PharmaDrug Expands Product Offering to Prepare for Potential Adult Use Market in Germany
PharmaDrug Inc.(CNSX: PHRX) (OTCMKTS: LMLLF), a specialty pharmaceutical company focused on the research, development and commercialization of controlled-substances and natural medicines such as psychedelics, cannabis and naturally-derived approved drugs, is pleased to announce that its 100% owned cannabis and controlled substance distributor Pharmadrug Production GmbH (“Pharmadrug Production“) has expanded its product offering with a goal to increase its pharmacy network and sales volume as it prepares for the significantly increased potential of cannabis adult use legalization in Germany.
In the immediate term, the Company has signed a supply agreement for Dronabinol, a synthetic THC oil that currently dominates the medical cannabis oil market in Germany. Pharmadrug Production has already added the product to its license and first shipment is expected this week. Sales efforts have already begun with first customer deliveries slated to begin in the current quarter. Management believes the selling of Dronabinol will serve to increase sales volumes, but should also significantly increase its pharmacy distribution network beyond its current levels. The Dronabinol is a third party product and Pharmadrug Production will act as a distributor much like its Bedrocan business. The Company is in advanced discussions with two separate manufacturers to be able to supply Dronabinol on a white label basis to be branded as a PharmaDrug product.
During the month of October, Pharmadrug Production conducted the final inspection of its supply partner in Denmark. The visit was deemed successful with the newly built cannabis oil extraction facility fulfilling all the necessary requirements to be able to supply GMP calibre THC oils to the German medical cannabis market. The Company has registered the initial product with the regulator, and it has been added to its controlled substance license. The initial product will be a PharmaDrug branded high THC oil. It is currently going through confirmatory stability testing with final results and certificates of analysis scheduled for this coming January. Once launched, PharmaDrug and its Danish supply partner have planned to introduce other oils including a balanced CBD / THC oil.
While the Company recently made the decision to focus its growth on cannabis oils and extractions, management believes the outcome of the recent election and the likelihood of adult use on the horizon requires a renewed focus on cannabis flowers. As expected, recent trends showed that cannabis oil growth is accelerating and is on a path to overtake flowers at some point in the future. That being said, the introduction of adult use should reignite the flower market. As such, the Company has resumed discussions to introduce a unique brand of flower to the German market. Such a product can either take the form of a third-party brand with an exclusive relationship and marketing sovereignty or a unique white label product that will carry the PharmaDrug brand.
We are extremely excited to be able to introduce new products in the immediate to short term. Adult use cannabis in Germany is a game changer and the next eighteen months will be a crucial time for strategic positioning. We are confident that the Company is making the right moves to increase its pharmacy network and establish PharmaDrug as a recognized brand in the German cannabis market.Daniel Cohen, CEO of PharmaDrug
On a final note, PharmaDrug was able to increase its ownership of Pharmadrug Production to 100% at the end of August. The Company had originally purchased 80% of the German distributor in May of 2019. The previous owner and holder of the final 20% went through some personal financial difficulties thereby enabling PharmaDrug to purchase the remaining equity stake at a sharp discount to both IFRS book value and what management believes to be fair market value. PharmaDrug’s management and board believe this opportunity came at the right time given the current German political landscape and high potential for the introduction of legal adult use cannabis.
German Adult Use Legalization
Following the recent German federal elections that took place on the 26th of September, a new coalition government is expected to be formed by the “Traffic Lights” group. The coalition was so named due to the colours of the red Social Democrats, yellow Free Democrats and the Green Party. The formal coalition agreement is expected by the end of November with an official government to follow in the first half of December. All three parties support the legalization of adult use cannabis. While it’s a fundamental platform for the Green Party, it is believed that the other two groups support it due to the need for additional government revenue in light of a strong campaign promise for no new additional taxes.
Discussions so far have pointed to a form of a cannabis control act. This would imply a regime where cannabis remains a controlled substance that would be subjected to stricter controls than alcohol or tobacco. The Green Party is advocating for specialty stores while the more conservative Free Democrats would prefer sales to remain in pharmacies. Regardless of the end retail model, two major themes have emerged. Firstly, there is a strong likelihood that adult use will be legalized in the next couple of years; and secondly, it will probably remain a controlled substance but with expanded access. This would imply that the current supply chain regulatory framework will remain in place and that the importation and distribution of cannabis will continue to require a narcotics or controlled substance license. A license that the Company currently has with Pharmadrug Production.
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