Is Organigram (TSXV: OGI) or Lexaria (CSE: LXX) more likely to succeed?

QUESTION: “I’ve owned Organigram (TSXV: OGI) from $1.92 per share. They have a proprietary technology that uses nano-emulsion that creates micro-droplets that are very small and uniform. The end result is a cannabis-infused product with rapid onset as well as reliable and controlled dosing. The process bypasses a large part of the metabolism that allows for a better absorption of cannabinoids into the bloodstream.

I also own Lexaria (OTCQX: LXRP) (CSE: LXX) that I’ve owned since $.45 per share that has a similar product. As I recall the technologies are a little different. Is one more likely to dominate the other or do you think both will succeed with their different methodologies?”

JV, Sedona from Arizona

ANSWER: Let me begin with a disclaimer/disclosure statement. I am not a scientist. I am an investment and financial analyst and writer. In many cases, what I say about these technologies, especially the nanotechnologies, is all I know.

I have recommended OGI in the past but because I thought they were more interested in revenue plus profit than growth at any cost. I have spoken to CEO Greg Engel but infrequently and not about this technology that I was not even aware of before your note. I have also and still do recommend LXRP because of their technology. I have spoken to Chair and CEO Chris Bunka many times about many things including their DehydraTECH™ technology.

In lay terms, my understanding is the human body evolved methods to prevent unwanted or dangerous materials from moving from one part of the body to another. One is in the intestines where the food we eat is separated into nutrients and waste. The intestinal barrier allows nutrients to pass into the blood while the waste is kept out. Another is the blood/brain barrier that protects the brain from molecules capable of upsetting the brain’s neural function. Many of these barriers are basically filters that prevent undesirable molecules from passing into unintended areas.

Humans are water-based creatures. Roughly 60% of the human adult body is water. The brain and heart are 73% water and the lungs are 83% water. The skin is 64% water; the kidney and muscles are 79% water and even the bones are 31% water.

Almost everything we eat is converted into water soluble forms for release into the bloodstream. Let’s see how this affects us. Vitamin C is water soluble and Vitamin E is fat soluble. If you take a Vitamin C pill, 60% to 90% of the Vitamin C will get into your bloodstream. But if you take an equal amount of Vitamin E, only around 5% will end up in your bloodstream. The body has challenges absorbing fat soluble vitamins.

Compare alcohol that is water soluble and cannabis that is fat soluble. Alcohol is easily absorbed into the blood and quickly excreted. So if a breathalyzer reading is high, it means the alcohol was taken shortly before the test because by 24 hours or so later it would have been all gone. Because cannabis is fat soluble, residual amounts can stay in your system for 3 or 4 weeks. So if a “cannabis breathalyzer” reports cannabis in your system, it does not mean you used cannabis that day or even that week. It stays in the body for a long time. Hence the difficulty with inventing a roadside detection system for cannabis.

Let me make one final general comment about the different ways of administering a drug. Using a hypodermic to inject a drug into the bloodstream is called perfect bioavailability, that is, 100% of the drug enters the bloodstream immediately. Anal suppositories are the next most efficient delivering 60% to 70% of the drug but the method is obviously less popular. Pulmonary inhalation, smoking and vaping, is next best with a delivery rate of 30% to 40%.

The main drawback to smoking combined with combustion is, in time, it will probably kill you. Vaping is most certainly much less harmful than smoking but it is not without harm. Nature’s way to introduce molecules into the body is through the lungs to breathe and the stomach and intestines for everything else. With eating, most things go through the liver to get metabolized so the body can direct the beneficial molecules into the bloodstream. With smoking you have a first bypass of the liver and the drug has a chance to circulate and bind with human receptor cells. So this first bypass is a much sought after characteristic because the drug gets into the bloodstream without being altered or delayed by the digestive process.

Lexaria’s DehydraTECH™ technology focusses on those difficult to deliver fat soluble molecules such as cannabis or Vitamin E and significantly enhances the amount that gets into the blood. It also substantially reduces the time required to get the molecules into the body. LXRP’s technology attaches a drug such as CBD or THC to a long-chain fatty acid (LCFA) such as olive oil or walnut oil. Because LCFAs are so important in the digestive process, the body treats it differently and allows it to bypass the liver and go directly into the lymphatic system. Bypassing the first-pass liver metabolism saves the 30 – 90 minutes of processing time needed by the liver. An added benefit is the LCFA locks the bitter taste receptors so the bitter taste of the drug is masked. This also explains why cannabis edibles are so slow. They have to pass through the liver.

An important and more recent discovery is the role of fatty acids and the interaction with the blood/brain barrier. Evolution has given the brain a LCFA transport mechanism. So DehyraTECH™ allows much larger molecules to pass into the brain. When the results from a study showed more nicotine passed the blood/brain barrier faster, it attracted the attention of the large tobacco companies and ultimately led to the research agreement with Altria (NYSE: MO), the largest tobacco company in the U.S.

Lexaria’s DehydraTECH™ is a new technology and the first of its patents were U.S. provisional applications in 2014. It has subsequently received approximately a dozen patents in the U.S. and Australia and have some 60 patents pending in over 40 jurisdictions around the world. DehydraTECH™ has the support of a considerable amount of scientific study most of which has been published. It also has applications in vitamins, non-steroidal anti-inflammatory drugs (NSAIDS) and nicotine as well as with treatments for erectile dysfunction and pulmonary arterial hypertension, among others. As I have pointed out on many occasions, cannabis is one of the smaller potential applications for DehydraTECH™ as the vitamin, NSAID and nicotine markets are all much larger.

Conclusion: what I seek with DehydraTECH™ is a new technology that is supported by a considerable body of scientific evidence and protected by a broad list of patents and patents pending. It has an important role to play in the fledgling cannabis industry as well as applications in the even larger vitamin, NSAIDs and nicotine markets as evidenced by the current research agreement with Altria, the largest tobacco company in the U.S. The prospects for DehydraTECH™ range far, wide and high in my opinion.

There is a lot of discussion about nanotechnology in the cannabis world these days. I suspect it is because the original nanotechnology patents are beginning to expire and the technology is relatively easy to use.

Here is my Nanotech 100 commentary. Nanotechnology effectively “chops up” molecules so they are small enough to pass through the body’s natural filters. Science has so far more or less determined nanotechnology should not be used with non-organic materials. For example, silver has known medical benefits but it is probably not a good idea to use nanotech to deliver silver because silver will accumulate in organs over time as the body may not have a way to expel it. With organic materials nanotech is probably acceptable for use.

As I said above, I don’t know much about nanotech and I know nothing about OGI’s claims specifically but, generally speaking, I haven’t seen any compelling scientific results to back up the claims that are made. In addition, nanotech is an old technology so I doubt any process utilizing it will be attractive to possible major users.

My expectation is nanotech applications will be used more as a marketing tool to differentiate products. Such applications can be very successful. But I believe its applications will be relatively narrow and used primarily in certain cannabis applications. Alternatively, there may be uses developed by big pharmaceutical companies that are highly sophisticated and beyond the scope and economics in applications such as consumer products. After all, nanotech is not new. In the world of technology it is very old.

I believe OGI’s nano-emulsion product may be very useful within the company’s product line. But I have a hard time seeing it having broad applications beyond that and probably none at all within other industries such as vitamins or tobacco.

My conclusion is that both technologies can be successful in their particular applications which are very different. It appears to me that the OGI technology can work in a relatively limited application. But the potential for LXRP’s technology is much greater. On November 3, 2016 in my first report on Lexaria titled ‘Lexaria (OTC: LXRP) – The Best Cannabis Technology You Can Eat’ I said, “In the foreseeable future, LXRP's revenue will be marijuana based. But in the long run, LXRP intends to expand applications of the technology to enhance delivery of vitamins, non-steroidal drugs such as aspirin and Tylenol and nicotine.” For Lexaria, the long run in 2016 is the shorter run today.