CV Sciences is growing a cannabis-based business that's making headway on the pharma and consumer levels

If you aren’t an active consumer of hemp-based nutritional products, you’ve probably never heard of CV Sciences Inc (OTCQB:CVSI). But after a blow-out quarter (the company reported on August 1) that’s about to change.

CV Sciences is a $289 million life science company managing two distinct business segments.

The company’s specialty pharmaceutical business focuses on developing synthetic cannabinoids to treat a variety of medical conditions.

Its lead drug candidate, CVSI-007, is cannabidiol (CBD) and nicotine combination therapy designed to support the cessation of smokeless tobacco addiction. CVSI management hopes to complete preclinical studies during the third or fourth quarter 2018 and submit an Investigational New Drug (IND) application between the end of 2018 and early 2019 and begin clinical trials in 2019. 

CV Sciences’ consumer products business focuses on manufacturing, marketing, and selling products containing plant-based CBD under their PlusCBD brand. Currently, revenue generated from consumer products segment is funding the company’s capital needs. 

Now, it doesn’t matter whether we’re talking about cannabis companies growing actual marijuana plants, packing companies distributing tamper-proof bottles, or consumer product companies selling plant-based Cannabidiol products via nutraceutical, beauty care, or specialty foods retailers. The bottom line is investors are still leery about investing in companies with any connection to an industry that remains illegal in the eyes of the US federal government. 

But after the quarter CVSI just delivered, I believe investors need to start paying closer attention. 

The numbers don’t lie

For the second quarter 2018 CVSI reported the following:

• Record sales of $12,349,000, an increase of 203% compared to Q2 2017 figure of $4.082 million. 

• Record gross profit of $9,060,000, an increase of 219% compared to Q2 2017′s figure of $2.844 million. 

• Record net income of $3,186,000, which compares favorably to Q2 2017’s figure of a loss of $992,000. 

CV Sciences’ CEO Joseph Dowling said this about his company’s quarterly performance: 

“To date, we have been able to successfully execute our planned strategy of aggressively and consistently growing our sales distribution channel, further penetrate the market and increase our market share within the natural products industry. Our operating performance is driven by the strength of our market-leading PlusCBD product line, which today is No. 1 in the hemp CBD product category in the natural products retail channel. In every aspect, we set new performance records and laid the groundwork for future expansion as the health and wellness markets continue to embrace CBD commercialization and standardization.”

The bottom line is while the cannabis and CBD industries will continue to face regulatory headwinds, when it comes growing the business and meeting customer demands, CV Sciences is knocking the ball out of the park. 

Upcoming catalysts

On July 23, 2018, CV Sciences filed its application to list the company’s stock on the Nasdaq Capital market. 

In the company’s press release Joseph Dowling, CV Sciences’ CEO said this: 

“We believe up-listing from the OTC Market to the Nasdaq Capital Market will increase corporate visibility, improve liquidity, and broaden awareness in the financial markets. An up-list will open the investment opportunity to a larger pool of investors and help create greater shareholder value. We have made significant progress in strengthening our financial performance and liquidity, positioning the company for future growth and profitability. A listing on the Nasdaq Capital Market is a natural progression for the Company and our shareholders.”

Stocks listed on the Pink Sheets, Over-The-Counter or off-exchange markets are often viewed as highly risky and lacking in liquidity. And this perception limits the number and types of investors willing to purchase such securities. So, while up-listing onto the Nasdaq may not generate additional business revenue for CV Sciences, it will unquestionably add a level of legitimacy in the eyes of many investors. 

A second catalyst is this Saturday’s August 4, 2018, Annual Meeting and Investor Day in San Diego, California. And in addition to a corporate presentation from senior management detailing the company’s business strategy and record second-quarter sales and profit, shareholders will be voting on an amendment that would permit a reverse stock split of all outstanding shares. Enacting a reverse split will allow the company to meet specific price requirements necessarily for up-listing to the Nasdaq. 

Buy on the dips

The only complaint one can have with CVSI’s stock price is that it’s already up more than 400% on a year-to-date basis. But given the company’s incredible financial performance and its chances to be up-listed to the Nasdaq, the share price gains shouldn’t come as a surprise. 

Now, if you’re a microcap investor, you’re likely accustomed to gut-wrenching price volatility. So, allow the volatility to work in your favor. 

CVSI rallied approximately 165% during December 2017. But after that, the stock dropped more than 45% and consolidated for 3.5 months. 

When the stock broke out in mid-April 2018, it gained an eye-popping 270% over the course of six weeks. But again, after the momentum faded the stock dipped more than 40% and traded in a horizontal consolidation pattern for seven weeks. 

Patient investors looking to invest in a fast-growing company connected to the CBD and cannabis industry should keep CV Sciences on their radar. And when the stock dips and goes through another period of consolidation, which it inevitably will, that’ll be your opportunity to initiate a position at slightly less risk.

Story by ProactiveInvestors