Canada’s still-developing cannabis sector has seen its share of fortunes won and lost over the past year, with marijuana stock prices skyrocketing in a matter of weeks over December and January, only to pull back considerably in the time since.
But recent developments on the political and regulatory end are likely to add stability to the emerging market, says Martin Landry, analyst with GMP Securities, who says Canada is poised to be an global leader in the cannabis space.
This past Thursday saw Canada’s Senate voting on its second reading of Bill C-45, the so-called Cannabis Act which would legalize the recreational use of marijuana. Although the vote was predicted to be tight, as some senators in favour of the legislation were out of Ottawa on committee work and Conservative senators promising to vote en masse against, the bill nevertheless passed 44 to 29.
That bodes well for the bill, says Landry, who projects a late summer/early fall opening up of the rec cannabis market.
“[The Senate vote] provides a positive read-through in our view for the potential outcome of the final third reading vote, as the majority of the Independent Senators Group appear to be aligned with the Liberals,” Landry said in a note to clients on Friday. “In a 3rd reading scenario where all Liberals and Conservatives vote for and against Bill C-45 respectively, this would suggest ~73 per cent of independents (versus 95 per cent at second reading) would need to vote in favour for Bill C-45 to become law.”
As well, this past week Health Canada released its fourth quarter 2017 data on medical marijuana use, finding that patient registrations were up 14 per cent on the quarter to 269,502, while total volume of medical cannabis grew around 10 percent on the quarter and around 34 per cent year-over-year, the best growth rate over the past three quarters, says Landry.
Also coming from Health Canada were summary results from public consultations on the new cannabis regulations, held during a 60-day period starting this past November. The consultations drew in approximately 4,000 responses, covering all aspects of the proposed regulations including licensing and permits, security clearance and cannabis tracking, product packaging and labelling and the medical use of cannabis.
Some notable results include strong support from respondents for a quick roll-out on regulations regarding cannabis edibles along with majority support for the government’s plans concerning licensing and product labelling and plain packaging.
Landry says that going forward the report should feed into guidance and regulations for industry participants. On the issue of product labelling, the analyst says that Health Canada’s push for plain packaging could make it “difficult for licensed producers to differentiate their brands on the basis of packaging, however advertising rules are not expected to be more restrictive than those for tobacco,” Landry says.
In all, Landry sees the ramped up medical market and the maturing regulatory landscape to be a win for Canadian companies, who now have a head start over the competition when it comes to the industrial production of cannabis within a tightly regulated environment.
Landry says that having LPs required to deliver secure and stable production has “led Canadian licensed producers to build pharmaceutical grade production facilities, develop solid cultivation know-how and create a large bank of genetics,” he says. “Combined with well capitalized balance sheets, we believe that Canadian LPs are well positioned to become global leaders in the cannabis sector.”
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