Thursday , 21 November 2019


Cannabis Central: These Companies Intend To Become Major Players In Europe

By Lorimer Wilson (munKNEE.com)

It is predicted that over the next 5 years the CBD industry will grow more than 400% through 2023 in Europe (source) making it the largest legal cannabis market in the world. This is a great opportunity for companies to enter and/or expand through Europe with far less competition than we’re seeing in the U.S. and Canada.

Why the focus on Europe? Because there is a large and undeveloped emerging market there for CBD, estimated to be worth C$66.8 billion by 2020 and, because European governments were early adopters of CBD, the product is readily available as an over-the-counter product, stocked in local pharmacies and available online.

The companies highlighted below may well become major suppliers to this burgeoning market.

1. StillCanna Inc. (CSE:STIL, OTCPK:SCNNF), a Canadian early-stage life sciences company focused on large scale CBD extraction in Europe, has taken this opportunity to heart by combining its proprietary strengths in the extraction and distillation of pure CBD from hemp and/or cannabis oils with a number of key acquisitions and initiatives, as follows:

  • acquired Olimax, a vertically integrated licensed Polish cultivator, extractor, and formulator of hemp CBD, in March making StillCanna one of the largest hemp cultivators in all of Europe,
  • signed an exclusive extracting contract with U.K.-based supplier of CBD, Dragonfly BioSciences LLC, which is expected to generate $46 million in revenue for the company over the next three years.
  • developed its own proprietary and registered hemp seed that has a short gestation period allowing the company to plant two crops a year starting in 2020,
  • owns a number of agricultural-based patents that give the company a distinct advantage over new entrants into the market,
  • established a new extraction facility in Poland called Nexus that will be fully operational by Q4,
  • constructing another CBD extraction facility in Poland, named Horizon, which should be operational in 10 to 14 months which will be one of the most advanced, green, high-capacity facilities in the world,
  • has reached the final stages of the licensing process for its ORIGIN extraction facility in Romania, a Joint Venture with its U.K.-based partner Dragonfly Biosciences, and anticipates licensing completion and full production within the 4th quarter of 2019 and
  • expects to be cultivating 12,500 acres and producing up to 60 million grams by 2021 with lots of room to grow beyond that.
  • Founder Marc Crimeni relocated to Europe at the end of July to concentrate on bulk sales of CBD.
  • Individual insider management owns 3% of the stock.
  • The company changed its name to StillCanna Inc. from EVI Global Group Developments Corp. in March 2019.

For a detailed financial analysis please go here. You will not be disappointed.

In spite of StillCanna Inc.’s  acquisitions and initiatives as stated above its share price is down 55% from its recent peak on April 18th.

2. ICC International Cannabis Corp. (CSE:WRLD.U), a Canadian company which specializes in the acquisition & operation of cannabis assets worldwide with an emphasis on Europe, is on a clear path to be the first publicly listed, globally focused, pure cannabis play. It also builds and operates high-quality, low-cost cannabis production, processing and distribution facilities worldwide.

The company:

  • has secured the exclusive European master license to the Affinity Alpha Unit whose extraction technology will allow the company to increase yield by a projected 40%-50% and limit cannabinoid losses associated with existing extraction process leading to cost savings that will help the company improve margins,
  • has completed a strategic investment in Biotii Technologies Corp., a privately-owned Boston company, that hopes to establish processes to mass produce genetically engineered micro-organisms that express CBD/THC profiles identical to those found in nature, at a fraction of the cost of current cannabis production methods and with more consistent production quality,
  • has signed a licensing agreement with Authentic Brands Group to market and distribute cannabidiol-derived health and wellness products throughout Europe under its brands which will compliment ICC’s product strategy by delivering unique CBD-based solutions to diverse targeted audiences,
  • has received a $5 million strategic investment by way of a convertible debenture from Auxley Cannabis Group Inc. (TSXV:XLY) effectively expanding its international footprint to 22 countries across 5 continents,
  • intends to introduce VendaPharm, MarinaBox and Bamboo vending machines into high traffic retail end points and pharmacies across its European downstream network of 80,000 retail outlets, pharmacies and stores to provide access to its broad range of branded THC/CBD products,
  • acquired 49.9% of Wayland Group Corp. (CSE:WAYL), a vertically integrated cultivator and processor of cannabis with production facilities in Canada, Germany, Switzerland and Italy, and assets in Colombia and Argentina and
  • ICC’s 60,000 square foot Swiss cultivation facility has put the company at the epicenter, both economically and geographically, of the booming market to feed the continent’s growing demand for CBD.

For a detailed financial analysis please go here. You will not be disappointed.

In spite of ICC’s efforts to date and stated plans for the future ICC’s share price is down 88% in the last 7 months.

3. Aleafia Health Inc.(TSX: ALEF, OTC: ALEAF, FRA: ARAH) is a vertically integrated cannabis health and wellness company with three cannabis cultivation facilities in Ontario, Canada where it produces a diverse portfolio of products including oils, capsules and sprays. The company also operates a national network of 22 medical cannabis clinics.

This past May it entered the German medical cannabis market with a 60/40 joint venture (JV), through its wholly-owned subsidiary Emblem Cannabis Corp., with German pharmaceutical wholesaler Acnos Pharma Gmbh. The JV entity will purchase Aleafia Health branded cannabis oils for distribution to German pharmacies and for clinical trial usage.

Why in Germany? Because:

  • according to a report by the Bank of Montreal, the German medical cannabis market is projected to produce revenues of $5 billion in 2025 for cannabis producers, and Aleafia wants to participate directly in that growth and
  • the German market:
    • has significantly higher margins compared to the Canadian market and
    • patient purchasing costs are reimbursed through private and public health insurance.

Why Acnos? Because it:

  • has access to 110 distribution centers and 20,000 pharmacies, along with extensive distribution channels across Europe and
  • is currently building a dedicated cannabis product storage and order fulfillment hub within its new headquarters.

Aleafia’s stock jumped by 24% with the announcement of the Acnos J/V in May but has continued its decline and is now down 63% from its recent peak on February 5th, 2019.

For a detailed financial analysis please go here.

4. Elixxer Ltd. (TSXV:ELXR), a Canada-based investment holdings company that focuses on acquiring production, brands and distribution in established and developing cannabis markets, focuses on international markets, which will help them provide profit from the growing international demand for cannabis.

The Company:

  • changed its name from LGC Capital Ltd. to Elixxer Ltd. on August 6th, 2019,
  • entered into a letter of intent in March 2018 with Italian-based company Evolution BNK, a legal cannabis producer with a 70,000 sq. ft greenhouse in Sanremo, Italy, to acquire a 49% equity interest at a future date under certain circumstances and offers an option to purchase a 5% royalty on net sales,
  • entered into an investment agreement in May, 2019 to acquire a 35% equity interest in Freia Farmaceutici Srl, the only company in Italy – and one of the few in Europe – to have developed and marketed hemp-based pharmaceutical products authorized by the European Food Safety Authority and
  • currently sells its cannabis products in over 1,000 points of sale across  Switzerland and Italy.

ATTRIBUTABLE REVENUE & EBITDA FORECAST

For a detailed financial analysis please go here.
ELXR expects the Freia acquisition to provide significant synergies for the company within Europe but, to date, that benefit has not translated into a higher stock price. It remains very much a penny stock in the true meaning of the word trading at $0.08 and is down 38% from its recent April 4th high.
In addition to the above mentioned companies that have a very small capitalization the following companies are much larger and much more established.

5. The Green Organic Dutchman Holdings Ltd. (TSX:TGOD) (OTCQX:TGODF) is focused on medical cannabis markets in CanadaEurope, the Caribbean  and Latin America, as well as the Canadian adult-use market. It also has organic hemp CBD oil operations in Canada, and in the EU through its wholly owned subsidiary, HemPoland.

The company:

  • announced its expansion into the hemp CBD market in June with the launch of its Global Strategic Hemp Division which will offer support to the Company’s international partners by:
    • providing genetics,
    • training on organic methods and standard operating procedures and
    • offering regulatory insights and other advisory support,
  • signed a letter of intent for a 50/50 joint venture with Queen Genetics/Knud Jepsen A/S based in Hinnerup, Denmark which will:
    • provide a consistent supply of high-quality organic European-grown cannabis,
    • give TGOD exclusive rights to all cannabis-related production at the JV and
    • increase TGOD’s funded capacity to 195,000 kgs,
  • acquired HemPoland in 2018 which is facilitating its entrance into the German CBD market and, to that end,
    • has signed a distribution agreement with Mediakos, a leading German pharmaceutical distributor and
  • has had in-depth discussions with co-packers and additional distributors to continue expanding its footprint across Europe.

Like most other pot stocks TGOD’s stock price continues to be quite weak as it is down 42% from its March high.

For a detailed financial analysis please go here.

6. OrganiGram Holdings Inc. (TSX-V:OGI) (NASDAQ:OGI) is well positioned in Europe undertaking the following investments:

  • In June 2018 OGI invested $10,000,000 in Serbian-based hemp and CBD producer Eviana Health Corporation (CSE:EHC) for 26% of its outstanding shares on a non-diluted basis (and 40% on a fully diluted basis) to provide Organigram with a source of low-cost, high-quality CBD for the burgeoning medical market within Europe.
  • In October 2018, bought a 25% interest in Stadthagen, Germany company, alpha-cannabis Pharma GmbH (ACG), which is strategically positioned to serve more than 20,000 pharmacies in Germany, Austria and Switzerland.

OrganiGram stock is down 46% since its recent high on May 17th.

For a detailed financial analysis please go here.

Cannabis Company Quarterly International Revenues

Source: Company Reports, Ubika

7. Tilray Inc. (NASDAQ:TLRY) is making a valiant effort to establish itself as outlined below:

  • On July 23rd Tilray announced the acquisition of United Kingdom-based company, Smith & Sinclair, a developer/producer/marketer of boozy candies, edible fragrances and other unique cocktail treats. The deal gives Tilray a way to develop novel cannabis products as it tries to differentiate themselves and attract new customers and should give a major boost to the company’s efforts to get into the CBD-infused edibles market just in time for the legalization of CBD-infused edibles in Canada at the end of 2019.
  • Earlier this week Tilray’s Portuguese subsidiary, Tilray Portugal Unipessoal Lda., signed an agreement with Cannamedical Pharma GmbH to export $3.3 million worth of medical cannabis to Germany this autumn which will give Tilray access to a much larger market than that of its home country of Canada.

Tilray needs a shot in the arm given the performance of its stock which has been terrible this year. As of the close of business on Aug. 26th Tilray’s stock was down 72% from its recent high on Feb. 28th.

For a detailed financial analysis please go here.

8. Aurora Cannabis Inc. (TSX: ACB) (NYSE: ACB) continues to move forward in cementing its positioning in Europe’s medical cannabis market to ensure that it is ready to enter new markets as regulatory barriers fall and demand rises.

Aurora has more production capacity than any other company with over  500,000 kilograms in annual output and, as production ramps up throughout Canada, supply could outpace demand by as early as 2021 and, to sell its domestic excess supply, Aurora is expanding into European markets and, to that end, Aurora:

  • created a European subsidiary, Aurora Europe GmbH, to manage its affairs in Europe with divisions in Germany (Aurora Deutschland GmbH), Poland (Aurora Polska) and Netherland (Aurora Nederland B.V.),
  • entered into a joint venture, back in January, 2018, with Alfred Pedersen & Son for a 51% interest in Aurora Nordic Cannabis A/S, the joint venture company. The company is based in Odense, Denmark and is one of few companies with a license to cultivate in Europe which will make it the continent`s largest producer of cannabis.
    • Aurora Nordic will focus on the cultivation and sales of cannabis in DenmarkSwedenNorwayFinland and Iceland, through Aurora’s wholly-owned subsidiary Pedanios GmbH (a leading wholesale importer, exporter, and distributor of medical cannabis in the European Union, based in Germany) with excess capacity being distributed to other EU countries with the support of Pedanios.
    • According to Terry Booth, CEO of Aurora, the JV has established Aurora as the leading cannabis company in Europe and the leading exporter to, and distributor of, medical cannabis in Germany.
  • won the right through its subsidiary, Aurora Deutschland, to supply Italy (the second-largest European medical cannabis market) with a total of 400 kilograms (880 pounds) of medical marijuana over the next two years,
  • acquired 51% of Gaia Pharm in Portugal, soon to be renamed Aurora Portugal, on the heels of it receiving approval from the EU to construct a cannabis cultivation facility there which is expected to be completed (first phase) in the third calendar quarter of 2020,
  • completed its first commercial export of cannabis oil to the United Kingdom,
  • began construction of an indoor cannabis production facility in Leuna, Germany in May 2019 with completion expected within 12 months and initial shipments of locally grown cannabis expected to become available to German medical patients starting in October 2020.

For a detailed financial analysis please go here.

As of the close of business on Aug. 26th Aurora’s stock is down 42% from its recent peak on March 18th, 2019.

9. Canopy Growth Corporation (TSX: WEED) (NYSE: CGC), one of the world’s biggest medical cannabis companies, is making major investments in Europe to expand production there over the next two years with new growing facilities in Italy, Greece or Spain. Specifically, Canopy, through its subsidiary, Spectrum Cannabis has:

  • acquired Spain-based licensed cannabis producer Cáñamo y Fibras Naturales, S.L. complementing the Company’s existing production site in Denmark, (Spectrum Cannabis Denmark), as well as its ISO 13485 certified Storz and Bickel facility in Germany (Spektrum Cannabis Germany).
  • partnered with Alcaliber SA to cultivate marijuana and extract its oil at its Spanish facilities for worldwide sale,
  • bought C3 Cannabinoid Compound, a German company that specializes in cannabinoid-based medical therapies used by European physicians,
  • bought British skincare and wellness outfit This Works this past May and
  • acquired Annabis Medical which will operate as Spectrum Cannabis Czech.

For a detailed financial analysis please go here.

As of the close of business on Aug. 26th Canopy’s stock is down 52% from its recent peak on April 29th, 2019.

10. Cronos Group Inc. (NASDAQ: CRON; TSX: CRON) engages in the production and sale of cannabis in Canada, Poland and Germany.

Cronos has:

  • a 5-year exclusive distribution agreement with G.Pohl-Boskamp in Germany allowing it to distribute its product to over 12,000 pharmacies in the country and
  • a 5-year exclusive distribution agreement with Delfarma Sp. Zo.o allowing it to distribute its products to over 5,000 pharmacies and more than 200 hospitals representing approximately 40% of the Polish domestic market.

For a detailed financial analysis please go here.

As of the close of business on Aug. 26th Cronos’ stock is down 52% from its recent peak on March 5th, 2019.

11. Aphria Inc. (TSX:APHA; NYSE:APHA) is one of Canada’s lowest-cost medical cannabis producers of medical cannabis.

Aphria:

  • has been awarded a fifth lot (the maximum allowed) for the cultivation of medical cannabis in Germany – it is the only licensed producer in Germany with permission to grow all three strains of medical cannabis approved by German Federal Institute for Drugs and Medical Devices – affirming it’s leading position in the German medical cannabis market.
  • is building an 8,000 square meter indoor growing facility in Neumünster and expects to be in a position to supply Germany’s first domestically-grown medical cannabis in early calendar 2020,
  • is completing work on a state-of-the-art GMP-certified cannabis vault in Bad Bramstedt, Germany, for the import of cannabis flowers and oil,
  • has entered into a 15% strategic partnership (with the possibility of increasing ownership to 50% under certain conditions) with Denmark-based Schroll Medical (a subsidiary of a prominent European flower producer), to pursue the cultivation and worldwide distribution of organic, EU GMP-certified medical cannabis. To that end Aphria has just completed its first transfer of plant cuttings to Schroll,
  • has a 25.1% interest in Berlin-based Schöneberg Hospital, which provides it access to both doctors and patients for education on the benefits of medical cannabinoids,
  • has introduced a CBD-based nutraceutical and cosmetics product line for the German market, produced in the EU and distributed by CC Pharma, a subsidiary of Aphria with access to more than 13,000 pharmacies throughout Germany, that it acquired back in January of this year and
  • has received the first import license for medical cannabis from the Malta Medicines Authority that will enable its Malta-based subsidiary ASG Pharma, a high-capacity EU GMP-certified lab, to become a cornerstone in testing, research and development of medical cannabis in Europe.

For a detailed financial analysis please go here.

As of the close of business on Aug. 26th Aphria’s stock is down 44% from its recent peak on February 5th, 2019.

Conclusion

The pot stocks that have entered the European market are currently performing worse than the market as a whole, on average, but that should change given their early positioning in the burgeoning European market.

Want more such articles? “Follow the munKNEE” on Facebook, on Twitter or via our FREE bi-weekly Market Intelligence Report newsletter (see sample here, sign up in top right hand corner of page).
Get engaged: Have your say regarding the above article in the Comment section at the bottom of the page.
Articles Wanted: Original articles & links to other informative articles that deserve a wider read. Send info to loriewil[at]yahoo[dot]com.