Issue #2: Branching into cannabis, a COVID-19 miracle drug and electric delivery trucks

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P.S. Tilray ($TLRY) is up 20% since we covered it in our report last week ????

Let's get into this week’s report. Here’s what we found:

  • An electric vehicle company that could replace 645,000 US Government vehicles
  • A seasoned agriculture company using its experience to branch into the weed market
  • A company that is less than a month away from (potentially) coming up with a miracle drug for severe COVID-19 symptoms

Workhorse Group, Inc. ($WKHS)


What they do:

Workhorse Group builds and designs high-performance, battery-electric vehicles such as trucks and drones.

They also build cloud-based, real-time performance tracking systems to make last-mile delivery as efficient and environmentally friendly as possible.

Why they’re spiking in interest:

Total volume of interest increased by 6,433% on 01/26/21 after President Biden signed a “Buy America” executive order that has major benefits for American electric vehicle manufacturers including Workhorse.

Although social volume has fallen since the announcement, current levels are still 400% higher than before the announcement.

Why WKHS could be valuable:

The U.S. government owns approximately 645,000 vehicles, according to 2019 data from the U.S. General Services Administration (GSA). As of July 2020, only 3,215 were electric vehicles.

The transition of US government vehicles, including postal delivery vans, to electric power would be a major win for Workhorse Group.

Prior to the announcement by President Biden, Workhorse received a purchase order for 6,320 C-Series all-electric delivery vehicles from Pride Group Enterprises (worth approx. $500 million).

The fact Workhorse already has revenue puts it ahead of other highly valued electric vehicle companies that are yet to make any revenue.

What the risks are:

Governments usually take their time when signing off on contracts, regardless of the size.

It also isn’t guaranteed Workhorse will be able to secure the contract especially with other competitors in the space.

The company only produced around 400 vehicles in the last quarter of 2020. WKHS posted revenue of just $92,000 in Q2 in 2020. Their cost of goods topped $1.5 million. This resulted in an 11 cent earnings per share loss in the period.

Village Farms International, Inc. ($VFF)


What they do:

Created in 1989, Village Farms International was originally a greenhouse operator producing tomatoes, peppers, and cucumbers.

In 2017, the company formed a joint venture with Emerald Health Therapeutics for large-scale cannabis production. The joint venture, named Pure Sunfarms Corp., has grown into one of the largest cannabis producers in Canada.

In 2019, Pure Sunfarms’ 1.1 million square foot plant produced approximately 110,000 pounds of cannabis.

Why they’re spiking in interest:

VFF announced a US$135 Million Registered Direct Offering on 01/15/21 with social volume increasing by 100% since December 2020.

Why VFF could be valuable:

Village Farms is positioning itself as a high tech, low cost, agricultural consumer-driven business. Leveraging its greenhouse experience to grow cannabis products at industrial scale.

It’s aggressively pursuing high-growth opportunities in emerging legal cannabis markets in the United States, Canada and Australia.

VFF’s Texas site is ready for hemp production when it receives the go-ahead from the US Food and Drug Administration (FDA). In Canada it is aiming to grow the number of stores in Ontario from 300 to 1000 in the next year. VFF also has a foothold in Europe – last year it became one of six equal shareholders in a Netherlands-based cannabis business.

What the risks are:

Latest balance sheet data shows that VFF has liabilities of US$20.5m due within 12 months and liabilities of US$34.7m due beyond that.

The future profitability of the business will decide if VFF can strengthen its balance sheet over time.

Although since VFF is publicly traded with its total shares worth around US$344m, it is unlikely that this level of liabilities would be a major threat.

Humanigen, Inc. ($HGEN)


What they do:

Humanigen is a clinical stage biopharmaceutical company focused on preventing and treating an immune hyper-response called cytokine storm (one of the major immune responses from COVID-19) with its lead drug candidate Lenzilumab.

Humanigen is also in the early stages of work on a drug designed to reduce the sometimes dangerous side effects associated with cancer therapy involving altered T-cells.

Why they’re spiking in interest:

Humanigen announced on 01/20/21 that it had completed enrolment for its critical Phase 3 study of Lenzilumab for COVID-19. The company is expected to announce top level results of the trial in March this year.

Social volume has increased by 133% from December 2020 to January 2021.

Why HGEN could be valuable:

Assuming the Phase 3 trial is successful, Humanigen is well positioned to profit from the use of Lenzilumab for COVID-19 patients experiencing severe symptoms.

They have already established a commercial partnership with life sciences services group EVERSANA to kick off the commercial launch of the drug. This would give Humanigen instant access to EVERSANA’s services, which include marketing, medical information, and market access.

EVERSANA currently serves more than 500 organizations, including innovative start-ups and established pharma groups.

Humanigen also announced an expansion to the Cooperative Research and Development Agreement (CRADA) that the company had previously entered into with the Department of Defense Joint Program Executive Office for Chemical, Biological, Radiological and Nuclear Defense (JPEO-CBRND).

The agreement supports the development of Lenzilumab in advance of a potential Emergency Use Authorization (EUA) for COVID-19.

What the risks are:

A lot of the growth prospects for Humanigen relies on the Phase 3 trials for Lenzilumab to show effective results.

Humanigen is also burning through cash fast. When Humanigen last reported its balance sheet in September 2020, it had zero debt and cash worth US$91m. In the last year, its cash burn was US$47m.

This isn’t all bad news though. When compared to its market cap of US$903m, Humanigen's US$47m in cash burn equates to only 5.2% of its market value.

That's a wrap!

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