCann to integrate Applied DNA’s CertainT supply chain integrity technology with TheraCann’s ETHC’s biotrace system and apply them to the global legal cannabis market. As part of the deal, the two companies will jointly market and sell the cannabis tracking system and share profits after the initial investment is recovered.
Applied DNA will receive an initial licensing fee of $5 million paid from April 15 to Oct. 15, 2019. After that, the company will receive annual minimum payment milestones starting in year two and scaling from $7 million per year in year three to $20 million per year in year 15.
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Why It’s Important
Applied DNA shares were skyrocketing for two primary reasons. First, the size of the contract and even the $5 million near-term licensing fee is very large for a company with a market cap under $30 million.
Second, cannabis investors have been starved for ways to gain exposure to the fledgling business. With many cannabis stocks already priced at steep premiums, Applied DNA could potentially offer a unique angle for investors at a reasonable price.
“The marketplace has responded with gusto to our shared ETCH biotrace platform,” TheraCann CEO Jason Warnock said. “Multiple letters of intent from numerous countries that wish to protect their licensed cannabis supply chain to maximize international export opportunities already anticipate commercial trials, and quotations are with customers for large scale supply.”
Investors will be watching closely to see if the letters of intent Warnock mentioned in the press release result in new deals for Applied DNA and TheraCann in the near term. Traders will also be watching Applied DNA’s penny stock to see if Friday’s rally gets enough cannabis investors’ attention to give the stock legs in the longer term.
The stock traded around 72 cents per share at time of publication, up 35 percent.
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