Canada’s largest pharmacy chain inks ‘game-changing’ medical marijuana distribution deal

Medical marijuana could soon be available through the online store of Canada’s largest pharmacy chain in what analysts are calling a groundbreaking deal for the MMJ industry.

Aphria is set to supply the medical cannabis, including leaf and oil, for Toronto-based Shoppers Drug Mart.

The Ontario-based licensed producer will be designated as the “preferred” supplier as part of a five-year arrangement with the pharmacy chain.

Financial terms of the agreement were not disclosed.

Health Canada will have the final say in determining whether Shoppers Drug Mart can become an online MMJ retailer.

If approved, the deal could breathe fresh life into the growth of Canada’s medical marijuana market, which has seen slowing quarterly growth in patient registrants since late 2016. The market recorded its 200,000th patient in June, up from 75,000 one year earlier.

“Pharmacies should and need to be part of treating patients with medical cannabis. This is a good beginning,” Aphria CEO Vic Neufeld said on a conference call with analysts after the stock market closed Monday.

The “integrity and the discipline” that Shoppers brings to the table could be a catalyst for further growth, he added.

“There are thousands of doctors sitting on the sideline,” Neufeld said. “The patient population could really explode once you have an organization that has the integrity and the discipline that a pharmacist brings to the table.

“Jointly with the doctor relationships they have, it is very powerful and meaningful.”

Aphria trades on the Toronto Stock Exchange as APH.

Shoppers, owned by Loblaw Companies, is the largest pharmacy chain in Canada, with more than 1,200 locations.

Loblaw was the first big corporation in Canada to cover medical marijuana costs for its 45,000 employees.

‘A home run’

Neufeld said the deal is subject to Health Canada’s approval of Shoppers’ application to be a licensed producer and retailer, as well as any other conditions the health agency might impose.

Under the arrangement, MMJ will be shipped in bulk from Aphria’s production facility in Leamington to Shoppers’ distribution center, which already handles the company’s online pharmacy. From there, Shoppers will send the medicine to patients from a central distribution point.

Down the road, Neufeld hopes medical marijuana will be available directly from the physical pharmacy.

“That’s when the home run turns into a grand slam,” he added. “But right now, online is how it’s going to work once they get their licensed producer status with Health Canada’s sanction.”

A prescription from a doctor will still be required.

Canadian regulations currently do not allow the sale of medical cannabis in retail pharmacies.

How the deal works

Shoppers Drug Mart previously said it applied to Health Canada be a producer strictly to distribute medical marijuana and that it has no intention of getting into cultivation.

Aphria agreed not to engage in business transactions with other national pharmacy groups in exchange for being Shoppers’ preferred supplier.

The deal includes minimum annual volumes that Shoppers must purchase from Aphria in order for the drugstore operator to maintain the exclusivity arrangement.

While specific financial terms were not disclosed, Neufeld said, “This is absolutely game changing from a revenue and EBITDA (Earnings Before Interest, Taxes, Depreciation and Amortization) certainty.”

Matt Lamers can be reached at [email protected]

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