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Richard Naiberg
Quality From Canada

Protecting Intellectual Property in Canada: A Practical Guide, Part 2

By Richard Naiberg
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Richard Naiberg

Editor’s Note: This is the second article in a series by Richard Naiberg where he discusses how cannabis businesses can protect their intellectual property in Canada. Part 1 introduced the topic and examined the use of trade secrets in business. Part 2 goes into how business owners can protect new technologies and inventions through applying for patents.


Patents: Protection For New And Inventive Technology

Patents, which are issued in accordance with Canada’s Patent Act, provide their owners with the right to have a Court prevent anyone else in Canada from making, using, selling, importing or exporting what is claimed as the patent’s invention. The owner of the patent enjoys this monopoly for a period of 20 years from the date the patent is applied for. A patent is infringed even if the infringer arrives at the invention independently, without actual copying. If a patent owner brings a lawsuit and the Court finds infringement, the Court will typically order the infringing activity to cease and require the infringer to pay the owner a suitable amount of compensation.

There are several drawbacks to applying for a patent from the point of view of the applicant.Patents are meant to protect only inventions, meaning novel, non-obvious and useful solutions to practical problems. In the cannabis field, such inventions could include engineered genetic sequences or new plant cells that lead to useful improvements in the whole plant, new cultivation processes, new methods of extraction, new methods of storage or means to enhance stability, new formulations for administration, and new uses for the plant. It would not be uncommon for a cannabis producer to hold a suite of different patents that cover a whole range of innovative technologies and innovative business methods.

Not all classes of technical innovations are protectable by patent. For example, patents are not available for a whole cannabis plant because no patents are allowed on higher, multicellular organisms. Patents are not issued for genetic sequences or cells that are the result of cross breeding. Patents are also unavailable to monopolize methods of using cannabis as a medical treatment. That said, patent agents are skilled at casting innovations in areas such as these in terms that do provide some patent rights.

To obtain a patent, the applicant hires a patent agent to prepare and submit an application to the Canadian Intellectual Property Office (CIPO). An examiner at CIPO reviews the application for compliance with the statutory requirements and enters into a correspondence with the applicant’s patent agent in a process known as a patent prosecution. Third parties also have the opportunity to oppose the grant of a patent on limited grounds. The prosecution may continue for a period of years before the application is either allowed to issue to patent, or is ultimately rejected. Separate patent applications must be filed in every country in which patent rights are sought, though there are international treaties that facilitate these separate filings and preserve early priority filing dates.there can be a significant cost in obtaining patents, particularly if patent rights are sought in multiple countries.

It is important to emphasize that if an invention had been disclosed to the public more than one year before the application for the patent is filed, a patent cannot issue. Cannabis producers must therefore ensure that disclosures of their innovative work be controlled, including when working with partners. This can typically be handled with the use of appropriate non-disclosure agreements.

The prospect of market exclusivity makes the filing of patent applications a must for cannabis businesses, including those just starting out. For a start-up, simply filing a patent application projects that the company has value and a clear vision of its business. Venture capital often seeks companies with patent applications on file because the applications can mature into assets which can be monetized either by protecting a market for the owner, or through assignment or license to others.

cannabis researchers and producers have already filed hundreds of patent applications in Canada. There are several drawbacks to applying for a patent from the point of view of the applicant. Unlike the case for a trade secret, an applicant for a patent must make full and correct disclosure of the invention and how to use it in the patent itself. This disclosure will allow competitors to understand the applicant’s technology. The public disclosure provides a blueprint for competitors to build upon the patent’s disclosure, and to design around it to avoid infringement. Also, and unlike trade secrets, patents have an expiry date after which the public is free to practice the invention. The Commissioner also has the power to issue compulsory licenses to third parties in several circumstances, including when the demand for the patented article is not being met on reasonable terms. Further, the patent right is not infringed when the patented invention is used for non-commercial or experimental purpose. Finally, there can be a significant cost in obtaining patents, particularly if patent rights are sought in multiple countries.

Disadvantages or not, cannabis researchers and producers have already filed hundreds of patent applications in Canada. These applications relate to a wide range of inventions in the cannabis field including new cannabis resins and oils, methods of producing cannabis having improved properties, specific new growing processes, new harvesting methods, new extraction techniques, new formulations for human and veterinary use as foods, medicines and supplements, new delivery devices, new purification methods, new analytical methods, and new stabilization methods. Interested companies can access these disclosures from the public record.

As cannabis companies rush to obtain patent monopolies for their technologies, minefields are created for operating companies. Cannabis producers should obtain reports on what patent applications exist and might be asserted against their operations if and when these applications mature to issuance. With that intelligence in hand, the cannabis producer can understand what threats can be safely ignored and what patents must be addressed by assignment or license, by ‘design around’ or by developing an argument as to why the patent is invalid and thus unenforceable.


Editor’s Note: In Part 3 of this series, which will be published next week, Naiberg will discuss plant breeders’ rights and protecting new plant varieties. Stay tuned for more!

Richard Naiberg
Quality From Canada

Protecting Intellectual Property In Canada: A Practical Guide, Part 1

By Richard Naiberg
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Richard Naiberg

Cannabis producers are making large investments in new technologies to improve their plant varieties, production know-how and product formulations. At the same time, producers are working hard to create and promote more compelling, top-of-mind brand identities for their improved products. The series concludes with a 9-point outline of specific steps cannabis producers need to consider taking to protect their key intellectual property assets. 

The value of these investments cannot be realized if competitors are allowed to copy and exploit the producer’s successes. Canada’s intellectual property laws can and should be used to protect cannabis producers from such predation. Invoking Canada’s laws to this end is not difficult and does not have to be expensive. It does, however, require specific, deliberate and early action.

This series of articles outlines the principal means of protecting intellectual property rights in the core technologies and marketing programs of cannabis companies. The series also highlights what any cannabis company must do to ensure that its own activities do not run afoul of another’s rights. No company wants to begin a new venture only to face a lawsuit for intellectual property infringement.

The series concludes with a 9-point outline of specific steps cannabis producers need to consider taking to protect their key intellectual property assets.

Trade Secrets: Protection For Confidential Know How

A trade secret is specific, commercially valuable information and know-how that is kept confidential within the company and cannot generally be reversed-engineered by outsiders. A trade secret provides protection over any type of information or know-how and is not subject to any expiry date. Trade secret protection is lost only when the information or know-how becomes available to the public.

As a best practice, defining the trade secret in a confidential document can be useful as a way of restricting access to the secretCannabis producers generate all kinds of valuable know-how that cannot be appreciated simply from an inspection of the vended product. Examples would include methods of crossbreeding, cultivation, harvesting, extraction and processing. Customer lists and other internal business structures and information may also qualify as trade secrets.

There are no statutory pre-conditions that must be met to obtain a trade secret. A trade secret is acquired simply upon the generation of valuable information or know-how that is kept confidential. As a best practice, defining the trade secret in a confidential document can be useful as a way of restricting access to the secret, and as evidence in proceedings as to the scope of the trade secret (an issue that is frequently in dispute in such cases).

For the trade secret to be maintained, the producer will need to take steps to ensure that access to the know-how and associated documents is restricted only to those who need to know the secret for purposes of carrying out their functions at the company. All personnel with access to the trade secret will need to be bound to confidence by employment agreement and/or by separate contract. When employees leave, they ought to be reminded of their obligations of confidentiality and must be prohibited from removing any documentation regarding the trade secret from the company. All outside companies who need access to the secret must sign non-disclosure agreements. It is typical for owners of trade secrets to be vigilant in their market surveillance and to engage private investigators when they suspect a trade secret has been stolen.

A trade secret’s very confidentiality provides its principal value. A competitor cannot copy what it has no ability to discern. However, when someone with access to the secret ‘goes rogue’, such as by using the know-how for his or her own account or for that of a new employer, the owner of the trade secret must act quickly and bring the matter before the Court. The Court has a broad discretion to stop the rogue and any persons or companies who learn the secret from the rogue from further dissemination or exploitation of the trade secret. The Court also has a broad discretion to craft an appropriate remedy to compensate the trade-secret owner for the wrong. If the action is brought before the trade secret is broadly disseminated, the trade secret may be reinstated and enforceable in the future. If the owner of the secret acts too slowly and the dissemination of the trade secret becomes too broad, the trade secret may be lost forever.

Adopting the use of trade secrets to protect know-how in the cannabis business does suffer from the fragility of the right itself. One disclosure, however inadvertent, can destroy the protection. In addition, a trade secret will not protect a company from a competitor who independently derives the know-how. Further, theft of the trade secret can be difficult to spot because, by its nature, the trade secret is exploited within the walls of the competitor company and is not evident in the marketed product. The owner of the secret will need to watch its competitors for telltale shifts in business direction and product offerings, particularly when those competitors hire the ex-employees of the owner of the trade secret. It is typical for owners of trade secrets to be vigilant in their market surveillance and to engage private investigators when they suspect a trade secret has been stolen.


Editor’s Note: In part 2 of this series, which will be published next week, Richard Naiberg will take a closer look at patents and how business can protect new and inventive technology in Canada’s cannabis industry. Stay tuned for more!

tilray-logo

Tilray Enters Both U.S. & UK Markets

By Marguerite Arnold
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tilray-logo

Tilray has long been seen as one of the market leaders in the global cannabis space. They are strategically placed in several critical areas to continue to do well, and put up major competition for just about everyone else (including German market entry first Canopy, plus the other big players in both Canada and Europe) ever since. See Aurora, Maricann and Aphria, to name a few. On the EU front, they are also certainly giving Dutch Bedrocan (with not only existing government contracts, but a newly increased ex-im medical allowance across the open Schengen border) a run for its money. And appear to have broached a monopoly long held by GW Pharma in the UK. 

But first things first. Here is a brief list of accomplishments on the corporate CV so far.In the U.S., Tilray just scored a medical trial at the University of San Diego with a pill used to treat a nerve disorder.

Long (relatively speaking) before Europe was on the map for anyone but a couple of Canadian LPs, the company was exporting to Croatia (in 2016). Even the initial hiccups in delivery (a batch arrived in broken bottles), did not stop their foreign expansion plans. 

When the first German cultivation bid was due, the company also, at least according to their spokesperson in Berlin at the time, considered applying. However, by late summer last year, Tilray was actually the first to publicly tip their hands that not only were they bowing out of the German tender, but had rather decided to import to Germany from cheaper EU climes. See their production facilities in Portugal. Plus of course a mass distribution deal to German pharmacies via local distribution.

Then there is their social media presence on Leafly, which also competes with Weedmaps as both an information portal and dispensary finder in key markets (California and Canada). The German version of the website (Leafly.de), has created a reality, no matter where the server is located, of also connecting directly to patients in a market still finding its way. 

tilray-logoAdd all these elements together, and that puts the company behind it all in an unbelievably strong position to continue to gain both market access and market growth in multiple jurisdictions while carefully moving at literally the change if not bleeding edge of the law.

How much long term impact this will have, however remains to be seen. Why? The times are changing fast. And not everyone is following a policy of promotion timed around other large events (see Canadian recreational legalization and the timing of the company’s IPO). 

Here is another example: the company’s most touted recent double victory, on each side of the Atlantic. Why? This is a place where cannabis companies are starting to compete. And while notable, particularly in it’s timing, is clearly indicative of the next stage in the development of the legitimate medical cannabis industry– not just Tilray.

Trials As Market Entry Tools

Medical trials in both the United States and Europe right now (including the UK for now at least), are the best way for cannabis companies to enter and gain market share. In the U.S., Tilray just scored a medical trial at the University of San Diego with a pill used to treat a nerve disorder.

Last week, Tilray also announced that they had essentially become the first Canadian LP to successfully challenge GW Pharmaceuticals on its home turf in the UK, even if for now limited to one patient application at a time. That won’t last, nor will such a tight monopoly.From a medical point of view, it is a very positive sign, at least for now.

That cross-Atlantic connection is even more interesting, however, given U.S. market entry recently for GW Pharmaceutical’s product, Epidiolex. 

From a medical point of view, it is a very positive sign, at least for now. How it will end up in the future is anyone’s guess, including stock valuation. 

Most advocates, of course, still hope for a medical market where patients are not restricted from deciding between the whole plant, oils or even the pharmaceutical products they choose to take.

Tilray of course is also not the only large LP engaged in medical trials. They are going on all over Europe right now (even if not as well strategically publicized). Health Canada is also committing to trials in Canada over the next five years.

However, what this very clearly demonstrates is that the global medical market is now ripe pickings for companies who approach the entire discussion from a “pharmacized” product point of view. Even if that means in Europe, and including for Tilray, entering the German and other medical markets with flower, oils and medical products.

Marguerite Arnold

Canadian Regulatory Authorities Struggling To Define Rules

By Marguerite Arnold
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Marguerite Arnold

Now that Canada finally has a date for the recreational market start, the federal government, provinces and other regulatory authorities are beginning to issue guidelines and rules that are going to define the early days of the recreational industry.

These include regulations on retail trade, medical sales and use. However this is precisely where the confusion is growing.

The Government Will Continue To Run The Medical Cannabis System

In a move to protect patients, Health Canada has announced that it will continue to run the medical part of the market for at least the next five years. In good news for medical users, this announcement was made against calls from the Canadian Medical Association for the medical infrastructure developed on Canada’s path to recreational reform to be phased out. The reason, according to the CMA? Many doctors feel uncomfortable prescribing the drug because of a lack of research and a general lack of understanding about dosing.

Both patients and advocates have expressed support for continuing the medical system. This includes organizations like the Canadian Nurses Association who fear that if a focus is taken off of medical use, producers will ignore this part of the market to focus only on recreational sales.

In the future, after legalization, Health Canada will also continue to support more research and trials.

Provinces Are Setting Their Own Rules For Recreational Sales

Despite early statements, the recreational market is still in the throes of market creation and regulation. The laws are also changing in progress, a situation one regulator has described as building an airplane as it hurtles down the runway for take-off.

Athletes in Canada are still banned from using any kind of cannabis.For example, Ontario, the largest provincial market, is also delaying private sector sales in retail shops until next year. It is also moving away from a government-run dispensary model. Government sales will begin in October, but private dispensaries will have to wait until next April to open their doors (and existing operations will have to close their doors while they apply for licenses). This is also a reversal of the regional government’s position that it would only allow government-controlled shops to sell recreational cannabis.

But perhaps the largest unknown in both national and provincial policy outside of retail brick and mortars is in the area of online sales. A major fight is now brewing in many places where the established industry is now siding with the government about unregistered dispensaries (see Ontario) and established if not registered producers are competing directly with the government not only on main street but online as well.recreational users are beginning to sound alarms that they do not want the government to have so much personal information about them

Retailers with a web presence operating in a grey space will continue to pose a significant challenge to the online system now being implemented by the government for two reasons. Product availability (which will be far more limited on the government-run sites) and privacy.

Beyond the lack of diverse products and strains to be initially offered via the online government portals, recreational users are beginning to sound alarms that they do not want the government to have so much personal information about them – and point specifically to the differences in the regulated alcohol industry vs. the new regulations for the recreational cannabis market.

Beyond Market Rules, There Are Other Guidelines Coming

The Canadian military has now issued guidelines for active duty personnel and cannabis. It cannot ban it from soldiers entirely of course, and as it stands, the situation will be ripe for misunderstandings. For example, soldiers are prohibited from consuming cannabis 8 hours before any kind of duty, 24 hours before the operation of any kind of vehicle or weapon and 28 days before parachuting or serving on a military aircraft.

The only problem, of course, is being able to enforce the same. Cannabinoids, notably THC, can stay in the body for up to 30 days for casual users long after the high is over.

Athletes in Canada are still banned from using any kind of cannabis. The reason? They are subject to the Canadian Anti-Doping Program (CADP) under which the use of cannabis will still be prohibited.

That said, the Canadian Hockey League is reportedly now examining how to revise how it addresses the issue of medical use.

A Province-By-Province Look At Recreational Cannabis In Canada

By Marguerite Arnold
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Federal recreational reform is coming to Canada next month, the second country after Uruguay to take the plunge. For the first time in almost a century, in other words, cannabis is now about to be legal again.

The federal government will license and regulate the industry. However each province and territory (analogous to American states) will set the rules on distribution and sales. As a result, there is quite a bit of difference across the country with implications both for licensed producers (LPs) and consumers.

A quick guide to the general Canadian regulations broken down by Province.

Who Can Buy, Sell and Grow?

With two exceptions, the legal age of consent is 19, home growing of up to 4 plants is allowed across many provinces (with only Quebec, Manitoba and Nunavut banning the practice), and rules vary by province on both public and private consumption.

However what the industry is really looking at right now is where private enterprise will be allowed to flourish at the retail end of the industry. Private retailers will be allowed to operate in 7 provinces and territories where they will compete with government run outlets. In New Brunswick, Nova Scotia, Ontario, Prince Edward Island, Quebec and the Yukon, consumers will be required to shop in only government-run establishments.

Nunavut, with no licensed producers, will allow online sales only, even in a recreational market. This gives Tilray an instant advantage with their established online presence not only from the company website, but Leafly.However, the two largest provinces are also where the competition will be most intense nationally.

Power Provinces

One of the most interesting statistics to look at is mapping this information to the number (and size) of licensed producers in each province. For example, Ontario currently clocks in at 59 producers, British Columbia at 23, Quebec at 8 and Alberta at 6, while the Yukon, the Northwest Territories and Nunavut have none. Of these, Ontario and Quebec will not allow producers to sell direct to private establishments but rather mandate sales via government-run dispensaries.

Ontario is slated to become the largest of all provincial markets in the country with Quebec coming in second.

However, the two largest provinces are also where the competition will be most intense nationally.

Where The Big Dogs Lie

Even these statistics do not tell the entire story. The biggest producers (especially those engaged in international rather than just domestic production and distribution) are scattered all over the map. For example, Tilray is in British Columbia. This gives the company the unprecedented ability, via its online portal and information website, Leafly, to engage in direct sales to both patients (via online sales) and recreational users from its home base.

How this will shape regional sales figures once the rec market actually starts is uncharted territory.Aurora is in a similar situation as it is situated in Alberta.

Canopy is headquartered in Ontario, but has grow sites across the country, giving it wide market access, and has just been picked as one of four companies to begin recreational sales in Manitoba.

Aphria and MedReleaf headquarters are also both located in Ontario. But it is not necessarily where such producers are located which will determine market access. Ontario has opened the door to suppliers of all sizes, across the country.

Quebec, in contrast, has signed deals with Canopy, Aphria, Aurora, Tilray, MedReleaf and Hydropothecary with both Aurora and Hydropothecary expected to have large home-court advantage when it comes to branding. MYM Nutraceuticals, with a huge greenhouse in Weedon, Quebec, has now also signed the largest deal in Quebec (as of June). The company represents one of Canada’s largest greenhouses.Canopy_Growth_Corporation_logo

Prince Edward Island and Brunswick have followed a bit of a hybrid model, signing deals with both small local players and the larger national companies.

The interesting twist to the Canadian medical market (that does not exist in Europe for example) is that all licensed producers are allowed to sell directly to patients online. How this will shape regional sales figures once the rec market actually starts is uncharted territory.

Ontario, with 40% of the country’s population and home to more than half of Canada’s registered producers, is slated to become the country’s largest recreational market.

British Columbia, in contrast, is developing as a place where mom and pops can still thrive.

Marguerite Arnold

Are Global Cannabis Markets Moving In Synch?

By Marguerite Arnold
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Marguerite Arnold

In American political lingo, an “October Surprise” is an event or incident that is deliberately planned to impact a political election – usually during a presidential year.

The cannabis industry, of course, is still highly political – starting with reform itself.

So what to make of the fact that over the course of the summer, three major markets have started to align in terms of timing?

Canada, Germany and The UK Moving In Synch?

None of these things were original, publicly planned or announced, of course. During July, the Canadian government finally announced the recreational market start date, the German government issued its new cannabis cultivation bid (due in October), and of course, the British government announced that they would reschedule cannabis and create more access for British patients.Canadian companies, for example, are perfectly poised to enter both markets and dominate the industry

What is in the air? And could this, in any way, be a deliberate cannabis industry power play by political forces in motion right now?

The Canadian-German Connection

Planned or not, it is certainly convenient that the much stalled German cultivation bid will now be due right at the time that the Canadian rec market goes into hyper drive. Why? The largest Canadian LPs are currently dominating the European market. These companies are also widely expected to take home the majority of the tender opportunities and are already producing and distributing across Europe.

For this reason, it is unlikely that there will be any “shortages” in the market in terms of deliverable product. However, larger Canadian cannabis companies have already announced that a certain percentage of their stock will be reserved for medical use (either at home or presumably to meet contract commitments that now stretch globally). Inefficiencies in the distribution network will be more responsible, at least in the short term, for consumer “shortages” rather than a lack of availability of qualified product.

Regardless, the connection between these two markets will generate its own interesting dynamics, particularly given the influence of both the Canadian producers and the size of the German medical space on cannabis reform as well as market entry.

The German-British Connection

Germany and the UK are connected historically, culturally, and now on the topic of cannabis reform. While it is unlikely in the short term that German-produced cannabis would end up in the UK, British grown cannabis products are available across Europe, including Germany, in the form of drugs developed by GW Pharmaceuticals.

In the future, given the interest in all things “export” in both economies, this could be a fascinating, highly competitive market space. Whether or not Brexit happens.

The British-Canadian Connection

While not much has emerged (yet) from these two commonwealth countries now embarking on the cannabis journey, it could certainly be an interesting one. This starts with the major competition GW Pharmaceuticals now faces at home from external (Canadian in particular) companies looking to expand their reach across Europe.

Whether Britain Brexits or not could also impact the pace of market development here. Particularly as cannabis supplies can be flown in (via Heathrow), or shipped via the Atlantic, thus missing the Channel crossing point and literally parking lot delays on major motorways.GW logo-2

Canadian cannabis companies could also decide to build production sites as the market matures in the UK.

As it emerged earlier in the year, the UK is also the world’s top cannabis exporter – ahead still of the entire Canadian export market. Do not expect this to last for long after October.

However, in one more intriguing connection between the markets, Queen Elizabeth II in the UK must sign the final authorization for the Canadian recreational market to commence. With a new focus on commonwealth economies,if Brexit occurs, cannabis could certainly shape up to be a major “commonwealth crop.”

Much like tea, for that matter.

The common language between the two countries also makes international business dealings that much easier.

But What Does This All Mean For The Industry?

The first indication of this synching phenomenon may well be simply market growth on an international level unseen so far.

Canadian companies, for example, are perfectly poised to enter both markets and dominate the industry simply because this odd calendrical synching is also very convenient for business,

British companies coming online in the aftermath of rescheduling will also be uniquely positioned, no matter the outcome of the now looming divorce agreement between the parties. Whether the first market beyond domestic consumption is either commonwealth countries or the EU (or both in a best case scenario), the British cannabis market is likely to be even more globally influential than it already is.

The German market may also, depending on the pace of patient growth and cultivation space, become the third big rival, particularly with the near religious fervour all exports are worshipped here.

In the more immediate future, Germany is actually shaping up to be the most international market. Established companies from Canada to Israel and Australia are clearly lining up to enter the market one way or the other. And all that competition is starting to predict a seriously frothy, if not expanding, market starting now with connections that stretch globally.

european union states

International Summer Cannabis Roundup

By Marguerite Arnold
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european union states

As August comes to a close, it is clear that it has been one busy quarter for market development – all over the place. Developments in the UK and Germany in particular, however, have been dramatic. In turn, this is also starting to bring other countries online – even as potential producers move in on the market and before real domestic medical reform has occurred (in countries ranging from Turkey to Spain).

And, say no more, Canada finally announced its “due date” in October.

How all three markets will move forward is also very interesting. They are all interrelated at this point, and even more intriguing, increasingly in synch.

This trend is also one advocates should take note of to push forward on further legislative and access issues going forward.

The EU looks poised to hop on the legalization train

In the future, no matter what happens with Brexit, developments in both the UK and Germany will continue to push the conversation forward in the EU, a region that is now the world’s most strategic (and globally accessible) cannabis market. Advocates, particularly in Canada and the U.S. right now, can also do much to support them.

Germany

Events here, while they may seem “slow” to outsiders, are in fact progressing – and as Cannabis Industry Journal has been reporting – quite fast even if the developments haven’t been (initially at least) quite as public. As this ‘zine wrote, breaking the news in July, the Federal German Drugs and Medical Devices Agency (BfArM) quietly posted the revised bid in July on a European tender site after refusing to confirm that it had sent out (undated) cancellation letters to previous hopefuls.  Applicants for the new tender have until October 22 to respond. It is expected, given the new focus on “coalitions” that there will be many more applicants from global teams.

Even more interesting is the informal “reference price” that BfArM is appearing to set for bid respondents (7 euros per gram) and the impact of that on all pricing going forward across the continent.

german flag
Photo: Ian McWilliams, Flickr

Within a week, it also emerged that the Deutsche Borse, the organization that regulates the German stock exchanges, and working via its third party clearing arm, refused to clear any trades of any publically listed North American cannabis company that are also listed in Germany. This is an interesting development for sure – particularly now. How it will impact the biggest companies (read publicly listed Canadian LPs) is unclear, particularly because they can now raise capital via global capital markets – including the U.S.

Earlier in the summer, one of the largest public or “statutory” health insurance companies in Germany issued the “Cannabis Report.” It showed that cannabis has now moved out of “orphan drug territory” in Germany, and over 15,000 patients are now prescribed the drug. That said, over 35% of all claims are still being rejected. Most patients at this point, are also women older than 40.

The UK

It seems to be less than coincidence that the other big mover this quarter (and in fact most of the year) has been the UK. These two countries are linked by history and trade more than any other in Europe.

Epidiolex-GWAs of October, the country will not only reschedule cannabinoid-derived medicine to a Schedule II drug, but also allow more patients to access it. It is unclear how fast reform will come to a country in the throes of Brexit drama, but it is clear that this discussion is now finally on the table. What is also intriguing about this development is how far and fast this will open the door for other firms to compete, finally, with the monopoly enjoyed by GW Pharmaceuticals in the British Islands since 1998.

In one of the quarter’s biggest coups that stockholders loved but left the domestic industry with few illusions about the fight ahead, GW Pharmaceuticals also announced that it had managed (ahead of all U.S.-based producers and firms and even rescheduling in the U.S.) to gain U.S. federal government approval to import a CBD-based epilepsy drug (Epidiolex) into the United States from the UK and thus gain national distribution.

Canada

While it was more inevitable (and planned for) than developments in Euro markets, Canada also moved forward this quarter. There is now a set date for a recreational market start.

What is even more interesting is that the next formal “steps” in all three markets are now timed to coincide within weeks of each other in October this year.

Canadian producers of course are in the leading position to enter both German and British markets. Further their production centers now springing up all over Europe are supplying both their source markets and will be available for international distribution.

german flag

German Drugs Agency Issues New Cannabis Cultivation Bid

By Marguerite Arnold
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german flag

Lessthan a week after Cannabis Industry Journal reported that BfArM had finally cancelled the first German tender bid for cannabis cultivation, and after refusing to confirm the story to this outlet, the agency quietly posted the new one online, at 3.45pm Central European Time, July 19.

First Thing’s First

For those who have not seen it yet, here is a first look at the “new” bid auf Deutsch. It is basically identical to the last one. For the most part, Europe is shaping up to be a high volume ex-im market.For now, that is all that exists. However,a move is on in Europe to translate the bid into English. Why? To hold BfArM accountable. And to help educate all the foreign and for the most part, non-German speaking investors who want to know what is required to get the bid in the first place. The process last time left a great deal to be desired.

Bid Redux

Apart from this, however, very little seems to have changed from the last time. Notably,the amount to be grown domestically is the same. This means that the government is deliberately setting production below already established demand.

german flag
Photo: Ian McWilliams, Flickr

Why?

As has become increasingly clear, the German government at leastdoes not want to step into the cultivation ring. Further,because they are being forced to, the government wants to proceed slowly. That means that for at least the next couple of years, barring local developments, it is actively creating a market where imports are the only kind of cannabis widely available – for any purpose. And in this case, strictly medical. With many, many restrictions. Starting with no advertising.

Import Europe

For the most part, Europe is shaping up to be a high volume ex-im market. This was already in the offing even last year when Tilray announced the constructionof their Portuguese facilities last summer, and Aurora and Canopy began expanding all over the continent, starting in Denmark, but hardly limited to the same.

These days it is not the extreme west of Europe (Spain and Portugal) that are the hot growingareas, but the Balkans and Greece. Cheap labour, real estate and GMP standards are the three magic words to market entry.

Can This Situation Hold?

There are several intriguing possibilities at this point. The simple answer is that the current environment is simply not sustainable.

In an environment where the clearing firm for all German securities has refused to clear any and all cannabis related North American public cannabis company stock purchases from Germans (and just updated the list to include companies like Growlife), citing “legal reasons,” it is clear the “fight” (read banking and finance) has clearly now landed in Europe.

The significance of all of this?

Clearly, it is two-fold. The first is to deleverage the power of financial success as a way of legitimizing the drug if not the “movement.” Further, if Germans want to profit from the legal cannabis market it is going to be very difficult. See the bid last year beyond this new development.

That means everyone else is going to have to get creative. The industry, advocates and patients have seen similar moves before. Patient access and profitability are not necessarily the same thing.An increasing numbers of companies are finding ways around being cultivators to get their product into the country anyway.

What Now?

The only problem with such strategies, just like banning German firms from competing in the bid, is that “prohibition” of this kind never works.

It will not keep cannabis out of Germany. The vast majority of the medical cannabis consumed by patients in Germany will come from the extremes – of east and western Europe – with Canadian, Dutch and even Danish stockpiles used as necessary. It will also not discourage the domestic cannabis movement here, which is critical as ever in keeping powerful feet to the fire.

It will also not discourage German firms from entering the market – in a variety of creative ways. Most German cannabis companies are not public, and most are setting themselves up as processors and distributors rather than growers.

So in summary, the bid is back. But this time, it is absolutely not as “bad” as ever. An increasing numbers of companies are finding ways around being cultivators to get their product into the country anyway.

As for raising money via public offerings? There are plenty of other countries where the publicly listed, now banned North American companies can raise funds on public exchanges (see Sweden and Denmark) as they target the cannabis fortress Deutschland.

Canada Legalizes Recreational Use of Cannabis

By Marguerite Arnold
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In what has already been called an “historic” vote, the Canadian Senate voted to legalize cannabis on June 19.

C-45 – or the Cannabis Act, passed overwhelmingly in the Senate by a vote of 52-29. Canadian Prime Minister Justin Trudeau has subsequently announced that the legislation will pass into law on October 17. The intent behind the legalization effort was to cripple organized crime and protect minors.

Only one other country in the world has taken such a dramatic step – Uruguay.

Now what?

The Medical Discussion Is Just Getting Underway

While legalization advocates and the increasingly corporate industry have everything to celebrate, this does not necessarily change the other conversation on the ground – in fact it only strengthens it.

Clearly this is a blow against prohibition still in force just south of the border in the U.S. This move alone is also likely to drive the debate in an environment where California and other states are clearly thumbing their noses at the federal government and proceeding apace with its own (and largest) U.S.-based marketplace.

However, there is another topic floating around this conversation. If cannabis is “harmless” enough for recreational use, its use for medical purposes has become the third rail that is now driving the conversation in other places – most certainly Europe.In the meantime, Canadian firms are in an unparalleled position to enter global markets (as they have already begun to do) and set the tone and debate.

Here, full legalization is absolutely off the table as policymakers and scientists begin to seriously contemplate integration of cannabinoids into comprehensive health systems. This week’s dramatic announcement in the UK to that effect, which came the same day as the Canadian vote, is one indication of that. Germany’s own cautious foray into medical use is another. The change in the law last year mandating public health insurance coverage of the same has created a population of 15,000 patients in the last year with many more lining up to obtain it. This population of patients will reliably use more cannabis every month than even the most dedicated recreational consumer.

What Comes Next?

Four and a half years after Colorado took the plunge, the world of cannabis acceptance has clearly changed – and for good.

But what is the next step? Clearly the pressure is now on in the U.S. to consider rescheduling to at least a Schedule II if not Schedule III drug. Marinol, the synthetic version of the drug, became a Schedule III drug in 2010. Epidiolex, GW Pharma’s drug derived from cannabis, just received FDA approval too.  GW Pharma is the only British company allowed to develop cannabinoid medications. Let’s see how long that flag flies in the new commonwealth, with Canada fast behind the UK now as the two compete for the title of largest canna exporter. Globally.

The drug war, in other words, is finally coming to close for cannabisHowever full legalization – even in the United States and most certainly in Europe – is at least several years away.

In the meantime, Canadian firms are in an unparalleled position to enter global markets (as they have already begun to do) and set the tone and debate. How they will position themselves – as medical pharmaceutical or recreational companies – is another discussion that is still unfolding. Particularly because cannabis is a hybrid substance. And further, it is not entirely understood (nor has of course it been studied) where cannabis stops becoming a drug. If a consumer uses CBD, for example, as part of a wellness routine but  also heads off a more serious condition, is the use of the plant “medical” or “recreational?”

These are all questions now on the table. But at least they are.

The drug war, in other words, is finally coming to close for cannabis. But the horizons beyond that, widely unexplored, promise blue ocean opportunities for decades to come. And not “just” in recreational use, but in the amazing worlds of science, technology and medicine that now lie within reach.

Cannabis Report

German Health Insurer Issues First Look at Impact of Medical Cannabis

By Marguerite Arnold
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Cannabis Report

If anyone (read Auslanders) had any illusions that the German take on medical cannabis was going to be casual or unscientific if not painstakingly documented, think again.

Techniker Krankenkasse (or TK as it is referred to by the locals) is one of Germany’s largest public health insurance companies. In other words, it is a private company that is required to provide so called “statutory” health insurance which covers 90% of Germans.

As such, they are also on the front lines now of the medical cannabis debate. Approximately one year after the new law requiring public health insurance companies like TK to reimburse cannabis claims went into effect, the company has just issued what would surely be a best-seller if it were being sold.All of the medical cannabis now being prescribed and reimbursed is coming from abroad.

The Cannabis Report, as it is titled, produced with the help of professors at the University of Bremen, is also the first of its kind. In its pages, along with the corporate summary produced for the recent press conference in Berlin, are several fascinating snapshots of what is going on.

By the numbers.

The Cannabis Report

For those who cannot understand German, this summary by Business Insider is quite educational. Here are the major takeaways: There are now almost 16,000 German patients who are receiving some kind of medical cannabis by prescription. From a doctor. These patients are also paying about $12 for their monthly supplies – even if they have to wait for reimbursement. This is in contrast to the 1,100 patients who managed to obtain cannabis by prescription and pay for it themselves before the law changed last spring.

Do the math and that is a 1,450% uptick. Add in the additional 15,000 left out of this report who are getting cannabis prescribed but their claims turned down, and that is an even more amazing story.

Cannabis ReportHere is the next obvious fact: All of the medical cannabis now being prescribed and reimbursed is coming from abroad. A significant amount is still coming from Holland. The rest? Canada.

For that reason, the cost of medical cannabis is a major concern, along with the medical efficacy of cannabis and the authors’ frustrations about dosing.

The most interesting takeaway? Chronic pain and spasticity arehigh on the list of prescriptions (MS is currently the only condition which is “on label” for cannabis). So is Epilepsy and AIDS. Most interestingly are the high numbers for ADD. This is also highly significant in a country where amphetamine prescriptions for the same are almost unheard of.

TK, like the other health insurers who have started to provide numbers, also approved approximately two thirds of the requests they received. And it has cost them $2.7 million. That bill will begin to reduce as Germany cultivates medical cannabis domestically. However, the tender bid, which now apparently includes 11 contenders, is still undecided, with growing apparently pushed off now until (at the earliest) sometime next summer.

The bottom line, however, in the report from Socium, a university-based think tank that focuses on social inequality, is that cannabis is a drug that should also be treated like any other medication. Even though study authors conclude that so far, they do not find cannabis to be as “effective” as other drugs, they clearly state that the drug does help patients.

An Equally Interesting Industry Snapshot

Flip to page 20, however, and the authors also confirm something else. The top companies providing medical cannabis to German publicly insured patients who are getting reimbursed are Bedrocan, Aurora andCanopy. Aurora’s brands clock in at the highest percentage of THC, although their German importer Pedianos, clearly offers a range of products that start at less than 1% and increase to 22%. MedCann GmbH (renamed Spektrum last year) is essentially providing the rest, and ranges of THC at least, that go from 5.4%-16.5%. They also provide the products with the highest percentages of CBD.

Page 20 of the Cannabis Report produced by TK
Page 20 of the Cannabis Report produced by TK

Unlike the other companies, Canopy’s “brands” are also showing up in ostensibly both medical and government reports (Houndstooth, Penelope, Princeton and Argyle). This is interesting primarily because the German government (and regulatory requirements) tends to genericize medications as much as possible.

Dosing, Impact, Results

The next page of the report is also fascinating. Namely a snapshot of what kind of cannabis is being prescribed and at what doses. Patients who are obtaining cannabis flower are getting up to 3 grams a day. Dronabinol, in stark contrast (which is still the only form of the drug many German patients are able to get), is listed at 30mg.

Unlike any corporate report so far, the study also discusses consumption methods (including, charmingly, tea). It is impossible to forget, reading this, how German and structured this data collection has clearly been. There are several fairly stern referrals to the fact that cannabis should not just be prescribed for “vague” (read psychological) conditions but rather aspecific symptomology (muscle spasms and severe pain).

There is also great interest in how flower differs from pills. And how long the effects last (according to the authors, effects kick in about 2-15 minutes after dosing and last for 4 hours). This is, of course, an accurate picture of what happens to just about every patient, in every country. What is striking, particularly to anyone with an American perspective, is how (refreshingly) clinical much of this basic data collection and discussion is.

And no matter how much the authors call for more research, they clearly have observed that cannabis can have positive, and in many cases, dramatic impacts on patients. According to the handy graphs which are understandable to English speakers, study authors find significant evidence that the drug significantly helps patients with severe pain and or muscle spasms – see MS and Epilepsy, AIDS patients with wasting syndrome and paraplegics (wheelchair bound individuals). Authors list the “strong possibility” that the drug can help with Tourette’s and ADHD. Fascinatingly, however, so far, German researchers are not impressed with the efficacy of the drug for Glaucoma. “Psychological” and psychiatric conditions are also low on the list.

Regardless, this is an important line in the sand. As is the clear evidence that cannabis has efficacy as medication.

The great German cannabis science experiment, in other words, is well underway. And further, already starting to confirm that while many questions remain, and more research is required, this is a drug that is not only here to stay, but now within reach of the vast majority of the population.