Cannabis in the news July 10, 2019

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News on cannabis stocks and on developments in the industry haven’t let up in today’s volatile markets. Here are this week’s stories that we believe will mean most to you as a Canadian investor.

1. Shares of Toronto-listed CannTrust plunged more than 20% this week on the news that Health Canada seized 4,327 kilograms of unlicensed cannabis from the company’s Pelham, Ont., greenhouse.

Health Canada notified the company of the seizure, pointing to cannabis cultivation in five unlicensed rooms at the facility. CannTrust employees also failed to provide the industry regulator with accurate information about the extent of production.

The company says production in those grow rooms took place from October 2018 to March 2019 when CannTrust had pending applications with Health Canada. Licences were issued for each of the five rooms in April 2019. There are 12 rooms in total at the facility.

Currently, Health Canada has put 5,200 kilograms of CannTrust’s product on hold. As part of a review, the company has voluntarily put on hold another 7,500 kilograms of products from its Vaughan, Ont.-facility.

CannTrust’s total harvested production for the quarter ended March 31, 2019, amounted to 9,424 kilograms.


2. New research suggests that teens are less likely to use cannabis following legalization than they were before it.

Researchers at Montana State University studied health surveys of U.S. high schoolers between 1993 and 2017.

They noted that overall use of pot among young people in the U.S. increased. However teen use actually declined by nearly 10% in those states that had legalized recreational marijuana for adults. In all cases—before and after legalization—teens use was prohibited.

While 33 states have legalized medical cannabis, only 11 now have also legalized recreational use.

The Montana researchers analyzed data on about 1.4 million teenagers in the U.S., taken from an annual national survey carried out by the U.S. Centres for Disease Control and Prevention.

The findings suggest that legalization has indeed managed to weaken the black market and made it harder for underaged users to access cannabis.

Cannabis sold in dispensaries is also often more expensive, potentially acting as another deterrent for teens.


3. The first state to legalize pot has now surpassed $1 billion in total cannabis-related revenues, while its private sellers counted more than $6.5 billion in sales over the same five-year period.

Colorado’s per-person sales of cannabis are also the highest in the U.S. at an average $280 per year. Washington and Oregon—the second and third states to legalize pot—follow with $220 and $130, respectively.

The state’s cannabis-related revenue equals just 3% of its annual budget. Still, most of those proceeds have gone directly to education, health care, literacy and drug prevention programs.

As of June 2019, Colorado had 2,917 licensed marijuana businesses and 41,076 individuals licensed to work in the industry.


4. The Alberta government collected $30 million in taxes from cannabis in the first six months of legalization—well above its own estimates.

That tax revenue from retail sales was $4 million over the government’s own projections, according to the province’s fiscal year-end financial statement.

Tax on cannabis is collected by Ottawa as an excise tax (tax on production), with 75% of it returned to the provinces.

“Cannabis excise tax was up $4 million from Budget 2018 due to higher than expected Alberta Gaming, Liquor and Cannabis (AGLC) purchases of recreational cannabis from licensed producers,” said Alberta Treasury Board and Finance in a statement.

The AGLC also generated nearly $77 million in cannabis sales between October 17, 2018, and March 31, 2019; Most of that was through online sales and through sales to private retailers. The industry regulator saw a profit of $4.7 million on those transactions.


5. The U.S. Food and Drug Agency is pointing to initial research suggesting non-intoxicating cannabis compounds (CBDs) may cause liver damage in some users.

The FDA continues to study the potential health benefits and risks associated with CBD concentrate, produced from both cannabis and hemp. However, an earlier look at the compound for approved use as an epilepsy drug raised questions about possible side effects on the liver.

During the clinical trials for the CBD-based epilepsy drug Epidiolex—approved for the U.S. market in 2018—researchers found the medication caused liver toxicity in some patients.

“The FDA identified certain safety risks, including the potential for liver injury,” writes the agency.

In addition to cannabis-derived CBD, however, Epidiolex contains other ingredients, such as dehydrated alcohol, sesame seed oil and sucralose. That adds to the challenge of isolating cannabis compounds as the direct cause of any negative side effects.


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