A draft of the German government's cannabis legalization measure, which was leaked on Wednesday, indicates the EU country is getting close to legalizing retail distribution, possession and home grow of recreational marijuana.
"We are encouraged by most aspects outlined in the draft," Cantor Fitzgerald's Pablo Zuaic said in his latest analyst note, adding that Canadian cannabis giants Tilray Brands Inc. TLRY and Aurora Cannabis Inc. ACB ACB are well positioned to benefit from the cannabis legalization in Germany.
With cannabis no longer considered a narcotic, greenhouse grows will not be out of limits, resulting in reduced costs and allowing facilities to be up and running by early 2024, Zuanic continued. "We think this would speed up new licensees getting up and running and lower production costs."
While it's unclear how many domestic production or retail licenses will be issued; current domestic production medical cannabis licenses "could be well placed."
Aurora Vs. Tilray
Interestingly, Aurora's management expected only domestic production to be greenlighted, while Tilray's leadership anticipated the same for imports, said Zuanic who earlier said he was "more comfortable" recommending Aurora over Tilray as a play on Germany and views the selloff as a buying opportunity, noting that Aurora leads the flower segment with a roughly 15% share.
He called Tilray a leader in the extracts sector, but said it's losing its market share on more potent offerings from competitors.
Either way, now that it's likely imports will not be allowed, recreational sales could kick off shortly.
"There could be a scenario of an earlier start to rec sales (without imports) if the current domestic producers are allowed to begin supplying the rec market, as per a scenario outlined by Demecan," which is the only domestic production licensee in addition to Aurora and Tilray, Zuanic said last month.
Aurora, Tilray In Germany
Aurora was awarded a tender/contract in 2019 by the German Federal Institute for Drugs and Medical Devices (BfArM) for the annual production of 1,000 kg of high-quality medical cannabis flower over a period of four years. The construction of Aurora Leuna, a nearly 3,600 sq. meter production, was completed earlier this year. The company received EU-GMP certification for its state-of-the-art medical cannabis production facility in May.
In 2021, via its Berlin-based subsidiary Aurora Europe, Aurora agreed to support a medical cannabis-related educational initiative in Germany with €38,000 ($46,198). Later that year, the company's EU subsidiary Aurora Germany GmbH and Ethypharm reported delivering their initial shipment of cannabis to France's medical cannabis pilot program.
Meanwhile, Tilray finalized its first harvest of medical cannabis grown in Germany via its German subsidiary Aphria RX GmbH in July 2021. The move represented the company's first medical cannabis harvest under European Good Manufacturing Practices standard at its state-of-the-art 6,000 square-meter indoor grow facility in Neumünster.
Last month, the company's management initiated a policy roundtable with German regulators on adult-use cannabis legalization in Germany.
Other Companies Could Benefit As Well
US MSOs like Curaleaf Holdings, Inc. CURA CURLF could benefit as well, Zuanic said in one of his previous notes.
In addition, together with the two cannabis giants, CannaMedical, Canopy Growth Corp CGC and Four20 Pharma accounted for more than 70% of the German flower medical cannabis market over the past 12 months.
- Aurora's shares traded 0.93% higher at $1.08 per share at the time of writing on Thursday morning.
- Tilray's shares traded 1.8462% higher at $3.31 per share at the time of writing on Thursday morning.
Photo: Courtesy of geralt and Kindel Media by Pixabay
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