• Health Canada’s regulatory requirements for cannabis research are similar to those required of licensed producers.
• In one case, a professor noted that no permits or exemptions were required to run identical impaired-driving research with alcohol.
• Health Canada said its regulations handled “otherwise prohibited activities with cannabis,” but couldn’t explain what that term meant after REC legalization.
• Responding to this article, former Ontario NDP premier (and later interim federal Liberal leader) Bob Rae argued Canada is “losing competitive advantage in cannabis research and product development that should have followed from the legalization decision.”
  The Straight

Quick Hits

1. Whether THC makes you feel pleasant or paranoid is decided in a part of the brain called the nucleus accumbens, according to two Western University researchers in a new study published in Scientific Reports. The researchers believe dramatically different reactions to THC are caused by individual sensitivity in that area of the brain.
   Canoe.com

2. When it comes to edibles, most companies have little idea how to define “appealing to children,” which according to Health Canada, their products and packaging must not be.
   Botaniq

3. Health-insurance premiums may go up for those who use edibles, since the industry considers that delivery method more likely to lead to harm.
   The Star

• Alberta has received $30M in its 75% share of federal cannabis excise taxes since legalization.
  Calgary Herald
• The sum was $4M more than the government expected, which it said was ” due to higher than expected AGLC purchases of recreational cannabis from licensed producers.”

Quick Hits

1. Tantalus Labs founder Dan Sutton pressed for provinces to rethink their REC retail approach, saying there is a straight correlation between the volume of cannabis consumers have purchased and their access to retail stores. “Canada has <300 stores. We need 5000+. It is going to be ugly quarter after ugly quarter for bellwether LPs until provinces materially ramp to meet demand,” Sutton said.
   Twitter

2. The SQDC will open another seven new locations across Quebec, adding to five previously announced upcoming openings. That will bring the number of SQDC stores from the present 16 to 28. The Crown corporation plans to have 40 stores by March.
   CBC Montreal

3. Vancouver REC retailers Muse Cannabis complained about provincial laws requiring them to have fogged windows, arguing they’ve put time and effort into “the detail and the aesthetic.” They’d also like to be allowed to advertise.
   DailyHive

• Bank of Montreal and Royal Bank of Canada both downgraded CannTrust and lowered their target prices as CannTrust’s shares sank. By Friday—four days into the crisis—CannTrust shares were down 44%, representing roughly $400M in market-value losses.
  Financial Post, The Straight, Bloomberg
• CannTrust bought 81 acres in BC with which to build an outdoor production site, and initially predicted it could yield 75,000 kilograms per year. On July 3, due to license delays, the company announced the most it could yield this year would be 15,000 kilograms, provided the site was licensed and CannTrust planted its crop by August 5. That’s not going to happen on schedule.
  Business in Vancouver
• Referring to CannTrust’s open application to grow outdoors, Lifford Cannabis CEO Lisa Campbell said, “just over $50 million in wholesale revenue on hold. Outdoor cultivation licence also 99.9% not happening. 75,000kg was 15,000kg as of last week is now 0kg expected outdoor yield.” She estimated the choice to grow in unlicensed rooms will cost CannTrust $350M in seized stock and lost outdoor revenues.
  Twitter
• Two US law firms are investigating CannTrust toward class-action lawsuits, and calling for those who invested in the company to contact them. Bloomberg‘s David George-Cosh reported he has received press releases from nine law firms launching CannTrust class actions.
  Press Releases, Twitter

• Analyst Mike Zmuda noted, “It’s possible senior management was told the grow areas were properly licensed. Most of that workflow falls on the operational side. [… But] it is a very unlikely scenario.”
  Twitter
• Cannalyst Craig “GoBlueCDN” Wiggins noted, “Eric Paul signed the audited year end financial [statements] where in the notes under Biological Assets they recorded (at the time) a record amount of Projected Yield. […] No one in [CannTrust] executive noticed this DOUBLING of Project Yield QoQ without new rooms?”
  Twitter

Quick Hits

1. Citing the difficulty involved in caring for living plants, BC’s Liquor Distribution Board announced it would not carry clones. A spokesperson for the LDB said the only way BC consumers could access clones would be if LPs were allowed to sell to them directly, but direct sales by LPs are against BC’s cannabis law.
   MJ Biz Daily

2. Organizers of the Journey Cannabis and Music Festival were forced to cancel the three-day music and bring-your-own-cannabis festival in Vaughan, ON after the City of Vaughan passed a bylaw outlawing smoking within the city boundaries. They claimed at no point during their permit meetings with the city did anyone mention the smoking ban.
   The Leaf

3. The Wildfire Collective is a farm-style co-op that grows exclusively outdoors, and founder Mark Spear told the Globe is goal was to focus on producing small batches of high-quality product.
   Globe and Mail

4. Companies producing edibles will likely start with only a few products, possibly based on the top-selling products in the US REC-legal states.
   The Star

• On Thursday, CannTrust suspended all patient sales before temporarily and voluntarily suspending all sales of cannabis products. Eight Capital analyst Graeme Kreindler said the hold will last until the end of July at least.
  Twitter—Harrison Jordan, Globe and Mail, Bloomberg
• Numerous analysts believe CannTrust could lose its production license.
• The company announced the establishment of a Special Committee of the Board of Directors consisting of independent members of the company board.
  Newswire
• CannTrust CEO Aceto admitted some of the illicitly produced product has been shipped to provinces across the country, though he would not say where the product was shipped.
  Financial Post
• Danish MED company Stenocare A/S reported receiving three of the batches of illicit product from CannTrust. Under the Cannabis Act, exporting unlicensed cannabis is an indictable offence punishable by prison time.
  MJBiz, Marketwatch

• The company has partnerships with Breakthru Beverage Group and Apotex, Canada’s largest generic drug producer, and is listed on the New York Stock Exchange.
• Further partnerships may not be forthcoming, warned Jefferies analyst Ryan Tomkins. He said, “This [scandal will] make them less appealing for possible [fast-moving consumer goods] partners. […]This will make institutional investors think twice.”
  MarketWatch
• Aceto said CannTrust fired one employee over the unlicensed growing and would conduct a third-party “root-cause analysis.”
• “Mistakes were absolutely made at CannTrust,” Aceto said. “We have got a very clear process in place that is going to get us back into compliance as soon as possible.

Quick Hits

1. The National Bank of Canada’s VP of ETFs and financial products research warned investors that within a couple of years, cannabis will no longer be a trendy investment and cannabis ETFs will face a “day of reckoning.”
   Bloomberg

2. When Health Canada overhauled its application process in May, existing applicants in the system were supposed to have been subject to “high level review,” which the agency estimated would be finished in June. To date, 75% of the reviews (450 of 580 applications) have been done, but insiders said it won’t likely be finished until next year.
   MJ Biz Daily

3. The Prince Edward Cannabis Management Corporation ended the first six months of legal REC sales with a $483,000 loss, which was canceled out by the province’s $546,000 share of excise taxes.
   CBC PEI

• Whistleblower Nick Lalonde said he realized in November the walls breached regulations. Lalonde hung onto his job until May when he could find a new one, at which point he tipped off Health Canada.
• Lalonde, who said he blew the whistle for the good of MED patients, has since become a scapegoat for some in the Pot stock community.
  Twitter, Reddit

• Harvest Moon states, “After the construction of grow rooms 4-5-6-7, without being a Health Canada-licensed area at the time[,] CannTrust populated the rooms with plants. Management instructed employers to do so[,] but prior they were asked to put up tarps, so no cameras could see.”
• “Master Grower Brady Green and Operations Manager Cam Fletcher […] are likely going to be the fall guys when CannTrust tries to shift blame,” argued Harvest Moon. “However, there is no way that executives didn’t know what was going on even if they turned a blind eye to what was happening.”
• Harvest Moon founder “Betting Bruiser” posted a photo which purported to be of a CannTrust employee “[rolling] around in a million dollars worth of prerolls.”
  Twitter—Betting Bruiser

Quick Hits

1. More losses are coming for cannabis investors as LPs struggle to become profitable. Analysts expect many LPs will post writedowns from unfinished inventory.
   Bloomberg

2. Organigram hasn’t yet inked a partnership with any beverage maker, so ahead of Legalization 2.0 the company is developing a flavourless, dissolvable REC powder that consumers can mix with any drink to instantly “infuse” it.
   CBC New Brunswick

3. Grocery monolith Loblaw filed a trademark application for the words “C Shop” and “CSHOP,” associated with selling cannabis products, cannabis oils, edibles, live cannabis products, and smoking accessories.
   Twitter—Presumably Paul

• The company also acknowledged in its statement that employees provided inaccurate information to Health Canada.
• A surprise inspection in June led to the non-compliant finding on July 3. CannTrust has to submit a formal response to Health Canada by July 17 to explain how the unlicensed growing occurred.
• CannTrust stressed the rooms in question received licenses in April.
• Health Canada ordered CannTrust to hold back 5,200 kilograms of product grown in the unlicensed rooms at CannTrust’s Pelham facility in Niagara, as well as another 7,500 kilograms grown in the unlicensed rooms and transported to CannTrust’s Vaughan facility.
  Financial Post

• Health Canada would not answer whether cannabis produced in unlicensed rooms qualifies under law as “illicit cannabis,” but it won’t affect consumers who possess the product in question.
  The Leaf
• A Canaccord Genuity analyst said, “It is highly likely the company will be forced to destroy the product that was produced within the non-compliant grow rooms.”
• This isn’t the first time CannTrust has caught regulators’ attention. In February 2016, Health Canada seized 377 kilograms of product from CannTrust following numerous violations. Between April 2015 and March 2018, Health Canada made 15 “major” or “critical” observations during CannTrust site inspections.
  Bloomberg

Quick Hits

1. Bruce Linton’s non-compete agreement with Canopy means he’ll have to work in the US, but he says cannabis is finished with Canada. He told Bloomberg, “Anybody who’s dumb enough to launch a new cannabis company in Canada, I don’t know what they’re doing, they should have been at it six years ago. Canada is done.”
   Bloomberg

2. Canopy is bringing chocolate back to its headquarters in Smith Fall’s, ON’s onetime Hershey factory. This time, the chocolate will be infused, and made in partnership with a local chocolatier.
   CBC Ottawa

3. WeedWeek founder Alex Halperin got an exclusive interview with Acreage CEO Kevin Murphy.

• “I’ve never seen this before. A $100B-$200B industry and our federal government won’t take a bow???? Or work to promote it??? What?!!!! We need a medical #cannabis export strategy NOW.
• “We need to transfer some degree of promoting and enhancing this industry to [Innovation, Science, and Economic Development Canada] and [Global Affairs Canada]. When we lose our first mover advantage because #cdnpoli views the potential of this industry with disdain, what then?
• “[…] Honestly: I want one #cdnpoli leader to point me in the direction of a new sector of the economy with as much potential as #cannabis. Cripes the @bankofcanada had to revise their growth estimates because of their strength of this sector!

Quick Hits

1. The source of LP investments is shifting from Bay Street to the UK, where family offices, funds, and private placements have been eager to contribute millions.
   Financial Post
2. Sundial Growers, the largest privately held LP in the country, bought UK plant, flower, and herb producer Bridge Farm Group for an undisclosed amount. The acquisition will give Sundial a foothold in the UK’s booming CBD market.
   Globe and Mail, Sky News
3. UK newspaper the Evening Standard profiled both legal and illicit REC retailers in Toronto.
   Evening Standard