Aphria Inks Supply Deal with Shoppers Drug Mart

Aphria (TSX:APH; OTC:APHQF) gave its investors some bragging rights on Monday (Dec. 4) as the company announced it had signed a supplier agreement deal with Shoppers Drug Mart, a Loblaw (TSX:L) company.
This deal directly links a licensed producer (LP) of cannabis and a major retailer in Canada, in what some experts had predicted could be a preferred avenue for the sale of medical cannabis.
Having said that, it is unclear as to whether it Aphria will be the exclusive supplier for Shopper’s Drug Mart moving forward. Under the agreement, Aphria will supply Shoppers Drug Mart with medical cannabis products branded with their name. The expectation is for the products to be sold online, according to Aphria’s statement.
The Canadian pharmacy declared its intentions to join the cannabis market, back in October 2016, when it applied for a producer license with Health Canada. The pharmacy, however, only plans to sell the products.
On Monday, shares of Aphria closed at $11.62 and saw a 1.93 percent growth in its share price during the one-day trading period. On a year-to-date basis, its stock is up 85.92 percent.

Canadian pharmacy seeking to enter cannabis space

“We have no intention of producing medical marijuana, but we do want the ability to dispense medical marijuana to our patients in conjunction with counselling from a pharmacist,” Shoppers Drug Mart spokeswoman Tammy Smitham told CBC News.
In November, it was also revealed that the pharmacy was seeking to staff a new position meant to lead its cannabis efforts.
The Canadian Press reported the job posting for a medical marijuana brand manager detailed this role would direct the “strategy and marketing to doctors and health-care providers in the cannabis space.”
With legalization looming in July 2018 in Canada, cannabis investors hope to maintain momentum on their picks with announcements on legislation, mergers or new partnerships. The deal also offers legitimacy to the sector since it brings an established industry player accepting the role of cannabis moving forward.

Role of pharmacies in medical cannabis market

It is unclear if the Canadian government will update the law to allow pharmacies to sell medical cannabis products directly to consumers. As the law evolves, the parent company of Shoppers Drug Mart had said it was campaigning for updated standards with pharmacies.
Galen Weston, executive chairman of Loblaw, said during an earnings call in 2016 they were arguing with the federal government about the benefit of pharmacies being allowed to sell medical cannabis, according to the Financial Post.
“We are engaging with the federal government and engaging with the provincial government around dispensing medical marijuana directly from our pharmacies,” Weston said. “We think that the pharmacy business is extremely well-suited for processing controlled substances.”
Canadian Health Minister Ginette Petitpas Taylor has expressed the Canadian government is looking to establish plain packaging as the option for all LPs once they are able to sell their products on retail stores next year. These retail spaces will be for the adoption of recreational cannabis products in 2018.

Similar deals in the industry

Earlier this year Cannabis Wheaton Income (TSXV:CBW) announced a partnership deal with an undisclosed independent pharmacy group for the distribution of medical cannabis products.
“We’re willing to take a bet that pharmacies will be included in the distribution channels for medical cannabis,” Hugo Alves, president of Cannabis Wheaton told INN in September. The group operates 40 independent pharmacies across Canada including remote locations.
In March, CanniMed Therapeutics (TSX:CMED) announced its intentions to aid PharmaChoice with the “education and the distribution, sale and marketing of medical cannabis products.”
“We recognize the incredible value medical cannabis has had on the lives of Canadians who have been prescribed the drug and found success in the therapy,” PharmaChoice West CEO, Grady Brown said in a joint statement. “It’s important that we are well prepared to assist patients in achieving their therapeutic goals within the medical cannabis arena.”
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Securities Disclosure: I, Bryan Mc Govern, hold no direct investment interest in any company mentioned in this article.