Pubdate: Tue, 15 Aug 2017
Source: Globe and Mail (Canada)
Copyright: 2017 The Globe and Mail Company
Author: Mark Rendell


The ancillary cannabis industry, including technology and logistics,
could be where Canadian firms shine. During a gold rush, there's often
as much money to be made selling picks and shovels as digging in the
dirt. One year out from the legalization of recreational marijuana, a
number of Canadian companies are betting that this logic holds true
for the country's cannabis rush.

With weed producers rushing to list on the TSX and other stock
exchanges, investor interest has focused mostly on companies that can
supply the drug. But the ancillary parts of the industry, based on
intellectual property, technology and logistics, could ultimately be
where Canadian companies shine on the global stage.

"Everyone wants to have a million square feet growing, but you need
software to do that, you need monitoring equipment, you need good
genetics, you need products that are going to come out the other side
that are efficient and replicable and have consistent taste," said
Scott Walters, co-founder and chief executive officer of Molecular
Sciences Corp., which designs software to connect cannabis producers
with labs and develops its own cannabis pharmaceutical products.

Between 7 per cent and 13 per cent of all money spent in the cannabis
economy is on technology and research, Mr. Walters said. He's hired a
team of six scientists, including Dr. Steven Rothstein, head of
molecular and cellular biology at the University of Guelph, to find
and trademark novel uses for cannabis molecules. Those could be in
pain-relieving gel caps, bandages for sprains, tinctures, patches and

"We're developing commercially ready products that we own the
formulations and processes for, that others will manufacture," Mr.
Walters said.

"I own the code in the data, I own the code in the genetics, I own the
code in the formulations, I own a portfolio of recipes and software
code that we think is going to be very valuable) The company's
intellectual-property approach - similar to traditional pharmaceutical
companies - attracted seven-figure investment from Howard Goldman, a
major investor in Canopy Growth Corp., Canada's most valuable listed
cannabis company.

"We rode that wave last summer and into the fall, with Canopy becoming
a billion-dollar unicorn," said Mr. Goldman, of soaring cannabis stock
prices. "By springtime and early summer, things have fallen off. But
the curve of the medical industry is still a long way from where it's
going to be."

It's not just pharmaceutical companies such as Molecular that are
poised to make significant money. Companies on the monitoring and
logistics side are already reaping the benefits of servicing an
industry that's seeing explosive growth.

Ample Organics, which provides growers with seed-to-sale software that
tracks everything from crop yields to shipping, is perhaps the best
example. Founded three years ago, the company's software is used by
around 70 per cent of licensed producers in Canada, according to
founder and CEO John Prentice.

"There was no operating system for conducting business in a regulated
market," said Mr. Prentice, who describes his company's product as
"the Microsoft Windows of weed."

Because the Canadian medical marijuana market is heavily regulated and
the bar is high in terms of record keeping, companies such as Ample
have had incentive to develop industry-leading products that are
highly exportable. Ample is now selling its product to Australia,
Germany, South Africa, and into the Caribbean. Mr. Prentice said it's
just getting started.

"Some of the new jurisdictions are still in [their infancy], but the
focus is getting to compliance and traceability," Mr. Prentice said.

Canadian cannabis tech isn't only developing fast on the supplier
side. Consumer-side technology is also seeing growth, as
medical-marijuana users try to figure out what works for their
ailments and recreational users search for the strains that make them
feel a certain way.

"It's not just about patients saying, I want to go and get stoned.
It's about, 'I'd like to try this for my tendinitis, or I'd like to
try this for nausea for my cancer treatment,' " said David Berg, whose
company Strainprint Technologies Ltd. has developed an app to help
marijuana users track how different strains affect them and help
doctors and researchers gather data to help with prescription and
product development.

The app tracks over 300 medical conditions, cross-referencing user
experience with all legally grown Canadian strains. It's free for
patients and physicians, but the 18-month old company makes money by
selling data-set subscriptions to researchers and partnering with
producers to use Strainprint data for branding purposes.

"People are rushing to grow, because it's very sexy and it's the
promise of the Green Rush," said Mr. Berg, Strainprint's chief
technology officer. "The reality is, there's a million and one
different ways you can go wrong in a [growing operation] and the cost
of compliance is very high. Technology is the key piece that helps
growers comply with Health Canada regulations, and it's the key tool
to distribute the product more efficiently to patients."

He sees a bright future for Canadian companies in the marijuanatech
field. "Canada is in a unique position, because we are the only
country that has a national access program, and as such, it provides
us with a certain level of critical mass and quality control for research."

Or, as Mr. Walters puts it, "While everyone is busy being a farmer,
we're busy building science teams."
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MAP posted-by: Matt