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CFN Media Interviews MedReleaf’s Igor Gimelshtein

Rachelle Gordon

October 25th, 2017

News, Top Story

Medical cannabis has been legal in Canada since 2001, when the government enacted a series of laws referred to as the Marihuana Medical Access Regulations (MMAR). The legislation was replaced by the Marihuana for Medical Purposes Regulations (MMPR) in July 2013, and has since transitioned to what is now known as  Access to Cannabis for Medical Purposes Regulations (ACMPR). MedReleaf (TSX:LEAF) was one of the first of 14 licensed cannabis producers approved by Health Canada, the governing board of the country’s medical marijuana program, and is the first and only ISO-9001 certified producer in North America. CFN Media spoke with MedReleaf CFO Igor Gimelshtein about the company’s dedication to quality medicine and how they are poised to become one of the largest cannabis producers in the world at the New West Summit.

Rachelle Gordon:  What is MedReleaf and how do they support medical cannabis patients?

Igor Gimelshtein:  MedReleaf is the second largest medical cannabis producer in Canada by revenue, and by far the most profitable. We set the medical-grade standard, having a very robust product development pipeline and a focus on quality.  In terms of our products, we sell dried cannabis, we sell cannabis oils. We were the first company to be licensed to sell cannabis capsules. Just last week, we were the first and now the only company to be licensed to sell topical creams infused with cannabis.

MedReleaf operates out of two facilities around the Greater Toronto area. We’re up to about 150 full-time employees. MedLeaf is generating about $40 million of revenue on a run rate basis, and last year generating nearly $14 million of EBITDA. Our robust product development pipeline is indicative of the analytical approach that we take in all facets of our business. We currently have the highest average price per gram of all of our public peers. We also have a cost to produce that’s in line with lower cost greenhouse peers, which gives us the greatest torque in our business model to ensure we can remain profitable despite the potential changes and disintermediation that’s going to happen in this industry.

RG:  What is the history of MedReleaf?

IG:  The company was started as an idea in February 2013, together with our strategic partner Tikun Olam in Israel. We received one of the first 14 cannabis production licenses granted in Canada in February 2014. We started the construction of our first facility in Markham, Ontario shortly thereafter.

MedReleaf shipped its first gram in August of 2014 and have built a business to about a $40 million revenue run rate since that time. Most notably, in terms of capital, this past summer, on June 7th, 2017, we did the first ever long-form prospectus offering on the TSX in the medical cannabis space. We raised $100 million, which was the largest ever initial public offering in the cannabis industry.

RG:  What’s it mean to be the first and only licensed producer certified as ISO-9001 and ICH-GMP?

IG:  ISO-9001 is a management framework. We’re currently the only company in Canada that has this certification, which means we follow the management processes that were put into place essentially by a third-party regulatory body. You often see these types of certifications in manufacturing and production companies, but it is not specifically talking about the products – it’s more about the processes. ICH-GMP is The International Council on Harmonization for Good Manufacturing Practices. It’s the harmonized body of 17 member countries, including Canada, the U.S., Japan, Australia, and the E.U., that comes together to form the “good manufacturing practice standards.” That is actually a focus on not just the process, but also the product and the output. With those together, we believe we maintain the optimal processes that lead to the best products for our patients.

RG:  Your patient-centered approach has led to the development of both oil capsules and high-CBD topical creams. How are these products helping patients specifically?

IG:  If you think about it from a physician’s standpoint, it’s a bit of an awkward process to prescribe a combustible product to a patient who’s inevitably already sick. It’s just not a motion that a physician is comfortable with or will ever get comfortable with. We thought it was of paramount importance to create new and novel products and get them approved by Health Canada so that one, there would be greater physician acceptance, as they’re more familiar with pills and oils and creams, but also to give patients a choice in terms of the way they consume the product – such that they would no longer have to smoke. As we’ve developed pills and now topicals, we see the reach in terms of the conditions we can treat, and we will continue to lead with innovative ways to serve patients.

RG:  What are your growth drivers over the next few years? New products? Recreational market? International market?

IG:  There’s four growth drivers for our business. The first is the continued growth of the medical market in Canada in its current form. The second is new form factors – new products that will be allowed in the medical space as time goes on. Specifically what I’m referring to here is higher concentration extracts. Third is the adult-use market in Canada. Canada has the highest per capita consumption of cannabis of any other country in the world, other than Iceland.

Lastly, also on the medical front, we’re focused internationally on commercial export and domestic cultivation opportunities under the U.N. Convention on Narcotics. The only narcotics that are allowed to be moved cross-border are those for medical purposes. As the medical-grade standard in Canada, we see an opportunity for us to deploy our brand, our products, and our expertise in other jurisdictions.

RG:  What are your projections for growth in the next two to five years?

IG:  We anticipate the completion of our Bradford building, which will bring our production capacity to 35,000 kilograms per year by next summer. We will continue to evaluate domestic opportunities for expanded cultivation facilities. We will do that in a capital-efficient way, the same way we’ve done in the past. We will look to develop new product categories and new brands for the recreational market, of which we’ve developed two to date that we’ll be launching ahead of the recreational framework coming into place of July of 2018.

In addition, we will look for viable commercial export opportunities. We’ve started to look at those in Australia, Germany, and Brazil. Ultimately, we think every developed country will make a decision on cannabis one way or another over the next five years and we will look to export to those countries until such a time where they decide to develop their own domestic cultivation frameworks. We will participate in those processes where we think it’s economically viable.

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This article was published by CFN Enterprises Inc. (OTCQB: CNFN), owner and operator of CFN Media, the industry’s leading agency and digital financial media network dedicated to the burgeoning CBD and legal cannabis industries. Call +1 (833) 420-CNFN for more information.

About Rachelle Gordon

Rachelle Gordon is a Minneapolis-based writer. Find her online at www.rachellegordon.net.

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