Not all mainstream partnerships with marijuana companies work

, Not all mainstream partnerships with marijuana companies work

Partnerships with mainstream businesses offer marijuana companies many potential benefits. But there can be pitfalls, too—and not every marriage of marijuana and mainstream companies has worked out.

Partnerships involving Intec Pharma, Curaleaf and Canopy Growth are among those that didn’t pan out as planned.

In mid-May, Intec Pharma, an Israeli biotech company whose portfolio includes drugs formulated with cannabinoids, announced a collaboration with pharmaceutical giant Merck to explore using one of its drugs—the Accordion Pill—for an undisclosed development program.

“Through partnerships such as this, we continue to evaluate how the Accordion Pill’s innovative gastric retention and controlled-drug-release properties may be used to enhance therapeutic attributes,” Intec Pharma CEO Jeffrey Meckler said in a news release.

But on July 19, Intec Pharma, which trades on the Nasdaq as NTEC, reported that one of its Accordion Pill formulations to treat Parkinson’s failed in a Phase 3 trial to show it was more effective than Sinemet, a Merck drug that was reportedly pulled from U.S. shelves after losing market share to cheaper generics.

At the opening bell after the news, the company’s stock price plunged to 55 cents a share from $3.43. In mid-October, the stock was trading at 75 cents. Despite the failure, an Intec Pharma spokeswoman said the partnership with Merck was “absolutely” continuing.

Curaleaf’s partnership with CVS in March—under which the pharmacy chain would sell the Massachusetts multistate cannabis company’s hemp-derived products—is another example of how a marijuana-mainstream partnership can backfire.

In July, the U.S. Food and Drug Administration (FDA) accused Curaleaf of selling unapproved merchandise online containing CBD with unsubstantiated medical claims that the company’s products treat cancer, Alzheimer’s disease, opioid withdrawal, pain and pet anxiety, among other conditions or diseases. The action prompted CVS to pull the Curaleaf products cited in the FDA complaint.

“The CVS partnership brought them a lot of attention. So they’re a good company to make an example of,” Andrew Kessner, analyst at William O’Neil & Co., told MarketWatch, referring to Curaleaf.

Curaleaf products still hadn’t returned to CVS shelves as of mid-October.


Going It Alone

Many companies, meanwhile, do just fine eschewing mainstream partnerships.

Billionaire investor Norman Peltz, who joined Aurora Cannabis as a strategic adviser in March, counseled the Canadian license holder against a mainstream partnership. He pointed to Canopy Growth’s affiliation with liquor giant Constellation Brands and Cronos Group’s relationship with tobacco company Altria Group as situations where cannabis businesses are giving up too much to the mainstream company.

In March, Altria gained a 45% stake in Cronos after investing $1.8 billion in the Canadian cannabis producer. In August 2018, Constellation sank $3.8 billion into Canopy, acquiring a 38% ownership stake in the Canadian cultivator after existing warrants were exercised. In October 2019, Constellation reported a net loss of $525.2 million in its most recent quarter, with most of the red ink coming from its stake in Canopy.

Cam Battley, Aurora’s chief corporate officer, told Barron’s earlier this year: “If you sell out now, it’s going to mean selling your shareholders short, because the value of your company is rising every quarter. There’s no need to do that. The opportunity exists to create strategic partnerships across more than one vertical. You don’t have to become a tobacco company. You don’t have to become a distiller. You can partner on a strategic level with multiple companies across multiple verticals and remain independent.”


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