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Aug. 31, 2022, 8:55 a.m. EDT

Akanda pivots to German market as cannabis reform gains traction

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By Steve Gelsi

Akanda Corp. CEO Tej Virk is pivoting the micro-capitalization cannabis company toward the European Union amid rising interest in the sector as German Chancellor Olaf Scholz continues to push for marijuana legalization.

Virk sees Germany offering regulatory tailwinds as the largest economy in Europe gets ready to set up its adult use cannabis industry in the coming months. Other EU countries may soon follow, he said.

“We’re going to see other countries in the EU watch this carefully,” Virk told MarketWatch. “It’s an exciting time. We’re gearing up our business.”

To boost its business in the EU, Akanda /zigman2/quotes/233075388/composite AKAN -3.44% in May closed its roughly $20 million acquisition of Holigen, owner of Portugal-based RPK Biopharma, which runs a 20,000 square foot indoor grow facility located near Lisbon. It also owns 180-plus acres of outdoor growing space about two hours south.

Also Read: Akanda buys Portugal unit of Canada’s Flowr

In early August, Akanda inked a multi-year supply agreement with European medical cannabis importer and distributor Cansativa GmbH to initially deliver a minimum of one metric ton over the first 12 months to the German medical market from its Holigen operation in Portugal.  

The deal ranks as one of the largest supply agreements in the European medical cannabis industry, as well as the most substantial commercial development for Akanda since the company was formed in 2021, Virk said.

Akana went public in March in the U.S. on the Nasdaq in a deal that raised $16 million with Bousted Securities LLC.

The German adult use market may tip the scales at about 300 tons of cannabis as early as 2024, according to comments in the press by the German health minister. But the country currently lacks adequate domestic supply to meet demand.

It’s likely Germany will accept cannabis produced inside the European Union for its adult use market, but whether imports will be allowed from outside the EU remains unknown, Virk said.

To boost its presence in Portugal and for other efforts, Akanda has hired two new cannabis industry veterans to start work on Sept. 1. Tom Flow will be chief operating officer of Akanda and managing director of Holigen.

Flow was co-founder of MedReleaf Corp. which was sold to Aurora Cannabis Inc. /zigman2/quotes/210559470/composite ACB -2.65% /zigman2/quotes/203734337/delayed CA:ACB -2.29% in 2018; he also worked in senior roles at The Flowr Corp. /zigman2/quotes/205237089/delayed FLWPF -0.79% .

Steven George, a veteran of Tilray Brands Inc. /zigman2/quotes/209129655/composite TLRY -3.64% /zigman2/quotes/226578748/delayed CA:TLRY -3.96% in Spain and Portugal, is joining Akanda as commercial director.

Akanda is currently involved in a legal fight with its former executive chairman Louisa Mojela over the liquidation of its Bophelo Bio Science & Wellness (Pty) Ltd. cannabis grow operation in Lesotho, a country located within South Africa. Virk said in a statement on July 27 that without Bophelo, the company remains on an “accelerated path” to profitability, but it also remains committed to the business.

Citing industry data, Cantor Fitzgerald analyst Pablo Zuanic said earlier this month that Aurora, Cannamedical Pharma GmbH, Canopy Growth Corp. /zigman2/quotes/200603886/composite CGC -6.79% /zigman2/quotes/202205609/delayed CA:WEED -7.48% , Four20 Pharma GmbH and Tilray comprised more than 70% of the cannabis flower market in Germany over the last 12 months. Berlin-based Demecan also ranks as a domestic production licensee in Germany.

Meanwhile, Curaleaf Holdings Inc. /zigman2/quotes/205334348/delayed CURLF -8.08% /zigman2/quotes/203485866/delayed CA:CURA -9.38% announced plans on Aug. 9 to acquire a 55% stake in Four20Pharma for €19.7 million ($19.7 million), to boost its presence in Germany.

With the German adult-use market estimated at $12.6 billion, Cantor Fitzgerald’s Zuanic said Aurora Cannabis and Tilray rank as the best-positioned companies to benefit from the potential market, among the stocks that he covers.

Also Read: These cannabis stocks could benefit from adult-use cannabis legalization in Germany

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