FROM POLITICS TO POT: Former B.C. premier Mike Harcourt is chairman of True Leaf Medicine, which has found a surprising new market for cannabis
The long wait for a green light from Ottawa has pushed would-be medical marijuana producers, like pet treat-maker True Leaf, to start growing other pot businesses
When True Leaf Medicine Inc. applied for a licence to grow medical marijuana at its Okanagan facility, CEO Darcy Bomford checked all the boxes. He compiled a 1,500-page brief and brought on former premier Mike Harcourt, a criminal defence lawyer, as chairman. Bomford was on the eve of winning municipal approval when he filed the application—48th in line nationwide. Health Canada turned it down. “It was very frustrating,” he recalls. True Leaf was sent back to the drawing board and bumped to 483rd place.
The Vernon-based company is one of dozens of B.C. businesses wading through Health Canada’s medical marijuana permitting process, determined to secure a licence to produce mail-order cannabis for patients enrolled in the federal Access to Cannabis for Medical Purposes Regulations (ACMPR) program. Like his peers, Bomford has spent the past 18 months cautiously watching the federal government set out to fulfill Prime Minister Justin Trudeau’s promise of marijuana legalization, which could come as soon as July 1, 2018.
This prospect has scores of medical marijuana businesses—many stymied by what they describe as a burdensome road to approval—weighing their options. All of Canada’s licensed producers of marijuana, and all applicants to the ACMPR program, explicitly sell, or intend to sell, medicinal cannabis. Some, like Vancouver-based Aurora Cannabis Inc., a listed licensed producer with a $1.1-billion market capitalization when it was trading at about $2.60 in late April, have embraced opportunities in the recreational market.
“This is something that we planned on, and that’s why we started construction on this enormous facility,” Aurora’s executive vice-president, Cam Battley, told CBC News in March about the company’s 800,000-square-foot plant near Edmonton, which it bills as the world’s largest. Others, such as Tantalus Labs, a privately held applicant that is nearing completion of its 115,000-square-foot greenhouse in Maple Ridge, are more reticent. “We’re focused on a quality product,” says Tantalus founder Dan Sutton. “We want to be consistent in our production no matter what the marketplace is.”
Then there are players like True Leaf, which wants to stick with the medical market—and even target specific ailments. “Our focus is on the medicinal strains for people with hip and joint problems, for example,” Bomford says. Harcourt, his adviser, is pithier: “We’re about ‘Get well,’ not ‘Get high.’”
The Canadian marijuana industry doesn’t consist only of those looking to operate legal grow-ops. On the margins, a host of small-cap companies aim to serve the market in other ways. Burnaby-based Cannabix Technologies Ltd., trading at 80 cents in late April, is developing a marijuana breathalyzer to meet U.S. and Canadian regulatory standards. Wildflower Marijuana of Vancouver, an early applicant in the Stephen Harper government’s Marihuana for Medical Purposes Regulations program (replaced last August by the federal Liberals’ ACMPR) turned to the recreational market in Washington State to sell its cannabis-oil disposable vaporizers. Another, Delta-headquartered Vodis Pharmaceuticals Inc., repositioned itself as an adviser to Washington pot producers on their operations.
Sources: Health Canada, Canaccord Genuity
All of this has kept investors interested—if over-optimistic. “The future is bright, but if one were to take the calculation of the market cap and then look at how much pot will be bought, you’ll see that [the licensed producers] are overvalued,” says Brayden Sutton, a Chilliwack-based independent analyst who has covered the medical marijuana sector since 2009. “We’re in bubble territory, and people are buying what they think is the future.”
In January 2016, CIBC World Markets estimated that the Canadian cannabis market could be worth $10 billion a year once the recreational system is up and running. Deloitte, in a report issued last spring, calculated that pot sales alone could range from $4.9 billion to $8.7 billion, while the total market size—including testing labs, security services, paraphernalia and tourism revenue—could reach $22.6 billion.
Deloitte based its results on an in-house survey that found one in five adult Canadians is a potential consumer of regulated recreational cannabis. But with the federal government still to table legislation—and B.C. yet to indicate what policy it might develop around supply chain, distribution and the retail market—nobody knows what the system will look like.
In the meantime, Bomford and Harcourt’s company has found a novel way to stay afloat: hemp-based dog treats. (Bomford’s previous business was Darford Oven Baked Treats.) With quarterly sales of about $150,000, it’s much smaller than other medical marijuana oufits—but at least it’s generating revenue. Bomford draws a parallel between the two sets of customers, dogs and their owners. “They’re looking at what they eat themselves as they get old,” he says of the latter, “at the aches and pains they get, and they look at their pets the same way.”