How CannaRoyalty (CRZ.C) will get a ‘tax’ on every Canadian weed sale

Whenever your business plan depends on other people acting outside of their best interests, chances are you’re going to do well. Republican politicians, casino operators, any store that sells Mountain Dew, Slushies and Twinkies – you guys are doing fine.

And CannaRoyalty (CRZ.C) isn’t far behind. Because CannaRoyalty bought 20% of Anandia Labs.

And Anandia Labs is about to get furiously busy because weed growers can’t keep pesticides off their crops, apparently.

OTTAWA, May 5, 2017 – Health Canada is committed to protecting the health and safety of Canadians, including those who use cannabis for medical purposes. On February 7, 2017, following three recalls of medical cannabis related to the use of unauthorized pesticides, Health Canada announced that it would begin a series of unannounced inspections, including random testing of cannabis products from licensed producers to ensure that only registered pesticides are used during the production of cannabis for medical purposes. The aim of these measures is to provide added assurance to Canadians that they are receiving safe, quality-controlled cannabis products.

Uh oh.

As part of a first series of unannounced inspections of seven licensed producers in March, Health Canada collected samples of plant leaves, dried cannabis and cannabis oil (if produced), as well as samples of any products suspected to contain pesticides the inspectors found on site.

On May 1 and 4, Health Canada’s Pest Management Regulatory Agency completed laboratory testing of plant leaves from the seven inspected sites.

Five of the seven sites (RedeCan, 7 Acres, Tweed, Tilray and Broken Coast) showed no sign of contamination in the leaves that were tested.

Of the remaining sites, both leaf samples at Hydropothecary tested positive for myclobutanil at low level concentrations of between 0.012 and 0.023 parts per million (ppm), and one leaf sample from plants at Peace Naturals tested positive for piperonyl butoxide at a low level concentration of 0.78 ppm.

Piperonyl butoxide is “considered an active ingredient in pesticides, and is not contained in any of the 17 pesticides authorized for use in cannabis cultivation.” Myclobutanil emits cyanide when ignited.

We’re going to roll right by the connection between those two entities – their part ownership by Cronos (MJN.V) – as unrelated to the problems at the facilities in question, because we don’t believe Cronos rolls that way.

To hear Hydropothecary was involved in the problems was not shocking, as they’ve had just about the worst reputation for keeping their plants unfurnaced. But Peace Naturals was a surprise, as that unit is known for doing things the other way.

Regardless, we’ve now had Organigram (OGI.V), Aurora (via Organigram) (ACB.V), Canopy (via Mettrum) (WEED.T), Hydropothecary (THCX.V), and Peace Naturals flunking the most basic of tests – that your medicine shouldn’t be schmeared in something that turns into literal poison when lit.

So Health Canada is clamping down. And that’s going to mean everyone testing everything.

When it announced random testing, Health Canada was clear that it would not hesitate to take additional measures if warranted based on evidence. Today, Health Canada is announcing that it will require all licensed producers to conduct mandatory testing of all cannabis products destined for sale for the presence of unauthorized pesticides. Licensed producers already test cannabis products for microbial and chemical contaminants (such as mould, heavy metals, and bacterial and fungal contamination) as required by the Access to Cannabis for Medical Purposes Regulations.

In addition, Health Canada will continue to carry out random testing of product samples collected during its regular and unannounced inspections of licensed producers to help ensure the safety of Canada’s medical cannabis supply.

Which gets us to Anandia Labs. Because where do several of Canada’s largest LP’s already go for lab testing?

Why, Anandia Labs.

Anandia Labs is a leader in cannabis testing, extraction and genetics, using genomics and modern plant breeding approaches to develop innovative products and next generation varieties. The company holds key intellectual property positions including cannabinoid pathway patents and is the only independent Canadian testing facility specializing exclusively in cannabis. With its Health Canada dealer’s license in hand, Anandia Labs has the seal of approval to undertake research and development, and to develop products beyond those currently permitted for licensed producers under Health Canada’s ACMPR.

CannaRoyalty owns a piece or all of 24 other assets in the weed space, from pre-rolled joints to edibles to CBD oils and beyond. But when they’re likely going to get a piece of the testing fees of just about every LP in Canada, as every single crop they put out will have to be tested by law… that’s going to be nice business.

The sort of business that casino operators love.

“Five for you… one for me… five for you… one for me..”

— Chris Parry

 

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