The industry in Canada is attracting investors eager to capitalize on the flourishing "green rush." Among them are Americans who see more opportunity north of the border than at home. The Canadian medical marijuana industry is valued at roughly $150 million - a figure worth about 200 million Canadian dollars - and may grow twentyfold in the next five years.
A growing body of evidence indicates that ancient Chinese doctors had it right - marijuana has substantial medicinal value. In scientific and medical circles, many experts now believe medical marijuana, which can be ingested in a number of ways, is beneficial in the treatment of various conditions, ranging from epilepsy and rheumatoid arthritis to chronic pain and PTSD.
But that shift in thinking is not reflected in U.S. government policy. Twenty-five states and the District of Columbia allow the use of marijuana in some form. Four states and D.C. have legalized marijuana for recreational use. But the DEA still classifies it as a Schedule 1 substance, a drug that, like LSD and heroin, has no accepted medical use and a high potential for abuse, so it's illegal federally. This complicated landscape makes commerce in this industry challenging at best. Discouraged by restrictions on banking and interstate commerce, some U.S. investors have set their sights on the Great White North.
In 2000, the Ontario Court of Appeal invalidated the prohibition of cannabis in a case concerning a person with epilepsy who said marijuana helped ease suffering. Ottawa soon set guidelines for individuals to grow marijuana or purchase it through Health Canada. In 2013, the federal government decided to allow some large-scale producers to grow medical marijuana and it banned patients from growing their own. Ottawa lifted that ban in a new set of regulations, which were introduced two months ago in response to another court decision. To date, the government has granted licenses to 35 large-scale producers. They act as distributors too, sending marijuana by mail to those who have prescriptions for it.
The Canadian medical cannabis industry is growing at a rapid rate. In March, 53,649 patients were registered to use medical marijuana in Canada, a 190 percent increase from the year before. By the end of July, that number had jumped to 82,217.
Three years ago, Privateer became the first U.S.-owned company to establish a commercial medical marijuana production facility in Canada. That facility, Tilray, is based in Nanaimo, British Columbia. Last year, Privateer, which has other interests in the industry, secured its first major institutional investor.
Founders Fund, a venture capital firm co-founded by American billionaire Peter Thiel, participated in a $75-million round of funding, investing undisclosed millions in Privateer. In explaining the fund's interest in medical marijuana, partner Geoff Lewis told an industry publication that the experience of a friend battling cancer had convinced him that "cannabis has real benefits."
Alphabet Ventures, a New York-based investment management firm, turned its attention to PharmaCan Capital, a Toronto-based company focused on investing in Canada's marijuana industry. Gorenstein, an Alphabet partner, saw great potential for growth and decided he was "all in."
Justin Trudeau's Liberal Party swept to power last October promising to legalize the recreational use of marijuana. Six months later, Health Minister Jane Philpott told the United Nations General Assembly that Canada would introduce legislation in 2017 to legalize and regulate recreational marijuana. That would open the door for it to be sold at pharmacies and province-run liquor stores - and likely reduce the number of recreational users who buy it on the black market, at illegal dispensaries and elsewhere.
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