Connect with us

International

Is Aphria A Better Cannabis Bet Than Canopy Growth?

Is Aphria A Better Cannabis Bet Than Canopy Growth?

Published

on

Cannabis sales in Canada have been on a rise since May following a decline in April. As per Statistics Canada, sales of legal adult-use cannabis in Canada grew by 5.2% month-over-month to C$244.9 million in August. Cannabis is legal in Canada for both medical and recreational purposes. Moreover, with Cannabis 2.0, cannabis derivative products like edibles, vapes, concentrates, and beverages have also become legal in the country.

However, intense competition from the illegal market continues to impact the sales of Canadian cannabis companies. Meanwhile, companies are awaiting the legalization of marijuana at the Federal level in the US to capture potential growth opportunities. Against this backdrop, we will use the TipRanks Stock Comparison tool to see if Aphria or Canopy Growth offers a more compelling investment opportunity.

Aphria (APHA)

Ontario-based Aphria sells its medical cannabis products under its namesake brand Aphria and Broken Coast and adult-use or recreational cannabis products under the Solei, RIFF, Good Supply as well as the Broken Coast brands.

Last year, Aphria’s co-founder Vic Neufeld resigned as the CEO of the company amid allegations by short-sellers that the company had overpaid for the acquisition of LATAM Holdings and that insiders had profited from the deal. Vic Neufeld was succeeded by Irwin Simon and under his leadership, Aphria has moved ahead of the controversy and improved its operational performance. It has generated positive adjusted EBITDA for six consecutive quarters unlike its rivals Canopy Growth and Aurora Cannabis, which are still not profitable on an adjusted EBITDA basis.

However, the company’s recently reported 1Q FY21 (ended Aug. 31) results disappointed investors and caused an 18% drop in its shares on Oct. 15. Aphria’s 1Q revenue grew 16% Y/Y to C$145.7 million but was down 4% from the prior quarter due to lower distribution revenue from its German distributor CC Pharma because of the pandemic.  

The company’s adjusted EBITDA came in at C$10 million in 1Q FY21, up from C$8.6 million in 4Q FY20 and C$1 million in 1Q FY20. However, investors were concerned as the company slipped into a GAAP net loss per share of C$0.02 in 1Q FY21 compared to EPS of C$0.07 in 1Q FY20. (See APHA stock analysis on TipRanks)

Looking forward, Aphria intends to launch new cannabis 2.0 derivative products, further strengthen its position in the vapes market where it is already the market leader and focus on the newly launched B!NGO brand (a large format, economy brand utilizing lower potency cannabis). It also aims to grow further in international markets by catering to the demand for either GACP (Good Agricultural and Collection Practices) or EU GMP (European Union Good Manufacturing Practices) certified products.

Commenting about the decline in stock following the 1Q results, Haywood analyst Neal Gilmer said, “Investors seemed focused on a drop in the distribution revenue and that the bulk of cannabis growth was due to sell-in of its new value brand. We remain positive on Aphria’s strong market share across its brand portfolio.”

“We continue to view Aphria as the leader in the Canadian LP [Licensed Producer] landscape. We believe yesterday’s 18 per cent correction provides an attractive entry point given Aphria’s strong market share position. We expect the company will continue to demonstrate its leading position, supported by expanding EBITDA margins in fiscal 2021,” added Gilmer in a research note to investors.

Indeed, the Street is very bullish about Aphria and has a Strong Buy consensus based on 7 unanimous Buy ratings. With shares down 12.3% year-to-date, the average analyst price target of $7.61 indicates robust upside potential of 66.5% over the coming months. 

Canopy Growth (CGC)

Canopy Growth is one of the largest producers of cannabis and sells its medical and recreational cannabis products through brands like Tweed, Spectrum Therapeutics, Houseplant, DNA Genetics, Tokyo Smoke, Doja, Van der Pop and Maitri. The company’s investors have been concerned about its aggressive investments in production facilities, acquisitions and growth initiatives being a drag on its bottom line. Canopy Growth has not yet posted a positive adjusted EBITDA.

To improve its profitability, the company has been implementing several restructuring initiatives with a focus on reducing costs and cash burn rate. It has also been curbing its capacity at certain plants while shutting down others. Canopy Growth was able to bring down its adjusted EBITDA loss to C$92.2 million in 1Q FY21 (ended Jun. 30) compared to a loss of C$93.4 million in the prior-year quarter.  

Meanwhile, 1Q FY21 revenue grew 22% Y/Y to C$110.4 million on strength in the company's medical cannabis business. However, revenue grew by just 2% Q/Q due to lower Canadian recreational cannabis revenue reflecting the impact of COVID-19 and heightened competition in dried flower-based products.

Canopy sees huge growth opportunities in the derivatives markets, including vapes, chocolates and beverages, and continues to expand its portfolio through innovative products. It has a strong presence in the Canadian cannabis-infused beverage space with a market share of 74% through products like Tweed’s Houndstooth & Soda and Bakerstreet & Ginger. Canopy is now gearing up to launch its beverages in the US market in summer next year through a partnership with Acreage holdings.  

Its other strategic initiatives for the US market include the launch of a new e-commerce site shopcanopy.com, expansion of the First & Free brand into topical and creams and further penetration of the BioSteel (Canopy is a major stakeholder in BioSteel) sports beverages.

Last month, Canopy launched Martha Stewart CBD – a new line of hemp-derived wellness supplements (like gummies, softgels and oil drops), which are specially formulated by celebrity Martha Stewart. (See CGC stock analysis on TipRanks)

Recently, Cantor Fitzgerald analyst Pablo Zuanic reiterated his Hold rating for Canopy and increased his price target to $20.93 from $20.56. The analyst noted that like its rival Aurora Cannabis, Canopy is also significantly dependent on the flower value segment rather than higher-margin products. As a result, both the companies are adversely impacted by price deflation, even at the low end of the price scale.

However, Zuanic feels that Canopy has much more financial flexibility than Aurora and can afford to take more risks. He sees "near-term upside" for Canopy shares based on encouraging market data and expects 24% sequential sales growth for Canopy in 2Q FY21, which is over three times the 7% consensus analyst estimate.

Meanwhile, the Street is cautiously optimistic about Canopy Growth with a Moderate Buy consensus based on 2 Buys versus 6 Holds and no Sells. The $18.22 average analyst price target indicates a possible downside of 1.7% ahead. Shares have already declined 12.2% year-to-date. 

Conclusion

Aphria has been consistently delivering positive adjusted EBITDA over the recent quarters while Canopy Growth is still away from that goal. Currently, Aphria appears to be a better cannabis pick than Canopy Growth as reflecting in the Street’s highly bullish stance and upside potential ahead.

To find good ideas for stocks trading at attractive valuations, visit TipRanks’ Best Stocks to Buy, a newly launched tool that unites all of TipRanks’ equity insights.

Disclaimer: The opinions expressed in this article are solely those of the featured analysts. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment

The post Is Aphria A Better Cannabis Bet Than Canopy Growth? appeared first on TipRanks Financial Blog.

Read More

Continue Reading

International

Four burning questions about the future of the $16.5B Novo-Catalent deal

To build or to buy? That’s a classic question for pharma boardrooms, and Novo Nordisk is going with both.
Beyond spending billions of dollars to expand…

Published

on

To build or to buy? That’s a classic question for pharma boardrooms, and Novo Nordisk is going with both.

Beyond spending billions of dollars to expand its own production capacity for its weight loss drugs, the Danish drugmaker said Monday it will pay $11 billion to acquire three manufacturing plants from Catalent. It’s part of a broader $16.5 billion deal with Novo Holdings, the investment arm of the pharma’s parent group, which agreed to acquire the contract manufacturer and take it private.

It’s a big deal for all parties, with potential ripple effects across the biotech ecosystem. Here’s a look at some of the most pressing questions to watch after Monday’s announcement.

Why did Novo do this?

Novo Holdings isn’t the most obvious buyer for Catalent, particularly after last year’s on-and-off M&A interest from the serial acquirer Danaher. But the deal could benefit both Novo Holdings and Novo Nordisk.

Novo Nordisk’s biggest challenge has been simply making enough of the weight loss drug Wegovy and diabetes therapy Ozempic. On last week’s earnings call, Novo Nordisk CEO Lars Fruergaard Jørgensen said the company isn’t constrained by capital in its efforts to boost manufacturing. Rather, the main challenge is the limited amount of capabilities out there, he said.

“Most pharmaceutical companies in the world would be shopping among the same manufacturers,” he said. “There’s not an unlimited amount of machinery and people to build it.”

While Novo was already one of Catalent’s major customers, the manufacturer has been hamstrung by its own balance sheet. With roughly $5 billion in debt on its books, it’s had to juggle paying down debt with sufficiently investing in its facilities. That’s been particularly challenging in keeping pace with soaring demand for GLP-1 drugs.

Novo, on the other hand, has the balance sheet to funnel as much money as needed into the plants in Italy, Belgium, and Indiana. It’s also struggled to make enough of its popular GLP-1 drugs to meet their soaring demand, with documented shortages of both Ozempic and Wegovy.

The impact won’t be immediate. The parties expect the deal to close near the end of 2024. Novo Nordisk said it expects the three new sites to “gradually increase Novo Nordisk’s filling capacity from 2026 and onwards.”

As for the rest of Catalent — nearly 50 other sites employing thousands of workers — Novo Holdings will take control. The group previously acquired Altasciences in 2021 and Ritedose in 2022, so the Catalent deal builds on a core investing interest in biopharma services, Novo Holdings CEO Kasim Kutay told Endpoints News.

Kasim Kutay

When asked about possible site closures or layoffs, Kutay said the team hasn’t thought about that.

“That’s not our track record. Our track record is to invest in quality businesses and help them grow,” he said. “There’s always stuff to do with any asset you own, but we haven’t bought this company to do some of the stuff you’re talking about.”

What does it mean for Catalent’s customers? 

Until the deal closes, Catalent will operate as a standalone business. After it closes, Novo Nordisk said it will honor its customer obligations at the three sites, a spokesperson said. But they didn’t answer a question about what happens when those contracts expire.

The wrinkle is the long-term future of the three plants that Novo Nordisk is paying for. Those sites don’t exclusively pump out Wegovy, but that could be the logical long-term aim for the Danish drugmaker.

The ideal scenario is that pricing and timelines remain the same for customers, said Nicole Paulk, CEO of the gene therapy startup Siren Biotechnology.

Nicole Paulk

“The name of the group that you’re going to send your check to is now going to be Novo Holdings instead of Catalent, but otherwise everything remains the same,” Paulk told Endpoints. “That’s the best-case scenario.”

In a worst case, Paulk said she feared the new owners could wind up closing sites or laying off Catalent groups. That could create some uncertainty for customers looking for a long-term manufacturing partner.

Are shareholders and regulators happy? 

The pandemic was a wild ride for Catalent’s stock, with shares surging from about $40 to $140 and then crashing back to earth. The $63.50 share price for the takeover is a happy ending depending on the investor.

On that point, the investing giant Elliott Investment Management is satisfied. Marc Steinberg, a partner at Elliott, called the agreement “an outstanding outcome” that “clearly maximizes value for Catalent stockholders” in a statement.

Elliott helped kick off a strategic review last August that culminated in the sale agreement. Compared to Catalent’s stock price before that review started, the deal pays a nearly 40% premium.

Alessandro Maselli

But this is hardly a victory lap for CEO Alessandro Maselli, who took over in July 2022 when Catalent’s stock price was north of $100. Novo’s takeover is a tacit acknowledgment that Maselli could never fully right the ship, as operational problems plagued the company throughout 2023 while it was limited by its debt.

Additional regulatory filings in the next few weeks could give insight into just how competitive the sale process was. William Blair analysts said they don’t expect a competing bidder “given the organic investments already being pursued at other leading CDMOs and the breadth and scale of Catalent’s operations.”

The Blair analysts also noted the companies likely “expect to spend some time educating relevant government agencies” about the deal, given the lengthy closing timeline. Given Novo Nordisk’s ascent — it’s now one of Europe’s most valuable companies — paired with the limited number of large contract manufacturers, antitrust regulators could be interested in taking a close look.

Are Catalent’s problems finally a thing of the past?

Catalent ran into a mix of financial and operational problems over the past year that played no small part in attracting the interest of an activist like Elliott.

Now with a deal in place, how quickly can Novo rectify those problems? Some of the challenges were driven by the demands of being a publicly traded company, like failing to meet investors’ revenue expectations or even filing earnings reports on time.

But Catalent also struggled with its business at times, with a range of manufacturing delays, inspection reports and occasionally writing down acquisitions that didn’t pan out. Novo’s deep pockets will go a long way to a turnaround, but only the future will tell if all these issues are fixed.

Kutay said his team is excited by the opportunity and was satisfied with the due diligence it did on the company.

“We believe we’re buying a strong company with a good management team and good prospects,” Kutay said. “If that wasn’t the case, I don’t think we’d be here.”

Amber Tong and Reynald Castañeda contributed reporting.

Read More

Continue Reading

International

Petrina Kamya, Ph.D., Head of AI Platforms at Insilico Medicine, presents at BIO CEO & Investor Conference

Petrina Kamya, PhD, Head of AI Platforms and President of Insilico Medicine Canada, will present at the BIO CEO & Investor Conference happening Feb….

Published

on

Petrina Kamya, PhD, Head of AI Platforms and President of Insilico Medicine Canada, will present at the BIO CEO & Investor Conference happening Feb. 26-27 at the New York Marriott Marquis in New York City. Dr. Kamya will speak as part of the panel “AI within Biopharma: Separating Value from Hype,” on Feb. 27, 1pm ET along with Michael Nally, CEO of Generate: Biomedicines and Liz Schwarzbach, PhD, CBO of BigHat Biosciences.

Credit: Insilico Medicine

Petrina Kamya, PhD, Head of AI Platforms and President of Insilico Medicine Canada, will present at the BIO CEO & Investor Conference happening Feb. 26-27 at the New York Marriott Marquis in New York City. Dr. Kamya will speak as part of the panel “AI within Biopharma: Separating Value from Hype,” on Feb. 27, 1pm ET along with Michael Nally, CEO of Generate: Biomedicines and Liz Schwarzbach, PhD, CBO of BigHat Biosciences.

The session will look at how the latest artificial intelligence (AI) tools – including generative AI and large language models – are currently being used to advance the discovery and design of new drugs, and which technologies are still in development. 

The BIO CEO & Investor Conference brings together over 1,000 attendees and more than 700 companies across industry and institutional investment to discuss the future investment landscape of biotechnology. Sessions focus on topics such as therapeutic advancements, market outlook, and policy priorities.

Insilico Medicine is a leading, clinical stage AI-driven drug discovery company that has raised over $400m in investments since it was founded in 2014. Dr. Kamya leads the development of the Company’s end-to-end generative AI platform, Pharma.AI from Insilico’s AI R&D Center in Montreal. Using modern machine learning techniques in the context of chemistry and biology, the platform has driven the discovery and design of 30+ new therapies, with five in clinical stages – for cancer, fibrosis, inflammatory bowel disease (IBD), and COVID-19. The Company’s lead drug, for the chronic, rare lung condition idiopathic pulmonary fibrosis, is the first AI-designed drug for an AI-discovered target to reach Phase II clinical trials with patients. Nine of the top 20 pharmaceutical companies have used Insilico’s AI platform to advance their programs, and the Company has a number of major strategic licensing deals around its AI-designed therapeutic assets, including with Sanofi, Exelixis and Menarini. 

 

About Insilico Medicine

Insilico Medicine, a global clinical stage biotechnology company powered by generative AI, is connecting biology, chemistry, and clinical trials analysis using next-generation AI systems. The company has developed AI platforms that utilize deep generative models, reinforcement learning, transformers, and other modern machine learning techniques for novel target discovery and the generation of novel molecular structures with desired properties. Insilico Medicine is developing breakthrough solutions to discover and develop innovative drugs for cancer, fibrosis, immunity, central nervous system diseases, infectious diseases, autoimmune diseases, and aging-related diseases. www.insilico.com 


Read More

Continue Reading

International

Another country is getting ready to launch a visa for digital nomads

Early reports are saying Japan will soon have a digital nomad visa for high-earning foreigners.

Published

on

Over the last decade, the explosion of remote work that came as a result of improved technology and the pandemic has allowed an increasing number of people to become digital nomads. 

When looked at more broadly as anyone not required to come into a fixed office but instead moves between different locations such as the home and the coffee shop, the latest estimate shows that there were more than 35 million such workers in the world by the end of 2023 while over half of those come from the United States.

Related: There is a new list of cities that are best for digital nomads

While remote work has also allowed many to move to cheaper places and travel around the world while still bringing in income, working outside of one's home country requires either dual citizenship or work authorization — the global shift toward remote work has pushed many countries to launch specific digital nomad visas to boost their economies and bring in new residents.

Japan is a very popular destination for U.S. tourists. 

Shutterstock

This popular vacation destination will soon have a nomad visa

Spain, Portugal, Indonesia, Malaysia, Costa Rica, Brazil, Latvia and Malta are some of the countries currently offering specific visas for foreigners who want to live there while bringing in income from abroad.

More Travel:

With the exception of a few, Asian countries generally have stricter immigration laws and were much slower to launch these types of visas that some of the countries with weaker economies had as far back as 2015. As first reported by the Japan Times, the country's Immigration Services Agency ended up making the leap toward a visa for those who can earn more than ¥10 million ($68,300 USD) with income from another country.

The Japanese government has not yet worked out the specifics of how long the visa will be valid for or how much it will cost — public comment on the proposal is being accepted throughout next week. 

That said, early reports say the visa will be shorter than the typical digital nomad option that allows foreigners to live in a country for several years. The visa will reportedly be valid for six months or slightly longer but still no more than a year — along with the ability to work, this allows some to stay beyond the 90-day tourist period typically afforded to those from countries with visa-free agreements.

'Not be given a residence card of residence certificate'

While one will be able to reapply for the visa after the time runs out, this can only be done by exiting the country and being away for six months before coming back again — becoming a permanent resident on the pathway to citizenship is an entirely different process with much more strict requirements.

"Those living in Japan with the digital nomad visa will not be given a residence card or a residence certificate, which provide access to certain government benefits," reports the news outlet. "The visa cannot be renewed and must be reapplied for, with this only possible six months after leaving the countr

The visa will reportedly start in March and also allow holders to bring their spouses and families with them. To start using the visa, holders will also need to purchase private health insurance from their home country while taxes on any money one earns will also need to be paid through one's home country.

Read More

Continue Reading

Trending