Local medicinal cannabis business Althea Group has announced its first foray into Canada, one of the biggest marijuana markets in the world, to build on the growth that has seen its share price rise quintuple since January.
The company has entered into a $35 million agreement to buy Canadian recreational cannabis business Peak Processing Solutions provided the company attains $27 million in revenue within two years.
The deal – first reported in Street Talk last week – comes after Althea gained a foothold into the United Kingdom medicinal marijuana market after being granted an import licence this month.
Chief executive Josh Fegan said the moves into Canada and the UK had broadened the companies horizons.
“It makes us a truly global cannabis business,” said Mr Fegan.
Canadian business Peak is focused on the recreational market, specialising in the extraction, processing and manufacturing of cannabis-infused edibles, drinks and cosmetics.
Peak is hoping to capitalise on the new market since Canada made marijuana legal in October last year and will – starting in three months – allow the distribution and sale of cannabis-infused products such as edibles, topical medications and beverages.
“This is a completely new segment of the market and one I think will be hugely attractive to a new user,” said Mr Fegan. He thought the regulatory change would open up the world of cannabis to consumers who were perhaps put off by having to smoke it.
Althea’s purchase of Peak is subject to three performance targets, as each target is hit Althea will purchase more shares in Peak. The final target is for Peak to hit $C25 million ($27 million) in revenue within 18 months of being granted its cannabis processor licence. This is the new licence required to accompany Canada’s new regulation.
June quarter results
On top of the international moves, the company’s June quarter results showed 1334 patients have been prescribed Althea medicinal cannabis products in Australia since it launched five products to the market in May 2018. Unaudited sales for the June quarter totalled $411,663, the company said.
The company’s share price has been on a tear since the start of the year, most recently trading at $1.28, up from 19.5¢ on December 31.
Mr Fegan has his eyes firmly trained on the future size of the local market.
“Fast forward three or four years we believe in Australia there will be upwards of 250,000 patients using medicinal cannabis on a daily basis,” said Mr Fegan. He said if his company can capture even a small slice of this market that would still mean big sales figures.
Mr Fegan is hoping to reach 20,000 to 30,000 patients within two years across the Australian and UK medicinal markets.
He anticipated the UK market would hit 900,000 patients within five years.
Combined with the sales of Peak, Mr Fegan said the businesses can achieve $100 million in revenue within 24 months.
Mr Fegan said 70 per cent of the patients prescribed Althea products suffered from chronic pain and the treatment acted as a pain reliever. Of the remaining 30 per cent, most were prescribed the medicinal cannabis products to help deal with mental health issues such as anxiety, post-traumatic stress disorder and sleeplessness.