Aleafia-Emblem Merger Creates Canada’s Largest Network of Clinics

Canada’s cannabis industry may be rapidly growing with new initial public offerings each week, but there has also been a fair share of consolidation within the industry. Investors may want to take a closer look at industry mergers, since they have the potential to create new industry leaders overnight. These larger combined companies may be better able to compete against industry leaders and ultimately become the next cannabis blue chips.

Aleafia Health Inc. (TSX-V: ALEF) (OTCQX: ALEAF) (FRA: ARAH) and Emblem Corp. (TSX-V: EMC) (OTCQX: EMMBF) entered into a definitive merger agreement that will create Canada’s largest cannabis clinic network along with 138,000 kilograms per year of planned annual cultivation capacity.

In this article, we will take a closer look at why investors should pay close attention to the merger over the coming months.

Largest Cannabis Clinic Network

The combination of Aleafia Health’s Canabo Medical Clinic and Emblem’s GrowWise Health clinics will create the largest network of cannabis clinics in the country, with 40 locations nationwide serving almost 60,000 patients. While most licensed producers are focused on mail order or retail sales, medical cannabis clinics provide an opportunity to cultivate repeat customers with a hands-on approach to treatment.

Without a sales license, Aleafia’s 20+ clinics and 50,000+ patients were forced to purchase cannabis through external licensed producers. The merger with Emblem enables the company to sell high-margin cannabis flower and extract products directly to this patient population. These products include capsules, oils, and oral sprays with industry-leading revenue per gram rates and award-winning customer service and deliver options.

The company will benefit from immediate revenue generation following the closing of the transaction from these unique synergies. With the average patient being authorized for about two grams per day, the company could generate significant recurring revenue if even a modest portion of its 60,000 patients transition to purchasing its internal products following the acquisition of Emblem’s sales licenses.

Sizable Licensed Producer

Aleafia Health will become one of the largest licensed producers in the country with a fully funded 138,000 kilogram annual production capacity across three Ontario-based production facilities coming online next year. Despite production issues at other licensed producers, the company’s production facilities have delivered 100% of their provincial supply agreements—a testament to management’s ability to execute.

Emblem has existing supply agreements with Ontario, Saskatchewan, British Columbia, and Alberta, as well as medical and retail distribution through various outlets, including Shoppers Drug Mart. In addition to these agreements, Emblem’s joint venture with Acnos Pharma could provide access to more than 82 million people through 20,000 pharmacy locations while Aleafia’s CannaPacific transaction could open access to the Australian market.

The company also owns a 30,000 sq. ft. state-of-the-art extraction facility with 5,000 sq. ft. dedicated to formulation and analytical services. With GMP certification expected next year, the company could begin to export these higher-margin products over the near-term. The company also has licensing agreements in place for metered dose sprays, as well as exclusive Canadian rights to oral sustained release tablets.

Looking Ahead

Aleafia Health Inc. (TSX-V: ALEF) (OTCQX: ALEAF) (FRA: ARAH) will become one of the largest and most diverse cannabis companies in the industry following its merger with Emblem Corp. With a leading network of medical cannabis clinics and 138,000 kilograms per year of production capacity, investors may want to keep a close eye on the stock as it executes its strategy to become a leader in the medical side of the industry with a growing presence in the recreational market.

For more information, visit the company’s website at www.aleafiainc.com.

Disclaimer

The above article is sponsored content. Emerging Growth LLC, which owns CannabisFN.com and CFN Media, has been hired to create awareness. Please follow the link below to view our full disclosure outlining our compensation: http://www.cannabisfn.com/legal-disclaimer/

About Ryan Allway

Mr. Allway has over a decade of experience in the financial markets as both a private investor and financial journalist. He has been actively involved in the cannabis industry since its inception, covering public and private companies.