In this market news, FSD Pharma (CSE:HUGE), one of the Canadian marijuana stocks, said it has signed a profit-sharing agreement with Canntab Therapeutics Limited (CSE:PILL)
SmallCapPower | September 19, 2018: FSD Pharma (CSE:HUGE), a licensed producer of cannabis, Tuesday announced that it has signed a definitive collaboration and profit-sharing agreement with Canntab Therapeutics Limited (CSE:PILL), a company focused on cannabis oral dosage formulations. The deal is a major positive for both companies as cannabis-based tablets offer a significant opportunity since doctors hesitate to prescribe smoked cannabis as a solution to patients’ health concerns. Following the announcement, shares of Canadian cannabis stocks FSD Pharma and Canntab rose 7% and 22%, respectively.
As per the agreement, FSD Pharma will provide Canntab with space at its Cobourg facility, where Canntab will install, at its own expense, a GMP facility to produce a suite of novel cannabis oral dose delivery platforms, including gel capsules and tablets, and other types of cannabis-based products, including sleep aids and pain relievers. FSD Pharma will also assist Canntab to obtain a license to process and sell cannabis products.
In return, Canntab will grant certain royalty and profit-sharing rights. Canntab provides FSD with 50% of the profits from retail sales of Canntab Products through channels established by FSD Pharma, while FSD will be entitled to retain 50% of the profits on FSD Pharma’s sales of the Canntab products. Additionally, a royalty of 3.5% of Canntab’s sale price for all products manufactured and sold at Canntab premises will be paid by Canntab to FSD Pharma.
FSD Pharma currently trades at a market cap of $954 million on the CSE with a price-to-book multiple of 18.0x.
Disclosure: Neither the author nor his family own shares in any of the companies mentioned above.
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