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MightyMaven (< 20)

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Demand Greater Than Expected Demand for Tetra Bio Pharma PPP001

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July 13, 2017 – Comments (1) | RELATED TICKERS: APHQF , SNY , GSK

The Original Announcement on the Aphria-Tetra Distribution Agreement:
On April 19, 2017, Tetra Bio-Pharma Inc. (CSE: TBP) (US OTCQB: TBPMF) and Aphria Inc. (TSX: APH) (US OTCQB: APHQF) announced a major partnership plan for the joint distribution of dried medical cannabis throughout the Canadian maritime provinces and the province of Quebec. Tetra and Aphria entered into the joint supply & distribution agreement with Aphria supplying dried medical cannabis under its ACMPR (Access to Cannabis for Medical Purposes) license and Tetra distributing that product after packaging the product using their proprietary process under their manufacturing CDSA (Controlled Drugs and Substances Act) dealer’s licence at its New Brunswick facility. Tetra and Aphria also announced in this news that they may expand into other provinces based on the successful outcome of the venture in these initial provinces.

The Three Month Update on the Partnership's Progress:
Three months later, on July 11, 2017, Tetra Bio-Pharma announced that "The initial demand forecasted in New Brunswick (one of the maritime provinces -- MM) for PPP001 using the ACMPR license is more than what we expected for sales. We are now putting in place the necessary manufacturing capabilities to address this increasing demand and to ensure the highest standards of quality control. We will look at launching PPP001 using the ACMPR license by the end of summer."

Conclusion & Analysis Based on the Update:
The only conclusion to draw from this is they are showing stronger than expected demand from pre-orders by retail outlets in New Brunswick and that probably translates pretty evenly over the rest of the provinces in this rollout. That is, it is not demand created by a certain location versus a different location, but is demand that is differentiated on the quality and price of the product. This is very high quality product and retail outlets know what customers are desiring, what they are ordering, and the conclusion of the retail outlets is to make strong pre-orders for Tetra's PPP001 medical cannabis. Furthermore, since it's not a demand created by a location but instead by quality and price, we can expect Tetra to do well in all the maritime provinces and the province of Quebec, and that success means they will be launching the product in the whole of Canada as per the news release on the Aphria agreement. The maritime provinces are New Brunswick, Nova Scotia, and Prince Edward Island and are located on the Canadian east coastline in the Atlantic region; their population is estimated at 2,000,000 in 2017. Quebec is the second largest Canadian province and has a population of 8.4 million with half of those living in Montreal. Thus the immediate total for that area is over 10 million people and Tetra has their manufacturing facility right in the heart of this region, which will lower shipping costs on an already lowest-cost produced product (see Aphria's latest quarterly and annual Sedar filing and related news release for more on that).

International Reach of Tetra Bio-Pharma Manufacturing & Distribution Center:
On the importance of the location the maritime provinces are well-known export centres via the Atlantic ocean. Quebec has access to multiple avenues of distribution via shipping, such as the St. Lawrence River, the Gulf of Saint Lawrence, the Arctic Ocean, James Bay, Hudson Bay and Ungava Bay. In Montreal, where half the population of Quebec resides, are located some of the largest inland Atlantic ports in the world, in fact. Through the St. Lawrence Seaway they have access to the Great Lakes as well as having a land border with some important US states. They border wth Maine (which legalized recreational marijuana in the November 9th, 2016 elections), New Hampshire (MMJ state just passed HB 160 adding PTSD to the list of accepted ailments for medical cannabis; Gov. Sununu stated he will also sign the decriminalization bill HB 640), Vermont (H. 511 to legalize marijuana was amended and passed by the Vermont Senate; next step is House passage when they reconvence later this year or in January 2018; and the bill is expected to pass the House since a similar bill was passed earlier in 2017 by the House)  and New York (the NY Senate passed S 5629 adding PTSD as a qualified ailment for the state's MMJ program). (See MPP Blog for more on states' medical and recreational MJ progress)

International Expansion Through Commercialization Partnerships:
The company announced in a corporate update earlier this week that they are "focused on expanding commercialization partnerships internationally for their product pipeline" and that they are receiving partnership inquiries not only in the USA, but also from Germany, Ireland, Brazil and Mexico. Canada has strong shipping channels both to Europe and Central and South America via the Atlantic. With the initial demand for their PPP001 product higher than their expectations, TBP has now been putting in place the necessary manufacturing capabilities to meet the demand load and ensure the product's high standard of quality and high quality-control processing. They are on schedule with their timetable for launch by the end of summer. It is likely they would like to have the launch begun before Q4 starts so they will have everything moving as they enter the last quarter of the year; while we may see a few weeks of sales go through in September, thereafter the sales of Q4 should be much stronger with thirteen weeks of sales. We can also expect that as each day passes, sales will continue increasing by a strong growth rate throughout 2018 as well. A recent 188 page industry analyst report by Azoth Analytics released in May 2017 covered all facets of the pharmaceutical industry market and growth (CAGR) expected for the coming years, highlighting in the study the first company in the world to bring dried medical cannabis into Phase III clinical trials, Tetra Bio Pharma ($65M USD market cap), along with the big names in big pharma, being nine major multi-billion dollar pharmaceutical companies. For a small research company to be included with such a major list of companies in their industry, there is a requirement to have found something substantial out about them, even disruptive for the marketplace. The first thought that comes to mind on what that would be is TBP's PPP001 dried cannabis as a prescription drug. Here is the list of companies covered in the Azoth report:

Pfizer ($199.45B) (NYSE:PFE)
Novartis ($185.475B) (NYSE:NVS)
Sanofi ($112.045B) (NYSE:SNY)
GSK ($101.269B) (NYSE:GSK)
AstraZeneca ($82.86B) (NYSE:AZN)
Allergan ($81.0B) (NYSE:AGN)
Endo Pharmaceuticals ($2.5B) (NasdaqGS:ENDP)
Purdue Pharma (Private, Top 20)
Boehringer-Ingelheim (Private, Top 20)
Tetra Bio-Pharma ($65M USD) (CSE:TBP)

The Tetra Bio-Pharma Mindset:
The mindset and practice of Tetra is that rather than reinventing the wheel, they find partners already well-versed in whatever it is where they have a need, and they partner up so they can work off of each other's strengths, creating a synergy and enabling significant cost savings. According to the company, they have opened lines of communications now with three of the majors and some thirty other pharma companies, and they announced news to this effect after being invited to the world's largest pharmaceutical conference and expo, just held in mid-June in San Diego this year. The company took the opportunity to update their shareholders through their Facebook page with this quote:

"We just completed Bio International Conference in San Diego yesterday. OVER 30 meetings were completed including THREE major pharma companies. We are working hard to expand, build and accelerate our innovative pharmaceutical pipeline. Now we work to CLOSE future partnerships and move the company in a forward position of becoming a global leader in pharmaceutical cannabis."

Investing in the Pharmaceutical Industry:
Is investing in the pharmaceutical industry a wise decision? Certainly it is the consensus of financial writers who have studied how to survive major market corrections and crashes, even major economic crashes on scale with the Great Depression and the 2007 crash that one investment that has great sustainability is pharma. Everybody needs medicine at one time or another to maintain their health in order to deal with whatever else it is they need or have to do; without good health, what good is anything else. If you have a job offer but are not healthy enough to work, what good is a job offer to you. Good health is a priority to everyone. It is backed by government and it is backed by insurance companies. It is backed by the medical associations. It is backed by every major university in the world. It is backed by every hospital in the world.

The Value of Good Personal Due Diligence:
Recently, one writer was writing on his concerns about the bull market in general saying valuations overall were high and a recession was due. That is a general comment, yet the writer tried to target cannabis stocks with that reasoning. However, the evidence is in that even in economic crises people spend their available resources on pharmaceuticals, health food, groceries, razor blades, tooth brushes, as well as items such as cigarrettes, wine and beer, and a host of other similar things. People want to feel good and in their own way each of these help them do that. These are things people consider to be necessities that they can't or just don't want to live without. With an investment in Tetra Bio-Pharma, you are taking part in a company with tremendous annual growth potential in one of the fastest growing industry markets in the world; and in particular one with a pharmaceutical grade product that's able to be sold right now, today, to those looking for the highest quality for their current medical cannabis program they are with, but that also is moving into Phase III clinical trials so that the product can be prescribed as a medicine with an actual drug identification number (DIN) and be covered by medical insurance rather than how it is now, paid out of pocket by patients. It's no wonder to me why Azoth Analytics included Tetra Bio-Pharma in their report because the opiod crisis has everyone on edge from patients to doctors to governments and PPP001 is a disruptive factor coming into that marketplace for reason of which some of the major competitors in pharma will begin to partner with TBP.

Doing Due Diligence on Articles and Authors You May Research:
If fear of another collapse wasn't enough to selectively target cannabis stocks, the writer continued that cannabis investors should be afraid of a federal crackdown even although President Trump has long stated that he has many friends and supporters who use medical marijuana. Lest everyone forget, he is the one who selected Mr. Sessions for his role as attorney general and not the other way around. Furthermore, the US Congress and state congresses have increasingly passed favorable legislation, favorable bills in both houses of Congress, and the voters nationwide have continued to increasingly favor legalizing cannabis both for medical conditions and for recreational use. Add to that people are learning the difference in taking a dangerous opiod drug versus using medical marijuana to resolve their pain issues. While people have died from opiod overdose, barbituate overdose, heroin overdose, meth-amphetamine overdose, and even alcohol overdose (think university students who died in hazing incidents), I have never been to or heard of a funeral for someone who died from marijuana overdose. The writer simply rehashes old news that has already been priced into the market and every day is more a non-issue!

Be Ready to Sift Through a Lot of Bad Analysis; Refuse to be Spoonfed:
If that wasn't enough fearmongering via a market collapse and a federal crackdown, the same writer continued  that financial institutions could turn cannabis companies' cash away because of fears of violating federal laws. But that is NOT something on the verge of happening but is already a major part of what cannabis companies go through in general. It is also priced into the market and on major changes offers strong upside potential for companies. MMJ companies have had to look harder than others for institutions to bank with, and some companies have started up to deal with that situation by transporting cash to a friendly bank or guarded vault location. Certainly not all financial institutions have a ban on cannabis cash and the situation is getting better through actions undertaken by the US Congress dealing with that specific issue in the last session of Congress. So the situation is getting better by the day. Irrational fears like these provide a great opportunity for investors to get in at a better price before the rest of the market enters. These are not really sound fears that are waiting to dampen prices, but irrational fears that have already had an effect on prices. So a smart investor studies what will happen once each of these issues is totally resolved (Congress defunding the DOJ in respect to cannabis in legal states like they did; Congress opening up banking to operate without fear in legal cannabis states, for example, which if the writer had read up on it, he would have found that Congress indeed has taken action on these issues!).

In Conclusion:
Remember to keep your thinking cap on when you read what people are disseminating these days, whether it's their opinions on cannabis, medical cannabis, the economy or anything else. Your best advice on any industry will come from within the industry itself, not from someone outside the industry and not from someone who doesn't invest in the industry. People tend to research best what they put their money into. I began investing in cannabis companies by watching the market back several years ago. Then after I had researched for a couple of years, I began by taking a small position in about a dozen companies. Those I began to follow closely and research and do the due diligence. Once I came to more fully grasp who the companies were, who the people running the companies were, what their products and services were, what their research was, who their partners were, I began to increase certain of those investments and divest of others. Then I turned from overall cannabis markets to place more attention on the pharmaceutical side of the industry, where most of the stocks I hold are now located. I consider Aphria to not only be a licensed producer but, due to their work with Tetra and their passion to produce a pharmaceutical grade product, also somewhat of a pharma company. That they along with their major partner Tetra are able to produce at the lowest cost among the industry really makes them a standout investment. Being the low-cost producer makes you disruptive to the rest of the market. For investors, when disruptive is on your side, that's a good thing. By that, YOUR company controls commodization of the key product being sold. (And yes, that same writer added commoditization as another fear to run investors off, but as you can see, one must look at it all with the right perception and analysis to see the real truth of the matter. As I came to the conclusion that I needed to greatly expand my investment in Tetra, Aprhia came along with a large investment in Tetra at that exact time. Holding both companies already as my two top favorites after three years of research, I had a headstart on all the research I felt I needed to take a stake. Last year people probably thought it would take Tetra years to make a profit, but today they are preparing to launch both 1) Phase III end-stage clinical trials based upon their highly successful Phase I clinical study of PPP001 and 2) distribute PPP001 backed by Aphria throughout Canada. Plus the company is stating they will be launching their natural health product lines this year as well. For me, I was never happier to have researched a company so well and have the opportunity to participate in what is now unfolding before our eyes.

Good luck, best regards,

Mighty Maven 

1 Comments – Post Your Own

#1) On July 14, 2017 at 1:19 PM, MightyMaven (< 20) wrote:

Some additional related news from Tetra Bio-Pharma via their Facebook page:

"We hHave received many emails and messages of thanks from the recent AGM. We are very encouraged by the strong support from shareholders. The strengthened Management team is now working together at full steam and we are really making great inroads at building Tetra into a strong organization. We are so encouraged from the strong initial demand for PPP001 that we now have to bring in new suppliers in order to meet the supply requirements while maintaining the highest quality standards. This is a great sign for a company when your lead product is significantly beyond your initial forecasts and it has only just started with one province! We are looking forward to building a strong product pipeline to take Tetra into a global leader in pharmaceutical cannabis."

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