Canadian Underwriter

Some business risks from marijuana regulation changes

June 7, 2018   by Greg Meckbach

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A Canadian fish oil supplement supplier, a business that hopes to enter the medical marijuana industry, is warning of the risks posed by the “rapidly-evolving” cannabis industry and uncertainty over Health Canada’s license approval process.

Health, safety and environmental regulations “are subject to change and development,” Neptune Technologies & Bioressources Inc. said in its management discussion and analysis of its financial results, released Tuesday. Quebec-based Neptune, a vendor of fish oil, is applying for a licence with Health Canada to produce cannabis oil.

Due in part to the rapidly-changing regulatory environment, “there is no assurance” that Neptune “will successfully develop its cannabis business in a profitable manner, or at all,” the company added in its MD&A. Neptune recently sold its krill oil supplement business.

Medical marijuana is already legal, with some restrictions, but recreational marijuana is still illegal.  The federal government proposes to change this with Bill C-45, currently before Parliament. If passed into law, Bill C-45 will make it legal for people 18 and older to possess and share up to 30 grams of dried cannabis for recreational use.

Bill C-45 also proposes to decriminalize possession of up to five grams of cannabis for youth 17 and younger. The bill passed third reading in the House of Commons last year, but a Senate Committee is proposing dozens of amendments, which Senators debated this week.

In a study titled A Society in Transition, Deloitte predicts the medical marijuana market could get revenues of up to $1.79 billion next year. Deloitte added the legal recreational cannabis market is predicted to generate sales of up to $4.34 billion in 2019.

“Cannabis-related activities are subject to regulations, laws and guidelines from a variety of governmental authorities regarding the production, distribution and business involvement in cannabis-related activities that are also subject to change due to the … rapidly evolving industry,” Neptune stated Tuesday. “These include, but are not limited to, rules regarding the transport, storage, manufacture and disposal of cannabis-related products.”

Cannabis vendors are also subject to environmental, health, safety, privacy, “and many other similar laws and regulations,” Neptune stated. “Such regulations, laws and guidelines are subject to change and development,” Neptune added, warning that “any delay or change in such rules” could “significantly impact” Neptune’s business.

Other Canadian firms in the marijuana business include Vancouver-based Aurora Cannabis Inc.

Aurora noted in its MD&A, released May 8, that it has licences from Health Canada to cultivate cannabis. Aurora also has an agreement with Shoppers Drug Mart to supply Shoppers with cannabis if Shoppers is approved by Health Canada to supply cannabis.

Bill C-45 passed third reading in November, 2017 in the House of Commons and is currently before the Senate for third reading.

The Senate Committee on Social Affairs, Science and Technology held hearings this past March through May. The committee voted in favour of dozens of amendments, which senators are expected to debate Thursday.

Among other things, the committee recommended that the federal government require mandatory health warnings for cannabis products, including warnings about the danger of smoking cannabis, the danger of exposure to second-hand cannabis smoke and the risks of combining cannabis and tobacco.