Tilray plans to spend 20 million euros ($24 million) to build a medical marijuana production facility in Portugal to serve the European Union, becoming the second Canadian licensed producer to unveil plans to build an overseas cultivation operation for exporting MMJ.
Thursday’s announcement comes a day after Toronto-based Cronos Group disclosed it is partnering with an Israeli collective settlement to grow medical marijuana in northern Israel for export to Germany and elsewhere in Europe.
The announcements mark a major shift among Canadian LPs which, until now, have been exporting medical cannabis from Canada as part of a major overseas expansion.
Unlike Cronos, British Columbia-based Tilray is pursuing its overseas expansion on its own – through a wholly owned subsidiary in Portugal, Tilray Portugal Unipessoal Lda.
It will be based in Cantanhede, 220 kilometers (24 miles) north of Lisbon and will target the EU, a tariff-free market that Tilray estimates will swell to about 40 billion euros ($48 billion) over the next decade with 10 million patients.
“It’s a massive opportunity in a medical market that’s larger than the U.S. and Canada combined,” Brendan Kennedy, Tilray’s CEO, told Marijuana Business Daily. “The velocity of change inside the EU is faster than anywhere else in the world right now.”
The new facility will be built in phases, beginning this month, and create of 100 jobs.
Phase one calls for the construction of a 32,000-square-foot greenhouse to produce 10,000 kilograms of cannabis annually. Completion is scheduled for next spring. The build-out will increase Tilray’s annual global production capacity to 62 metric tons by the end of 2018.
The expansion’s second phase will see Portuguese cultivation grow to 25,000 kilograms of cannabis by 2020, 80% of which will be grown in a greenhouse and the rest through indoor and outdoor cultivation sites.
Tilray Portugal’s multimillion-dollar EU Campus – based at the Biocant Research Park in Cantanhede – will consist of facilities for cultivation, processing, packaging, distribution and research and development.
Tilray, which is owned by Seattle-based Privateer Holdings, said it received licenses from the Portuguese government in July to launch a facility to produce and import MMJ genetics. Portugal decriminalized all drugs in 2001. Marijuana is legal for medical use.
Tilray’s Portuguese expansion comes after the company announced last month it will invest 30 million Canadian dollars ($24 million) to convert an Ontario pepper farm into one of Canada’s largest MJ production facilities.
Why Portugal?
Tilray’s new Portugal operation will give the company production capacity inside the EU to meet European demand, Kennedy said.
“Our campus in Portugal will serve as a hub supporting our cultivation, processing, research, packaging and export to other EU countries,” Kennedy said.
Kennedy visited 17 countries and analyzed dozens of sites over the past two years before settling on Cantanhede.
He said various factors make Portugal, and Cantanhede in particular, advantageous for marijuana production and research:
- The consistent climate and sunlight are suitable for cannabis production.
- A highly skilled healthcare workforce is available around the Biocant Research Park.
- Portugal provides a tariff-free gateway to the rest of the EU.
Tilray Portugal is looking at approximate indoor production costs of CA$1.25 per gram, greenhouse costs of CA$1 per gram and 50 Canadian cents per gram to produce outdoors – all of which are lower than typical production costs in Canada.
The early focus
Although 11 countries in Europe have active medical marijuana laws on the books, and another 10 have pending laws, the big prize – at least in the near term – is Germany.
“Initially the primary focus will be Germany,” Kennedy said. “It’s the second-largest pharmaceutical market in the world.”
Germany was the second G-7 nation to legalize medical cannabis at the federal level after Canada, and its gross domestic product is roughly 2½ times larger than Canada’s.
Germany also presents unique advantages, according to Kennedy.
“The regulatory framework in Germany is very different from anything we’ve seen in most places in the world,” Kennedy said. “Any doctor can write a prescription to any patient for any illness with insurance company coverage.”
Going it alone
Unlike some other companies preferring to set up joint ventures or establish partnerships, Tilray sees more advantages in building international operations from the ground up.
It also has subsidiaries in Australia, New Zealand and Germany.
Kennedy says that’s an important part of the company’s international strategy.
Acting independently is “hugely important,” Kennedy said. “There are a lot of perils involved in organizing partnership agreements, and we seem to function better when new operating business are wholly owned subsidiaries. It gives us more control and responsibility.”
Matt Lamers can be reached at mattl@mjbizdaily.com
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