Charlotte’s Web Holdings Inc. (TSX: CWEB) bought Abacus Health Products Inc. in a stock transaction worth about $100 million last June. With competition on the rise in the CBD industry, Abacus provided Charlotte’s Web with a portfolio of over-the-counter (OTC) topical products that combined active pharmaceutical ingredients with hemp extracts.

HempFusion Inc. (TSX: CBD.U – reserved) has taken a similar approach with its portfolio of proprietary OTC FDA Drug Listed topical products. By going through the lengthy and costly approval process, the company can make unique health claims that differentiate its products including: pain relief, eczema relief and acne relief.

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Unique Product Portfolio

HempFusion Co-Founder and CEO Jason Mitchell, N.D. was instrumental in building Country Life Vitamins, a leader in health and wellness supplements, as Chief Science Officer. Building upon that experience, he co-founded HempFusion and Probulin to focus on next-generation probiotic supplements and unlocking the promise of phytocannabinoids like CBD.

After several years and over $2 million in capital investment, Mitchell helped secure OTC Drug Listed status for its line of topical CBD products targeting pain relief, wound healing, anti-aging, and other categories. The company’s other products include proprietary blends designed to support healthy sleep, promote energy and reduce anxiety.

Charlotte’s Web’s acquisition of Abacus Health underscores the uniqueness of the ability to make these claims. After all, most CBD companies don’t have the time or capital required to advance products through the years-long and multi-million-dollar process of securing FDA OTC Drug Listed status for their product lines; and therefore, cannot make impactful health claims. 

The company’s OTC Drug Listed portfolio provides both a competitive barrier to entry and an important marketing advantage on store shelves. In addition to these qualities, the company has already built robust distribution channels, including Amazon.com, Whole Foods, Sprouts and the Vitamin Shoppe with plans to move into Big Box (Food & Drug Mass) and convenience stores soon.

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IPO on a Senior Exchange

HempFusion plans to complete its Initial Public Offering on Canada’s Toronto Stock Exchange (TSX) in December. After setting out to raise $17 million, the company immediately saw a heavily oversubscribed order book with interest from both accredited investors in the United States and non-accredited investors in Canada.

With the second largest cash position in the industry at about $18 million as of June 2020, the company’s $17 million capital raise will provide ample capital to pursue its ambitious plans to reach 150,000 retail locations over time. Its focus on ecommerce could further help it dominate a space that has seen record levels of consumer interest.

The Brightfield Group projects that the U.S. CBD market will reach $16.8 billion by 2025. The company believes that the growth will reward companies that react quickly to the market and ultimately unlock significant value.

Looking Ahead

HempFusion is well positioned to capitalize on growing demand for CBD products. With OTC Drug Listed status, it has a unique marketing advantage compared to other products that have become ubiquitous on store shelves. The funding from its IPO should help expand its distribution and revenue over the coming quarters. 

For more information, visit the company’s website or download their investor presentation.

Disclaimer

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About Ryan Allway

Mr. Allway has over a decade of experience in the financial markets as both a private investor and financial journalist. He has been actively involved in the cannabis industry since its inception, covering public and private companies.