This morning, Aphria Inc. (TSX:APH)(OTC:APHQF)(FRA:10E) announced that the company has invested $11.5 million in Scientus Pharma, a Canadian licensed dealer, late stage ACMPR applicant, and vertically-integrated developer of cannabinoid biopharmaceuticals. This isn't Aphria's first deal with Scientus, in July, Aphria entered into a cannabis supply agreement with the company. 

Related: Aphria Enters Into Strategic Partnership With Int'l Cannabis Company, Nuuvera

About Scientus Pharma

As previously mentioned, Scientus Pharma is a Canadian licensed dealer, late stage ACMPR applicant and vertically-integrated developer of cannabinoid biopharmaceuticals. As a quick refresher, Canadian licensed dealers are permitted to conduct activities with cannabis under the Narcotic Control Regulations. The 'activities' these licensed dealers conduct are quite broad, but primarily fit into two categories; testing and research. Scientus Pharma's current activities are research-focused, although the company's dealers license enables them to buy, process and sell cannabis derivatives both to and from licensed producers as well as internationally.  Scientus has developed a proprietary, patent pending method of cannabis extraction that is cost effective, resource efficient and results in a consistent, pharmaceutical grade extract. On the biopharmaceutical side, the company's current research efforts focus on cannabinoid treatments for central nervous system disorders including neuropathic pain and epilepsy.

Terms of the Investment 

Aphria is investing in Scientus Pharma by way of a two year, senior, secured convertible debenture that carries an 8% interest rate. Simply put, this means Aphria lent $11.5 million to Scientus Pharma for two years at 8% per year. Aphria also has the option to convert the loan into common shares of Scientus Pharma at a rate of $2.75 a share, giving them exposure to growth of the company. Also, if something were to go seriously wrong at Scientus causing them to default on the loan, Aphria has some degree of protection. The 'senior' part means that Aphria would be one of the first creditors to be paid in the event of bankruptcy, and the 'secured' aspect means that Aphria has the first charge on all of the current and future assets, giving them even more protection in the unlikely event of a default. 

Management Commentary

Aphria's CEO, Vic Neufeld

"We are excited to enhance our relationship with industry leader Scientus Pharma. "Their proposed pipeline of new and innovative products represent a major step forward for cannabinoid based medical products in Canada.  Gaining access to their dealer's license provides Aphria immediate access in the short-term to enhanced global opportunities."

Scientus Pharma's CEO, Trevor Folk

"We are excited to welcome Aphria as a strategic investor. Coming on the heels of the two companies completing a major wholesale supply agreement in June, this sizable investment serves to validate the Scientus Pharma business model to be the leader in extractions, formulations and provider of best of breed derivative medical cannabinoid based products.  It also significantly expands our existing partnership, allowing Scientus Pharma to complete implementation of its patent pending commercial scale microwave extraction platform, an important step toward creating an active pharmaceutical ingredient that can be subsequently formulated into a range of effective dosing forms, and to execute the commercial launch of its first differentiated product."

Market Reaction 

In midday trading Tuesday, markets are shrugging off this announcement. Shares of Aphria are gaining roughly 0.5% on the TSX and roughly a quarter of one percent on the OTC Markets. 

Conclusion

Learn more about Aphria Inc. by checking out the company's marijuana stock profile in our Canadian L.P. database. To view more marijuana stocks, check out our main marijuana stock database. Be sure to subscribe to our Canadian L.P. newsletter, so you never miss an important update from one of Canada's 52 LPs. Don't forget to connect with The Daily Marijuana Observer on Facebook, Twitter, StockTwits, and Instagram.

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