Forget The Noise, Here's Where The Value Lies In Growblox Sciences Inc (OTCMKTS:GBLX)

Growblox Sciences Inc (OTCMKTS:GBLX) is a tough one to weigh up right now. The company has a spectrum of different focuses within the cannabis space, ranging from mobile and mail-based distribution to developing potential treatments for cancer, but as yet, doesn't really seem to have made too much progress towards bringing anything worthwhile to market.That is, however, aside from one specific element of its operations that we see as having huge potential, initially in pharmaceutical marijuana but beyond that, into recreational cultivation.Before we get into that, let's address something.In one of its latest releases, GrowBlox announced it had filed for some patients relating to the treatment of patients with Parkinson's disease, Alzheimer's disease, Lewy Body Dementia, and Huntington's disease, among others. While these are big targets, and any drug that hits a commercialization phase having demonstrated safety and efficacy in the US in any of these indications as a billion-dollar potential, we don't believe there is any value in it currently for GrowBlox. We are not saying that the company is misleading investors, but just that this operational division is decades away from bringing in revenues, and so it is tough to say with any certainty right now whether it is relevant to a valuation. We say it's not, but we concurrently think that the company is far from worthless.Quite the opposite. Why? Because of its manufacturing capabilities.In the biotechnology space, we have seen companies go from small development phase entities to essentially big pharma overnight (obviously we are exaggerating here, but within a couple of years) based on patented manufacturing capabilities. Roche Holding Ltd. (VTX:ROG)'s Genentech did it. Amgen, Inc.(NASDAQ:AMGN) did it. How? By controlling the manufacturing of a superior subset of active ingredients necessary for the development of new compounds. In the instance of the two companies mentioned here, the space is gene therapy, and oncology (specifically, immunotherapy). Both patented technologies produced superior raw ‘ingredients’ that could be used as building blocks for new drugs, and then sold these building blocks en masse to biotech companies, which in turn used them for development phase production and early commercial phase fulfilling. We’re not talking CMO here – these aren’t companies that generate all of their revenues from producing a wide variety of drugs for other entities – we’re talking a company that creates superior drug related ingredients and sells them to others, while also developing its own pipeline (as funded by the manufacturing revenues).We think this would be a valid strategy for GrowBlox, based on its technology suite.The company has developed a technology that allows for the cultivation of cannabis strains controlled both locally and remotely down to the most minute detail, ensuring identical genetic structure from plant to plant in each grow batch. It has also developed a post-initial grow infrastructure that fosters this identical genetic structure until maturity. As far as we are aware, this technology is some of the only technology available that can control the grow process to this degree of precision, and when it comes to pharmaceutical manufacture, precision is everything.Essentially, what we are saying here, is a development pipeline (as illustrated by its recent patents) is great, but it is not going to bring about revenues near-term. What could, however, is contracts that see the company manufacture genetically identical batches of cannabis for pharmaceutical development, and in turn, this is what GrowBlox should be focusing on. We got a hint of a potential pivot towards this strategy in the most recent letter to shareholders, and any implication above and beyond this hint near term is – for us – a bullish signal.Standard risks apply with this one. The company is overstretching itself right now from a product touting perspective, so don't get caught on the wrong side of a promotional rally. There's a potentially valuable business model here, however, and once the company realizes it (we are assuming it already has and is working towards that aim) markets will as well, and the company should start to grow in capitalization organically.We will be updating our subscribers as soon as we know more. For the latest updates on GBLX, sign up below!Disclosure: We have no position in GBLX and have not been compensated for this article.