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Aphria Inc Boosts Its War Chest

Aphria Inc Boosts Its War Chest
Written by
Alex Carlson
Published on
November 14, 2016
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Aphria Inc just announced a C$35 million bought deal that is the largest capital raise by a cannabis company. Clarus Securities Inc., on behalf of a syndicate of underwriters, has agreed to purchase, on a "bought deal" basis, 8,750,000 Common Shares of the Company at a price of C$4.00 per Common Share (the "Offering Price") for aggregate gross proceeds to the Company of C$35,000,000. Aphria will add these funds to its already sizable war chest of C$53,452,414 and allow for the development of infrastructure, purchase of capital equipment, capacity expansion, strategic investments, and general working capital purposes.There's also an over-allotment option to purchase up to an additional 1,312,500 Common Shares at the Offering Price, exercisable in whole or in part at any time for a period ending 30 days from the closing of the Offering. In the event the over-allotment option is exercised in full, the aggregate gross proceeds of the Offering will be C$40,250,000. The Offering is expected to close on or about November 29, 2016.What we like about the deal is that it puts a floor on the company's stock price at C$4. Any dips below will be picked up dip buyers and the company's sizable cash hoard justifies a higher market cap when compared to its peers. The stock trades in Canada under the symbol APH, in the US under APHQF, and in Germany under 10E. At the time of this writing, Aphria closed at C$4.61 in Canada.Aphria Inc., one of Canada’s lowest cost producers, produces, supplies and sells medical cannabis. Located in Leamington, Ontario, the greenhouse capital of Canada, Aphria is truly powered by sunlight, allowing for the most natural growing conditions available. The company is committed to providing pharma-grade medical cannabis, superior patient care while balancing patient economics and returns to shareholders. Aphria is the first public licensed producer to report positive cash flow from operations and the first to report positive earnings in consecutive quarters.Aphria is gearing up to increase production big-time. As the first phase of its Part III expansion, Aphria’s capacity under the Access to Cannabis for Medical Purposes Regulations (“ACMPR”) will increase from 100,000 square feet to 300,000 square feet and is expected to increase the Company’s ACMPR compliant growing capabilities from 5,500 kgs annually to 18,000 kgs annually. The project includes 200,000 square feet of state-of-the-art Dutch style greenhouses, 21,000 square feet of infrastructure, including four Level 9 vaults, automation for both the greenhouses and processing areas and security consistent with ACMPR standards.Aphria anticipates completion of this phase of the project within 12 months, Health Canada approvals within 4 months of completing the expansion and reaching full crop rotation within 4 months after Health Canada approval. Aphria is in the midst of completing its previously disclosed 57,000 square foot Part II expansion, which is expected to increase production capacity from 2,600 kgs annually to 5,500 kgs annually and is on target for completion in December with full crop rotation by June 2017.Earlier this month, Tetra Bio-Pharma Inc. through its subsidiary, PhytoPain Pharma Inc. (PPP), signed a Supply Agreement with Aphria for the supply of dried medical cannabis as an Active Pharmaceutical Ingredient (API) for PPP's inhalation cannabis product PPP001. PPP001 is a medical marijuana product that the company is developing as a prescription controlled drug for inhalation using a fully assembled titanium pipe. Under this supply agreement with Aphria, PPP shall pursue the development of a prescription controlled inhalation drug product of medical marijuana and seek marketing approval across the world either directly or indirectly through partnerships or licensing agreements. Aphria will be the exclusive supplier of this API to PPP for the development and commercialisation of PP001. CEO Vic Neufeld said:

"Aphria is excited and proud to be an integral part of advancing the scientific research being led by Dr. Chamberland and the team at Tetra Bio-Pharma. Using our proprietary and high quality medical cannabis blend supported by high calibre research is exactly what professional healthcare practitioners require to gain the confidence to prescribe medical cannabis as a pharmaceutical."

Currently trading with a market cap of C$438 million, Aphria will have roughly C$90 million in cash on its books by the end of this month. We believe the company is on the verge of some major developments in terms of production and M&A activities. With smart money coming in at C$4 a share, we believe this bull run could just be getting started in Aphria. Aphria is certainly a must-own in the cannabis space. We will be updating our subscribers with the latest on Aphria and other cannabis names. For complete coverage, sign up below!Disclosure: We have no position in Aphria Inc and have not been compensated for this article.

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