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

• Targets Canadian recreational and European medical cannabis markets
• Holds 70% stake in 2.2 million-square-foot greenhouse complex in British Columbia
• Tapped Canadian cannabis industry veteran Elise Coppens as CEO

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 – to supply the Canadian recreational market with high-potency flower products, while serving the European medical cannabis market. 

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, 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 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:

AgraFlora headed into 2021 with a new CEO who is tasked with setting new goals and priorities for the company.

In early March, the company tapped Canadian cannabis industry veteran Elise Coppens for the top spot as well as a seat on the board of directors. During her career, Coppens has worn many hats — including but not limited to serving as president of Bloomera, marketing director for Aurora Cannabis, and director of international sales for Ample Organics.

Soon after Coppens joined the company, AgraFlora sold its 43% stake in The Edibles & Infusions Corporation, a 51,500-sq ft edibles manufacturing facility and federally licensed research and development lab in Winnipeg, Manitoba, to Organigram Holdings Inc (TSE:OGI) (NASDAQ:OGI) for $35 million.

In addition, AgraFlora signed recently a definitive agreement to sell its wholly-owned subsidiary AAA Heidelberg Inc (AAA) for around C$1 million in cash. AAA operates an 8,800 square foot (sq ft) indoor growing facility in London, Ontario, and the closing of the deal is expected to occur in the second quarter of 2021.

AgraFlora is now focused on its flagship cultivation asset in British Columbia, under its JV with PCS and Farmako GmbH in Germany.

Meanwhile, PCS is advancing towards its first commercial sales. It is also expected to report initial revenues in the summer of 2021.

PSC expects its first commercial crop for sale will include three proprietary high-THC, low-cost-farming strains — Mimosa 37, Kosher Kush, and Gelato – all of which have strong demand in Canada’s dried flower market. AgraFlora says PSC continues to “develop and strategize to further aid in its positioning as a leader in low-cost product.”

AgraFlora, now the fourth-largest licensed producer in Canada, is establishing a footprint in Germany. In early 2020, it acquired 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. 

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 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:

• Anticipates Delta’s wholesale availability in 1Q 2021 
• Integrate EU-GMP compliant cannabis products from Delta into its European distribution channels

What the boss says:

“It is always a difficult decision to sell a significant asset, however, the timing of our review of all company assets aligned well with the opportunity to receive the value that we did for this facility. Ultimately, the sale of AgraFlora’s share of EIC was a strategic decision,” CEO Elise Coppens said in a letter to shareholders recently.

“So what’s next, you may ask? With the proceeds from the sale of EIC, as well as from the recent smaller sale of AAA Heidelberg, AgraFlora is now in the best financial shape that it has been in over 24 months. The sale of these two assets gives us the financial flexibility to look at entering more lucrative markets.”

Contact the author: [email protected]

Follow him on Twitter @PatrickMGraham

Story by ProactiveInvestors