A new distribution agreement in Germany has GMP Securities analyst Martin Landry feeling positive about Cronos Group’s (TSXV:MJN) international plans.
This morning, Cronos Group announced a five-year distribution agreement with German pharma G. Pohl-Boskamp GmbH & Co. KG. The company said it would begin shipping product shortly.
“We are ecstatic to partner with Pohl-Boskamp, an established and reputable pharmaceutical leader,” said Cronos CEO Mike Gorenstein. “This partnership allows us to leverage an existing industry-leading pharmaceutical distribution channel to immediately create the world’s largest medical cannabis distribution platform.”
Landry says the scope of this deal is bigger than others we have seen in the space.
“The distribution reach of Pohl-Boskamp, with a supply network of 12,000 pharmacies, appears to be larger than other companies which have partnered with Canadian LPs to distribute medical cannabis in Germany,” the analyst notes. “Recall that Pedanios GmbH, upon the acquisition by Aurora Cannabis, was distributing medical cannabis to 750 pharmacies, while Canopy Growth’s German subsidiary (Spektrum Cannabis Germany GmbH) was distributing to 480 locations as of June. Cronos’ exclusive distribution agreement with Pohl-Boskamp could significantly boost Cronos’ access to the fast-growing, and potentially large German medical market. This should allow the company to arbitrage supply/demand dynamics in both Canada and Germany to maximize pricing of their products. Anecdotal evidence suggests that the number of medical patients in Germany is increasing rapidly, given the government reimbursement for medical cannabis. With Germany’s large population of 82 million, the German medical marijuana market could exceed the Canadian medical marijuana market in coming years and potentially reach C$2b. The above supports our view that Cronos is well positioned to capitalize on the growing global medical marijuana market.
In a research update to clients today, Landry maintained his “Buy” rating and one-year price target of $4.00 on Cronos Group, implying a return of 27.4 per cent at the time of publication.