Medical Science Laboratory: A stunning black scientist is engrossed in her work as she carefully examines a sample under a microscope. With a determined expression on her face, she delves into the analysis of the test sample, showcasing her expertise as an ambitious young biotechnology specialist. The laboratory is filled with advanced equipment, reflecting the cutting-edge nature of her research.
Philip Morris International (PMI), the world’s largest tobacco company by market capitalization, is expanding its influence in the cannabis industry through its subsidiary, Vectura Fertin Pharma (VFP). In an often-overlooked press release, the company recently announced a collaboration with Avicanna, a Canadian biopharmaceutical company focused on cannabinoid-based medicine. The goal of this partnership is to advance research on medical cannabis and enhance accessibility in Canada. By harnessing Avicanna’s expertise and utilizing its MyMedi.ca platform, PMI is furthering its strategic shift towards prioritizing health and wellness.
In continuing its strategic approach to the cannabis industry, PMI’s Vectura Fertin Pharma and Avicanna have joined forces. This collaboration underscores PMI’s emphasis on medical applications rather than recreational cannabis. Aaron Grey, managing director at Alliance Global Partners, a prominent cannabis investment firm, notes, “PMI has consistently demonstrated its interest in the medicinal aspects of cannabis. Their investment in Syqe Medical back in 2016 was focused on medical applications, and this partnership with Avicanna follows that same trajectory. PMI’s public engagement with cannabis has primarily revolved around its medical potential rather than consumer or recreational products.”
PMI Eyes The Future With Medical Cannabis Investments
PMI’s strategic emphasis on medical cannabis is in line with its overall approach of driving innovation through research. Grey further explains, “It seems that PMI’s interest in cannabis, especially in medical applications, is an ongoing endeavor. In fact, they made an investment in Syqe Medical in 2016 and later acquired the remaining shares of the company in July 2023. Although the investment was contingent on FDA approval for their device, it also had a strong focus on medical applications. This collaboration with Avicanna seems to be in sync with PMI’s overarching strategy.”
According to Grey, PMI is not only focused on its medical cannabis initiatives but also preparing for a long-term change in consumer preferences. He believes that usage trends among young adults are evolving, with a shift away from tobacco and alcohol towards cannabis. Recognizing this, major tobacco companies like British American Tobacco are adapting their strategies to capture the growing consumer base. Grey emphasizes that this is not just a short-term hedge, but a strategic move to align with the anticipated long-term shift in consumer behavior.
According to Dan Ahrens, managing director of AdvisorShares, Big Tobacco has been making investments and joint ventures in the cannabis industry, particularly in Canada. However, Ahrens believes that they are being cautious and holding off on making large additional investments until they can do so in the U.S. markets after federal reforms are implemented.
According to Todd Harrison, the founder of CB1 Capital, the tobacco and alcohol industries have shown interest in the cannabis sector for a while now. However, the extent and speed of their involvement will ultimately depend on the regulatory framework in place.
A Strategic Detour: Why PMI Isn’t Following The Crowd
PMI’s approach to cannabis stands apart from competitors such as Altria and British American Tobacco (BAT) in terms of its strategic direction. While Altria made a substantial investment of $1.8 billion in Cronos Group, and BAT formed a CAD 125 million R&D partnership with Organigram, PMI has chosen to prioritize medical cannabis as a key element of its diversification strategy.
“According to Grey, many leading tobacco companies have shown a strong interest in the cannabis industry. For instance, Altria has made a significant investment of $1.8 billion in Cronos Group, while Imperial Brands has invested CAD 125 million in Auxly. In November 2023, BAT also joined the trend by investing CAD 125 million in Organigram, establishing an investment pool and an R&D partnership. These strategic moves by Big Tobacco highlight their exploration of the cannabis space, and PMI’s partnership with Avicanna can be seen as a part of this larger trend.”
PMI’s focus on Canada’s well-regulated cannabis market serves as a strategic testing ground and allows the company to gather valuable insights into patient-focused care and market dynamics. According to Grey, when cannabis was first legalized in Canada, several companies, including Altria, Constellation Brands, and Molson Coors, made substantial investments or formed joint ventures with cannabis firms. However, many of these early moves did not yield the expected results. In recent times, we have witnessed a shift towards more targeted investments, such as BAT’s partnership with Organigram.
Avicanna: A Key Player In PMI’s Long-Term Game Plan?
Avicanna has a track record of forming significant collaborations. In 2023, the company acquired Shoppers Drug Mart’s Medical Cannabis by Shoppers platform and seamlessly integrated it into its MyMedi.ca ecosystem. This integration not only expanded Avicanna’s curated medical cannabis product offerings but also provided pharmacist-led support to patients. Moreover, Avicanna has been operating out of Johnson & Johnson’s JLABS incubator for several years, focusing on groundbreaking research and development in the field of cannabinoids. Furthermore, the partnership with Daabon, a leading organic agribusiness, has further strengthened Avicanna’s supply chain by incorporating sustainably cultivated cannabinoids.
Avicanna’s selection by PMI, even though it has a smaller market cap compared to other cannabis companies that have received investments from tobacco giants, showcases its unique emphasis on medical cannabis. From the beginning, the company has prioritized research and development (R&D) and clinical studies over consumer-driven recreational markets. Its unwavering dedication to advancing cannabinoid-based therapeutics and creating evidence-based solutions for patients has been a long-term commitment.
Other companies in the cannabis industry have also made significant investments in medical cannabis. One notable example is GW Pharmaceuticals, which is now part of Jazz Pharmaceuticals. They were responsible for developing Epidiolex, the very first cannabis-derived drug to receive FDA approval for the treatment of epilepsy. Tilray, on the other hand, has focused on forming research partnerships with prestigious institutions like New York University and the University of Sydney. Their aim is to explore the potential of cannabis therapies for various conditions, such as anxiety and chemotherapy-induced nausea. Although these companies have achieved great success in specific therapeutic areas, Avicanna stands out by conducting research across multiple conditions. They have collaborated with esteemed institutions like the University Health Network and SickKids Hospital in Canada to investigate the use of cannabis in treating epilepsy, dermatological disorders, and pain management.
Avicanna stands apart from companies like Canopy Growth and Cronos Group by taking an integrated approach to patient care through MyMedi.ca and having a broad focus on clinical development. While other companies have developed consumer-facing products, Avicanna also prioritizes medical cannabis and research and development. This unique combination makes Avicanna a specialized partner in advancing cannabinoid-based therapeutics for various medical applications.
What’s Next For PMI And Cannabis?
Analysts are raising questions about PMI’s long-term intentions following its partnership with Avicanna. Some speculate that this collaboration could potentially lead to an acquisition, similar to PMI’s previous investment in Syqe Medical. Grey, an analyst, points out that PMI initially invested in Syqe Medical in 2016 and eventually acquired full ownership in 2023. The outcome of the partnership with Avicanna will depend on how it progresses and regulatory developments.
According to Ahrens, it is still too early to determine whether PMI will acquire Avicanna. He explains that the current information regarding the collaboration is quite limited.
Ahrens believes that PMI’s ambitions likely extend to the U.S., as we have already witnessed similar activity on a limited basis in Canada. He is of the opinion that big tobacco (and big alcohol) are eagerly waiting for entry into the U.S. markets and MSOs.
The collaboration between Avicanna and PMI sets the stage for Avicanna to become a crucial partner for multinational companies. PMI’s decision to concentrate on medical cannabis allows them to mitigate the risks associated with the recreational market and establish a strong foundation for future diversification. Harrison emphasizes that traditional consumer packaged goods (CPG) companies have largely kept their distance from the cannabis industry until regulatory clarity is achieved. However, this partnership serves as another example of how traditional CPG companies are gradually incorporating cannabis into their business portfolios.
Disclosure: I do not own any shares of the companies mentioned in this article, their peers, or competitors. Additionally, I have no plans to initiate any positions in these stocks within the next 72 hours.
Disclaimer: Please note that the information provided in this article is for informational purposes only and should not be taken as investment advice. It is important to consult with a qualified financial professional and conduct your own thorough research before making any investment decisions. Remember that all investments come with risks, and it is crucial to consider your individual financial circumstances and goals.
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