The DEA’s Race to Research Cannabis.

More great news for cannabis research as the DEA makes a big announcement...

Welcome to Four PM — a newsletter that provides the top cannabis industry news from Canada to California.

In the last two days alone, cannabis companies have spent a combined $734 million USD acquiring competitors.

In Today’s Issue 💬

→ Great News For Cannabis Research. 🙌🏽

→ TerrAscend Gobbles Up Gage. 🍊

→ New Jersey’s Cannabis Problem. 📉

The Race To Research Cannabis Continues

The Drug Enforcement Administration makes a big announcement…

Despite 36 states having already legalized cannabis for medical purposes — cannabis remains a Schedule I drug which is defined as a drug with no accepted medical use & a high potential for abuse.

The inconsistency of this specific policy has received no shortage of attention in recent times, with many policymakers highlighting the hypocrisy of the DEA’s current position on cannabis.

Times are changing… 🕙

The DEA whose mission is to enforce the controlled substances laws and regulation of drugs in the U.S made a very big announcement.

To better understand how cannabis should be scheduled, they are proposing a substantial increase in the production of cannabis for research purposes.

In a notice that is now available on the Federal Register, the DEA is proposing “significant increases” in both the quantity of cannabis & cannabis extracts made available for research purposes.

The “DEA firmly believes in supporting regulated research of schedule I controlled substances”

The “increases reflect the need to fulfill research and development requirements in the production of new drug products, and the study of marijuana effects in particular” it said.

The numbers…

Per the document, the DEA is seeking to increase the quantity of cannabis which will be used for research purposes to 2 million grams in 2021 — a 30% increase in its initial quota for cannabis.

Additionally, the DEA is proposing to manufacture 500,000 grams of “cannabis extract” — a 100% increase.

When it comes to psilocybin the DEA is also seeking to increase the quantity produced for research purposes, increasing the quantity to 1500 grams — a 30x increase on its initial quota.

Our Take

This is extremely positive news that will benefit everyone interested in seeing more common-sense policies adopted for cannabis around the world.

Armed with the right information, the timeline for cannabis to be legalized in the U.S can be significantly reduced, and with more research — the days of cannabis remaining illegal are numbered.

TerrAscend Is Acqurining Gage

In a deal worth $545 million USD TerrAscend is expanding into Michigan….

With cannabis sales in Michigan on track to reach over $1 billion USD, there’s no shortage of companies interested in competing in this market.

Gage Cannabis…

In 2017 Gage Cannabis Co was founded — in the time since they have become one of the top cannabis companies in Michigan.

The leadership team at Gage has taken a very unique approach to succeed in cannabis.

Instead of building brands from scratch, Gage focused on producing high-quality cannabis and licenses established cannabis brands.

“Partnering with best-in-class brands in order to elevate the Gage brand has been one of our main strategies whereby we partner with brands who are outside of Michigan” — Gage CEO Fabian Monaco said to Four PM.

This morning, however, it was announced that TerrAscend is acquiring Gage in an all-stock deal that values Gage at $545 million USD.

Why Gage?

Consolidation is a theme we will continue to see in cannabis as larger companies such as TerrAscend seek to expand their footprint into new markets, however, three things stand out about Gage.

  • → Gage sells cannabis at a 46% premium vs average price point in Michigan $5,100/lb vs. Michigan average of $3,500/lb.

  • → Gage is on track to increase its revenue by over 100% this year, selling $26.4 million USD worth of cannabis in the last 3 months alone.

  • → Consumers spend 47% more when shopping at Gage stores, with an average basket spend of $158 vs the average Michigan basket of $85.

Our Take

It’s crazy to see cannabis companies spend a combined $734 million USD acquiring competitors in the last two days, despite the fact that cannabis remains illegal in 99% of nations.

With over 90% of this $734 million coming from U.S cannabis companies — it also calls into question how it’s possible that 40,000 people remain in prison for this plant in the U.S today?

The Challenges For Cannabis In New Jersey 

Cannabis businesses face an uphill battle to succeed in the state…

New Jersey might have legalized cannabis for adult-use purposes, however, consumers in the state will face an uphill battle to find legal cannabis for sale when legalization comes into effect.

Cannabis in New Jersey…

On the 18th of January, 2010, then governor of New Jersey Jon Corzine legalized medical cannabis on his last day in office.

That said, the number of people who could obtain access to cannabis in the state was very limited.

5 years after medical cannabis became legal, less than 6,000 patients had obtained access to cannabis in New Jersey, however, less than 2 years later this number increased to 11,659 patients.

The wheels of progress….

In spite of the challenges, the wheels of progress continued to turn and in 2017 Senator Scutari introduced a bill to legalize cannabis for adult-use purposes.

In response to this, then governor Chris Christie made clear he would do all within his power to prevent this going on record saying it was "nothing more than crazy liberals who want to say everything's OK”.

Thankfully, Christie was voted out in 2018, and the new governor Phil Murphy had a very different opinion on cannabis, and on the 3rd of November 2020, 67% of people in New Jersey voted to legalize cannabis for adult use.

One step forward…

A majority of voters in all but three municipalities in New Jersey voted in favor of the cannabis legalization ballot question in November 2020. 

Despite this wide spread support — nearly 71% of towns in New Jersey have completely opted out of the adult-use cannabis industry.

Of the 565 municipalities in New Jersey, only 98 municipalities have so far approved cannabis retail stores to open their doors.

Our Take

The decision made by 71% of municipalities to go against the will of the people who voted to legalize cannabis makes a mockery of this process.

That said, this staggering percentage also highlights the continued need to educate those in positions of power when it comes to cannabis.

Have a great rest of the day, and talk to you all on Friday — Matthew.

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