The European nation has relied solely on imports since it legalized cannabis for medical purposes in 2017. However, it decided to award 13 licenses for firms to cultivate and distribute cannabis in Germany and 79 different companies went in for the competitive tender process.
Earlier this month the German Federal Institute for Drugs and Medical Devices (BfArM) chose Aurora, Aphria, and Demecan as the three winners of this tender process. Aurora and Aphria were each awarded five licenses, and the other three went to Demecan, which is a joint venture Wayland set up with German partners to make inroads into Europe’s largest economy.
The provisional decision was subject to a mandatory 10-day standstill period for public contracts, which allowed the 76 unsuccessful bidders to challenge the decision before the final contract could be signed.
Today BfArM announced that nine of the licenses have now officially been handed out – five to Aurora and four to Aphria – but the other four cannot yet be awarded because one of the unsuccessful bidders has sent a request for review to the Awarding Chamber. That leaves Aphria waiting on one license and Demecan waiting on all three of its licenses.
Wayland Confident of Success
Wayland believes that its pitch is vastly superior to that of the companies challenging it. The firm received 60 out of 60 points for quality and 40 out of 40 points for price, adding that it does not believe there is merit to their complaints. “Wayland fully expects that the award of three lots to Demecan will be confirmed,” said the company.
This is a frustrating development for BfArM, which has been under pressure for many months to roll out a domestic cannabis cultivation and distribution industry. Each license is for 200 kg per year over a four-year period, meaning the total tender is for 10,400kg. That means cultivation of 7,200kg, with the rest outstanding while the challenge is assessed.
“Today’s contract award is an important step in the supply of seriously ill patients with pharmaceutical-grade cannabis grown in Germany,” said Prof. Karl Broich of BfArM. “Nevertheless, we regret that once again economic interests of a tenderer mean that we can not fully contribute to the improvement of the supply situation earlier.”
An Incentive to Go Low on Price
Shares in Wayland increased 14.7% to C$1.09 on April 5 as a result of the news it had won the tender. Today the stock opened at C$0.90 and decreased to C$0.86 after an hour of trading on the back of the news of the challenge.
Earlier this year January, Wayland agreed to sell 49.9% of its international business to International Cannabis Corp.
None of the winning bidders have disclosed how much they will sell the German medicinal cannabis. Yet it is interesting to note that Wayland spoke of receiving 40 out of 40 points on price, suggesting it went in low to beat the competition. While the company will be pleased to gain a foothold in the strategically important German market, it might not make much of a margin from the cannabis it sells there.
The opinions provided in this article are those of the author and do not constitute investment advice. Readers should assume that the author and/or employees of Capital 10X hold positions in the company or companies mentioned in the article. For more information, please see our Content Disclaimer.