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Canadian cannabis companies continue to be one of the most attractive opportunities as investors aim to capitalize on this burgeoning growth opportunity.
We have been bullish on this sector for the last two years and our conviction level remains high as growth prospects look attractive for the coming years. The opportunity many of these cannabis producers are focused on is much bigger than just Canada and we are targeting companies focused on the global marijuana market.
Today, we have highlighted five company developments that investors need to be aware of. Over the coming months, we expect to see these companies continue to execute and investors should be monitoring these players.
Organigram Rallies After Health Canada Grants License
The market responded favorably to Organigram (OGI.V) (OGRMF) receiving an expanded cultivation license from Health Canada related to its previously announced Phase 2 expansion. This was a significant announcement and we remain bullish on the Canadian marijuana producer.
The Phase 2 expansion also includes significant improvements and efficiencies to the cultivation and processing systems. The scope of the amendment includes approval of the first ten of the new 23 three-level cultivation rooms as well as the entire perimeter of the expanded facility, approx. 150,000 sq. ft.
As a result of this approval, cannabis plants were moved into these new rooms on a rolling basis beginning on February 10th. The company will be in a position to begin staggered harvests from these new rooms by the third week of April. The remaining 13 rooms are expected to come on line by March 10th pending Health Canada approval.
With Organigram’s unique three-level grow system, the 23 planned cultivation rooms represent an additional 10,800 kg/year of production capacity increasing total capacity from approx. 5,200 kg/year to 16,000 kg/year. The Phase 3 expansion (expected to be complete in May) will increase Organigram’s production to 25,000 kg/annum. A fully-funded Phase 4 expansion (currently scheduled to start construction expected to commence in April) will bring production capacity to 65,000 kg/annum in three stages over the next two years.
CannTrust: A Stock to Watch
Several leading Canadian cannabis producers are focused on major expansion initiatives ahead of legalization of recreational marijuana and we are favorable on companies that have fully funded expansions of this nature.
CannTrust Holdings (TRST.CN) (CNTTF) is one of these companies and yesterday, the shares rallied after the marijuana producer received its sales license for the 250,000 square foot Phase 1 expansion at its Niagara cannabis greenhouse production facility. So far, 10 harvests have been completed at the Niagara Facility and the 180,000 square foot Phase 2 expansion is expected to be completed in the middle of 2018.
Since the facility is located on a 46 acre piece of property, CannTrust has significant room to expand. We are favorable on this expansion opportunity as CannTrust will be able to sell the product it produces to its significant patient base.
CannTrust was an early adopter to the Canadian cannabis movement and we believe that this is a stock investors need to keep an eye on.
Phivida: Announces Significant CBD Study
Phivida Holdings Inc. (CSE: VIDA) OTCMKTS: PHVAF) edged higher after making a significant announcement and we are monitoring the shares closely following this development. The company is emerging leader in the burgeoning medical CBD and hemp oil extract market and offers a premium line of CBD products which are marketed as functional foods and nutraceutical supplements.
Yesterday, the company’s subsidiary, Phivida Organics, entered an agreement with Artelo Biosciences to carry out a Pharmacokinetic (PK) study on its hemp derived nanoencapsulated cannabidiol (CBD) at the University of Nottingham , School of Medicine at the Royal Derby Hospital, England .
The study will test encapsulated-CBD and measure how fast and how much CBD enters the blood stream after oral consumption with each of the different formulations. The study is a healthy volunteer pharmacokinetic study based on a four-arm cross over design in healthy volunteers measuring the plasma levels of encapsulated CBD after a single dose (100 mg) of CBD in four formulations. Study results will be documented in a whitepaper written by researchers at the University of Nottingham and expects to be submitted to a peer reviewed journal for publication.
Phivida represents a differentiated opportunity and we are favorable on the company’s ability to capitalize on a multi-billion-dollar market. In 2018, the shares have fallen more than 35% off its highs and this has created a great opportunity for new and existing investors.
Aphria, Nuuvera, and Broken Coast: Something to Watch
In late 2017, leading Canadian licensed marijuana producer Aphria (APH.TO) (APHQF) discussed plans to capitalize on the domestic (Canada) and international cannabis markets and the company has done nothing short of execute on this plan.
In 2018, Aphria announced two strategic acquisitions that cost more than $1 billion. The company first announced the acquisition of Broken Coast, positioning Aphria to be a leader in the soon to be legalized adult use market. The acquisition is expected to add 10,500 kilograms of incremental annual production while also providing Aphria with geographic diversification, a cross-Canada distribution platform, and access to over 40,000 medical patients.
In late January, Aphria announced plans to acquire Nuuvera (NUU.V) for more than $800 million. Although his acquisition is expensive, Nuuvera provides leverage to several attractive international medical marijuana markets (Germany, Italy, Spain, the United Kingdom, Malta, Israel, Lesotho and Uruguay). Aphria will benefit from Nuuvera's management team and the international expansion opportunities it has secured.
When you combine these agreements with Aphria's existing agreements in Australia, the combined company establishes a leading international footprint among Canadian licensed producers, and expands Aphria's processing and manufacturing capabilities globally.
During the last month, Aphria has been under considerable pressure and the shares have fallen more than 35% from its 2018 highs. We are bullish on the combined company and expect it to be one of the leading global medical cannabis players. Investors need to monitor the recent pullback as the shares look much more attractive at current levels.
Aurora Cannabis: Trades Mixed After Reporting Earnings
Last week, leading licensed Canadian medical marijuana producer Aurora Cannabis (ACB.TO) (ACBFF) released better-than-expected second quarter financial results and we have been monitoring trading activity since this release.
The Canadian medical marijuana producer recorded $10 million in net income during the quarter and we are favorable on these numbers. Over the next year, we expect Aurora to record incremental growth as the company ramps up production capacity and increase market shares throughout the world.
In 2017, Aurora announced several strategic investments and acquisitions which have significantly advanced the company’s fundamental story. During this time, the marijuana producer entered the German and Australian medical marijuana markets while increasing market share in Canada.
These international markets represent massive long-term opportunities and we are favorable on Aurora’s position within these markets. We will monitor how the company executes after Aurora Sky (a 800,000+ square foot hybrid greenhouse facility) received a cultivation license from Health Canada in late January and we remain bullish on the company.