Yesterday, India Globalization Capital (IGC) traded higher after saying that it is commercializing a treatment for Alzheimer’s disease through medical marijuana dispensaries.
Although this update seems exciting, IGC did not provide any detail when it comes to how they plan to execute on this strategy.
The biotech firm said that they will target Germany, Canada and certain medical cannabis states in the U.S. for commercialization. IGC has been focused on this product for less than a year and we are not buying into this press release.
Doesn’t Have the Resources or Capital to Deliver
We continue to believe that the biotech industry will be one of the greatest beneficiaries of the legal cannabis movement, however, companies need to be well capitalized if they want to capitalize on it.
IGC is not well capitalized and the company does not have enough cash on hand to produce this product at scale. If the biotech firm plans to enter three countries at once, it must have several million dollars if it wants to execute effectively.
IGC CEO Ram Mukunda said that the product will be ready for commercialization in early 2018, which means that we are not going to have to wait too long to watch this initiative prove to be nothing but smoke and mirrors.
Focused on Construction, Equipment Rentals, and Cannabis?
While we view the biotech cannabis industry as very profitable opportunity, we believe there are much better opportunities available and continue to prefer companies that are led by a management team with a proven track record of success, are well capitalized, and have a visible growth strategy.
IGC does not meet our criteria of a long-term investment opportunity and is still trying to find itself. Besides for focusing on the biotech cannabis industry, IGC also provides construction management services for the construction of a 7-star hotel in Malaysia and rents heavy equipment with operators to construction companies
Although IGC traded higher off this news, the market did not seem to buy into this announcement. Shortly after the market opened, the shares were up more than 23%. IGC gave up a good portion of these gains and the shares ended the day up 7%.
Source: Technical 420