Looking to find a steady supply of cannabis concentrate ahead of the impending legalization of edible products, Cronos Group Inc. (NASDAQ: CRON; TSX: CRON) just signed a new supply agreement through wholly owned subsidiary Peace Naturals Project Inc.
Under the terms of the multi-year deal, Peace Naturals will provide dried cannabis in large bulk quantities to MediPharm Labs Corp. (TSXV: LABS; OTCQX: MEDIF). That company will then convert the dried product into $30 – $60 million worth of concentrate.
The deal is initially set to last for 18 months, with an option available to renew the agreement and extend out to a full two years. In addition to the renewal, the agreement also sees Peace Naturals Project gain a right of first offer to buy an extra $18 million worth of concentrate throughout the duration of the deal.
Cronos Group Chief Executive Officer Mike Gorenstein commented on the reasoning behind the agreement:
While recreational cannabis in dried flower form and oils for vaping have been legalized since last year, the legal edible market – including both foods and infused drinks – has not yet officially opened up to Canadians.
Barring any potential delays, specific rules for legal edible sales are expected to be announced through Health Canada for the licensed market in October.
The details of those regulations have been a cause for concern among licensed producers ahead of their announcement, with proposed guidelines leaked ahead of time setting low THC counts and featuring an excess of required packaging.
Aside from the impending derivative market opening, Cronos Group has recently focused on oils for vaporizer products. Earlier this month, the company opened a research & development centre in Israel to launch new vaporizer formulas and products.
In other recent Cronos news, the company scored a landmark $2.4 billion investment from Altria Group, Inc. (NYSE: MO) back in March.