AgraFlora Organics intends to be a top cannabis player in Canada and Europe

• Targets Canadian recreational and European medical cannabis markets
• Owns three greenhouses and an edibles-manufacturing plant
• Recently closed on $29 million in financing 

What AgraFlora Organics does:

AgraFlora Organics International Inc (CSE:AGRA) (OCTMKTS:AGFAF) grows, distributes and markets premium cannabis and cannabis-infused products. 

Its strategy is two-pronged – supply the Canadian recreational market with high-potency flower and edible products, while serving the European medical cannabis market. 

AgraFlora, based in Vancouver, owns an 8,000-square-foot (sq/ft) indoor cultivation (AAA Heidelberg) facility in London, Ontario that grows premium cannabis. 

The company is also in a joint venture with Propagation Services Canada Inc (PSC), which operates a 2.2 million-square-foot greenhouse complex in Delta, British Columbia. The company has both an industrial hemp license and a standard cultivation license from Health Canada. Agraflora holds a 70% stake in PSC.

AgraFlora owns a 51,500-sq/ft edibles-manufacturing facility and federally licensed research and development lab in Winnipeg, Manitoba that is GMP-certified. The company has applied for and is close to obtaining a processing license from Health Canada. It also has a licensed cannabis campus in New Brunswick to formulate and synthesize its infused topicals products.

The company also owns, via its recent acquisition of Sanna Health Corp, a 16-acre, 27,000 sq/ft licensed cultivation, processing, and extraction space outside Toronto, with an option to enlarge production to 89,000 sq/ft. There are plans to add farm-gate retail outlets (dispensaries) at the Sana facility as well as the AAA Heidelberg plant for direct-to-consumer distribution. 

In Europe, AgraFlora recently established a foothold starting in Germany with the acquisition of Farmako GmbH, a leading European medical cannabis distributor in the UK, Luxembourg, and Denmark.

As for its products, the company has seven brands that reflect the wide diversity of uses among consumers: Canutra Naturals (skincare), Edibles and Infusions (gummies), Howlbrands (CBD sports performance), Whole Hemp Health (lotions and oils), Eurasia Infused Cosmetics (CBD), True Focus (THC spray bottle), Potluck (cannabinoid-infused carbonated beverages) and Sports Cap (dispensing-cap technology). 

How is it doing:

For AgraFlora, 2019 was a transformative year as the company laid the groundwork to expand its physical operations and grow organically via acquisitions and key partnerships. The company deployed over $125 million in associated plant property and equipment expenditures last year and raised some $30 million in financing as it headed into 2020.

Today, those investments and fund-raising are paying off, boosted by some $29 million in another round of financing to fund further its growth plans in 2020 and beyond.   

AgraFlora is now the fourth-largest licensed producer in Canada. The company’s flagship Delta Greenhouse, which is run by JV partner PSC, recently secured a standard cultivation license from Health Canada. The facility expects to see its first harvest early in the fourth quarter of 2020, with the first wholesale product available in the 1Q of 2021.

In addition, the construction of AgraFlora’s GMP-certified Winnipeg edibles facility has been completed. The automated manufacturing center, controlled by subsidiary Edibles and Infusions Corporation (EIC), is designed to be one of the most technologically advanced and efficient cannabis facilities in Canada.  

Once activated with a standard processing license, the Winnipeg facility will be operated by chocolatiers and confectioners producing an assortment of cannabinoid and terpene-infused products for medicinal and adult use. For the time being, EIC is now creating test cannabis edibles products such as gelatin gummies, hard candy, and sugar-free variants through its licensed R&D lab. The company is also thinking of contracting out its R&D services.  

In early 2020, AgraFlora officially closed on two acquisitions that began in 2019 — Sanna Health and The Good Company GmbH, the parent of Frankfurt-based Farmako, which has a network of 19,800 pharmacies covering 100,000 patients as well as an 8% market share. 

JV partner PSC also acquired a portfolio of elite live-plant cannabis genetics from an award-winning cultivator to disrupt the Canadian dried flower market. PSC’s investment in Live-Plant Genetics is expected to generate a positive impact on the three key drivers of profitability: improved sales prices, greater per-plant yields, and shorter flowering time. 

Partnerships and collaborations also play key roles to help the company expand its market reach. 

Its wholly-owned subsidiary, Sustainable Growth Strategic Capital Corp (SGSC), a licensed cannabis company in the Greater Toronto Area, has struck an extraction partnership for processing 44,000 kilograms (kg) of hemp biomass with a top tier extractor in Quebec via its JV with hemp firm Micro C45 Inc. SGSC and Micro 45 also are growing a hemp crop expected to yield around 50,000 kgs of CBD hemp in the fall of 2020.

As AgraFlora seeks further penetration into the German medical cannabis market, the company recently signed a letter of intent with EuroLine Brands Inc (CSE:EURO) (OTCMKTS:EURPF) to collaborate. AgraFlora will integrate Eurolife’s physician-sanctioned German cannabis education platform, Cannvas.de, into its German operations.

The company has been making deep inroads into the German market thanks to several contract wins. Most recently, Farmako struck a binding supply agreement with ZenPharm Limited, a subsidiary of Zenabis Global Inc (TSX:ZENA), to secure additional medical cannabis stock. ZenPharm will supply flower cultivated by Zenabis to Farmako for distribution to patients in Germany. Farmako also signed a similar supply deal with Adjupharm GmbH. 

In Germany, licensing and certification are crucial. Farmako has secured a special authorization from the German Federal Institute for Drugs and Medical Devices for the distribution of medical cannabis flowers that have undergone an ionizing radiation treatment (AMRadV license). This is a critical milestone for Farmako, as the German medical cannabis wholesaler will now be able to import for sale in Germany medical cannabis that is EU-GMP certified, but which has been subject to sterilization by irradiation.

Inflection points:

• Expect Delta’s first harvest in 4Q 2020 and wholesale availability in 1Q 2021 
• Project 2020 output of dried cannabis flower at roughly 170,000 kilograms
• Integrate EU-GMP compliant cannabis products from Delta into its European distribution channels
• Obtain Health Canada processing license for Winnipeg facility

What the boss says:

“Our goal is to provide a comprehensive and sustainable portfolio of high-quality medical cannabis products, including both flower and ‘2.0’ ingestible products to patients in Germany,” said AgraFlora CEO Katrin Eckmans, after German subsidiary Farmako signed a medical cannabis supply deal with Adjupharm.

“We believe Farmako’s established pharmacy network combined with (Adjupharm) IMC’s quality and manufacturing excellence will be a disruptive force in Germany’s rapidly evolving medical cannabis market.”

Story by ProactiveInvestors