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The cannabis sector recorded mixed movements as the overall market was under pressure yesterday and investors are closely watching these movements after the recent developments.

Canada’s recreational marijuana market is expected to open before July and this will be a catalyst for the companies levered to this opportunity. Although Canada represents a very attractive opportunity, we continue to prefer companies that are also levered to emerging international markets such as Germany and Australia.

The cannabis sector continues to evolve rapidly, and we are closing monitoring these changes. Today, we highlighted 3 recent company developments that we find to be significant and that investors should be aware of.

Aphria: License Amendment More Than Triples Production Capacity

Yesterday, leading Canadian marijuana producer Aphria (APH.TO) (APHQF) announced a major milestone and received a license amendment from Health Canada that provides 200,000 square feet of additional production as part of its Part III expansion. This will more than triple the company's production capacity and is a significant development for the company.

In 2018, the Canadian marijuana producer has made two strategic acquisitions and has significantly improved its leverage to emerging marijuana markets all over the world. We expect Aphria’s acquisition of Nuuvera (NUU.V) to close in the coming weeks and are favorable on the combined company. 

Aphria is a stock that cannabis investors need to watch and we consider the company to be a long-term investment. Aphria is led by a management team with a proven track record of success and has been laser focused on execution. We are bullish on the recent developments and expect the company to be one of the greatest beneficiaries of Canada’s recreational market.

CannTrust: Enters Denmark’s Medical Marijuana Market

CannTrust Holdings (TRST.TO) (CNTTF) recorded a strong gain after entering a joint venture (JV) agreement with Denmark based STENOCARE, which is one of the first Danish companies to receive its license to grow and produce medical cannabis, as well as to import and sell cannabis products in Denmark.

On January 1st, medical cannabis became legal in Denmark after a unanimous vote by the country's parliament. We are bullish on this agreement and consider STENOCARE to be a strategic partner since the firm currently has agreements in place with Denmark's two leading pharmaceutical distributors, which together service 99% of pharmacies in the country.

STENOCARE is a privately-owned company established in October 2017, to be a first mover in Denmark's legalization of medical cannabis. Denmark is the second international expansion for CannTrust and comes after it started shipping products to Australia in November.

Under the terms of the agreement, CannTrust will receive a 25% equity stake in STENOCARE together with the right to appoint half of its Board of Directors.STENOCARE will initially sell CannTrust's cannabis products in Denmark while working towards developing a domestic growing facility.

We are favorable on CannTrust and consider the marijuana producer to be one of the most underappreciated Canadian LPs. The company has been laser focused on increasing production capacity and has fully funded its growth initiatives. We see considerable upside to current levels and this is a stock that investors need to keep an eye on.

Aurora Cannabis: A Global Cannabis Story

Yesterday, Aurora Cannabis (ACB.TO) (ACBFF) and PreveCeutical Medical (PREV.CN) (PRVCF) announced the grant of three permits by the Australian Government, Department of Health, for the importation of cannabis into Australia for research purposes. The permits were granted to the Pharmacy Australia Centre of Excellence (PACE) at the University of Queensland and allow PACE to import shipments of cannabis plant material for research purposes. Aurora, in turn, has received the required Canadian permits to export the cannabis to PACE.

PreveCeutical intends to apply Sol-gel technology to cannabinoids to develop therapies for relief from a range of symptoms, including pain, inflammation, seizures and neurological disorders. The permits will enable PreveCeutical to test an array of cannabis strains for the development and commercialization of cannabinoid-based Sol-gels.

In consideration of the shipment, Aurora has received certain rights, including the option to either license, on a non-exclusive basis, the technology for Canada and Australia, or to opt for a royalty arrangement on product sales, as well as to purchase shares in PreveCeutical.

Aurora has been executing flawlessly on a business plan that will make the company one of world’s leading cannabis producers. We are favorable on the continued execution and continue to view the company as one of the best long-term cannabis stocks. Aurora has a war chest of cash, has made several strategic investments and acquisitions, and has improving fundamentals. We are favorable on these traits and will keep a close eye on the shares.