Aleafia Health Inc. (TSX:ALEF)(OTC:ALEAF) owns and operates Canada’s largest physician-led, referral-only clinics for medical cannabis
SmallCapPower | June 29, 2018: Aleafia Health Inc. (TSX:ALEF)(OTC:ALEAF) is a vertically-integrated cannabis company operating cannabis clinics (Aleafia Total Health Network and Cannabinoid Medical Clinics) that are supported by an ACMPR- licensed facility based in Scugog, Ontario. Aleafia continues to expand its clinics as well as production capacity to meet a growing patient population and the impending recreational opportunity in Canada.
Since recommencing trading on March 28, 2018, post amalgamation with Canabo Medical Inc., shares of Aleafia Health have been trading in a range of $0.50-$0.75. With a vertically-integrated business model, along with a fully-funded ~300,000 sq. ft. capacity, Aleafia is well positioned to serve its expanding network of clinics, as well as the large recreational opportunity in Canada, starting October 17, 2018.
Investment thesis
- Vertically-integrated business model – clinics and production facilities
- Aggressive expansion plans underway
Vertically-integrated business model
Aleafia Health is a vertically-integrated cannabis company operating clinics and an ACMPR facility that supports these clinics. Aleafia opened its first Aleafia Total Health Clinic in Vaughan including affiliate feeder clinics. The Clinic follows an interconnected medical service model by focusing on the link between early intervention and successful treatment, unlike most clinical programs that are geared primarily towards post-injury rehabilitation. With the recent amalgamation, Aleafia also owns and operates Cannabinoid Medical Clinics, or CMClinics, Canada’s largest physician-led, referral-only clinics for medical cannabis. The clinics currently serve more than 20,000 patients and have seen over 40,000 patients (18% of total 220k) since inception, which continues to expand, as the Company adds 1,500 new patients per month currently, and an expected 2,000/month by 2018-year end. Leveraging its vast patient population, Aleafia Health has developed the largest observational database for patients on medical cannabis in Canada. The database containing medical, demographics and treatment efficacy can be easily monetized, as it is a valuable resource for clinical trials.
Aleafia Health – Structure
To support the Aleafia Health network clinics, the Company acquired Aleafia Farms, an ACMPR licensed producer operating a 7,000 sq ft medical cannabis production facility situated on 76 acres of farmland in Ontario.
Massive production expansion plans underway
Aleafia Health continues to aggressively expand its production capacity and aims to produce more than 38,000 kgs over the long term. At its existing Scugog property in Ontario, the Company plans up to 1.2 million sq ft of expansion over four phases, with its Phase I, 150,000 sq ft facility being fully funded. Additionally, the Company acquired a 160,000 sq. ft. Niagara, Ontario greenhouse last month for $9.6 million, for which a second ACMPR license application will be filed. First production from the Niagara-region facility is expected in third quarter of 2018.
First harvest post supply agreement with CannTrust: In May 2018, Aleafia Health signed a supply agreement with CannTrust, who is expected to supply starter genetics for cultivation in Aleafia’s Scugog facility, while also taking responsibility for purchasing the product from Aleafia. Post-agreement, Aleafia Health completed its first harvest at May-end 2018 and expects to receive its bulk sales license from Health Canada for the recently-harvested cannabis product in the second quarter of 2018. Quality production from the facility helps Aleafia in meeting the exacting standards required by the expanding network of more than 40,000 patients. Additionally, production from both the Scugog and Niagara facilities will also cater to the large recreational opportunity in Canada beginning in October 2018.
Outlook and valuation
Since recommencing trading on March 28, 2018, post the amalgamation with Canabo Medical Inc., shares of Aleafia Health have been trading in a narrow range of $0.50-$0.75. With a unique, vertically-integrated business model along with a fully-funded ~300,000 sq. ft. capacity, Aleafia is well positioned to serve its expanding network of clinics as well as the large recreational opportunity starting October 17, 2018. Near-term catalysts for its stock include improved financial performance from its expanding clinics network, as well as the expected investor hype leading up to the recreational legalization date in Canada in October.
Disclosure: Neither the author nor his family own shares in the company mentioned above.
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