Canadian Cannabis Producers Build Inventory Ahead of Legalization

Health Canada released monthly data on Friday afternoon on its medical cannabis program, Access to Cannabis for Medical Purposes Regulations (ACMPR), which was implemented as MMPR in April 2014. The number of patients as of June 30, 2018 increased to 330, 758 from 296,702 at the end of March and 201,398 as of June 30, 2017, representing quarterly growth of  11.5% and annual growth of 64.2%.


The growth remains robust and was slightly higher than the 10.1% quarterly growth in the prior quarter, but the annual growth was the lowest since the program began four years ago, reflecting the maturation of the program as well as perhaps some hesitancy among potential patients who will just wait for legalization. At the current rate of growth, the program will meet 10-year projections shared in 2013 by Health Canada of 400K patients more than five years earlier than expected.


This is the second quarter that the agency included monthly data after  providing it on only a quarterly basis in the first three years of the program. It has added a significant number of data categories as well, including a geographical breakdown of patient registrations.  Alberta continues to have a disproportionate amount of patients relative to its population, as its total, at 117,347, represented over 35% of all patients. Ontario, the largest province, had over 43% at 143,321. BC and Quebec continue to have very few patients relative to their overall populations.


Oils continue to gain share over dried flower, growing 18.9% from the prior quarter to 13,219 liters. Dried flower sold to patients for the quarter increased by 2.4% from the prior quarter to 6767 Kg. During the quarter, exports of dried cannabis accounted for an additional 745 Kg, a sharp increase from the 330 Kg in the prior quarter. Oil exports increased from negligible amounts in the prior quarter to 131 liters.

A big change in the data was the amount of inventory held by licensed producers, with dried flower growing  50.3% from the prior quarter and 164.8% from a year ago to 66,404 Kg. LPs held 32,513 liters of cannabis oil in inventory, up 106.7% from the prior quarter.

With the passage of the Cannabis Act in early June, producers began to prepare for the rollout of legalization for adult use, which will dramatically expand the size of the market. The largest cannabis producers will be reporting more updated inventory carrying values individually as they detail financials. Aphria (TSX: APH) (OTC: APHQF) will report its August quarterly financials in mid-October, while HEXO Corp (TSX: HEXO) (OTC: HYYDF), which is Quebec’s largest supplier, will detail its July financials by the end of October. Aurora Cannabis (TSX: ACB) (OTC: ACBFF, CannTrust (TSX: TRST) (OTC: CNTTF), Canopy Growth (TSX: WEED) (NYSE: CGC) and Tilray (NASDAQ: TLRY) will report September financials in November.

Exclusive article by Alan Brochstein, CFA
Alan Brochstein, CFA
Based in Houston, Alan leverages his experience as founder of online community 420 Investor, the first and still largest due diligence platform focused on the publicly-traded stocks in the cannabis industry. With his extensive network in the cannabis community, Alan continues to find new ways to connect the industry and facilitate its sustainable growth. At New Cannabis Ventures, he is responsible for content development and strategic alliances. Before shifting his focus to the cannabis industry in early 2013, Alan, who began his career on Wall Street in 1986, worked as an independent research analyst following over two decades in research and portfolio management. A prolific writer, with over 650 articles published since 2007 at Seeking Alpha, where he has 70,000 followers, Alan is a frequent speaker at industry conferences and a frequent source to the media, including the NY Times, the Wall Street Journal, Fox Business, and Bloomberg TV. Contact Alan: Twitter | Facebook | LinkedIn | Email

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