Tilray Stock Up on Medical Cannabis Collaboration With Sandoz

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Tilray Inc.TLRY announced that its subsidiary, Tilray Canada Ltd., has entered into a global framework agreement with generic arm of Novartis NVS - Sandoz AG, expanding the current collaboration. Under the new agreement, Tilray will collaborate with Sandoz to increase the availability of high-quality medical cannabis products across the world. Also, Sandoz will support the commercialization and supply of Tilray's cannabis non-smokable/ non-combustible products for medical use globally.

Both the companies already had a collaboration for supply of medical cannabis products in Canada, signed earlier in March.

Following the news, Tilray's shares gained 16.1% on Dec 18 following the news. In fact, shares of the company have soared 241.7% since it went public on Jul 19 against the industry 's decline of 15.3% in that period.

Notably, Tilray is a global pioneer in the field of medical cannabis. The company has its product available in twelve countries and operates in Australia & New Zealand, Canada, Germany, Latin America, and Portugal. It is also the first medical cannabis producer in North America to gain current Good Manufacturing Practice (cGMP) certification in Europe. Meanwhile, Sandoz is one of the largest generic and biosimilar manufacturer with a worldwide presence. This latest collaboration will help Tilray to use Sandoz's supply experience and infrastructure for faster penetration of its products.

Apart from commercialization of Tilray's products by Sandoz, both these companies might co-brand certain non-smokable/non-combustible products, per the agreement. They may also collaborate to develop innovative medical cannabis products. Additionally, Tilray is likely to supply non-smokable/non-combustible medical cannabis products and grant/gain license rights to/from Sandoz in relation to such products, according to the deal. Tilray and Sandoz have also agreed to educate pharmacists and physicians about the usage of medical cannabis products.

Currently, the market for cannabis products pertaining to medical as well as recreational use is in the early stages of expansion. In an interview with CNBC , Tilray's CEO stated that there are more than 35 countries that have legalised medical cannabis, while there are only two countries where recreational use of cannabis products for adults is legal. He also added that medical cannabis may be legalised in nearly 60 countries in the next two-three years, reflecting a significant growth. Markedly, this latest deal with Sandoz will help Tilray to be at par with this expansion rate without major investments. Moreover, collaboration with Sandoz will boost physicians' confidence in the product, which is likely to improve traction for Tilray's products.

Moreover, with growing interest and expansion of the cannabis market, few small companies with cannabis products and several large companies from beverages and tobacco industry are looking to gain market share. In this regard, it is imperative to mention that Canopy Growth Corporation CGC , Aphria Inc. APHA and Cronos Group are among the small companies that primarily focus on cannabis products. In 2018, Constellation Brands and Altria Group have acquired stakes in Canopy Growth Corporation and Cronos Group, respectively, while Diageo Plc and Coca-Cola Company are scouting for a good deal to enter the industry.

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Tilray currently carries a Zacks Rank #4 (Sell).

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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