Aleafia Health (ALEF) Gains Outdoor Cultivation Licence

Aleafia Health Inc. has planted the first outdoor crop at its Ontario facility after gaining a licence from Health Canada.

The license increases the Port Perry facility’s licensed cultivation area from 22,000 sq. ft. to 314,000 sq. and it is now expected to produce 60,000 kg annually. Aleafia has another operational facility in nearby Scugog and its total capacity is expected to rise to 138,000 kg this year now that it has completed its purchase of Emblem.

“Our promise made last year to cultivate outdoors in 2019 is now a reality,” said Aleafia chairman Julian Fantino. “We will continue to lead the way in low-cost production. This milestone exponentially increases our total cultivation footprint while securing product supply for our medical cannabis patient base.

It has already moved 13,000 started clones onto the land and three master growers are carefully nourishing them. The flower grown there will be transported to the firm’s facility in Paris, Ontario, and turned into cannabis-based health and wellness products.

International Distribution Plans

In Germany, Aleafia is setting up a joint venture with pharmaceutical wholesaler Acnos Pharma GmbH, which distributes to 20,000 pharmacies across the country and has accounts throughout Europe.

Aleafia’s recreational and medicinal marijuana products will be sold via its national network of Canabo Medical and GrowWise Health clinics, which merged when Aleafia took over Emblem, plus supply agreements with Ontario, Alberta, British Columbia, and Saskatchewan.

It also boasts international distribution in Australia and Germany for its products. Earlier this year, it invested a further AU$540,000 in Australian producer CannaPacific after buying a 10% stake in 2018.

In Germany it is setting up a joint venture with pharmaceutical wholesaler Acnos Pharma GmbH. Acnos distributes to 20,000 pharmacies across the country and it has many more accounts in the rest of Europe.

Aleafia’s portfolio spans derivative products including oils, capsules, and sprays.

A $35 Million Public Offering

Last week the firm announced a $35 million public offering based on the issuance of 35,000 convertible debenture units at $1,000 apiece. Each unit consists of one 8.5% unsecured convertible debenture and 680 common share purchase warrants.

The net proceeds received by Aleafia are intended to be used for working capital and general corporate purposes.

Aleafia had cash of $61 million at March 31, 2019, compared to $29.2 million at December 31, 2018, yet there was always a risk of burning through that quickly and a dilutive raise has always been on the cards.

The company reported a net loss of $20.2 million for Q1 2019. A one-time, non-cash payment to complete its acquisition of Emblem accounted for $13.2 million of that loss, but it still halted ALEF’s momentum.

It recorded a net loss of $9.7 million on operations in 2018, as Aleafia Health itself recorded a gross profit of $1.6 million, while Emblem experienced a net loss from operations of $24.3 million. Aleafia brought in total revenue of $3.3 million in 2018 and Emblem added another $8 million.

The share price stood at $2.39 on March 19, 2019, shortly after its TSX listing following the completion of the Emblem deal, but it has underperformed the sector significantly since then and it closed at $1.32 on Friday, June 7. However, news of the licence from Health Canada has given it a shot in the arm today and ALEF opened at $1.40, giving it a market cap of $375 million.

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The opinions provided in this article are those of the author and do not constitute investment advice. Readers should assume that the author and/or employees of Capital 10X hold positions in the company or companies mentioned in the article. For more information, please see our Content Disclaimer.

Martin Green
Martin Green is an experienced journalist with a strong focus on the cannabis, alcohol, and gambling industries. He is particularly interested in the political issues affecting the global marijuana trade, and he has a keen focus on regulation changes and legal topics. He holds a BA English Literature, MA Creative Writing and a National Qualification in Journalism diploma. He has worked in journalism since 2009 and written for a broad range of newspapers, business titles and magazines, including The Sun, The Metro, The Journal, Livestrong, Drinks Retailing News, Harpers, Sportsbook Review, Vital Football, Essex Live and Surrey Live. Address: 682 Indian Road, Toronto, Ontario, M6P 2C9. Phone: 416-721-8257.
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