Germany, the largest medical cannabis market in Europe, decriminalized cannabis possession and small-scale home cultivation in April, making it easier for doctors to prescribe it.

But only a few local companies are licensed to grow pot, and U.S. and Canadian firms are looking to capture a slice of the market by providing capital and exporting products to Germany.

Industry insiders said this is mostly driven by problems at home, with Canada plagued by an illicit market and oversupply. In the U.S., allure has dimmed amid regulatory hurdles, including a lack of timeline for federal legalization.

“Canadian market is very challenging for these producers and Germany is probably the largest opportunity for them,” said Frederico Gomes, analyst at brokerage ATB Capital Markets.

Last week, the large-scale Manitoba cannabis grower and retailer Delta 9 said it had filed for creditor protection as it was struggling to pay its bills.

Two German companies, including its largest cannabis producer Demecan and online seller Bloomwell Group, told Reuters they are in talks with US and Canadian companies for potential investments, and more deals may be announced in the coming days.

“We see a big movement in the global market. Everybody needs to be in Germany and wants to be in Germany now,” said Bloomwell CEO Niklas Kouparanis.

Canada’s OrganiGram had in June announced a 14 million euro ($15.21 million) investment—16.5 per cent of its overseas investments funds—in Berlin-based Sanity Group.

A demand spike following decriminalization would further encourage investors, with Cannabis research firm BDSA estimating Germany’s marijuana sales to hit $1.5 billion (C$2.1 billion) in 2024 and $3.7 billion (C$5.1 billion) by 2027.

Bloomwell said it added more patients in the three months following reclassification, compared to its first four years in business.

Another draw is that Germany does not impose high taxes on medical marijuana sales, keeping prices competitive to the illicit market in contrast to Canada, OrganiGram CEO Beena Goldenberg said.

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Biden said thousands of people with prior federal convictions could be denied employment, housing or educational opportunities and his executive action would relieve such “collateral” consequences.

Biden’s move fulfills a campaign promise and is likely to please members in his left-leaning political base ahead of the November midterm elections in which the president’s fellow Democrats are defending control of the House of Representatives and Senate.

“Too many lives have been upended because of our failed approach to marijuana. It’s time that we right these wrongs,” Biden said.

He urged state governors to follow suit.

“Just as no one should be in a federal prison solely due to the possession of marijuana, no one should be in a local jail or state prison for that reason, either,” Biden said.

Shares of cannabis growers and sellers surged following Biden’s comments, with Tilray Brands and Canopy Growth both jumping more than 20 per cent.

The results of a classification review could have wide ramifications. Presently the drug falls under the same classification as heroin and LSD and is in a higher classification than fentanyl and methamphetamine, the president said.

If marijuana classification were to ease at the federal level, that could allow major stock exchanges to list businesses that are in the cannabis trade, and potentially allow foreign companies to begin selling their products in the U.S.

While many states have legalized the medical or recreational use of cannabis, the substance remains illegal under U.S. federal law, forcing most major banks to deny their services to cannabis-related businesses.

The issue has forced U.S. marijuana companies to trade their shares over the counter or by listing in Canada, with the Nasdaq and New York Stock Exchange prohibited from listing them.

The president’s action drew praise from some members of Congress.

“The Progressive Caucus applauds this action by President Biden today to advance criminal and racial justice,” said Representative Pramila Jayapal, who chairs a group of left-leaning lawmakers, in a statement.

Biden said he had directed Attorney General Merrick Garland to develop an “administrative process” to issue certificates of pardon to those who are eligible.

“The Justice Department will expeditiously administer the President’s proclamation, which pardons individuals who engaged in simple possession of marijuana, restoring political, civil, and other rights to those convicted of that offense,” the department said in a statement.

Biden said certain rules needed to stay in place even as regulations around the country loosened.

“Finally, even as federal and state regulation of marijuana changes, important limitations on trafficking, marketing, and underage sales should stay in place,” Biden said.

— Reporting for Reuters by Jeff Mason and Doina Chiacu; additional reporting by Noel Randewich, Shariq Khan and Richard Cowan.

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Smiths Falls, Ont.-based Canopy announced Sept. 27 it has an agreement in place with OEG Retail Cannabis — already the owner/operators of Canopy’s franchised Tokyo Smoke stores in Ontario — to buy Canopy’s 23 corporate-operated Tweed and Tokyo Smoke stores in Manitoba, Saskatchewan, Newfoundland and Labrador.

A separate Calgary-based cannabis retailer, 420 Investments, operator of the Four20 chain in that province, has a deal to buy five Canopy-owned retail stores in Alberta and rebrand them under its own banner.

Canopy said the deal “reinforces (its) focus on advancing its path to profitability as a premium brand-focused cannabis and consumer packaged goods company.”

The deal with OEG would give it not only the stores but “all Tokyo Smoke-related intellectual property,” Canopy said in a release. Tweed stores going to OEG in this deal are to be rebranded as Tokyo Smoke.

Canopy would continue to own and operate the Tweed consumer brand, which includes a “vast portfolio” of products such as pre-rolled joints, drinks, edibles, whole flower, vapes, cartridges and oils, the company said.

“We are taking the next critical step in advancing Canopy as a leading premium brand-focused (consumer packaged goods) cannabis company while furthering the company’s strategy of investing in product innovation and distribution to drive revenue growth in the Canadian recreational market,” Canopy CEO David Klein said in a release.

“By realizing these agreements with organizations that possess proven cannabis retail expertise, we are providing continuity for consumers and team members.”

Canopy’s “path to profitability” has been uphill: for its fiscal year ending March 31, it booked an company-attributable net loss of $302.2 million on net revenue of $520.3 million, up from an attributable net loss of $1.74 billion on net revenue of $546 million in the year earlier.

The company in April announced a cost-cutting plan including “cultivation-related efficiencies,” facility improvements, contracting out some processing work, cutting sales and administrative costs and reducing staff headcount, with a goal of $100 million to $150 million in savings over the following 12-18 months. — Glacier FarmMedia Network

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Canada became the first developed nation to legalize use of recreational marijuana in October 2018. It has since also passed a law allowing citizens with a criminal record for marijuana possession to be pardoned quickly and without cost.

Canada’s health minister was required to conduct a review of the legislation, its administration, and operation three years after coming into force, so the review is coming a year later than had been planned.

Health Minister Jean-Yves Duclos said it took longer than expected to begin the review because the government wanted to “make sure things were done right” and plan a review broader than what is mandated by law.

While a study of the law’s safety was a priority, Duclos said the review also would look at Canadian cannabis industry complaints about high taxes, sale limitations and advertising restrictions.

The Canadian Chamber of Commerce welcomed the review, saying its broad scope would help facilitate growth of the legal cannabis sector.

“However, to effectively displace the illicit market and protect the public health and safety of all Canadians, law enforcement, businesses, industry and all levels of government will need to continue to work together,” the chamber’s National Cannabis Working Group said in a statement.

The review will evaluate the law’s impact on young Canadians and progress toward the legislation’s aim of providing adults with access to regulated, lower-risk and legal cannabis products, according to a statement from the government.

It will also analyze what progress has been made in deterring criminal activity and displacing the illicit cannabis market.

Through this review, “we will strengthen the (Cannabis) Act so that it meets the needs of all Canadians while continuing to displace the illicit market,” Duclos said in a statement.

— Reporting for Reuters by Ismail Shakil in Ottawa.

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Most Canadian marijuana companies have struggled to turn a profit despite more than three years of cannabis legalization due to fewer-than-expected retail stores, cheaper rates on the black market and sluggish overseas growth.

That has piled pressure on companies to slash expenses, with Canopy saying Tuesday that it would also reduce costs by lowering how much it spends on cultivation of weed.

The moves are expected to yield cost-savings of between $100 million and $150 million within 12 to 18 months.

Yet the Smiths Falls, Ont. company, which lost $67.4 million in the third quarter, did not set a new timeline for turning profitable.

Canopy said it expected to take charges of $250 million-$300 million in the fourth quarter, most of which would relate to the write-down of excess inventory.

It also expects to incur between $100 million and $250 million in impairment charges, largely driven by goodwill and intangible asset impairments.

The company had 3,259 employees, including 2,362 full-time employees in Canada, as of March 2021.

— Reporting for Reuters by Arunima Kumar in Bangalore.

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Demand for pot edibles such as gummies has risen during the pandemic, as people stuck at home turn to cannabis-related products for relaxation and entertainment.

“The categories that resonate the most with consumers, particularly in THC space are gummies and beverages, we continue to look at other ways of consumption but these two seem to be the ones that are taking off,” Canopy CEO David Klein told Reuters.

Tetrahydrocannabinol or THC is the ingredient in marijuana that gets users ‘high.’

Wana sells gummies in the U.S. state of Colorado and licenses its intellectual property to partners who manufacture, distribute and sell Wana-branded gummies in states including California, Arizona, Illinois, Michigan and Florida.

Canadian pot producers are looking at cross-border expansion, as the industry has garnered investor interest with some U.S. states legalizing pot and on increased expectations for federal marijuana reform.

“We remain more bullish than others in the regulatory front and feel that our ecosystem in the U.S. is strong enough to grow even without federal permissibility happening in the short term,” Klein added.

U.S.-listed shares of Smiths Falls, Ont.-based Canopy, down 46 per cent so far this year, rose nearly two per cent to US$13.55 in premarket trade.

The acquisition will provide Canopy access to Wana’s vertically integrated facility in Colorado and its licensing division, the company said, adding that it would continue operating independently in the state until the deal closes.

The transaction is structured as three separate option agreements allowing Canopy Growth a call option to acquire 100 per cent of the membership interests in each Wana entity, the company said in its statement.

— Reporting for Reuters by Rithika Krishna in Bangalore.

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U.S.-listed shares of the company, which also posted a bigger-than-expected quarterly loss, were down two per cent in extended trading.

After more than three years into Canada’s legalization of recreational cannabis, profits have been wearing thin at most pot firms, weighed down by fewer-than-expected retail stores, cheaper rates on the black market and sluggish overseas growth.

Aurora last week said it would shut down a facility in Edmonton, without disclosing the number of employees that would be impacted by the move.

The company laid off hundreds of employees last year to mitigate the impact of the pandemic, shut facilities and amended its loan agreements.

Net revenue at its consumer cannabis business, its second largest segment, slumped 45 per cent to $19.5 million in the fourth quarter.

The Edmonton-based company’s total net revenue fell 20 per cent to $54.8 million, below Refinitiv analysts’ expectations of $56.28 million.

Aurora sold 11,346 kg of cannabis in the quarter, compared with 16,748 kg a year earlier.

On an adjusted basis, the company lost 68 cents per share, compared with Wall Street expectations for a loss of 27 cents per share, according to data from Refinitiv.

— Reporting for Reuters by Rithika Krishna in Bangalore.

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The company said medical distribution from the Aurora Polaris facility that is being shut down will move to an adjacent factory, Aurora Sky, while manufacturing will move to its Aurora River factory at Bradford, Ont., north of Toronto.

“We aspire to be a leaner, more agile organization that keeps pace with our competition and is on a path to profitability,” a spokesperson for the company said in an email statement.

The company, however, did not disclose the number of employees that would be impacted by the move.

On Monday, the Edmonton-based company also delayed the announcement of its fourth-quarter earnings.

Aurora had announced staff reductions and plans to shut five facilities in June last year, hit by the pandemic’s impact on the cash-strapped cannabis industry.

Canada legalized recreational cannabis in October 2018, but profits have remained elusive for most marijuana companies due to fewer-than-expected retail stores, cheaper rates on the black market and slow overseas growth.

— Reporting for Reuters by Niket Nishant and Shariq Khan in Bangalore.

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The decline in valuations over the last few months has been largely due to a lack of progress on anticipated federal marijuana reforms in the United States.

Jushi said Monday its revised offer of $91 million upfront, down from $100 million agreed upon in April, comprised $40 million in cash, about $34.7 million in stock, a $11.5 million unsecured three-year note and a $5 million unsecured five-year note (all figures US$).

With this latest acquisition, Jushi enters one of the largest U.S. weed markets. The Florida-based, Vancouver-registered company, which went public in Canada through a reverse takeover in 2019, has operations in seven states and a retail footprint of 24 dispensaries.

— Reporting for Reuters by Sahil Shaw in Bangalore.

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The Cannabis Administration and Opportunity Act floated by Senate majority leader Chuck Schumer, finance chairman Ron Wyden and New Jersey Senator Cory Booker, would expunge federal non-violent marijuana crimes, further medical research and allow cannabis companies access to essential financial services.

While adult use of cannabis is legal in 18 states, and allowed medically in 37 states, it remains illegal under U.S. federal law, deterring banks and others from dealing with companies that sell marijuana or related products.

The draft set the minimum age required to buy cannabis at 21 and limited retail sales transactions at the state level to 10 ounces of cannabis at a time or the equivalent amount of any cannabis derivative.

The draft also states that a new definition of cannabis would be established and proposes moving cannabis oversight to the Food and Drug Administration and regulators that overlook alcohol and tobacco, away from the Drug Enforcement Administration.

States will control the possession, production, or distribution of cannabis, the draft says, while shipping marijuana into states that have not legalized it will be prohibited. However, such states can not stop shipments going to other legalized regions through their borders.

Senator Chuck Grassley, the top Republican on the Judiciary Committee, said “This new bill puts the cart before the horse.” He added that marijuana use needs more research.

A final legislative draft will be introduced later and feedback on the discussion draft can be provided until Sept. 1.

To become a law, the measure will have to pass both the Democratic-controlled Senate and House of Representatives and be signed by President Joe Biden.

“It is hard to see how this can pass, but nonetheless it is positive to see progress and momentum,” said Greg Heyman, founder of cannabis investment firm Beehouse Partners.

A major cannabis banking reform bill that was approved by the U.S. House of Representatives in April has failed to make any progress in the Senate.

“Our main concern over this current legislation (Cannabis Administration and Opportunity Act) is around the ability to get it passed in the Senate,” private equity firm Poseidon managing director Michael Boniello said, adding it may hinder other federal cannabis reforms, including the banking act, from being passed in 2021.

— Reporting for Reuters by Arathy S Nair in Bangalore.

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