Aleafia Health in Big Revenue Boost With New Supply Deal

Aleafia Health (OTC: ALEAF) will be busy cultivating and shipping product over the holidays. On Monday,the company announced that late last week it signed a deal to supply 2,840 kilos of dried cannabis flower to an entity it described only as a "Canadian Licensed Producer."

The price per gram of the cannabis will be 2.50 Canadian dollars ($1.88), for total gross revenue of CA$7.1 million ($5.3 million). The product will be delivered in a maximum of three shipments, the final one before Jan. 31, 2020. All of it derives from the company's Port Perry cultivation facility near its headquarters in the Canadian province of Ontario. Marijuana leaf with sun shining behind it

Image source: Getty Images.

Aleafia emphasized that the volume figure covers only dried flower; stems or other by-products are not counted in the tally.

Although the deal is small by the standards of the rapidly growing cannabis industry, it's large in terms of the company's recent financials. That CA$7.1 million is 34% higher than the total revenue in Aleafia's most recently reported quarter.

The Canadian dried flower deal also comes on the heels of the company's completion of its first white label production run of medical cannabis oils (white label refers to the production of a good for a third party, which then sells it under its own branding). Last week, Aleafia announced it had finished a supply of the oils, which will be distributed by Australian company Montu Group in that country under the brand name Circle.

The medical cannabis segment is notably higher-margin than its recreational sibling, which is why numerous cannabis companies have ramped up the production and sale of product aimed at that market. In March, Aleafia merged with medical cannabis specialist Emblem Health in order to build a stronger presence in the segment.

As for the newly announced dried flower deal in Canada, Aleafia said in the press release announcing it that "This sale validates the strength of our outdoor cultivation. Moving forward, we have a strong inventory of high quality outdoor input material to accelerate the growth of our priority international and Canadian medical sales channels."

In spite of the relatively large size of the new deal, marijuana stock investors seem to be fairly indifferent to it. Aleafia's stock was up, but only marginally, in late afternoon trading on Monday.

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Eric Volkman has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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