The Althea Group (ASX: AGH) is an Australian cannabis company with a mission to corner the market on the importation, cultivation and supply of medical cannabis.
The Melbourne-based company has a robust three-stage business strategy with a strong focus on early revenue generation, sales-driven growth, and scalable domestic production.
Since Althea was founded in 2017 it has already managed to get five branded medicinal products on the market. Its' dedication to patient care also led to the development of the Althea Concierge, a web-based platform and mobile application intended to support access to medicinal cannabis.
The company is one of the few operating in Australia that has been granted a full set of licenses from the Office of Drug Control (ODC) and Agriculture Victoria, allowing it to engage in cultivation, manufacturing, production, import and exporting activities. As a result, Althea is able to supply its patients with pharmaceutical grade, full spectrum medicinal cannabis products.
Althea's immediate focus remains on rapidly building our prescriber base, which will ultimately increase the number of patients who are prescribed Althea medicinal cannabis worldwide. Althea Group CEO, Joshua Fegan
The company also recently entered the UK—gaining traction in what will be a very large medicinal market—and acquired the Canadian cannabis extraction and manufacturing company company, Peak Processing Solutions. This means that the company is now well positioned to reap considerable revenue from the recent introduction of "Legalization 2.0", which will see cannabis-based edibles and extract products hit the shelves in Canada by the start of 2020.
According to the CEO of the Althea Group, Joshua Fegan, the company has built its' market leading position by focusing on building patient access.
"Althea is a cannabis-focused pharmaceutical company and our market leading position in Australia and the UK, two highly regulated medicinal cannabis markets, is due to the fact our business was built on servicing patients. The most important thing is helping patients and educating doctors on the pathways to prescribing medicinal cannabis," Fegan said.
"This is where we are doing all the hard work and this is what is opening up the market and generating demand for our products. Our focus is on getting product to patients and I would argue the most important and profitable part of the entire supply chain is marketing and distribution."
"Medicinal cannabis is only available by prescription in Australia and the UK, and requires certain criteria be met in advance of prescribing. The regulations and patient access pathways are much more onerous than in Canada, for example."
Another element that sets Althea apart from its competitors is its "seed-to-sale" certification and dedication to safety, consistency and quality, with every medicinal cannabis product manufactured by the company being subject to a rigorous 509-step quality assurance process.
Althea's recent capital raising—and its ongoing revenue intake, which significantly offsets operational expenditures—means that the company is well-funded to continue pursuing its current expansion initiatives. These include adding new products to its portfolio, continuing its expansion into the UK and Europe, and reaching the 10,000 patient prescription milestone during 2020.
Increasing Australian Market Share
Althea's medicinal cannabis prescription numbers have been expanding quickly and the company says that they are approaching a "rapid growth phase".
In August the company was already welcoming 36 new patients per business day, and since then this number has only grown. By September, Althea had secured approximately 32% of the market share in Australia—based on the number of active patients—and on November 15 the company officially surpassed 3,000 patients.
The company then managed to top this milestone only a month later, reaching 4,018 patients by 31 December, 2019. And with 432 Australian Healthcare Professionals now prescribing Althea's products, the company has been enjoying a year-over-year growth rate of more than 2,100%.
Althea is in a market leading position due to our brand recognition and high value proposition which resonates with doctors and patients alike. The Company remains fully funded and on track to deliver Australian manufactured Althea products in 2020, as well as supporting our international expansion. Althea Group CEO, Joshua Fegan
The company has also extended its supply agreement with Aphria to 2027, in anticipation of further demand for Althea medicinal cannabis products.
But it's not all good news, as the renewal of Althea's supply agreement with the company came hot on the heels of an announcement that Aphria would be offloading 37 million non-escrowed shares of Althea stock.
However, the CEO of the Althea Group, Joshua Fegan, said that things have been progressing rapidly for the company, despite the setback.
"Mid-way through 2019 we set a target of 4,000 patients by the end of the year and by mid-December, we were well placed to reach it," Fegan said.
"Having received our final 2019 numbers, I am pleased to advise that Althea concluded the year by exceeding its target, with 4,018 patients prescribed our medicinal cannabis products."
"We now have our sights set on a strong 2020 where we once again expect to see significant patient and prescriber growth."
Source: Company Presentation
The continued growth of Althea's patient base will be sustained by the company's patient-focused approach and emphasis on medical education—for both patients and prescribers—combined with its proprietary technology platform Althea Concierge.
The company's growing market share has also been boosted by the rise in Therapeutic Good Administration (TGA) Special Access Scheme Category B (SAS) patient applications, which saw another 3,594 approvals issued in October.
"Althea is the preferred medicinal cannabis brand for a growing number of prescribers in Australia and the UK because of our unrivalled patient care services, including our proprietary Althea Concierge web based platform and our infield Medical Science Liaison team," Fegan said.
"Althea Concierge is a guardian angel for doctors investigating or actively prescribing, medicinal cannabis. We are focussed on being as profitable as possible and that is why we have invested in Althea Concierge and other medical education initiatives."
"Whilst production is a part of our long term plans, for now, Althea will focus on where the patients are."
Additionally, the company recently released a highly concentrated full-spectrum CBD oil product known as CBD100. Althea expects sales of CBD100 to drive considerable patient growth in the near term due to its unique forumilation, which also contains small traces of terpenes and flavonoids, with less than 1mg per ml of tetrahydrocannabinol (THC).
According to the company, CBD100 will also contain a host of lesser-known cannabinoids such as CBG and THCV, making it the most highly concentrated medicinal CBD product developed by Althea.
This will give CBD100 a competitve edge over similar CBD oils, as patients have demonstrated a growing interest in full-spectrum products due to increasing awareness of the infamous "Entourage Effect".
As evidence of this the company pointed to data from one of the largest cannabis clinic networks in Australia, Cannvalate, which confirmed that CBD products account for up to 30% of their total prescriptions.
Althea CBD100 contains minimal THC (<0.08%) and so should meet the needs of Cannvalate's network of 1000+ doctors, especially those who want a pure CBD product, those who are concerned about driving impairment and for certain pediatric patient populations. Cannvalate CEO, Dr Sud Agarwal
This perspective was also echoed by the management of Cannabis Access Clinics, who stated that Althea's CBD100 may be a suitable treatment option for a significant segment of their clientele.
CBD100 is also Good Manufacturing Practice (GMP) certified, ensuring that Althea's products are of high quality, with a potentially global addressable market.
The Althea Group CEO Josh Fegan has stated the company believes that, "given the TGA's comprehensive regulatory system for medicinal cannabis at a Commonwealth level, other states including Victoria, will soon follow the lead of Queensland and New South Wales by removing state-based applications for patients seeking access to medicinal cannabis."
"This will certainly lead to wider acceptance of medicinal cannabis treatment within the medical community and we believe will significantly increase Althea's patient base," he said.
Sales of CBD100 have also been exceeding expectations, with 206 bottles already being sold. The product has received strong response from doctors and patients alike, due to its affordability and potency.
"Althea CBD100 has launched successfully and we are already receiving positive feedback from doctors, patients and pharmacists about the product's efficacy and price point," Fegan said.
"In fact, many of our sales have come from prescribers switching their patients to Althea CBD100 from other brands."
Earlier this year the Althea Group was selected to be a supplier of medicinal products for Project TWENTY21, which is the UK's first national pilot trial for medicinal cannabis.
The Althea stock looks set to benefit significantly from the trial, which aims to enrol 20,000 patients suffering from a variety of conditions by the end of 2021.
The study is being run by one of the UK's leading independent scientific committees, Drug Science, and aims to create the largest single body of evidence in Europe supporting the usage of medicinal cannabis. This evidence will then be used to persuade policy makers and the wider European healthcare community of the efficacy of medicinal cannabis, while also improving patient confidence.
Project TWENTY21 has the support of The Royal College of Psychiatrists, The British Pain Society, the United Patients Alliance, and will offer subsidised medicinal cannabis to patients participating in the trial.
The treatment and monitoring of patients will be administered by doctors working in Althea's MyAccess Clinic network, using a real-world data registry to, "assess efficacy, safety and patient-reported outcomes".
"We believe the pilot program will yield valuable data that can be used to further bolster the case for wider medicinal cannabis use and inform public health and stakeholder decisions," the company stated.
Source: Company Presentation
In November the company also entered into an agreement with the Australian Centre for Cannabinoid Clinical and Research Excellence—in conjunction with the University of Newcastle—to be a product supplier for an upcoming Open-Label Prospective Clinical Trial of cannabinoids as a form of symptom control for advanced-stage cancer.
Under the agreement Althea will become one of several suppliers providing two medicinal cannabis products to the trial, which will target up to 600 patients.
Althea's cannabis products will be supplied to the Australian Centre for Cannabinoid Clinical and Research Excellence on commercial terms, though the trial will not guarantee a projected maximum, or minimum, quantity of product purchased.
The CEO of Althea Group, Josh Fegan said the company is proud to be, "supplying cannabis medicines to the Australian Centre for Cannabinoid Clinical and Research Excellence's clinical trial."
"We are big believers in the potential benefits of medicinal cannabis and pleased to support an initiative such as this, which will further our scientific understanding of its use in areas of unmet needs."
"We look forward to the results of the CARE," Fegan said.
Peak Processing Solutions
In October 2019, Althea announced the completion of the transaction to acquire a contract extraction and manufacturing company based in Canada known as Peak Processing Solutions.
Peak specialises in the extraction, toll processing, and contract manufacturing of cannabis-infused edibles, drinks, nutraceuticals and cosmetics products. This makes it ideal to take advantage of Canada's newly introduced "Legalization 2.0" regulations, which is great news for investors, as researchers have predicted that Canada's cannabis industry will double in value to $5.4 billion by the conclusion of 2021.
In support of this early moving strategy, the company has applied for one of the country's first large-scale cannabis processing licenses, which is expected to receive approval during Q1 2020.
Peak is well-positioned to capitalize on the next generation of adult-use cannabis offerings in Canada and we expect Althea shareholders to realize an exceptional return on the Peak investment. The Peak completion of the Peak acquisition is yet another successful milestone achieved by the Company in our short history. Althea Group CEO, Joshua Fegan
The CEO of Althea Group, Joshua Fegan, remarked that Peak Processing Solutions is "well placed to launch products early on in this new segment of the Canadian adult-use cannabis market."
"Media reports suggest that Canada's cannabis industry is expected to double to A$5.4 billion by the end of 2020, up from A$2.3 billion in 2019, with sales of new cannabis-infused products accounting for approximately A$1.3 billion," he said.
The acquisition of Peak Processing Solutions was finalised following Althea's recent completion of a $30 million institutional capital raise, which means that the company is still well-funded to pursue its other expansion initiatives.
Althea has continued to make significant progress in the UK—having already forged an industry leading position in the market—and recently received additional Home Office import licences for the supply of medicinal cannabis products.
Earlier this year the company launched a network of cannabis clinics in the UK, known as MyAccess Clinics, which have seen a considerable growth in patient numbers since their inception.
In fact, as of mid-November there were approximately 100 patients on the clinic's waiting list, which has prompted Althea to pursue the creation of additional MyAccess locations throughout the UK.
The company's Bristol clinic was also awarded a license by the Care Quality Commission (CQC) in November, which is huge news, as it will allow the Bristol to provide domiciliary care.
We're delighted to have received our CQC registration and licence, which I am confident will be a turning point for patients who have so far been unable to access medical cannabis in the UK. The CQC licence will allow our physicians to prescribe with absolute confidence, along with now being able to assess patients in their own homes MyAccess Clinics Director, Grahan Woodward
This means that health care providers from MyAccess Clinics will now be able to prescribe patients medicinal cannabis while conducting home care services, which will significantly broaden their total addressable market.
Additionally, the credibility associated with the CQC license will aid in the recruitment of further prescribing doctors in future, further legitimising the company's position as a provider of cannabis-based healthcare.
"We are replicating our Australian strategy in the UK and German markets and expect to see similar patient growth trajectories in due course," Althea CEO Joshua Fegan said.
"Althea is in a market-leading position due to our brand recognition and high-value proposition which resonates with doctors and patients alike."
"The company remains fully funded and on track to deliver Australian manufactured Althea products in 2020, as well as supporting our international expansion," Fegan said.
To assist the expansion of its UK operations, the company has also launched a British version of its online prescription platform, which is known as Althea Concierge UK.
The company believes that the platform will assist healthcare providers by streamlining the prescription process, while also facilitating patient referrals from primary doctors to specialist prescribers.
As part of its push into the UK market, the company has partnered with the country's leading independent scientific committee on drugs, Drug Science, to allow the non-profit use of its Medical Education in Cannabinoids (MEDIC) learning portal, which will assist doctors and other health care professionals who are looking to learn more about medicinal cannabis.
The launch of Althea Concierge UK and progression of our partnership with two leading UK scientific committees are key developments for our UK expansion. While Althea Concierge UK streamlines prescribing pathways for doctors, the partnerships with Drug Science and IOTOD are furthering our educational outreach efforts. Althea CEO, Joshua Fegan
Althea's partnership with Drug Science has also landed the company a lucrative supply agreement for the scientific organisation's upcoming TWENTY21 study, which is the UK's first national pilot program for medicinal cannabis.
According to Althea's Chief Medical Officer, Dr Robert Pawinski, the company is, "proud to be able to provide the product as part of the national pilot, and resources to ensure patient access."
"We believe the pilot program will yield valuable data that can then be used to further bolster the case for medical cannabis use and inform public health and stakeholder decisions," he said.
The deal will see Althea supply medicinal cannabis products to patients participating in the TWENTY21 trial, which aims to enrol 20,000 people before the end of 2021.
Entry into German Market
There was big news from the Althea stock in November, after the company announced that it had successfully executed its planned entry into the German market.
The move came as part of Althea's broader push into the European cannabis landscape, with the company already having locked down a distribution agreement with Nimbus Health GmbH. This is a well-suited match, as Nimbus are a global pharmaceutical wholesaler specialising in the distribution and import of medicinal cannabis products.
Under the agreement, Althea products will stocked in throughout Germany in the Nimbus Health's pharmacy network. However, this isn't just some hands-off distribution deal, as the two companies will also jointly establish yearly sales targets and develop real world anonymized patient data.
The regulatory and social acceptance of medicinal cannabis use in Germany is favourable and we are expecting immediate patient growth in what is one of Europe's largest and most affluent countries. Althea CEO, Josh Fegan
The company currently expects—based on projected timelines provided by Germany's Federal Institute for Drugs and Medical Devices and Australia's Office of Drug Control—that the first shipments of Althea's medicinal cannabis products will begin arriving in Germany by early 2020.
As part of its move to enter into the German market, Althea will also develop a localised version of its Althea Concierge platform, while also offering its Medicinal Education in Cannabinoids (MEDIC) learning portal to the German market.
These two online tools will be used to streamline the prescription process, and also fill a gap in the German market for reliable clinical evidence and efficient patient access. The company believes that by making using of these educational initiatives it will be able to rapidly build market share.
According to the CEO of Althea, Josh Fegan, the company is, "very pleased to have entered into this MOU with Nimbus."
"Working within an existing and successful distribution channel in Germany is a low risk and high reward strategy for us."
"I am looking forward to relocating to London so that I can oversee the next phase of growth in our UK operations and facilitate a timely entry into the German market, during what is an exciting period for Althea and its shareholders," Fegan said.
The Althea CEO Josh Fegan will also be relocating to London to help drive the scaling up of Althea's UK business—along with coordinating its expansion into Germany—however the company's global headquarters will still remain in Melbourne to main its market leading position domestically.
According to the founder and CEO of Nimus, Linus Maximilian Weber, his company only, "engages with partners following extensive and careful testing to deliver the highest quality products to our patients."
"We are excited to work with a highly reputable partner like Althea and deliver such high-quality products to the pharmacies in our network who are covering approximately 25% of the existing medical cannabis market in Germany," Weber said.
The latest news relating to the Althea Stock
Althea Exceeds 4,000 Patient Milestone – The company surpassed its 4,000 patient target for 2019, representin 48% month-on-month growth for the company
Althea Scores Approval for CQC License – MMJ Clinic Group Limited, the company's wholly owned UK subsidiary, secured a license for its MyAccess Clinics site in Bristol.
Althea Updated the Market on 2019 Operations – The company gave its investors an update on the company's operations during its 2019 Annual General Meeting.
Althea Experiences Record Breaking Patient Growth – Althea is currently adding 35 new patients each business day, representing a 46% increase on the previous month.
Should I buy Althea stock?
Althea Group has a growing Australian market share.
- The company is currently welcoming 36 new patients per business day.
- By September 2019 Althea had secured approximately 32% market share in Australia.
- The company has extended its supply agreement with Aphria to 2027 in anticipation of further demand for its cannabis products.
Althea Group is already entering the European Market.
- The company made significant progress in the UK in 2019, establishing the MyAccess Clinics network and partnering with the TWENTY21 Project.
- Althea's successfully executed its entry into the German market in November through an agreement with distributor Nimbus Health.
- Experts estimate that the European market could be worth as much as €123 billion by 2028.
The acquisition of Peak Processing Solutions will offer access to the highly lucrative extracts and edibles market in Canada.
- The company specialises in the extraction and manufacturing of cannabis-infused edibles, drinks, nutraceuticals and cosmetics, making it perfect to take advantage of "Legalization 2.0".
- Peak has already applied for one of Canada's first large-scale cannabis processing licenses, which is expected to be approved before Q2 2020.
- Sales of new cannabis-infused products are expected to account for more than $1.3 billion in revenue during 2020.
Disclaimer: Past performance is not an indicator of future performance.
The Forward Outlook for Althea Stock
The Althea stock reached a number of key milestones in last year, beginning with its expanding market share in the Australian cannabis space.
There are now 432 Australian Healthcare Professionals prescribing Althea's products, representing a year-over-year growth rate of more than 2,100%. The company also managed to exceed its 4,000 patient milestone before the end of 2019. Additionally, Althea expects its new highly concentrated full spectrum CBD oil product, CBD100, to generate considerable patient growth in the near term.
The company is making considerable headway with its expansion into Europe, having already set up shop in the UK with its highly popular MyAccess Clinics network. Althea's products also recently received distribution in Germany, thanks to a distribution deal with Nimbus Health.
This could prove to be a hugely advantageous move for investors, as the German cannabis market is shaping up to be one of the most valuable in Europe. In fact, some experts are even saying that Germany could eventually become the world's largest market for medicinal cannabis, while a recent study by Prohibition Partners predicted that it could swell to $18 billion in value within the next 10 years.
Althea is replicating its highly successful Australia-born strategy in the UK by simplifying patient access to medicinal cannabis and using a combination of in-field representatives and our proprietary Althea Concierge technology platform to encourage uptake. Althea Group CEO, Joshua Fegan
The company's acquisition of Peak Processing Solutions should also generate considerable revenue for the Althea stock in the near future, as "Legalization 2.0" takes full effect. Extracts and edible products are expected to begin reaching Canadian consumers by the start of 2020, leaving the company well positioned to capitalise on the growing demand for alternative cannabis form factors.
Althea is also one of the few cannabis companies operating in Australia with a complete set of licenses from the ODC and Agriculture Victoria, which allows it to engage in cultivation, manufacturing, production, import and exporting activities.
This gives Althea stock a considerable advantage over its competitors, as the company is able to supply its patients with pharmaceutical grade, full spectrum medicinal cannabis products.
However, Althea did suffer some setbacks in 2019. After an IPO that saw the company raise $19.65 million in funding, it managed to push its' initial market capitalisation of $40.6 million all the way to $121.8 million. Unfortunately, what goes up, often comes down, and the company's market cap would eventually stabilise to approximately $62 million, as of December 2019.
But investors can breathe easy, as the company is well-funded thanks to its recent capital raising, while upcoming milestones such as new product launches, further expansions into the German and the UK markets, and reaching the 10,000 prescription milestone are expected to drive price movement from the Althea stock in 2020.
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