The Coronavirus has many cannabis companies in a panic, but how will it affect Australia's leading medicinal cannabis company, Althea Group Holdings? We spoke with the company's CEO Josh Fegan to find out.
Over the past year, pot stocks have been pummelled and pulverized in the markets, precipitously declining as they continue to burn enormous amounts of cash while generating very little revenue.
The nascent cannabis industry already had its hands full with this capital crunch as companies vied for their spot in the global marketplace, and now, coronavirus has kicked in and sent the world into a tailspin – with cannabis companies in some of the worst positions to deal with it.
This has cannabis investors wondering, which pot stocks will survive the current crisis? The situation looked dire enough without a global pandemic thrown into the mix, and now, everything is up for question.
We think one ASX-listed pot stock that isn't going anywhere is Althea Group Holdings (ASX:AGH), and so we sat down with the company's CEO, Josh Fegan, to discuss the company's battleplan moving forward.
While other companies are battening down the hatches in order to deal with COVID-19, Mr. Fegan has stated that it's largely business as usual at Althea.
"We knew that this was going to be a marathon. It's a brand new industry, and we're in the introductory phase of that. It's an early revenue business, so we're one of the ones that are making money, but we realize we're nowhere near where we want to be in that regard either."
"When you are a growth business, there is an element of investment required. So we're always very conscious about our expenditure on any given day, even more so now that the coronavirus situation is among us. We're very calculated in the investments that we make, and we ensure that every dollar works hard for us."
And though Althea is only in the "introductory phases" of the business, the company is showing some serious strengths.
Althea Group – An Australian Medical Cannabis Powerhouse
Founded in Melbourne in 2017, Althea Group Holdings is a medicinal cannabis company that focuses on cultivating, producing, manufacturing, and distributing medicinal cannabis products throughout Australia, the United Kingdom, Canada, and most recently in Germany.
The company is one of the few cannabis players operating in Australia that possesses the full set of licenses from the Office of Drug Control (ODC) and Agriculture Victoria, allowing the company to supply its patients with its pharmaceutical grade, full spectrum medicinal cannabis products.
In these few years since Althea's founding, the company has released five branded medicinal products on the market, with the most recent addition to their product portfolio being CBD100, a highly concentrated, full-spectrum cannabidiol oral oil product.
Though as impressive as these licenses and products are, the real juice of Althea is in the numbers.
After adding 719 new patients in December, Althea climbed to 4,018 patients by the end of 2019. This continued through to January, with the company adding 572 new patients to its books, and more recently in February, with the company adding 617 patients for the month, representing the second-highest month for patient additions.
Now, the company sits above 5,000 patients.
To put these numbers into context, by the end of 2019, Australia had 10,595 medical cannabis patients, up from just 1,608 at the beginning of the year.
Althea's market share is now approaching a quarter of Australia's entire medicinal patient base, and the company's patient acquisition numbers are growing at an exponential rate.
Mr. Fegan attributes Althea's success to several factors, the first of which is having a "very good product."
Though he continues that having success with medicinal products often boils down to more than just the product, with a lot depending upon the gatekeepers, who in this case, are the medical community.
One of the biggest barriers for patients in being prescribed medicinal cannabis is gaining the approval of a healthcare professional, many of whom have a lack of knowledge about cannabis-related medicines. In this regard, Althea is dominating, with 459 Australian healthcare professionals now prescribing Althea's products, representing an enormous 40% of all medical professionals in the medicinal cannabis space.
"You're basically actually selling a formulation and, realistically, a brand that people can trust in. The people that trust in those brands are your doctors. So if you don't do the work with the medical community, and they don't understand this as a genuine therapy, it'll never get the traction that it deserves."
In order to better facilitate the education and interaction between cannabis companies and medical practitioners, Althea created Althea Concierge, a proprietary web-based platform and mobile application that supports access to medicinal cannabis, making the prescribing process easier than ever.
How is Althea Coping with Coronavirus?
While Coronavirus is sending the world into a panic, Althea has positioned itself to be largely unaffected by the crisis. The company has done this in several ways, the first of which is by ensuring they have a solid balance sheet and strong revenue growth.
"Althea is extremely healthy with 15.5 million dollars in the bank, and solid cash flow now amongst all the businesses. We're nearing breaking even in profitability for the Australian business in isolation, which is a real positive."
"We've got meaningful revenue offset in the expenditure that we have now, but we also never set up to be some sort of fly-by-night success. It's a sustainable business model. It's happening, but we all need to understand it's going to take time to build. Rome wasn't built in a day."
Mr. Fegan mentions that Althea has the most inventory of any medicinal cannabis company in Australia, and is also building up a solid amount of inventory in the UK, despite the recent pandemonium surrounding Brexit.
The supply chain is unaffected by Coronavirus. That's the most important point.Josh Fegan, CEO of Althea Group Holdings
Additionally, as Mr. Fegan remarks, while coronavirus has brought the economy to a halt, it doesn't pause the health issues of medical patients across the globe.
"What Althea's products are doing for people across a number of different indications, mainly pain, is unbelievable. That pain doesn't simply stop because coronavirus has arrived. Patients need their medicines, just like any other medication that people are utilizing, and so Althea's products are going to be required."
The Path Forward for Althea
If there's one message Josh Fegan wants to stress about Althea to investors, it's "longevity."
"People need to look at us as a long-term investment," stated Mr. Fegan, mentioning that "it takes time to forge our place in medicine and then get the proper traction that we deserve. And when I think that comes through on the financial statements in a meaningful way, people will pile into the stock."
Once Althea has concretized its position as Australia's leading medicinal cannabis company, and when the pharmaceutical industry begins to notice the significance of medical cannabis, "it's all going to add up."
"It's the sum of the parts, meaning that doctors are going to prescribe medical cannabis, either as an adjunct or as a replacement to opioids, and when that happens at some sort of meaningful scale, Big Pharma is going to look at this thing and think, "Well geez, we need to get into medical cannabis."
Though for the immediate term, with the coronavirus looming over the world, Althea is not going anywhere.
"We want people to know that we're in a very healthy position. I want our shareholders to know that we're watching the coronavirus situation very carefully, and it's impact, if any, on our ability to trade, to make sure that we're implementing different management policies to ensure that our working capital is protected and that we're in as good a shape, if not better, when the fog lifts, when we come to the other end of this. We are very fiscally responsible and not afraid to make significant moves to make sure that the balance sheet health remains intact."
The only impediment which Althea's CEO and founder can see affecting the company is the current uncertainty surrounding coronavirus. This, he believes, will be resolved once the Australian government provides a consistent message to citizens.
"The impact I've seen from coronavirus is probably more out of fear of sitting than anything. Usually, people have no apprehension to visit their doctor whatsoever. Right now, you've got some mixed messages by the government about what you can leave your house for, and social distancing, and this and that. You also have clinicians and clinics that are hyper-sensitive to potential coronavirus patients and making sure that they're screened and directed to the right places."
"Once we get some clarity from the Government, people will know which framework we're looking at, and we will all be on the same page from there."
"We're still operating and living within as a community, people will still be able to access their doctor and still be able to access their medications, and we'll adapt to make sure that we can deliver them the best way possible."
To learn more about Althea Group, visit their company HQ here.
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