Shadow cast over vaping debut

Uncertainty about link to illnesses

• The vaping health crisis is happening at a very bad time for the Canadian cannabis industry.

With pot stocks already down over 40 per cent since the end of the first quarter, news an Ontario youth has been diagnosed with Canada’s first reported vaping-linked illness while hundreds have fallen ill in the U. S., is further battering the sector.

It’s not clear what’s causing the illnesses or whether they’re tied to nicotine, cannabis or both. As long as that uncertainty persists, so will questions about whether the big bets many Canadian pot companies have made on vaping will pay off.

Canada has taken a staggered approach to legalization, and the first legal cannabis vapes will appear on stores shelves along with edibles and beverages Dec. 16. Pot companies are optimistic vapes will be the most popular format with consumers, and they’ll help boost flagging margins in an industry that’s struggling to become profitable.

Vaping accounts for 24 per cent of the legal U. S. market, according to Cowen & Co. analyst Vivien Azer, and many companies are expecting it to take an even larger share of the Canadian market. Tim Pellerin, general manager of Canada for Pax Labs Inc., predicts Canadian vape sales could reach $600 million by 2021.

T he illnesses haven’ t dampened companies’ optimism, at least in public, but there is concern that sales could be more muted than expected if they continue.

“Market confusion is never good,” Mark Zekulin, chief executive at Canopy Growth Corp., said last week. “We’re seeing unknowns that people need and want answered.”

The highly regulated market should provide assurance legal vape products will be safe, he said, a sentiment echoed by Cam Battley, chief corporate officer at Aurora Cannabis Inc.

“In Canada we’ve got perhaps the world’s most respected regulatory system with respect to cannabis,” he said. “That likely will give both patients and consumers confidence that any product that reaches the market will have gone through rigorous testing and will be compliant with all regulations.”

The impact on the market will come down to whether the cause of the illnesses is identified by Dec. 16, said Trina Fraser, partner at Brazeau Seller Law in Ottawa.

“If we can get to the bottom of what the root cause is and we can offer assurances to consumers that that ingredient is not used in cannabis vape pens in Canada, I don’t think it should have any effect on demand,” she said. “If it is a more systemic problem and these products generally are an irritant or somehow a precipitant to lung disease, that would be devastating to the vape industry.”