This browser is not actively supported anymore. For the best passle experience, we strongly recommend you upgrade your browser.
Welcome to Reed Smith's viewpoints — timely commentary from our lawyers on topics relevant to your business and wider industry. Browse to see the latest news and subscribe to receive updates on topics that matter to you, directly to your mailbox.
| 1 minute read

Partnership as a future for Cannabis

On Wednesday, Perrigo Company, a global provider of self-care products, announced a strategic partnership with hemp-based CBD supplier, Kazmira LLC, in the form of an exclusive supply agreement and $50mm investment. (link) I’m proud to have led the deal team to negotiate and close this deal on behalf of Perrigo, which brought to bear Reed Smith’s depth of industry knowledge across disciplines.

I’m highlighting this deal as an example of where, in my opinion, the cannabis industry (both non-hemp and hemp) is headed in order to survive and transform, both from a capital perspective and an operational perspective. I expound frequently in these Cannabis Musings and beyond about the problem of capital (e.g., link, link, link), particularly its fleeting and fickle nature. The industry enjoyed a whirlwind of cash, but times changed, well before the onset of the current pandemic-induced recession.

Both non-hemp and hemp cannabis operators have needed to shift once again to changing market dynamics. That’s certainly easier for hemp - by virtue of not being constrained by the Controlled Substances Act, hemp operators can attract partners with strong balance sheets and access to a lower cost of capital. We saw evidence of that earlier this year on the equipment side (link), and once again see that with the entry of Perrigo into the space.

The challenge is greater for non-hemp cannabis, with a smaller pool of potential capital providers and operational partners who are willing to accept the federal law risk.

Integration of hemp-based CBD into the broader, established consumer products supply channel is a natural fit (and will be more so once the FDA provides guidance on food, beverages, and dietary supplements), even with the regulatory thicket of USDA, FDA, state, and local laws. It will likely take descheduling before we see the same with non-hemp cannabis products. Either way, the broader embrace of cannabis by complementary industries and multinational concerns is, in my opinion, a logical and necessary step for the maturation of the industry.



Latest Insights