Medipharm Labs (TSX: LABS) and TerrAscend Corp (CSE: TER) announced a significant transaction this morning, wherein Medipharm will supply a minimum of $27 million in cannabis distillate to TerrAscend over the next two years. The contract has the potential to expand to $192 million under certain conditions.
The cannabis distillate will be utilized by TerrAscend to produce branded products for the “rec 2.0” market, which includes items such as vapes and other concentrates. A series of branded products are expected to be released by TerrAscend Canada this fall.
The base agreement will see TerrAscend purchase a minimum of $27 million in cannabis distillate from Medipharm Labs in a 24 month period ending September 2021, with an option to acquire up to $105 million in distillate subject to availability of product. A one year extension also exists for the agreement, which has a minimum purchase value of $10 million in distillate. The extension comes with a right of first refusal for an additional $51 million in cannabis concentrate, subject to availability, for TerrAscend Corp.
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The result of the numerous optional extensions and additional purchases is a contract that may be up to $192 million in value. However, the minimum purchases result in a contract that is $27 million in size as a base line.
The deal is the second significant supply agreement for Medipharm Labs announced as of late, following last weeks announcement of a second manufacturing agreement with that of Cronos Group.
Medipharm Labs closed yesterdays session at $4.77 on the Toronto Stock Exchange.
Information for this briefing was found via Sedar, Medipharm Labs and TerrAscend Corp. The author has no securities or affiliations related to this organization. Not a recommendation to buy or sell. Always do additional research and consult a professional before purchasing a security. The author holds no licenses.
