Althea Group is an Australian cannabis company that's on the rise, as it continues to rapidly build its local patient base while also targeting lucrative new international markets.
The Althea Group (ASX: AGH) is an Australian cannabis company that is aiming to corner the market on the importation, cultivation and supply of medical cannabis. The company was founded in 2017, and since then it has already managed to get five branded medicinal products on the market.
Althea's ongoing dedication to patient care also inspired the creation of Althea Concierge, a proprietary web-based platform and mobile application that supports access to medicinal cannabis, making the prescribing process easier than ever.
The Melbourne-based company also has a robust three-stage business strategy with a strong focus on early revenue generation, sales-driven growth, and scalable domestic production.
We are unrelenting in our efforts to grow the number of patients utilising Althea products and there is no question that our patient growth in January was better than expected, given that many doctors take time off to spend the summer holidays with their families. The acceleration in patient numbers experienced over December and January is also continuing into February.Althea Group CEO, Josh Fegan
Additionally, Althea is one of the few companies 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.
The company has also been performing significantly above expectations in recent months, as the end of Q4 2019 saw Althea exceed its 4,000 patient end-of-year milestone—adding 719 new patients in December alone—while also taking in $1,095,057 in unaudited revenue, representing 45% quarter-on-quarter growth.
However, there are a number of additional factors we've identified that have established AGH as one of the stronger ASX-listed pot stocks. And at only 0.28 per share, there's never been a better time to initiate a position on the Althea Group stock.
So, let's dive into some of the reasons why we believe AGH is primed for growth in 2020.
Growing Australian Market Share
Althea's medicinal cannabis prescription numbers expanded at an accelerated rate during 2019, which the company attributes to the fact that it is undergoing a "rapid growth phase".
In August last year Althea was already welcoming 36 new patients per business day, and since then this number has grown considerably.
By the time September rolled around, Althea had locked down roughly 32% of the market share in Australia, and on November 15 the company officially surpassed the 3,000-patient mark.
The company then managed to top this milestone only a month later, climbing to 4,018 patients by the end of 2019. And with 459 Australian Healthcare Professionals now prescribing Althea's products, the company has been enjoying a year-over-year growth rate of more than 2,100%.
This trend towards exponential growth also continued into the new year and in January Althea added another 572 new patients to its books, representing the second-best month on record for the company.
Additionally, Althea recently released a highly concentrated full-spectrum CBD oil product known as CBD100. Althea expects sales of CBD100 to drive significant patient growth in the near term due to its unique formulation—which also contains both terpenes and flavonoids—along with less than 1mg per ml of tetrahydrocannabinol (THC).
According to the company, CBD100 also contains a host of lesser-known cannabinoids such as CBG and THCV, making it one of the most highly concentrated medicinal CBD products available on the market. This will give CBD100 a competitive edge over similar CBD oils, as there is an increasing demand for full-spectrum products due to the growing awareness of the "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 has launched successfully and we are already receiving positive feedback from doctors, patients and pharmacists about the product's efficacy and price point," Althea CEO Josh Fegan said.
"In fact, many of our sales have come from prescribers switching their patients to Althea CBD100 from other brands."
Entry into the European Market
There was huge news from the Althea stock in November 2019, after the company announced that it had successfully executed its previously announced entry into the German market.
The move came as part of Althea's broader push into the European cannabis landscape, which saw the company secure down a distribution agreement with Nimbus Health GmbH. Under the agreement, Althea products will be stocked in pharmacies throughout Germany that operate via the Nimbus Health's distribution network.
The partnership was considered by many to be a match made in heaven, as Nimbus is a global pharmaceutical wholesaler that specialises in the distribution and importation of medicinal cannabis products. 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.
Based on projected timelines provided by Germany's Federal Institute for Drugs and Medical Devices and Australia's Office of Drug Control, the company currently expects the first shipments of Althea's medicinal cannabis products to begin arriving in Germany during the first half of 2020.
As part of its efforts to further penetrate the German market, Althea is also developing a localised version of its Althea Concierge prescription platform, while also making its Medicinal Education in Cannabinoids (MEDIC) learning portal available to the German market.
The company believes that these two online tools will be assist healthcare providers in streamlining the prescription process—allowing Althea to rapidly build its market share—while also addressing the need for reliable clinical evidence and efficient patient access in the German market.
Aside from its entry into the German cannabis space, Althea also made significant progress in the UK during 2019. The company has already forged an industry leading position in the country and recently received additional import licenses from Home Office allowing it to engage in the supply of medicinal cannabis products.
Last year the company also launched a network of cannabis clinics in the UK—known as MyAccess Clinics—which have already seen a considerable growth in patient numbers since their inception, and as of mid-November 2019 had over 100 patients on its waiting list.
Another factor working in its favour is the fact that company's Bristol clinic was recently awarded a license by the Care Quality Commission (CQC).
According to the CEO of Althea Group, Josh Fegan, the license is a huge win for the company as it will allow MyAccess Clinics to begin prescribing patients with medicinal cannabis while conducting home care services, substantially broadening its total addressable market.
"We are replicating our Australian strategy in the UK and German markets and expect to see similar patient growth trajectories in due course," 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."
Peak Processing Solutions Acquisition
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.
The company specialises in the extraction, toll processing, and contract manufacturing of cannabis-infused edibles, drinks, nutraceuticals and cosmetics products, making it the ideal way for Althea to gain a first-mover advantage following the introduction of Canada's "Legalization 2.0" regulations in late 2019.
This is great news for investors, as researchers have predicted that Canada's cannabis industry will double in value to $5.4 billion before the end of 2021.
Additionally, the sale of cannabis derivatives and alternate form factors—such as edible, extracts and concentrate products—attracts a considerably higher margin than traditional dried flower, which should lead to significant revenue growth for the Althea Group stock throughout 2020.
The acquisition of Peak Processing Solutions was officially finalised following Althea's completion of a $30 million institutional capital raise during mid-2019, which means that the company still has plenty of cash in the bank to pursue its ongoing expansion initiatives.
The CEO of Althea Group, Joshua Fegan, stated 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," Fegan said.
In support of this early mover strategy, the company has also applied for one of the first large-scale cannabis processing licenses in Canada, which is currently on schedule for approval during the first half of 2020.
As a result, Peak has already made significant progress in line with Althea's operational timeline and is currently on schedule to begin manufacturing and shipping products by Q2 2020.
With an increasing European market share, thriving Australian patient base and upcoming Canadian cannabis derivatives launch—not to mention its steadily increasing quarter-on-quarter revenue growth—it seems like 2020 could be the year that the Althea Group finally breaks through the grass ceiling.
To learn more about Althea Group visit their Company HQ here.
Disclaimer: Past performance is not an indicator of future performance.
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