In morning trade the Althea Group Holdings Ltd (ASX: AGH) share price has surged higher following an announcement.
At the time of writing the cannabis company's shares are up 8% to 47 cents.
Why is the Althea share price charging higher?
Investors have been buying Althea's shares this morning after it announced plans to expand into the Germany market.
According to the release, Althea has signed a memorandum of understanding (MOU) with nimbus health for the sale and distribution of Althea's medicinal cannabis products in Germany through its pharmacy network.
Nimbus is a leading wholesale pharmaceutical licence holder based in Frankfurt, Germany. It specialises in the distribution and import of medicinal cannabis products and estimates that it has access to 25% of all German medicinal cannabis patients through its pharmacy network.
Althea anticipates the first shipment of its medicinal cannabis products arriving in Germany early in the first half of 2020. Relevant applications for import and export permits will be lodged now that the MOU has been executed.
What now?
In order to support its entry into the Germany market, Althea is following the same strategy that has been successfully implemented in Australia and the UK.
It will develop a localised version of its Althea Concierge platform and its Medicinal Education in Cannabinoids learning portal in Germany.
Thanks to these initiatives and Nimbus' strong market position, management believes it will be ideally positioned to compete in the German market and quickly build market share.
Which could potentially be very lucrative. The release advises that Prohibition Partners estimates that the German medical cannabis market will be worth €7.7 billion by 2028.
Althea CEO Josh Fegan said: "We are very pleased to have entered into this MOU with Nimbus. Working within an existing and successful distribution channel in Germany is a low risk and high reward strategy for us. The regulatory and social acceptance of medicinal cannabis use in Germany is favourable and we are expecting immediate patient growth in what is one of Europe's largest and most affluent countries."
Whilst this has the potential to be a big positive, I feel it is a little soon to get excited. Firstly, MOUs are not legally binding and, secondly, there is nothing to say that any deal will be exclusive.
