MEDIF stock is gaining momentum in early session on Thursday after MediPharm Labs (TSX:LABS) (OTCQX:MEDIF) has signed a multi-year contract manufacturing agreement with Cronos Group (TSX:CRON) (NASDAQ:CRON). However, CRON stock tumbled following the news.
A Major Boost for MediPharm
Among the many cannabis companies that have come up over the past few years, MediPharm is one of the most interesting ones. It is not directly involved in cultivating cannabis but instead in providing extraction services to some of the biggest cultivators in the industry.
Today, the company made a significant announcement as it unveiled a private label contract agreement with Cronos Group. Cronos is one of the biggest cannabis companies in the industry, and so this is a significant deal for MediPharm. According to the terms of the contract, MediPharm is going to produce vaporizer devices for Cronos Group over the course of the multiyear deal.
That being said, it is necessary to point out that the deal can only go through once it is approved by Health Canada. If the deal is indeed completed, then MediPharm will provide filling services associated with superior quality customized concentrate. In addition to that, it will provide packaging and labeling services, in accordance with the specifications provided by Cronos Group.
At the time of writing, MEDIF stock is trading higher by 3.50% at $3.87. However, CRON stock tumbled 4.50% at $10.47.
It is a significant deal and a potentially lucrative one for MediPharm Labs, although the financial details have not yet been revealed. Initially, the deal is going to run for two years, and Cronos Group will retain the option to extend it by a year.
MediPharm has grown by leaps and bounds recently due to its superior extraction technology. However, in addition to extraction services, the company also helps in producing customized concentrates. The company processes a large amount of cannabis every year and is trying to raise its capabilities to 500,000 kilos a year. Its expertise has not gone unnoticed, and it counts Canopy Growth (TSX:WEED) (NYSE:CGC) and The Supreme Cannabis Company (TSX:FIRE) (OTCQX:SPRWF) among its clients.
This is not the first contract that the company has signed with Cronos Group. It has an 18-month contract to produce $30 million worth of concentrates already in place and, more importantly, the company delivered on the earnings front as well. MediPharm Labs actually recorded a net profit in the most recent quarter.
MEDIF stock is one of the biggest gainers this year, with a jump of 192% year-to-date. On the other hand, CRON stock is down 10% so far in 2019.
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