Cannabis Industry Daily News

Trump’s move to restore some jobless benefits could help cannabis sales

The coronavirus-related enhanced jobless benefit of $600 a week that recently expired would be cut to $400 a week under an executive memorandum signed by President Donald Trump over the weekend.

It’s unclear how quickly the jobless benefit will be put in place or to what extent the stimulus will influence cannabis spending patterns.

Marijuana sales generally have increased during the coronavirus pandemic.

The $600-a-week temporary lifeline expired July 31, raising issues about the potential impact especially on recreational marijuana sales during the recession.

Trump’s executive action calls for cash-strapped states to pay for 25% of the jobless benefit, or $100 a week per qualified individual.

But Trump indicated Sunday that the federal government could pick up the full tab on a case-by-case basis if a state governor requests help.

Trump also signed executive actions that would defer payroll taxes and give key federal agencies the power to extend moratoriums on renter evictions. Both measures could help bolster marijuana sales, but again, it’s unclear to what degree.

The president’s executive orders came as Congress failed to make progress on an economic stimulus deal.

Democrats wanted to preserve the $600-a-week enhanced jobless benefit; Republicans wanted to slash it to $200.

Federal spending decisions are under the domain of the Congress, so it’s possible Trump’s executive actions will face legal challenges.

Arizona adult-use marijuana initiative wins key legal battle

An Arizona county judge rejected a challenge to a proposed voter initiative to legalize recreational marijuana.

If the ruling is upheld after expected appeals to the state Supreme Court and if enough qualifying signatures are certified by the Secretary of State in the coming weeks, recreational marijuana will appear on Arizona’s November ballot.

Opponents argued the 100-word ballot petition summary that Arizona residents signed misrepresented the proposal by failing to outline a host of changes the initiative would make.

But Maricopa County Superior Court Judge James Smith wrote in his ruling Friday that the principal provisions of the Smart and Safe Arizona Act were included in the summary while noting that lawyers for legalization foes took 25 pages to describe provisions they said should have been included.

“Addressing legalizing a previously illegal substance must account for laws touching many parts of life,” Smith wrote. “But if everything in an initiative is a principal provision, then nothing is.”

Backers of the initiative gathered 420,000 signatures, a significant cushion over the 237,645 required to make the November ballot.

The initiative:

  • Features a licensing structure that would favor existing medical marijuana operators.
  • Would allocate 26 social equity licenses.
  • Calls for a 16% retail sales tax on adult-use marijuana products.

Associated Press and Marijuana Business Daily

Epidiolex maker GW Pharma turns in flat second quarter on pandemic impact

United Kingdom-based GW Pharmaceuticals posted marginal revenue growth in the second quarter over the previous quarter, citing challenges stemming from the COVID-19 pandemic.

GW reported revenue of $121.3 million for the quarter ended June 30 – about the same as the previous period.

GW’s quarterly net loss rose slightly to $8.8 million.

By product, Epidiolex sales of $117.7 million accounted for most of the company’s revenue.

The United States was GW’s most important market, with Epidiolex sales reaching $111.1 million – or 92% of overall.

That’s a $5 million improvement over the first quarter.

In a conference call with analysts, executives said GW faced challenges stemming from medical centers being closed because of the coronavirus crisis.

“The vast majority of customer interactions at this time remain virtual,” Darren Cline, U.S. chief commercial officer, said during the call.

“We witnessed the shift to telemedicine by providers and a significant reduction in patient clinic and institution visits,” he said.

CEO Justin Gover said the company’s teams in both the U.S. and Europe maintained “active engagement by remote channels” with clinicians prescribing Epidiolex.

In May, executives had warned that the pandemic could impact sales if fewer patients visit their doctors – which is how the quarter unfolded.

In late July, Epidiolex received approval from the U.S. Food and Drug Administration to treat seizures associated with a third medical condition.

The new approval, granted in July to GW’s American subsidiary, Greenwich Biosciences, means the drug can be used in the United States to treat seizures associated with tuberous sclerosis complex.

GW Pharma trades on the Nasdaq as GWPH.

Massachusetts cannabis processor fined $120,000 for using excess ethanol

Massachusetts regulators fined a marijuana grower/processor $120,000 for selling vape cartridges in late 2018 and early 2019 that exceeded ethanol limits.

The state’s cannabis tracking system flagged a transaction that showed a failed test for cartridges processed by Fitchburg-based Revolutionary Clinics.

Revolutionary Clinics, which said it was unaware of the failed test, then conducted an internal investigation that found a lab technician hadn’t read the complete test results on the cartridges, the State House News Service reported.

The excess ethanol was referenced on the fourth page of the certificate of analysis. The technician has since been fired, according to the news outlet.

For its part, Revolutionary Clinics, which also was put on probation for four months, took responsibility for the infraction.

The company noted that it provided the Massachusetts Cannabis Control Commission (CCC) with a full account of transactions involving products with excess ethanol.

“Patient and consumer safety were not compromised during this time, and we accepted full responsibility for our shortcomings in 2019, as well as the fine levied by the CCC, which is now being announced publicly,” the company said in a statement Thursday.

Although the infraction didn’t pose a public-safety issue, Revolutionary Clinics said it asked retailers to return unsold cartridges for a full refund.

The CCC recently stepped up enforcement, imposing a total of $800,000 in fines last month against three marijuana businesses:

  • Acreage Holdings, $250,000 for trying to control more dispensaries than allowed by law.
  • Garden Remedies, $200,000 for using banned chemical pesticides.
  • Healthy Pharms, $350,000, for repeatedly using banned chemicals.

Lawsuit over California marijuana deliveries continues

A landmark legal battle over marijuana delivery operations in California won’t be settled anytime soon.

That’s the upshot Thursday from a short hearing on the case in Fresno, where representatives from the state attorney general’s office faced off with lawyers from 25 local governments that are trying to neuter a California policy allowing cannabis businesses to deliver products into any jurisdiction they wish – regardless of local MJ business bans.

Instead of handing out a decision, Judge Rosemary McGuire of the Fresno County Superior Court issued a tentative ruling and scheduled further briefing deadlines for both sides to argue whether the case is ripe for litigation.

The judge will hear arguments Nov. 16.

Multiple California marijuana delivery companies have said in the past year that their ability to deliver into any jurisdiction is “critical” to their bottom lines because roughly two-thirds of California’s local governments maintain bans on commercial cannabis companies.

But attorneys watching the case have also predicted that whichever side loses is certain to appeal, meaning the case could drag on for years until being decided by the state Supreme Court.

Michigan cannabis worker allegedly licked pre-rolls, sparking vast recall

Michigan marijuana regulators issued a broad product recall Thursday based on a “confirmed complaint” that a processing worker licked pre-rolls.

The Michigan Regulatory Agency’s product recall covered more than 3,000 pre-rolls from 14 retail locations across the state. It’s unclear how many pre-rolls the worker allegedly licked.

The processing center was identified as 3843 Euclid in Bay City.

The center’s processing license has been suspended for 14 days, according to MLive.com.

“It’s an overall unhygienic process that has the potential to spread a host of respiratory and gastrointestinal illnesses,” Bob Wheaton, public information officer for the Michigan Department of Health & Human Services, wrote in an email to Marijuana Business Daily.

“An analog in food safety would be a cook at a restaurant licking someone’s eating utensils.”

While there probably isn’t sufficient data to make a judgment about the possibility of COVID-19 transmission, Wheaton wrote, “we do not think we can eliminate the possibility. The virus that causes COVID can certainly be found in saliva.”

State regulators said their investigation is ongoing.

Sales of the recalled products occurred between June 10 and Aug. 3. A number of brands were identified in the recall.

Multiple pre-roll sales were made after the state started its investigation, MLive.com reported, suggesting that some sales might have occurred after the products had been placed on an “administrative hold” in the Michigan cannabis tracking system.

The state bulletin said consumers who bought the recalled pre-rolls should return them to the point of purchase for proper disposal. Retail outlets are required to notify patients and caregivers who purchased the pre-rolls.

State officials also asked consumers who had any adverse reactions to contact the regulatory agency.

Illinois urged to apply adult-use marijuana tax revenue to social equity

Illinois should use tax revenue from recreational marijuana sales to help social equity applicants who continue to accrue expenses because of extended coronavirus-fueled licensing delays, an industry group says.

The Cannabis Business Association of Illinois suggested the move in a letter to Gov. J.B. Pritzker, according to the Chicago Tribune.

“We all recognize that the industry cannot reach its full potential without awarding these social equity licenses, and many of these applicants cannot afford an extended delay,” the industry association wrote in its letter.

“Their expenses continue to mount every day these licenses are delayed.”

The state is falling months behind in awarding the next round of licenses in an adult-use market that launched Jan. 1.

Currently, the Illinois rec market is controlled by medical marijuana operators who were given a head start.

For its part, the association said it is:

  • Offering free memberships to qualified social equity applicants for the remainder of the year.
  • Creating a social equity advisory committee to support the applicants in other ways.

Illinois has developed a social equity program that some believe could become an industry blueprint, but it is unclear if the rules will go far enough to result in robust minority participation.

Meanwhile, rec sales in Illinois are off to a fast start, exceeding $300 million year-to-date, including a record $61 million in July.

For a sampling of organizations and efforts that support, foster and enhance social equity in the cannabis industry as well as opportunities for minorities, overall diversity and racial justice, click here.

California cannabis company settles enforcement case for $546,000

(This story has been updated with more details about the settlement and comment from Lowell Farms and to clarify that the company’s $500,000 payment was not a penalty.)

A first-of-its kind enforcement case in California ended in a settlement in which a licensed marijuana company agreed to pay the state nearly $550,000 but avoided any loss of its business permits.

The lawsuit, filed by the state attorney general’s office in 2019, charged Lowell Farms with operating without a license at its facility in Nipomo between December 2018 and March 2019.

The case marked the first time California regulators brought a civil enforcement suit against a state-licensed marijuana business.

The suit was dismissed on July 31 after the parties reached a settlement, according to court records.

Under terms of the settlement, Lowell Farms agreed to pay just over $546,000, including:

  • $500,000 to the state as part of the overall settlement.
  • $33,560 to the California Department of Food and Agriculture as reimbursement for attorney fees and investigation costs.
  • $12,852 to the state Department of Fish and Wildlife for attorney fees, investigation expenses and the cost of destroying illegal cannabis that was seized during a raid on Lowell’s facility in March 2019.

An attorney representing Lowell Farms described the settlement in an email to Marijuana Business Daily as a “quick, amicable and forward-looking resolution.”

The attorney, Sean Walsh, emphasized the company did not admit to any wrongdoing.

“Because we sat at the table and thoughtfully worked with our regulators, we were able to resolve all outstanding issues and, as part of the settlement, the state’s claims were dismissed with prejudice,” Walsh wrote.

Ohio medical marijuana firms seek expansion to meet growing demand

Medical cannabis companies in Ohio, complaining that market growth is being constrained, are calling for more dispensaries and permission to expand cultivation facilities.

The complaints come as MMJ sales in the state reached the milestone of $100 million year-to-date, according to Columbus Business First.

Despite those numbers, Ohio MMJ sales are running at a pace less than half that of neighboring Pennsylvania, according to Cleveland TV station WEWS.

Pennsylvania, which has a similar population, launched its program in early 2018, while Ohio started sales in January 2019.

“Compared to a market like Pennsylvania, (Ohio’s medical marijuana program) is significantly behind where they are, and their program came online about the same time as ours,” Geoff Korff, founder of Galenas, which has a cultivation facility in Akron, told WEWS.

“There aren’t enough dispensaries (in Ohio), there aren’t enough access points. Folks that live in more rural locations sometimes have to drive upwards of an hour to get to a dispensary,” Korff added.

He wants to expand his cultivation facility but hasn’t received permission to do so.

Pennsylvania law allows more than double the number of dispensaries as Ohio (150 versus 60), although not all of Pennsylvania’s are open yet.

Ohio regulators told WEWS that the need for expansion is based on a number of factors, including population, number of patients and geographic distribution of dispensaries.

Ohio has only about half the number of registered MMJ patients as Pennsylvania does.

The new Marijuana Business Factbook projects Ohio MMJ sales will reach $175 million-$225 million this year, while Pennsylvania will hit $400 million-$500 million.

Canadian cannabis firm Cronos posts $31.3M operating loss in Q2

Toronto-based cannabis company Cronos Group reported an adjusted operating loss of $31.3 million for its second quarter, along with $40 million worth of coronavirus-related impairment charges on its U.S. operations.

Net revenue for the quarter ended June 30 was $9.9 million, a 17.9% increase over the previous quarter. Cronos reports in U.S. dollars.

About $2.2 million of that revenue came from Cronos’ U.S. operations, with the remainder coming from the “rest of world” business segment, which includes adult-use and medical sales in Canada and international interests in Australia, Colombia, Germany and Israel.

The $40 million impairment charge, which included $35 million for Cronos’ U.S. unit and $5 million for its Lord Jones hemp-derived CBD brand, was attributed to margin compression caused by pandemic-related measures. Those include pay increases for production workers, discounts including free shipping and “promotional events.”

Cronos said COVID-19 did not materially affect revenue or revenue growth in its operations outside the United States.

The company did not break out its Canadian recreational revenue, making it hard to assess the company’s performance in Canada’s increasingly competitive adult-use market.

However, Cronos wrote down $3.1 million of dried cannabis and extracts in the quarter, “primarily driven by cannabis product price compression in the Canadian market.”

“We anticipate further inventory write-downs due to pricing pressures in the marketplace,” Cronos management said in a regulatory filing.

Cronos had more than $1.1 billion of cash and cash equivalents on hand at the end of the quarter and nearly $214 million in short-term investments.

The company’s gross loss for the quarter was $3 million.

Cronos trades as CRON on the Toronto Stock Exchange and the Nasdaq.

Pennsylvania wraps up medical marijuana research partnerships

Marijuana multistate operator Parallel will provide $3 million in grants to the University of Pittsburgh to research medical cannabis under a 10-year agreement.

The partnership is the eighth and final of such alliances permitted under Pennsylvania’s medical marijuana rules.

Under the program, the MMJ businesses grow, process and supply marijuana to the research institutions.

In return, the companies are granted a vertically integrated medical cannabis license with the right to open six dispensaries across the state.

Atlanta-based Parallel, formerly Surterra Wellness, said it will operate its Pennsylvania MMJ dispensaries under its new Goodblend retail brand.

If the research produces promising results, it could encourage more physicians to recommend medical marijuana and eventually lead to increased sales in the state.

The University of Pittsburgh medical cannabis research initially will focus on treating sickle cell disease. Subsequent research will address anxiety disorders and chronic pain.

Pennsylvania has emerged as one of the country’s strongest MMJ markets since sales began in early 2018.

The new Marijuana Business Factbook projects that sales will reach $400 million-$500 million this year, up from $225 million-$275 million in 2019.

MI may allow stand-alone adult-use cannabis licenses earlier than expected

(The story has been updated to reflect comments by the state that a final decision hasn’t yet been made on the plan.)

Michigan is considering making recreational-only licenses available to marijuana businesses in November, a year ahead of schedule, according to the state’s top cannabis regulator.

The plan would open up new business opportunities in Michigan’s nascent adult-use industry, including the possibility of more robust social equity licensing.

But the state’s program remains constrained because only about 60 municipalities have embraced adult use, while roughly 1,400 have opted out at least for the time being.

The plan to allow stand-alone rec licenses a year ahead of schedule was disclosed by Andrew Brisbo, executive director of the Michigan Marijuana Regulatory Agency (MRA), in an interview with Crain’s Detroit Business.

MRA spokesman David Harns told Marijuana Business Daily on Wednesday afternoon that a final decision hasn’t yet been made and that discussions are ongoing with stakeholders.

Michigan launched its adult-use market on Nov. 1, 2019, giving medical marijuana operators a two-year head start.

But Brisbo told Crain’s that obtaining both an MMJ and a rec license might be too high of a barrier to entry, especially in cities such as Detroit that want to make sure they have strong social-equity programs for individuals harmed by the war on drugs.

“I would expect to see municipalities that want to address equity at the local level could move forward with a lot of additional participation,” Brisbo told Crain’s.

“There’s not quite as high a barrier to entry on the adult-use side, and that could open the market up.”

Despite a low municipal participation rate, Michigan adult-use sales already are rivaling MMJ sales – both categories have exceeded $200 million in sales since last December.

The new Marijuana Business Factbook estimates that Michigan rec sales will reach $400 million-$475 million in 2020.