An Analysis of Global Trends in the Medical Cannabis Industry
[Danish: En analyse af globale tendenser for den medicinske cannabisindustri]
Written by: Sussie Rørstrøm
Supervisor: Dr. Kasper Roldsgaard
Study program: Cand.ling.merc. Hand-in date: 1 June 2016 Total number of pages and characters: 157 pages of 169.022 characters
Master’s thesis Copenhagen Business School 2016
If marijuana were a new discovery rather than a well-known substance carrying cultural and political baggage, it would be hailed as a wonder drug.
- Lester Grinspoon, professor at Harvard Medical School, 2007
To my grandfather, the strongest man I know
Table of contents
i. Acknowledgements ………………………………………………………………………….. 5 ii. Dansk resumé ……………………………………………………………………………….. 7 iii. Abstract …………………………………………………………………………………….. 11
Chapter 1: Introduction ……………………………………………………………………….. 15
Chapter 2: Literature Review ……………………………………………………………….... 19
Chapter 3: Methodology ………………………………………………………………………. 23
Chapter 4: Theory ……………………………………………………………………………... 29
Chapter 5: The Roots of the Medical Cannabis Industry …………………………...... 35
5.1. The Botany of Cannabis and Its Human Connection ……………………………………… 35
5.2. Phytocannabinoids, Cannabinoids and the Endocannabinoid System …………………….. 36
5.3. The Historical Use of Cannabis as a Medicine ……………………………………………. 37
5.4. Legal History of Cannabis …………………………………………………………………. 38
Chapter 6: Analysis …………………………………………………………………...... 45
6.1. Representative Sample …………………………………………………………………….. 47
6.2. Analysis of Core Business Activities …………………………………………………….... 53
6.3. Systematic Analysis of Core Business Areas …………………………………………….... 75
Chapter 7: Discussion ……………………………………………………………………….... 99
Chapter 8: Conclusion ……………………………………………………………………….. 105
Bibliography ………………………………………………………………………………….. 109
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Appendix I: ……………………..…………..………………………………………………….. 141
Appendix II: …………………….. .…………………………………………………………… 147
Appendix III …………………….…..……...………………………………………………….. 151
Appendix IV …………………….……………………………………………………………... 153
Appendix V ……………………….…………………………………………………………… 157
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i. Acknowledgements
My deepest thanks and appreciation to:
My research advisor Dr. Kasper Roldsgaard, Doctor of Business Administration, from Polytechnic University of Valencia (2014), for all his dedication, for being my confidence and dialogue partner, for his help in my research study to identify the global trends of the industry, and for keeping my head above water
My boyfriend for all his support, motivation and comfort that kept me focused
My best friend for her encouragement and blind faith in me
And my family for their endless love, support and patience
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ii. Dansk Resumé
Formålet med specialet er at skabe et overblik over den internationale industri for medicinsk cannabis. Dette er skabt ved at analysere et repræsentativt udsnit af industrien, bestående af 34 medicinsk cannabis virksomheder fra 10 forskellige lande og 25 amerikanske stater, med henblik på at identificere de seneste års national, regionale og globale markedstendenser inden for medicinsk cannabis.
En tilpasset miljøscanningsmodel blev brugt til informationsindsamlingsprocessen for at sikre ens datasæt for hver virksomhed i det repræsentative udsnit af industrien. Denne både primære og sekundære data er analyseret ud fra virksomhedernes nøgleaktiviteter, hvorefter de er kategoriseret ud fra deres primære branchefokus og systematisk krydsanalyseret.
Resultaterne af disse analyser har gjort det muligt at identificere nationale, regionale og globale tendenser.
På nationalt plan har rammerne for lovgivningen en stor betydning for industrien. Enhver usikkerhed om reglementer og krav til håndteringen af medicinsk cannabis sår tvivl om hvad lovlig adfærd indebærer. I USA skabes sådan tvivl i dualiteten mellem den føderale lovgivning og staternes ret til danne deres egne regler. En udredelig statslig kontrol med medicinsk cannabis eksisterer i Chile, Holland og Israel, der med støtte fra lokale regeringer har skabt vækst og innovation på deres respektive markeder.
I Sydamerika ses en regional tendens til at fokusere på personlig kommunikation, hvilket er en kulturelt baseret tendens der også påvirker udførelsen af virksomhedernes socialt ansvarlige aktiviteter i lokalområdet og anskaffelsen af finansielle informationer om virksomhederne. Socialt ansvarlige virksomhedsaktiviteter ses desuden i europæiske og amerikanske regioner, men fremstår i mindre omfang i Australien fordi landet kun for nyligt har legaliseret medicinsk cannabis.
Internationalt set bruger virksomhederne social ansvarlighed til at sikre fremgang for industrien, især ved at dele viden og erfaringer på tværs af brancher og landegrænser for at styrke den fælles vidensbank og videnskabeligt bevise cannabis’ medicinske virkning. De videnskabelige beviser er grundlaget for industrien og fremhæver den internationale tendens til at hvile på forskning of udvikling. Evidens og innovation er derfor centrale for at retfærdiggøre industriens aktiviteter og for
7 at fjerne den stigmatisering af medicinsk cannabis der er blevet lagt til grund for internationale lovgivninger igennem de sidste 55 år.
Størrelsen på det repræsentative udsnit repræsenterer en svaghed, men idet nye konkurrenter tiltræder hver dag i den hastigt voksende industri for medicinsk cannabis er det en stor udfordring at skabe et komplet globalt overblik. Fremtidige undersøgelser kan med fordel inddrage et større udsnit for at identificere de mest betydningsfulde virksomheder og deres respektive indflydelse på industrien. Den globale medicinske cannabisindustri er stadig i opstartsfasen og er til dato blevet overset af marketinganalyser. Derfor er der rigelig med muligheder for fremtidige undersøgelser.
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iii. Abstract
The purpose of the thesis is to create an overview of the global medical cannabis industry by analyzing a representative sample of 34 medical cannabis companies from 10 countries and 25 US states in order to identify national, regional and international medical cannabis industry trends in recent years.
The information gathering process has been performed using a fitted environmental scanning framework to gather a set of common primary and secondary data about each of the 34 companies included in the representative sample. This data is analyzed by core activities and subsequently compared through a systematic analysis of the core business areas of the medical cannabis industry.
The results of these analyses have enabled the identification of national, regional and international trends.
Nationally, the legal framework impacts the industry significantly. Any uncertainty regarding regulations and requirements of the handling of cannabis creates industry uncertainty of what constitutes as legal. In the US, the duality between state and federal laws creates such uncertainty. Clear legislative control is seen in Chile, the Netherlands and Israel, where growth and innovation have been possible through the support of local governments.
Regional trends include South American cultural trend of personalized communication, which affects the acquisition of financial information and the form of local corporate social responsibility activities. CSR is also seen in European regions and North American regions, but less so in Australia due to its very recent legal acceptance of medical cannabis.
Internationally, CSR is widely used to ensure the advancement of the medical cannabis industry. This is particularly done through sharing experiences and knowledge across companies and nations, to strengthen the joint knowledge bank of scientific evidence. This evidence is root of the industry, which also highlights the international trend of relying heavily on research and development. Such evidence and innovation is important for the medical cannabis industry, in order to justify its activities and reduce the stigma of cannabis as a dangerous drug that has been the basis of global legislations throughout the past 55 years.
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The size of the representative sample presents a limitation. The industry is growing rapidly with new players every day, which makes a complete global overview challenging. Future research could include a larger sample to identify the most significant global medical cannabis companies and their respective influences on the industry. The global medical cannabis industry is in its infancy and has to date been neglected by marketing researchers, which presents an abundance of future research possibilities.
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Chapter 1. Introduction
Throughout the 20 th century, cannabis has been illegal. The implementation of the United Nations Single Convention on Narcotic Drugs in 1961 defined cannabis as a dangerous substance, which put severe restrictions on its use as a medicine. This and other factors formed an international political and social stigma on the plant as a psychotropic drug with no medical value.
Medical scientific research has since tried to prove the benefits of medical cannabis, supported by patient organizations and doctors that have experienced the relief of medical cannabis patients. Evidence is mounting, yet medical cannabis remains illegal. 1
International pressure to change the legal status of medical cannabis peaked this year, when the media announced that the War on Drugs has failed. This announcement came as the United Nations General Assembly Special Session (UNGASS) met two years earlier than planned by request of Colombia, Mexico and Guatemala. The South American countries called for an immediate reconsideration of the UN drug policies, in light of the failure to control the drug abuse and trafficking problem that has caused considerable damage to region.
Although no decisive actions were taken at this meeting, such international pressure could change the international perception of medical cannabis. 2 This perception is already changing in many countries. As the Green Avalanche of legal, domestic production to replace the growing illicit market is spreading, millions of patients are able to legally obtain pure and safe medical cannabis. 3
The awareness of the medical properties of the cannabis plant can be traced back 5000 years. The plant has been part of pharmacopoeias in several countries and regions around the world, but modern perception of cannabis as an illicit drug removed it from medical practices and made it illegal in almost every country. Synthetic, medical cannabis is already legally obtainable in several countries, but new scientific research suggests that the natural combination of active compounds in raw medical cannabis can be more effective than synthetically-produced cannabis pharmaceuticals. 4
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After 55 years of prohibition, cannabis is now regaining acceptance as a source of medicine. The discovery of the human endocannabinoid systems in 1992 and 1995 has scientifically proven that there is support to patients' claims of relief from their ailments by using cannabis. 5 This set in motion an expansion of medical research on using cannabinoids to relieve a wide range of symptoms and diseases. From this expansion sprouted a whole new industry of medical cannabis.
The medical cannabis industry is still in its infancy, but a significant growth is already seen as the legalization of medical use of cannabis spreads throughout the world. 6 The US market alone grew to an estimated to be a $2.9 billion dollar industry with over 1 million US medical cannabis users last year, which reflects the industry growth experienced on an international level.7
Despite such immense growth, there exists no comprehensive overview of the global medical cannabis industry and its most recent trends. This is what this research study has set out to provide, which represents a step towards a wider understanding of the medical business surrounding the cannabis plant.
The trends will be identified both at macro and micro levels, i.e. from market to global trends. A representative sample of companies from countries with legal medical cannabis markets will be analyzed to identify such trends. It is in this connection relevant to stress that this research study will only focus on medical uses of cannabis, and will not include the matter of recreational use.
To create an overview of the trends in the internationally emerging medical cannabis industry, a central question will create the base of the thesis and its research design:
Research question:
Which regional and international business trends have affected the global market for medical cannabis companies in recent years?
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Sources and Notes
1 Grinspoon (1 March 2007) 2 United Nations Office on Drugs and Crime (2016) 3 European Monitoring Centre for Drugs and Drug Addiction (2012) 4 Sur Actual (15 March 2016) 5 Catalano (15 March 2016) 6 See Appendix I, Tables 1.1. and 1.2. for overview of countries and states with legal medical cannabis 7 De Brüin et al. (2015)
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Chapter 2. Litterature Review
When searching through academic databases, the amount of literature on the medical cannabis industry is very limited.
On the CBS database, Libsearch, 45 search results appear when the three word cannabis, medicine and business are combined in a search. The search results are all articles that mainly focus on clinical evidence and drug use reviews. One article analyzes how cannabis is used by the pharmaceutical industry by analyzing hemp- or synthetically based pharmaceutical products.1
The EBSCO database lists 19 results when all three search words are combined, with sources from newspaper, periodicals and academic journals. Similar to above, most search results are medical research reviewing the markets for specific cannabis products. News articles on legal evaluations and discussion. Similar for them all is that they focus on a specific product or local market.
The Web of Science database only brings up 3 results when all search words are combined. These results focus on the health of medical cannabis users and the business method of using cannabis plant material in the production of medicines.
Similar for all search results is that none of them write about the global business of medical cannabis and the trends in this industry. This is what my research study sets out to provide.
Table 2.1.: Amount of existing literature on the medical cannabis industry
8.000 7.000 6.000 5.000 4.000 Web of Science Database 3.000 EBSCO Database 2.000 CBS Database Searchresult (amount) 1.000 0 Cannabis Medicine Business Search word added
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1 Scott (2004)
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Chapter 2: Methodology
The research study is designed to identify a set of important trends in the medical cannabis industry through a systematic review of core business activities that are subsequently analyzed by core business area.
Exploratory information about the medical cannabis industry was gathered simultaneously with the acquisition of botanical, historical and legal information about medical cannabis in general. This process began as a search for alternative pain medicine for my grandfather, but quickly became a deep-seeded fascination with the plant and its medical abilities. This provided me with a insight into the roots of the industry and an profound interest in its recent growth.
During the information scanning process, it became clear that there was a lack of information about the global industry of medical cannabis. The international industry appeared highly connected and interrelated, which highlighted the need for a global overview of the industry as a whole to explain this dynamic. However, the immense amount of companies in the global medical cannabis industry today calls for a method to comprise the industry into a comprehensive representation.
This method was developed through the in-depth understanding of the industry, as it enabled the creation of a set of criteria for the selection of a representative sample for the analysis. This sample was chosen during the industry information research process, where companies mentioned in the media or in other research studies were selected. Such a selection process ensured the availability of information about companies. The methods for the selection process are presented in Figures 2.1 and 2.2 in Appendix II.
Once the representative sample was been identified, companies were categorized by their primary business activities and information was gathered through off-the-peg research on a case-by-case basis. The information gathering process was based on a fitted framework through the use of marketing theories. These theories are used in the analysis.
The analysis is divided into two part-analyses:
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1. Analysis of core business activities 2. Systematic analysis of core business areas
The first part-analysis focuses on identifying the primary and secondary activities of the representative sample, which are subsequently used to systematically compare the activities by business area to understand how companies handle the competitive challenges that the external environment presents. This analytical approach is based on the perception that the companies are a set of components interacting in a mutual external environment. The nature of this interaction is analyzed to enable a comprehensive overview of market trends. 1
A theoretical framework for environmental scanning was used during the information gathering process in order to compartmentalize the information and create an overview apt for the systematic analysis of core business areas. This framework was based on a rigorous methodological process to ensure the acquisition of similar information from each company. Thereby, the identification of global trends will be based on a rigorous and objective analytical approach rooted in the research traditions of positivism.
Through a discussion of the qualitative results, an overview of national, regional and global trends can be established that will improve the understanding of the medical cannabis industry.
Semi-structured expert interviews were used to evaluate the results generated in the analysis in order to determine their accuracy. The choice of expert interview was based on the fact that this method would gain a more qualitative insight into the industry and its activities. The qualitative research method is a quintessential part of the research design.
The choice of experts to interview was based on the grounded theory that interview subjects are aptly identified during the analytical process. The intensity of relevance of the company on their local market was important in my choice of interview subject. I requested interviews from companies with higher market values and broad competitive scopes to ensure that their responses would be based on experience. Prior to contact, I analyzed the activities and compared it to its business area, in order to ensure an objective analysis that provided a basis for the interview. 2
The expert interviews were conducted through the electronic medium Skype, which was necessary because of the distance between the interview subjects and me. While Skype presents a fast and effective way of conducting an interview, it cannot replace the flexibility and openness of a face-to-
24 face interview. 3 Therefore, it is possible that interview subjects unintentionally withheld some information, because of the impersonal feel of the electronic method. This is in part because of a lack of communicative cues that is usually provided through body language and facial expressions. Even though the interview will include a video feed, subconscious interpretations of visual cues can be lost because of the lack of face validity to determine similarities between verbal response and facial expression. 4
In spite of such uncertainties, the expert interviews provide a personal interpretation of the medical cannabis market dynamics. This presents a unique insight into the industry that can help validate hypotheses made in the analysis. The semi-structured interview approach enables a more personal conversation rather than a strict interview, which can encourage the interview subject to subconsciously be more open and thereby provide more in-depth answers. These interviews are transcribed and presented in Annex IV.
The research design above is based on inductive reasoning. Such a basis highlights the positivistic approach of the study, because the results of the study are based on subjective observations and hypotheses of the industry. It is therefore important to keep in mind that the general conclusions about industry trends made in this study are based on a sample of the industry, and are therefore merely a qualitative evaluation of the trends that are likely affecting the industry as a whole. However, the consistent use of this inductive and qualitative approach throughout the study ensures that objective analyses and conclusions are made.
A positivistic scientific approach to trend identification aims to ensure objectivity, bit it is criticized for its naïve perception of the world because of the generalization of analytical results. However, a representative sample of medical cannabis companies can reflect the market dynamics of the industry and an inductive approach to the business area analysis can identify patterns that reflect global industry trends. Extensive off-the-peg research into the existing literature and company records will thereby support the results of analyses, which represents the literary research design of this thesis. The inductive approach similarly presents a problem of validity, but qualitative expert interviews will be used to evaluate any generalizations made in the analyses and thereby determine the validity of the identified trends. 5
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Sources and Notes
1 Kuada (2008), p. 52 2 Flick (2007), pp. 26-34 3 Burr & Nicolson (2005); Moutinho & Chien (2007) 4 Moutinho & Chien (2007) 5 Egholm (2014), pp. 69-87
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Chapter 4: Theory
The global medical cannabis industry is influenced by macroeconomic, legal, social, political, technological, and infrastructural factors that complicate the information gathering process.1 The extent of the representative sample therefore necessitates a systematic information gathering process to ensure an effective analysis.2
The analytical framework of Moutinho & Chien’s (2007) environmental scanning model allows for such a systematic approach, by organizing the information into 6 broad categories: market information, competitive information, foreign exchange, prescriptive information, resource information, and general conditions. 3
Under these broad categories, the framework is designed to include subcategories that best fit the information needed. Therefore, the environmental scanning framework allows the inclusion of subcategories based on marketing theories to develop a fitted framework.
The marketing theories on which the fitted framework was based are Porter’s matrix of generic strategies, the Boston matrix, Ansoff’s matrix of growth strategies, the PEST analysis, Porter’s five forces, Porter’s industry evolution model, and the 4 P’s of marketing; price, product, place, and people. 4 This mix of theories will provide an exhaustive and detailed account of the macroeconomic and multinational factors affecting the business activities of medical cannabis companies. The extent of use of each theory will vary, depending on the information available by the company.
The first part-analysis will evaluate the companies on Porter’s matrix, the 4 P’s and the Boston matrix in order to analyze the micro-environments. This will enable the identification of each company’s overall strategy, its marketing mix and the competitive performance of its product. This will establish an overview of each company, which will facilitate the second part-analysis of comparing the companies.
The second part-analysis will therefore systematically compare the sample by business area, based on Ansoff’s matrix, Porter’s industry evolution model, the PEST analysis, and Porter’s five forces. This will allow for a macro-environmental evaluation.
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Political, economic and some social considerations are included in the environmental scanning framework, but technological considerations are not. 5 This is relevant for the medical cannabis industry, as their product and research development highly depend on technologies to test for factors such as potency and purity to ensure qualitatively stable production. Thereby, there is a need to include the PEST analysis to evaluate the political, economic, social, and technological environments. Legal considerations will also be included.
Porter’s and Ansoff’s matrices support each other, as Porter’s enables the identification of a company’s overall strategic focus and Ansoff’s identifies the strategy most efficient for a company’s growth potential. The 4 P’s of marketing identifies the marketing mix of each company, but since prices are not available for all companies due to differences in distribution methods, the analysis of price includes pricing variables such as discounts and price sensitivity. Finally, the Boston matrix identifies how the competitive strategies of the companies influence the position of their products or services based on their relative market share.
The fitted framework that includes these abovementioned theoretical considerations is presented in Table X.X in Annex II.
2.1. Limitations
The criticism of a screening approach is that it omits the human factor of consumer needs and payment capabilities. 6 However, the inclusion of a PEST analysis can provide an insight into the socio-economic conditions of a country and thereby include consumer considerations in the research study.
The theoretical framework for environmental scanning is a multinational scanning model for marketing research, which helps companies identify their main competitors and provide an overview of the challenges of a given market. The framework can also be used at a project level, which warrants its use in this research study.
A limitation of using Porter’s, Ansoff’s and the Boston matrices is that they necessitate the generalization complex information in order to find a fit within the models. However, since the purpose of the research study is to identify broad commonalities between the companies of the
30 representative sample, inductive generalizations are part of the methodology of the study. Therefore, the use of such theories correlates well with the research design.
A weakness of the Boston matrix is that it assumes that experience generates profits. However, Proctor (2000) suggests that experience today can be acquired rapidly and that the largest competitors are not always the most profitable. 7 The systematic analysis of core business areas will evaluate if there is a connection between the largest and the most successful.
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Sources and Notes
1 Kuada (2008), pp. 64-68 2 Proctor (2002), p. 64 3 Moutinho & Chien (2007), pp. 1-33 4 Hooley, Piercy & Nicoulaud (2008); Proctor (2002) 5 De Brüin, et al. (2015), pp. 32-33 6 Kuada, p. 65 7 Proctor (2002), p. 27
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Chapter 5: The Roots of the Medical Cannabis Industry
It is relevant to review the botanical composition of cannabis, its historical uses as medicine and the legal environment surrounding the plant in order to understand the roots of the industry. This includes a review of the social, pathophysiological and political understandings of cannabis that provide an insight into its medical uses and the stigmatizations that strongly affect the modern use of cannabis in the medical industry.
5.1. The Botany of Cannabis and Its Human Connection
The name Cannabis derives from its botanical name Cannabis Sativa L. 1 The term hemp refers to the industrial cultivation of the plant for its fiber yields, which contains less than 0.3% THC. 2 Marijuana is a nickname given by South Americans to describe the smoked dried leaves and flowers of cannabis that are mainly used recreationally. 3 Marijuana does, however, have some negative connotations to racial tension within the US, which is why the more neutral term cannabis is consequently used throughout this research study. 4
The cannabis plant is among the world’s most diverse, because of its wide range of uses. Its fibers can be used to make paper, fiber, food, textiles, clothing, and rope, while its active compounds can be made into cooking oil, fuel, fodder, medicines and more. Its many uses have benefited people across continents and throughout centuries. The cannabis plant thrives in disturbed soils such as dump heaps and waste areas left by humans, which has led to a close relationship between the plant and the people. 5
The plant has a natural ability to adapt to a wide range of environmental conditions, which has allowed it to spread throughout the world. 6 This is believed to have resulted in a wide range of biotypes. 7
The biotype of which cannabis got its botanical name is Sativa . This type is tall and has narrow leaves that makes it useful for more fiber yields, while the biotype Cannabis Indica is shorter and secretes more resin that can be used for recreational and medical purposes. Finally, the naturally occurring biotype Cannabis Ruderalis is considered to be the ancestor of most cannabis biotypes. All biotypes contain cannabinoids, the active compound of cannabis. 8
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While modern cultivation and artificial indoor breeding of the plant may have led to the extinction of some biotypes, it has also created the opportunity for cultivators to reduce the plant’s life cycle and harvest up to six times annually, as compared to two annual harvests for outdoor cultivation. 9
5.2. Phytocannabinoids, Cannabinoids and the Endocannabinoid System
Each biotype has a unique composition of active compounds, present in the leaves and flowers of the plants. 10 These compounds are known as phytocannabinoids. When these are extracted from the plant, either through heating the plant material or using liquid or gas extraction technologies, they become cannabinoids. 11
The most common and most studied cannabinoid is tetrahydrocannabinol (THC), which is also the most psychoactive. The cannabis plant further contains other less psychoactive and non- psychoactive compounds, such as CBG, CBC, CBN, and CBD. 12 The non-psychoactive compound CBD is scientifically and medically recognized as the natural pain killer of the cannabis plant. 13 However, it is also increasingly argued that the natural combination of phytocannabinoids might make raw medical cannabis more effective than monocannabinoid products. 14
Aside from phytocannabinoids, there are also synthetic cannabinoids and endocannabinoids. Synthetic cannabinoids are produced artificially in laboratories, while endocannabinoids are naturally present in the human body and are responsible for regulating the central nervous and the immune systems. This is known as the human endocannabinoid system, which Israeli scientist Dr. Raphael Mechoulam discovered in the 1990s. 15
The impact of cannabinoids on the body is still poorly understood, but the discovery of the endocannabinoid system has created a science of cannabis. The endocannabinoid system consists of CB1 and CB2 receptors, located in the central nervous system and in the immune system, respectively. 16 An additional three cannabinoid receptors have been identified as part of the endocannabinoid system in humans and several other living species, a system that partly regulates metabolism, inflammation, pain, cognition, appetite, and a wide array of other physiological and pathological functions. 17
It is the possibility of treating diseases related to these functions that medical cannabis companies are pursuing. Cannabinoids act as bio-regulators once absorbed by the endocannabinoid system, enabling companies to treat physiological and pathological diseases with the development of cannabis-based medical products and services. Such developments are highly dependent on research to gain further understanding into the relationship between cannabinoids and endocannabinoid receptors. 18
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Part of such research is the understanding of the effects of different types of ingestion methods. Smoking is currently the most popular within both recreational and medical consumption of cannabis. 19 The absorption of cannabinoids through lung tissue has been proven to be the most effective, because the cannabinoids are not diluted or destroyed as they are when absorbed through the stomach, the skin or injection. 20 Furthermore, dosage control is easier for patients who smoke, because the effects of smoked cannabis occur faster, which allow for a quick way to stop administration. 21
However, smoking has long been scientifically proven and socially accepted as an adverse health risk.22 This has provided an initiative for modern medical cannabis companies to research and develop new methods of consumption that allow the same quick and controlled administering of cannabis as smoking without the health risks. This has created new, prosperous and rapidly growing markets for medical cannabis throughout the world.
Throughout history, cannabis has been claimed to relieve, reduce and even cure a long list of ailments and diseases. 23 Such historical accounts have been carried through to modern medicine and its historical knowledge is now used as a basis for an evolving industry of medical cannabis.
5.3. The Historical Use of Cannabis as a Medicine
The medical ability of cannabis is far from a new discovery. The plant’s medical use can be dated back 5000 years to “the Father of Chinese Medicine”, Shen Nung, whose Panacopoeia – the oldest known medical text – mentioned cannabis as a remedy to improve breathing, fight menstrual fatigue, rheumatism, and constipation, among others. 24
Medical uses of cannabis was furthermore documented in Indian, Arabic, Egyptian, Roman and Greek medical traditions as far back as 1 th century BC, and European use was also documented in pre-Christian Mediterranean countries and on the British Isles during Roman times. 25
In Europe, cannabis’ medical application did not become widely known until Irish physician W.B. O’Shaughnessy introduced Indian Hemp ( Cannabis Indica ) to European medicine in 1839. 26 However, its popularity was limited. The unreliability of potency and quality made it less desirable than other medicines, but it was nonetheless available in tincture, pill and extract forms shortly after its Western introduction. Some European and American physicians even advocated its use in the late 19 th century. 27
Cannabis as a medicine and as a multipurpose plant spread throughout the world, mainly through colonization of the Americas and Australasia. In 1870, cannabis was added to the American pharmacopoeia. 28
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Latin American pharmacopoeias also listed its medical use, where strong traditions of herbal healing persisted despite religious opposition. Such religious opposition had long existed, but ultimately it was political pressure that set in motion the prohibition of cannabis worldwide. 29
5.4. Legal History of Cannabis
By the turn of the 20 th century, most of the world’s countries had no laws regulating cannabis. However, a rising international drug trafficking problem concerning opium brought about debates on cannabis as well. At the first international meeting on the drug trafficking problem in 1909, cannabis was not included as part of the problem, but due to American and Italian political pressure the League of Nations decided at the Hague Convention of 1912 to study the problem of cannabis for the next meeting in 1925. 30
American political pressure represents a central reason for the international cannabis restrictions that still apply today. Internal debates during the early years of the 20 th century fueled this pressure. American pharmaceutical companies were divided between those that supported prominent doctors who opposed cannabis as a medicine due to its risk of addiction and those that agreed with the National Wholesale Druggist Association who argued that cannabis was a medicine that had no such addictive effects. In 1906, a legal requirement of proper labelling of cannabis products was implemented under the Pure Food and Drug Act, which was an attempt to appease both sides of the debate by simply reducing the amount of cannabis medicine in circulation. 31
Subsequently, throughout the 1920s, several American states prohibited cannabis for non-medical purposes, which can be attributed to the racial tension between Americans and Mexican immigrants at the time. Cannabis was blamed for the rising violence in Mexican ghettos during the Great Depression and this negative association of cannabis was further emphasized when the American media started using the Mexican word marijuana .32
American newspapers conveyed this association to the people, who pressured the Federal Government to handle the drug problem. This led to the implementation of the 1937 Marijuana Tax Act that prohibited non-medical cannabis in the US and put strict bureaucratic procedures in place for the pharmaceutical industry that limited medical supply of the plant. In 1941, medical cannabis was removed from the American Pharmacopoeia, signaling the beginning of the end for cannabis as a medicine. 33
American news reports of cannabis’ negative impact also spread to Canadian newspapers. This had a great impact on the social and political opinions of cannabis, even though no national use had been recorded. As a result, the Canadian Government implemented the 1923 Opium and Drug Act that fully prohibited cannabis. 34
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At the next League of Nations meeting, the 1925 Geneva Convention, nations agreed to limit exports on cannabis, despite the fact that no study on the problem of cannabis had been presented in accordance with the 1912 Convention agreement. This was mainly due to American political pressure, along with Egyptians, South African and Canadian persistence to pass such restrictions. 35
In 1961, the 1925 Geneva Convention was the basis of the United Nations Single Convention on Narcotic Drugs. This Single Convention took a tougher approach to drug control, as it urged nations to prohibit domestic cannabis cultivation for non-medical and non-scientific purposes and to make possession punishable by law. By the late 1970s, almost every nation in the world had prohibited cannabis, even countries that had not signed the treaty. In Europe, The Schengen Agreement put more pressure on EEC member nations to prohibit cannabis, because it called for the harmonization of drug policies. 36
Despite such pressure, the Netherlands fundamentally amended their national 1928 Opium Act during the 1970s, in order to distinguish between “hard” drugs and “soft” drugs and to combat drug trafficking. 37 This legal change gave birth to a policy of tolerance on personal consumption that continues today. 38
The Dutch separation of “hard” and “soft” drugs was based on the “expediency principle” that cannabis use leads to other illicit drug use due to similar availability on the illicit market. 39 This principle directly opposes the American theory of the “gateway effect” that had affected American and international drug policies since the turn of the century. 40 The gateway theory claims that cannabis leads to other illicit drug use due to its psychoactive and addictive effect that is substitutable by other drugs. 41
The polarity between the American and Dutch model of perception was strengthened when the Nixon Administration launched the War on Drugs in 1986. 42 This war has continued to be the focus of drug policies into the 21 st century, but it is likely to change soon.
5.4.1. The End of the War on Drugs
In April 1998 at the United Nations General Assembly Special Session (UNGASS), member nations vowed to make efforts to create a drug-free world by 2008. 43 This failed, since drug problems are still present today.
Consequently, in 2012, Colombia, Guatemala and Mexico urged the UN to rethink their drug policy, because vulnerable communities in these countries were severely affected by the consequences of decades of failed attempts to reduce the illegal drug industry. The reduction of public health and the increase in drug-related deaths in the South American region were blamed on the War on Drugs. Also the extension of the War on Drug approach, the implementation of Plan Colombia that targeted cultivation, was argued to be a contributing factor to the growing illicit drug markets.44
39
The UN complied with South American requests and moved the date of the decennial UNGASS up two years to April 2016, sparking media-wide claims that the War on Drugs was a failure.45 Even the previous UN Secretary-General, Kofi Annan, who led the 1998 UNGASS, has publicly stated that the war has failed and that international and national drug policies need to be reconsidered. 46
New approaches to drug policies have been suggested by several nations. The most prominent country is the Netherlands that allow legal possession and consumption, but restricts the distribution and wholesale of cannabis. The only legal body of distribution is the Office of Medicinal Cannabis, controlled by the Dutch Ministry of Health, Welfare and Sport.47
While Dutch drug policy has become stricter in recent years, an increasing number of countries around the world are loosening their national laws and policies. Since the turn of the 21 st century, Portugal, Spain and Uruguay have implemented various levels of liberal interpretations of the Single Convention. Portugal and Spain have legalized drug use to provide more people with treatment for drug abuse without the fear of being criminally prosecuted, but cultivation and sale are still illegal. In 2012, Uruguay became the first country to legalize cannabis completely, but due to national opposition from pharmacies and 60% of the public, the law is still awaiting implementation. 48
Additionally, the US that spoke for the international ban of cannabis in the early 20 th century has since 1998 gradually changed position, as an increasing number of US states are legalizing cannabis, both for recreational and medical use. While the Federal Government still considers cannabis a Schedule I drug with no medical properties, states are by law free to make their own individual drug laws.
Initially, this duality of state and federal laws presented a big risk for medical cannabis companies that legally operated under state laws, as they were in violation of federal drug laws. However, an omnibus bill approved in 2014 now ensures that companies and individuals in states with legal cannabis laws cannot be prosecuted by the US Department of Justice. 49 Cannabis thereby remains illegal under federal law, but conflicting state laws are tolerated.
The legalization of medical cannabis is spreading fast around the world. It is supported by medical experts and international organization, but countries and states are widely apart on the question of how to regulate such a legal market. 50
The 1961 UN Single Convention still applies to signing nations today and thereby still represents a legal barrier to medical cannabis companies.51 While the Single Convention does recognize that “medical use of narcotic drugs continues to be indispensable for the relief of pain and suffering and that adequate provisions must be made to ensure the availability of narcotic drugs for such purposes”, a significant majority of countries still consider any use of cannabis illegal. 52
However, there are countries that allow the medical use of cannabis, such as Australia, Canada, Colombia, Chile, Israel, Jamaica, the Czech Republic, the Netherlands, The United Kingdom, Uruguay, and 24 US states and the District of Columbia.
40
In the following, medical cannabis companies within these 10 countries and 25 US states will be analyzed in order to enable the identification of national, regional and international trends of the legal medical cannabis market.
41
Sources and Notes
1 European Monitoring Centre for Drugs and Drug Addiction (2012) 2 Clarke & Merlin (2013); European Monitoring Centre for Drugs and Drug Addiction (2012) 3 Clarke & Merlin (2013) 4 See 5.4. Legal History of Cannabis 5 Clarke & Merlin (2013) 6 With the exception of Antarctica (EMCDDA, 2012) 7 Clarke & Merlin (2013) 8 Ibid. 9 Clarke & Merlin (2013); European Monitoring Centre for Drugs and Drug Addiction (2012) 10 European Monitoring Centre for Drugs and Drug Addiction (2012); Mack & Joy (2000) 11 De Brüin, et al. (2015) 12 European Monitoring Centre for Drugs and Drug Addiction (2012) 13 Hanuš & Mechoulam (2005) 14 Sur Actual (15 March 2016) 15 Clarke & Merlin (2013); Catalano (15 March 2016) 16 De Brüin, et al. (2015) 17 De Brüin, et al. (2015); Basavarajappa, et al. (2008) 18 Mack & Joy (2000) 19 Ibid. 20 Huestis (2007) 21 Böllinger (1997) 22 Ibid. 23 Clarke & Merlin (2013); Mikuriya (2007) 24 Clarke & Merlin (2013) 25 Ibid. 26 Clarke & Merlin (2013); Mikuriya (2007) 27 Clarke & Merlin (2013) 28 Ibid. 29 In 1484, the newly appointed pope Papal Bull of Innocent VIII affiliated herbal healers with witchcraft and medical cannabis with satanic rituals (Clarke & Merlin, 2013) 30 Italy had in 1911 gained territories from Turkey where cannabis was a concern (Böllinger, 1997) 31 Mikuriya (2007) 32 Mack & Joy (2000) 33 Clarke & Merlin (2013); Mikuriya (2007) 34 Böllinger (1997); Riley (1998); Spicer (2002) 35 Egypt and South Africa had documented abuse among poorer populations and South Africa had passed an anti- cannabis law in 1911. Meanwhile, Canada had no documented use, but American horror stories of drug abuse had circulated Canadian media in the years prior to the Convention and the Canadian Parliament had passed the 1923 Opium and Drug Act that for the first time prohibited cannabis (Riley, 1998; Böllinger, 1997) 36 Böllinger (1997) 37 European Monitoring Centre for Drugs and Drug Addiction (2012) 38 Sensi Seeds (2 September 2015) 39 Böllinger (1997) 40 Mikuriya (2007) 41 European Monitoring Centre for Drugs and Drug Addiction (2012) 42 Böllinger (1997) 43 United Nations (21 October 1998) 44 Brodzinsky (2016); Doward (2016); Ingraham (24 March 2016) 45 Ingraham (24 March 2016); De Carvahlo (17 February 2016); Chalabi (19 April 2016); Brodzinsky (18 April 2016); Doward (2 April 2016); Clegg & Sobotka (31 January 2016) 46 Annan (2016); Annan (2015); Silva (2015) 47 The Office of Medicinal Cannabis: Homepage 48 Silva (2015); Marshall (2016); de los Reyes (2013) 49 Sullum (2015)
42
50 Ingraham (24 March 2016); De Carvahlo (17 February 2016) 51 Böllinger (1997) 52 United Nations Office on Drugs and Crime (2013)
43
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Chapter 6: Analysis
45
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6.1. Representative Sample
6.1.1. Criteria for Sample Selection
Based on social, pathophysiological, legal and political impacts on the medical cannabis industry, four criteria have determined the selected representative sample. These criteria eliminate any inadequate measurements to ensure reliable results. However, some companies will be included in the research study despite inadequate information available, because regional practices in reality can interfere with the theoretical basis of the criteria. Such exceptions will be argued for throughout the analysis.
6.1.1.1. Criterion 1: Business Focus
The first criterion for the selection of a representative sample is that any company included must primarily focus on medical cannabis business activities. This criterion is based on the botanical diversity of cannabis and thereby its wide variety of potential for pathophysiologic profitability. While some companies operate on both the recreational and the medical cannabis markets, the primary activity of a company must be on the medical market in order to fit with the focus of this research study.
In order to determine a company’s primary focus, it must have a readily available website with information on their current activities within the medical cannabis business. If their medical cannabis activities are not mentioned on a company’s website, if a company’s website is unavailable due to maintenance or other, or if any information about its activities is unsubstantial, the company is excluded from the analysis. 1
6.1.1.2. Criterion 2: Legal Conduct
The second criterion is based on the legal and socio-political accounts of medical cannabis. This criterion requires that all companies of the representative sample operate within the legal frameworks of the local law. This allows for a sample of wide national diversity due to the legal status of medical cannabis in several countries. 2
6.1.1.3. Criterion 3: Availability of Financial Data
The third criterion is due to cultural diversity only applied to North American, Australian and Western European companies, whom are legally required to have financial data and information available in the form of annual reports, stock market developments and press releases. Such data is
47 readily available for North American, Australian and British companies, but less so for South American, Eastern European and Dutch companies included in the analysis. Particularly financial data is unavailable for these latter regions.
Despite this, the inclusion of non-Western companies is important for a global overview of the medical cannabis industry. The lack of data for these companies will necessarily exclude them from comparative analyses of financial categories within the theoretical framework, however national legal and social structures are still relevant for comparative analyses as they represent the challenging environments of the companies.
Even though the analyses of the companies will involve non-comparable variables due to lack of data from non-Western companies, the external environmental differences between the companies will affect the comparative analysis even if there was sufficient data to adequately make international comparisons. 3 This stresses the need to include analyses of social, legal, and political structures of each country to cross-compare the environments in which the companies operate.
6.1.1.4. Criterion 4: Parent Company
The fourth criterion requires that the companies analyzed must be the parent companies. This will ensure that all disclosed business areas of a selected company are available for analysis. It also ensures that no business area is overlooked. Furthermore, parent companies have the aggregated experience and knowledge of the industry from own and subsidiaries’ activities, which allows for more comprehensive analyses based on a variety of information.
6.1.2. Definition of Business Activities
The companies included in the research can be separated into eight categories based on their primary business activity. 4
6.1.2.1. Research & Development
R&D is important for all companies in the industry. Companies with a competitive focus on R&D include any activity that helps evolve knowledge and uses of cannabis, such as clinical trials, analytics, etc. This business activity is kept separate from the business focus of testing, since the testing of cannabis is a legal requirement by many countries and states, while R&D is not.
48
6.1.2.2. Cultivation
Companies that primarily focus on cultivation are those that have own cultivation facilities and deliver the raw product to the customers, after purity, potency and other testing has been performed. Wholesale of raw cannabis products can also be sold.
6.1.2.3. Rental of Facilities and Equipment
Rental of facilities and equipment includes products and services that can be used throughout the supply chain for the end-to-end supply of various forms of medical cannabis. Other companies offer rental and sale of facilities and equipment as well, but have other primary business focuses.
6.1.2.4. Technology
Technological services include web applications, mobile apps, computer systems, and other proprietary technology that customers can purchase directly from a company.
6.1.2.5. Consulting
Consulting services is a business activity that includes companies with a main focus on providing guidance and assistance for other companies in the industry. Such services may also include the acquisition of facilities and equipment, but these are not directly supplied by the company.
6.1.2.6. Supply and Distribution
The business activity of supply and distribution includes companies that focus on managing the supply chain to provide patients and customers with products and services.
6.1.2.7. Production
Another business area is production, which includes the companies that prepare the cannabis in some way, before it is sold. Such preparations include processes such as extraction of cannabinoids for oils and creams, infusion into edibles, pharmaceutical manufacturing of pills, capsules, etc. The preparation of cannabis separates the business activity of production from cultivation.
49
6.1.2.8. Testing
Testing services include the provision of potency, quality, purity, and other tests that ensure that the cannabis products used by patients are safe. Such testing is often legally required.
6.1.3. Definition of Business Areas
The business activities above can be grouped into three business areas, which will be the focus of the systematic analysis. These three areas are:
6.1.3.1. Research & Development
This business area is important for the industry, which warrants a systematic comparison of R&D companies. This business area therefore only includes companies whose primary activities are R&D.
6.1.3.2. Cultivation and Production
The activities of cultivation and production are tightly connected, as production is heavily dependent on adequate levels of supply from cultivation. Furthermore, the activities that make up this business area have the same focus of serving the end-consumer, the patient.
6.1.3.3. Rental of Facilities and Equipment, Consulting, Technological Services, Supply and Distribution, and Testing Services
The final business area consists of the activities that enable the industry as a whole to grow. This area represents a larger array of products and services than the previous two, which reflects the importance of R&D, cultivation and production in the balance of the industry.
50
Sources and Notes
1 Unsubstantial information is here considered to be a lack of press releases available to validate or falsify mentions in the general media, or a lack of information on the products and services provided by the company or any of its subsidiaries or affiliates. Any lack of such data would results in analyses based on speculation, therefore making the results unreliable 2 See Appendix I, Tables 1.1. and 1.2. for overview of countries with legal medical cannabis 3 Moutinho & Chien (2007) 4 See Appendix III: Company Overview
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6.2. Analysis of Core Business Activities
In this chapter, I analyze a representative sample of medical cannabis companies by their core business activity. The purpose is to identify the core business activities of the companies that characterize key business area.
6.2.1. Representative Sample
The representative sample of 34 medical cannabis companies is representative for the entire supply chain of the global medical cannabis industry. 1 The sample is categorized as follows:
1. Research and development (R&D) for eleven companies (11),
2. Cultivation for two companies (2),
3. Rental of facilities and equipment for one company (1),
4. Technology for one company (1),
5. Consulting for three companies (3),
6. Supply and demand for two companies (2),
7. Production for eleven companies (11),
8. Testing for one company (1).
The analysis uses the 4 P’s of marketing together with Porter’s generic strategies and the Boston matrix to provide comparable analytical information for the systematic analysis of the sample by business area.2
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6.2.2. Systematic Analysis of Core Business Activities
The information gathered for the sample is obtained by data scanning the companies, stock exchange websites and general media news sites. 3 This off-the-peg scanning process is guided by analytical marketing theories.
6.2.2.1. Core Business Activity: Research & Development
The third group with 11 companies (n=11) was identified for the business area of research and development (R&D).
6.2.2.1.1. INSYS Therapeutics
INSYS is a dominant competitor on the American medical cannabis market, with a market value of over $1 billion USD. 4 This dominance has been obtained, because the company is able to compete with the pharmaceutical market with its DEA-approved production of synthetic cannabinoid medicines. 5
INSYS has a limited product portfolio that is based on the synthetic cannabinoid, dronabinol. Its primary product is Subsys, a sublingual spray for pain treatment, which gained a market share of 26.8% in its first three years since launched in 2012. 6
The product candidate Syndros has the commercial opportunity to increase revenue by $200 million USD during peak sales. With plans to expand its usage through an aggressive marketing effort to reach physicians, INSYS estimates that the product’s gross sales could be up to $525 million USD. 7
The position as a market leader on the American market matches a strategy of cost leadership in Porter’s matrix, since the company stretches its market presence across the entire US by offering a product that is similar to other medicines based on the synthetic compound dronabinol. 8 This leadership position is further strengthened by their star product position, according to the Boston matrix.
6.2.2.1.2. Cannabics Pharmaceuticals Inc.
Cannabics is a Nevada-based company established by Israeli researchers. Since 2014, the company has focused on researching the medical properties of cannabinoids in order to develop innovative therapies and delivery systems. 9
54
This focus has resulted in the development of a long-active oil capsule, Cannabics SR, which is currently going through clinical trials to examine its effectiveness of treating cancer-related cachexia and anorexia (CACS). 10 This clinical study and other R&D activities are conducted in Israel by the company’s local licensed partner, GRIN Ultra Ltd. Cannabics SR is currently only available for registered Israeli patients. 11
The company also has international presence, with production and distribution operations in Spain and production and distribution in the Czech Republic and Israel. Furthermore, Cannabics has manufacturing and distribution operations in Colorado. All operations are run by subsidiaries and partners.
These international business operations reflects a broad scope of business activities, which is part of Cannabics product strategy as it aims to gain licenses to distribute and sell Cannabics SR worldwide. 12
This ambition combined with the clinical development that differentiates the products suggests a differentiation strategy, according to Porter’s matrix.
The company’s accumulative losses are increasing to the point where the company’s future depends on generating additional capital. Its stock has experienced minor spikes during 2016, likely due to the expectations of the clinical trials results. 13
However, until the product is fully implemented and the distribution and sale licenses are obtained, the company’s product is likely to remain in its position as a dog, according to the Boston matrix. This product position is due to the company’s relatively low market share and because the company is unable to grow until this product is released. 14
6.2.2.1.3. Cannabis Science Inc.
Cannabis Science is a multimarket company based in Colorado that has produced medical cannabinoid formulations derived from extracts since 2009. 15 The company currently sells its products in Californian dispensaries owned by Notis Global Inc., as well as in stores and online through The Hempery that delivers nutraceutical and cosmeceutical products to the US market. 16
Through the company’s R&D operations, products have been developed for topical and oral uses by skin cancer patients, AID and HIV patients with infections and inflammations, and patients with neurobehavioral disorders like ADHD, PTSD and anxiety. 17
The broad scope of business activities and the high degree of product differentiation through its R&D operations indicates a differentiation strategic intent of the company. This is confirmed through Cannabis Science’s mission statement to provide innovative therapeutics for unmet medical needs. 18
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The current low market growth experienced by the company and its low market share indicates that the Cannabis Science’s products are dogs in the Boston matrix. 19
6.2.2.1.4. iCan
The Israeli cannabis company iCan conducts cannabis-based agricultural research through international collaborations with national, American, Canadian, Czech, and Australian companies. Its goal is to treat patients with chronic illnesses.
At a national level, the local government supports the R&D initiatives of iCan and other medical cannabis companies by providing infrastructure and funding for testing in federal laboratories. 20 Through its partnership with B.O.L., iCan holds CannaTech, an annual summit for the international industry of medical cannabis to share experiences and accelerate innovation. 21 The company also provides educational symposiums in Tel Aviv, called Cannabis 101.
The strategy of the company is difficult to determine, in part due to the lack of the financial records of the company, but the general Israeli market is currently experiencing incredible growth. This could indicate a high global market share for Israeli companies, which would place iCan’s research activities as a star in the Boston Matrix. 22
6.2.2.1.5. Breath of Life Pharma (B.O.L.)
The Israeli company B.O.L. provides B2B application programming interface (API) that keeps track of the product from seed to sale. This interface is part of the company’s R&D efforts, which also includes the development of cannabinoid-based pharmaceuticals, nine patented formulations and multiple clinical trials.
BoL’s clinical trials could provide treatment for patients with decreased appetite, chemotherapy- induced nausea and vomiting (CINV), ADHD, neuropathic pain, epilepsy, colitis, psoriasis, Parkinson’s disease, fibromyalgia, diabetes, Crohn’s disease, and atopic dermatitis. 23
Furthermore, the company cultivates its own cannabis, owning one of the eight government- approved cannabis farms in Israel. 24 Its greenhouse cultivation allows the company to produce over 230 unique strains of medical grade cannabis that is sold in various packaging formats and sizes to medical cannabis companies.
BoL owns ten patented indications for CBD-therapies, which indicates a high level of product differentiation as well as a potential for growth. The possibility of high market share due to the growth of the Israeli market in general could be a star on the Boston matrix, where increasing sales is the main strategy. This strategy is concurrent with the differentiation strategy of Porter’s matrix.
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6.2.2.1.6. Tikun Olam Ltd.
Tikun Olam is the largest supplier of medical cannabis out of the eight companies that the Israeli Ministries of Health and Agriculture have given authorization to cultivate cannabis. The company was given its authorization in 2007 and has since then gained accreditation for food production safety, patient instruction and care, and for growing, producing, selling, and distributing medical grade cannabis.
As a secondary focus, Tikun Olam sells 16 strains of cannabis and 14 “smoking substitutes” in forms of capsules and oils that are sold at fixed prices set by the government. 25 At a national level, the company focuses on building relationships with hospitals, researchers, physicians, and nursing facilities to provide treatment alternatives to about 30% of registered Israeli patients. 26 Through international collaborations, the company is also able to sell its products tor registered patients in Canada, Spain and the US. 27
The company primarily focuses on researching and developing strains for the treatment of vulnerable patients, by conducting clinical research and trials for a wide range of illnesses. 28 Through experiences from its extraction and analytical laboratories, Tikun Olam has built the world’s largest medical cannabis treatment databases containing information on optimal strain and dose for several different diseases, as well as information on reducing the use of conventional medicines. This has gained it a global reputation for its techniques, making them an industry leader on the Israeli market.
Tikun Olam’s international presence and highly differentiated product indicates that its strategy is differentiation, according to Porter’s matrix, which is also confirmed by the added value of its public services.
Its products and services can be placed as stars, reflected by the high market share of the Israeli market, the company’s high growth through international partnerships and agreements and Tikun Olam’s international and national leadership status.
6.2.2.1.7. MGC Pharmaceuticals
The Australian company MGC became a new entrant to the medical cannabis industry this year, when it in March signed an R&D agreement with Israeli-based SipNose Ltd. within a week after the legalization of medical cannabis in Australia. 29 This agreement is set to combine MGC’s cannabinoid compounds with SipNose’s intra-nasal delivery device to offer treatment to epileptic patients. 30
Furthermore, the company plans to sell hemp strains, cosmetics and over-the-counter medical products, made from its first cannabis crop that is expected to be harvested in Q3 of 2016. In the meantime, its cannabis supply comes from Natura Laboratories Ltd. which will be used for the
57 production of skin care products. 31 The launch of an online store is also planned, but not yet implemented. 32
Porter’s matrix that suggests that MGC’s strategy for the future is based on differentiation. However, the company has not fully established itself on any market as of yet, indicating a low market growth and a relatively low market share that places its future products as dogs in the Boston matrix.
6.2.2.1.8. MMJ PhytoTech Ltd.
MMJ was formed in March 2015 when Australian Phytotech Medical Ltd. and Canadian MMJ Bioscience merged to form a medical cannabis company that focuses on researching and developing therapeutics and agro-medicines. 33 On 22 January 2015, it moved to national pioneer status as it became the first medical cannabis company to list on the Australian Stock Exchange (ASX). 34
The company has developed Sativol, a gastro-resistant CBD pill that is currently available on the European, American and Canadian markets. Furthermore, it is developing a vaporizer and an oral capsule in partnership with Canigma and Yissum Research Development Company at the Hebrew University of Jerusalem, respectively. 35
Its farm-to-pharma business model and distribution portfolio consists of four operating units, where Canadian United Greeneries cultivate cannabis that is then tested by Canadian AgriChem Analytical and commercialized by its Swiss subsidiary SatiPharm. 36
These strategic alliances provide the company with a competitive advantage of a broad and strong market presence and the potential of marketing its currently limited product portfolio. These factors indicate a cost leadership strategy, according to Porter’s matrix.
6.2.2.1.9. Echo Pharmaceuticals BV (Echo)
Dutch Echo receives its supply of cannabis from Bedrocan BV through the Dutch Government’s Office of Medicinal Cannabis. While Bedrocan BV is the only company in the Netherlands that are authorized to cultivate cannabis, the Office of Medicinal Cannabis is the only authorized distributor of the plant. 37
The product that Echo receives is used in the isolation, formulation and clinical development of drug and delivery technology. The company’s primary product candidate is Namisol, which is a high-THC tablet for the treatment of chronic pain, multiple sclerosis (MS) and Alzheimer’s disease. The product is currently undergoing phase II clinical trial. 38 Echo’s drug delivery technology, Alitra, is offered as an extra value to the B2B customer of Echo. 39
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The narrow competitive scope on the Dutch market and the value-added product portfolio indicates a differentiation strategy of the company. Such a strategic focus conforms to the suggestions from the Boston matrix to identify a niche market to transform its dog product position to a star.
6.2.2.1.10. Winter Garden Biosciences (WGB)
WGB is a Uruguayan company that was established in 2014 by the CEO, Julian Strauss, who had experience with medical cannabis production facilities in Canada. When it was granted the first research license in the country, the construction of a laboratory enabled the development of a cutaneous delivery system similar to the Nicotine patch that is expected to be launched this year. 40
The company seeks to grow, research and produce medical cannabis plants with low THC-content to increase clinical relief of neurological ailments for local patients. 41 This indicates a differentiation focus, according to Porter’s matrix. Due to lack of financial data, the product position on the Boston matrix is not possible to determine.
6.2.2.1.11. The International Cannabis and Cannabinoids Institute (ICCI)
The ICCI is a limited liability company that was created in 2014 and launched in 2016 through a R&D coalition between American for Safe Access (ASA) and The Patient Association for Cannabis Treatment (KOPAC). 42 This launch is further supported by the International Medical Cannabis Patients Coalition (IMCPC).
The Institute’s purpose is to provide research tools for the industry-wide advancement of the knowledge of medical cannabis. These research tools include metabolomics tools for specimen analysis and optimal clinical trial design, big data tools and platforms, consulting on patent application and compliance certification, and other clinical research services. Furthermore, KOPAC provides educational webinars with information on medical use and consumption of cannabis.
The knowledge acquired through these tools is then shared with a wide range of organizations and institutions, both public and private as well as governmental entities and patient advocates. The sole purpose is to advance the international knowledge of cannabis as a medicine. 43
The supply of cannabis seeds is imported by the Czech company Elkoplast, who also cultivates and delivers it to the ICCI for the purpose of research and product development. 44 The products are manufactured to provide patients in the Czech Republic with a quality product that is based on extensive knowledge. The price of medical cannabis in the Czech Republic is currently $12 USD per gram, but it is expected to drop when the ICCI and Elkoplast can deliver a national supply. 45
Despite the ICCI’s high aspirations, its level of product differentiation and scope of activities are both relatively low, indicating a cost-focused strategy. This is also reflected in the Institute’s expectation of lowering the price of nationally available medical cannabis. Such a strategy is
59 furthermore concurrent with the ICCI’s market position as a dog, according to the Boston matrix which suggests a focus on a niche market. For the ICCI, such a niche market is the Czech.
6.2.2.2. Core Business Activity: Cultivation
The first group with two companies (n=2) was identified for the business area of cultivation.
6.2.2.2.1. Fundación Daya Inicio (Daya)
Daya is a non-government and non-profit organization from Chile. 46 In 2014, the Chilean Government granted Daya the exclusive legal right to cultivate cannabis and gave authorization for the import of seeds and plants from the Netherlands. 47 The cultivation is fully organic and is performed by the residents of 20 municipalities on what has unintentionally become the largest cannabis farm in Latin America. 48
The local workforce provides cheaper labor and therefore lower production costs, and in return Daya provides free medical cannabis treatments for the 20 municipalities. 49 Throughout Chile, Daya has provided treatment for more than 5,000 patients through the Daya Network.50 This strategy of mutual aid is supported by the University of Valparaíso, the Chilean Pharmacopoeia and Knop Labs who provide R&D and quality and potency testing.
Daya’s strategy diversifies itself by focusing on the local Chilean market segment and maintaining low production costs, fitting with a cost focus strategy as is concurrent with Porter’s matrix. The organization’s dominant market position and its potential for growth have positioned it as a star on the national market, according to the Boston matrix.
6.2.2.2.2. OrganiGram Holdings Inc. (OrganiGram)
The Canadian company OrganiGram cultivates 15 strains of organic, medical grade cannabis. Its Compassionate Pricing Program provides a 25% discount for low-income households and veterans to ensure that patients in at all income levels have access to medical cannabis. Regular prices are set between $7 and $11 CAD per gram. 51
The company relatively low market value and sales growth indicates question mark position of the company’s product portfolio, according to the Boston matrix, which also matches the build-strategy of OrganiGram’s customer base that its pricing program reflects.52 This product position and OrganiGram’s ability to serve multiple income levels indicates a differentiation strategy, according to Porter’s matrix.
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6.2.2.3. Core Business Activity: Rental of Facilities and Equipment
The second group with one companies (n=1) was identified for the business area of renting facilities and equipment.
6.2.2.3.1 AmeriCann Inc. (AmeriCann)
AmeriCann is a company that operates out of Colorado, USA and owns facilities in Massachusetts and Illinois. Its primary operations are to provide greenhouse and processing facilities for medical cannabis companies in these states.53
These facilities are either leased or sold to customers, which often includes their proprietary cultivation and processing system, Cannopy. This system automates production, monitoring and security of the facility, among others, and thereby adds value to the facilities. The greenhouses offer customers savings on utility bills and a sustainable cultivation process further adds value to the AmeriCann brand which indicates a high degree of product differentiation.
On Porter’s matrix, the company’s strategy is between differentiation and differentiation focus. The company’s competitive scope is limited to only three states, which suggests a differentiation focus on a small target market, but the Cannopy system indicates higher productions costs associated with differentiation.
Currently, their market share is low and its financial situation is characterized by deficits and loans.54 This indicates that the company’s product is a dog, according to the Boston matrix, for which the solution is to focus on a profitable market niche.
6.2.2.4. Core Business Activity: Technological Services
The fourth group with one companies (n=1) was identified for the business area of technological services.
6.2.2.4.1. CannaSys Inc.
CannaSys has operated on the markets of Colorado and Washington since 2014 and are currently looking to expand to other states with legal medical cannabis, among those Oregon. 55 The company focuses on providing technological aids for the medical cannabis companies to provide them with marketing outreach and customer retention tools, on both retail and wholesale levels. These technologies include mobile apps and Furthermore, it provides a laboratory information and data-
61 exchange management software system, CannaLIMS, which is aggressively being marketed to cannabis laboratories.
The technology that CannaSys provides is of great value to the development of the industry, which indicates a high product differentiation. This reflects a differentiation strategy of the company, which is also seen in their aim to expand to more state markets. This expansion and the potential of gaining customers through its marketing efforts indicate a potential for growth. Considering the company’s relatively low market share, its product can adequately be placed as a question mark on the Boston matrix.
6.2.2.5. Core Business Activity: Consulting
The fifth group with three companies (n=3) was identified for the business area of consulting.
6.2.2.5.1. American Cannabis Company (ACC)
ACC provides consulting and management services to US and Canadian medical cannabis companies.56 As a secondary product focus, the company also provides organic growing soil, child- safe packaging, light and watering systems, and other equipment for cannabis production. Furthermore, ACC has an e-commerce website that offers cultivation equipment for businesses. 57
The company was the first to cultivate medical cannabis on a commercial scale in Colorado and has since helped the industry set protocols for pest control to ensure safe medical cannabis products.58
ACC’s human resource consists of a team of consultants with experiences from healthcare, agriculture, cannabis regulation, construction, and engineering. 59 This team provides customers with value-added services, indicating that ACC’s products are highly differentiated on a broad market, concurrent with a differentiation strategy on Porter’s matrix.
A limited growth and a relatively low relative market share indicate that the company’s services are either dogs or question marks. 60 The Boston matrix suggests that such a product positions require the identification of a niche market to focus operational efforts on in order to create growth.
6.2.2.5.2. Chuma Holdings Inc. (Chuma)
Chuma is a company that provides B2B consulting to the Californian market. This operational focus includes their seed-to-sale consulting service model that helps with legal compliance, financing, dispensary solutions, banking, payment processing, and marketing and sales. 61
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Despite such a wide set of services, their degree of differentiation is relatively low, due to the presence of other consulting companies within the medical cannabis industry that provide additional, value-adding products. Chuma’s competitive scope is narrowed down to the Californian market, which matches a cost-focused competitive strategy of the company, according to Porter’s matrix.
Such a strategy is needed, because the company’s stock prices are currently at their lowest since it entered the industry, which Chuma also identifies as a significant going concern to its ability to continue its operations. 62 This indicates a dog position for its products.
6.2.2.5.3. GreenPlex Services Inc. (GreenPlex)
GreenPlex has a single market niche focus for providing consulting services to the Californian market. Furthermore, the company differentiates itself by including additional services such as engineering and construction management of growing facilities. 63 GreenPlex also partners with CannaSafe Analytics, LLC to provide testing services to the Californian customer base. This niche market focus and its additional services of facility construction indicate a differentiation-focused strategy, according to Porter’s matrix.
GreenPlex’ annual report includes warnings to its investors and stockholders that dilutions and loss are a substantial risk, since the company’s financial situation is signified by loss, deficit and low market share. 64 This indicates a dog position in the Boston matrix.
6.2.2.6. Core Business Activity: Supply and Distribution
The sixth group with two companies (n=2) was identified for the business area of supply and distribution.
6.2.2.6.1. Terra Tech Corp. (Terra)
The American company Terra operates cultivation, production and distribution activities through wholly-owned and licensed subsidiaries in Nevada and California, and has future plans of expansion to the New Jersey market. The company also has an in-house testing laboratory.
A focus on consistency is reflected in Terra’s strategic business model, which focuses on creating a sense of security in every dispensary that it owns. The dispensaries sell two types of strains, four types of concentrates like oils and waxes, and custom-rolled joints.
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The low product differentiation and narrow presence on the US market indicates a cost-focused strategy, according to Porter’s matrix. This correlates well with Terra’s greenhouse cultivation, which they state provides 50% savings on operational costs. 65 Consequently, such saving increases Terra’s gross margin, which in 2015 provided the company with significant revenue and growth. 66 This places the company as a star in the Boston matrix, indicating that the company has a strong product portfolio which competitive position should be maintained through cost focus.
6.2.2.6.2. Canopy Growth Corp. (Canopy)
In 2015, Canopy was founded when through a reverse merger with Tweed Inc. The same year Canopy bought Bedrocan Canada , which is a company that was established based on the cultivation experiences from Bedrocan BV.
The subsidiaries Tweed, Tweed Farms and Bedrocan operate independently under the centralized management of Canopy.67 Canopy operates under license from Health Canada cultivates cannabis in greenhouses and also conducts in-house research and testing.
Furthermore, the company also produces and sells 24 genetic strains and 2 oils of medical cannabis through its three subsidiaries, Tweed Farms, Bedrocan Canada and Tweed. 68 Bedrocan Canada and Tweed sell through their online shops to registered Canadian patients at prices between $6 and $12 CAD for dried cannabis and $95 to $185 CAD for cannabis oil. 69 Furthermore, Bedrocan offers discounts to recent and newly registered customers, which will ensure the price of a chosen strain will remain fixed until the customer’s license.70
The company’s marketing strategy consists of informing and educating doctors on the medical benefits of cannabis, thereby bypassing the Canadian ban on direct advertising by spreading awareness among the medical personnel that prescribes the industry’s products.
Canopy’s ability to circumvent the difficulties that advertising prohibition presents for the Canadian market has provided them with a strong competitive position. This position is highlighted by high market value and growth, which reflects a star position for its product portfolio in the Boston matrix. 71
Its strong position also indicates leadership, however its investments in resources that minimize operational costs indicates a cost-focused strategy on Porter’s matrix. 72 This is reflected in the company’s lean manufacturing focus to invest resources into minimizing operational costs through greenhouse cultivation and research active compounds.73
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6.2.2.7. Core Business Activity: Production
The seventh group with 11 companies (n=11) was identified for the business area of production.
6.2.2.7.1. GW Pharmaceuticals Plc. (GWP)
British company GWP has is the largest international competitor in the medical cannabis industry, because of the company’s extensive distribution portfolio that enables its multimarket focus. 74
GWP has a broad competitive scope and a large customer base. Since 2011, the company has been able to market its product star, Sativex, in 28 countries that allow hemp-based products.75
Sativex has positioned GWP a leadership position on the international market for medical cannabis, because of its low content of THC and its orphan drug status on the US market for the treatment of rare epilepsy diseases. 76 77 The multimarket strategy behind this product success is also planned for the company’s primary product candidate, Epidiolex.78
The diversification of its single product’s market availability and range of treatment options indicates a differentiation strategy on Porter’s matrix. Such a strategy is needed because the company evaluates that lower prices on Sativex will harm its profitability and revenue. 79
6.2.2.7.2. Bedrocan BV
The Dutch Bedrocan is one of the first medical cannabis companies to establish an international distribution and sales base. This has supported the spread of the brand throughout the world. Its six products are distributed to nine countries by the Dutch the Ministry of Health’s Office of Medicinal Cannabis, at the company’s expense. 80
Bedrocan’s legal production of cannabis seeds started in the 90s when the Dutch Government legalized its commercial production. This production expanded to legal cannabis cultivation in 2002, and in 2003 the company became the sole producer and supplier of medical cannabis for Dutch pharmacies, controlled and distributed by the Office of Medicinal Cannabis. 81
Its wide competitive scope and a diverse set of skills indicate a differentiation strategy in Porter’s matrix, which is also reflected in its diverse product portfolio, available through Dutch pharmacies. 82 In addition, Bedrocan’s exclusive supplier position and its growth onto the international market place its product portfolio as a star in the Boston matrix.
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6.2.2.7.3. Better
Israeli-based Better is an organic and chemical free mass producer of medical grade cannabis that is available in Israeli pharmacies as edibles, pills, capsules, inserts, suppositories, oils, creams, and 16 strains of dried flowers that are also available as pre-rolled joints. 83 The company operates a distribution center at the Abarbanel Hospital and also provides home delivery services.
Better’s cannabis products and patient care services are also expected to be available for Czech patients during 2016. Furthermore, Better intends to expand to Romania, Canada and Australia, where it is pending approval from local governments. Its operations in Australia, Israel and the Czech Republic are conducted through a joint venture with Australian Cann Pharmaceuticals.
Better’s broad competitive scope and its high product differentiation indicate a differentiation strategy, in Porter’s matrix.
Due to the lack of financial data, Better’s product portfolio position on the Boston matrix is not identifiable.
6.2.2.7.4. Mettrum Health Corp.
Canadian Mettrum has cultivates, produced and sold its own products under Health Canada licenses since 2014. 84 Mettrum’s products include hemp-based dried products, oils and edibles. 85
Sales are conducted through the company’s webshop, where prices range from $5.60 CAD per gram to $9.60 CAD per gram for dried cannabis that are available in 5 or 15 gram bottles, while oils cost $90 CAD for 40 ml. 86
The somewhat diversified product portfolio and the narrow market focus indicate a strategic focus on cost or differentiation of the company’s strategy. The high growth of the company and its relatively decent market value places its product portfolio as a question mark. This product position recommends a focus on differentiation. 87
6.2.2.7.5. Sannabis
The Colombian company Sannabis is an independently managed subsidiary of the American mining company New Colombia Resources. 88 The company is included despite the fourth criterion to only include mother companies, because its mother company is not directly involved in the medical cannabis industry and Sannabis operates independently from it.
Sannabis provides 11 pure cannabis extracts for a retail price of $22-$37 USD for 5 ml. It also provides creams, balms, essential oil, massage oil, and an intimate spray with prices ranging from $1.75 and $39 USD. 89 All products are available on the local market for Colombian patients.
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Even though Colombia did not legalize medical cannabis until 2015, the company has since 2013 cultivated cannabis on the Indian reserve in Tóez. This was because indigenous territories are exempt from Colombian cannabis regulation, due to the people’s use of cannabis for traditional ceremonies. 90 Its collaboration with the indigenous reserve has ensured Sannabis a market share through its early ability to produce and guarantee crop supply for Colombian patients.
Despite such market share, it has not been able to reduce the costs of work force and taxes that its parent company pays, but its reinvestment in high quality standards has provided high profit margins. 91 This market share and profit growth indicates a star position of Sannabis’ products, which is a position that can be kept through capital investments from its parent company. Such a cost-focused strategy is also concurrent with Porter’s matrix that identifies Sannabis’ strategy as such.
6.2.2.7.6. Cannalivio
Cannalivio provides a line of phytotherapies and cosmetic products to Colombian patients with musculoskeletal disorders, chronic pains and inflammations. Prior to the country’s legalization of medical cannabis in 2015, the company owned a small-scale cultivation of 19 plants, in accordance with the 1986 law 30. 92 This has since grown to commercial scale.
Today, products are developed by the Center of Pharmaceutical Investigations ( el Centro de la Ciencia y la Investigación Farmacéuticas , CECIF) and produced in collaboration with the certified and nationally recognized laboratory, MEDICK Laboratories. 93 It also conducts scientific research to conserve native varieties and to analyze the health benefits of cannabis. 94
Financial information is also unavailable, which excludes the possibility of placing its products on the Boston matrix.
Cannalivio’s narrow focus on its national market and its medium degree of product differentiation indicates that its strategic focus is somewhere between differentiation and cost focuses. According to Porter’s matrix, both strategies suggest focusing on a small number of market segments, which is fits Cannalivio’s current strategy well.
5.2.2.7.7. Ecojardín Plantas Medicinales y Auromáticas Ecológicas (Ecojardín)
Ecojardín is another Colombian company that provides a range of phytotherapies for the local market. Its medical cannabis product portfolio includes gels and oils with prices between $6 and $18 USD for 60-500 grams of gels and between $16 and $20 USD for 100-250 ml of cannabis oil. 95
Very little information is available on the operations and financial situation of the company, but its brief inclusion in this analysis provides an insight into the pricing level of Colombian cannabis medicine. Due to the lack of information, its product position is non-determinable. However, its narrow focus on the local market and its limited amount of cannabis products suggests a cost focused strategy, according to Porter’s matrix.
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6.2.2.7.8. Medicanja Ltd.
Medicanja is a Jamaican company founded by Dr. Henry Lowe, who is a well-known and highly respected medical cannabis advocate with experience in health care, medicinal chemistry and international education. 96
The company develops pharmaceuticals, nutraceuticals, functional foods and cosmeceuticals from cannabis that are sold as the “magnificent seven” product line that include rubbing alcohol, creams, sprays, oils, ointments, and sublingual drops. Furthermore, Medicanja plans to introduce eye drops, sub-dermal patches, pills, and teas in the near future. 97
Medicaja currently has international collaborations, but evaluated that it currently does not have the capacity to supply the international market, but has developed a process of CBD synthesis to enhance its production with synthetic cannabinoids.98 In the future, it plans to develop a global customer base by expanding to the US and Canadian markets. 99
Medicanja’s broad competitive scope and high product diversification indicates a differentiation strategy, according to Porter’s matrix. Unfortunately, its product portfolio position according to the Boston matrix is undeterminable due to lack of financial data to indicate market growth and market share.
6.2.2.7.9. Medical Marijuana Inc. (MMI)
Californian-based MMI provides CBD-based hemp oil products to all of the US states and more than 40 other countries, which allow hemp-based products. Its broad market presence is designed based on the premise that hemp is legal in most countries, because of the low content of THC. 100
Its product portfolio consists of five brands with delivery methods such as gum, sublingual spray, tinctures, capsules, and salves. These delivery methods were developed by the collected research from international industry experts, through a diversified portfolio of subsidiaries and shareholders.
The products are distributed through a relationship marketing model, which the MMI believes will motivate the distributor sales force because of the decentralized management. 101
Recently, the company established an export venture to provide Brazilian cancer patients with CBD oil from the company’s brand Real Scientific Hemp Oil, when the country legalized such use. 102 The company also supplies its brand portfolio to Puerto Rico and is planning expansions to Mexico, the Dominican Republic, Spain, and the United Kingdom. 103 This highlights the company’s broad competitive scope.
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Its diversified product portfolio and its broad competitive scope indicate a strategy of differentiation, in accordance with both Porter’s. MMI’s positive revenues and its high market share reflect a star position for its product portfolio on the Boston matrix. 104
6.2.2.7.10. GrowBLOX Sciences Inc.
American GrowBLOX provides a product portfolio of eight skincare products and seven strains of dried cannabis that are designed to treat specific medical conditions. 105 Its primary product candidates are its indoor cultivation and growing equipment, which will allow patients to safely cultivate their own cannabis supply by using the GrowBLOX growing and cultivation suites. 106
The company owns cultivation facilities in Nevada that supply the company with raw material for the R&D and production activities.107
Announced as one of the biggest winners of the US industry in 2015, the stock prices of American GrowBLOX have hovered at the bottom of the chart since February 2015. 108
The company focuses on the small target market segment of Nevada and differentiates its product portfolio through R&D which indicates a differentiation-focused strategy, according to both Porter’s matrix. The limited growth and the relatively low market share of the company suggest a dog position for its products.
6.2.2.7.11. Earth Science Technology Inc.
Earth Science Tech is an American company that produces nutraceuticals, bioceuticals, phytoceuticals, and cosmeceuticals for alternative medicine markets, among those the local medical cannabis market since 2014. 109
Through its own extraction, testing and production processes, the company is able to deliver a wide range of cannabis products with various delivery methods.110 The hemp-basis of its products allows the company to market its products throughout the US and in about 40 other countries for retail and wholesale through its website. Furthermore, it also provides consulting and marketing services to its business customers. 111
Its broad market segment focus and its high product differentiation indicate a differentiation strategy, according to Porter’s matrix. The company’s low market growth and relatively low market share, the company’s product portfolio position on the US market is a dog. 112
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6.2.2.8. Core Business Activity: Testing
The eighth group with one companies (n=1) was identified for the business area of testing.
6.2.2.8.1. CannLabs
CannLabs provided testing services and data aggregation through a web application exclusively to the markets of Colorado and Connecticut, but in December 2015 it closed its Colorado testing laboratory after founder and license-holder Genifer Murray resigned two months earlier.113 Murray’s resignation came after the Colorado Marijuana Enforcement Division (MED) found several product safety violations that had been withheld from shareholders.114
The fact that Murray was the sole holder of the license that kept the company in the medical cannabis industry in Colorado has driven the company to seek other markets within the American industry. 115 The company still owns licenses to operate in Connecticut and Nevada. 116
The complex situation has resulted in the closing of the company website. 117
The turmoil that the company experienced in 2015 is evident in its stock, which after a decent increase in late 2014 steadily dropped throughout the next year, where its volume of services also dropped. 118 Its low market value and its falling stocks indicate a dog position of its services, which was at least a question mark before the crisis. Its relatively narrow competitive scope and the added value its product, StrainData, indicate a differentiation focus of its business activities. 119
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Sources and Notes
1 See Appendix III: Company Overview 2 Hooley, Piercy & Nicoulaud (2008) 3 Clow & James (2014) 4 OTC Markets: Insys Therapeutics Inc. 5 Insys Presentation – RBC Capital Markets Healthcare Conference, p. 14; Edgar Online, Inc. (2016): INSYS Therapeutics, Inc. p. 11 6 Edgar Online, Inc. (2016): INSYS Therapeutics, Inc., p. 3 7 Insys Presentation – RBC Capital Markets Healthcare Conference, p. 11 8 Edgar Online, Inc. (2016): INSYS Therapeutics, Inc., p. 11 9 Edgar Online, Inc. (2016): Cannabics Pharmaceuticals Inc., p. 11 10 Cannabics Pharmaceuticals, Inc.: Homepage; PR Newswire (22 March 2016) 11 Cannabics Pharmaceuticals, Inc.: Homepage; Blanco (17 September 2015) 12 Edgar Online, Inc. (2016): Cannabics Pharmaceuticals Inc., p. 7 13 OTC Markets: Cannabics Pharmaceuticals Inc. – Charts 14 OTC Markets: Cannabics Pharmaceuticals Inc. – Company Profile 15 Cannabis Science, Inc.: The Science of Cannabinoids; Cohen Grassroots Research, Inc. (13 March 2015), p. 7 16 Cohen Grassroots Research, Inc. (13 March 2015), p. 4-5 17 Cannabis Science, Inc.: Corporate Overview; Cohen Grassroots Research, Inc. (13 March 2015), p. 5-27 18 Cannabis Science, Inc.: Homepage 19 Cohen Grassroots Research, Inc. (13 March 2015), p. 5-6 20 Cheng (2 March 2016) 21 Israel (10 March 2016) 22 Mitzner (4 September 2015) 23 Breath of Life: Homepage 24 Mitzner (4 September 2015) 25 Besimon (22 Janruary 2014) 26 Gusovsky (29 April 2014) 27 Tikun Olam Ltd. (18 June 2015) 28 Tikun Olam: Homepage 29 MGC Pharmaceuticals (3 March 2016) 30 Ibid. 31 MGC Pharmaceuticals Limited (30 June 2015), pp. 3-4 32 MGC Pharmaceuticals Limited (13 April 2016) 33 Phytotech Medical Limited (25 March 2015); MMJ PhytoTech Limited: Homepage 34 MMJ PhytoTech Limited (23 October 2015) 35 MMJ PhytoTech Limited: Homepage 36 Phytotech Medical Limited (25 March 2015) 37 Echo Pharmaceuticals: Homepage; The Office of Medicinal Cannabis: Homepage 38 Echo Pharmaceuticals: Homepage 39 Ibid. 40 International Goldfields (1 May 2015) 41 International Goldfields (5 February 2016) 42 Sullivan (5 January 2016); Northern Lights Cannabis Co. (2 February 2016) 43 Americans for Safe Access (17 December 2015) 44 Ibid. 45 Ibid. 46 Guler & Romo (21 January 2016); Fundación Daya: Homepage 47 Resión Metropolitana, Servicio Agrícola y Ganadero (2014); División Protección Agrícola y Forestal (2014); Cluster Salud (25 January 2016) 48 Cluster Salud (25 January 2016); Fundación Daya: Homepage; Slattery, Gram (19 January 2016) 49 Cluster Salud (25 January 2016) 50 El Martutino (19 March 2016) 51 OrganiGram Inc.: Homepage 52 TMX Money: OrganiGram Holdings Inc.; TMX Money (30 November 2015)
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53 Edgar Online, Inc. (2016): Americann, Inc. 54 Ibid. 55 United States Securities and Exchange Commission (2015): Cannasys, Inc., pp. 4-11 56 AmeriCann Cannabis Consulting: Homepage 57 AmeriCann Cultivator Company: Homepage 58 AmeriCann Cannabis Company: Homepage 59 Ibid. 60 OTC Markets: American Cannabis Company, Inc. – Company Profile 61 OTC Markets (10 September 2015) 62 OTC Markets: Chuma Holdings, Inc. – Chart; United States Securities and Exchange Commission (2015): Chuma Holdings, Inc., p. 33 63 United States Securities and Exchange Commission (2015): GreenPlex Services, Inc., p. 24-27 64 United States Securities and Exchange Commission (2015): GreenPlex Services, Inc., pp. 6-12; OTC Markets: Greenplex Services, Inc. – Company Profile 65 Terra Tech Corporation: Homepage 66 Terra Tech Corporation (February 2016): Investor Presentation 67 Canopy Growth Corporation (Formerly Tweed Marijuana Inc.) (24 February 2016), p. 24 68 Canopy Growth Corporation (Formerly Tweed Marijuana Inc.) (24 February 2016), pp. 22-23; Bedrocan Canada: Homepage; Tweed Inc.: Homepage 69 Canopy Growth Corporation (Formerly Tweed Marijuana Inc.) (24 February 2016), p. 10 70 Bedrocan Canada: Finer Points 71 TMX Money: Canopy Growth Corporation 72 Tweed, Inc. (2015) p. 11 73 Canopy Growth Corporation (Formerly Tweed Marijuana Inc.) (24 February 2016), p. 21 74 OTC Markets: GW Pharmaceuticals Plc. – Company Profile 75 United States Securities and Exchange Commission (7 December 2015) 76 United States Securities and Exchange Commission (7 December 2015), pp. 7 and 54; Electronic Medicines Compendium (ed. 20 May 2015); Min.Medicin (ed. 10 February 2015) 77 The low level of THC is enabled through the preparation of cannabis extracts. This process is recognized as pharmaceutical production and therefore allows products to be marketed legally in a significant amount of countries (Danish Medicines Agency (10 December 2015), p. 18) 78 United States Securities and Exchange Commission (7 December 2015) pp. 36-43 and 54-56; Hirschler (14 March 2016) 79 United States Securities and Exchange Commission (7 December 2015), p. 10 80 Bedrocan Canada Inc. (14 January 2014); The Office of Medicinal Cannabis: Medicinal Cannabis 81 Leaf Science (26 January 2014); The Office of Medicinal Cannabis: Medicinal Cannabis 82 Bedrocan BV: Homepage 83 Better: Homepage 84 Mettrum Health Corporation (31 August 2015); Mettrum Health Corporation (24 August 2015); Mettrum Health Corporation: Management Discussion and Analysis for the Three and Nine Months Ended December 31, 2015 and 2014, pp. 2-3; Mettrum Health Corporation: Interrim condensed consolidated financial statements of Mettrum Health Corp., p. 9 85 Mettrum Health Corporation: Investor Presentation February 2016, p. 10 86 Mettrum Health Corporation: Homepage; Mettrum Health Corporation: Investor Presentation February 2016, p. 10 87 Mettrum Health Corporation: Investor Presentation February 2016, p. 6; TMX Money: Mettrum Health Corp 88 New Colombia Resources, Inc.: Homepage 89 López, Hugo Mario Cárdenas (15 November 2015) [1]; New Colombia Resources, Inc. (15 March 2016) 90 New Colombia Resources, Inc. (29 October 2015); López, Hugo Mario Cárdenas (15 November 2015) [2] 91 López, Hugo Mario Cárdenas (15 November 2015) [2]; New Colombia Resources, Inc. (29 October 2015); New Colombia Resources, Inc. (21 October, 2015) 92 Cannalivio: Presentación, p. 8 93 Cannalivio: Presentación pp. 3-4; Vivir en el Poblado: Entre mitos y realidades (3); MEDICK Laboratories: Homepage 94 Cannalivio: Presentación pp. 22-30 95 Ecojardín Plantas Medicinales y Aromáticas Ecológicas: Homepage 96 Medicanja: Homepage 97 Kelly (31 October 2014); Dewar (31 October 2014)
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98 Dewar (31 October 2014); Lowe (9 November 2014) 99 Lowe (13 December 2013) 100 Medical Marijuana, Inc.: Homepage 101 Ibid. 102 Martinelli (9 May 2016); Medical Marijuana, Inc.: Homepage 103 Medical Marijuana, Inc.: Homepage 104 OTC Markets: Medical Marijuana, Inc. 105 United States Securities and Exchange Commission (2015): GreenPlex Services, Inc., p 4 106 Edgar Online, Inc. (2016): GreenPlex Sciences, Inc., p. 1 107 Edgar Online, Inc. (2016): GreenPlex Sciences, Inc., p. 3 108 Cataldo (24 February 2016); OTC Markets: Greenplex Services, Inc. – Chart 109 OTC Markets: Earth Science Tech, Inc. – Company Profile 110 E.g. capsules, tablets, soft gels, chewables, liquids, creams, sprays, powders, and whole herbs (Earth Science Tech: Homepage) 111 Edgar Online, Inc. (2016): Earth Science Tech, Inc. p. 17-18 112 OTC Markets: Earth Science Tech, Inc. – Company Profile; OTC Markets: Earth Science Tech, Inc. – Charts 113 Wallace (3 December 2015); Baca (25 November 2015) 114 Wallace (3 December 2015) 115 Wallace (3 December 2015); CannLabs, Inc. (18 January 2016) 116 Edgar Online, Inc. (2016): CannLabs, Inc., p. 2 117 CannLabs: Homepage (UNAVAILABLE) 118 OTC Markets: CannLabs Inc. 119 Edgar Online, Inc. (2016): CannLabs, Inc., p. 13
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6.3. Systematic Analysis of Core Business Areas
In this chapter, I will systematically compare the 34 medical cannabis companies by their core business area:
1. Research & Development
2. Cultivation and Production
3. Rental of Facilities and Equipment, Consulting, Technological Services, Supply and Distribution, and Testing Services
The national, regional and international aspects of the companies are reviewed in a holistic approach to ensure a comprehensive and representative analysis. The systematic analysis of the companies uses Ansoff’s matrix, Porter’s industry evolution model, Porter’s five forces, and the PEST analysis to identify the influence of the environment on the players of the industry and how the companies manage this influence from multiple stakeholders. 1
6.3.1. Business Area: Research and Development (R&D)
The business area of R&D is vital for the business, as new research on cannabis enables the development of cultivation and delivery methods, etc. Without R&D, the industry as a whole cannot grow and could also risk remaining illegal in most of the world.
INSYS, Cannabics and Cannabis Science all operate on the American market, although in different states. This makes them indirect competitors that are affected by the channel uncertainty that the duality between state and federal law creates for all American companies.
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The duality between state and federal laws creates channel uncertainty. Customers are not deterred by the fact that federal law still considers cannabis an illicit drug with no medical properties, under Schedule I of the Controlled Substances Act (CSA). 2 Even though Congress passed a law in 2014 that kept the Department of Justice from prosecuting state citizens and businesses that legally use and provide cannabis, it remains a federal crime to cultivate, supply and distribute cannabis for any purpose. 3
INSYS has a strong competitive advantage, because it is able to distribute its synthetic product throughout the country without legal worries or entry barrier. The R&D efforts of Cannabics and Cannabis Science focus on phytocannabinoids, which puts more restrictions on the acquisition and use of cannabis.
INSYS’ synthetic cannabis medicines is its star product. Cannabics and Cannabis Science’s product portfolios are both in dog positions. However, their mutual strategic focus on differentiation is in correlation with Ansoff’s recommendations, which indicates high future potential for them.
The stronger competitive position of INSYS is reflected in its strategy as a cost leader. The synthetic basis of INSYS’ cannabis R&D also enables the company to reduce technological uncertainty, as it allows them to build its portfolio using synthetically-produced cannabinoids. Currently, INSYS is researching the effects of its synthetic cannabidiol oral solution in its leading product candidate, Syndros, which is expected to have full government approval and be ready for launch in mid-2016. 4
Cannabics deal with technological uncertainty by focusing on developing biotechnological therapies through clinical trials of innovative delivery systems. 5 However, the future of the company will remain uncertain until the results of the clinical trials are published, because these results will determine the prospect of its Cannabis SR product line. Thereby, its efforts to reduce technological uncertainty through R&D also create some technological uncertainty in itself.
For Cannabis Science, the technological uncertainty is rooted in its dependence on established partnerships with extraction laboratories, analytical providers and companies with experience in clinical trial implementation. This also highlights its channel uncertainty, as it is dependent on infrastructure and transport costs for its supply chain. This uncertainty is critical at the moment, because the company is seeking distribution partnerships. This search is necessary for the continued growth of the company, which at the moment is low due to the company’s inadequate capital and
76 increasing debt. 6 Further channel uncertainty is added, because the federal law prohibits transfer of cannabis through the US mail system, which means that all samples must be hand delivered to testing laboratories. 7
Such substantial channel uncertainty and a tough financial situation are potentially devastating for Cannabis Science, but it is actively seeking to reduce such channel uncertainty through establishing new licensing and distribution partnerships in Spain, the Netherlands, Canada, Africa, Uruguay, Colombia, Mexico, East Asia, and Australasia. 8 The reason for such high expansion aspirations can be because of a high level of customer uncertainty, however Cannabis Science’s dog position suggests that the company should focus on a profitable niche market, which is supported by Ansoff’s matrix.
Cannabis Science provides information through a strong media program designed to spread public awareness of cannabis medicines and its effects. Anecdotal accounts are also acknowledged as highly valuable to the company’s R&D process, which decreases customer uncertainty and reflects a corporate social responsibility (CSR) strategy.9
Customer uncertainty is likely felt by Cannabics, whose only customers at the moment is registered Israeli patients. 10 R&D efforts therefore present a channel uncertainty for Cannabics, because these operations are highly dependent on subsidiaries and partners that manage production and distribution of its products.
Even though both Cannabis Science and Cannabics provide R&D to reduce customer uncertainty, the costly process of such R&D is a hindrance. 11 The manufacturing of a pharmaceutical product represents a barrier in itself, because the clinical trial process can cost between $200 and $600 million USD and one in five drug candidates do not make it pass phase I trials on healthy volunteers. Furthermore, the approval process takes an average of 5 years to complete, which might be the reason why several American companies apply for orphan drug status. This status is given to drug trials that have the potential to treat less than 200,000 patients and allows for the drug to pass through approval faster. 12
Cannabis Science operates out of Colorado, which has beneficial advertising laws and thereby allows the company to improve brand awareness through a strong media program. 13 This media program aims to bring full social and legal acceptance of the industry by ending the federal ban on cannabis. 14 Meanwhile, Cannabics has the unique opportunity to develop local cannabis advertising
77 laws for the state of Maryland, as this state has none at the moment. 15 Such influence can substantially decrease customer and commercial uncertainties.
Commercial and customer uncertainties are also experienced by INSYS, however these originate from non-local competition. GW Pharmaceuticals is INSYS’ primary competitor, because both companies produce synthetically manufactured products that both have gained orphan drug status in the US. 16 The risk of GWP replacing INSYS is present.
Substitution is also a significant threat to Cannabics, whose product portfolio is only distributed in Israel. The Israeli medical cannabis market is highly competitive, because of the favorable legal environment and because an increasing number of American companies partner with Israeli R&D companies. 17 In 2014, American companies invested about $50 million USD in Israeli companies, which is expected to grow substantially as the US market expands. 18
Such partnerships are created through summits like CannaTech, which is run by iCan and B.O.L. and supported by Tikun Olam. These three Israeli companies are therefore able to reduce channel uncertainty of the emerging industry by partnering with international companies. This provides opportunities for participating companies to reduce channel, customer and technological uncertainties through the business connections made at such an event.
While all uncertainties cannot be eliminated completely, the strength of the Israeli business environment in general thrives in times of uncertainty, according to the CEO of iCan. 19 The local medical cannabis industry is certainly thriving, as media has announced Israel as a world innovator of medical cannabis knowledge. 20
The cooperation between Israeli companies thereby decreases the level of the uncertainties present on an emerging market, which strengthens the Israeli market as a whole. This can be seen in the success of Tikun Olam, who has treated over 10,000 patients with a 95.5% satisfaction rate that has provided the company with a turnover of €2 million euros. 21 While no financial information is available for iCan and B.O.L., their partnership with Tikun Olam likely affects them positively. Thereby, commercial uncertainties are significantly reduced because the high patient base and turnover, which also indicate lower needs for commercial recognition.
Tikun Olam’s accreditations indicate a high level of production standards as well as a social responsibility to provide patients and physicians with the superior care products and services. 22 Its
78 cooperation with iCan and B.O.L. to enable the CannaTech summit can also be considered an active social health effort, because such a summit can enhance the shared knowledge of the industry and help the global industry develop products that can benefit patients. 23
The knowledge and experience of Israeli companies has gained the interest of the global industry. Israeli partners include the Australian company MGC, whose agreement with Israeli SipNose has reduced the level of technological uncertainty through their R&D collaboration. This partnership also gained MGC the license to cultivate, extract and sell cannabis in Slovenia, allowing them access to the internal European market. 24 Such access reduces customer uncertainty due to availability on a larger market, but may enhance channel uncertainty, because the wide diversity of European law could slow down distribution in customs.
However, MGC’s high starting capital from its previous business operations and the rising of its stock since entering the medical cannabis business suggest that the future could bring growth to the company that could transform its dog products into stars. 25
Similar challenges are faced by Australian MMJ, who reduces technological and channel uncertainties through its international R&D and distribution partnerships. However, these same partnerships also increase customer and commercial uncertainties, because of the fragmented international market with various legal frameworks that disrupts business activities.
A strong market value and a market growth propelled by the legalization of medical cannabis in Australia have given MMJ’s product a star position on the market. 26 Nevertheless, it may become a cash cow if the company is not able to sustain the growth from the Australian legalization.
The international market focus of Australian companies reflects the infancy of Australian medical cannabis markets. In February this year, the country legalized the cultivation of cannabis for the manufacturing of medical products. 27 Before this, public debate flourished online about the effects of cannabis as a medicine and the high prices on medical cannabis products. 28 This reflects a social demand for information and price control. Politically, the country is still focuses on reducing the presence of cannabis through the National Drug Strategy 2016-2025. 29 Such social and political pressures on the industry are highly affected by the stigma on cannabis formed by more than 30 years of Australian drug deterrence strategies. 30
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While Australian deterrence strategies focus on reducing the demand, supply and harm of drugs, Dutch deterrence strategies focus on educating young people about the adverse health effects of drugs and promoting healthy behavior. 31 The main difference between the two strategies is that Australia still aim to reduce cannabis use, while the Netherlands focus on educating the public. Furthermore, the Dutch legal system is based on a policy of tolerance, which prohibits transporting and sales but allows cultivation and use. 32
Such a policy alleviates the political and legal pressure on the Dutch company Echo, but also increases the uncertainties they experience. The local legal framework only allows distribution through government channels, at the expense of Echo.33 This increases channel uncertainty for the company, because Echo highly depends on external sources for its supply chain operations.
The policy also creates customer uncertainty, because most patients prefer to grow their own supply at home. 34 Nevertheless, the Dutch medical cannabis sales increased by 45% in 2015 of which Echo enjoyed none because it has no available product on the market. 35
Echo is combatting this uncertainty by developing a tablet with high levels of THC that can provide relief for patients in pains or with muscle spasms. However, the adverse side effects often experienced from high doses of THC might negatively affect patients’ experiences and thereby increase customer uncertainty. Furthermore, the high costs of developing a new pharmaceutical product and pushing it through clinical trials is a technological uncertainty for the company. Echo’s product candidate has already passed through phase I of the clinical trial process and has therefore made it further than most drug candidates do.36
Echo’s drug delivery technology, Alitra, reduces the technological uncertainty related to an emerging market, as well as the customer-related uncertainty as the technology is offered as an extra value to the B2B customer of Echo. 37
WGB was the first medical cannabis company to obtain license in Uruguay, after the country became the first to fully legalize cannabis in 2012. 38 Even though the legal framework is not fully in place, foreign interest is substantial and has also encouraged Danish entrepreneur, Klaus Riskjær, to invest in the Uruguayan company Nube Serena SA, who unfortunately has no website. 39
In 2013, 60% of Uruguayans opposed the law, which might have caused some initial customer and commercial uncertainty for WGB, because negative public perception of medical cannabis directly
80 affects the company’s image. 40 However, the changing political environment in Uruguay towards more liberal laws is also changing public perception of cannabis towards acceptance. 41
WGB is the only Uruguayan company with an online presence. This suggests a wider commercial reach and therefore a low level of commercial uncertainty, which is likely also reducing customer uncertainty. However, I have not been able to find any socially responsible activities linked to the company. WGB is licensed to import and export cannabinoid products, which lowers channel uncertainty.
Even though WGB was acquired by the Australian company International Goldfields Ltd. in 2015, I have kept the Uruguayan company in the sample in order to include the local market. This market is unique, because the country was the first to fully legalize cannabis and is currently the only country to do so.42 International Goldfields has no information about the Uruguayan company on its website, which eliminates the possibility of focusing on the mother company in this case. 43
The Uruguayan regulatory system is favorable for businesses due to federal legalization of cannabis cultivation, sale, consumption, and R&D. 44 The liberal legal environment also allows for lower production costs, which reduces customer uncertainty because prices can be decreased.
The more liberal stance on drug policy of the Uruguayan Government was mainly due to the failure of the 1974 drug law to eradicate the drug problem in the country. 45 The new law allows Uruguayan citizens to purchase and grow for personal consumption, when registered with the Institute for Regulation and Control of Cannabis (IRCCA). Through such policies the local government hopes to fight drug addiction and abuse by providing education on consumption, offering treatment to those with addictions and combatting illicit drug trafficking. 46 Currently, Uruguay has 1,500 IRCCA- registered home cultivators. 47
The regulation of Uruguay has been criticized by experts, claiming that the new law violates the country’s promise to uphold the UN Single Convention on Narcotic Drugs. 48 However, this convention is under scrutiny this year, as the media has announced the War on Drugs to have failed. South American countries also blame the harsh approach to drug elimination for the growth in drug- related deaths and cases of HIV and hepatitis C in the region. 49
Uruguay defends the decision to fully legalize cannabis by arguing that the quality of cannabis will ensure healthy consumption, the prison population will decrease and the cannabis market will
81 operate separately from more harmful drug markets. 50 The separation of drug markets is similar to the Dutch model.
Similarly, American states have also been accused of violating the Single Convention and the Canadian suggestion to fully legalize cannabis has already been deemed a breach of the UN Single Convention. 51 At the UNGASS 2016, Uruguay was one of the countries that argued for the regulation and control of the cannabis market to ensure human rights and the continuous innovation within scientific and medical evidence. 52
The ICCI was founded to focus on developing such medical evidence. The Institute provides testing, clinical trial processes and big data tools, etc., to the larger medical cannabis market. The ICCI is able to help the medical cannabis industry reduce the uncertainties that are present in the emerging industry. Through its cost-focused competitive strategy, it is thereby able to provide the industry with cheaper services and also aim to provide patients with affordable medicines. This highlights the Institute’s focus on social health, because of the large socioeconomic inequality in health in the Czech Republic.53
According to Ansoff’s matrix, the strategy suggested on a new market with new products is diversification, but since the ICCI are focusing on sharing any knowledge gained in order to enable better treatment for patients, this is not an adequate strategic fit for the focus on social health of the Institute.
Social health is an important part of R&D, as the ethicality of medicines is of high demand among patients across nations. 54
WGB has no CSR strategy disclosed on its website and do not have any media mentions of such. INSYS, Cannabics, MGC, MMJ, and Echo do not actively provide social health efforts that benefit patients. All of them have information about cannabis and its medical properties to some extend on their websites, but this can only be considered a passive way of bringing information to the patients. Such a lack of social health efforts could damage the companies’ images and thus incomes.
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6.3.2. Business Area: Cultivation and Production
The cultivation and production of cannabis is the business area of the industry that actively uses the research and development of techniques in its practices.
Daya and OrganiGram have different strategic focuses, but they also operate under very different legal frameworks. OrganiGram’s differentiation focus matches what is recommended by Ansoff’s growth matrix, which has also gained them a decent market share of the Canadian industry.
Meanwhile, Daya operates under exclusive government license, which allows them to focus on reducing costs rather than competing for market share. Both companies are at risk of being substituted, but while OrganiGram worries about legal competitors, Daya is up against the illicit drug market which still circulates in the South American region. The risk of substitution presents both companies with commercial and customer uncertainties.
OrganiGram differentiates its product through fully organic cultivation process that has been certified by Ecocert may indicate a high product differentiation level. However, raw cannabis products represent a low level of product differentiation on the general medical cannabis market, because of the several types of products available such as pills, sprays and creams. These types of delivery methods are also considered safer by medical professionals than inhalation methods. 55 Such perceptions affect patient’s decisions and are important, because healthcare consumers today have access so an immense amount of information about medical cannabis. 56 This decreases customer uncertainty, but puts a demand on ethics.
This ethical demand creates a high commercial uncertainty on the Canadian market, because the Marihuana for Medical Purposes Regulations (MMPR) legal framework for the industry highly restricts advertisement of cannabis. 57 Therefore, OrganiGram provides physicians and patients with information on medical use and treatment, which indicates a CSR strategy that can reduce the commercial uncertainty that the MMPR creates.
Bilingual services are also provided by OrganiGram as a social health effort. Under the MMPR program, OrganiGram is the only licensed producer of medical cannabis east of Québec. 58 As Quebec is a predominantly French-speaking Canadian province, the company provides bilingual services. These services are threatened to be substituted because of the strong competitive position
83 of Canopy that provides similar bilingual services. Nevertheless, the services do provide a reduction of customer uncertainty.
Comparatively, Daya provides social health efforts through personal consulting, national talks for the general public, etc. 59 Self-cultivation for exclusive personal use is legal in Chile if person has reason to do so, for example for medical treatment.60 This could be considered a customer uncertainty for Daya, because patients are then able to grow their own supply. However, Daya provides free educational documents on medical and legal guidance, which improves Daya’s image and thereby reduces customer uncertainty.
Furthermore, Daya contributes to scientific knowledge by providing raw cannabis materials for clinical trials and laboratory tests on the medical relief of cannabis for patients with chronic pains, epilepsy and other conditions. The company’s social health efforts are also reflected in its strategic model of mutual aid that is endorsed and regulated by the Chilean Government. 61 Daya also consults state organs on the development of policies that promote public health. 62
Daya’s government-supported social health activities also allow the promotion of the Daya brand among the public. This brand is designed to generate compassion from the public through the company’s mission and vision to alleviate human suffering through love, generosity and compassion. This is also reflected in its name Daya which means compassionate love. 63 Thereby, Daya can actively reduce customer and commercial uncertainties, strengthening its future competitive position. Its strategy of mutual aid furthermore ensures lower operational costs that enable lower pricing on medicines, thereby supplying a wider customer base. This is also beneficial for the poorer demographic of the population, because of the substantial income inequality in the country. 64
However, the Chilean people are divided between those who believe that legal cannabis can limit the illegal drug market and those who believe that legal cannabis will increase consumption. 65 Such a divide could create customer uncertainty for Daya, if the foundation is unable to convince the sceptic part of the population.
OrganiGram differentiates through its Compassionate Pricing Program. This program provides low- income patients with discounts on purchases, which allows for OrganiGram to serve a wider customer base and reduce customer uncertainty. Furthermore, the 13-17% increase in patient registration that occurred when the Canadian Government changed its medical cannabis
84 requirements and allowed only commercial cultivation of cannabis highlights the need for OrganiGram to focus on patient acquisition. 66 Such market growth will naturally increase competition, causing customer uncertainty. 67
The legal requirement for OrganiGram to perform sample analyses of its products increases technological uncertainty, as the company relies on third-party performance. 68 Daya cooperates with Knop Labs, which presents the same third-party technological uncertainty as for OrganiGram.
The supply of medical cannabis to Canadian patients is only legal through e-commerce and telephone orders, which presents a channel uncertainty. Such uncertainty is avoidable for Daya, due to its Daya Network of physicians and medical professionals. However, Daya does experience channel uncertainty in the form of infrastructural costs of transporting cannabis to these physicians and medical professional. Meanwhile, OrganiGram’s single facility focus reduces channel uncertainty as it reduces transportation and infrastructural costs.
Patients in both Chile and Canada are able to legally obtain medical cannabis. Even though Health Canada does not consider dried cannabis an approved drug or medicine, the law support use of cannabis as a medicine and allows its use if purchased from legal sources, such as OrganiGram. 69 Canopy is a direct and substantial competitor to OrganiGram, mainly because of the similarity of products and services. Compared to Daya, OrganiGram operates on a much more competitive market with stricter legal requirements.
Competition is particularly substantial in the business area of production. The companies in the cannabis production business prepare cannabis for the manufacturing of a wide array of delivery methods, but there is a divide in the strategy taken.
Big competitors like GWP, Bedrocan and MMI all have differentiation strategies, similar to Better, Medicanja and Earth Science Tech. Meanwhile, smaller companies like Mettrum, Cannalivio, Ecojardín, Sannabis, and GrowBLOX focus on reducing costs or differentiating their product portfolios through local competitive scopes.
GWP is able to commercialize its product on almost any market through its wide range of distribution partners in eight countries around the world. Furthermore, the company has R&D collaborations with eight universities in Great Britain, Jerusalem, Italy, and Spain. 70 This
85 international supply chain increases the dependence on infrastructure which could create channel uncertainty if partners were to exit the market.
Channel uncertainty is avoided by Bedrocan, because their distribution and sale is fully handled by the Office of Medicinal Cannabis. Thereby, the company has no direct contact with the end- consumer and has no influence on the sales process, but is still responsible for the products. This can reduce customer uncertainty, but can also increase commercial uncertainty. Meanwhile, this system eliminates channel uncertainty for the company, if it remains the sole supplier of Dutch cannabis medicine.
Comparatively, the beneficial legal framework in Israel provides local companies with a competitive advantage to handle uncertainties. The Israeli Government provides infrastructure and funding to develop evidential healthcare, which reduces channel and customer uncertainties. 71 The company does this by collaborating with a local hospital for the distribution to patients, which reduces channel and commercial uncertainty.
In 2010, the Israeli Government expanded access to medical cannabis by allowing direct sales at fixed prices to licensed patients. 72 Such a state-controlled pricing scheme compared to market- regulated pricing in North America indicates a lower level of competition in Israel.
Such a lower level of competition is reflected in the Israeli companies’ cooperation and focus of sharing knowledge through international connections. Better has fewer connections, but the company operates on a local market that for decades has been a leading global player in clinical testing and producer of new strains of cannabis. 73 The market therefore presents a competitive advantage for Better. Through the shared knowledge and leading global position of the Israeli market, the technological uncertainty is reduced significantly.
On more competitive markets, GWP reduces technological uncertainty through collaborations with universities, while a smaller company like Mettrum reduces such uncertainty by focusing on differentiating its hemp-based product line and providing innovative services. 74
Mettrum is able to reduce channel uncertainty through its centralized management. However, customer and commercial uncertainties are difficult to handle, because of the competitive strength of the local industry leader, Canopy. Mettrum attempts to gain customers through lower pricing, but because of the pricing program of Canopy and OrganiGram, Mettrum faces significant customer
86 and channel uncertainties. This indicates that the Mettrum’s strategic focus is on price differentiation, but the tough competition might force its question mark product into a dog position. Mettrum therefore relies on its technological innovation and product differentiation to grow.
The need for third party testing partners to ensure objective potency and purity testing is managed by Mettrum through its in-house testing facility, which reduces technological uncertainty. 75 However, Mettrum appears to have no social health efforts and could therefore risk high customer and commercial uncertainties that could reduce its revenue.
The Colombian medical cannabis market is experiencing low growth, because of legal opposition and low levels of investments. Cannabis is considered an illicit crop in the country, but licensed producers of medical products are allowed to cultivate. Foreign direct investments (FDIs) into the Colombian cannabis industry are needed to strengthen the local companies and provide growth to neglected areas in the country. 76
Growth is much needed after almost 80 years of conflict between the guerilla movement and the Colombian Government, to which the emerging medical cannabis industry has been named a beneficial business area for Colombia. 77 The conflict’s roots in drugs could damage the general image of the medical cannabis industry in Colombia, but public perception of cannabis as a poison is coming off as the plant is transformed into medicine that can benefit both patients and the economy. 78 This changing perception of cannabis represents a reduced customer uncertainty. However, the ongoing political conflict between the opposite sides of the conflict is increasing commercial and channel uncertainties for the companies in the country.
The unavailability of financial information for companies in the South American region made it difficult to analyze certain aspects of the companies’ performances, but this lack is likely due to the cultural emphasis on personalized communication. Companies are therefore likely to appreciate personal contact prior to obtaining financial information. 79
The limited competitive scope of the Colombian companies, Sannabis, Cannalivio and Ecojardín, and the changing legal and social perception of medical cannabis indicate a low level of channel uncertainty on the Colombian market.
Cannalivio’s collaborations reduce the technological uncertainty, as does the company’s own technological portfolio of extractions machines. 80 Sannabis and Ecojardín have no such machines to
87 reduce technological uncertainty. However, the favorable environmental conditions for the cultivation of cannabis outdoors enables the Colombian companies to save costs on production and thereby to reduce technological and commercial uncertainties. 81
Similarly, Medicanja is able to reduce technological and commercial uncertainty by cultivating under naturally beneficial conditions. Its future CBD synthesis process could also decrease technological uncertainty, but no press releases or social media updates have been provided since November 2015. Consequently, this suggests increased technological uncertainty and poor management, as the company states that it is committed to transparency and stakeholder information. 82
However, customer and commercial uncertainties are decreased by the goal of Medicanja to increase Jamaica’s socio-economic development by advancing the local market of medical cannabis and collaborating with medical professionals and policymakers. 83 This goal reflects a social health foundation of the company and the high unemployment and poor growth in the country. 84
Substantial growth is however experienced on the American market, which is estimated as a $2.9 billion dollar industry with over 1 million US medical cannabis users. 85 The increasing attention given to the industry in American media has enabled companies to strengthen their customer base through public awareness, which has reduced some customer and commercial uncertainties.
The star position of MMI’s product portfolio on the Boston matrix suggests that longer experience and a positive income improves market position for medical cannabis companies. This position is reflected in the added value that its differentiation strategy enables, by licensing its services of testing, labelling, packaging, production, and standardization. 86 The company’s wide set of products and services reduce the uncertainties connected to customer acquisition and technological knowledge. Its model of relationship marketing further enables the company to reduce channel uncertainty.
GrowBLOX’s dog position does seemingly not affect the position of the company, as it was named one of the American industry’s biggest winners in 2015 based on growth. Such an announcement can reduce commercial and customer uncertainties for the company, as it spreads positive awareness of the GrowBLOX brand. However, the direct competition of companies like ACC that focuses on the supply of cultivation and growing equipment is a big competitor to GrowBLOX.
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GrowBLOW handles the competition by investing in technological innovation, which decreases technological uncertainty. However, the lack of delivery and dispensary permits in Nevada where it focuses its business operations presents the company with customer and commercial uncertainties, because of the wider availability of competing products. This presents a risk of substitution, as well as a risk of channel uncertainty. Its third-party production facility contract in China also comes with a high risk of channel uncertainty. 87
MMI, GrowBLOX and Earth Science Tech operate on the American market, but Earth Science Tech appears to be struggling. Due to the company’s inventory shrinkage and low production, its operating costs rose during 2015. 88 This resulted in the company being named as the second biggest losers in the American cannabis business in 2015. 89
These economic concerns along with the failure to launch its new product line suggest high commercial and customer uncertainties that the company has been unable to reduce. The company made the attempt to reduce these uncertainties when it launched a campaign that offered 20% off its new product line of hemp oils that launched in January 2016. 90
The Boston matrix suggests that Earth Science Tech’s focuses on a niche market in order to change the position of its product portfolio. This could decrease channel uncertainty, but might increase customer uncertainty due to lower availability of its products. Meanwhile, its collaborations to advance its scientific research reflect a lowered technological uncertainty. 91 Its implementation of a non-profit research foundation could also reduce technological and commercial uncertainties. 92
6.3.3. Business Area: Rental of Facilities and Equipment, Consulting, Technological Services, Supply and Distribution, and Testing Services
The business area of the additional resources that support the medical cannabis industry includes facilities, equipment, consulting, technology, distribution, and testing services.
The differentiation strategy of AmeriCann fits well with the suggested strategy of Ansoff’s matrix, but so far this strategy has not changed the company’s poor financial situation or the dog position of its product portfolio of rental equipment and facilities.
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This lack of change is likely due to the high competition within the business area. Its indirect competitors are companies like GreenPlex, GrowBLOX and ACC. GreenPlex primarily focuses on consulting, but also provides construction of facilities. ACC similarly focuses on consulting, but offers proprietary cultivation equipment that competes directly with GrowBLOX’s similar equipment.
This competition increases customer uncertainty, because of the threat for AmeriCann of being substituted, but the company manages to differentiate its products by offering them on a rental basis. Furthermore, ACC and GrowBLOX’s products are of small scale, compared to the full-scale cultivation facility that AmeriCann and GreenPlex can provide. This can reduce customer and technological uncertainties, as AmeriCann is also able to provide technology designed for its facilities. This adds value to its product portfolio and can thereby attract customers.
However, the high threat of substitution on the highly competitive Coloradan market presents uncertainties for AmeriCann and ACC.
The dog position of ACC’s product line indicates that the consulting business in the medical cannabis industry is highly competitive, where many players fight for a small share of the market. This is likely due to the infancy of the industry. Nevertheless, the CEO and founder, Ellis Smith, said that “there is plenty for everybody”. 93
Nevertheless, Chuma and GreenPlex both have lower market share than ACC and their product lines are therefore dogs. This is further indicated by both Chuma’s and GreenPlex’ poor financial situations, which indicate that their respective competitive strategies are not providing the same growth potential as the differentiation strategy provides for ACC. This also matches the recommendations of Ansoff’s and the Boston matrices.
The substantial uncertainties experienced by Chuma and GreenPlex are perhaps the reason for the closing of both companies’ websites. No information is available to ascertain a reason for this. While this lack breaches the first criterion for the representative sample, I have decided to keep both companies in the research study to reflect the high uncertainty that exists in the highly competitive, emerging industry, as confirmed by Porter’s industry evolution model.
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For Chuma, this reflects a strategic uncertainty, because its competitive scope and its product portfolio are not flexible enough to ensure a successful transition of strategic focus. GreenPlex already offer similar services and products as ACC, allowing for greater strategic flexibility.
Technological uncertainty is therefore mainly relevant for ACC and GreenPlex to reduce through their value-added products, but Chuma is also faced with this uncertainty as it adds pressure on the company to ensure high quality of its services to be able to compete with other consulting companies. The growth technologies that ACC and GreenPlex have developed also represent technological and technique advancements for the industry as a whole.
ACC furthermore has political influence on the regulations and guidelines that are set for the industry in Colorado. It is unknown whether Chuma and GreenPlex have such influence. The legal gray area of the medical cannabis industry in America is heavily influenced by lobbying activities by companies, to which ACC takes active part. 94 ACC has also so the companies that lobby get to take part in the development of medical cannabis laws and regulations. Such participation represents an active initiative by ACC that can help reduce the uncertainties on the emerging medical cannabis industry.
Social response to legal changes has been positive. This is particularly seen in Colorado, which has been named the best place to live in America. 95 It also has the highest percentage of registered medical cannabis users of any US state and is therefore a lucrative market for medical cannabis companies. 96 Therefore, ACC has the advantage of primarily operating on this local market, as does AmeriCann, Cannabis Science, CannaSys, and CannLabs.
CannaSys provides technological services that are supplementary to the developing cannabis industry and help the industry connect. 97 The company’s products are therefore able to reduce the uncertainties of the emerging medical cannabis industry. The company has been able to create a product portfolio with great variety that can cater to several types of customers, regardless of business area. The company’s technology infrastructure and due diligence reviews assures own compliance with state laws.
The companies Terra and Canopy both supply and distribute products that have been cultivated and produced through subsidiaries. Sales are also conducted through subsidiaries and partners, managed by the parent companies to reduce costs. Cost reduction is also the companies’ strategic focus, which have given their product portfolios the position of stars on their respective markets. The high
91 market value of both companies indicates that diverting from the recommendations of marketing theories can be beneficial.
The supply chains of the respective companies are contributing to a reduced channel uncertainty, which reflects that a centralized-managed medical cannabis company can be a strong competitor on its local market. Mettrum also manages its operations from a centralized perspective, indicating that it should not be underestimated despite its lower market share.
Canopy is the lead competitor on the Canadian market and has experienced significant growth through the centralized management of its independently operated subsidiaries. This is particularly reflected in its high media share that includes more than half of the Canadian media mentions of local medical cannabis companies.98 This share is marginally larger than other companies included in this research study, such as Mettrum and OrganiGram.
Bedrocan Canada’s experience from Dutch Bedrocan BV allows for more control of technological uncertainty for Canopy. Meanwhile, Mettrum does not have the experience to compete with Canopy, but the rapid growth of the Canadian market does present an opportunity for all competitors. 99
Media mentions are important to Canadian companies, because of highly restricted advertising opportunities. Such restrictions heighten commercial uncertainty, which in turn increase customer uncertainty, because it is difficult to directly reach out to patients. In order to handle such uncertainties, Canopy particularly focuses on a strong brand and a strong social media presence, through customer engagement on social and traditional media that can reduce customer and commercial uncertainties. 100
Canopy also offers bilingual webinars and patient information for the Canadian AIDS Society. 101 Canopy also provides a True Compassionate Pricing program, which offers a fixed discount for a specific segment of its customers. Such an effort enables the company to keep track of purchases and ensure that its most popular products are always in stock. Such commercial efforts can reduce customer uncertainty and ensure that logistics is optimal and will not increase channel uncertainty.
A competitor to Canopy’s pricing program is OrganiGram that has a similar pricing program, which it only provides to low-income and vulnerable patients. This potentially provides them with a majority of that niche segment of the Canadian market. Meanwhile, Canopy provides discounts to
92 wider patient segments, reducing customer uncertainty on the wider market, as opposed to OrganiGram’s niche market customer uncertainty reduction. The difference in market shares of the companies explains this difference in focuses.
Terra is a big competitor on the Californian market, where customer uncertainty mainly manifests in the effort to attract patients to the company’s dispensaries. Inside the dispensaries, Terra focuses on customer satisfaction by creating a sense of security in all of its dispensaries. This approach is based on the “Starbucks model”, which focuses on recreating the same in-store environment in every sales location. 102 This is a way for Terra to reduce customer uncertainty.
The wider acceptance of what constitutes as medical in California enables Terra to sell joints for medical use. However, joints are smokeable and therefore entail the health risks associated with smoking in general even though the company claims their joints are free of any unhealthy contents. Such information on the dangers of smoking could deter patients from choosing Terra’s products and thereby increase customer uncertainty.
Both Canopy and Terra have in-house testing labs, which reduces technological uncertainty and saves them the infrastructural costs that is adherent to channel uncertainty. Such facilities further reduce channel uncertainty, because it reduces the costs of transporting product samples to other facilities for testing. Nevertheless, some third-party testing is conducted to ensure quality, purity and potency safety and consistency.
Terra focuses on reducing its facility costs by cultivating in greenhouses that claims to save them 75% on energy and water, 50% on operations, which could reduce technological uncertainty. Such reductions enable Terra to provide cheaper products to Californian and Nevadan patients, which is likely why it has a marginally higher market share than its local competitors of Medical Marijuana Inc., GreenPlex Services Inc. and Chuma Holdings.
The less favorable environmental conditions increase wholesale demand for greenhouse facilities to provide optimal growing conditions for higher and consistent yields. In states that allow personal cultivation, retail demand is also increased, which provides a market for companies like ACC and GrowBLOX.
While Earth Science Tech was announced the second biggest loser of 2015, CannLabs should perhaps have slipped in as number one. The steady drop of its stock throughout 2015 came after it
93 was revealed that the company had withheld important information from shareholders about the status of its Colorado testing laboratory. 103 The subsequent closing of this laboratory represented a great channel uncertainty for the company, because it lost most of its clientele in Colorado. This left it with a facility in Connecticut and a not-yet-finished testing facility in Nevada. The scandal at the Colorado laboratory possibly also had a negative effect on the company’s reputation in Connecticut and has created immense customer and commercial uncertainty throughout its operations. Technological uncertainty might also have risen, due to the closing of its main facility.
The legal requirement in Colorado puts a high demand on testing services in the industry, which for CannLabs might have been too much pressure and the reason for demise of the company’s Colorado-based testing laboratory.
Withholding information is seemingly a wide-spread phenomenon on the US cannabis market, because of the lower set of reporting requirements for companies listed as Pink Sheets on the OTC market exchange. 104 Furthermore, the emerging industry of medical cannabis is still experiencing uncertainties regarding the regulatory environment, as businesses and authorities are working together to develop it. Since 2014, testing of edibles, buds and concentrates has been mandatory in Colorado, which indicates that the closing of CannLabs local laboratory is a huge blow to the company’s revenue. 105
The case of CannLabs does violate criterion two, but is nevertheless included to show how important it is for medical cannabis companies in the emerging industry to adhere to local laws and regulations in order to reduce uncertainties and continue its business operations.
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Sources and Notes
1 Hooley, Piercy & Nicoulaud (2008) 2 United States Securities and Exchange Commission (2015): Cannasys, Inc.: Form 10-Q for the quarter ended September 30, 2015, p. 8 3 Sullum (31 December 2015) 4 INSYS Therapeutics, Inc.: Homepage; INSYS Therapeutics, Inc.: Presentation, p. 10 5 Cannabics Pharmaceuticals, Inc.: Homepage; Edgar Online, Inc. (2016): Cannabics Pharmaceuticals Inc., p. 11 6 Cannabis Science, Inc.: Homepage; Cohen Grassroots Research, Inc. (13 March 2015), pp. 5-6 and 25 7 Terra Tech Corporation (February 2016): Investor Presentation 8 Cohen Grassroots Research, Inc. (13 March 2015) p. 5 9 Cohen Grassroots Research, Inc. (13 March 2015), p. 4-18 10 Cannabics Pharmaceuticals, Inc.: Homepage; Blanco (17 September 2015) 11 Mack & Joy (2000) 12 Ibid. 13 Leafly Staff (30 November 2015) 14 Cohen Grassroots Research, Inc. (13 March 2015) pp. 5-7 and 18 15 Leafly Staff (30 November 2015) 16 INSYS Therapeutics, Inc. (4 August 2015); Blinch (21 April 2016) 17 Mitzner (4 September 2015); Lubell (29 March 2016); McHugh (30 March 2016) 18 Jensen (30 March 2016) 19 Hernandez (15 April 2016) 20 PR Newswire (10 March 2016); News.com.au (14 March 2016) 21 Tikun Olam: Homepage 22 Ibid. 23 Mitzner (4 September 2015) 24 MGC Pharmaceuticals: Full Presentation; MGC Pharmaceuticals, Ltd. (22 April 2016) 25 Reuters: MGC Pharmaceuticals Ltd (MXCta.AX); MGC Pharmaceuticals Limited (30 June 2015), p. 3 26 MMJ PhytoTech Limited (23 October 2015); APP Securities Pty, Ltd. (17 August 2015) 27 See Appendix I for overview of countries and states with legal medical cannabis status 28 Pash (23 February 2016); Chung (29 March 2016); Mishra (2016); McCauley (4 March 2016) 29 Australian Institute of Criminology: National Drug Strategy 30 United Nations Office on Drugs and Crime (October 2008), p. 24 31 Dutch Association for Legal Cannabis and its Constituents as Medicine (2011) 32 Sensi Seeds (2 September 2015) 33 The Office of Medicinal Cannabis: Homepage 34 Bergman (2015) 35 Kidd (23 October 2015) 36 Mack & Joy (2000) 37 Echo Pharmaceuticals: Homepage 38 International Goldfields (1 May 2015) 39 Walsh (2015); Nielsen (15 February 2016) 40 De los Reyes (11 December 2013) 41 Silva, et al. (4 December 2015) 42 Walsh & Ramsey (2016) 43 International Goldfields (5 February 2016) 44 Ibid. 45 Walsh & Ramsey (2016) 46 Junta Nacional de Drogas (15 September 2015) 47 Instituto de Regulación y Control del Cannabis: Homepage 48 United Nations (ed. 2016) 49 Doward (2 April 2016) 50 Graham (30 October 2014) 51 Travis (3 March 2015); Canadian Medical Association Journal (16 May 2016); Weinberg (1 April 2016) 52 Junta Nacional de Drogas (30 April 2016) 53 Vandenheede (2013)
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54 Applying Marketing Principles in the Field of Medical Services (2013) 55 Böllinger (1997), pp. 139-144 56 Cătoiu & Geangu & Gârdan (2013) 57 Health Canada (ed. 25 November 2015) 58 OrganiGram (29 February 2016), p. 5 59 Fundación Daya: Instructivo Para Acreditar el Uso Medicinal del Cannabis Frente a Procedimientos Politicales; Fundación Daya: Homepage; Fundación Daya (19 March 2016); Cooperativa.cl (29 March 2016) 60 Transnational Institute: Chile: Overview of drug laws and legislative trends in Chile 61 Fundación Daya: Proyecto de Cannabis Medicinal en la Comuna de la Florida; Guler & Romo (21 January 2016) 62 Fundación Daya: Homepage 63 Ibid. 64 Gammage & Alburquerque & Durán (2014); Alarcon (8 December 2015) 65 RT (19 December 2015) 66 OrganiGram (29 February 2016) p. 3 67 Hooley, Piercy & Nicoulaud (2008), p. 79; Appendix IV: Sound file no. 2: Expert Interview with Tyler Burns 68 Health Canada (ed. 8 June 2015) 69 Health Canada (ed. 29 April 2015) 70 GW Pharmaceuticals, Plc. (2015), p. 24 71 Mitzner (4 September 2015) 72 Tikun Olam: Homepage 73 Mitzner (4 September 2015) 74 Brochstein (17 April 2016); Mettrum Health Corporation (16 March 2015) 75 Mettrum Health Corporation (2 October 2014) 76 The World Bank: Colombia 77 Felbab-Brown & Newby (16 December 2015); Palamino (23 December 2015); BBC News (24 March 2016) 78 Cannalivio: Presentación, p. 6; New Colombia Resources, Inc. (21 October 2015) 79 Osland et al. (1999) 80 Cannalivio: Presentación, p. 4 81 Zuluaga (17 November 2015) 82 Medicanja: Homepage; Medicanja: Facebook; Medicanja: Twitter 83 Kelly (31 October 2014); Jamaica Observer (29 October 2015); Lowe (9 November 2014) 84 The World Bank: Jamaica 85 De Brüin et al. (2015) 86 Medical Marijuana, Inc. (2015), p. 5 87 Edgar Online, Inc. (2016): GrowBLOX Sciences, Inc., p. 29 88 United States Securities and Exchange Commission (2015): Earth Science Tech, Inc., p. 18-19 89 Cataldo (22 February 2016) 90 Earth Science Tech, Inc. (15 January 2016) 91 Earth Science Tech, Inc. (29 September 2014); Earth Science Tech, Inc. (4 September 2015) 92 Earth Science Tech, Inc. (3 February 2016) 93 Appendix IV: Sound file no. 1: Expert Interview with Ellis Smith 94 Appendix IV: Sound file no. 1: Expert Interview with Ellis Smith; Sender (20 April 2015) 95 Kelly (17 May 2016) 96 De Brüin (2015) 97 United States Securities and Exchange Commission (2015): Cannasys, Inc.: Form 10-K for the fiscal year ended December 31, 2014, p. 5-8 98 See Appendix V: Media Mentions 99 Mettrum Health Corporation: Investor Presentation February 2016, p. 6 100 Tweed, Inc. (2015), p. 33-34; Appendix IV: Sound file no. 2: Expert Interview with Tyler Burns 101 Canopy Growth Corporation (Formerly Tweed Marijuana Inc.) (24 February 2016), p. 7 102 Terra Tech Corporation: Homepage 103 OTC Markets: CannLabs Inc.; Wallace (3 December 2015) 104 Rowe (16 October 2015) 105 Edgar Online, Inc. (2016): CannLabs, Inc.: Form 10-K (Annual Report), p. 6
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Chapter 7. Discussion
The century-long prohibition of cannabis has significantly affected social perceptions of cannabis, as well as the political perceptions that uphold the prohibition. The medical cannabis industry is actively trying to reduce the stigma on cannabis, in order to justify its business activities.
There seems to be no definitive strategy to success, neither for heavily regulated or self-regulated markets. However, any legal or political uncertainty results in fewer investments in local markets, reflected in fewer FDIs for Colombian companies and bank reluctance in the US. Legal doubts are thereby the primary reason for the presence of the uncertainties that Porter’s industry evolution model present. Such uncertainties hinder innovation. The legal framework for a local market is therefore a key component to ensuring local medical cannabis market growth.
In general, the emerging market of medical cannabis is highly competitive and therefore also appears to have a fairly large failure rate. The global industry is still in its infancy, which comes with growing pains in the form of uncertainties. The companies manage these uncertainties by focusing on saving costs, social health and partnering with other companies to strengthen their brand and market presence.
Saving costs is often done through greenhouse cultivation in colder climates, such as North America and Europe. Greenhouse cultivation also strengthens brands by promoting a green marketing strategy and increasing crop yields, showing that greenhouse cultivation in less favorable climates is a competitive advantage. In more favorable climates, such as South America, cost savings and increasing crop yields are achieved by the cheaper workforce that the country can provide. This reflects the socioeconomic conditions and the need for lower prices.
The need for greenhouse cultivation in colder climates has particularly gained the Netherlands a global leadership status in the business area of cultivation and production, because of the decades of experience its medical cannabis business has gained. This experience and knowledge has been exported to other countries and has helped expand the global industry. Similarly has Israeli companies shared their knowledge worldwide, to enable the expansion of the industry.
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This focus on expanding the industry can be considered a social health effort, particularly in Israel. Israeli companies are focusing their social health efforts on providing healthcare to patients and improving their quality of life, which has effectively promoted the industry. This is also seen in the Czech Republic, Chile and Jamaica. This reflects well onto the companies, as well as the local governments that support and in some cases finance the operations.
Most of the companies focus on promoting a positive image of the business activities of the industry. Such social health efforts include educational information provisions online or in person, collaborations with patient unions and charity organizations, and a focus on providing pricing programs for low-income patients.
In Canada, social health efforts are particularly used by companies to promote their respective brands. Advertisement of cannabis is highly restricted, which puts pressure on Canadian medical cannabis companies to provide ethical information that is approvable by Health Canada and that can also attract a customer base. The strict Canadian legal framework has created uncertainties for local companies, specifically when it was changed in 2014 to only allow commercial cultivation. This caused a market disruption under which companies struggled to attract customers.i Pricing programs are often used to attract customers. This indicates a high price elasticity of medical cannabis, which is also confirmed by Frontier Financial Group, Inc. (2015).
Pricing programs are less used in the US, where fewer social health efforts have also been identified. Instead, lobbying is widely used to gain control of the market and its current legal gray area.ii Lobbying activities are quite normal in the US, as it reflects the market-orientation that dominates US business culture. iii Ethicality is considered in the legal developments, which is seen in the strict requirements on testing and advertisement that exists in most US states with legal medical cannabis. Such strict requirements provide a competitive advantage to companies with in- house testing facilities. This is an advantage that is seen globally.
The rapid growth of the global industry has allowed for a wide variety of products and delivery methods, which also reflects a riveting innovation that the global industry is achieving. Particularly the Netherlands and Israel have delivered innovative R&D that has enabled global industry growth, likely because of the support of their respective governments. This has also gained high international attention, as several international companies choose to partner with Israeli and Dutch companies. However, the strictly regulated Dutch market creates high entry barriers for new
100 companies to enter. This is similarly seen in Chile, where growth was also experienced without specific intention.
The legal framework is however significant to business activities in the business area of R&D. R&D is vital for the business, but it is also very costly. The cost of the clinical trial of the R&D process alone is staggering and is linked with a high failure rate. Such a hindrance is common for all industries that develop pharmaceuticals, but for the medical cannabis industry it is apparent that government support and looser legislations enables innovation and growth, as seen in Israel, the Netherlands and Chile.
Cannabis pharmaceutical innovation also creates high entry barriers. The advantage of using synthetic cannabinoids is clear, as companies such as GWP and INSYS have achieved large market shares on international levels through such use. This makes them strong competitors.
Hemp-based products are also a competitive advantage, because most countries allow medical cannabis products with lower than 0.3% THC. Meanwhile, the use of phytocannabinoids is less of a competitive advantage, because of the tighter legal restrictions on its use and distribution. However, phytocannabinoids do represent more future potential than hemp, as scientific evidence provides increasing proof of the many uses of THC as a medicine. iv
The stigma formed by political and social perceptions restricts medical cannabis, particularly in countries that have signed the UN Single Convention. The several different interpretations of the Single Convention have resulted in a highly fragmented legal environment on the global market of medical cannabis. However, despite legal framework, the main focus is on health, safety and responsibility.
Ethics is important in any medical industries, because healthcare consumers are vulnerable patients with access to a lot of information about strains and delivery methods. v This is also the case for medical cannabis, perhaps even more so since most of the industry’s products and knowledge is still evolving at a rapid pace. A vast majority of the companies manage such ethical concerns by providing information, either through their websites or through personal contact and public talks. Such social health efforts strengthen companies’ brands, regardless of legal framework.
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Sources and Notes
i Canopy Growth Corporation (Formerly Tweed Marijuana Inc.) (24 February 2016) p. 21-22; Appendix IV: Sound file no. 1: Expert Interview with Ellis Smith ii Appendix IV: Sound file no. 1: Expert Interview with Ellis Smith iii Huttin & Bosanquet (1992); Appendix IV: Sound file no. 1: Expert Interview with Ellis Smith iv Leaf Science (22 July 2014); Sirius (29 December 2015) v Cătoiu & Geangu & Gârdan (2013)
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Chapter 8: Conclusion
The global medical cannabis industry is experiencing an impressive growth. Significant amounts of money are being invested in companies that contribute to the supply of medical cannabis from business areas of R&D, cultivation and production to support business activities that enable industry growth. Medical cannabis is gaining acceptance in an increasing amount of states in the US and countries around the world. The regulatory trend has had an impact on the medical cannabis industry.
Political acceptance of medical cannabis is the main driver for industry growth. This is particularly seen in the US, where half the country has legalized medical cannabis and where the amount of companies in the competitive market is constantly expanding. This puts a high pressure on the states to provide a legal framework that benefits patients and also allows the market the possibility to grow. However, cannabis remains an illicit drug with no medical benefits under federal law. This duality significantly affects the American companies because banks are reluctant to accept medial cannabis companies as their business customers due to the duality between federal and state laws.
The reluctance of banks is also observed in Canada, even though the Canadian Government has legalized medical cannabis. This reluctance is influenced by the highly restrictive legal framework. Tight control is put on Canadian companies, particularly on advertising. To deal with the challenge that the advertising restrictions create, Canadian companies focus on providing ethical information and education to patients and physicians. This social health effort promotes safe use of medical cannabis and it strengthens the companies’ brands through public awareness.
Social health efforts, ethical information and education also play a central role in the Eastern European countries for the management of medical cannabis activities. The medical cannabis industry in this region is grounded in the motivation to expand their activities in the global industry through the exchange of knowledge and experience.
In contrast, the social and ethical activities in South America primarily center on the cultural value of personalized communication and contact with doctors and patients. Medical cannabis companies in the region provide personal consulting and public discourses to disseminate information about
105 the benefits of medical cannabis through direct contact with local patients. The medical cannabis industry in South America has great socioeconomic potential via foreign investments.
South American companies focus on local markets, contrary to Australian companies that show interest in the global market. The Australian companies mostly seek international partnerships that can provide them with knowledge, innovation and access to foreign markets. This is most likely due to the infancy of the Australian market, which became legal this year.
Regionally, price on medical cannabis varies. In South America, prices are lower because of the cheaper workforce available, which due to the income disparity in the region also benefits the patients. In North America, pricing competition is common, which means that pricing offers often are used to attract customers. Price is a subject of debate in European and Australian countries, while the Israeli Government sets fixed prices.
The global growth and the advancements made within the medical cannabis industry do not reflect is to a large extent a results of the motivation of the companies to deliver safer and more efficient medical cannabis products. Looking forward, cost saving activities such as green marketing and collaborations with national and international industry players are well-known methods that the companies in the medical cannabis industry use to strengthen their competitive position and extend market presence.
The successful expansion of the medical cannabis industry and positive social outcomes are changing political opinions around the world. Along with a rising international pressure to change the approach to reduce the presence of drugs, the global industry is influencing legal decisions in different countries to treat medical cannabis as a prescription with a real potential for health treatment.
The health efforts of the international industry have created a growing market for medical cannabis. A wide range of methods for medical cannabis treatment have been developed, from capsules to vaporizers, creams, and sprays, etc. These delivery methods provide a healthy alternative to smoking cannabis, which still remains the most popular ingestion method among patients. Appropriate guidance on use and effects is a central theme to ensure safe and efficient treatments.
Ethical conduct is at the heart of the global medical cannabis industry. The companies are not only focused on providing a safe medicine to patients with a wide range of medical conditions, they
106 actively fight the stigma on the medical cannabis industry. This is necessary to justify the activities of the companies to ensure the development of a healthy industry. Unethical conduct results in termination of the core business activities of the companies.
In conclusion, the global industry for medical cannabis industry is growing fast as a direct result of the increasing political acceptance and a rising demand for medical cannabis. The primary motivation for the companies in the industry is to help patients improve their quality of life by offering an alternative treatment in the form of medical cannabis.
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Appendix I
Table 1.1: Overview of countries with legal medical cannabis
Year Country Legal status 1971 Germany Medical prescriptions of cannabis-derived medications legal i 1976 The Netherlands Small amounts of cannabis in possession is legal, while illegal operations like sale, wholesale, cultivation and public use is tolerated through coffee shops 1996* United States of Illegal under Federal law, but states can implement their own laws America 1997 Austria Pharmaceutical use of THC legal ii 2000 Portugal Drug use decriminalized to enable treatment rather than punishment 2001 Canada Prescription access for specific symptoms iii 2001 United Kingdom Cannabis decriminalized 2005 Chile Decriminalization of cannabis cultivation and the possession of any drug for personal consumption 2013 Israel Cannabis for any purpose is illegal. Permits needed for legal imports, exports, consumption, and other legal diversions iv 2013 Czech Republic Medical use legalized for 30 grams of dried cannabis for patients with electronic prescription issued by doctors of specified medical professions for specified conditions. Possession of small amounts and cultivation punishable with a fine v 2013 Romania Derivatives of cannabis can legally be used as medical treatment, but raw cannabis remains illegal vi 2015 Colombia Medical cannabis legal 2015 Jamaica Possession decriminalized and licensing authority established to regulate cultivation, sale and distribution 2016 Australia Cultivation and use is legal for manufacturing of medical cannabis products 2016 Italy The Italian military have been given the task of cultivating cannabis for medical use 2017** Uruguay Complete legalization of adult use
* See Table 1.2
** Yet to be fully implemented (law passed 2012, signed 2013, regulatory guidelines released 2014, medical guidelines released 2015)
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Table 1.2: Overview of 24 US states and the District of Colombia medical cannabis laws
Year State Legal status 1996 California 8 oz. or 18 plants legal for patients with medical conditions preapproved by the California Department of Public Health 1998 Oregon 24 oz. or 24 plants legal for registered patients with medical conditions preapproved by the Oregon Department of Human Services 1998 Washington 24 oz. or 15 plants legal for patients with medical conditions approved by the Washington Board of Health 1999 Alaska 1 oz. or 6 plants legal for registered patients with medical conditions preapproved by the Alaska Department of Health and Social Services 1999 Maine 1.25 oz. or 6 plants legal for patients with medical conditions preapproved by the Maine Division of Licensing and Regulator Services 2000 Hawaii 4 oz. or 7 plants legal for registered patients with conditions preapproved by the Hawaii Department of Health 2001 Colorado 2 oz. or 6 plants legal for registered patients with medical conditions preapproved by the Colorado Board of Health 2001 Nevada 2.5 oz. or 12 plants legal for registered patients with medical conditions preapproved by the Division of Public and Behavioral Health 2004 Montana 1 oz. or 18 plants legal for registered patients with medical conditions preapproved by the Montana Department of Health and Human Services 2004 Vermont 2 oz. or 9 plants legal for registered patients with medical conditions preapproved by the Vermont Department of Public Safety 2006 Rhode Island 2.5 oz. or 12 plants legal for registered patients with medical conditions preapproved by the Rhode Island Department of Health 2007 New Mexico 6 oz. or 16 plants legal for registered patients with preapproved medical conditions and for patients in hospice care 2008 Michigan 2.5 oz. or 12 plants legal for patients registered with the Michigan Department of Licensing and Regulatory Affairs 2010 Arizona 2.5 oz. or 12 plants legal for registered patients with medical conditions preapproved by the Arizona Department of Health Services 2010 District of 2 oz. purchasable every 30 days for registered patients with medical Colombia conditions preapproved by the D.C. Department of Health 2010 New Jersey 2 oz. purchasable every 30 days for registered patients with medical conditions preapproved by the Department of Health and Senior Service’s Medical Marijuana Program 2011 Delaware 6 oz. legal for registered patients with medical preconditions approved by the Delaware Department of Health & Social Services 2012 Connecticut One-month or 2.5 oz. legal for registered patients with medical conditions preapproved by the Department of Consumer Protection 2013 Massachusetts 60-day supply or 10 oz. legal for registered patients with debilitating medical conditions approved by a licensed physician
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2013 New Hampshire 2 oz. purchasable every 10 days for registered patients with medical conditions preapproved by the New Hampshire Department of Health 2014 Illinois 2.5 oz. purchasable every 14 days for registered patients with medical conditions preapproved by the Illinois Department of Public Health 2014 Maryland 30-day supply legal for registered patients with permission from the Medical Marijuana Commission 2014 Minnesota 30-day supply of non-smokable products legal for patients with debilitating medical conditions who are registered with the Minnesota Department of Health 2014 New York 30-day supply of non-smokable products legal for registered patients with medical conditions preapproved by the New York State Department of Health 2016 Pennsylvania 30-day supply of non-smokable products for registered patients with medical conditions preapproved by the Pennsylvania Department of Health Sources: Americans for Safe Access: Legal Information By State & Federal Law and ProCon.org.: 24 Legal Medical Marijuana States and DC
Notes:
Maryland approved a medical cannabis bill in 2013, but implementation has been delayed. vii
Florida, Georgia, Iowa, Kentucky, Mississippi, Missouri, North Carolina, Oklahoma, South Carolina, Tennessee, Texas, Utah, Virginia, Wisconsin, and Wyoming have decriminalized low- THC cannabis for medical treatment in order to provide patients with legal protection. Medical cannabis remains illegal in these states.
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Sources and Notes
i Törnkvist (10 June 2013) ii European Monitoring Centre for Drugs and Drug Addiction (ed. 2012) iii Spicer (12 April 2002) iv Levush (6 January 2014) v Filipková (28 September 2015) vi Gates (5 October 2015) vii Nirappil (21 December 2015)
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Appendix II
Figure 2.1: Selection Method for Representative Sample
Medical Cannabis Industry
– general information
Criterion1 Criterion 2 Criterion 3 Criterion 4
Representative sample
A representative sample will be selected based on a set of criteria warranted by the information of the industry.
(Own production)
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Figure 2.2: Categorization of the Representative Sample
Criteria-based selection
process
Rental of facilities R&D Consulting Production Case-by-case and equipment analyses of core business Supply & Cultivation Technology Testing activities Distribution
Systematic Rental of facilities and analysis of Cultivation and equipment, consulting, R&D core business Production technological services, areas supply & distribution, testing
Since the American market for medical cannabis is growing rapidly compared to other national markets, the sample will consist of equal amounts of companies from the United States and from other nationalities. These will be categorized based on their operational focus to facilitate cross-analyses of the companies.
(Own production)
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Appendix III Company Overview Mother Company Market value Year of entry in Location Analysis of core business activities B.A. 1 B.A. 2 B.A. 3 a/o 30 May 2016 (n=11) (n=16) (n=6) 1 2 3 4 8 7 5 6 Renting Supply & Technology R&D Cultivation Production facilities / Testing Consulting Distribution services equipment Echo Pharmaceuticals BV N/A 2006 The Netherlands ✓ ✓
Breath of Life Pharma N/A 2008 Israel ✓ ✓ ✓ ✓
Tikun Olam Ltd. N/A 2007 Israel ✓ ✓ ✓
Cannabis Science, Inc. $22,139,071 2009 Colorado, USA ✓ ✓ ✓ ✓
INSYS Therapeutics $1,115,852,338 2011 Arizona, USA ✓ ✓ Texas, USA Cannabics Pharmaceuticals, Inc. $7,030,582 2012 Maryland, USA ✓ ✓ ✓ Israel Winter Garden Biosciences N/A 2014 Uruguay ✓
MGC Pharmaceuticals $35,940,000 2015 Australia ✓ ✓
MMJ PhytoTech Ltd. $31,760,000 2015 Australia/ ✓ ✓ Multinational iCan N/A 2015 Israel ✓ ✓
The International Cannabis and N/A 2016 The Czech Republic ✓ ✓ Cannabinoids Institute Fundación Daya Inicio N/A 2014 Chile ✓
OrganiGram Holdings, Inc. $64,311,991 2014 Canada ✓
GW Pharmaceuticals, Plc. $983,070,161 1998 United Kingdom ✓ ✓ ✓ California, USA Bedrocan BV N/A 2001 The Netherlands ✓ ✓ ✓ ✓ Canada Ecojardín Plantas Medicinales y N/A 2005 Colombia ✓ ✓ Auromáticas Ecológicas Cannalivio N/A 2007 Colombia ✓ ✓ ✓
Better N/A 2009 Israel ✓ ✓ ✓
Medical Marijuana, Inc. $131,951,196 2009 California, USA ✓ ✓ ✓
Medicanja Ltd. N/A 2013 Jamaica ✓ ✓ ✓
Mettrum Health Corp $64,484,878 2013 Canada ✓ ✓ ✓
Sannabis N/A 2014 Colombia ✓ ✓
GrowBLOX Sciences, Inc. $14,724,047 2014 Nevada, USA ✓ ✓ ✓ ✓
Earth Science Technology, Inc. $23,466,838 2014 Florida, USA ✓ ✓ ✓ ✓
Canopy Growth Corp. $276,457,449 2014 Canada ✓ ✓ ✓
Terra Tech Corp $164,470,451 2014 California, USA ✓ ✓ ✓
AmeriCann, Inc. $12,805,870 2014 Colorado, USA ✓ ✓
CannaSys Inc. $1,498,149 2014 Colorado, USA ✓
CannaLabs $18,852,053 2014 Colorado, USA ✓ ✓ Connecticut, USA American Cannabis Company $7,430,528 2014 Colorado, USA ✓ ✓ ✓
Chuma Holdings $2,042,362 2014 California, USA ✓
GreenPlex Services, Inc. $5,976,941 2014 California, USA ✓ ✓ ✓
Note 1: Emphasized indicates a company's primary business area Note 2: Market value unavailable for some companies, namely those from Israel, the Netherlands, the Czech Republic, and South America
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Appendix IV
Sound file no. 1: Expert Interview with Ellis Smith
Interviewee: Ellis Smith, Co-Founder and Chief Development Officer of American Cannabis Company, Inc.
Conducted via Skype on Tuesday, 17 th May 2016
Bullet points:
• The company saw a lack of help for clients to get through the application process • The motivation is in the passion for providing medical cannabis • Major asset: track record in application writing • New approach: lean manufacturing, design and workflow management • New product: technology of high-density cultivation system, which includes SoHum Living Soil • Targets commercial clients all over North America • New target segment: home-grower and private cannabis patients • The industry is getting competitive, but the emerging market is still in its infancy and there is plenty of work for everyone • The duality of state and federal law • Bank’s reluctance • Direct advertising prohibited in Canada and some US states • Licensed American patients can buy products on the legal in Canada • There is a lot of direct advertisement in Colorado • Companies often influence the regulations, which is common for the US • Lobbying is a way to circumvent restrictive regulation • Help the patients by focusing on raising the standards for medical cannabis • R&D is very important • The industry is still not 100% regulated • There is no social stigma in Colorado anymore • The mission is to change the perception of cannabis • The UN laws are preventing the growth in the industry • Political pressure is changing international perceptions of cannabis • The change of perception lies in semantics • In the future, the company will attempt to maintain its market presence and growth
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Sound file no. 2: Expert Interview with Tyler Burns
Interviewee: Tyler Burns, Investor Relations in Canopy Growth Corporation
Conducted via Skype on Tuesday, 24 th May 2016
Bullet points:
• There is a need to educate people • From 2002-2013 Canadian law allowed self-cultivation • In 2013, new regulations only allowed commercial cultivation, which caused a market disruption • Canopy is working with an Australian company to help with the start-up of cultivation operations, in exchange for a ownership position of the company • Canadian regulations are widely viewed as being the leading standards, which established Canadian companies as a go-to resource for start-ups all over the world • Canada has one of the most stable banking systems in the world, but cannabis is considered a vice industry • Larger banks are reluctant to be involved in the cannabis business due to the legal environment • Canopy makes efforts to educate doctors at conferences or in their offices • Public awareness of medical cannabis is increasing through general media • All cannabis is delivered through registered couriers • The company does not involve themselves with illicit activities • Sales in Canada are only legal through the internet and call centers • There is a huge demand for medical cannabis • Advertisement is highly restricted in Canada • Branding is a strong way to market the company, as well as a strong social media presence • Centralized management allows the expansion and growth of the corporate company • All three subsidiaries produce cannabis, but there are restrictions on sales • Marijuana is a commonly used word for cannabis in Canada • The stigmatism of medical cannabis is coming off as people are generating more discussions • Canopy sees a need to provide information and taking a leadership role to establish educational programs • Health Canada inspects business activities on an ad hoc basis • 600-700 pages of standard operating procedure manual • Health Canada has established the regulations, but it is up to the companies to establish standard operating procedures for how it plans to comply to the licensing requirements • In the future, the end of cannabis prohibition presents a huge business opportunity
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Appendix V
Chart 1.1.: Media Mentions of Canadian companies in 2015
Source: Tyler Burns, Canopy Growth Corporation
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