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  1. Valens expects cannabis extraction supply chain to struggle to keep pace
  2. Valens says secured multi-year agreements, targets international deals
  3. Company’s extraction capacity boosted to 240,000 kg/year

Valens GroWorks Corp. expects strong cannabis extraction demand to fuel a bottleneck and drive “significant revenue growth” in 2019 while the supply chain “will struggle to keep pace” as Canadian licensed producers (LPs) prepare for legalization of concentrates later this year.

The Kelowna, B.C.-based company said it has secured multi-year agreements with major growers and eyes international expansion.

“Valens believes there will continue to be a bottleneck in the supply chain as high quality extraction capabilities, such as those provided by the company, will struggle to keep pace with the increasing quantities of cannabis and hemp being grown,” the company said in its 2018 fiscal report, noting that hemp and cannabis production is expected to increase.

The company more than tripled its cannabis and hemp extraction capacity to meet new demand ahead of legalization of cannabis concentrates and edibles, which is expected in October, and initiated commercial activities in its first quarter of 2019 that started in December, it said.

Valens has said it increased its annual extraction capacity of dried cannabis and hemp to 240,000 kg per year “to ensure it is positioned to meet the anticipated rise in demand for its services.”

“These efforts resulted in several multi-year agreements to provide premium extraction services to some of the most well-known players in the industry, including Canopy Growth, Tilray, Organigram and The Green Organic Dutchman, and represent initial volumes that have greatly exceeded our initial ramp up expectations,” said Valens Chief Executive Tyler Robson in the company’s fiscal year report.

Despite expectations for an extraction bottleneck in Canada, Valens is in negotiations with international companies and organizations to develop and produce cannabis products abroad, with a near-term focus on Australia, Colombia and Europe, it said.

Valens reported total revenue for the year ended Nov. 30, 2018, at $51,526, up 27 per cent year-over-year, while operating expenses more than doubled to $13.8 million, up from $5.3 million the prior fiscal year.

Go deeper: ‘Our legalization is really this year’: Valens GroWorks’ EVP on extracts