And the Unofficial List of German Cannabis Bids Is…
August 1st, 2017
For those who are watching the international cannabis space right now, there is one obvious trend going on. The Canadian LP enabled markets of the world are about to be highly influenced by them as well. Nowhere is this clearer than in a review of companies that appear now to be the top five finalists in the first German government tender bid offer to grow the crop domestically.
This list of firms has been confirmed independently by industry (not government) sources. When asked for comment on the list, Dr. Werner Knöss, the head of the Cannabis Agency responded by email that “BfArM is following tasks which are defined by the legislation. The ongoing procedure is confidential and we are not allowed to provide any information. The names of the successful participants will be published, when the tender procedure will have been completely finished.”
Four of the firms in the apparent top five finalists, are Canadian. The other is Dutch, with a Canadian counterpart. The only thing less surprising about these firms is the number of them that have either “cannabis” or a derivative of the word in their name.
What is clear, however, is that these firms are clearly and rather brilliantly, angling themselves into at least a two country if not regional play that will absolutely shape the future of the cannabis market in both Canada and Europe, far beyond Germany. In addition to this, all of these companies have global reach.
The most significant aspect of this announcement? A true new global industry has been born. How far Canada will continue to dominate the global cannabis space is unclear as regionally based affiliates establish their brand and market presence. What is clear however is that this global market will also have a determined Deutsch tang too.
The Unofficial Finalists
Maricann (CSE:MARI). The company secured $42.5 million in financing to underwrite their German expansion in May, several weeks after the German bid tender was announced. The finance deal is backed by a right to purchase agreement (of 20% of capability) with a Vancouver-based cannabis specialty finance firm. The financing will fund an expansion of a two-tiered cultivation farm near Dresden and an outdoor hemp farm. In Canada, the firm is well established and obtained its license from Health Canada in 2014 to cultivate plants and sell the dried crop. Its corporate headquarters in Munich as well as its German board are packed with people with a background in insurance. It is clear that this firm is setting itself up for a medically underwritten market globally, with a major boost coming from Deutsch operations and input.
Bedrocan. This Dutch producer (not to be confused with the Canadian Bedrocan) has grown from a family firm into the monopoly supplier of medical cannabis to the Dutch government over the last several decades. However, the firm is also facing a bit of a reorganizational challenge at the moment. The company was also in the position of supplying all Dutch pharmacies. As of Q1 this year, the majority of Dutch insurance companies pulled their underwriting of medical cannabis, claiming no evidence of medical efficacy. Coming as it did on the heels of the German legislation earlier in the year, this is a strange sign. It may be that the government has decided to allow a full recreational market. Better regulation of the coffee shop grows is also another sign of this. Regardless, no matter the case, the oldest established cannabis firm in the world, with an established record of export both within Europe and globally (starting with Israel) is now looking for a new market. Will they make the jump?
Spektrum Cannabis (traded under Canopy Growth Corp.) (OTC:TWMJF). Spektrum is not really a “start up” anymore in the sense that it is owned by the largest Canadian GMP-certified producer – itself the self-described “Canadian Pot Unicorn” with a billion dollar market cap. However in the sense that it has established a brand presence on the ground from scratch over the last two years, it is a company to watch. If they can do this much in two years, who knows where the next decade will take them. Headed by a former German stem cell research scientist and American expat, the company has literally created a new player in the global cannabis space and further one that was established in Germany at a strategically critical time.
Aurora Cannabis (OTC:ACBFF). This company is the only one so far to announce the fact that they were finalists in the German bid via press release. On July 12, the company announced its German subsidiary Pedianos had passed the next stage of the tender bid application. Building on that momentum, the company also just began trading on the Toronto Stock Exchange as of July 24, 2017. Since the company stock began trading on the TSX Venture Exchange last year, it has seen its market cap increase by more than $600 million, doubled its active registered patients in Canada and tripled its monthly revenue. This puts them on the heels of Canopy Growth. Via Pedianos, the company now has distribution to about 1,000 German pharmacies.
ABcann (TSXV:ABCN). This company also appears to be following a similar strategy to Aurora in terms of listing and stock plays. They also announced listings on both German and American stock exchanges on July 12, the same day Aurora announced its successful participation in the German bid finalists list. This early player to the Canadian market has also rapidly and aggressively established itself and in various ways. Their board is packed with globally known experts including the “Father of THC” – Israeli scientist Raphael Mechoulam. They have also begun to establish their German branch and activities on the ground.
Summaries And Takeaways
The combination of a German-Canadian medical market is going to be significant globally, no matter which of these firms takes home the final prize. Or if there others on the list.
What does this mean for investors and patients? Right now, there are few better plays than investments in these firms. They are aggressively growing in multiple markets with a product that is just on the edge of legal and markets that are exploding globally. That is good news for both investors and patients. What is not so good news for patients is that the price of marijuana is also, unfortunately, on the edge of a massive price jump for the next several years. Demand in Canada will continue to grow as the German market begins its first mass registration of patients before first crops are harvested. That means, by definition, that even though facilities are expanding now in Canada and farms will be in place in Germany by 2019, the capacity may well not meet demand.
This in turn will place a negative incentive on insurers, who are being forced now to cover it by national legislation and lawsuits in two countries. Patients are going to have a hard time finding and affording medical cannabis. That said, several companies on this list have already begun making statements about reserving a certain percentage of overall grow for the medical market.
No matter what, however, this bi-country alliance that will be formed by the winners of the German bid, whoever they are, is set to change the world of weed, if not the world beyond it.
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