Health Canada’s decision to allow licensed producers to produce and sell cannabis oil, fresh marijuana buds and leaves, and dried marijuana could speed the acceptance of cannabis with doctors, says M Partners analyst Daniel Pearlstein.
In 2009, Owen Smith, the head baker for Victoria-based Cannabis Buyers Club of Canada, was arrested when police found items such as dried marijuana and cannabis cookies on site. He was charged under sections 4(1) and 5(2) under the Controlled Drugs and Substances Act (CDSA).
But in June, in a 7-0 ruling, the Supreme Court acquitted Smith of trafficking charges. Now, Health Canada has LPs to produce and sell cannabis oil, fresh marijuana buds and leaves and dried marijuana. The agency has created a new category on its website: “Licensed Producers of fresh marijuana and cannabis oil”. The list is comprised of just two names; Ontario’s Peace Naturals Project Inc. and B.C.’s Whistler Medical Marijuana Corp.
In a research report to clients today, Pearlstein reviewed Health Canada’s decision. The analyst cited monthly data from the Canadian Medical Cannabis Industry Association (CMCIA) that shows the number of doctors writing cannabis prescriptions is increasing. He believes the introduction of edibles could help ratchet up patient enrollment.
“We believe an environment that includes edibles in the form of cannabinoid-containing pills or capsules could provide a product to accurately standardize, blind and measure for in clinical trials, as well as an alternative method of administering medical cannabis for physicians that would prescribe it but don’t feel comfortable having their patients smoke,” said Pearstein.
Pearstein says he expects the first sales of cannabis oils will happen by the end of this year as many licensed producers has been preparing for it. He believes the additional upside from cannabis oil is going largely unnoticed, and thinks a licensed producer could double its EBITDA without adding production capacity.
The analyst currently has “Buy” ratings on both Tweed Marijuana (TSXV:TWD) and Bedrocan Cannabis (TSXV:BED), which are preparing to merge.