MMJ on the verge of cannabis production in Canada

MMJ Phytotech (ASX:MMJ) is one step closer to becoming a licensed grower of medical cannabis in Canada.

Having submitted its application last year, MMJ, which currently operates through its fully owned subsidiary, United Greeneries (UG), needs to obtain a ‘Marijuana for Medical Purposes Regulations (MMPR)’ license in order to commence growing operations in Canada.

Having received confirmation from Canada’s medical cannabis watchdog Health Canada (HC) that a ‘pre-license’ inspection of its Duncan Facility on Vancouver Island in British Columbia would take place on 1 February 2016, MMJ expects to have its license granted soon afterwards.

The inspection will take place onsite at the Duncan Facility over the course of two and half days and is designed to verify that the information submitted to HC is accurate. HC will also assess compliance with the applicable sections of the MMPR prior to license approval.

If and when the license is granted, UG will then immediately commence its growing operations which are currently targeting up to 1000kg of dried medical cannabis per year.

A green future

UG passing the permitting stage positions MMJ to become one of only a handful of producers in the world that are legally permitted to produce medical cannabis in a developed country within a stringent regulatory framework.

Andreas Gedeon, Managing Director of MMJ PhytoTech, sees the news as a significant milestone for MMJ.

“An MMPR license at the Duncan Facility will have enormous strategic and fundamental value,” Gideon said.

“Further, Duncan’s status as a Licensed Producer will be key to MMJ’s evolution into a diversified, revenue generating, integrated medical cannabis company.”

In Canada, MMJ has two facilities with pending applications – the Duncan Facility in Vancouver and the Lucky Lake Facility in Saskatchewan.

Duncan Facility in Vancouver, BC operated by United Greeneries, a subsidiary of MMJ Phytotech

Notice of pre-inspection is a key catalyst

In past cases, a pre-license inspection is the penultimate step before a license is granted with no known instances of a license being denied. Therefore, notice of a pre-license inspection can often be seen as de-facto approval in all but name.

Every MMPR applicant that has received a notice of Pre-License Inspection from HC has subsequently been issued an MMPR Licensed Producer license, making pre-inspection notices a value catalyst as opposed to the actual granting of a MMPR license.

The most recent example of this counter-intuitive status-quo was the recent pre-inspection announcement by Supreme Pharmaceuticals Inc (CSE:SL) on 3 December 2015. SL’s stock appreciated sharply by over 140% from C$0.20 per share at the time of the announcement to C$0.49 on 12 January 2016. SL has still not had its MMPR license granted as of yet.

The Duncan growing facility provides MMJ with a secure source of medical cannabis and brings MMJ close to near-term revenues from the sale of produce. MMJ plans to supply registered MMPR patients in Canada, other licensed producers in Canada or for export into other jurisdictions with medical cannabis regulations.

MMJ Phytotech is already listed on the Australian Stock Exchange (ASX), and is pursuing a ‘farm to pharma’ strategy of becoming a vertically integrated supplier of medical cannabis globally. MMJ completed its first sales in August last year and followed up with a wholesale sale agreement with a UK distributor in November 2015.

At the time of writing, MMJ shares were up 17.4% in early trade at $0.27 per share.