Licensing for cannabis oil lags behind heady growth

Entrepreneurs are missing revenue opportunities because of delays in approving sales

The consumption of extracted oil and oil-based products is predicted to increase 198,000% over the next five years, according to Rosy Mondin, executive director at the Cannabis Trade Alliance of Canada | Photo: Tyler Nyquvest

The tomato enriches many recipes, yet it was the creation of tomato paste that gave birth to branded products such as ketchup and pasta sauce. This analogy is often referenced when considering the marijuana plant.

As the number of licensed marijuana producers (LPs) in Canada continues to grow, the pace of granting LPs the ability to extract, produce and sell cannabis oil has lagged.

While worries of the recreational market are fixated on distribution and price of dried cannabis, many industry workers fear a shortage of LPs licensed to also produce and sell cannabis oil will leave the market undersupplied.

According to a recent Health Canada report, the cannabis oil sector grew more than 871% between April 2016 and March 2017.

To date, Health Canada has issued 62 licences to producers under the Access to Cannabis for Medical Purposes Regulations (ACMPR).  There are 24 companies permitted to produce cannabis oil, seven of which are in B.C.

There is huge market yet to be realized, says Dan Sutton, managing director of Tantalus Labs.

“Oil production certainly represents significant market traction today both in Canada and the U.S., and substantially more potential,” said Sutton. “Jurisdictions that recognize the demand for extraction-enabled products, from edibles to vaporization, reap the rewards in tax revenue, job creation and industry growth.”

Tantalus received a licence to cultivate marijuana earlier this year but has not received approval for cannabis oil production or sale.

The regulatory system is not structured to solely license companies exclusively focused on oil extraction, said Rosy Mondin, executive director at the Cannabis Trade Alliance of Canada. Oil extraction carries extra restrictions and regulations governing dosage and application.

“The way the system is set up is that it is a complete seed-to-sale licence,” said Mondin. “If you want to process oils, you are forced to cultivate [marijuana].”

Mondin is also president and CEO of Quadron Cannatech Corp. (CSE:QCC), a Vancouver-based company that creates and supplies extraction equipment and services for LPs.

Producers licensed to extract are also limited by capacity. The cap established by Health Canada under the ACMPR restricts producers to cannabis oil containing no more than 30 milligrams (mg) of THC (the primary psychoactive found in cannabis) per millilitre (3%). Additionally, any cannabis oil sold in capsules cannot exceed 10 mg of THC per unit.

Industry experts agree that oils will be a substantial part of the industry as the Canadian market matures.

“When you look at consumption trends in the U.S. and use [them] as predicators to Canada, the prediction is that consumption of extracted oil and oil-based products is going to increase 198,000% over the next five years,” Mondin said.

Beyond their recreational potential, oil-based products like edibles also have medical applications.

“We can see the demand from clients, patients and doctors because it is more standardized, and it definitely beats smoking [which] is the wrong way to deliver a drug,” said Bin Huang, CEO of Emerald Health Therapeutics (TSX-V:EMH).

Emerald Health is a Victoria-based licensed medical marijuana company. It is also licensed to produce and sell cannabis oil. Quality control is paramount, said Avtar Dhillon, executive chairman of Emerald Health.

“If the physician doesn’t know [both] what they are prescribing and the dosage form [and can’t] predictably determine what the patient is taking, then a physician will be hesitant to prescribe regardless of how safe it is,” said Dhillon, who has family-doctor training.

Added Huang: “Now with oils becoming more available, there is more education, doctors are more familiar with the product and attitudes have changed.”

Some industry professionals say the early development of standard processes will be key to the successful launch of a cannabis oil industry.

“You have dried cannabis, then you have every other cannabis-related product that is available out there coming from [cannabis] oil,” said Mondin. “[Cannabis oil] can be standardized. We can have consistency in the products and we can create methodology around standardization.”