Until cannabis is legalized or decriminalized in the US, we continue to view the European Union (EU) as one of the most attractive markets over the long-term.

During the last year, we have seen a wave of positive cannabis legislation support the growth of the EU cannabis market. We believe this vertical is in its infancy and continue to monitor the companies that are focused on this emerging market.

We consider Germany to be one of the most attractive cannabis markets in the EU and have seen an increase in the number of companies that are levered to it. Today, we want to highlight two operators that have been highly focused on this opportunity. The companies, Aphria Inc. (APH.TO) (APHA) and Tilray Inc. (TLRY) recently reported a merger agreement and we are favorable on the amount of leverage that the combined company will have to the opportunity in the EU.

A Global Leader in the Making

Earlier this week, Tilray, Inc. (TLRY) announced a major milestone as it relates to the cannabis opportunity in the EU and reported to have been selected by the French National Agency for the Safety of Medicines and Health Products (ANSM) to supply Good Manufacturing Processes (GMP) certified medical cannabis products for experimentation in France.

This agreement expands Tilray’s position in the EU cannabis market and we are favorable on how this aspect of the business has advanced. According to the agreement, Tilray is expected to start shipping products to France in the first quarter of 2021. The experiments are expected to take place over an 18 month to 24 month period and we will monitor how the agreement supports revenue growth in the coming quarters.

Under the agreement, Tilray products will administer cannabis products to patients who are not benefiting from existing treatments and for therapeutic indications that include: neuropathic pain, severe forms of epilepsy, cancer or anti-cancer treatments, palliative care, and sclerosis or other pathologies of the central nervous system (CNS).

Tilray has already received the necessary regulatory approvals to participate in the experiment and will export medical cannabis products from its GMP-certified facility in Portugal. We are favorable on this asset and expect it to play an important role in the growth of the business.

Tilray’s Portugal operations is comprised of a multi-faceted production facility that includes research and quality control labs, packaging, and distribution sites for medical cannabis. The facility also serves as a hub for Tilray’s clinical research and product development efforts. We consider the facility to be of strategic significance as it relates to the EU cannabis market and will monitor how it supports the growth of the business.

Tilray has established sales and distribution arrangements to supply medical cannabis through major pharmaceutical distribution channels throughout Germany and the EU. By having these agreements in place, Tilray will be able to easily expand its reach and we will monitor how revenue numbers increase over the long-term.

The Combined Company has Large Growth Prospects in the EU

In late 2020, Tilray shocked the market when it announced a merger agreement with Aphria Inc. (APHA.TO) (APHA). The combined company would be well-positioned to capitalize on the EU cannabis market and are favorable on the assets that Aphria brings to the relationship.

The combined company would be expected to take a leadership position in Canada and we are bullish on the potential synergies that could be found between the operators. Aphria has been highly focused on the Canadian and the international cannabis opportunity and we are favorable on the amount of distribution that it has in the EU.

Earlier this week, Aphria’s subsidiary, CC Pharma, entered into a strategic agreement with AMP German Cannabis Group Inc. (XCX.CN) that covers marketing for Aphria’s brand of medical cannabis products for the German market. The agreement is a collaboration contract to sell Aphria’s medical cannabis brand in Germany and we are favorable on the development.

According to the agreement, AMP will organize information events in Germany to market Aphria’s branded products to doctors and pharmacists. We are favorable on how the relationship will target a specific group of people and will monitor how it supports the growth of the business over the long-term.

The merger between Aphria and Tilray is expected to be completed in the near future and expect the combined company to be a leader in the global cannabis market.