Canada’s cultural landscape is changing with the legalization of recreational marijuana. We will become one of the few countries in the world to legitimize this much-maligned plant, and if the experiments with legalization in the U.S. have taught us anything, it is that the benefits far outweigh the drawbacks. Suffice it to say that this cash crop juggernaut will have positive implications.
Presently, many corporations are vying for the right to produce cannabis for the government, which has decided to distribute through its agencies such as the Liquor Control Board of Ontario (LCBO). The hurdles are a little daunting, but WeedMD has a distinct advantage; it has been in the medical marijuana business for over four years and is good at what it does. Bolstered by scientific methods and having all the necessary licensing, it is ready for the windfall to come. We spoke with its Chief Financial Officer and Director Keith Merker.
WeedMD Inc. was formed in 2013 when the founders saw an opportunity in the changing regulations coming to Canada. As early as 2001, the Marihuana Medical Access Regulations (MMAR) program allowed for a cottage industry to spring up in this country. In 2013, new regulations came into force now recognized as the Access to Cannabis for Medical Purpose Regulations (ACMPR), which led to a more commercial industry beginning to take shape.
“We sprung upon that opportunity very early on and became one of the early applicants under this new regime. Unfortunately, we were not licenced until April of 2016 to cultivate cannabis. It’s a very arduous process to obtain a licence in this country. It takes time, money and a lot of different skill sets,” says Keith.
This is a very highly regulated industry, so companies need to know how to navigate the rules and deal with Health Canada. WeedMD started the very long licencing process in 2013, culminating in approval in April of 2016. WeedMD began cultivating before receiving a licence to sell product in April of 2017. This was obviously a huge milestone for the company as it began to generate revenues.
“That was a new era for this corporation to enter into and was a very exciting period. It was around that timeframe that we also went public and are now publicly traded under the symbol WMD on the TSX Venture Exchange,” says Keith. A host of other milestones have been achieved in the interim, including a licence to produce and sell cannabis extracts, which are allowable under the regulations.
WeedMD’s Founder and Chief Executive Officer Bruce Dawson-Scully comes from three generations in the long-term care industry in which his family has owned and operated several businesses. At its peak, they owned twenty-six long-term care facilities and homes in Canada.
The long-term care industry is quite like the medical cannabis industry, in that they are both highly regulated. “You have to be very diligent about your processes, and the way in which you go about operating your business. That has held us in good stead here at WeedMD, but there was also an interesting parallel between the needs of the resident population in senior care and the potential benefits that medical cannabis can provide,” says Keith.
In addition to the regulatory parallels between the industries, there was also the feeling that medical cannabis could be part of another solution. In long-term care, there are residents who take multiple prescriptions every day. Symptoms of one medication are alleviated by prescribing a new medication in what can have a bit of a snowball effect. This is especially true when dealing with ongoing issues, such as chronic pain or arthritis, which affect ninety percent of these residents. The phenomenon is known as polypharmacy, and there are many issues attached to it.
“There isn’t a tonne of evidence at this point for medical cannabis because it’s been under prohibition for over one hundred years. But, the research that’s coming in and the anecdotal evidence available is all pointing to the fact that it can be, if not a panacea, certainly very helpful in alleviating a lot of these symptoms, and can mitigate some of this polypharmacy issue that we are seeing,” says Keith.
Cannabis can also reduce the overuse and abuse of opioids for painkilling, and WeedMD thought that it could have a positive impact in this area. This is being pursued avidly and successfully to date. However, it is not the only goal, because there is a recreational market coming quickly. Licenced producers such as WeedMD will be supplying this new market.
“This was not a consideration at all when the company got started, but, of course, now that the opportunity has presented itself, we are more than happy to supply that market as it comes online,” says Keith.
Dr. Luc Duchesne is WeedMD’s chief scientific officer. He has a Ph.D. in plant biochemistry and is familiar with processes in horticulture and the methods used to create extracts and oils. Through his work, WeedMD has developed standard operating procedures to ensure that the company has taken a scientific and precision-controlled approach to its cultivation.
“I think it’s served us well as we’ve ramped up. It has created a lot of efficiencies along the way, but more importantly, it’s allowed us to fine-tune everything from the nutrient and light regime and the climate controls. We deliver everything in a very precise manner to care for our plants and ultimately produce the best product for our patients,” says Keith.
WeedMD’s official licenced facility is in Aylmer, Ontario, about two hours outside of Toronto and just outside of London. It is a 26,000-square-foot former Imperial Tobacco plant and is one of the most capital efficient facilities that you can find in this industry in Canada.
“We landed on a spot that had ample power onsite and a sufficient clean water supply. We didn’t have to do a major retrofit to have it up to speed and deliver good quality product,” says Keith.
At this point, the company is able to produce about 1,500 kilograms of product per year. It has always been the goal of WeedMD to have a larger footprint, but it takes time to get through all the necessary roadblocks to expand. These include licencing, operational and financial hurdles.
Now, everything is aligned, and WeedMD has landed on what Keith believes is an optimum scenario. It has optioned a hundred-acre farm, with fourteen aces – 616,000 square feet – of currently operational greenhouse space. Five acres – roughly 220,000 square feet – of that space is currently being retrofitted.
“The retrofit is well underway and going extremely well. We anticipate having plants in this facility by early spring, with the first harvest coming out by this summer. It’s a wonderful deal for us on a number of levels,” says Keith.
The new facility is in Strathroy, Ontario, just twenty minutes from London and just down the road from the company’s main building, making it logistically efficient. Many resources can be shared between the two plants. The farm has a lot of room to grow beyond the currently built out 616,000 feet of space.
WeedMD, also has the option to spread out into the entire facility and purchase the farm outright. The first 220,000 square feet will produce over 20,000 kilograms of product per annum, which is a very significant amount. It is being retrofitted to create a hybrid space with some of the amenities of an indoor grow combined with the advantages of a greenhouse space.
“We are utilizing the sun to provide the light we need to grow. That obviously has huge cost savings associated with it. There are a number of cost savings associated with being in a greenhouse, however, we are providing our own HVAC and supplemental lighting to control the environment, and make a grade-A product,” says Keith.
WeedMD also sells to other growers. This aspect of the business was something that it stumbled on, and success followed. The company looks at things a little bit differently than some of its competitors. The ability to sell plants to other licensees as well as others licenced under the ACMPR was at first seen as a threat to other businesses.
“We saw this as an opportunity. We have developed a certain expertise around selling live plants to other licensees, and it has been profitable. However, it will eventually become a smaller piece of our business once we are producing more than twenty tonnes per year of product. It may get lost in the shuffle,” says Keith. While this may be true, it showcases WeedMD’s ability to be adaptable and make money.
Keith sees that we are very much at the beginning of this industry. He is excited to be a part of something in its infancy and more so because cannabis has been under prohibition for so long. He believes that WeedMD is well positioned to take part of history being made.