The Chinese Are Coming
Synthetic CBDs and THC: Better Living Through Chemistry
TD Forecasts Marijuana Will Hike GDP by $8 Billion
Momentum Public Relations
Blog: September 26 2018
Just when you thought the Canadian marijuana industry was a slam dunk for becoming a dominant global force the Chinese are beginning to set up and take notice. According to a September story in The GrowthOp, the Postmedia marijuana industry news website, here come the Chinese.
Arcview Market Research and BDS Analytics have predicted that by 2027 the global marijuana market will be worth $US57 billion and you can be sure that Chinese business will see that as an attractive market. The Chinese will have to play catch-up, but catch-up is a game the Chinese play very well. Things will kick off when CannaTech: Hong Kong’s first cannabis investor symposium takes place on November 1st.
While Chinese investors will probably start to pour into the Canadian cannabis industry, they will as legislation changes, consider starting their own industry. Chinese herbal medicine has longed used marijuana as an ingredient.
URI Capital Management, one of the symposium sponsors was quoted in the story as saying: “Asia, more specifically China, is poised to leverage its unique advantages in Hemp and agriculture to become a dominant global leader. URI is proud to become the first Chinese financial conglomerate to focus on the Asian cannabis industry and will leverage the firm’s world-class research and investment resources to lead the way.”
If there is any doubt about the marijuana market drying up Canopy Growth (TSX:WEED) spun off its investment arm last Thursday and by Friday, Canopy Rivers Corp. (TSXV:RIV) market evaluation had more than doubled, according to a story in the Financial Post, to $1.6 billion. Before its IPO Canopy Rivers was valued at $600 million.
RIV has already made ten investments in Canada and one in Italy. According to the company website the investments include licensed producers, pharmaceutical formulators and retail.
As noted by Bloomberg it was the first time a bank, CIBC, had helped a marijuana company list on a Canadian stock exchange. CIBC led the deal with GMP Securities and Eight Capital.
The Bloomberg story contained the following quote: “We’re really trying to make this smart money that goes global,” Bruce Linton, chief executive officer of Canopy Growth and acting CEO of Canopy Rivers, said, “The scouting has been pretty active.”
Tilray (NASDAQ:TLRY) showed just how volatile marijuana stocks could be by rising 98% before plunging and then climbing back up to gain 44% on September 19, 2018. Tilray stock started climbing when the US FDA granted it permission to export medical marijuana for a trial in California as a treatment for essential tremors. The stock then came down to earth when a Florida Republican came down on the deal and said that the trial should be using American produced medical marijuana.
According to Bloomberg, Tilray shares rose to US$176 a share and then dropped like a stone to US$123 a share, finally ending the week up by 12%. Since it IPO in July, Tilray has risen by 800%.
Just as Aphria sold its interest in Liberty Health Sciences last week Aurora Cannabis (TSX:ACB) has spun off its American interests by spinning off Australis Capital (CSE:AUSA). Last Fall The TMX Group ruled that American federal overruled American state law and that consequently Canadian marijuana companies with American operations faced delisting if they did not exit the American market.
Like Canopy Rivers, Australis is an investment vehicle designed to aid American marijuana companies that have problems accessing capital and expertise. In an oversubscribed non-brokered pre-IPO private placement financing Australis raised $17 million at $0.20 a share. On Friday September 21st, Australis opened at $3.90 before closing at $3.16.
The next story should be filed under the 60s rubric of Better Living Through Chemistry. Cronos Group (TSX:CRON), one of the top Canadian vertically integrated marijuana producers, has announced a partnership with Boston-based Ginkgo Bioworks, a biotech startup. Under the partnership Cronos will fund research designed to produce synthetic CBDs and THC. Cronos is targeting a production price point of a thousand dollars a kilogram. The process will involve using fermentation to produce the cannabinoids.
Ginkgo Bioworks has had success producing expensive ingredients, perfume and flavours using synthetic DNA. The end product could be used in a variety of ways: including medical therapies, vaporizer cartridges and edibles. Cronos will invest up to $22 million in Ginkgo to fund research and development and in return for milestones give Ginkgo up to 14.7 million shares. In exchange Cronos will have the right to use and commercialize the resulting intellectual property.
Cronos is not the only marijuana LP looking into the future. On September 19th The Gazette reported that LP Organigram’s parent company, Organigram Holdings (TSXV:OGI), has invested $10 million in and formed an alliance with Hyasynth Biologicals, to develop synthetic phytocannabinoids, using the same techniques as Ginkgo, biofermentation. Hysaynth will be using its proprietary technique to produce the synthetic cannabinoids. As with Ginkgo, the process uses genetically engineered strains of yeast.
Finally, on September 19th the Financial Post reported that the Toronto-Dominion Bank had predicted that after legalization the marijuana industry will add up to $8 billion to the country’s real GDP. Canada’s measure of real gross domestic product will get a boost after the legalization of marijuana adds as much as $8 billion to the country’s economy, according to the bank. After legalization. Statistics Canada will face the daunting task of including both legal and illegal marijuana industry economic statistics in its forecasts.
Just how Statscan will assemble the black market statistics remains to be seen. Given that the illegal marijuana trade isn’t big on keeping records a lot of by guess and by golly will probably be used.