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Monday, May 10, 2021

Big Days Ahead for Aphria Inc (TSX:APH) (OTCMKTS: APHQF)

Aphria Inc (TSX:APH) (OTCMKTS: APHQF) led by Vic Neufeld and a strong management team with production capacity set to exceed 255,000kgs by early 2019 holds a commanding position in the Canadian cannabis industry and we have been reporting on it for years.

Cannabis is a great place to be; according to a recent report from Arcview Market Research and its research partner BDS Analytics, over the next 10 years, the legal cannabis industry will see much progress around the globe and spending on legal cannabis worldwide is expected to hit $57 billion by 2027. The adult-use (recreational) market will cover 67% of the spending; medical marijuana will take up the remaining 33%. The largest group of cannabis buyers will be in North America, going from $9.2 billion in 2017 to $47.3 billion a decade later. Of course much of this hinges on how laws progress.

Aphria Inc (TSX:APH) (OTCMKTS: APHQF) is a vertically-integrated Canadian cannabis producer with a focus on the global cannabis market. Headquartered in Leamington, Ontario – the greenhouse capital of Canada. The Company was founded in 2014 by Cole Cacciavillani and John Cervini, who were Leamington greenhouse operators. Vic Neufeld, formerly CEO of Jamieson Laboratories, a Canadian vitamin company stepped in as CEO of Aphria. The Company was granted a license to produce and sell medical cannabis by Health Canada in 2014 and made its first wholesale shipments in April 2015.

Aphria is doing huge sales; Revenue for the three months ended August 31, 2018 was $13,292,00 representing a 10% increase over the prior quarter’s revenue of $12,026,000 and a 217% increase over the same period last year. The increase in the quarter was driven primarily by increased wholesale orders, accounting for 313 kgs. The increase in wholesale orders was comprised of approximately 200 kgs of cannabis trim sold to other LPs, to properly balance inventory levels of specific strains that were not in demand by the Provincial Control Boards and approximately 100 kgs of dried cannabis and cannabis oil, supplied to third party partners conducting clinical drug trials. Cannabis oil sales, as a percentage of volume, increased from 29.2% to 39.1% in the quarter, driven primarily by an internal formula change for our equivalency factor. On a year-over-year basis, revenue in the quarter increased 217.2%.

The Company’s facility in Leamington, Ontario in currently being expanded; work continues to rapidly advance on the 700,000-square-foot Part IV expansion, which Aphria anticipates will have its first sale early next year. The Part III expansion added 200,000 square feet of production space and more than tripled Aphria’s production capacity from 9,000 kg annually to 30,000 kg annually. When completed early next year, the fully expanded facility (referred to as Aphria One) will provide over 1,000,000 square feet of production space with an annualized capacity of 100,000 kg. Combined with the Company’s Double Diamond Farms location (referred to as Aphria Diamond) and its B.C.-based subsidiary Broken Coast Cannabis, Aphria’s fully-funded production capacity is anticipated to be approximately 230,000 kg per year by early 2019.

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In January Aphria acquired Broken Coast Cannabis, a Vancouver Island cannabis producer, for $230 million in cash and stock. Also in January Aphria acquired Nuuvera which holds a commanding position in the German and Italian markets for $425 million. Aphria also completed the acquisition of several South American cannabis companies for about $200 million in a deal with Scythian Biosciences, a closely related company sometimes described as an acquisition arm of Aphria. Aphria was founded in 2014 by Cole Cacciavillani and John Cervini, who were Leamington greenhouse operators. Vic Neufeld who was formerly CEO of Jamieson Laboratories, a Canadian vitamin company stepped in as CEO.

Last month Aphria unveiled its comprehensive portfolio of adult-use brands that will be available for sale in the adult-use market. Backed by more than a year and a half of extensive qualitative and quantitative research, including focus groups and influencer consultations, the Company has developed a portfolio of brands designed to meet the needs of specific consumer segments. The brands feature a range of price points and offer a variety of product formats and consumption options tailored to consumer preferences.

On October 15 Aphria announced it has completed its first shipment of cannabis oil to its Argentina-based subsidiary ABP, S.A. a pharmaceutical import and distribution company. In accordance with a previously announced supply agreement, the Company delivered 1,500 bottles of Aphria’s renowned Rideau CBD oil, which were provided to Hospital de Pediatria Garrahan (“Hospital Garrahan” or the “Hospital”), a leading pediatric hospital located in Buenos Aires, for use in a clinical study focused on treating refractory epilepsy in children.

Aphria acquired ABP last month when the Company closed its acquisition of LATAM Holdings Inc. (“LATAM Holdings”), expanding the Company’s global footprint to include a leading presence in Latin America and the Caribbean. “Argentina will play a foundational role as Aphria cements its leadership in medical cannabis throughout the region,” said Vic Neufeld, Chief Executive Officer of Aphria. “Aphria and ABP, in close partnership with the Argentinean government, continue to advance opportunities for medical cannabis in the country, including the potential for in-country cultivation. We are also proud to support the critical and necessary research being undertaken by Hospital Garrahan on the treatment of refractory epilepsy in children with our Rideau CBD oil.”

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Currently trading at a $3.5 billion market valuation Aphria has very little debt on the books, $59 million in the treasury and another $45 million in marketable securities. Aphria is one exciting Company; they are a vertically-integrated Canadian cannabis producer with a focus on the global cannabis market and they are already doing huge sales reporting revenue for the three months ended August 31, 2018 was $13,292,00 representing a 10% increase over the prior quarter’s revenue of $12,026,000 representing strong quarterly revenue growth – up 117% y/y. Aphria led by Vic Neufeld and a strong management team with production capacity set to exceed 250,000kgs by early 2019 holds a commanding position in the Canadian cannabis industry. Aphria is currently the only Company of the big 5 that are not listed n the US. CEO Vic Nuefeld recently suggsted a US listing is hopefully coming soon. We will be updating on Aphria when more details emerge so make sure you are subscribed to Microcapdaily so you know what’s going on with Aphria.

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Disclosure: we hold no position in Aphria either long or short and we have not been compensated for this article.

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