Easton Pharmaceuticals (OTC: EAPH) has decided to break into the American and Canadian marijuana sector. Separately, Vermont jumped in as the seventeenth state thus far to decriminalize the possession of small amounts of marijuana. Let’s take a look at how the two relate to each other, and the implications that move beyond.
Easton designs and develops a range of topical healthcare products for commercial purposes. The burgeoning marijuana sector is a highly attractive one, and that’s why Easton will employ third-party consultants to help it open up boutique clinics in Canada and the U.S. Within the latter, Easton hopes to start out with the relatively “friendly” states of Michigan and California.
Michigan, if you recall, initiated the state-wide Medical Marijuana Program. Under the program, users may legally buy, own, or grow medical marijuana under legal protection. Canada, for its part, is presently working on nation-wide legislation that will allow similar legal protection across numerous Provinces.
Patients with valid medical prescriptions will be able to secure their products from highly regulated small clinics that Easton plans on setting up. The clinics will also undergo periodic inspection to ensure adherence to all relevant government norms. From Easton’s press release on Business Wire:
John Adams, President of Easton Pharmaceuticals commented, "With thousands of people in the nearby state of Michigan and various Canadian provinces and jurisdictions to follow, requiring relief from various ailments and illnesses that only the use of medicinal marijuana can provide relief for, Easton has chosen to participate in this industry that has slowly over the last few years received recognition for its medicinal benefits. The United States congress was to have made a final decision approving the use of medical marijuana in limited ways, but recently adjourned the final decision for later in the year."
Medical marijuana is well on its way to becoming a major industrial sector. Back in 2011, the medical marijuana sector was worth around $1.7 billion, but with growing state acceptance and a definite push at the federal level to achieve the widespread legalization of both medical and recreational use of marijuana, this could mushroom to become a $9 billion industry in less than five years.
Witness Vermont, for example. Last Thursday, Vermont Governor Peter Shumlin signed into law the official decriminalization of marijuana possession. Instead of criminal penalties, civil fines will be enforced for possession of up to 1 ounce of marijuana or five grams of hashish.
Those under 21 will face penalties in line with underage possession of alcohol; thus, they may be referred to court for a first offense, civil penalties in combination with a suspension of license the second time, and criminal penalties may be enforced for third-time offenders.
Until now, possession of up to 2 ounces of marijuana carried a six-to-24-month jail sentence. Vermont had already decriminalized medical marijuana usage back in 2004, and this marks a significant step forward—not only for the state of Vermont, but also for the nation as a whole.
Opportunity for Investors and Entrepreneurs
Meanwhile in other states, entrepreneurial forces are accelerating the pace of the marijuana industry’s growth. CannLabs, for example, operates in Colorado, where it serves as a testing lab for many of the leading dispensaries and manufacturers of cannabis-infused foods and beverages in that state. As Entrepreneur.com reports, CannLabs has experienced steady growth, with sales set to double over this year and a second lab brewing.
Washington, another marijuana-friendly state, has also seen its fortunes increase thanks to the new industry. Privateer Holdings is a Seattle-based private equity firm, and so far, it has raised $5 million from more than 20 investors. The company’s goal is $7 million.
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Last December, Privateer acquired Leafly. Leafly is a website that reviews a variety of medical marijuana products in detail. At the time, the website was not making any revenue. Today, traffic grows by 20 percent every month, and for 2013, the company anticipates sales of $3-$4 million. Pretty major stuff.
However, because the federal legislative framework has yet to change in accordance with state-wide changes, major banks and centers of capital remain reluctant to get involved directly. That’s why any new investor or entrepreneur absolutely has to understand the applicable laws before making a move.
And it’s much safer to remain on the periphery of the sector—I mean businesses like software development for product supply chain tracking—than to dabble directly in growing and dispensing. Banking and legal representation still remains problematic.
All of these are significant issues that won’t disappear anytime soon. They do represent hindrances that the fledgling marijuana industry must cope with, but until the federal law is updated, investors and entrepreneurs need to be aware of what they’re working with.
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