On May 8, 2019, Health Canada announced that it is introducing changes to its cannabis licensing process, effective immediately. Before the change, an applicant can apply for a cannabis license by submitting paper application to Health Canada without having to build a facility first. Now, a new applicant for licence to cultivate, process or sell cannabis for medical purposes must have fully built a cannabis facility that meets all the regulatory requirements under the Cannabis Regulations at the time of submitting an application.
This change came about after Health Canada reviewed its existing licensing regime, which revealed that a major amount of resources were spent on reviewing applications from companies that were not ready to begin operations, thereby prolonging the wait time and preventing more mature applicants from entering into the market sooner. For instance, Health Canada identified that more than 70 per cent of the applicants who successfully passed the initial paper-based review over the past three years have no yet submitted evidence package to the government agency, showing that they have built their proposed site that satisfies the regulatory requirements. As such, the changes in process aim to correct the inefficient allocation of government resources and alleviating the licensing bottleneck.
Along with new criteria for new applicants, Health Canada in its statement promised to provide more support to all applicants by publishing additional guidance on the licence application process and regulatory requirements with respect to Good Production Practices and physical security measures. Furthermore, the government agency is committed to increasing predictability for applicants by creating service standards for its review and supporting micro-class applicants by implementing additional measures.
For existing applications currently in queue, Health Canada will first conduct a high-level review of the paper application submitted. If this review is successful, the applicant will receive what is known as a status update letter, specifying that there are no issues with the proposal. A more detailed review will be conducted once the applicant has a completed site that satisfies the regulatory requirements.
On the market side, private cannabis companies are driving up cannabis M&A activities. According to Marijuana Business Daily’s weekly deal watch, compared to a similar time period last year, the number of M&A transactions in the cannabis industry increased by nearly 40 per cent year-to-date over 2018, from 94 to 130.
More specifically, deals involving private cannabis companies almost tripled from 15 in 2018 to 43 by the week ending May 3, 2019. With a growing number of applicants and changes to the licensing process that will hopefully reduce wait time, one can expect to see more cannabis operators entering into an expanding and maturing legal cannabis market, which may further accelerate M&A activities in the cannabis space.
The author would like to thank Coco Chen, articling student, for her contribution to this article.
Stay informed on M&A developments and subscribe to our blog today.