CORONAVIRUS AND ITS IMPACT ON THE CANNABIS INDUSTRY VALUE CHAIN
Coronavirus (COVID-19) is crippling the cannabis industry value chain, especially businesses focused on the vaping and packaging segments. The number of people infected with COVID-19 across the globe has topped 118,000 as the outbreak spreads to more countries, resulting in more than 4,200 deaths and causing economic damage across industries and financial markets worldwide. The U.S. imports about 30 million Chinese vape pens and cartridges every month and, according to California online vape retailer ProVape, about 1,000 factories in China produce 90% of the world’s vaping devices, with Chinese manufacturers producing almost all cannabis vaporizers, cartridges, and batteries. As these manufacturing plants have been shut due to the Chinese government’s quarantine measures, the supply chain for these critical elements has been crippled. Vaping companies in North America are being told that their products are on back order and that they should stock up on vape hardware to avoid any issues in the coming months. This is corroborated by cannabis hardware provider Feather, which counts Organigram (OGI) among its largest customers and is experiencing shipment delays of two to four weeks due to epidemic-related factory shutdowns. Even though the Chinese government is making efforts to restore normalcy, manufacturers are not rushing to resume regular operations and even the ones that have managed to reopen have to comply with stringent measures to prevent the spread of the virus, implying that the supply squeeze is only going to worsen in the months to come and will hurt the cannabis industry in the form of higher input prices and lower sales. Apart from vapes, the other segment that will be negatively affected by the shutdown is Packaging. Most of the packaging materials utilized by cannabis companies are manufactured in China, so a supply shortage will result in a production slowdown and rise in raw material costs (and thus lower margins) for packaging players like KushCo (KSHB) which is a key supplier to large LPs and MSOs and whose stock has more than halved from $2.07 at the end of January to less than $1 right now as investors try to assess the impact of COVID-19 on its business.
The negative impact on the industry’s value chain is reflected in the fall in cannabis stocks across the board – this will worsen the funding crunch already hurting North American cannabis operators. Given the interlinkages in the value chain, a shortfall in vaping devices, packaging materials, batteries, and other key inputs means that LPs and MSOs will be unable to service their target markets effectively. Further, growing aversion to public gatherings means that social consumption – a key demand driver for Cannabis 2.0 products – will suffer, thus resulting in earnings pressure on cannabis operators that have yet to recover from the regulatory headwinds, oversupply, shortage of retail outlets, and senior management exits of 2019 and were facing a very challenging funding environment even before the coronavirus scare set in. The effect is visible on stock prices as all major cannabis ETFs – THCX, MJ, YOLO, and POTX – are down 30% to 35% YTD and are underperforming the S&P 500 by a huge margin. And with global macroeconomic events like the fall in oil prices triggering a spike in volatility, stocks – especially those in an out-of-favor sector like cannabis – are likely to face more selling pressure in the days to come. This will further limit the fundraising ability of cannabis companies and result in a faster-than-expected industry shakeout, including consolidation.
There is, however, a silver lining amid all this gloom as U.S. hemp producers could emerge as beneficiaries of the fall in imports from China. Driven by federal legalization of hemp in the 2018 Farm Bill, the U.S. CBD industry is expected to grow from $5 billion in 2019 to $23.7 billion in 2023, according to Brightfield Group. To meet this demand, U.S. farmers planted an estimated 288,000 acres of industrial hemp in the U.S. in 2019, up from 78,000 acres in 2018. However, they face competition from China which is the world’s second largest producer of hemp after the U.S. Rising domestic supply and increasing Chinese imports have resulted in an oversupply situation in the U.S. hemp market and a m/m fall in hemp prices since July 2019. While the fall in imports from China will pressure hemp fiber manufacturers in the short term, long-term production delays will boost interest in fiber products grown in the U.S., especially nonwoven products like construction components. This will help the industry address oversupply concerns and emerge as a key supplier to the domestic market as cannabis businesses are likely to revisit their supply chains and increase the share of domestic suppliers in order to de-risk their business from global shocks.
STATE AND REGULATORY NEWS
Expected delay in vote on WHO cannabis scheduling recommendations spurs U.S. official to express ‘regret’ over decision. A United Nations drug policy agency is expected to postpone a vote on the World Health Organization’s cannabis scheduling recommendations, prompting a U.S. representative in Vienna to voice “regret” over the delay. Several other countries, however, welcomed the expected postponement of the vote until December. The expected delay by the United Nations Commission on Narcotic Drugs (CND) involves several changes to how cannabis is scheduled in international drug control treaties, a decision that would have significant implications for the regulated industry. Read More (Marijuana Business Daily)
Super Tuesday results: What they mean for cannabis. Joe Biden and Bernie Sanders sit at the far ends of the legalization spectrum within the Democratic Party. Biden was a primary architect of the drug war in the 1980s and 1990s, and even today can’t bring himself to consider federal legalization. He says he’s for decriminalization instead. Sanders, by contrast, has a long record of advocacy for legalization and drug reform. The Vermont senator has said he will end federal prohibition “on day one” by executive order. We’ve heard two main arguments in each candidate’s favor. Because of his explicit “day one” promise, Sanders would certainly kick-start the process of federal legalization. Those who back Biden argue that the former Delaware senator has the backroom bargaining skills—unlike Sanders—to hammer out a deal with Congressional Republicans to at least pass a half-measure like the STATES Act. Read More (Leafly)
Marijuana businesses fight state efforts to limit THC content in flower, concentrates. Lawmakers in several states have sought to limit the amount of THC in cannabis – moves that, if successful, would likely result in costly business adjustments, loss of sales to illicit markets and other disruptions. Marijuana industry officials fighting back against the limitations say the proposals are based on questionable science, including a controversial study that suggests a correlation between high-potency marijuana and psychosis. Industry watchers predict the efforts to cap THC at levels of 10% and even lower will likely fail this year. Some states have already watered down proposed measures or abandoned them. But the anti-THC trend is worrisome to the cannabis industry and an issue many say businesses need to keep an eye on. Read More (Marijuana Business Daily)
California lags other adult-use markets in per-capita marijuana sales. California’s per-capita cannabis sales by the second year of operations only added up to $70 per customer. By comparison, year two per-capita sales in Colorado were $99, Oregon’s were $97 and Washington state’s $89. The discrepancy can be attributed to many factors, including: 1) The strength and resilience of the illicit market in California, which continues to capture a significant amount of consumer cannabis spending, 2) Price differences between legal and illegal cannabis. The illegal market is not subject to the 30%+ retail tax rate consumers pay in most cities nor the $9.65 per ounce tax on wholesale adult-use cannabis, and 3) Limitations set by California municipalities on where cannabis businesses can operate. Read More (Marijuana Business Daily)
Marijuana retailers near Illinois borders benefit from out-of-state customers, offer warnings on crossing boundaries with marijuana. Cannabis retailers in Illinois border towns are seeing strong sales to customers from neighboring states but are spending time and money training their employees to warn people that it is unlawful to transport marijuana across state lines. While adult-use marijuana shops in Illinois declined to report the exact percentage of customers who came from other states, they did describe the number as “many.” Out-of-state customers who are 21 years old and have a valid driver’s license can purchase cannabis in Illinois, which offers expanded sales opportunities to marijuana shops that are near the state’s borders in particular. But it is illegal to cross state lines with cannabis. Read More (Marijuana Business Daily)
Legal marijuana sales in Illinois total nearly $35 million for February. Statewide legal marijuana sales in Illinois totaled nearly $35 million in the month of February, according to the state. The Illinois Department of Financial and Professional Regulation announced preliminary numbers showed statewide sales totaled $34,805,072.01 for February. Dispensaries sold 831,600 items in total, with $25,615,371 worth being purchased by Illinois residents, and $9,189,701.01 being purchased by out-of-state residents. The figures do not include taxes collected. The state charges a 7% tax on the sales of cannabis by cultivators and craft growers to dispensaries. The governor’s office has estimated cannabis tax revenues will grow to $127 million in fiscal year 2021, which begins July 1. Read More (CBS Chicago)
Prices surge for wholesale cannabis flower in Illinois as demand outstrips supply. Wholesale marijuana flower prices in Illinois are soaring as strong demand in the state’s nascent recreational cannabis program puts a strain on supply and cultivators scramble to build out facilities. Illinois adult-use cannabis sales started gangbusters in January, with retail sales hitting $40 million in the first month – one of the strongest starts for an adult-use market since state-legal recreational sales began in the U.S. cannabis industry. Sales dipped in February to $35 million, but the month had two fewer shopping days and some of the early excitement may have faded, if only slightly. Marijuana business owners in the state report pounds of wholesale cannabis flower are selling for: 1) Average-quality indoor: $3,500 ($3,300 for medical marijuana a year ago) and 2) Premium-quality indoor: $4,000 ($3,500 for medical marijuana a year ago). Read More (Marijuana Business Daily)
In San Francisco, cannabis business hasn’t hit the highs expected when it went legal. High prices, increased competition, and a largely unchecked illegal market have taken the bloom off San Francisco’s budding cannabis business. “It’s a mess,” said Erich Pearson, a longtime cannabis activist and CEO of SPARC, which operates three cannabis outlets in the city. And no one knows how to fix it. A recent report from the city controller showed total retail sales of medical and recreational cannabis rose steadily each year to $223 million in 2018 — that’s $100 million more than in 2015. Recreational cannabis became legal in late 2016, while medicinal sales have been permitted since 1996.. Read More (San Francisco Chronicle)
Why is New York’s medical marijuana program insanely expensive? Notoriously byzantine in its policies, New York appointed a limited number of vendors, requiring them to vertically integrate their services, from seed to security guard. This presented enormous barriers to entry and now just 37 shops are run by 10 companies, many owned by multi-state or multinational corporations. With a medical card, a person can visit one of the retail outlets in New York state, and with recent developments, they can even get home delivery. But their card and patient recommendation expire each year, requiring a renewal that incurs fees ranging from $50-200 each year. Once they’re in the door, another hurdle appears in the form of exorbitant pricing, much more than what you see at shops in legal states. Read More (Leafly)
Maine’s recreational marijuana launch delayed until June. Adult-use cannabis sales in Maine will likely kick off in June, three months later than initially anticipated. Recreational sales were expected to begin in March. But a state revenue forecasting committee telegraphed the delay by changing the date it projects the first sales tax revenue from marijuana to arrive, the Portland Press Herald reported. The state Office of Marijuana Policy said it has received 197 adult-use marijuana applications. Of those, 80 are considered complete enough for a regulatory review. Read More (Marijuana Business Daily)
Ohio activists formally file measure to put marijuana legalization before voters this year. Reform advocates in Ohio took a first step toward putting a marijuana legalization initiative before voters this year on March 2. The “Regulate Marijuana Like Alcohol” measure would allow adults 21 and older to purchase, possess and cultivate cannabis for personal use. Possession would be capped at one ounce, and individuals could grow up to six plants, three of which could be mature. Under the proposal, the state Department of Commerce would be responsible for regulating the marijuana market and issuing licenses for cannabis businesses. Read More (Marijuana Moment)
U.S. Cannabis Spot Index up 2.3% to $1,389 per pound, September forward initially assessed at $1,400 per pound. The simple average (non-volume weighted) price decreased $6 to $1,572 per pound, with 68% of transactions (one standard deviation) in the $838 to $2,306 per pound range. The average reported deal size decreased to 2.0 pounds. In grams, the Spot price was $3.06 and the simple average price was $3.47. The average reported forward deal size was 39 pounds. The proportion of forward deals for outdoor, greenhouse, and indoor-grown flower was 50%, 33%, and 17% of forward arrangements, respectively. Read More (Cannabis Benchmarks)
Pot banking legislation won’t have much impact. The chances that cannabis banking legislation will pass before the November election are dimming by the week, but the author of the Department of Justice’s 2014 guidance on pot banking says it may not matter anyway. “For those banks that are on record as saying, ‘We will never bank this industry so long as it remains federally illegal,’ SAFE Banking doesn’t change a thing,” John Vardaman, former head of policy at the DoJ’s money laundering section, said in an interview. “At this point, there’s only so much more than can be done short of legalization.” Read More (Bloomberg)
Feds subpoena records from CA marijuana firm Weedmaps and others. Prosecutors for a U.S. attorney’s office in California issued a grand jury subpoena for records related to 30 marijuana companies, including the parent of Weedmaps. Although the purpose of the investigation by the U.S. attorney for the Eastern District of California is unclear, according to MarketWatch, a subpoena was issued to Ghost Management Group, which owns California-based Weedmaps. The subpoena “covers documents related to cannabis businesses listed on Weedmaps and records related to its ordering service,” MarketWatch reported. Read More (Marijuana Business Daily)
Ontario’s cannabis vape, edibles sales surpass CAD $4 million in January. Roughly CAD $4.4 million ($3.3 million) worth of cannabis edibles and vape products were sold via wholesale and online channels in Ontario in January, the first month the products were available in the nation’s largest consumer market. The figures indicate strong demand from consumers, the Ontario Cannabis Store said in a statement. Demand for edibles has exceeded supply levels from producers, the OCS said. In January, sales of edibles were CAD $569,000. Sales of vape products were CAD $3.8 million in the month. Read More (Marijuana Business Daily)
Total spend on alcoholic beverages increased by 2.6% y/y while cannabis spend increased 3.6% y/y in 2019. Starting last year, the Canadian government started issuing the quarterly spend on cannabis alongside alcoholic beverages and tobacco. In the chart below, Cannabis Benchmarks has aggregated the cannabis spend for medical, legal recreational, and illicit products. Interestingly, all three product categories illustrated below observed steady to slightly rising sales over the past 12 quarters, or three years. It was thought that the legalization of cannabis would have cut into the alcoholic beverages sales, but so far that has not been the case. From 2018 to 2019, the total spend on alcoholic beverages increased by 2.6%, while the cannabis spend increased by 3.6%. Read More (Cannabis Benchmarks)
Cannabis greenhouse retreat continues as Canopy closes two facilities, sheds 500 jobs. Canopy Growth (CGC) announced the closure of two British Columbia greenhouses, in Aldergrove and Delta. The closures will result in about 500 job losses, which are becoming more commonplace in the cannabis industries in Canada and the U.S. The greenhouses, opened in 2018, account for about 3 million square feet of licensed cannabis production space. The cuts are part of an “organizational and strategic review” to “align the company’s cultivation capacity with projected demand,” according to a Canopy news release. The company blamed the closures on a market that developed “slower than anticipated,” although, as far back as 2017, experts were warning Canadian producers to hit the brakes on spending. Read More (Marijuana Business Daily)
Cresco Labs’ co-founder resigns as President. Joe Caltabiano, the co-founder of multistate marijuana operator Cresco Labs (CRLBF), announced he has resigned as president of the Chicago-based company, becoming the second high-profile founder to step down from a top post in less than a week. Caltabiano will continue to serve on the board of Cresco, one of the largest vertically integrated marijuana companies in the U.S. “As the founder who brought the initial idea of entering into the regulated cannabis industry to the original Cresco team in 2013, this day is bittersweet,” Caltabiano said in a statement. Caltabiano, who co-founded Cresco Labs in 2013, didn’t give many details about why he is stepping down, other than to say in a statement that, “as a serial entrepreneur, I know it’s time for the next challenge.” Read More (Marijuana Business Daily)
Organigram expands leadership team with the appointment of chief strategy officer and newly appointed chief financial officer. Organigram Holdings (OGI) announced that effective March 4 Paolo De Luca, the company’s current chief financial officer (CFO) has been appointed chief strategy officer and Derrick West, currently on the company’s board of directors, is joining the company as its CFO. “In this highly dynamic and growing industry, we are strengthening the skill and scope of our leadership team,” said Greg Engel, chief executive officer. “I am thrilled to have Paolo take on the role of chief strategy officer. He has been intimately involved in our strategy development since he joined Organigram and has an excellent track record of rapidly and profitably scaling the company through substantial growth.” Read More (Business Wire)
The Valens Company launches white label cannabis-infused beverages in Canada. Valens (VGWCF) announced the launch of a line of cannabis-infused beverages, produced under a white label agreement with A1 Cannabis Company (a subsidiary of Iconic Brewing). The new line of beverages includes BASECAMP, a CBD-forward iced tea, and SUMMIT, a THC-forward citrus water. BASECAMP will be available at select retailers throughout Ontario in the coming days, with additional markets expected to follow. SUMMIT is expected to be available at select stores in the coming weeks. Read More (Newswire)
48North Cannabis launches first cannabis topical brand in Ontario. 48North Cannabis (NCNNF) announced that it has shipped its first order of its topical brand Apothecanna to the Ontario Cannabis Store for retail sale. As a result, Apothecanna will be the first legal topical brand available to Ontario consumers. To start, 48North will be launching Apothecanna’s Extra Strength cream. The product’s quick absorbing formula works fast to combat sore and overworked areas. Harnessing the power of 48North outdoor grown cannabis, this non-psychoactive formula uses both THC and CBD blended with high-quality healing natural ingredients arnica, peppermint and juniper for targeted relief. Read More (Newswire)
Charlotte’s Web pet products approved for NASC quality and U.S. Hemp Authority seals. Charlotte’s Web Holdings (CWBHF) announced that its edible pet supplements have been approved to carry seals of approval from two of the most trusted organizations in their respective industries, the National Animal Supplement Council (NASC), a non-profit group dedicated to protecting and enhancing the health of companion animals throughout the country and the U.S. Hemp Authority, an organization created for the purpose of helping create standardization and quality across the hemp industry. As the only full-spectrum hemp derived CBD brand to comply with both the NASC Quality Seal program and the U.S. Hemp Authority Certification Program, Charlotte’s Web is further validating to pet owners why it is known as The World’s Most Trusted Hemp Extract. Read More (Extraction Magazine)
More Canadian cannabis companies receive EU-GMP certifications. Two Canadian cannabis companies received EU-Good Manufacturing Practice (GMP) certification, an essential step to exporting medical marijuana to markets in the European Union. Brampton, Ontario-based producer Northern Green Canada received its EU-GMP certification March 4. On the same day, Eve & Co. (EEVVF) subsidiary Natural MedCo earned a certificate of EU-GMP compliance for its Strathroy, Ontario, facility. “This certification enables us to continue in our global growth strategy and fulfill contracts in the EU market,” Eve & Co CEO Melinda Rombouts said in a statement. Eve has inked three nonexclusive agreements to supply medical cannabis to the German market. So far, the certification has not been the revenue-generator Canadian companies predicted. Read More (Marijuana Business Daily)
CBD uncertainty in the U.S. market prompts $112 million Tilray write down. Canadian marijuana producer Tilray (TLRY) is lowering the value of its U.S. CBD assets, citing delays from health regulators. Tilray executives reported a $112 million writedown of the value of its 2019 agreement with Authentic Brands Group. The two companies planned to bring CBD products to mass retail outlets, but the lack of direction from the U.S. Food and Drug Administration on CBD has slowed the rollout, Tilray executives told investors. The company also said it will slow investment in the hemp company it acquired, Manitoba Harvest. “We are closely monitoring the FDA’s guidance around CBD and await further clarity before we make further investments in this market,” said Rachel Perkins, Tilray’s senior vice president. Read More (Hemp Industry Daily)
Harvest One provides strategic update and announces Q2 2020 financial results. Harvest One Cannabis (HRVOF) announced its financial and operating results for the three and six months ended December 31, 2019, as well as an update on the company’s strategic plan. Net revenues from the company’s cultivation division were negatively impacted due to industry wide factors. The decrease in net revenue was primarily attributable to product returns, pricing adjustments and reduced provincial orders in comparison to the prior year. Despite this, its consumer division continued to show steady results with 11% revenue growth over the previous quarter. Read More (Newswire)
Investors target distressed cannabis companies for new opportunities. An increasing number of investors – including mainstream investment banks new to cannabis – have begun seeking out cash-strapped marijuana companies with the aim of pumping money into them to provide a financial lifeline. The investments offer the distressed companies a chance to get back up on their feet. In return, investors get the opportunity to take a financial stake in a company, restructure it and put the business on the road to recovery – all with the aim of making a profit on the investment. Read More (Marijuana Business Daily)
Deals have dried up in cannabis, but that may be starting to change. When the bottom fell out for public cannabis companies last summer, appetite for acquisitions quickly soured. Signs are emerging that deal making activity may be returning to cannabis, but it won’t be like the Wild West-style land grab days of before. In its latest weekly Viridian Deal Tracker reports, the firm identified several trends indicating an increase in M&A activity: Businesses are signing letters of intent, raising more money, and building better balance sheets. Also waiting in the wings are a freshly funded crop of blank-check companies looking to buy in cannabis. Read More (CNN)
Interesting demographic may open up cannabis ETFs. Data suggest more and more seniors are indulging in cannabis, be it for medicinal or recreational use. “An increasing number of states have licensed cannabis sales, so a couple of geriatrics researchers wondered how many of the new users are elderly,” reports Bill Alpert for Barron’s. “Plenty, it turns out, according to a study published in the Internal Medicine imprint of the Journal of the American Medical Association.” According to Barron’s, “Survey data collected by the federal government showed that the proportion of seniors reporting pot use rose from 0.4% before 2007, to nearly 3% by 2016. As legalization has spread to new states, Han and Palamar found, the share of people 65 or older using cannabis increased from 2.4% in 2015 to 4.2% in 2018.” Read More (ETFdb.com)
Did market saturation and overspending cause 2019 cannabis market slump? In the case of the cannabis industry, there was far too much money spent building an infrastructure, including enormous investments in the technology, packaging, regulatory lobbying, and adjustments to the new and ever-changing regulatory environments. All of this happened without showing investors much in the way of profit, if any. Market saturation will all depend on the regulatory oversight and the behavior of the federal government. In Canada, the market is saturated, and they now need more brands and products instead of more growing capacity. The effects of different markets coming online—Colombia being a prime example—that will be able to export the product all over the world, and their effects on market saturation, are difficult to gauge at this time. Read More (Cannabis Business Times)
Green Thumb inks $50 million cannabis sale-leaseback deal in Illinois. Multistate marijuana operator Green Thumb Industries (GTBIF) on March 9 announced it has sold an Illinois cultivation and processing facility to Innovative Industrial Properties (IIPR) in a sale-leaseback deal valued up to $50 million. IIPR paid $9 million for the property in Oglesby, Illinois, and plans to make up to $41 million in upgrades to the property. This is the largest of three sale-leaseback deals Chicago-based Green Thumb has done with the California real estate investment trust. Read More (Marijuana Business Daily)
Bruce Linton launches $150 million cannabis SPAC. Bruce Linton revealed that he would soon announce his involvement with a special purpose acquisition corporation (SPAC) in order to potentially bring a company public, joining several other SPACs that have raised in excess of $1 billion to deploy into the cannabis industry. Collective Growth Corporation, which intends to trade its units on the NASDAQ with the symbol “CGROU”, filed an S-1 registration statement to raise $150 million by selling 15 million units that include shares at $10 with $11.50 warrants for 1/2 of a share. 52 days after trading commences, the company expects that the shares will begin trading with the symbol “CGRO” and the warrants with the symbol “CGROW”. Read More (New Cannabis Ventures)
Linton-backed psychedelics firm Mind Medicine joins NEO Exchange. Mind Med, which claims to be the world’s first publicly traded psychedelic pharmaceutical company, joined the NEO Exchange on March 3. The company, backed by an investment from Dragon’s Den star Kevin O’Leary, develops medicines derived from psychedelics to address “significant unmet medical needs.” The first goal is finding a solution to address the opioid crisis and other forms of addiction, but it’s also studying the efficacy of microdosing. Going public, the company says, will give it access to new capital and help it build a pipeline of clinical trials for psychedelic inspired medicines. Read More (BNN Bloomberg)
Rapid Dose Therapeutics enters into investment agreement. Rapid Dose Therapeutics (RDT) has entered into an investment agreement with an institutional investor, which will see the company secure a drawdown equity financing facility in the amount of $10 million over the span of two years. The company plans to use the proceeds to increase its international manufacturing and distribution agreements, as well as support its product development. As per the agreement, RDT will be able to efficiently access $500,000 worth of private placement tranches at a time, which will consist of a purchase warrant and a common share in the company. The holder of the private placement securities will be able to purchase them at a reduced rate anywhere between 15% to 20% of the market price. Read More (the deep dive)
Vireo Health raises CAD $10.5 million selling stock and warrants. Vireo Health International (VREO-CA) announced it has closed the first tranche of a non-brokered private placement offering of 13,651,574 units of the company. The offering was authorized at a price per unit of CAD $0.77 for up to a total amount of U.S. $10,000,000. “This financing reflects the confidence of the capital markets in the potential growth of sales and margin for Vireo,” said Executive Chairman, Bruce Linton. “There are significant opportunities across our existing footprint to leverage increasing scale to improve sales growth and operating performance, especially considering that we anticipate as many as seven of our medical-only state markets could enact recreational-use legislation over the near- to mid-term future.” Read More (New Cannabis Ventures)
MGC Pharma enters Europe with exclusive supply deal in Poland. ASX-listed medicinal cannabis player, MGC Pharma (MGCLF), has gained exclusive access to a key market in Europe after signing a commercial, wholesale supply agreement with a Polish NGO known as Cannabis House Association and the Forensic Laboratory of the Faculty of Law and Administration at the University of Lodz to supply a large-scale research project in Poland. Under the exclusive deal, MGC Pharma said it will supply its cannabinoid medicine products to 15 pharmacies initially, up to 50 pharmacies within nine months with around 250 outlets set to roll out within two years. The company will also provide scientific support to the commercial research study while gathering participant data on the effects of its products on medicinal cannabis users. Read More (The West Australian)
New Michigan rule could increase business for cannabis growers. Michigan regulators agreed to phase out medical marijuana caregivers, a move that could generate more business for the state’s licensed cannabis growers and processors. Authorized caregivers who grow cannabis have been the biggest supplier of marijuana products to retailers. Starting October 1, medical cannabis caregivers will be prohibited from selling product to licensed businesses, the Marijuana Regulatory Agency said in a bulletin. “The Marijuana Regulatory Agency’s goal is to stimulate business growth while protecting patient safety,” according to the bulletin. To reach that goal, the MRA will phase out the “transfer of marijuana and marijuana products into the regulated market from caregivers.” Read More (Marijuana Business Daily)
As Utah’s medical cannabis program launches, some patients report problems registering. The day that Utah’s medical cannabis program launched, qualifying patients reported some problems registering with the state. Utah’s Department of Health confirmed that some patients were having trouble accessing a website set up by the state to register people. The agency had staff on hand to work through problems. “There was a small glitch earlier, but it’s working now,” UDOH spokeswoman Charla Haley said. Read More (FOX 13)
Alabama lawmakers approve medical marijuana legalization bill. An Alabama Senate committee approved a bill that would legalize medical marijuana in the state. The legislation would allow patients with qualifying conditions to purchase cannabis products from licensed dispensaries. It would be a limited system, however, prohibiting patients from smoking or vaping marijuana. The proposal would establish the Alabama Medical Cannabis Commission, which would be responsible for overseeing a patient registry database, issuing medical cannabis cards and approving licenses for marijuana dispensaries, cultivators, transporters and testing facilities. Read More (Marijuana Moment)
More than 35,000 in Missouri approved to buy medical cannabis. In a sign of strong demand that bodes well for the nascent medical marijuana market in Missouri, regulators already have approved more than 35,000 patient registrations. Medical cannabis sales won’t begin in Missouri until late summer at the earliest, but 35,532 patients have successfully registered to use medical marijuana to treat certain qualifying conditions. The number of registered patients far exceeds what had been projected this early in the process by researchers with the University of Missouri’s Economic and Policy Analysis Research Center. Such interest in medical cannabis could prove a boon for MMJ businesses in Missouri, where Marijuana Business Daily estimates annual sales could eventually reach $300 million. Read More (Marijuana Business Daily)
Rhode Island poised to triple number of medical marijuana dispensaries. Rhode Island regulators are expected in the coming weeks to announce the licensing application period for six new medical cannabis dispensaries. The new licenses awarded by the Department of Business Regulations will be assigned using a lottery system. Currently, Rhode Island has only three operating dispensaries, called compassion centers in the state. There will be one dispensary for each of the six geographic zones in Rhode Island. An applicant who applies for a compassion center license may submit only one application per zone, according to a final version of a new medical marijuana regulation released by regulators. Read More (Marijuana Business Daily)
FDA finally sends overdue CBD enforcement update to Congress. The Food and Drug Administration (FDA) issued an update to Congress on the status of rulemaking for CBD. While the process remains ongoing, the agency announced that it is actively exploring pathways to allow for the marketing of cannabidiol as a dietary supplement and is developing enforcement discretion guidance. It will also be reopening a public docket to solicit additional scientific information about the risk and benefits of the cannabis compound. “FDA is currently evaluating issuance of a risk-based enforcement policy that would provide greater transparency and clarity regarding factors FDA intends to take into account in prioritizing enforcement decisions,” the agency told lawmakers. Read More (Marijuana Moment)
FDA pledges action against ‘unlawful CBD products’ while offering confidentiality for research. The U.S. Food and Drug Administration (FDA) said it will continue to “take appropriate action against unlawful CBD products that pose a risk of harm to the public,” even as the federal agency implored the industry to collaborate with the government to study CBD’s possible benefits and dangers. The statement on March 5 from new FDA Commissioner Dr. Stephen Hahn did not mention a timeline for when the agency will release CBD-usage guidelines, which businesses have been expecting for several months. But there were some new positions staked out in the memo issued in response to pressure from Congress to issue regulations allowing the sale of hemp-derived CBD without a doctor’s prescription. The FDA said for the first time that it wants to learn the difference between full- and broad-spectrum CBD products. Read More (Hemp Industry Daily)
Hemp industry is not raising expectations with new FDA chief. The nation’s top drug regulator set a new tone for the government’s stance on CBD in his first comments about the popular hemp extract. But longtime hemp entrepreneurs say they’re not raising their expectations that changes are imminent to the way the U.S. regulates hemp extracts. The newly appointed commissioner of the U.S. Food and Drug Administration (FDA), Dr. Stephen Hahn, recently said his agency is moving forward with regulations for a domestic retail CBD market. “We’re not going to be able to say, ‘You can’t use these products.’ It’s a fool’s errand to even approach that,” Hahn said February 26, during the organization’s winter conference. Read More (Hemp Industry Daily)
USDA: ‘Difficult to imagine hemp matching corn or soybeans.’ A report from the U.S. Department of Agriculture (USDA) that summarizes development of the industrial hemp sector is not necessarily upbeat about the future, calling hemp a “specialty crop,” and noting: “It is difficult to imagine…the demand for acres for industrial hemp matching the demand for acres to grow corn or soybeans for animal or human food.” While noting that pilot hemp programs created under the 2014 U.S. Farm Bill were “successful” in restarting hemp as a crop, the report concludes that “some common challenges and lessons learned in moving production beyond the pilot programs have become apparent.” Read More (Hemp Today)
Minnesota floats idea of central regulator for hemp, marijuana. Minnesota regulators are calling for a one-stop office that would oversee all aspects of hemp and medical marijuana – as well as a potential adult-use cannabis market. The office also would oversee the state’s fast-growing CBD market. A central office, among other things, would help the state deal with unregulated and mislabeled products, according to the Minneapolis Star Tribune. Four Minnesota agencies – the Minnesota Pharmacy Board and the state’s Agriculture, Health and Public Safety departments – requested that an Office of Cannabis Management be created to streamline the process of governing the medical marijuana and CBD industries. Read More (Hemp Industry Daily)
Ohio Department of Agriculture accepting applications to grow, process hemp. The Ohio Department of Agriculture announced March 2 it will accept applications for three-year licenses to grow and process hemp. The application window begins at noon March 3 and is open through May 1. Cultivation and processing licenses are separate. Unlike the Ohio Medical Marijuana Control Program, there is no cap on license holders for hemp. Department rules require each license applicant to undergo a criminal background check. Read More (Cleveland.com)
CBD retail giant to focus on marijuana dispensaries as it sells part of its business. An Ohio-based cannabis retailer that owns the nation’s largest chain of CBD retail kiosks in malls is selling most of that business to focus on running marijuana dispensaries instead. Green Growth Brands’ (GGBXF) announcement caps a tumultuous year for the company, which laid off 50 workers in September from its Columbus headquarters. GGBXF also reported a loss of $35.9 million in the fourth quarter of 2019. The loss was an increase of 149% from losses in the fourth quarter of 2018, when the company reported a deficit of $14.4 million. Read More (Hemp Industry Daily)
Cannabis firms BR Brands, Dixie to merge hemp, marijuana portfolios in $43 million deal. Connecticut-based BR Brands, which owns and distributes a range of marijuana and hemp products, announced that it will merge with Denver-based Dixie Brands (DXBRF) in a $43 million reverse takeover. Dixie Brands is a consumer-packaged goods company and manufacturer of cannabis-infused products, including Aceso Hemp, a line of hemp-derived supplements for humans, and Therabis hemp-based products for pets. Under the terms of the transaction, BR Brands will own 80% of the merged company and Dixie shareholders will possess the remaining 20%. The transaction is expected to be completed in the third quarter of 2020. Read More (Hemp Industry Daily)
Canada to offer ‘value’ marijuana brands to compete with illegal market. Canadian cannabis companies are introducing lower-priced, “value brand” marijuana in a bid to overtake sellers on the illegal market, who reportedly account for nearly 70 percent of the country’s total cannabis sales. The strong competition has prompted three of Canada’s biggest cannabis producers (Canopy Growth (CGC), Tilray (TLRY), and Aurora (ACB)) to introduce lower-priced marijuana products offering equal, if not better, value for money. Twd., Canopy’s value brand, is offering a one-ounce product this April called “Twd. 28”, which will be priced at $4 per gram, with a THC (tetrahydrocannabinol) potency level of 13 to 25 percent, CNBC reports. Read More (Newsweek)
Tinley Beverage’s Beckett’s product line begins distribution. The launch of Tinley Beverage’s Beckett’s line of non-infused alcohol-free beverages for the sober curious movement has begun. The company announced that they have begun shipping their Beckett’s line of product to over 150 BevMo! retail locations across Arizona and California, with Washington to soon follow. The shipping of product to the West Coast’s second largest alcohol retailer is significant for Tinley, marking a new phase in the company’s development. BevMo! currently operates over 200 retail locations up the West Coast, bringing with it significant exposure for Tinley’s branding. Read More (the deep dive)
Nearly 80% of illicit-market vape cartridges collected during buy-back program were unfit for consumption. An illicit-market vape cartridge buy-back program set in motion by Platinum and Miramar, California’s Mankind Dispensary has revealed that the majority of unregulated vapes collected are unfit for consumption. During the month of September, Mankind’s customers were invited to turn in vape cartridges that had been purchased from sources other than a legal cannabis dispensary in exchange for a Platinum vape cartridge. “We saw that 79% of them were deemed as unfit for consumption overall,” Josh Swider, co-founder and CFO of Infinite Chemical Analysis Labs, tells Cannabis Business Times. “About 80% wouldn’t have passed the California compliance regulations.” Sixty-two percent of the cartridges failed for pesticides, while 37% failed for lead. “One of them [tested] extremely high [for lead]—approximately 100 times the limit,” Swider says. Read More (Cannabis Business Times)
CONSUMER AND SOCIAL TRENDS
Baseball players can smoke marijuana but can’t be sponsored by cannabis companies, MLB says. With spring training now in full swing, Major League Baseball is further clarifying its stance on marijuana. Players can now consume cannabis without risk of discipline, the league explained in a new memo, but they can’t show up to work under the influence and—at least for now—are barred from entering into commercial arrangements with companies in the marijuana industry. The league also says it’s also teaming with product-testing organization NSF International to analyze and certify legal, contaminant-free CBD products in order to allow teams to store them on club premises. Read More (Marijuana Moment)
Ontario received 450 cannabis store applications on March 2. Approximately 450 cannabis stores applications were filed in Ontario on March 2 – the first day Retail Store Authorization (RSA) submissions were accepted under the province’s new open-market process. The strong interest demonstrates pent-up demand for regulated recreational marijuana stores, experts say. Ontario is pivoting to an open-market store-allocation process after relying on two lotteries to open a few dozen stores since last spring. Ontario expects to start issuing store authorizations for the new applicants “before the end of April,” the AGCO spokesperson said. Read More (Marijuana Business Daily)
Life after the lottery: Cannabis retailers share challenges faced since opening. Lisa Bigioni was awoken last September in the middle of the night by a call from an alarm company that’s been seared in her memory ever since. The 1:30 a.m. alert was linked to her Niagara Falls, Ont. cannabis store, where two men had been caught on camera getting out of their car, smashing the shop window and then driving away. It was enough to send Bigioni, who had been fast asleep, scrambling to meet police at the store. The window-smashing happened just four months after her store opened in June, but is part of an array of challenges cannabis retailers across the country have faced since first welcoming customers. Between inventory levels, security and staffing, the stress of trying to figure out a new industry has been demanding for business owners. Bigioni expected there would be challenges. Legalization, after all, thrust cannabis store ownership into the hands of hundreds of people across the country, many with limited business or pot store experience under their belts. Read More (The Star)
Mexican Senate commissions approve marijuana bill legalizing recreational use. Three Senate commissions in Mexico acting together passed legislation on March 4 to legalize all forms of cannabis, bringing the Latin American country one step closer to launching the world’s largest adult-use program by population. The bill now goes to the full Senate and, once approved there, the lower legislative chamber. The measure might well be revised along the way, but a final approval is expected as the ruling party has the necessary majorities. Mexican lawmakers face an April 30 deadline to legalize cannabis, according to a Supreme Court decision. In addition to recreational marijuana, the bill would legalize cannabis for medical and industrial hemp use. Read More (Marijuana Business Daily)
CBD in the U.K.: What industry players make of the new food rules. The U.K. became a trailblazer in national CBD regulation when its Food Standards Agency (FSA) set a deadline for the industry to apply for European Union (EU) safety evaluations as a “novel food” and also provided consumption guidelines to consumers. The U.K. guidelines, which do not apply to Scotland, came a little more than a year after the EU added hemp extracts and hemp-derived products containing cannabinoids – including CBD – to a list known as the Novel Food Catalogue. The catalogue indicates whether a product will need authorization before being allowed on the market. Read More (Hemp Industry Daily)
U.K. government looks to ease barriers on bulk importation of medicinal cannabis. The U.K. government has announced that it is changing importation restrictions regarding medicinal cannabis, so as to minimize the waiting time for fulfillment of prescriptions. The change allows licensed wholesalers to: (1) import larger quantities of cannabis-based products; and (2) hold supplies for future use by patients with prescriptions. Although there is little detail as to its implementation currently, patients and other stakeholders will no doubt welcome the change, as the UK Government look to tackle the waiting time for cannabis-based medicines. Read More (Forbes) and More (Analytical Cannabis)
Europeans increasingly incorporating CBD in relief of medical conditions. A survey of European consumers of CBD details how they are opting to use CBD as a health supplement to help relieve their medical conditions while not replacing their prescriptions. The New Frontier Data 2019-2020 European CBD Survey included feedback from 3,101 respondents in 17 countries across Europe. Survey participants were asked whether they had any medical conditions, and if so whether they used CBD as a treatment. Among participants indicating having Alzheimer’s, 60% reported using CBD to manage their illness; among respondents with ALS, 58% reportedly used CBD. For respondents using CBD as a medical intervention, 76% reported that it improved their medical condition. However, the overwhelming majority (87%) indicated that CBD did not displace any of their medications. The feedback suggests that CBD is being deployed as a supplement to treatment but not as a substitute for traditional medical interventions. Read More (New Frontier Data)
German government sides with EIHA on CBD ‘novel food’ question. The European Industrial Hemp Association (EIHA) said it has achieved “groundbreaking success in the discussion about the generally permissible trade and sale of CBD-containing products,” as the German Federal Government and the Federal Ministry of Food and Agriculture (BMEL) has endorsed the Association’s view that “foodstuffs containing parts of the hemp plant are in principle not ‘novel’ foods under EU regulations.” The development, announced in a statement, is significant in light of European stakeholders’ continuing efforts to clarify rules regarding hemp extracts, including CBD, in the EU. Germany is the EU’s biggest market. Read More (Hemp Today)
EU CBD consumer archetypes. Demographic archetypes of CBD consumers identify their frequency and intensity of use, and preferences in applications and products. Most (54% to 98%) among consumers — regardless of archetype — claimed that CBD has positively affected their quality of life. The most frequent consumers are identified as Exuberant & Intense, generally consuming CBD at least once daily, in a wide variety of forms, with overwhelmingly positive feelings about it. Integrative & Consistent consumers are also frequent consumers, using CBD for many reasons; they have an exclusively positive impression of CBD, and staunch believe in its medical efficacy. Read More (New Frontier Data)
New cannabinoid discovery: THCP. In the December 30th, 2019 edition of the open-access journal Scientific Reports, a team of Italian scientists formally introduced the new cannabinoids THCP and CDBP to the world. The researchers found two unique, organic molecules that mimicked the structure of THC and CBD almost perfectly, except for one critically important variation. “In our opinion,” the Italian scientists said, “this [THCP] compound should be included on the list of the main phytocannabinoids to be determined for a correct evaluation of the pharmacological effect of the cannabis extracts administered to patients. In fact, we believe that the discovery of an extremely potent THC-like phytocannabinoid may shed light on several pharmacological effects not ascribable solely to THC.” Read More (Cannabis Tech)
Vital considerations remain for standards in cannabis testing and quality. As medical cannabis becomes increasingly adopted as a treatment or palliative for various diagnosed conditions, so increases the need to ensure standards for quality control and testing procedures. Like with pharmaceuticals, medical cannabis needs to undergo rigorous testing to ensure both its suitability for human consumption along with the appropriate potency and dosage to serve its intended application. Typically, regulators would require assessments of: cannabinoids, terpenes, pathogens such as E. coli, salmonella, and aspergillus; heavy metals; pesticides; fungicides; solvents; moisture content; and foreign matter. Read More (New Frontier Data)
Evielab launches first solid CBD/CBG sublingual micropearls. Los Angeles-based Evielab has launched and patented the industry’s first CBD/CBG solid sublingual pearl. Originally developed in France, Evie pearls measure just 0.15 inches and deliver 5 mg of the highest quality CBD and CBG. The innovative patent-pending micropearl technology dissolves quickly under the tongue and is as discreet as a breath mint. Each pearl consists of purified CBD and ultra-rare CBG (cannabigerol) combined with natural terpenes and comes in effect-based profiles that may provide energy for sports performance, pain relief, relaxation, sexual drive, sleep, immunity and brain focus. Evie pearls are all natural with no additives, sugar, GMOs, or THC. Read More (Extraction Magazine)
New era in preparation of water-soluble nanoemulsion for CBD. Pressure BioSciences has announced the official opening of its new Ultra Shear Technology (UST) Demonstration Laboratory which will be developing water-soluble nanoemulsions for CBD. The major purpose of the UST Demo Lab is to showcase the ability of the Pressure BioSciences revolutionary UST Platform to process CBD oil into true, high quality, water-soluble nanoemulsions. Pressure BioSciences expect that nanoemulsions of CBD will be more stable, have superior aesthetic quality, and offer higher bioavailability than the standard macro/microemulsions used in most CBD products today. Read More (Health Europa)
How packaging materials impact shelf life and potency for infused beverages. For any consumer beverage, compatibility between the product and its packaging is a make or break issue. Most industries have it figured out, but for infused cannabis and CBD beverages, achieving compatibility is a complicated and often overlooked challenge. In fact, loss of potency due to incompatible packaging has been an issue for the infused beverage industry since day one. Engineering the perfect fit for any product takes time. For example, scientists benefit from decades of research to determine what can liner material is best for beer, and which is best for tomato sauce. Cannabis and hemp infused beverages are a new product category, and we are still in the process of building this knowledge. Therefore, producers of infused products need to understand interactions between different packaging materials and the beverage’s cannabinoid emulsion – the dispersion of cannabinoid droplets throughout a liquid. Read More (Analytical Cannabis)
Gibraltar acquires leading cannabis extraction equipment makers for coast to coast market approach. Two of the leading U.S. cannabis extraction system manufacturers are joining forces to create the most versatile customized botanical extraction plans and unmatched customer service on the market today. The deal was created when Gibraltar Industries officially acquired its second extraction manufacturer in California based Delta Separations. The move brings Delta, an emerging leader in Ethanol extraction system technology, together with trailblazing CO2 extraction innovator, Apeks Supercritical, headquartered in Ohio. Together, Apeks and Delta will work to drive the industry’s most versatile extraction innovations and create holistic and customizable solutions for botanical processors with unrivaled expertise. Read More (Extraction Magazine)
Cannabis payments are ripe for fintech innovation. Considering that cannabis is still illegal under federal law with the Controlled Substances Act, banks, many of which are federally chartered, do not allow companies in the cannabis space to have bank accounts. For the government, it is harder to collect taxes and detect when individuals or companies are selling illicitly. Both the industry and government would benefit: allowing electronic payments would make it easier for the consumer, increasing volume and garnering greater tax revenues. This is a perfect opportunity for fintech companies to provide services in payments and compliance to help cannabis companies manage their finances and operations in order to keep growing sustainably. There are some companies already well-positioned to do so. Companies designated by various states which enable tracking and taxation through their products had a first crack at this. These includes Metrc, BioTrack (owned by Helix (HLIX)) and MJ Freeway (owned by Akerna (KERN)). Point of sale providers such as Flowhub, Green Bits and Treez are already sitting on many retailers’ registers. Read More (Forbes)
LEGAL & IP
Two Canadian cannabis production companies settle legal dispute. Two Canadian companies that formed a joint venture to sell hemp and marijuana have settled a legal dispute over which owned more of the business they created. Village Farms International (VFFIF) and Emerald Health Therapeutics (EMHTF) announced the settlement, which stipulates that Village Farms will own 57.4 % of Pure Sunfarms, the venture they created to sell products in Canada. Terms of the settlement include: 1) Emerald will not invest the nearly CAD $6 million ($4.5 million) it had planned into Pure Sunfarms, giving Village Farms a majority stake in the company, and 2) Emerald will drop its claim that Pure Sunfarms owed it CAD $13 million in a shareholder loan. Read More (Hemp Industry Daily)
Harvest Health dismisses lawsuit against Falcon International. Harvest Health & Recreation (HRVSF) has dismissed its previously announced lawsuit against that of Falcon International, a recently filed Form 7 with the Canadian Securities Exchange has shown. The lawsuit was in relation to allegations that Falcon had failed to provide auditable financial statements, and that multiple legal obligations have failed to be met. The lawsuit was originally announced to the market on January 7, with Harvest making a number of allegations against potential acquiree Falcon International. Claims against Falcon were numerous and included allegations of illegally bringing cannabis product across state lines which is a federal offence. Read More (the deep dive)
Manufacturers are now using hemp to create renewable weed packaging. Denver-based Sana Packaging is one company that is using both hemp-derived plastic, as well as recycled ocean plastic, to create sustainable packaging for the cannabis industry. Retail regulations in Canada and U.S. adult-use states often impose extreme packaging requirements on legal weed products, which have resulted in an excessive amount of single-use plastic pot packaging. “Because of the ability to [easily] produce plastics, we got ourselves into single-use disposable culture, and that has caused a dysfunctional system,” said Sana CEO Ron Basak-Smith to United Press International (UPI). Read More (Merry Jane)
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