Obtaining its Dealer’s License is a key milestone in Aphria Inc.’s (TSE:APH) international expansion strategy
SmallCapPower | November 27, 2017: Aphria Inc. (TSX:APH) announced recently that it obtained its Dealer’s License pursuant to the Controlled Drugs and Substances Act under Health Canada. The receipt of license is a key milestone in Aphria’s international expansion strategy as it permits the Company to possess, sell and transport medical cannabis oil and resin to international markets.
Post the announcement, shares of Aphria have surged nearly 20% to its current price of $10.78 as of early Monday trading.
Currently producing ~9,000 kgs of cannabis annually, Aphria plans to boost its capacity to meet the large recreational opportunity expected in Canada in mid-2018 as well growing legal cannabis opportunities internationally. Post the completion of its rapidly-progressing four-part expansion of its facility in Leamington, Ontario, the greenhouse growing footprint of Aphria will increase to one million square feet with production capacity rising to over 100,000 kgs of cannabis.
As part of international strategy, Aphria had invested in the U.S. cannabis markets in 2016, but this investment is currently under scrutiny by the U.S. regulators due to legalization issue. Additionally, in October 2017, Aphria completed its first medical Cannabis oil shipment to Australian Medlab Clinical Limited (ASX:MDC) for use in Medlab’s forthcoming human trial to test management of intractable pain in oncology patients. The first shipment of medical cannabis to Medlab is part of the Company’s global expansion strategy to create additional revenue streams. With a Dealer’s License that paves the way for the export of cannabis products globally, Aphria plans to target other legal cannabis markets such as Italy, Germany and Argentina.
Vic Neufeld, CEO of Aphria, commented “There is an incredible appetite for high-quality medical cannabis in legal markets around the world. Obtaining our Dealer’s License is a significant milestone in our international expansion strategy as it enables Aphria to have greater control over importing and exporting medical cannabis oil globally. This license will accelerate our speed to international markets and broaden our patient base internationally, resulting in greater revenue for Aphria.”
Aphria prides itself as one of the low-cost producers in the marijuana industry. In 1QFY18, the Company reported a 4% QoQ reduction in production costs to $1.61/gm of dried cannabis and reported eighth consecutive quarter of positive EBITDA, at $1.5 million. Aphria currently trades at a price to TTM sales multiple of 69.0x.
Disclosure: Neither the author nor any of the principals at SmallCapPower, or their family members, own shares in the company mentioned above.
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