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Canopy Growth, PharmHouse Enter Into Supply Agreement

Alex Oleinic

Canopy Rivers Inc. (OTC: CNPOF) announced one of its portfolio companies,PharmHouse Inc., has entered into a large supply agreement with Canopy Growth Corp (NYSE: CGC).

Canopy Rivers is the investment arm of Canopy Growth.

What Happened

PharmHouse, a joint venture formed by Canopy Rivers and a conglomerate of North American agriculture companies, and Canopy Growth entered into a second offtake agreement. Under the terms of the deal, Canopy Growth will buy between 25,000 kilograms and 45,000 kilograms of cannabis per year from PharmHouse's greenhouse facility.

The agreement commits an additional 20 percent of PharmHouse's flowering space to Canopy Growth for the next three years. A year ago, the companies entered into a similar supply agreement, under which PharmHouse committed another 10 percent of space to Canopy Growth.

PharmHouse's facility is the first stage of a strategic partnership between Canopy Rivers and its JV partner. The parties intend to further explore opportunities in regulated cannabis markets across the world.

Why It's Important

The supply agreement will provide PharmHouse with some financial stability over the next three years and will allow it to easier forecast the revenue streams for its 1.3-million square foot flagship facility in Leamington, Ontario.

Canopy Rivers, which holds 49 percent equity interest in PharmHouse, helped the venture establish production and supply agreements covering around 50 percent of its expected annual output. The rest of the output will allow PharmHouse to develop its own brands and products.

“PharmHouse continues to show tremendous progress at the facility, and the joint venture is quickly developing as a key pillar for value creation and synergy within the Canopy Rivers portfolio ecosystem,” said Olivier Dufourmantelle, Chief Operating Officer of Canopy Rivers. “Thanks to the collaborative contributions of our joint venture partners, the ongoing support and guidance of Canopy Rivers, and the strategic insight of Canopy Growth throughout the licensing process, we are excited to announce an incremental supply partnership that mutually benefits all three parties.”

Canopy Growth last closed at $48.04 per share. Canopy Rivers closed at $2.78 per share.

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