Farmako GmbH, a subsidiary of Agraflora Organics International (AGRA.C), and ZenPharm, subsidiary of Zenabis Global (ZENA.T), joined into a binding supply term sheet, which serves as the basis for a supply agreement, which they expect to complete in a few weeks.
The conditions of the term sheet include ZenPharm supplying medical cannabis flower cultivated by Zenabis to Farmako for distribution in Germany. The number they’re looking at is 1,500 kilograms of cannabis flower over a three year term, with options to extend the supply relationship. Farmako will receive the products in Germany and sell them under its own brand to German pharmacies and doctors.
“The assignment of this term sheet, and addition of minimum volumes, reinforces Zenabis’ impetus for its international medicinal cannabis activities, in particular in Europe. Working with key distributors like Farmako is vital in ensuring patient accessibility to medicinal cannabis products in a manner that safeguards quality and consistency of supply. Zenabis anticipates significantly increasing supply to Europe from Q4 2020 onward, where bulk pricing of cannabis is now significantly more attractive than in the Canadian market,” said Kevin Coft, chief executive officer of Zenabis.
Before we get into the details we should discuss what Farmako is.
Farmako is a pharmaceutical wholesaler from Frankfurt, Germany, focused on distributing medical cannabis to pharmacies and closing the supply and demand gap for medical cannabis. Agraflora acquired Farmako GmbH at the start of the year through their acquisition of The Good Company GmbH to make their entrance into the European Union cannabis markets.
Now that we’ve got that covered, let’s resume.
The products provided by ZenPharm include high potency THC flower and balanced THC and CBD flower, and are in high demand in Germany. Shipments will start in Q4 2020. Both companies have agreed to collaborate on additional products, which they will add to the agreement in 2021, including cannabis oils.
The market value of the German medical cannabis market is over 170 million euros in a tightly regulated setting. Theirs is the regulatory framework others countries in the EU are adopting as they open their borders to medical cannabis. Since they legalized medical cannabis in March 2017, the market has doubled in size every year. More than 6,700 kilograms of flower were imported to be dispensed to patients in Germany pharmacies in 2019, up from 3,000 kilograms in 2018, with flower accounting for more than half of the medical cannabis market in Germany.
Medicinal Cannabis Supply to Germany
- Zenabis has assigned its term sheet with Farmako, which was announced on April 29, 2019, to its Maltese-based European joint venture, ZenPharm.
- ZenPharm is expected to process EU GMP compliant bulk from Zenabis to supply Farmako with a minimum of 500 kg per year for a term of three years.
- This is subject to ZenPharm itself obtaining EU GMP certification, which is expected to occur in Q3, 2020.
- Shipments to Farmako are expected to commence in Q4, 2020.
- ZenPharm anticipates supplying cannabis oils to Farmako beginning in 2021.
As the second year of the legal cannabis market came to a close Germany had more than 140,000 cannabis prescriptions issued, with insurance reimbursements having jumped to almost 70% in 2019, compared to 2018. The second half of 2020 with the advent of cannabis 2.0 and the CBD boom will show a diversification of available products on the market, and it’s expected that the market growth rates will continue to climb.