Cannabis in the news January 16, 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 the stories that we believe will mean most to you as a Canadian investor.

1. Canopy Growth Corp. is making a federally-sanctioned move into the U.S. with its plan to build at $150 million hemp production facility.

The project is set for New York and comes after state regulators granted the Canadian cannabis company a hemp licence. Hemp is a member of the cannabis family, but without the chemical compound responsible for a pot-induced high.

The newly approved U.S. farm bill legalizes hemp and hemp-derived cannabidiol, and has opened the door for Canadian pot producers to legally enter the U.S. without running afoul of a federal ban on marijuana.

Canopy’s New York licence lets it process and produce hemp. The company also plans to establish a hemp industrial park focused on extraction and product manufacturing. Hemp’s cannabidiols have been created with the same medicinal benefits as those in marijuana.

2. The 25 companies that have won the right to apply for a cannabis retail licence are now fielding partnership offers from the industry’s large companies.

The Alcohol and Gaming Commission of Ontario used a lottery draw last week to make the selection from hundreds of expressions of interest.

All the companies selected have five business days to turn in their applications along with a $6,000 non-refundable fee and a $50,000 letter of credit.

The industry’s large producers are now approaching those potential licensees with partnership offers, although any stake they win in those new retail companies will be capped at about roughly 10%.

The government has divided up the licences regionally: five for the eastern part of the province, seven for the west, two in the north, six for the Greater Toronto Area and five for the City of Toronto, itself.

Currently, recreational cannabis can only be purchased legally in Ontario through the government-run website. Those private sellers will be allowed to open for business as early as April 1, 2019.

3. Large industry retailers in other provinces are now criticizing the Ontario government’s decision to pick its limited number of licencees using a lottery system.

“Taking 25 would-be, hopeful retailers, bringing them in and hoping that they’re going to be successful? That’s very low probability,” said Mark Goliger, CEO of National Access Cannabis Co. (NAC), in an interview with BNN Bloomberg this week. “In fact when you look at it, almost two-thirds of the applicants were sole proprietors.

“That just shows to me in a controlled-substance retail environment that these were people that were strictly buying a lottery ticket.”

NAC operates seven cannabis stores in Manitoba under its Meta brand as well as 14 NewLeaf-branded locations in Alberta. Goliger points to Manitoba’s selection process—which used a requests-for-approval process—as better designed to ensure a successful retail environment.

“They picked four who were successful applicants out of hundreds, based on the merit of their proposal and their ability to actually execute,” he said. “I think that that would have been a logical first (step).”

4. Another of the country’s food chains is planning to enter the cannabis retail market through a joint venture with an industry player.

Cannabis producer WeedMD Inc. will now partner with Pita Pit Canada in a joint venture aimed at developing a pot retail presence across the country. The move comes in anticipation of the legalization of marijuana “edibles” this fall.

WeedMD’s venture with Pita Pit will likely leverage a franchise-type model to help entrepreneurs open their own pot shops where provincial laws allow.

“We’ve spent years learning and perfecting the skills we have in our businesses such as finding locations and hiring people,” Pita Pit CEO Chris Fountain told BNN Bloomberg.

Unlike Second Cup’s joint venture, which will see some of its existing locations converted to cannabis retailers, the chain of sandwich shops says none of its more than 200 locations will get converted.

5. B.C. cancer researchers will be the first to undertake a national clinical trial aimed at establishing the symptom relief benefits of marijuana.

Depending on Health Canada and ethics approvals, B.C. Cancer will recruit 150 patients from across the province as well as Calgary, Winnipeg, Ottawa, Kingston and Toronto for a 48-day trial. The goal is to investigate whether cannabis properties reduce cancer-related symptoms including pain, sleep disturbance, anxiety and nausea.

Anonymous private donors will provide $1 million in funding for the randomized, double-blind, placebo-controlled study.

Researchers will use an organic oil-based cannabis product donated by the Whistler Medical Marijuana Corp.—now a subsidiary of Aurora Cannabis Inc.

Dr. Pippa Hawley, who’ll lead the study, says Canada’s legalization of marijuana has paved the way for the research, which may support or contradict anecdotal evidence of cannabis’s medicinal benefits for cancer patients.


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