Vancouver – Master horticulturalist Francoise Levesque tends to the thousands of marijuana plants at Tilray, one of 35 federally licensed producers of medicinal marijuana that have brought pot growing “from the basement into the light.”
“We are pioneering, in a way, how to do things,” says Levesque, who was growing tomatoes before joining the Vancouver Island company.
But pioneering is rarely easy work.
Tilray won a coveted licence in 2014 for the previous Conservative government’s mail-order medical pot system, but, like many of the licensed producers, has since endured a boom-and-bust cycle.
Encouraged by Ottawa to move quickly, it invested $26 million in its Nanaimo warehouse and had big expansion plans; a year later it laid off a third of its staff, in part because of foot dragging by the Tories to green-light the facilities and also due to the proliferation of illegal dispensaries offering easier-to-access retail sales. Then the fledgling industry took another hit earlier this year when the Federal Court struck down a Conservative law prohibiting medical patients from growing their own pot.
Tilray president Brendan Kennedy is hoping the new Liberal government and its intention to legalize recreational marijuana in Canada will be good news for the industry, a scenario also predicted by industry watchers. He has an interesting perspective since Tilray’s parent company is based in Seattle, where retail stores have sold legal marijuana for two years.
“I see recreational legalization as a huge opportunity for the industry,” Kennedy said in a phone interview from Seattle. “In Washington … they merged the medical program and the recreational program and in some ways that is probably closest to what is happening in Canada.”
Washington sells both kinds of pot from retail stores, which, Kennedy pointed out, is “very different from the dispensary model in Canada.”
Ottawa continues to deem storefront dispensaries illegal and unsafe. Prime Minister Justin Trudeau’s government has said it is studying the use of pharmacies to distribute medicinal pot to patients, and is so far silent on how recreational pot will be sold.
The clunky mail-order system has not been embraced by Canadians. Health Canada’s own study in 2011 determined there were 420,000 Canadians who use pot for medicinal reasons, and yet only 70,000 got doctors’ notes and registered to buy from the licensed producers. Sales have been increasing, with nearly triple the amount of dried pot shipped to clients in fiscal 2015 than in 2014.
But for more than a year now, these facilities have been producing more products than they have been able to sell, resulting in 11,000 kilograms of dried marijuana collecting dust in warehouses as of March – more than double the amount from the same time last year.
A potentially good seller for these producers may be cannabis oil – it can be taken in pill form, rather than smoked – which was green-lighted by Health Canada last year. Sales still lag dried pot, but the amount of oil these companies produced increased seven-fold between December 2015 and March 2016.
Of the 35 companies issued licences over the last two years, 20 of them are based in Ontario, eight are in B.C., and the rest are scattered.
Stock watchers, including Cantech Letter, have identified a small number of these companies as financial winners. According to Bloomberg, the market capitalization (as of mid-September) of several of these players is sizeable:
– Canopyin Ontario, created by the 2015 merger of Tweed and Bedrocan, is the granddaddy of them all, estimated to be worth $445 million;
– The other big players, with valuations well over $100 million, include Aphriain Ontario, Aurorain Alberta, Mettrum in Ontario, and Organigram in New Brunswick.
Despite the competitive environment, more entering the field. To date, Health Canada has received 1,561 applications; 419 have advanced to a review stage, a long process with an uncertain end.
Kirk Tousaw, a legal expert on marijuana policies and an advocate for modernizing cannabis laws, believes Ottawa’s restrictive rules have hobbled the 35 licensed producers.
“I don’t think there is anyone in the industry who is profitable at this juncture,” said Tousaw, who has law offices in Vancouver and Victoria.
There is a role for the licensed producers to sell recreational marijuana, but existing illegal growers – who already sell pot to many clients – should not be excluded. “It cannot be an oligopoly,” he argued.
Tousaw suggested the licensed producer system needs to be more accessible for both buyers and growers – mail order cannot be the only option, and dispensaries are a “necessary component.” While speaking to a federal government committee on this topic, he made several recommendations, including:
– Ottawa should no long disqualify people with cannabis convictions from applying for licences – if people have the expertise in growing pot, there is a good chance they have had run-ins with the law;
– The costly, onerous security requirements at federally licensed facilities must be reduced. “You don’t need a bombproof vault to store pot in … or two years of security recordings.”
– The government needs to more quickly process the applications – Colorado does this in 90 days – because many groups cannot financially survive Canada’s multi-year wait.
Tilray’s Kennedy, however, argues that Canadians have not been properly educated about the difference between bud grown in the tightly regulated licensed facilities versus the uncertain safety and criminal element tied so some weed sold under the table.
News Moderator: Katelyn Baker 420 MAGAZINE ®
Full Article: The Competitive World Of Medicinal Marijuana
Author: Lori Culbert
Contact: 416-383-2300
Photo Credit: Tilray
Website: National Post