(Reuters) – Canadian pot producer Canopy Growth Corp said on Wednesday it would sell its German pharmaceuticals unit, C3 Cannabinoid Compound Co GmbH, to a local firm as revenue took a hit due to pandemic-related restrictions in the country.
Shares of Canopy were down 3.4% at C$8.85 in afternoon trading.
The Ontario-based company said it would get an upfront payment of about C$115.5 million ($89.51 million) from German pharmaceutical firm Dermapharm Holding SE once the deal closes in January, and up to C$61.4 million in a milestone-based payment.
That is lower than the C$342.9 million Canopy paid in 2019 to buy C3, which it had often described as “transformational” to its business.
Recent COVID-19 lockdown measures in Germany due to soaring virus cases restricted people’s ability to visit doctors and pharmacies, and dented C3’s revenue in the past few quarters.
Sales in the unit fell 13% to C$11.9 million, according to Canopy’s second-quarter earnings report.
The divesture will help avoid future operational complexities associated with C3 and reduce short-term capital investment, Canopy said, adding that all C3 employees would be retained by Dermapharm.
“We remain committed to serving the medical cannabis market as a channel and will continue to do so by leveraging our existing high-quality supply of Canadian cannabis products to meet patient demand globally,” said David Klein, chief executive officer of Canopy.
($1 = 1.2903 Canadian dollars)
(Reporting by Arunima Kumar in Bengaluru; Editing by Vinay Dwivedi and Ramakrishnan M.)