By Michael Berger
Recently, the Canadian government and the 10 provinces agreed on a deal on how to split a proposed federal tax on the sales of marijuana once the drug is legalized.
Finance Minister Bill Morneau told reporters that for an initial two years, 75% of the revenue would go to the provinces and 25% to Ottawa. Morneau expects the federal cannabis tax to initially raise around $400 million per year. After the initial two-year period has ended, the government and provinces will meet to determine if this method is working.
This meeting was an important development for Canada’s cannabis industry and we are glad to see the government and the provinces agree on the terms of the deal. We expect Canada’s legal cannabis industry to show strong growth over the coming years as companies capitalize on the country’s recreational market as well as international medical markets.
The international opportunity is significant and several Canadian medical marijuana producers are well positioned to capitalize on this.
Aurora: Provides Update on Germany Operations
Aurora Cannabis Inc. (ACB.TO) (ACBFF) traded higher after the Canadian marijuana producer received European Union (EU) Good Manufacturing Practices (GMP) certification for the production, handling, storage and packaging of cannabis flowers. The certificate covers both Chapter I II of the EU GMP regulations, certifying Aurora to produce active ingredients and their formulation into a pharmaceutical drug.
EU GMP certification is the highest such recognition attainable by companies in the pharmaceutical space, and is a requirement for companies to supply EU markets with medical cannabis.
Additionally, Aurora’s wholly-owned subsidiary, Pedanios Gmbh, Germany’s largest distributor of cannabis to pharmacies, has received EU GMP certification pertaining to the import, release and distribution of dried cannabis flowers. Aurora is the second Canadian company with wholly owned subsidiaries possessing an EU GMP certification for production, handling, storage and packaging in Canada, as well as, for the import, release, and distribution in Germany and beyond.
Aphria: Looks to Decrease Exposure to the U.S. Market
When it comes to international exposure, Canadian licensed marijuana producer Aphria Inc. (APH.TO) (APHQF) has more questions than answers.
Earlier this month, Aphria announced plans to reduce exposure to United States medical marijuana markets as it undergoes a de-listing review by the group which operates the Toronto Stock Exchange. Aphria’s CEO Vic Neufeld said the company is in discussions with TMX Group and planned to submit a brief on its stance before the holiday season.
Earlier this year, Aphria announced the launch of its United States expansion strategy through a lead investment in Liberty Health Sciences (LHS.CN) (LHSIF). In 2016, Aphria made its first investment in U.S. market via an investment in a medical marijuana producer in Arizona called Copperstate Farms, LLC.
CEO Neufeld said that Aphria is looking to shift its direct stake in Copperstate Farms into Liberty Health Sciences, thereby making it an indirect investment. He said that Aphria has been working on this for the last three months and made its request to Copperstate’s Board last month. Over the last quarter, Aphria has decreased its stake in cannabis technology platform MassRoots through the sale of stock.
Canopy Growth: A Global Opportunity
Canopy Growth Corp (WEED.TO) (TWMJF) has been executing on all cylinders and the company has been laser focused on international opportunities.
While we are favorable on Canopy’s leverage to the German medical marijuana market, we are also very excited about its Australian cannabis assets. In 2016, Canopy Growth acquired 15% of AusCann Group Holdings Ltd (AC8: ASX) (ACNNF), which is a cultivator, manufacturer and supplier of Australian-produced medical marijuana.
Earlier this month, AusCann was granted a manufacturing license from the Office of Drug Control for its Tasmania site. The license was granted to AusCann’s strategic partner and allows for the joint manufacture and supply of medical cannabis products in Australia. AusCann and Tasmanian Alkaloids are the only Australian integrated operation holding cultivation and manufacturing licenses, with an approved manufacturing facility. This puts the partnership in a firm position with operations starting in 2018.
In September, Canopy Growth entered a supply agreement with AusCann and will act as AusCann’s exclusive supplier of medical cannabis for the Australian market. We are favorable on this relationship and it is already proving to be a very strategic investment.
The Australian market continues to present attractive growth opportunities for medical cannabis and we are favorable on Canopy’s minority ownership stake and excellent working relationship with AusCann.
Michael Berger is the Founder/President of Technical 420 LLC and may be reached at (305) 458-9982, or Michael.berger@technical420.com.
