Cannabis Weekly Round-Up: Aphria Jumps on Financials

During the past trading week (July 29 to August 2), a new financial results release signaled a potential turn of the page for Canadian cannabis producer Aphria (NYSE:APHA,TSX:APHA).

More insights into the CannTrust Holdings (NYSE:CTST,TSX:TRST) situation made headlines, while the decriminalization of marijuana in New York also caught attention.

Here’s a closer look at some of the biggest news during last week’s trading period.

Shares of Aphria jump following positive quarter

Aphria shocked the market with its fiscal Q4 and year-end results on Thursday (August 1), reporting positive net income of C$15.8 million during the latest quarter.

For the 12 month period ended on May 31, 2019, Aphria reported net income of C$29.5 million. Interim Aphria CEO Irwin Simon said the results represent a new day for the company. “Over the last six months, our organization identified immediate priorities to help generate substantial progress near-term and long-term,” he said in a press release.

“We built upon existing business fundamentals and capabilities, streamlined processes, strengthened governance, and focused on building brand awareness,” Simon added.

The company credited the results to C$99.2 million in distribution revenue from CC Pharma, its German pharmaceutical distributor subsidiary.

Aphria is now projecting revenue of between C$650 million and C$700 million in its 2020 fiscal year.

Shares of the Canadian producer surged in New York and Toronto following the financial results, opening at US$6.74 and C$8.94, respectively. As of 1:04 p.m. EDT on Friday (August 2), shares of the producer were up over 30 percent on both exchanges.

CannTrust faces OSC investigation

CannTrust informed shareholders that — in addition to a projected delay in its upcoming financial report — the company is now being investigated by the Ontario Securities Commission (OSC).

“Today, staff of the OSC advised the Special Committee’s legal counsel that an investigation has been opened into matters and parties related to CannTrust and the investigation has been assigned to the Joint Serious Offences Team of the Enforcement Branch of the OSC,” the firm indicated on Friday.

A recent Globe and Mail report also shows CannTrust executives made millions from insider selling. This news came right after an internal email showed company communication on the illicit operations.

Co-founder and former board chair Eric Paul — who also previously served as CEO of the company alongside Director Mark Litwin — sold approximately C$1 million worth of CannTrust shares on November 16, 2018. An additional C$5 million in shares were sold through Cannamed Financial, a holding company.

New York decriminalizes marijuana

Also last week, New York Governor Andrew Cuomo (D) signed a bill officially decriminalizing marijuana use and possession in the state. However, the state failed to introduce a full legalization program after reported disputes on where to allocate tax revenue from a full cannabis program.

“It’s not legalization,” Cuomo said, according to NBC New York. “But it is decriminalization and it’s a major, major accomplishment.”

On Monday (July 29), representatives Nydia M. Velázquez (D-NY) and Steve Stivers (R-OH) introduced the Clarifying Law Around Insurance Marijuana (CLAIM) Act into Congress. This proposed bill would allow insurers to offer services to players in the marijuana industry, despite the federal illegality of the drug.

“Without this legislation, insurers will understandably be reticent to insure businesses operating in the cannabis sector,” Velázquez said in a statement. “This means a legal cannabis distributor whose product is ruined from a flood or fire could lose all their capital and their livelihood.

Market updates

Colorado-based Dixie Brands (CSE:DIXI.U,OTCQX:DXBRF) told the Investing News Network (INN) that its upcoming FUSE line of beverage products will bring the launch of brand new water-soluble drink additives containing THC.

“In this case we’ll have flavored THC as well as non-flavored THC drink additives. If somebody has tea or coffee or … orange juice and they want to put some THC in it, they’ll be able to do that,” explained Chuck Smith, CEO of Dixie.

Smith expressed an optimistic outlook for cannabis-infused drinks moving forward and indicated that his company’s entire line of products is planned to be available in Canada through a partnership with Auxly Cannabis Group (TSXV:XLY,OTCQX:CBWTF)

According to a new co-authored report from PwC Canada and CB Insights, cannabis investment from private money is seeing a downturn in 2019. So far in the year, US$42 million has been raised through 18 total deals. In 2018, US$224 million was raised across 51 deals.

“After unprecedented highs in 2018, this year has seen less funding and fewer deals for Canadian companies,” Anand Sanwal, co-founder and CEO of CB Insights, said in a press release.

The Florida market keeps expanding, with multi-state operator (MSO) Harvest Health & Recreation (CSE:HARV,OTCQX:HRVSF) confirming the opening of its sixth dispensary on Thursday.

Last month, the Florida Office of Medical Marijuana Use indicated that there were 144 active dispensaries in the state as of July 26. While Florida remains a medical-only market, the CEO of a fellow MSO ⁠— Kim Rivers with Trulieve Cannabis (CSE:TRUL,OTC Pink:TCNNF) ⁠— previously told investors she expects a vote on adult use by the 2024 ballot.

On Thursday (August 1), Aleafia Health (TSX:ALEF,OTCQX:ALEAF) reported its biggest recreational cannabis sale through its recently acquired subsidiary Emblem.

The C$1 million sale raised Aleafia Health’s monthly gross revenues average to a higher mark than the recorded revenue generated throughout 2018.

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Securities Disclosure: I, Bryan Mc Govern, hold no direct investment interest in any company mentioned in this article.