There's been no shortage of speculation about when Big Pharma would plunge into the business of medical marijuana. But the large companies have stayed on the sidelines in large part because of legal concerns.
Nanaimo, British Columbia-based Tilray produces a variety of whole flowers, ground cannabis, drops and capsules for Canadian medical pot patients. It should be noted that the Canadian government has approved the use of marijuana for recreational purposes and that will become legal policy later this year.
The agreement between Tilray and Novartis stipulates that the products that Novartis subsidiary Sandoz Canada will receive are "non-smokable/non-combustible medical cannabis products."
Terms of the agreement were not revealed. Sandoz Canada will wholesale and distribute Tilray products to healthcare facilities and pharmacies. It will also aid Tilray in developing new products.
Tilray, which is American owned but has all of its operations in Canada, serves the Canadian medical patients as well as markets in Latin America, Australia and the European Union. The company completed a Series A funding last month raising $C60 million ($46.3 million).
"We are thrilled to form a strategic alliance with Tilray to strengthen our portfolio," Michel Robidoux, president and GM of Sandoz Canada, said in a statement. "We are committed to making every reasonable effort to respond to patients' medical needs by increasing the number of high-quality, adequately dosed non-smokable, non-combustible medical cannabis products at the disposal of doctors."
Tilray is controlled by Seattle-based Privateer Holdings, a private equity investor which is focused on investing in non-U.S. cannabis companies. In a statement about the Novartis agreement, Brendan Kennedy, Tilray CEO and a Privateer founder said, This agreement is a major milestone on the long road to legitimizing medical cannabis as conventional medicine. Tilray is pleased to be, what we believe is, the first federally licensed producer of medical cannabis to form a strategic alliance with a local affiliate of a global pharmaceutical company to improve the availability and quality of medical cannabis products for Canadian patients in need."
Privateer also hopes the ability to co-brand with Sandoz on some products will strengthen Tilray's image in the medical community.
Besides Tilray, Privateer's portfolio includes Leafly, Marley Natural and Goodship. Leafly is an online cannabis information resource. Marley is the cannabis company started by the family of the late reggae star Bob Marley. Goodship is a company focused on producing cannabis edibles.
While Novartis is likely the first entrant of Big Pharma into cannabis, it is not the only pharma player. Teva Pharmaceutical Industries Ltd. (TEVA - Get Report) has a distribution agreement in Israel with Syqe Medical for a cannabis inhaler product, another Syqe investor is tobacco giant Philip Morris International PM. Insys Therapeutics Inc. (INSY - Get Report) gained approval from the FDA for a liquid form of dronabinol, a pharmaceutical version of THC. Syndros can be used by patients with loss of appetite due to anorexia as well as AIDS patients affected by weight loss. It has also gained approval for use by cancer patients affected by nausea and vomiting not controlled by other anti-nausea and vomiting meds.