Aleafia’s (CVE: ALEF) share price has soared after it snapped up a 10% equity stake in Australian medicinal marijuana producer CannaPacific.
The Vancouver-based firm has seen its shares rise 23% to C$2.77 ($2.11) after the announcement, which represents its first international expansion. It will lend its clinical and cultivation expertise to CannaPacific and it hopes to gain future market access to Asia through the company.
Chief executive Geoffrey Benic said the deal will put Aleafia “at the epicenter of what we expect will be a major growth center in the global medical cannabis market”. They have signed a non-binding terms sheet and the transaction is subject to the definitive agreements and due diligence, but both parties expect it to go through smoothly.
CannaPacific has operations in Newcastle and the Macleay Valley, and it has obtained licenses to cultivate, produce, and research cannabis for medical use in Australia. It’s currently building a 53,000 sq. ft. cultivation and plant research facility and it hopes to enjoy a long-term partnership with Aleafia, capitalizing together on changes in the Australian regulatory environment.
Aleafia is poised to open a 160,000 sq. ft. greenhouse in the Niagara area before the end of the year and it should yield 98,000kg of cannabis flower in 2019. It has already supplied more than 50,000 medicinal marijuana patients, and this broad expertise should help CannaPacific grow its footprint in the burgeoning Australian medicinal cannabis market.
The Arcview Group estimates that medical cannabis spending in Australia will rise from $52 million in 2018 to AU$1.2 billion by 2027 ($870 million). Prohibition Partners believes it will hit the AU$1.2 billion mark by 2024 and reach AU$3 billion by 2028. It’s therefore understandable to see Canadian companies muscling in as the industry gathers pace.
Australia’s Therapeutic Goods Administration approved 469 applications for medicinal cannabis under its special access scheme in August and September, up from 97 in January and February, and it is tipped to continue to grow more widespread.
Prohibition Partners believes cannabis could be an AU$8.8 billion ($6.35 billion) industry in Australia within a decade if it legalizes cannabis for recreational use.