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Evitrade Health Systems (EVA-CNX) Setting Up to be the Breakout Stock of 2018

Put EVA on the top of your Watchlist Now! (EVA-CNX)

Plants are the foundation of all modern medical science. Even today, essential oils and other chemicals from the farm and garden make their way into high-tech therapies for huge targets — tobacco derivatives can cure ebola, here’s a company treating Alzheimer’s disease with daffodil bulbs, the list goes on and on.

Never mind nutraceuticals, high-end cosmetics and “herbal medicine,” which is easily a $70 billion industry. Never mind coffee and chocolate translating mood-altering effects into gigantic export markets. Those are sideshows compared to the role plants play in the Big Pharma machine.

Poppies grown in British fields end up in $13 billion prescription painkillers. Access to the humble Peruvian shrub that fights malaria turned the course of World War 2. And now demand for active pharmaceutical ingredients is so fierce that the big boys are rolling out sophisticated “bio reactors” to feed the need.

But that’s the challenge. Mother Nature doesn’t obey standard manufacturing guidelines. Every plant produces different levels of active ingredients and every step in the extraction process can warp the active profile in the molecules. To put it at its simplest, quality control is a problem.

Of course every “problem” for Big Pharma is an opportunity that an ambitious start-up with vision and the right collection of strategic assets can exploit. I’m thinking EVITRADE Health Systems Corp. (EVA-CNX or in the States OTCQB:AXHLF) has what it takes to become just that kind of disruptive player.

EVA is small right now, barely $10 million in market cap. We’re in the early stages here, literally ground floor and some of the connections are extremely low profile — very few people on Bay Street or Wall Street have even started connecting all the dots.

The story starts back in December with a $2.25 million financing round that was a lot more successful than expected. Management originally only wanted to close the door at $1 million, but four days later demand for the deal was so intense that they upsized the offer to let early-stage investors grab another 10 million shares.

A day later, 85% of that additional supply was already absorbed and EVA had $2.25 million to start rolling up the assets they’d need to become a vertically integrated player in plant-based medicine. Now the REAL fun can start!

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The first item on the shopping list was Cantech Molecular Research, a niche genetics lab that specializes in plant-based biotch — everything from analyzing samples on high-end systems like the ones used in major universities to breeding mass quantities of identical vegetable clones. The company calls these products “elite plants.”

As EVA management points out, “the significance of this genetics technology is that it can be coupled along with advanced drug development software,” effectively turning what was once the hit-and-miss of Mother Nature into reliable raw materials for Big Pharma drug discovery.

Every “elite plant” Cantech grows produces the same mix of essential oils, alkaloids and other active ingredients. And if that mix doesn’t hit Big Pharma’s clinical goals, just go back into the lab and breed something better!

While some species obviously have more tempting development prospects than others, this isn’t just just a one-sprout wonder. The ultimate goal here is “creating large genetic mapping databases using the latest in next generation genetic sequencing platforms. The mapping will be done at a molecular level and will have the opportunity to identify the organisms’ general health.”

In that scenario, EVA becomes the gatekeeper to the entire universe of plant-based medicine, manufacturing and even healthier agriculture. Think of a farmer looking for certain genetically modified crops to plant. Or on the other hand, consider an organic-only food packager looking for a way to certify beyond scientific doubt that there aren’t any “unwelcome” genes in the corn or the sugar or the chocolate or the coffee.

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Certification is the key word. Even the process of deciding if food is organically grown is full of glitches. Moving up to the pharmaceutical world layers on higher standards and what amounts to an obsession with reliability, predictability, making the same pill from the same ingredients every single time.

Doing that with plants requires a lot of expensive equipment and complicated science. But if you know in advance that every single sprout is going to be identical, satisfying the regulators gets a whole lot easier. (Compliance eats up 25% of all pharma manufacturing costs so factory by factory a little investment in knowing the ingredients can save the industry BILLIONS a year.)

And then there’s the $34 billion nutraceutical industry, where the effectiveness of each supplement or capsule varies widely according to the ingredient quality . . . and yet, almost perversely, the closer those ingredients get to the wildness of nature, the more health-hungry consumers will pay.

EVA can certify exactly how much of each essential oil or flavonoid or enzyme each plant makes. Once it maps the tissues and organizes the strains, that leads to a more reliable product, from farm to pharmacy.

A few short weeks ago, that value chain got tighter. Turns out EVA is ALSO negotiating to buy a health product marketing company, Artillery Labs.

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This one looks like an all-stock deal. In exchange for up to 5 million EVA shares, investors get a revenue-positive business. They also get a seat at the negotiating table beside the nutraceutical companies that already work with Artillery.

There’s PreveCeutical, which sells peptide water enhanced with scorpion extract. They say it relieves pain and inflammation. Whatever the science is behind the claims, a company like EVA can check the molecules and confirm what’s in each bottle.

SierraSil offers all-natural joint pain relief. And so and so forth, across the Artillery client line. These are the kinds of companies that have promising products but could benefit from a competitive edge . . . better metrics on the label, more efficient manufacturing systems, you name it. One way or the other, EVA can provide.

And here’s the deal: doing the math, I don’t think EVA has even come close to finishing its strategic M&A cycle. There’s still cash left over from that December offering and besides, Artillery management decided to take the STOCK payout instead!

We may get a few more “dots” here to connect over the next few months. Where will they take the company? I have no idea, but it’s clear that management is thinking in big-picture terms.

They’re not just making a new vitamin. They’re not just growing a new strain of Plant A or Plant B. They’re looking at the entire process of sourcing drug ingredients, food ingredients, nutraceuticals. Think about ultra-elite chocolates and coffee, sourced by plant and certified to justify the premium price.

It’s going to be a long journey. If you want to take it with them, you know where to reach them. The future is HERE.

 

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