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Germany’s latest decision on cannabis cultivation is a negative for Canadian LPs: Canaccord Genuity

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cannabis cultivationGermany dragging its feet on cannabis cultivation could be a negative for Canadian LPs already in the tender process, says Canaccord Genuity analyst Neil Maruoka.

Yesterday, Düsseldorf’s Higher Regional Court ruled to stop the tendering process for marijuana for medical purposes in Germany. The move followed on a tender document released by Germany’s Federal Agency for Medicines and Medicinal Products that envisioned supply of 6600 kilograms by 2022. Germans can get cannabis by prescription, but the supply is imported. Judge Heinz-Peter Dicks said the tendering process had been rushed.

Maruoka says he believes there are at least five Canadian LPs already involved in this process, Canopy Growth Corp. (Canopy Growth Stock Quote, Chart, News: TSX:WEED), Aurora Cannabis (Aurora Cannabis Stock Quote, Chart, News: TSX:ACB), Aphria (Aphria Stock Quote, Chart, News: TSX:APH), MedReleaf (MedReleaf Stock Quote, Chart, News: TSX:LEAF), and Maricann Group (Maricann Group Stock Quote, Chart, News: CSE:MARI). In a “Flash Update” to clients today, the analyst explained why he thinks the German opportunity is symbolically important, even though the opportunity in that country represents a relatively small component of his overall company valuations.

“We believe this decision is likely to result in a delay to the licensing of domestic production, potentially ranging from several months to a year (in a worst-case scenario),” the analyst says. “Although the German opportunity represents a relatively small component of our overall company valuations, we do believe that valuing international opportunities is necessary to support current stock prices which cannot be justified by the Canadian medical and rec markets alone.”

Maruoka says an increasingly competitive tender process is a negative for existing applicants.

“While we have not seen the details of the German higher court’s decision, we believe the options will be to re-start the process (less likely) or roll-back the process to allow the inclusion of additional applicants,” he says. “Initial domestic supply was slated for the start of next year; however, we now expect German production will be delayed by 6-12 months. Moreover, we see increased risk for existing finalists given the likelihood of increased competition from new applicants.”

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About The Author /

Cantech Letter founder and editor Nick Waddell has lived in five Canadian provinces and is proud of his country's often overlooked contributions to the world of science and technology. Waddell takes a regular shift on the Canadian media circuit, making appearances on CTV, CBC and BNN, and contributing to publications such as Canadian Business and Business Insider.
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