If a company has developed very effective, transformative technology, it takes an investment into research and development and time.  It also pays to protect it from copycats and pirates with patents. And if the company’s specialty is science and product development rather than in retail sales and marketing, a royalty- or license-based revenue model could make more sense than investing and building the infrastructure for a multi-market sales organization.

These three characteristics – completed research and development, intellectual property, and recurring royalty revenue – are the hallmarks of the business model for Ovation Science Inc. (CSE:OVAT) (OTCQB:OVATF). Investors may be attracted to the company for the protection provided by the patents, the multiple market opportunities, and the simplicity of the revenue model. Ovation’s central innovation is the Invisicare® skin delivery platform, a polymer technology that greatly enhances the durability, effectiveness, and deliverability of cannabinoids (like CBD and THC) on and through the skin.

Patents

Ovation’s products are all delivered by its Invisicare technology.  This underlying technology is patented in eleven countries, including the US, Canada, four European countries, China, and India. Ovation’s products are protected by various patents or patents-pending; depending on the product The company has further patent protection on individual products like its CBD sunscreen As well Ovation has also applied for patents in the US and Canada to cover its transdermal applications of its CBD: THC combo products. Transdermal treatments are intended to deliver active ingredients like CBD and THC through the skin and work systemically throughout the body.

For both Ovation’s topical or transdermal creams, Invisicare® polymers greatly enhance the duration and amount of active ingredients delivered. For topicals, the company found its technology released 40% of active ingredients compared to 3% for market-leading formulations at 2 hours. For its transdermal creams, Invisicare® provided an 80% penetration rate after 4 hours compared to a range of 10% – 25% for market-leading products. This is exactly the type of technology that needs to be protected and can lead to attractive returns over the life of the patent (often 20 years).

Royalty Revenue Model

The investment of 20 years doing research and development of the novel Invisicare® polymers and over thirty CBD and/or THC formulations is already completed. With the technology in hand, the company is now in the phase of commercialization through royalty and licensing agreements. For most arrangements, an established and licensed operator in a given market will license the rights to Ovation’s formulations and purchase the Invisicare polymers from the company and manufacture the proven Ovation-formulated products with them. That licensee is the exclusive representative of Ovation’s products in that market, be it a state or province or country. Once sold, Ovation receives a  percentage of the wholesale revenue generated, usually a double-digit royalty.

The model reduces the risk to Ovation and its investors. The R&D phase is complete, the product works, the patents are secured. At this point, the catalysts for the company are basically revenue growth with existing licensees and the addition of new partnerships to broaden the market.

In an international industry as explosive and young as the legal cannabis and hemp sectors, Ovation’s position is rare and filled with potential. The company’s main market right now is expansion across the USA, but there are obviously more fish to fry internationally as well. Keep an eye for further developments in the coming quarters as Ovation executes its expansion plans.

Click here to learn more about investing in patented skincare technology

Disclaimer

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Ovation Science’s Proven Science, IP, and Royalty Model Protects Investors and the Company