Shifting Cannabis Regulations Signal New Potential for the Industry

NEW YORK, July 17, 2019 /PRNewswire/ -- The cannabis industry experienced uplifting news after the U.S. Food and Drug Administration announced it is expediting processes to address the matter regarding cannabidiol or CBD. FDA Principal Deputy Commissioner and Acting Chief Information Officer Amy Abernethy announced in a series of tweets that the matter is an "important national issues with public health impact." Moreover, Abernethy says that the FDA is enthusiastic about researching regarding the therapeutic benefits of CBD products. Similarly, former FDA commissioner Scott Gottlieb also made it a goal to expedite research regarding CBD. The conjoined efforts of the public and the FDA ultimately led to the passage of the U.S. Farm Bill and the descheduling of CBD by the U.S. Drug Enforcement Administration. Additionally, the FDA approved the use of Epidiolex, a CBD-based drug, to treat epilepsy common among children. Following the passage, CBD products rapidly emerged throughout the U.S. from local brick-and-mortar stores to giant e-commerce portals. However, the FDA has made it clear that the addition of CBD in foods and beverages is still prohibited. Nonetheless, consumers can still obtain these health and wellness products containing CBD in some areas. Furthermore, CBD has also become prevalent in nations such as Australia, Chile, Colombia, France, Germany, and Spainas they have legalized cannabis for medical applications. Primarily, most of the regions are using CBD to treat patients suffering from conditions such as multiple sclerosis, cancer, chronic pain, epilepsy, and depression. While the CBD marketplace is thriving globally, the THC market is experiencing growth in regions where recreational cannabis is legal. Overall, the combination of the two markets is causing the broader cannabis industry to undergo exponential growth and development. According to data compiled by Mordor Intelligence, the global cannabis industry was valued at USD 14.5 Billion in 2018. By 2024, the market is expected to reach USD 89.1 Billion while registering a CAGR of 37% during the forecast period from 2019 to 2024. MediPharm Labs Corp. MEDIF LABS, Cronos Group Inc. CRON CRON, Aurora Cannabis Inc. ACB ACB, The Green Organic Dutchman Holdings Ltd. TGODF TGOD, Charlotte's Web Holdings, Inc. CWBHF CWEB

While foods and beverages cannot contain CBD, the FDA has allowed companies to commercialize and market CBD oils, as long as the health claims aren't overly exaggerated. As a result, the CBD oil industry became a booming marketplace as many businesses have hopped on the CBD craze and began to sell oils and topicals in physical retail locations and even on e-commerce sites. Now, consumers can find CBD health and wellness products at major international chain stores such as Walgreens, CVS, Amazon, and Walmart. However, due to the widespread proliferation of CBD, the FDA was forced to step in and take action. The FDA's decision to understand and evaluate the efficacy of CBD through public opinions and data marks a major milestone within the industry as decades ago, cannabis was something that was never on the agenda of federal governments across the world. Now, cannabis has become such a trending topic that many countries are beginning to explore opportunities within the industry themselves. Regions that have already passed a legislation have witnessed a booming economy with the addition of cannabis sales. For instance, Colorado reported sales of USD 1.54 Billion in 2018 compared to USD 683.52 Million in 2014, the first year of legal adult-use. However, Colorado reported that its legal flower sales have declined since 2014. Generally, flower is most commonly associated with cannabis, but more consumers have begun to shift towards concentrates and extracts. In the same period that legal flower sales fell in Colorado, concentrates and extracts closed the gap. In short, the combination of CBD and the concentrates market is creating an entirely new marketplace within the broader cannabis industry. "The industry is at about 5 percent of what it will be someday," concurs Tyler Stratford, Director of Client Operations for cannabis consulting firm Canna Advisors. "Even if the path forward isn't straight, we're certainly on a path forward. The tide has changed, and there's no turning it back now."

MediPharm Labs Corp. MEDIF LABS is also listed on the TSX Venture Exchange under the ticker LABS. Yesterday, the Company provided, "an update to investors on the significant strategic progress it is making, including with its successful ramp up of production capacity to supply its growing customer base.

• Growing Private Label Volume & Forging White Label Platform: To date, MediPharm Labs has signed four large contracts including with Canopy Growth, Cronos Group and AusCann for the sale of private-label cannabis concentrate. It has also launched a White Label platform to serve consumer packaged goods (CPG) companies and licensed producers (LPs) in Canada and announced a supply contract for a minimum of approximately two million vape pens with Ace Valley, subject to purchase orders from provincial distributors.
• Increasing Production: By end of Q2 2019, the Company increased production to an average of 75 million milligrams of active cannabinoid component concentrate on a weekly basis that will support significant, large-scale white label contracts.
• Building Scale: MediPharm Labs has increased annual dried cannabis processing capacity to 300,000 KG and with a new customized, large-scale extraction line set to open in 2019, annual capacity is expected to increase to over 500,000 KG.
• Broadening Global and Domestic Distribution: MediPharm Labs has commenced global distribution with its first exports to Australia and has become the first and only third-party concentrate manufacturer to start shipping private label products to three Canadian Provincial distributors with a rollout to all provinces expected by the end of 2019.
• Expanding Footprint: The Company plans to open, subject to Health Canada approval, 25,000 square feet of additional licensed space in H2 2019 for significant automation to support filling, packaging and new product manufacturing, cannabinoid isolation activities and specialized R&D.
• Increasing Dried Cannabis Supply: MediPharm Labs purchased 9,000 KG of dried cannabis in June 2019 and expects to process and sell it in Q3 2019.
• Governance and Quality: The Company has acquired dried cannabis from more than 23 Health Canada-compliant Licensed Producers that meet MediPharm Labs' enhanced quality control agreements and third-party testing.
• New Product Development: The Company will ramp up industrial scale Soft Gel capsule capabilities in Q3 2019 and is building the foundation to be one of the largest vapourizer fill manufacturers in Canada by this fall.
• Australia Gaining Momentum: MediPharm Labs Australia received its manufacturing licence in May from the Australian Office of Drug Control. Construction of the facility is well underway and nearing completion with equipment ordered for installation in H2 2019. MediPharm Labs Australia is expected to have 75,000 KG of annual capacity.
• Financing: The Company completed a $75 million bought deal financing to fund capital expenditures at its Canadian and Australian facilities, for domestic and international expansions, research and development and general corporate purposes. Signed a $20 million debt facility term sheet with a Schedule 1 Bank.

'MediPharm Labs is executing exceptionally well against all of our strategic operating priorities for 2019 and this will be reflected in our financial results for Q2 and beyond,' said Patrick McCutcheon, Chief Executive Officer, MediPharm Labs. 'I am particularly pleased with the pace of new sales, the advancements we're making in scaling up global production and the high-quality collaborations underway with industry Health Canada compliant suppliers, customers and scientific partners. I am confident that our recent momentum will continue as we strive to produce the world's best cannabis concentrates and drive future cannabis product innovation.'

Growing Private Label Production and White Label Platform: MediPharm Labs has increased production of private label cannabis concentrate products and distillate supply – including CBD or THC dominant as well as balanced formulations – to meet the growing demand for specialty concentrate based consumer end products ahead of legalization of vapeables, edibles and topicals in the fall of 2019. Production and quality operations teams ramped up weekly production output to approximately 75 million milligrams of active cannabinoid component concentrate at the end of Q2 2019.

To date, MediPharm Labs has signed four significant contracts for the sale of private label cannabis concentrate including to Canopy Growth, Cronos Group and AusCann.  The Company also launched its White Label platform to service direct-to-consumer brands, CPG companies and large LPs in Canada.  In June 2019, MediPharm announced its first white label deal to produce a minimum of approximately two million vape pens with Ace Valley, subject to purchase orders from provincial distributors.

Increasing Production Volumes: The number of dry cannabis suppliers and concentrate purchasers in Canada continues to increase. In turn, this has resulted in higher demand that supports MediPharm Labs' differentiated, private label business model.

The Company announced it successfully acquired 9,000 KG of dried cannabis in the last three weeks of June 2019 expected to be processed and sold in Q3 2019, and 5,000 KG in the last two weeks of March 2019 that were processed and sold in Q2 2019.

Enhanced Governance and Quality: To date, the Company has purchased dried cannabis from over 23 suppliers across the country. MediPharm Labs has conducted in-depth qualifications of all of its dry cannabis and product suppliers.

Potential suppliers to MediPharm Labs are subjected to rigorous scrutiny before entering into agreements which require an enhanced Quality Agreement beyond Health Canada standards. This enhanced supplier qualification aligns with our pharmaceutical-like standards for production of cannabis oil and derivative products. All suppliers and customers remain in good standing with Health Canada Licensing and Inspection division.

Broadening Domestic and Global Distribution: During the quarter, MediPharm Labs became the only third-party concentrate manufacturer to begin shipping white label products, including bottled oil, to Provincial cannabis distributors. MediPharm Labs' white label products can be found in three provinces including Ontario, British Columbia and Alberta. The Company expects to rollout distribution of Health Canada approved products to all remaining provinces during H2 2019.

MediPharm Labs successfully completed its first international export of commercial volume cannabis concentrate to AusCann in Australia in June 2019.  The Company continues to focus on accessing and distributing its private label cannabis concentrate to global markets, including across Europe, and is working on various commercial terms.

Expanding Footprint in Canada: At MediPharm Labs' facility in Barrie, Ontario, the Company is adding over 25,000 square feet of purpose-built production space for filling and packing automation, new product manufacturing, cannabinoid isolation activities and specialized R&D projects. Taking a phased approach, operations in this new space are expected to come as each phase becomes approved by Health Canada during the second half of 2019.

Building Scale and Increasing Capacity: MediPharm Labs has successfully completed several equipment automation and innovation projects. The success of these optimization projects has resulted in an increased in capacity of dry cannabis processing to 300,000 KG annually. 

As a global leader in extraction with a focus on providing high quality cannabinoid concentrates, MediPharm Labs recently completed a 14-month project for an additional, fully customized large-scale extraction line. The extractor has completed its factory testing in Europe and is being shipped to the Company's Barrie, Ontario facility. Upon completion of installation, operator training, EU GMP qualification and regulatory prestart activities, operational capacity of specialized and automated dry cannabis processing will exceed 500,000 KG annually. 

New Product Development: MediPharm Labs is continuing to evolve its product mix. The bulk of its production and revenue to date has been in high quality winterized resin. This critical input ingredient will become the key building block for future high-growth and high-margin products:

Soft Gel Caps: MediPharm Labs has focused on building scale across operations and product lines including bottled oil and gel caps.  An industrial scale soft gel capsule project is underway. Equipment has been deployed, equipment training has started, and formulation work is being conducted.

Vapourizers: The Company is building the foundation to be one of the largest vaporizer cartridge manufacturers in Canada. With new regulations finalized and set to come into effect on October 17, 2019 MediPharm Labs has finalized various formulations and started vapourizer pen cartridge filling research and development trials to ensure readiness to serve current and future white-label partners."

For our latest "Buzz on the Street" Show featuring MediPharm Labs Corp. recent corporate news, please head over to: https://www.youtube.com/watch?v=be6y0SIH1XI

Cronos Group Inc. CRON CRON is an innovative global cannabinoid company with international production and distribution across five continents. Cronos Group Inc. recently announced that it had entered into a multi-year supply agreement with MediPharm Labs Corp. MediPharm Labs will supply Cronos Group with approximately USD 30 Million of high-quality private label cannabis concentrate over 18-months, and, subject to certain renewal and purchase options, potentially up to USD 60 Million over 24-months. In addition, Cronos Group and MediPharm Labs have entered into a multi-year tolling agreement, where Cronos Group will supply bulk cannabis to MediPharm Labs' state of the art extraction facility in Barrie, Ontario, to fulfill certain additional processing needs of the Company. "As the industry develops and matures, we see opportunity to work with companies like MediPharm Labs that provide specialized, high-quality services and inputs for our products," said Mike Gorenstein, Chief Executive Officer of Cronos Group. "Along with our internal capabilities, we are pleased to be working with MediPharm Labs to bring great products to consumers in anticipation of the derivative market launching in Canada this fall."

Aurora Cannabis Inc. ACB ACB, headquartered in Edmonton, Alberta, Canada with funded capacity in excess of 625,000 kg per annum and sales and operations in 24 countries across five continents, is one of the world's largest and leading cannabis companies. Aurora Cannabis Inc. recently announced that it had received Health Canada licenses for outdoor cultivation at two Canadian sites. The new sites in Quebec and British Columbia will be used for cultivation research to develop new technology, genetics and intellectual property in order to drive sustainable, high-quality outdoor production. Aurora purposefully chose the outdoor sites because they represent two different growing environments. The company will conduct research on cultivation techniques to further excel at growing cannabis in varying climate conditions and will examine approaches to environmentally sustainable cannabis agriculture. "Aurora believes in innovative operations and intensive research and we're applying our approach to outdoor grown cannabis," said Aurora Chief Executive Officer Terry Booth. "Our team plans to use these areas to ensure we are able to consistently grow the high-quality cannabis Aurora has become known for around the world. We're proud to be a Canadian company and this is a further commitment to research and job creation in Canada."

The Green Organic Dutchman Holdings Ltd. TGODF TGOD is a publicly traded, premium global organic cannabis company, with operations focused on medical cannabis markets in Canada, Europe, the Caribbean and Latin America, as well as the Canadian adult-use market. The Green Organic Dutchman Holdings Ltd. recently announced that it had secured a cannabis supply agreement with Alberta Gaming, Liquor & Cannabis ("AGLC"), further expanding its footprint in Western Canada. AGLC, under the brand Alberta Cannabis, is Alberta's legal, non-medical online cannabis store. "Alberta is an important market for us as we continue to expand our distribution channels across Canada," commented Brian Athaide, Chief Executive Officer of TGOD. "With our production facilities in Hamilton, Ontario and Valleyfield, Quebec coming online in phases, we are thrilled to start distributing TGOD's premium certified organic cannabis to AGLC."

Charlotte's Web Holdings, Inc. CWBHF CWEB is the market leader in the production and distribution of innovative hemp-derived cannabidiol wellness products. Charlotte's Web Holdings, Inc. recently unveiled its newest CBD product line - hemp extract-infused CBD Gummies – made with whole-plant extract from its prized hemp genetics and featuring synergistic functional ingredients to support specific health related functions including everyday stress, sleep, and recovery from exercise or active lifestyles. The gummies feature Charlotte's Web whole-plant hemp extract made from the Company's proprietary hemp genetics that people know and trust. Charlotte's Web extracts contain a full-spectrum of 80+ naturally occurring phytocannabinoids plus terpenes and flavonoids. In addition, the three varieties of gummies are uniquely formulated and enhanced with functional herbs and botanical supplements that work in synergy to further support a targeted wellness focus. "Gummies are a very popular edible format as a result of convenience and measurable consumption," stated Kelsey Morrison, Associate Director of Product Development at Charlotte's Web. "This new delivery format from Charlotte's Web provides an easy bite-sized way to ingest full-spectrum hemp-extract CBD."

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