Time to Buy Canadian Licensed Medical Cannabis Producers?

On Friday, Health Canada announced that the Marihuana for Medical Purposes Regulations (MMPR) will be replaced by the Access to Cannabis for Medical Purposes Regulations (ACMPR). The ACMPR essentially re-added the MMAR personal plant count limit and designated grower options to the MMPR licensed producer model, which will formally begin on August 24^th.

What Caused This?

On February 24^th, the Federal Court of Canada ruled in favor of Conroy and Allard et. al., and gave Health Canada six months to revise the MMPR.

New Regulation Highlights

1. Licensed producers are the only source of legal genetics. Patients who choose to cultivate cannabis must purchase starting materials from one of the 34 licensed producers.
2. Health Canada’s dosing information is largely unchanged, and applies to patients who grow their own as they require a medical document from a health care practitioner.
3. For every one gram prescribed, a patient will be allowed production of five plants indoors or two plants outdoors. Patients that choose to grow, or designate someone to grow, their own cannabis must register with Health Canada and receive a maximum plant count limit, maximum storage limit, and maximum possession limit.
4. Designated growers are still allowed but will be subject to background checks, further data tracking by Health Canada, and are still only allowed to grow for two patients.
5. Pharmacies were not included in the new regulations. The Canadian Pharmacists Association said the new regulations missed the mark by not including pharmacies as a distribution point. We think they will be included in future regulations.

What is Next

Health Canada called the ACMPR a short term solution due to the amount of time it was provided to draft the new regulations.

The ACMPR is designed to provide an immediate solution required to address the Federal Court’s judgement on February 24^th. These changes should not be interpreted as the long-term solution for the regulation of medical cannabis.

We believe the move towards legalization is likely to start with government-vetted licensed producers as suppliers. On June 30^th, the government launched a Task Force that will inform the creation of a new marijuana legalization and regulation system, and we expect another update in November.

Something to Watch

The decision by the Federal Court impacted the share price of publicly traded licensed medical cannabis producers and we remain favorable on these stocks.

Although we remain favorable, we expect to see further weakness in the near-term and we would use this opportunity to create or add to existing positions.

Canopy Growth Corp (CGC: TSX) (TWMJF: OTC)

On Friday, CGC fell 2.7% on heavy volume and the shares closed the day at $3.94. We exited our position earlier this month after the shares broke above $4 and we are monitoring the shares for a bottom. Canopy’s United States symbol fell slightly more than 3% and TWMJF closed the day at $3.036. We prefer CGC over TWMJF but are favorable on shares as it provides investors with an attractive opportunity. The shares are no longer trading in overbought territory and we will keep you updated on significant price movements and buy opportunities.

OrganiGram Holdings (OGI: TSXV) (OGRMF: OTC)

OrganiGram came down from its recent highs as both OGI and OGRMF were impacted by the Federal Court’s announcement. Like Canopy, the company also has a United States symbol, OGRMF and we are favorable on both OGI and OGRMF.

On Friday, OGI and OGRMF fell 7.6% and 7.5%, respectively and the shares closed the day at $1.57 and $1.207. We continue to hold on to both OGI and OGRMF in our Mock Portfolio and we will keep you updated on any exit and re-enter opportunities. Stay tuned!  

Aurora Cannabis Corp (ACB: CSE) (ACBFF: OTC)

After announcing that it broke through the 6,500 patient level, Aurora Cannabis bounced higher before giving up its gains. The shares traded range-bounced last week as they bounced from the low $0.60s to the high $0.60s with relative ease.

Aurora’s United States symbol was also subject to significant volatility last week as volume has strengthened over the last month. We continue to monitor volume closely as this has a direct impact on trading from a liquidity standpoint.

On Friday, ACB and ACBFF fell 7.3% and 6.9%, respectively and the shares are trading at $0.63 and $0.467. We remain favorable on ACB as we continue to monitor the shares for a bottom following this move lower. We will keep you updated on any significant price movements and buy opportunities through updates to our premium newsfeed.

Aphria, Inc. (APH: TSXV) (APHQF: OTC)

This licensed producer was one of the top movers in the last month as the shares rallied more than 50% and traded at a new 52-week high. APH and APHQF fell 13.3% and 10.7% on heavy volume. The shares ended the week at $2.34 and $1.84, respectively and we expect to see shares move slightly lower in the near term.

APH and APHQF bounced off of its Friday lows and they are no longer trading in overbought territory. We would use this dip as an opportunity to create or add to an existing position. We will release updates on the feed this week and keep you updated on buy opportunities.

Mettrum Health Corp (MT: TSXV) (MQTRF: OTC)

After breaking above the $3.15 level, MT found resistance right below $3.20 as the shares were trading in overbought territory. The shares plunged more than 6% on Friday and MT is closed the day at $2.67. MQTRF fell more than 6.5% on heavy volume and the shares are no longer trading in overbought territory after this plunge. MQTRF is trading right above $2.06 after this move lower and we are monitoring the shares for a buy opportunity.

We view the shares as an attractive long-term investment and will monitor both MT and MQRTF for a bottom.

Supreme Pharmaceuticals (SL: CSE) (SPRWF: OTC)

One of the only licensed producer to actually rally on Friday and we will continue to keep a close eye on shares after this move. SL an SPRWF rallied 5.1% and 9.3% on heavy volume and the shares are trading at $0.51 and $0.41, respectively.

Supreme has recently come back onto our radar and we are monitoring the shares for a buy opportunity.

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Michael Berger is Managing Partner of StoneBridge Partners, LLC and Founder of Technical420.com. Prior to entering the cannabis industry, Michael was an Equity Research Analyst at Raymond James Financial covering the Energy Sector. Michael has been featured in publications such as The Street, Bloomberg, US Money News, and hosts various cannabis events across North America.

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