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Aleafia Health Bags a Crucial Cultivation License in Canada, bolstering its Supply Chain

23 Mar Aleafia Health Bags a Crucial Cultivation License in Canada, bolstering its Supply Chain

Aleafia Health (OTCQX: ALEAF), a wholly owned subsidiary of Aleafia Farms Inc, announced that the Company’s Ontario–based Niagara Production Facility, has obtained a crucial Health Canada Cultivation License. The license, which is valid until 2023, will enable the Company to cultivate, process and sells its cannabis produce in a state-of-the-art facility, which comprises of an automated moving container bench system that facilitates year-round production, resulting in lowered costs and execution risks.

The facility will also help the Company significantly reduce planting-to-harvest lead times for its planned outdoor cultivation at Port Perry in 2020, by transporting Starter plants to the site at the start of the cultivation season. In addition, it will offset any issues faced with seasonal fluctuations in inventory that plague outdoor cultivation and result in a consistent and standardized input for its medical and adult-use sales channels.

Aleafia Health (OTCQX: ALEAF)

Market Cap: $71.36M; Current Share Price: 0.2515 USDChart
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Geoffrey Benic, CEO of Aleafia Health, stated,

“This is an important and long-awaited breakthrough for Aleafia Health. We can now fully leverage our supply chain across three completed, licensed production facilities.  The Niagara Facility provides both near term, stable inventory for our health and wellness sales channels, and the inputs needed for the 2020 outdoor cultivation season.”

Furthermore the Company intends to submit a license amendment application within the next 30 days, for authorization of production in the remaining 90,000 sq. ft. of greenhouse area, to Health Canada. This is in addition to its 50,000 sq. ft. of greenhouse area and 20,000 sq. ft. for post-cultivation operations in building 1, which will be utilized for drying, storage and shipping and outdoor cultivation.

The Global legal marijuana market is likely to reach over USD 66.3 billion by the end of 2025, as per a report by Grand View Research, Inc, growing at a CAGR of 23.9%. There is a growing acceptance of the curative effects of cannabis, with some countries such as Canada and certain states of U.S legalizing the use of Marijuana for medical and recreational use. Research has time and again shown that cannabinoids (CBD), extracted from the cannabis plant, have varied medical uses with minimal side effects, making it a sought after alternative to traditional pharmaceutical options.

The U.S, where the use of cannabis has only been legalized in 33 states for medical use and 11 states for recreational use, is one of the largest untapped markets for Marijuana, with an estimated value of over USD 11.9 billion in 2018, which is likely to grow at a CAGR of 24.1% from 2019 to 2025. There have been series of mergers and acquisitions in the Cannabis space, which have seen consolidation of major players such as Aurora Cannabis, Canopy Growth, Curaleaf etc, in the anticipation of legalization of marijuana in the U.S by the end of 2019.

However the cultivation of cannabis, and a reliable supply and distribution chain, is still a major challenge that the industry at large is grappling with. The need of the hour is a consistently high quality product that is economical and cost-efficient to grow. An increasing number of players in the industry are realizing the importance of tailor made services that address the issues faced by cannabis cultivators, ranging from how to grow the best quality weed with limited resources such as water and land at their disposal to how to address the challenges in transportation and distribution to areas beyond their immediate markets.

The Cannabis industry is on a consolidation spree. Major players in the market are joining ranks, to gain strategic advantage, in case of legalization of Marijuana in newer markets such as U.S and Europe. They are acquiring partners with substantial cultivation capabilities, for instance Hexo Corp (NYSE: HEXO), which recently acquired Newstrike, now has a cultivation space of over 1.8 million square feet and a production capacity of 150,000 kg of cannabis annually. In addition it also has a 1 million square-foot greenhouse in Gatineau, Quebec that currently yields over 14 tonnes of cannabis annually.

Aleafia Health is leveraging it experiential knowledge of medical cannabis to establish itself as Canada’s premier cannabis-centric patient healthcare provider. The company aims to become a global brand through education, research and development in the field of cultivation and science of medically authorized cannabis.

The Company owns and operates three modern cannabis production facilities that have a combined capacity of 138,000 kg and extract 50,000 kg annually. Aleafia Campus Outdoor facility is a 3.7 million sq.ft low-cost outdoor facility that complements the Company’s low-cost leadership, besides its acquisition of Port Perry, which will add an additional 2.6 million sq. ft. of cultivation area for the 2020 season.

Aleafia Campus Indoor, comprising of its Port Perry and Paris Indoor facilities produce premium cannabis in climate controlled environments, with a combined yield of an estimated 3,000 kg annually from 22,000 sq. ft. of licensed and operational cultivation area. Additionally the company also has a processing facility in Paris that manufactures oils, tinctures and gel caps for its adult-use Symbl and medical Emblem brands.

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The Company is currently scaling up its production capacity through its Phase II expansion, which will add 50,000 kg to its total extraction capacity. The plan includes a GMP-standard laboratory to produce high-margin products that will be sold to the German and European cannabis market. Aleafia also caters to the cannabis-based wellness product market.

Aleafia is actively engaged in research using its proprietary 10 million point medical cannabis dataset, aimed at delivering evidence-based solutions for the treatment of opioid dependence and chronic illnesses including pain, insomnia, anxiety, and eating disorders.

Furthermore the Company offers educational solutions under the brand name FoliEdge, from information collated through nearly 60,000 + patient engagements that have yielded 10,000,000+ medical patient data points, covering cannabis health & wellness. Aleafia also runs Canabo Medical Clinic (Canabo), Canada’s largest network of referral-only medical cannabis clinics.

Risk Assessment

  • The Medical Cannabis market is projected to reach $97.35 billion by 2026, growing at a CAGR of 32.92%, from 10.60 billion in 2018, according to a report by Fortune Business Insights. Aleafia is partnering with scientists globally to conduct research and achieve breakthroughs in the field of medical cannabis, especially focused on ailments such as chronic pain insomnia, anxiety, and eating disorders. The Company’s merger with Emblem Health will help the Company gain a strong foothold in this market.
  • Aleafia signed a substantial deal in December 2019, to supply 2,840 kilos of dried cannabis flower to an unnamed licensed producer in Canada, most of which was derived from its Port Perry cultivation facility. The size of the deal was CA$7.1 million, a considerable amount when compared to its revenues.
  • The Company has also forayed into white label production with its deal with the Montu Group, which will market oils under the brand name Circle in Australia. This presents a significant opportunity for the Company to expand its footprint in the Australian cannabis market.
  • FoliEdge, the Company’s educational services subsidiary, announced a deal with an unnamed post-secondary institution in Canada in November 2019, to provide courses and programs related to cannabis for its students, on a non-exclusive basis. Aleafia also entered into agreement with Seneca for courses and programs on the cannabis industry in Canada.
  • The Cannabis Industry is governed by stringent regulations and is fraught with uncertainty, the Company will have to be prepared to adapt to any changes in policies or regulatory framework and capitalize on new opportunities that may arise in the future such as heavy taxation or clamp-down on operations.
  • Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

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