ASX Cannabis Player Althea’s Subsidiary to Commence Operations in Canada; Share Price Up ~11%

  • Sep 14, 2020 AEST
  • Team Kalkine
ASX Cannabis Player Althea’s Subsidiary to Commence Operations in Canada; Share Price Up ~11%

Summary

  • ASX-listed medicinal cannabis company Althea Group stated that its Canadian subsidiary, Peak Processing Solutions has successfully obtained Standard Processing Licence from Health Canada.
  • Peak Processing shall immediately commence commercial operations in Canada to manufacture Cannabis 2.0 products.
  • The subsidiary intends to attain revenue of almost C$25 million within eighteen months.
  • In addition to obtaining the licence from Health Canada, Peak Processing signed an agreement with a non-alcoholic beverages company in Canada, Blum Beverage Company Inc.
  • Althea’s share price surged following today’s announcement and closed at A$0.645, up 11.207%

At the end of today’s session, Althea Group Holdings Limited’s (ASX:AGH) share price rose by 11.207% to A$0.640. With a market capitalisation of A$135.32 million, Althea has almost 233.31 million outstanding shares. 

The surge in share price was driven by Althea’s announcement on a significant milestone related to the grant of cannabis license to its Canadian subsidiary, Peak Processing Solutions.  Althea stated that Peak Processing Solutions should immediately commence commercial operations in Canada.

Let us discuss in detail what Althea has announced today-

About Althea Group Holdings Limited

ASX-listed global pharmaceutical company Althea Group Holdings Ltd is a supplier of medicinal cannabis products to improve the lives of patients who are suffering from debilitating conditions. The Company is engaged in the production and export of pharmaceutical-grade medicinal cannabis. Althea also offers several services related to education, access, as well as management to support eligible patients & healthcare professionals (HCPs) in navigating treatment pathways related to medicinal cannabis.

Currently, Althea operates in the regulated markets, including the UK, Australia, and Germany. The Company intends to expand into emerging markets across EU and Asia.

Manufacturing of Cannabis 2.0 Products in Canada

On 14 September 2020, Althea disclosed that its Canadian subsidiary, Peak Processing Solutions successfully obtained the Standard Processing Licence from Health Canada. Peak Processing will immediately commence commercial operations in Canada.

This licence permits operations to begin at the recently completed 3,716 square metre facility in Ontario. The facility is one of the first large-scale independent processing facilities specialised in the manufacturing and distribution of Cannabis 2.0 products (cannabis-infused beverages, concentrates & topicals).

On behalf of 3rd parties, Peak Processing shall manufacture Cannabis 2.0 products and supply medicinal cannabis products to Althea Company Pty Ltd. This will significantly decrease the Company’s cost of goods sold. Peak Processing intends to attain revenue of nearly C$25 million within eighteen months.

In particular, this licence from Health Canada provides Peak Processing with:

Agreement with Blum Beverage Company

In addition to securing the Licence from Health Canada, Peak Processing signed a contract with a Canadian non-alcoholic beverages company, Blum Beverage Company Inc.

With this agreement, Blum Beverage Company shall be capable of placing orders for Peak to manufacture as well as distribute cannabis beverages comprising 5 mg of THC (tetrahydrocannabinol) on behalf of Blum Beverage. The commercial conditions of the agreement were not disclosed.

The Company anticipates that the granting of the licence will facilitate negotiations with several other consumers who are now concerned that Peak Processing has cleared the regulatory barriers necessary to provide its services to them.

The agreement with Blum Beverage Company follows the binding production agreement with Collective Project Limited, which was announced on 22 June 2020.

Furthermore, now Peak will be included on the licensed producers’ list of Health Canada, which is a highly monitored list within the industry.

On the granting of the licence Josh Fegan CEO Althea, commented-

DO READ: Australian Cannabis Sector’s Growth Continues; Lens on Althea and MGC Pharmaceuticals

Cannabis 2.0 market in Canada

The Company considers that the Cannabis 2.0 market is significantly underserved.

Cannabis 2.0 products produce a substantial cost premium in the adult-use cannabis market in Canada in comparison to cannabis oils and dried flower. These products were only regulated for sale from January 2020, and currently, retailers are suffering from stock deficiencies across product segments.

Althea stated that as an independent processor, Peak Processing is well-positioned to capitalise on the demand in the Cannabis 2.0 space.

Peak Processing Solutions estimates that its yearly manufacturing capability in year one is up to:

Source: AGH ASX Announcements

Notably, most existing cannabis facilities in Canada were designed and built specifically to produce cannabis dried flower products and basic cannabis extracts. In comparison, Peak Processing facility has been built to produce Cannabis 2.0 products.

These products include ready-to-drink beverages, hydrocarbon extracts, topicals, cannabis oils, pre-filled vaporisers along with the final dose form medicinal cannabis products.

Obtaining Standard Processing Licence from Health Canada is a significant milestone for Althea. With this license, the Company can immediately commence its commercial operations in Canada.

ALSO READ: Two Cannabis Stocks on an Upswing Following Major Announcements: Althea, MGC Pharmaceuticals

 


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