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Canopy Growth Closes Beckley Canopy Therapeutics Deal, Announces Sale of AusCann Stake

By Joe Tenebruso - Oct 15, 2019 at 8:17PM

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The marijuana titan continues to make moves in the rapidly shifting cannabis industry.

Cannabis giant Canopy Growth (CGC -12.50%) said on Tuesday that it completed its acquisition of cannabinoid research company Beckley Canopy Therapeutics.

Canopy Growth and Beckley Research & Innovations created Beckley Canopy Therapeutics in January 2018 to research and develop cannabis-based medicines. The joint venture will now be integrated into Canopy Growth's Spectrum Therapeutics subsidiary.

"The acquisition comes at a time when commercial opportunities across Europe are ramping up," Canopy Growth CEO Mark Zekulin said in a press release. "Spectrum Biomedical has completed all necessary approvals to import cannabis into the UK market and is proud to facilitate patient access to safe cannabinoid-based medicines there."

In conjunction with the closing of the deal, Paul Steckler and Steven Wooding will become co-managing directors overseeing all of Canopy Growth's European operations. Both executives have more than 20 years of experience in the pharmaceutical industry, with Steckler and Wooding having worked for industry leaders such as Pfizer and Johnson & Johnson, respectively.

"Consolidating our UK-based operations will allow Canopy to simultaneously improve its research and commercial capabilities across the continent," Zekulin said.

A person in a lab coat holding a cannabis leaf and a bottle of oil with a cannabis bud on top of it.

Canopy Growth is ramping up its cannabis research efforts in Europe. Image source: Getty Images.

While Canopy Growth is bolstering its European operations, it's divesting some of its Australian assets. The company is selling its 13.2% stake in Australian cannabis company AusCann Group Holdings for 6.3 million Canadian dollars ($4.8 million).

"Canopy Growth remains optimistic about the future of the Australian medical cannabis market and will continue to collaborate with the team at AusCann to support greater physician understanding and patient access to high-quality cannabis products throughout Australia," Zekulin said. "The decision to divest our position in AusCann, which we obtained three years ago in exchange for support provided, will allow us to sharpen our focus on our wholly owned operations in the market, while continuing to collaborate with our partners at AusCann."

Analysts at Jefferies praised the move. "We believe it is evidence of Canopy now beginning to clear its balance sheet to put more focus on core assets and the goal of profitability," Jefferies analyst Owen Bennett said.

Zekulin has placed a greater emphasis on financial discipline since taking over the CEO position after Canopy co-founder and co-CEO Bruce Linton was fired in July. Linton had a reputation for spending aggressively when entering new markets, a luxury afforded to him after beer colossus Constellation Brands (STZ 3.69%) invested $4 billion in Canopy in exchange for a nearly 40% stake. But Constellation Brands eventually grew frustrated with Canopy's mounting losses, and the beer giant is widely believed to have pushed for Linton's ouster.

After a turbulent several months, Canopy's shares are now down 25% so far in 2019 and 60% over the past year. But with more than $2 billion in cash reserves, Canopy is still the most cash-rich cannabis company. This war chest, combined with Zekulin's financial discipline, could help Canopy Growth regain its footing and stabilize its stock price in the months ahead.

Joe Tenebruso has no position in any of the stocks mentioned. The Motley Fool recommends Constellation Brands and Johnson & Johnson. The Motley Fool has a disclosure policy.

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