Why the Althea (ASX:AGH) share price soared 6% today

The Althea share price soared today as the company announced a new manufacturing deal. We take a closer look.

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The Althea Group Holdings Ltd (ASX: AGH) share price stormed higher today after the company announced it will be manufacturing US Cannabis brand Tinley's products in Canada. Shares in the small cap closed today's trade 6.19% higher at a price of 52 cents.

The news continues what has been a strong year for the company, which has seen its share price rise by more than 32%. For comparison, in the same period the All Ordinaries Index (ASX: XAO) has risen by 0.29%.

What Althea does

Althea is an Australian licensed supplier and exporter of pharmaceutical grade, medicinal cannabis. The company offers a range of products, education, and other services to support patients and healthcare professionals in navigating medicinal cannabis treatment pathways.

The group currently operates within select, highly regulated medicinal cannabis markets, which include Australia and the United Kingdom. However the company has plans to expand into Europe and emerging markets throughout Asia.

What happened

Althea announced a deal for one of its subsidiaries, Peak, to be used as the exclusive manufacturer of Tinley's.

Tinley's is a leading cannabis beverage brand in the United States and the company itself is listed on the Canadian Securities Exchange.

Under the agreement, Peak holds exclusivity for the manufacture and distribution of three Tinley's products in Canada until Tinley's meets minimum quantities. An initial order representing more than CA$100,000 in revenue for Peak is planned for delivery in the first quarter of 2021. The agreement is for an initial 3-year period.

What now

Shareholders were clearly pleased with the deal as the Althea share price stormed higher today.

This sentiment was shared by Althea's CEO Joshua Fegan,  who said:

The agreement with Tinley's is yet another key milestone for Peak and immediately follows the Company announcing an increase in its forecasted revenue of up to CAD$4.65M, over the next 12 months. With Peak having successfully obtained its Standard Processing Licence from Health Canada in only September 2020, the team has been quick to further ramp up business development. The addition of the Tinley's Agreement to Peak's growing list of contracts increases our 12 months expected revenue yet again and keeps the Company well on track to deliver on our revenue objectives in the short, medium and long term.

Motley Fool contributor Daniel Ewing has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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