AGORACOM Small-cap Investor Relations Blog

• Aphria Inc struck a deal to sell medical marijuana to Shoppers Drug Mart, Canada’s largest pharmacy chain
• “Subject to Health Canada’s approval of Shoppers Drug Mart’s application to be a licensed producer, under the terms of the agreement the Company will supply Shoppers Drug Mart with Aphria-branded medical cannabis products,” a release from Aphria said. “It is expected the products will be sold online, as Canadian regulations currently restrict the sale of medical cannabis in retail pharmacies.”

Shoppers, or its parent company, Loblaw Companies Ltd., have not been issued a licence to dispense cannabis yet, according to Health Canada’s list of companies registered to grow and sell medical marijuana. It was reported in November that Shoppers was searching for someone to serve as the pharmacy chain’s medical marijuana brand manager.

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Vic Neufeld, chief executive of of Aphria, said his company had a five-year agreement with Shoppers as its “first and primary supplier,” and that every year of the deal included “minimum requirements on volumes that they must purchase from us for them to maintain the following year’s exclusivity.”

Based on the terms of the agreement, specific financial terms would not be disclosed, he said.

“This stems from our long-held belief that pharmacies can, and should, play an important role in the safe and secure distribution of medical cannabis in Canada,” Neufeld added on a conference call with analysts. “It gives Aphria a huge, huge lift when it comes to the shareholder value.”

Trading of Aphria shares was halted Monday afternoon, with the company’s stock price closing up 1.93 per cent, at $11.62. Shares of the greenhouse grower are up nearly 86 per cent for the year.

The supply agreement between Aphria and Shoppers has been reached approximately seven months out from Canada’s July 2018 target date for the legalization of recreational cannabis. It also follows Saskatchewan-based medical marijuana company CanniMed Therapeutics Inc. becoming the first licensed producer to sign a deal with a national pharmacy chain when it signed a letter of intent with PharmaChoice in March of this year.

Neufeld said that during the “many months” of conversations with Shoppers, they had only discussed medical marijuana sales, not recreational.

Neufeld also said the form of “exclusivity” Aphria had given Shoppers does not restrict the pharmacy from considering “other forms of intake products, medical devices by way of example.”

“However, there is an understanding that should we be able to service their needs we would be given an opportunity to bid on it,” Neufeld added.

According to Aphria’s most recent results, for the quarter ended Aug. 31, the company reported net income of $15 million and a 15 per cent increase in sales, to 852 kilograms or kilograms equivalent of cannabis.

“For a period of time, we will not engage in any other conversations or business transactions with other national pharmacy banners in excess of a certain size,” Neufeld said. “Have we excluded certain banners? Yes, however, for us it was very important to get Canada’s leading banner in alignment with the Aphria business model, and so that’s what we agreed to.”

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Twitter: @geoffzochodne

Source: http://business.financialpost.com/commodities/ontario-cannabis-company-aphria-to-supply-medical-marijuana-to-shoppers-drug-mart