Canadian PubCo’s & The German Medical Cannabis Market

When it comes to federally legal market opportunities, it’s widely accepted that Europe is the next frontier when it comes to the cannabis markets. While the US is favoured by many, the Schedule 1 status of cannabis within the country heavily limits those that are eligible to invest in the nascent sector. As a result, many are turning to Germany when looking at growing market opportunities.

In fact, Arcview Market Research and BDS Analytics have projected that the German market alone will account for close to $1.6 billion in sales by 2022, and that it will be one of the largest markets outside of North America.

The market itself is desirable for Canadian licensed producers for a number of reasons. First and foremost, wholesale prices are much higher than what’s become the norm in Canada. Canopy Growth reported that in 2018, the average price they received for their dried flower was $13.50 a gram – and that was purely wholesale. Second, medical cannabis is covered by insurance providers similar to any other prescription. Reimbursements within the country totalled over €73.68 million (CAD$110.92mm) in 2018.

Medical cannabis reimbursements in Millions (€). Colouring from top to bottom indicates proportion of cannabis flower, finished medical preparations, and Sativex. Translated from German. Source:

When it comes to access to the German market there are a number of ways that Canadian licensed producers have opted to gain exposure. The simplest, and most common method is simply obtaining a supply agreement with a licensed German importer and distributor. A number of companies, such as Zenabis, Invictus MD, Tilray, and Aleafia Health have gone through this route to acquire access to the nascent market.

There are some requirements however to be able to export cannabis product to the German, and European, markets. For instance, facilities must conform to European Good Manufacturing Practice (eGMP) standards. This requires certification from the German regulating body to ensure that all cannabis is grown to pharmaceutical standards. To do so, it requires a licensed distributor to request that your facility be certified, which is typically part and parcel to a supply agreement. Specific cannabis strains are also required to be certified by the governing body.

Others, such as Vivo Cannabis, Aurora Cannabis, Wayland Group, and Aphria, have attempted to gain access by means of acquiring an allotment through a recent lottery to grow cannabis within the country. This method however is limited in size due to small production limits of 200 KG per annum per lot acquired, with a company receiving a maximum of five lots over a period of four years. All of Aurora Cannabis, Wayland Group, and Aphria were successful in this bid, however the revenue from such efforts will be minimal until such time that the German regulator elects to increase production allowances.

The final method that a select few companies have elected to take is purchasing a licensed German importer, exporter, and distributor itself. Only four Canadian firms have elected to go this route to gain access to the European cannabis medical market. Namely, they are Canopy Growth, Aurora Cannabis, Aphria, and most recently, Aura Health.

Public EntityDistributor% OwnershipPurchase PriceYear
AphriaCC Pharma100CAD$27.89mm2019
Aura HealthPharmadrug80CAD$6.82mm2019
Aurora CannabisPedanios100CAD$20.8mm2017
Canopy GrowthMedCann100CAD$10.4mm2016

The benefit to going this route, is effectively gaining control of the import process. Those that have an import and distribution license are able to select which Canadian licensed producers they’d like to certify to eGMP standards. If you are a producer yourself, its another market for which you can sell your product. If you are not a producer, it enables you to secure supply agreements through the licensing of LP facilities, which can be done as a requirement for having a facility certified by the German authority.

Arguably, this is the ideal method to gain access to the German as well as the even larger European markets. It essentially provides the firm with the upper hand in negotiations, as they have the power to demand the best price for product by owning the means of importation. There’s also the fact that there is minimal risk of a supply agreement being severed, versus being on the exportation end of the transaction wherein access to the nascent German market could be terminated at a moments notice.

While Aurora, Canopy Growth, and Aphria will utilize their distribution license to import product grown in their own Canadian facilities, Aura Health is taking a slightly different approach. The firm will be utilizing its license to secure supply agreements with a number of licensed producers in the Canadian market. This process has already begun as they work with BlissCo to acquire eGMP certification at their facility located in British Columbia, upon which a distribution agreement will be enacted. However, Aura Health will also be utilizing the distribution license to import their product from their Israel-based operation known as HolyCanna, a 50,000 square foot cultivation facility located in Central Israel, as well as their allotment from Bedrocan BV.

Whichever method to enter the German cannabis market is used, it’ll undoubtedly be a net positive for Canadian entities. With the expected surge in medical patients within Germany and the European Union as a whole, early positioning is key to securing long term market positions. The method used however, will have an impact on future earnings potential.

FULL DISCLOSURE: Aura Health is a client of Canacom Group, the parent company of The Deep Dive. The author has been compensated to cover Aura Health on The Deep Dive, with The Deep Dive having full editorial control. Not a recommendation to buy or sell. Always do additional research and consult a professional before purchasing a security.