Germany hits pause on cultivation licences

Canadian companies hoping to grow cannabis in Germany are looking at a delay of several months or more, following a German court decision on Wednesday to halt the government’s tender process for cultivation licences.

A number of Canadian companies and their German subsidiaries were believed to have been on the shortlist for the 10 licences, including Canopy Growth Corp., MedReleaf Corp., Aurora Cannabis Inc. and Aphria Inc. ( through its recent acquisition of Nuuvera Inc.).

Other companies, such as Maricann Group Inc., Tilray and Cronos Group Inc. are also invested in Germany, and may have been in the running as well. It’s unclear when the tender process will continue and whether or not it will have to start from the beginning.

The 10 cultivation licences, which were tied to a 6,600 kilogram supply agreement for the Federal Institute for Drugs and Medical Devices running from 2019 to 2022, were expected to be awarded in the coming weeks. They would have been the first licences to grow in Germany since the country legalized medical marijuana last spring.

On Wednesday, however, a Dusseldorf Higher Regional Court judge halted the tender process, arguing that the timeline given to companies had been too short.

“Initial domestic supply was slated for the start of next year; however, we now expect German production will be delayed by 6-12 months,” wrote Canaccord Genuity Corp. analyst Neil Maruoka in a note to clients, where he reduced his price targets for Aurora, Aphria, MedReleaf and Maricann, each by between $ 0.25 and $1.

The court’s decision follows complaints from German companies that had reportedly argued that timelines were too tight and that certain tender requirements — such as experience growing marijuana legally — favoured foreign applicants from countries like Canada with an existing medical marijuana system.

So far, the response to the court’s decision from Canadian LPs has been mixed.

Aphria chief executive Vic Neufeld said, in a written statement, that his company was “disappointed by the delay,” but that they would continue in the interim with the construction of a cultivation facility in Germany.

This was echoed by MedReleaf chief executive Neil Closner: “We are obviously disappointed by the news of this delay but we are simultaneously moving forward with our plans to begin exporting cannabis to Germany in the near future,” he said.

Spokespeople for Canopy and Aurora, which have already begun shipping cannabis to Germany through their respective subsidiaries, Spektrum Cannabis GmbH and Pedanios GmbH, were more upbeat. “The German market is establishing itself and if that process takes 12 months or 20 months, we’ll work towards it and supply the market with imported product in the interim,” said Canopy’s Jordan Sinclair.

Germany is seen by many as the crown jewel of the European medical marijuana market.