Canopy Growth Corporation (TSX: WEED; NYSE: CGC) just inked an 18-month supply deal with licensed cannabis extraction company MediPharm Labs Inc., a subsidiary of MediPharm Labs Corp. (TSXV: LABS).
The deal arrives as companies across Canada struggle to meet increased demand after the Cannabis Act legalized recreational marijuana usage nationwide.
Under the terms of the deal, Canopy commits to purchasing 450kg of cannabis extract, with the option available to buy double that amount for a total of 900kg.
MediPharm has the distinction of being the first company granted a license for cannabis oil production before receiving a cannabis cultivation license under the Access to Cannabis for Medical Purposes Regulations.
In a press release announcing the deal, MediPharm Labs Chief Executive Officer Pat McCutcheon had this to say:
“We are thrilled to work with Canopy Growth, the world’s leading cannabis producer, to deliver the highest quality cannabis oil concentrates for medical patients and recreational consumers. This sales agreement serves as a strong endorsement of MediPharm’s industry leading extraction-only business model.”
Canopy has stated the deal will allow them to provide additional softgel products to end consumers quickly, adding that “this is a nimble model that benefits both parties and Canadian consumers.”
A recent study from the federal government revealed that smoking as the primary form of marijuana consumption is actually decreasing, while consuming various edibles is on the rise.
Canopy Growth Co-Chief Executive Officer Bruce Linton also commented:
“As the industry matures we are seeing exciting businesses like MediPharm establish specialized skill sets that will drive the industry forward. Extraction is now and will continue to be an opportunity to develop expertise and IP. We continue to develop our own capacity in this area and are pleased to work with MediPharm, a leading team that has demonstrated it shares this vision.”
Each cannabis entity has struggled to meet unprecedented demand in the month since legalization, with a variety of solutions on display, with HEXO Corp. (TSX: HEXO) constructing a new greenhouse and companies such as Namaste Technologies (TSXV: N) and Organigram Holdings (TSXV: OGI) signing new supply deals.
The industry has also seen a sharp spike in cultivator investments as companies seek out right of first refusal deals to ensure they can keep shipping products to fill the shelves.