Marijuana stocks Cronos Group (CRON 7.26%) and MediPharm Labs (MEDIF -13.30%) are extending their cooperation with a new supply deal, according to a press release published Thursday. Under the terms of the multiyear contract manufacturing agreement, MediPharm -- a specialist in cannabis extraction -- will fill and package vaporizers for Cronos' COVE line of cannabis products.
Neither the terms nor the financial details of the arrangement were provided.
This is not the first time the two companies have cooperated. In May, they signed contracts in which MediPharm agreed to supply bulk resin and cannabis concentrate to Cronos.
Cronos has gone the partnership route in various ways with several companies. Perhaps its most notable tie-up is with Altria Group, in which Altria invested $1.8 billion for a 45% holding in the company. It's very possible that at some point these two makers of complementary goods will find a way to cooperate in the development of new products for the cannabis market.
Cronos considers the latest cooperation with MediPharm to be a foundation for a new line of products. In MediPharm's press release, Cronos CEO Mike Gorenstein was quoted as saying that "[w]orking with MediPharm Labs gives us the quality and optionality that we are looking for as we introduce our proprietary vape pen formulations."
"We are committed to continuing to the lead the industry responsibly as derivative products are introduced to the expanding Canadian marketplace," Gorenstein continued. Next month, Canada's "next wave" of cannabis legislation will see the market opened for derivative products such as edibles, extracts, and infused beverages.
COVE is a higher-end line of cannabis flowers and oils. It is one of Cronos' three retail brands, the others being Spinach (focused on more youthful consumers) and Peace Naturals, a line that emphasizes health and wellness.
Neither stock did particularly well following the announcement. Cronos closed down 6.7% on the day, while MediPharm was off by 3.5%. Investors might be a bit skittish about the connection to vaping, an activity that has become more controversial lately due to fatalities allegedly resulting from it.