Commercial medical marijuana producers banking on massive sales under new rules

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Commercial medical marijuana producers banking on massive sales under new rules

VANCOUVER - From the outside, there's little to distinguish MediJean Distribution Inc.'s headquarters from the unremarkable office complexes and warehouses that surround it in a sprawling slice of industrial suburbia near Vancouver.

Inside, however, the picture is unlike anything else around it. The company is putting the finishing touches on a massive hydroponic operation as it joins a lucrative new industry made possible by Health Canada's overhaul of the country's medical pot system.

One of the facility's growing rooms is already home to dozens of maturing green plants of various strains, and it will soon house many more. The concrete vault is empty, but it will eventually be filled with dried marijuana ready to be shipped across the country.

In contrast to the stereotypical grow-ops of movies and TV newsreels — whether for medical use, the black market, or the uncomfortable place where those two worlds collide — the facility has a sterile laboratory feel, which is precisely the point.

"This is anything but a grow-op," says Anton Mattadeen, the company's chief strategy officer, during a recent tour of the facility in Richmond, B.C.

"It is a clean-run, biopharmaceutical facility designed to produce the highest quality produce available. Whatever your views are based on the stigma (of marijuana), that's not us."

Mattadeen makes the same pitch other operators do: MediJean, he says, will be able to produce a wide variety of consistent, high-quality marijuana that simply wasn't available in the makeshift home grow-ops of the old system.

MediJean is one of hundreds of companies that have applied to supply marijuana under new Health Canada regulations that aim to stop patients from growing their own pot and instead restrict production to licensed commercial operations.

A dozen commercial growers have been fully licensed so far, and dozens more, like MediJean, are in the late stages of approval. MediJean expects to produce 90,000 kilograms of medical marijuana in its first year.

"It's a huge market," says Mattadeen.

A recent Federal Court ruling injunction will allow patients to continue to grow under the old rules for now, but the commercial regime will still proceed as planned.

Under the new system, patients send a form signed by their doctor to the commercial producers of their choice. The marijuana will then be shipped directly to them using a secure courier, such as Canada Post or a private company.

As of early February, Health Canada had received more than 450 applications from prospective producers, with about 25 new applications arriving every week.

While Health Canada sold medical marijuana for $5 a gram under the old system, prices are expected to average about $8 initially, though the federal government predicts competition will make the drug cheaper as more producers enter the market.

Health Canada says the number of patients consuming medical marijuana in the country could increase to between 300,000 and 400,000 within a decade.

PharmaCan Capital has already invested in three medical marijuana outfits in B.C., Ontario and Quebec, and says it has raised more than $10 million in the last 12 months.

CEO Paul Rosen says attitudes toward marijuana are shifting in Canada and around the world — in the industry's favour.

"There's a lot of cultural momentum — globally and within Canada — leading to a general, more accepting, liberal understanding of what marijuana really is," says Rosen.

In addition to Health Canada, medical marijuana operators also must deal with local municipalities, where politicians and residents aren't always ready to welcome the marijuana industry.

In Richmond, where MediJean is setting up shop, city councillors initially prohibited medical marijuana production while leaving open the possibility of approving applications on a case-by-case basis. After months of poring over the proposal and the people behind it, council voted to give MediJean its blessing in mid-March.

Some communities, such as the B.C. cities of Abbotsford and Langley, have moved to ban medical marijuana production altogether.

In Lakeshore, Ont., a town of about 40,000 people just outside Windsor, municipal officials actively sought out a medical marijuana producer after Health Canada announced the new rules.

They found CEN Biotech, a Michigan-based company that is now building a $12-million facility on a four-hectare lot a stone's throw from the town's Ontario Provincial Police station.

Mayor Tom Bain said the response from his fellow councillors and residents has been mostly positive, thanks to the promise of tax revenues and jobs in a community whose fortunes have long depended on the turbulent auto industry.

"It's going to be limited to medical marijuana and it's not going to be anything else, so with those regulations in place and with such a strong geographical location next to the police department, we felt we were ready to go ahead with it," says Bain.

The commercial market also has its detractors among patients, particularly those who have been growing their own marijuana. They complain the prices will be too high under the new system and they won't have the same access to the strains that work for them.

A group of patients won a Federal Court injunction March 21 that will allow them to continue to grow and possess under the old rules until a legal challenge of the updated regime is heard, likely within the next year.

The federal government warned allowing the old system to continue would prevent the commercial market from fully developing.

Mattadeen, the strategy officer at MediJean, says he isn't worried. He insists the market will be healthy, even with the injunction.

"You're talking about a pretty small number of people who are comfortable and want to be able to grow their own product," he says.

"There's no reason for any licensed producer to view this particular injunction as an issue for the business that we're trying to do."

Follow @ByJamesKeller on Twitter

Organizations: MediJean Distribution, Health Canada, Federal Court Canada Post PharmaCan Capital Ontario Provincial Police

Geographic location: VANCOUVER, Richmond, Canada Ontario Quebec Abbotsford Lakeshore Windsor

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