Pubdate: Thu, 03 Apr 2014
Source: Globe and Mail (Canada)
Copyright: 2014 The Globe and Mail Company
Contact:  http://www.theglobeandmail.com/
Details: http://www.mapinc.org/media/168
Author: Craig Offman

UP IN SMOKE: INJUNCTION BURNS BUDDING MEDICAL-POT INDUSTRY

Ottawa's introduction of a medical marijuana strategy last summer was
supposed to relieve some anxiety. Patients facing debilitating
diseases would have wider access to cannabis produced in safe,
regulated environments. Enforcement officials wouldn't have to worry
as much about pot going out the back door of grow-ops to criminal
elements, and insurance companies wouldn't have to grapple with house
fires brought on by inexperienced growers who place too much faith in
their electricity outlets.

But a temporary federal injunction last month has rocked the cradle of
a nascent industry, a dozen or so companies licensed to sell medical
marijuana to about 38,000 patients who face debilitating issues as
varied as spinal-cord injuries, Parkinson's disease and cancer. By
April 1, around 24,000 marijuana growers were obliged to destroy
around a total of 3.5 million plants, which in turn would have created
a relatively huge base of customers who needed to buy marijuana
elsewhere. The injunction, which Ottawa is appealing, put an end to
that. Patients who have valid licences through September 30, 2013, can
keep cultivating provided they keep no more than 150 grams of dried
pot.

While some companies remain buoyant despite the ruling, other
companies question the meaning of their own existence. There could be
major revenue shortfalls, surplus marijuana and cut-throat
competition.

"The injunction has really thrown a monkey wrench in this industry,"
said Brent Zettl, the chief executive officer of Saskatoon-based
CanniMed, the country's largest cannabis company. "There will be a
cash-flow crunch in the short term. We always say that necessity is
the mother of invention, but cash flow is the father."

With many cost-burdened companies vying for such a small market - many
of which have separately laid down millions in sophisticated machinery
and security - Mr. Zettl predicts short-term, predatory pricing, as
well as oversupply. "I got an anonymous call [Monday] from B.C. -
someone who said he heard we were in the business of buying who
offered us 3,000 pounds of marijuana," he said, describing that amount
as sufficient to fill a cube truck. "There is not supposed to be that
kind of supply kicking around."

Companies typically won't say how much business they were expecting
from the April 1 migration. Mr. Zettl estimates however that there
initially would be 10,000 to 12,000 government-approved patients who
would have wanted to buy immediately; the ruling could reduce that
customer base to 3,000 to 5,000. Doctors' reluctance to prescribe the
drug, whose efficacy is scientifically unproven, may also stymie
industry growth. "The changes are confusing for doctors and patients.
That's the real tragedy," Mr. Zettl said.

Mr. Zettl was uneasy about the enthusiasm among entrepreneurs at last
week's conference for the Canadian Consortium for the Investigation of
Cannabinoids, which was held in Toronto. "Everybody was giddy with
excitement, but they weren't realizing what's going to happen."

In a closed-door meeting, Health Canada's director of market
development, Todd Cain, used the phrase "significant capacity" to
characterize the supply, which others construed as a way of stating
that there was too much pot on the market.

Health Canada has estimated that within a decade, there could be as
many as 400,000 patients fuelling a $1.3-billion industry. Before the
injunction, The Globe and Mail estimated that the industry would
generate $120-million to $200-million in its first year, not a huge
pie for more than 12 companies with millions of dollars in sunken costs.

Though they won't say it, some entrepreneurs hope that Canada could
turn into Colorado, the U.S. state that instituted a similar medical
program and legalized cannabis this year. Such a scenario would leave
them in a strong market position, as would one in which the medicinal
merits of cannabis were clinically proven.

For now, however, Canada remains conflicted, torn between arguments
pitting access against safety. Ottawa believes that the safety of
quality-controlled cannabis is a healthier alternative to homegrown
pot, which can be fouled with mould or pesticides. The courts have
been arguing from the position of access: Pot prices are too costly
for many patients in the current marketplace, reasoned Justice Michael
Manson in his March 21 ruling, and they wouldn't have as much control
over marijuana strains.

"The injunction is an awesome victory for patients," said Adam
Greenblatt, executive director of the Medical Cannabis Access Society,
adding that the injunction could be profitable for companies, who
could sell their seeds or clone plants to smaller growers. "Nobody is
losing money in these injunctions but the taxpayer, because Health
Canada keeps fighting them."

Bedrocan president Marc Wayne says that the injunction hasn't affected
his Toronto-based company. His model, he said, was more conservative:
Bedrocan imports medical marijuana legally through the Netherlands, so
he doesn't worry about oversupply. If anything, the injunction gives
his company time to create its own supply.

Michael Haines, CEO of Ontario-based Mettrum, said that the injunction
hasn't affected his business, either. "There has been no drop-off
since the injunction," he said, adding that they didn't build in a
spike into their modelling.  
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MAP posted-by: Jo-D