Cowen: What The Sandoz Deal Means For Tilray Investors

Tilray Canada, a subsidiary of medical cannabis company Tilray Inc TLRY, entered into a global collaboration agreement with Sandoz AG, a generic pharmaceuticals and biosimilars company that's part of Novartis AG NVS.

The agreement marks an expansion of an existing relationship and will see the two companies working together in markets where cannabis is or will be approved for medical purposes.

The Analyst

Cowen's Vivien Azer maintains an Outperform rating on Tilray with an unchanged $150 price target.

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The Thesis

Tilray and Sandoz's prior relationship consisted of the companies working together to market Tilray's products to health care workers and pharmacists in Canada, Azer said in a note. The new agreement calls for closer collaboration across five areas, including global commercialization, co-branding, licensing and new product creations.

Azer said Tilray will be in a better position to win early market share within new markets due to the expanded relationship with Sandoz. The deal will also better help Tilray grow at scale, especially in large markets like Europe and Latin America that requires larger investments in sales force. In return, Tilray will see benefits to the top-line while still being able to keep "some of its own feet on the ground." (See Azer's track record here.)

The expanded relationship with Sandoz reinforces the company's competitive positioning and should support consumer packaged goods-like EBITDA margins of 30 percent by 2021, the analyst said.

Price Action

Tilray's stock was trading higher by more than 17 percent Tuesday afternoon to $77.10 per share.

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