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4 Canadian LP’s With Major European Exposure

Mar 15, 2019 • 11:24 AM GMT+0000
5 MIN READ  •  By Michael Berger
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With a population that is twice the size of the United States, the European Union represents an attractive market for cannabis companies. During the last few years, the number of European countries with a legal cannabis market has significantly increased and this has created a massive opportunity for Canadian Licensed Producers (LPs).

Demand for cannabis products has been steadily increasing in countries like Germany, Italy and Poland, and this is trend that we have been monitoring. The increasing demand is an important trend for the companies that are levered to this emerging cannabis market and today, we have highlighted 3 companies that are well positioned to capitalize on cannabis opportunity in the EU.

Canopy Growth: A Global Leader

Canopy Growth (WEED.TO) (CGC) was an early mover when it comes the European cannabis opportunity and has significant leverage to this market. The Canadian cannabis producer has the strongest balance sheet when compared to its peers and this is primarily a result of Constellation Brands’ (STZ) $4 billion investment in the company.

With this type of capital on the balance sheet, Canopy Growth is well positioned to make acquisitions in order to firm up its leverage to the European cannabis market. The company has significant catalysts for growth, and we consider this to be an important aspect of the fundamental story.

Canopy Growth is in the early innings of a major growth cycle and we expect to see fundamentals significantly improve on account of its leverage to emerging international markets and due to the growth of Canada’s recreational market. The company is led by a management team with a proven track record and we are favorable on its ability to maintain a leadership position in the cannabis sector.

Aurora Cannabis: A Company to be Watching

Aurora Cannabis (ACB.TO) (ACB) was also an early move on the European cannabis market and started off by making a significant acquisition of Pedianos in Germany. At the time of this acquisition, Pedianos was working with Cronos Group (CRON.TO) (CRON) when it came to the German cannabis opportunity and we think this was a significant acquisition.

Following the acquisition, Aurora Cannabis was nothing short of an execution story and continued to advance its story through similar types of transactions. Through an organic and inorganic growth strategy, the Canadian cannabis producer has been able to position itself as a leader in the international cannabis market and we think this is an important aspect of the company’s growth story.

Over the next year, we expect to see Aurora Cannabis’ acquisitions pay significant dividends and to support growth. Last year, the company made a significant acquisition in Latin America and we are favorable on the number of avenues for growth.

Indiva Limited has been Flying Under the Radar

Indiva Limited (NDVA.V) (NDVAF) is a cannabis company that has been flying under the radar and has leverage to the European cannabis market. The company is in the middle of a major expansion and has been focused on the global cannabis opportunity.

In late 2018, Indiva signed a non-binding letter of intent to acquire 100% of AEssense Europe which has a medical cannabis cultivation and handling license in Denmark. In early 2018, AEssense Europe received its license from the Danish Medicines Agency and has strategic leverage to the European cannabis market.

This acquisition supports Indiva’s expansion plans as it will pursue the cultivation and worldwide distribution of EU-GMP certified medical cannabis and cannabis-derived products.  To support this growth initiative, Indiva has created a wholly-owned subsidiary, Indiva Europe, which will be responsible for financing and managing the European operations.

The acquisition of this license and the collaboration with AEssense provides a gateway to the European cannabis market and we are bullish on this opportunity. With a population of more than 500 million, the European cannabis market is expected to be massive. Indiva is well positioned to capitalize on this burgeoning opportunity and will be able to produce and distribute cannabis under some of the most stringent quality rules in the world.

The companies have identified several sites to construct a 1,000 sq. ft. research lab as part of the production facility. These locations offer significant room to expand and to construct facilities that will be able to serve Danish patients as well as the European market with high-quality cannabis products.

Although Indiva has come well off its 2019 lows, the shares have been trending lower and this is an opportunity we are monitoring. During the last year, the Canadian cannabis producer has significantly advanced its fundamental story and has attractive growth prospects. The company has been focused on increasing production capacity and securing strategic relationships with leading cannabis brands. We are favorable on these moves and expect them to support growth going forward.

Vivo Cannabis Significantly Advances European Agenda

In late 2018, VIVO Cannabis Inc. (VIVO.V) (VVCIF) appointed Andreas Sander as President, European Operations, and Managing Director of ABcann Germany GmbH, VIVO’s German subsidiary. As President of European Operations, Sander is expected to lead the company’s burgeoning German activities and oversee the expansion of its operations into multiple European markets.

This was a significant appointment and we have been monitoring how the company advances its European operations. Sander has accumulated a wealth of leadership experience in the 25 years he has spent in the European pharmaceutical industry. He has held multiple VP and managing director roles with multinational pharmaceutical companies in Western and Eastern Europe, including executive positions at Boston Healthcare International, Sanofi Pasteur, ALK-Abelló and Wyeth Pharmaceuticals.

VIVO has been highly focused on the European cannabis opportunity and this is one of its most important objectives for 2019. Andreas’s expertise in the highly-regulated European pharmaceutical sector will be critical in helping the company expand operations and we are favorable on this addition to the leadership team.

 When it comes to companies that are levered to the European cannabis market, VIVO is not the first company to come to mind and we believe that this opportunity has been flying under the radar. When compared to its peers, VIVO has a very attractive valuation and this is something to watch.

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Authored By

Michael Berger

Michael Berger is Managing Partner of StoneBridge Partners, LLC and Founder of Technical420.com. Prior to entering the cannabis industry, Michael was an Equity Research Analyst at Raymond James Financial covering the Energy Sector. Michael has been featured in publications such as The Street, Bloomberg, US Money News, and hosts various cannabis events across North America.

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