EDITOR: | April 1st, 2016 | 8 Comments

Medical Marijuana – Expect Patient Friendly Changes after Allard

| April 01, 2016 | 8 Comments
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Allard_MMARThis is an update to our article from earlier this week, “Allard has no Appeal”.

In that article we pointed out the massive risks caused by the Allard decision, leaving the MMPR’s in legal limbo. Read that article for context and background, then come back here for the update.

The news of the week is that Canopy Growth Corp. announced on March 31 that one of its subsidiaries was granted a license to produce, possess and ship dried marijuana at its facilities in Niagara-on-the-Lake, Ontario.

What does this mean? First, specific to market competition, this licence helps CGC compete in the lower margin commodity space, perhaps to defend market share against a company like Aphria Inc., from Leamington, Ontario. The existing Canadian medical marijuana market is so small that all market share is important market share.

How small is the Canadian medical marijuana market? Here’s a simple exercise. Pull the latest quarterly financials from all the publicly traded MMPR’s. Add up their gross revenues. Make an educated guess about revenue levels for the private MMPR’s. Add that in. See for yourself how minute the market currently is.

Second, from a broader perspective, we had pointed out the government’s decision not to appeal Allard created a fair amount of uncertainty in the market. Increased uncertainty leads to less equity value.

With the licence being granted to CGC’s subsidiary, some of that uncertainty has been eliminated. The rumour mill also tells us that Health Canada inspections are continuing, and that no one has been laid off or re-assigned from Health Canada’s medical marijuana department. It’s business as usual on the operational front.

In the rest of the market, the MMPR’s are carrying on as though Allard didn’t happen. This is part whistling past the graveyard, part sound business strategy. For example, look at Aurora Cannabis Inc.’s update from April 1, that is obviously intended to offer a steadying hand to a nervous market:  “Nothing to see here, folks, we’re doing fine, move along, move along.” (I am a fan of the company and put it in the top tier of growers.)

It appears the federal government is steady on with the MMPR’s, even though that system of regulating the MMPR’s has been declared constitutionally invalid. The Liberals have until the middle of August, 2016 to introduce replacement regulations.

Our conclusion: Combining Health Canada’s ‘business as usual” approach with the pro-patient court rulings in Allard and Smith means the replacement regulations will be patient-friendly. They will lead to an expanded albeit still small market within the medical marijuana community and sets the stage for the Liberals to introduce de-criminalization should they win a second majority in 2019.


Peter Clausi

Editor:

Mr. Clausi is an experienced investment banker, executive and director. A graduate of Osgoode Hall Law School called to Ontario's bar in 1990, Mr. Clausi ... <Read more about Peter Clausi>


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Comments

  • awesomesound

    Does anyone in the Cannabis investment community understand that Canada has a Gray Market Dispensary “Sector” that has revenue 5X the amount that the whole MMPR all 28 Commercial Producers have? and that they are now being licensed and regulated. The MMPR is over invested, overvalued, and has a total of 20,000 “CUSTOMERS”, How does this Equal = $100.000.000 Marketcap?, Your Investor math Stinks!!!!

    April 2, 2016 - 10:44 AM

  • awesomesound

    May I add to my last comment, Tweed alone has reported over $10 million dollars worth of Cannabis in Storage that they can’t sell to those 20,000 “Customers”. How is a does Growing another $10 million make any sense?

    April 2, 2016 - 10:57 AM

  • Peter Clausi

    The “grey” market is actually a black market. Selling outside of the approved MMAR and MMPR channels is drug trafficking. No amount of self justification can change that. Expect the police to step up enforcement, as they recently did in the Niagara Region of Ontario, when the new regulations are introduced. Yes, it is a very tiny market right now.

    April 2, 2016 - 10:59 AM

  • Wessty

    Congratulations.
    I see you all drooling about the money to be made by selling over rated, and over valued cannabis to medical patients.
    Most medical patients can barely afford the basics to sustain themselves, and you want to drive them deeper into debt and further reduce their heath with pesticide laced and irradiated cannabis.
    Thanks for once again proving that business has no moral concsience, and will at any cost to the public protect their bottom line.
    Karma is a cold hearted bitch with a long long memory, be prepared for your judgement because it is coming.

    April 2, 2016 - 12:18 PM

  • Al57

    I agree with you Wessty. These companies just don’t understand who there are suppose to be supplying namely the sick and disabled. No big profits there

    April 3, 2016 - 3:15 PM

  • med

    Stockpiling for legalization?

    April 3, 2016 - 10:08 PM

  • Rob

    Another hugely missed point is this is a market where quality matters above all else. The MMPR program has been producing low THC and CBD products. In a market where everyone wants to have the best. Even idiots who have no clue what they are doing think and want the best and brag about it. I had a friends girlfriend one day ask me if I wanted to smoke one ( the guy I got it from said it was really good he called it bunk weed ) For anyone who doesn’t know bunk normally means it crap. The crap the licences producers are aloud to grow is paper filler for oil joints even tobacco works to hold the paper open. No mater what direction the future takes the guy with the best product will get the highest sales. So having 10 million dollars worth of low quality marijuana, you might be able to recoup some if you made it in to hemp clothing, oil, fuel or even hempcrete and build yourself a house out of it. But even when we hit the point of legislation quality is where the money will flow. Which is why a lot of patients like myself choose to go to compassion club or dispensary over ordering your product. Even if you got them to close them all it would just push us back to the black market from the grey. Some of us are at a point in our lives where we need an extremely strong product. I have days where dry marajuana does not help and I have to smoke shatter to get relief, most of those days I am forced to take Hydromorphone at doses that would be lethal to most people.

    April 6, 2016 - 1:51 PM

  • justin boudreau

    I think that all passion clubs stay open see to patients as years nooew have doctor write amount out and obey rules bu family doctor let.govenment legalize to charge rich prices an poor buy from passion clubs with doctor note as well.mmrr product our licence to grow own to the licence says an.doctors do far good is more 6grms daily it’s 6ozs an 11 grms monthly don’t see.my medical weed do hope govenment agrees to work out deal buying from govenment prices too high weed in Toronto helps cancer patient’s do hope deal.fair all work out all passion clubs paid high-quality taxes do know reason shut them down because black m are see it lower prices since govenment raise price to high thanksgiving justin

    April 11, 2016 - 6:42 AM

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