Aura Health Signals Turning Point With Name Change To Pharmadrug Inc.
Aura Health (CA:BUZZ – $0.04 & US:LMLLF – $0.02) completed its previously announced name change to Pharmadrug Inc. this week. This name better reflects the Company’s core business and models itself after its 80% owned German subsidiary, Pharmadrug Production GmbH. This is a smart move by the Company as part of a greater initiative to expand the distribution and brand creation of medical cannabis in Germany.
Pharmadrug is at a turning point where it is transforming from an early-revenue company into an international cannabis supplier. It recorded just under $300,000 in revenue in Q2 2019. This was its first revenue-generating quarter and was driven by the acquisition of its German subsidiary which supplied pharmacies throughout the country with medical cannabis from the Netherlands.
The Company has secured supply in Israel and is looking at potential deals with GMP-certified Canadian licensed producers with the intent to import medical cannabis into Germany and throughout the rest of the Eurozone. We believe that all of these initiatives will result in strong revenue growth throughout next year as the increased supply of product from international locations will fulfill an unmet demand in Germany.
Daniel Cohen, CEO of Pharmadrug, supports our optimism over these near-term goals by stating, “We are consistently working to further develop our distribution of medical cannabis in Germany. In addition to the continued expansion of volumes from The Netherlands Office of Medicinal Cannabis, we are to launch our own proprietary brand with the introduction of Israeli-sourced supply in the second half of 2020. The company also expects upcoming Canadian supply deals, which could lead to an earlier ramp and brand launch.”
An Unprecedented Opportunity In A Growing European Market
Pharmadrug isn’t the only company to aggressively go after the Eurozone medicinal market through the purchase or creation of a German subsidiary. In fact, three of the largest licensed producers trading in Canada – Canopy Growth, Aurora Cannabis and Aphria – have also walked the same path.
What makes Pharmadrug an unprecedented opportunity for investors is its valuation. Those three larger companies are already valued at multi-billions in market capitalization. In contrast, Pharmadrug is trading at… a $3 million market cap, basically the size of a CSE shell listing. Pharmadrug is like a rookie athlete who is compared to three Hall of Fame players in his sport, except with none of the hype.
However, Pharmadrug is not starting from scratch. It holds one of only fifteen German Schedule I narcotics licenses that permits the import and distribution of medical cannabis throughout legalized areas in the European Union. While the cannabis industry is new territory for Pharmadrug, it has been in operations for over 20 years. Even though the Company made a strategic decision to shut down those low profitability divisions, it may still be able to leverage Pharmadrug’s brand name, infrastructure and distribution expertise with a new focus on cannabis.
The acquisition was completed half way through Q2 on May 17th, so the Company achieved $300,000 revenue in half of a quarter. If Pharmadrug was to remain flat at $600,000 revenue per quarter, it would be trading at a multiple of just 1.4x of revenue at a stock price of $0.04. Of course, this assumption is ridiculous as everyone should expect substantially higher revenue numbers from the growth initiatives going forward. The CEO already disclosed in an interview with us that July saw a 300% increase in revenue over the first four months of operations.
Pharmadrug’s management is executing a prudent business plan. We think it is an opportune time for existing investors to consider adding to their position and new investors to consider initiating a position in Pharmadrug. We believe that anyone who has the patience and risk tolerance to hold the stock for the next 12-18 months will be rewarded with strong revenue growth and the potential for profitable operations. The management of the Company for sure knows what it’s doing, as they have been buying shares in the open market at 4 cents. Smallcaps Recommendation: BUY.
|Smallcaps Recommendation: Buy||Price Target: $0.21||Latest Company Report (pdf)|
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