Canada’s medical pot companies aim to grow export business

Theglobeandmail.com
July 22, 2016
By Laurent Bastien and Mike Hager

Canada’s licensed medical cannabis producers are searching for opportunities to expand overseas while Ottawa works on its plan to legalize recreational marijuana next spring, with two producers recently securing licences to sell their products in Europe.

The latest company to announce plans to export marijuana is Canopy Growth Corp., the largest of the country’s two dozen licensed producers. Canopy Growth said it would soon begin selling dried cannabis in pharmacies across Germany after securing an export licence from Health Canada on Wednesday. The company also said it had signed partnerships to share its technical expertise with medical marijuana companies in Brazil and Australia.

Last month, B.C.-based Tilray announced it had shipped cannabis oil capsules to patients in Croatia for the first time.

Canopy Growth chief executive officer Bruce Linton said his company is preparing to enter Germany, which will legalize medical marijuana next year. Plans for opening a factory inside the country have also been drawn up.

“This is a very substantial market, and it’s probably the best place to enter the European Union from,” said Mr. Linton, whose publicly traded company sells cannabis in Canada under the Tweed and Bedrocan brands.

John Fowler, president of Supreme Pharmaceuticals, said licensed Canadian producers are already operating under a “world-leading regulatory scheme” for medical marijuana, so they offer an attractive option for other governments looking to create their own federal system for growing and delivering the drug.

“Other countries are looking both at our regulator and at our regulated companies,” he said.

While many of his competitors are looking for opportunities abroad, Mr. Fowler said his company is focused on the robust domestic market because it does not want to face new regulatory hurdles or spread its management or capital thin by looking for opportunities elsewhere.

He said the Health Canada-run medical marijuana industry is growing its overall patient base by about 10 per cent each month, with more than 60,000 people being prescribed dried buds or oils since the system was overhauled three years ago.

“These are fantastic numbers for any industry, and well ahead of Health Canada’s projections of 400,000 [patients] by 2020,” Mr. Fowler said.

Still, there are roughly 500,000 medical cannabis users in Canada over the age of 25, according to a survey commissioned by Health Canada - the majority of whom are not purchasing the drug from licensed commercial producers, with many turning to the black market or dispensaries.

Khurram Malik, a cannabis analyst at Jacob Securities, said licensed cannabis growers are seeking to expand their businesses abroad, because of a dwindling demand for medical pot at home.

“There’s all this product being produced sitting up in people’s inventory shelf and not being sold. That’s the problem. So it’s forcing producers to look elsewhere sooner than they would have,” he said.

For marijuana importers, the cannabis grown by licensed producers in Canada is especially attractive, Mr. Malik said.

“We’re the only federal jurisdiction that can produce large-scale cannabis at pharmaceutical-grade quality. When you look at other jurisdictions, it’s typically food grade. And there’s a huge difference between food grade and pharmaceutical grade,” he said. “That consistency on that scale doesn’t exist anywhere else in the world.”

In February, a Federal Court judge gave Ottawa six months to overhaul its existing medical marijuana regime after he found the current system to be “overbroad and arbitrary” because it effectively forced patients who were previously allowed to produce their own marijuana to choose between their medicine and jail.

These changes are expected to be made next month and could enshrine a sick person’s right to grow their own marijuana at home.

Canada’s licensed growers have said this move likely won’t affect their bottom line much, as few people are likely to go through the trouble of producing their own medicine.

However, these producers could reap a windfall after recreational marijuana is legalized.

It’s still unknown whether small-scale producers will be able to supply the recreational market, but MP Bill Blair, head of the government’s push to legalize, has praised the ability of existing medical growers to provide a secure, high-quality product.