Tilray, Inc. (NASDAQ: TLRY ) has signed a binding letter of intent (LOI) to purchase hemp-derived CBD isolate from LiveWell Canada Inc. (CSE: LVWL), which will be sourced from the United States and Canada. Hemp CBD is estimated to be a $22 billion market in the U.S. The product will be used for distribution of Tilray-owned wellness and medical products across North America.
LiveWell will supply Tilray with a minimum of 150 kilograms per month of wholesale CBD isolate cultivated and processed from hemp commencing in February 2019, through to July 2019. The amount then increases to a minimum of 300 kg/month for the remainder of the contract, until December 2019. Tilray has the option to increase the amount of CBD supply purchased to 500 kg/month, and there is an additional 12-month renewable option.
“Today’s announcement puts Tilray in a strong position to expand the availability of our products in existing and new potential markets,” says Brendan Kennedy, Tilray CEO. “We’re pleased about the opportunity to increase our capacity to supply high-demand CBD products in Canada.”
The recently passed 2018 Farm Bill in the U.S. presents an opportunity to enter the hemp-derived CBD industry and capitalize on it. The bill needs to be signed by President Trump, which is expected to happen this week before lawmakers leave for the holidays.
“We are pleased to have a strong partner such as Tilray in this emerging market,” said David Rendimonti, President and CEO of LiveWell Canada. “With the legal barriers lifting, we believe the market for hemp CBD could exceed all forecasts because of the huge shift to self-directed care and wellness among consumers.”
Regulations in Canada allow for the use of hemp as a source of CBD, as long as the product satisfies certain quality requirements. These new rules will allow for wholly-owned Tilray Inc. subsidiaries, Tilray Canada Ltd. and High Park Farms Ltd. to potentially utilize hemp-derived CBD to increase the supply of CBD medical and wellness products in Canada.
On December 3, LiveWell signed a binding letter of agreement to merge with Vitality CBD Natural Health Products Inc., one of the largest industrial hemp cultivation and extraction operations in North America, with approximately 20,000 acres harvested in 2018. The merger will bring together the U.S. and Canadian assets to create one of the first fully integrated CBD companies with a production capacity of CBD isolate anticipated to reach 3,000 kilograms per day by mid-2019; research, product development, and GMP manufacturing facilities; international sales and distribution networks; and experienced leadership