Special Sponsored Video Feature
Cannabis Daily was recently asked to provide coverage for an investor event at the Walrus in Toronto for Biome Grow, a relatively new entrant among the licensed producers.
We were there to cover the public debut of the company and a groundbreaking technology they are part of developing called WeedVR.
After the event we had the chance to speak with Khurram Malik, interim CEO of Biome Grow. He answered our questions and gave us a look at the future of this company.
CD: What is your general outlook for the cannabis industry and your role in it as legalization expands?
KM: We expect it to go from a small medical market to a multi-billion-dollar recreational market. Medical will still be there and continue to grow. There will be enough supply in the early days, because large licensed producers are sitting on inventory and stocking their vaults in anticipation of October 17 (when recreational goes live). However, in a few weeks after that, we expect there to be a supply shortage that will last into 2020. Once supply and demand normalizes in 2020, we expect the number of licensed to dramatically decrease—from over 200 to less than 20 viable platforms. Biome is being built for a post 2020 reality to survive the shakeup and thrive on the other side of it. We will have a defensible platform in Canada that will be entrenched in Atlantic Canada, but the bulk of our sales in 2-3 years will come from international jurisdictions.
CD: Considering how many other enterprises are developing in your space as competitors, what distinguishes your business from them?
KM: What do we do better? We are a more efficient platform when it comes to deploying investor capital. After having helped build some of the larger licensed producers, we know and when to spend money and when not to. And just importantly where to spend it. Also, having worked and studied the sector from before the inception of MMPR/ACMPR, we know where there are gaps in this young industry that we try to fill (much less competition in these gaps).
CD: How has the company been financed in the past?
To date it has been financed by individual investors along with a small number of institutions. We try to get influential investors to come on board whenever we enter a new province—it is one of the key cogs we have in building local ecosystems in the provinces where we are focused in. So we would do a Nova Scotia and then Newfoundland round of financing. We will be relying on the more traditional institutional investor market on a go forward basis as well.
CD: How much will the current round/RTO bring in?
It will bring in between $15-$20m.
CD: What are the intended directions for expansion of your company post-raise?
KM: The capital will be sufficient to achieve licenses in four provinces along with working capital. We will do a larger financing after listing and announcing several additional fundamental developments (expected to be at a much higher valuations).
CD: What do you expect your production to be and where do you plan on expanding?
KM: We will be producing indoors and greenhouses (about 50/50 across the whole system) depending on the province. We also have several hundred acres of farm land tied to license/applications which will also facilitate outdoor grow. We have the capacity to produce 2,500 kg in 2018, 12,000kg in 2019 and over 30,000kg in 2020. We are currently developing facilities in Nova Scotia, Newfoundland, Prince Edward Island, and Ontario. We will be announcing plans for NB shortly. We have a license in NS. We anticipate licenses in NL and ON later this year. We build our facilities in phases. By the end of 2019 we plan to have about 400k sq ft of indoor/greenhouse grow space in our four announced facilities. Factoring in outdoor grow in Canada and international jurisdictions, the production footprint will be considerably larger.
CD: What will be the key differentiation points in your business? Focus on quality? Price? Production efficiency? Export?
KM: We anticipate having one of the lowest production costs in Canada. Even our indoor facilities use a highly automated approach that allows for low production costs. So our key advantage will be the efficiency of our production assets that will be able to grow at low cost while achieving a high quality in a predicable fashion (this is not possible without automation that is sorely lacking in the Canadian market). And our international cash flows almost right away in 2019 will make us dramatically different than other Canadian cannabis companies.
CD: When do you anticipate profitability?
KM: We expect to be profitable in 2019.
CD:Where do you see your company in 5 years?
KM: It will be a global platform that will be headquartered in Canada. Most of our sales will be medical sales to international jurisdictions at considerably higher margins than recreational sales can achieve.
CD: A number of cannabis producers are interested in international expansion. Can you tell us if Biome has any plans to do the same thing?
KM: Most Cannabis producers are chasing the same markets. For example, Germany. We feel that is a valid approach and are pursuing some of these same markets. However, what makes us unique is we primarily target countries where medical programs do not exist at the moment, and plan to be the first company in these markets with a period of exclusivity. You will likely see the first one of these markets secured later this year. All these markets have populations that are considerably larger than what we have in Canada. These markets also have vibrant healthcare systems to support the purchase and distribution of cannabis-based medicine.
CD: What role do you see the WeedVR venture playing in your consumer strategy in Canada and in international markets?
KM: In Canada it will be an educational tool that fills a need based on how badly provincial liquor board storefronts are in terms of educating a casual consumer. It will be both an e-commerce platform and educational tool in international markets.
The crew behind Biome were also behind a number of key capital raises for several early movers including Mettrum, Tweed, Organigram, THC Biomed, HydRX, and Emblem to name a few.
Board members that have signed onto this company include Steven Poirier, formerly of Moosehead Breweries with deep connections to the all the provincial liquor control boards and knows how to build a company and brand tied to an adult consumable (i.e. wine and beer) in Canada. Mark Leivonen is key to Biome’s medical strategy. Mr. Malik believes that most of the product innovation will come on the medical side. Brett James has regulatory experience in Canada, particularly with respect to Health Canada as the company expands their regulated production/distribution footprint in Canada. Since he has a background in public relations he will also be involved in messaging with respect to Biome. George Smitherman, former Ontario health minister is a very passionate and visible advocate for the liberalization of cannabis in Canada. His years in Ontario politics can be expected to be very useful as the provinces are more actively involved in the ever evolving regulations.