Current Situation

The number of MMJ patients in Canada has boomed over the last several quarters, corresponding with the rise of large, federally licensed marijuana producers in the country.

Some observers believe that patients are taking advantage of the liberal list of qualifying MMJ conditions to legally acquire cannabis for recreational purposes.

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Others, however, attribute the rise in patients to increased awareness of the potential medicinal uses of marijuana among both the general public and physicians.

In reality, it’s likely a mix of both factors.

Not all of Canada’s licensed producers are permitted to sell MMJ, however. After a producer is approved to begin cultivating marijuana, the company must pass a series of tests and inspections before any product can be shipped to patients.

On average, it has taken 12 to 18 months for producers to receive licenses to sell.

Thousands of businesses have submitted applications to produce MMJ in Canada, the vast majority of which have been refused, withdrawn or were incomplete.

As of early November, over 400companies were waiting for Health Canada (the country’s health department) to review their applications, though just a small percentage are likely to move forward in the process.

In the United States – where marijuana is illegal in the eyes of the federal government – each state operates its own cannabis industry.

In Canada, however, medical marijuana is legal at the federal level, and the government has left production in the hands of a relatively small number of companies.

Canada also requires each MMJ producer to be vertically integrated, meaning the company grows its own cannabis, manufactures its own extracts and handles all aspects of sales in-house.

Some medical marijuana markets in the United States also mandate vertical integration, but most states license businesses across the entire supply chain.Though dispensaries are currently illegal in Canada, they do exist.

Most operate in major cities such as Toronto and Vancouver, where officials have not prioritized enforcement of the law unless there are complaints.

The number of MMJ patients in Canada has boomed over the last several quarters, corresponding with the rise of large, federally licensed marijuana producers in the country.

Some observers believe that patients are taking advantage of the liberal list of qualifying MMJ conditions to legally acquire cannabis for recreational purposes.

Others, however, attribute the rise in patients to increased awareness of the potential medicinal uses of marijuana among both the general public and physicians.

In reality, it’s likely a mix of both factors.

The increase in patients has fueled a sharp rise in sales.

The medical market is expected togenerate approximately $250 million by the end of 2017, representing a 65% increase over 2016 MMJ sales.

While the total dollar value of the market is impressive, the rapid growth is driving enthusiasm among Canadian MMJ businesses and investors.

In July 2015, Canadian MMJ producers were given the green light to begin producing marijuana extracts, which are sold to patients in the form of cannabis oil.

Much like in the United States,extracts have gained traction in Canada’s medical market. Patients treating severe and chronic conditions typically need larger, easily ingestible doses of THC to provide symptom relief – which has helped fuel overall sales growth.

Since cannabis oil was introduced to the market in the first quarter of 2016, the rate of sales growth has outpaced that of dried marijuana in every quarter.

Cannabis oil now accounts for about half of all marijuana sales in the country, where it appears to have stabilized.

A limited number of MMJ producers in Canada, combined with rising patient counts and growing MMJ sales, have enabled the country’s licensed marijuana companies to grow much larger than their U.S. counterparts.

Due to the federally illegal nature of marijuana in the United States, the country’s largest publicly traded businesses focused specifically on the marijuana industry – TerraTech and Kush Bottles – do not actually touch the plant.

Providing goods to cannabis companies that do touch the plant allows Terra Tech and Kush Bottles to trade in OTC markets, though their overall value is limited relative to public marijuana companies in Canada.

Because MMJ is legal at the federal level in Canada, marijuana producers are allowed to export cannabis products and establish large operations in other countries that have also legalized marijuana.

Cannabis businesses in the United States, however, operate regardless of the federal government and are not even permitted to ship product across state lines.

That’s given Canadian MMJ producers a major opportunity to establish a presence in emerging international markets, and several companies have taken significant steps to do so.Exports of MMJ from Canada were nonexistent just a couple of years ago but now represent a considerable growth opportunity for licensed producers.

Based on year-to-date totals, Canadian MMJ producers are on pace to export approximately 255 kilograms (562 pounds) of dried marijuana and cannabis oil in 2017, which would represent a 75% increase over 2016.