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Canopy Growth, MediPharm Labs Enter Cannabis Supply Agreement

November 29, 2018 11:29 am
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Canopy Growth, MediPharm Labs Enter Cannabis Supply Agreement

Canadian cannabis producer Canopy Growth Corp (NYSE:CGC) has announced the signing of a strategic supply agreement for MediPharm Labs Corp. to supply Canopy Growth with cannabis extract.

What Happened

The agreement rolled out Thursday covers a time frame of 18 months. MediPharm will provide Canopy Growth and its subsidiaries up to 900 kg of cannabis extract. In addition, Canopy has committed to purchase at least 450 kg, with an option to buy an additional 450 kg.

Why It's Important

The agreement allows Canopy Growth, which has a core cannabis-growing business, to deliver a higher-quality product.

For MediPharm, the supply agreement, in addition to revenue, is also an endorsement from a top Canadian cannabis companies with exports to several countries globally.

"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," MediPharm President and CEO Pat McCutcheon said in a statement.

"This sales agreement serves as a strong endorsement of MediPharm's industry leading extraction-only business model."

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What's Next

As the cannabis industry matures, companies are finding their operations do not need to be vertically integrated and seed-to-sale in nature. Rather, more companies are emerging that focus on a single piece of the cannabis supply chain.

In turn, this delivers higher quality product, as each company can hone in on a single aspect of the product.

The nationwide legalization of marijuana in Canada is speeding up this process, while in the U.S. many companies are still required to follow a seed-to-sale business model.

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