Changing of the guard in Ottawa could speed up cannabis industry growth

Medical marijuana producers are bracing for the possibility that Canadians could elect a new government this fall.

Thestar.com
Sept. 13, 2015
By Alexandra Posadzki

Medical marijuana producers are bracing for the possibility that Canadians could elect a new government this fall - a change that could accelerate the already breakneck pace of growth in the burgeoning industry and usher in new players such as tobacco companies and pharmacy chains.

“This whole election’s very interesting,” said Bruce Linton, the CEO and chairman of Tweed Marijuana Inc. “When you have a business that has the potential to see quite a lot of acceleration because of outcomes, you watch it more carefully.”

Marijuana became a hot-button issue in the election campaign on Thursday, when Joy Davies, a Liberal candidate in British Columbia, pulled out of the race because of posts she had made on Facebook about marijuana.

Liberal Leader Justin Trudeau distanced himself from Davies when asked about her posts, which included claims that marijuana can cure skin cancer and a link to an academic study suggesting pot decreases domestic violence.

Trudeau has long promised to legalize and regulate marijuana if elected, while NDP leader Tom Mulcair has said his party would decriminalize the drug immediately upon forming government.

Khurram Malik, an analyst at Jacob Securities, says the election of either the Liberals or the NDP could lead to less red tape for licensed medical marijuana producers.

“We have the most anti-weed party in power right now,” Malik said. “Any other party that wins is a lot more friendly to marijuana than this one, so things will get done a little more efficiently and openly, so people can actually plan their businesses in a more reasonable and logical manner.”

The introduction of a recreational marijuana program could bring new players such as tobacco and liquor companies into the market, Malik added. Currently the industry is too small for the giants to bother with, he said.

“Big tobacco never comes in and starts from scratch,” said Malik. “They always buy something, and then build it into something bigger.”

Michael Haines, the CEO of Mettrum Health Corp., says the creation of a recreational program - similar to those that exist in Colorado and Washington state in the U.S. - could create a dual system. While the medical program would likely continue to be federally regulated, recreational programs may be regulated at the provincial level, similar to alcohol.

However, a recreational marijuana program - similar to those that exist in Colorado and Washington state in the U.S. - would take at least a year or two to implement, said Malik.

“It’s a complicated program to set up, and then they’ve got to figure out how to capture taxes from it, which is not an easy thing to do.”

A changing of the guard in Ottawa could also result in new distribution rules. Currently, federal rules only allow licensed cannabis producers to distribute product to customers via mail - a process that can be confusing for patients, who are more accustomed to picking up their drugs in person at pharmacies.

Adding to the confusion is the proliferation of medical marijuana dispensaries in some parts of the country.

Some local authorities have turned a blind eye to the dispensaries and the City of Vancouver has moved to license them, providing some legitimacy to the shops. But Health Canada has called the dispensaries illegal and threatened an RCMP crackdown if they don’t close up shop.

“Before any government would want to look at any potential changes, that’s one of the issues they would need to address before moving forward,” said Greg Engel, the chief executive of B.C.-based Tilray.

Haines says he isn’t holding his breath waiting for the end of the marijuana prohibition era.

“We didn’t get into this business hoping that it turns into a recreational market,” said Haines, noting that Mettrum already has a “thriving business” within the medical sphere.

“That said, if that were to ever happen, we would be exceptionally well-positioned,” he added.