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September 20, 2017

Canada’s medical cannabis market was initially a flower-only market, but following a court ruling, licensed producers (LPs) were allowed to begin producing extracts in late 2015. While these products are very limited because they must be liquid and must meet the THC potency limit (30 milligrams per milliliter), which effectively bans vaporized products that are popular in the U.S., their popularity has driven very strong growth in recent quarters. The latest figures from Health Canada show that the category grew by 871% for the quarter ending 3/31, while dried cannabis grew by 89%, with the most recent quarter showing 5,673 kilograms sold. During the same period, registered patients increased by 213 percent to 167,754.

 

Many in the industry believe it is the addition of oil that is driving the strong growth in patient registrations. David Brown, director of communications for Lift, a patient-oriented community that provides information about the Canadian cannabis market, said the availability of oil has made medical cannabis a realistic option for doctors, who are more willing to write warrants for their patients. “Cannabis oil allows doctors to see cannabis not in grams of dried flowering plant matter, but in milligrams per milliliter of active ingredients such as THC and CBD, similar to the way they prescribe other medications.”

Demand is so high that suppliers can’t keep up. In its MD&A for FY17-Q2, Canabo Medical (TSXV: CMM) (OTC: CAMDF), which operates medical clinics focused on cannabinoid therapies, has seen patients leave its care due to shortages of.

The Canadian market is currently facing a shortage of cannabis oil. Many licensed producers did not anticipate the increased demand for medical cannabis and are facing difficulties in providing a steady supply of the product. As a result, many patients are looking for alternative sources of product and leaving Canabo’s research program. The Company is unable to fully optimize our business plan in this environment until supply issues are resolved in the coming months.

Health Canada has issued 50 licenses under the Use of Cannabis for Medical Purposes Regulations (ACMPR), but a smaller number of producers have been approved to produce or sell the oil, including Aphria, Aurora Cannabis, Broken Coast Cannabis, Canna Farms, CanniMed , CannTrust , Canopy Growth (5 licenses, including 3 for Mettrum, 1 for Tweed and 1 for Bedrocan Canada), Emblem (production only), Emerald Health, Hydropothecary, Maricann, MedReleaf Organigram, Peace Naturals, THC BioMed, Tilray, WeedMD (manufacturing only) and Whistler Medical Marijuana, for a total of 18 companies (16 authorized for sale).

careddi (TSX: APH) (OTC: APHQF) uses pruning and flowers to produce its oils, which are processed using a Waters supercritical CO2 machine (supercritical CO2 machine china www.careddi.com/brc/66.htm). According to the company, it is exploring different extractor suppliers and different extraction processes. It currently markets five medium-chain triglyceride (MCT)-based oils, each produced with a specific but undisclosed strain of bacteria. The most popular oil is its Rideau, a CBD-dominant alfalfa strain that is listed on its website for C$99. The company says about 25% of its sales come from the oil, which is about 5% more profitable for the company than dried flowers.

Aphria sees extracts and petroleum products as one of the drivers of growth in the cannabis industry. The company is committed to improving its extraction efficiency by investing in state-of-the-art extraction technology and continuous process innovation. Our goal is to extend our position as a low-cost producer in the cannabis industry to our petroleum processing and to become the most efficient producer of quality cannabis oil in the industry.

Gregg Battersby, Director of Operations Logistics, Aphria
Aurora Cannabis (TSXV: ACB) (OTC: ACBFF) uses Waters supercritical CO2 extractors for flower and trimming, although it is working on microwave technology. It uses MCT and sells 3 varieties of oil, including high THC alfalfa, high THC indica and high CBD oil using cannabinoids. the THC products are not currently strain specific. the CBD oil is the company’s most popular. As a publicly traded company, ACB cannot discuss the profitability of its oils or the percentage of sales they represent, but the company recently shared an update that its oils, which began selling in April, drove record sales of C$2.4 in May. Each milliliter of oil contains about 26 milligrams of cannabinoids.

Broken Coast’s website says the company’s oils are sold out and provides no information about its products.

CannaFarms sells three oil products, including a high THC product, a high CBD product and a balanced product. It uses a proprietary extraction process that utilizes water and ice to create whole plant cannabis resin, which is then heated in its carrier grapeseed oil to decarboxylate it.

CanniMed Therapeutics (TSX: CMED) (OTC: CMMDF) sees a bright future for the oil as it is investing heavily in capacity. in April, it announced plans to build a new ethanol extraction facility in saskatchewan at a cost of 10.5 mmcg, capable of supplying 12 mm 60 ml bottles. CMED also exports small amounts of oil to australia and the cayman islands. CMED also exports small amounts of oil to Australia and the Cayman Islands. The company currently offers three oils, including a high THC product, a high CBD product and a balanced product, and intends to launch gel capsules later this year. in April, the company said the oils accounted for 46% of sales in March, and it reported that they accounted for almost half of sales in the full quarter ending in April.

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