Search

Newsletter 35: Aphria and Aurora Awarded German Cultivation Licenses

EXECUTIVE SUMMARY

________________________________________

• Aphria and Aurora Awarded German Cultivation Licenses

• Israel Decriminalizes Adult Use Cannabis, Companies Prepare Exports

• Cresco Buying California’s Largest Distributor of Cannabis Products

• MediPharm Reports Q4 Revenue of $10.2 Million and EBITDA of $2.1 Million


COMPANIES: Aphria and Aurora Awarded German Cultivation Licenses

________________________________________


Aurora Cannabis (NYSE: ACB), Aphria Inc. (NYSE: APHA), and Berlin-based Denecan are the three companies who have been selected by the German government to cultivate and distribute medical cannabis in Europe’s largest market. The decision, approved by Germany's Federal Institute for Drugs and Medical Devices is provisional and subject to a mandatory 10-day waiting period, which allows unsuccessful bidders to submit a challenge before the final contract is signed.


Before this recent solidification of a home turf advantage, Aphria and Aurora had already made significant inroads into the German market. Aurora has supplied the German market with dried cannabis flower via Aurora Deutschland (formerly Pedanios) since December 2015, and with Canadian-grown Aurora products since September 2017. On March 11, 2019, Aurora announced that it has commenced sales of cannabis oils to German pharmacies following all necessary approvals from Canadian and German regulatory authorities. The company’s product, Pedanios 5/1 drops, has become the first cannabis extract-derived oil product compliant with German standards for in-pharmacy preparation.


Aphria, has also made significant inroads into the German market with the acquisition of CC Pharma on January 9, 2019, a leading distributor to pharmacies in Germany.


Brightfield Group estimates that Germany's medical cannabis market was worth US $73 million in 2018 and is forecast to grow to US $2.7 billion in 2023.


POLICY AND REGULATION: Israel Decriminalizes Adult Use Cannabis

________________________________________


Israel has decriminalized the adult use of cannabis — a significant development considering Israel’s robust history as the epicenter of biomedical research on the plant. Indeed, scientist Raphael Mechoulan of the Hebrew University of Jerusalem is believed to be the first to have isolated THC from the plant back in 1964.

Israeli firms have been at the vanguard of cannabis commercialization efforts. Global giant Teva is partnering with fellow Israeli firm Syqe Medical Ltd. to market medical cannabis inhalers. Tel Aviv-based Therapix Biosciences (THXBY) has undertaken clinical trials at Yale, testing cannabinoid-based drugs as a treatment for Tourette’s Syndrome. U.S. firms have invested $50 million in Israeli cannabis companies since 2014, and around $100 million in 2016.

As cross-border canna-pharma markets develop, Israeli companies and their products are preparing to penetrate European and other markets. Israel’s Aura Health (CSE: BUZZ), owns a German import and distribution company and is ready to bring Israeli medical cannabis into Germany, made possible by Israel legalizing exports recently.


On December 26th, 2018, the Israeli Parliament passed legislation allowing the export of medical cannabis from Israel. Cannabis securities reacted with prompt positivity on the Tel Aviv Stock Exchange after the announcement. Israel-based cannabis company Medivie Therapeutic Ltd. climbed 32.7% on Tel Aviv’s exchange by Wednesday 12/26/2018’s close. Israeli medical cannabis distributor, Together Pharma Ltd., rose 60.2%. The news may also bode well for other Israeli cannabis cultivators including Tikun Olam, PhytoPharma, Seedo, and Cannabics.


COMPANIES: Cresco buying California’s largest distributor of cannabis products

________________________________________


On April 1, 2019, Chicago - based Cresco Labs (CL:CSE) announced its acquisition of California - based Origin House for $850 million. Origin House, founded in 2015, holds licenses to grow and distribute cannabis in California. While Origin House has several of its own brands in its portfolio, it markets itself primarily as a distribution powerhouse within the California cannabis industry. Indeed, Origin House functions as a distributor of other companies’ products, delivering more than 50 cannabis brands to more than 500 dispensaries to the largest cannabis market in the USA. The California cannabis market is expected to total $7.7 billion in sales by 2022, compared with $270 million for Illinois, according to Arcview Market Research.


This news comes two weeks after Cresco announced its intention to buy VidaCann, a Florida-based grower and distributor, for $120 million.


Cresco is expanding its national footprint after maxing out its presence in its home state. On December 20th, 2018,, Cresco Labs (CL:CSE) announced that it has signed definitive agreements to acquire Illinois licensed medical cannabis dispensaries MedMar Rockford and MedMar Lakeview. These acquisitions had Cresco Labs reaching the maximum level of dispensaries any single company can own in the state, adding to the maximum three cultivation and processing facilities it currently operates in Illinois, being the only company in Illinois that has reached those limits.


COMPANIES: MediPharm Labs Reports Q4 2018 Revenue of $10.2 Million and Adjusted EBITDA of $2.1 Million

________________________________________


Medipharm Labs, based in Barrie, Ontario, is the first fully Canadian Licensed Producer to specialize solely in cannabis extraction. On April 3, 2019, the company announced fourth quarter and full year financial results for the year ended December 31, 2018.


The company reported revenue of $10.2 million, commencing November 12th (following their receipt of a sales license from Health Canada), with gross profit of $4.0 million and gross margin 39%; the firm was only operational for in 6 weeks during the period.


Operating solely as a processor and an extractor, the company has established decisive agreements with Canadian licensed producers cultivating at scale. They’ve signed large private label cannabis oil sale agreements with Canopy Growth Corporation for the sale of up to 900 kg over 18 months, as well as 4 multi-year tolling agreements with James E. Wagner Cultivation Corporation, INDIVA Limited, Emerald Health Therapeutics, Inc. and The Supreme Cannabis Company, Inc.


The company was awarded “Start-Up of the Year” at the Canadian Cannabis Awards by Lift & Co.


Patrick McCutcheon, Chief Executive Officer of Medipharm Labs expressed optimism for the future of Medipharm Labs: “2018 was a breakthrough year for MediPharm Labs. We became the first fully Licensed Producer to specialize solely in extraction and quickly scaled operations to emerge as the dominant market leader in the manufacturing of high quality, pharmaceutical-like production of cannabis derivative products – the future of cannabis.”