Unit of big pharmaceutical firm Novartis partners with medical marijuana producer Tilray

Image of two businesspeople shaking hands

British Columbia-based medical marijuana producer Tilray announced Monday it has formed a strategic partnership with Sandoz Canada, the first known affiliation between a marijuana producer and a major pharmaceutical company.

Tilray signed a letter of intent with the Quebec-based affiliate of Sandoz International GmbH, an arm of global health care giant Novartis.

The entry of Big Pharma into Canada’s marijuana industry comes after alcoholic beverage giant Constellation Brands and a large U.S. tobacco company recently made their own forays into the country’s MJ sector.

Tilray will collaborate with Sandoz Canada to make co-branded, nonsmokable and noncombustible cannabis-based medical products such as sprays, patches and gel caps.

According to Tilray CEO Brendan Kennedy, the goal of the partnership is to distribute these co-branded products to Canadian hospitals and pharmacies on a wholesale level.

“It’s a huge milestone for us,” Kennedy said in an interview with Marijuana Business Daily.

“We’ve all been wondering when global pharmaceutical companies would enter the cannabis industry.”

Kennedy said Sandoz Canada has been looking to make an entrance into medical cannabis for the past year and a half and has talked with several licensed producers in Canada.

He expects to see co-branded products available for sale in the summer.

For Tilray, Kennedy sees a number of benefits from the affiliation:

  • The company can leverage Sandoz Canada’s existing sales force. Tilray has 10 salespeople who speak with health care professionals about medical cannabis products on a daily basis; Sandoz Canada has about 150. It’s expensive and time-consuming to scale a sales team.
  • Research and development is expensive. Tilray has expertise producing MMJ products, but the company wanted a partner who knew how to manufacture and develop pharmaceutical products.
  • Physicians and patients in Canada know the Sandoz label on pharmaceutical products.
  • Tilray currently has products in 10 countries. Kennedy hopes this alliance will open even more market opportunities internationally.

‘A pharmaceutical market’

“When we look at this market globally, it’s a pharmaceutical market,” Kennedy added.

As wholesale prices continue to decline for cannabis producers, Kennedy sees his company moving toward other ventures.

“While we cultivate cannabis today, that’s not our primary focus,” he said.

“Our primary focus is on manufacturing pharmaceutical products based on cannabis that we can sell in 10 countries around the world.”

Novartis, one of the world’s largest pharmaceutical companies, is based in Switzerland. The company trades on the New York Stock Exchange as NVS:US.

Sandoz and Tilray are not publicly traded, nor is Tilray’s parent company, Seattle-based Privateer Holdings.

Similar deals likely on way

Brett Roper, CEO of Denver-based Medicine Man Technologies, expects to see more activity of this type – where a local affiliate of a major company partners with a cannabis firm – as these larger pharmaceutical corporations “dip a toe in the water.”

This way, Novartis has a way to segregate the investment and control it accordingly, Roper said.

“If something goes wrong or something goes kablooey, Novartis doesn’t want to be engaged in a potential lawsuit,” he added.

Roper compared this move to the 245 million Canadian dollars ($190 million) that Constellation Brands invested in Canopy Growth last year.

“The main reason that money went to Canada is because there’s a legal market there,” Roper said.

“As we look at the industry’s growth in Canada, where it’s obviously legal to have these business entities that are traded, it gives these other groups the opportunity to invest in Canada and feel like their money is at least reasonably protected.”

As for what it means that a major pharmaceutical company is getting involved in the cannabis industry, Roper believes Big Pharma is “champing at the bit.”

“They’re probably very interested on the sidelines to see how this process evolves,” he said.

Last month, U.S. tobacco company Alliance One International bought controlling stakes in two Canadian marijuana producers and invested in a North Carolina hemp grower.

Bart Schaneman can be reached at barts@mjbizdaily.com