Cannabis 2.0: Where are they now?
Medipharm Labs CEO reviews the first year of extracts legalization
By Jean Ko Din
Around this time last year, the industry was gearing up for a second cannabis boom.
On Oct. 17, 2019, Canada opened up the market to edibles, infused beverages, topicals, oils, concentrates and other extract products one year after the legalization of recreational cannabis. This wave of new cannabis products were meant to inject $2.7 billion into the Canadian market in its first year. But as we near the close of 2020, the market shows a different story.
Medipharm Labs Corp. has been in the forefront of cannabis processing and extraction in Canada. In March 2018, it was the first company to become a licensed producer (LP) for cannabis oil production under the Access to Cannabis for Medical Purposes Regulations (ACMPR) without first receiving a cultivation licence.
While other LPs focused on producing dried flower on a mass scale, chief executive Pat McCutcheon told Grow Opportunity that Medipharm has been positioning itself to stake its claim on its own corner of the cannabis value chain since the very beginning of its founding in 2015.
Grow Opportunity: Why was it important for the company to distinguish itself strictly as an extraction and processing company from the very beginning?
Pat McCutcheon: We were licence number 95 in the application process. In our application, we made the case that if we really look at any other industry, we see a separation and specialization. Many companies have done really well in history when they picked their point on the value chain, and then really run it as a specialist on that value chain. So we picked our spot. On the second page of our pitch spec, it says, “Do what you do best and forget the rest.” And that’s very much the mantra that we live by today.
GO: By the time Canada opened up the market to edibles, topicals and extracts, Medipharm Labs must have been ready for the market. What was the prep like before the 2.0 launch?
PM: We sent a ton of bulk distillates and bulk rosin to a ton of our major clients, including Canopy Growth which was our first one. We had the largest oil deal at that point prior to Cannabis 2.0 launching. We also did a number of large deals to Cronos and TerrAscend and Hydropothecary, which now has turned into Hexo Corp. We were able to produce more volume of extract than anyone else in the game, at a very high quality, and we were able to support all of our partners or peers so they could prepare their Cannabis 2.0 strategy.
GO: Looking back at the lead up to Cannabis 2.0, there was a lot of excitement around the potential of this market. From where you stand, how has the market changed since then?
PM: Not unlike the launch of Cannabis 1.0, it was challenging for the different provincial governments to be prepared for this new bricks and mortar scenario. Rather than them deciding to use the existing LCBO or the existing alcohol distribution bricks-and-mortar stores, they were faced with the challenge of being able to now build a whole new industry and new infrastructure to move these products out.
So this is something that not only plagued the industry out of the gates, but also put significant challenges for our company as we tried to push large volumes across the country. We have contracts from all provinces now, but particularly in Ontario, we positioned the company to be in a great position geographically, to set up our products to be accessible to the warehouse supply chain. And basically, when so few stores launched, then this held back the explosion that I think a lot of people were expecting with Cannabis 2.0.
GO: Then the COVID-19 pandemic struck. Overall, how has your company been affected?
PM: I would take this chance to say it really wasn’t chaos because we were being advised so closely by a lot of physicians that were dealing with infectious control in the major hospitals. We have Dr. Paul Tam as one of our board members, who is head of dialysis in Scarborough General and has a number of hospitals that work within his jurisdiction. He was a fantastic help with our policies and procedures.
Even though it was a disturbance, and even as we look at it from direct costs and efficiencies output, we did see some challenges. I think we did a fantastic job because we stayed so closely to the way that the hospitals were managing this directly into the headwinds.
I also think that with the deeming of cannabis as an essential service, that has helped accelerate the fact that patients, physicians, regulatory bodies are now more accepting of the industry. Consumer research shows many are using cannabis-based products to deal with anxiety or sleep disorders, which are commonly found with the global pandemic right now. I think it’s helping reduce the stigma of cannabis with the world we’re in today.
GO: Is Medipharm more focused on the medical or the recreational cannabis space?
PM: This is obviously a question we get all the time. If I could just reframe the way you’ve articulated it, is MediPharm interested in the global medical market? Yes, absolutely. We’ve built two of the most impressive, large-scale cannabis processing facilities that are both GMP-certified. Now, we’re not only able to deliver products into the medical channel and the wellness, recreational channel in Canada but we’re able to move product around the world. Very few companies have this ability.
Having said that, from a recreational standpoint, we also do a lot of white label manufacturing. We are seeing dynamic growth of the provincial adult-use and wellness segment. Even though this sector is regulated, there is very much a difference in terms of the comfort level that a lot of physicians feel when considering recommending these products.
GO: Can you expand a bit more on physicians and their comfort level with cannabis?
PM: We’re able to sell and distribute a line of Medipharm Labs products of 25mg of CBD per mL to 1mg of THC per mL, 50 to 2 and 25 to 5 in the medical channel which requires a prescription, but are also available in the recreational channel or wellness channel.
These duo streams, and the fact that our products are manufactured in our pharma-quality facility, should give physicians the confidence and option to recommend these as over-the-counter products. Or, consumers can test out products themselves.
And the point of it is, I think that it gives physicians more tools in their tool chest, or in their medical doctor handbag. That’s brought enhanced comfort for our physicians.
It’s still very young, the medical cannabis land and the wellness/recreational industry. And I think as we move forward, patients will start understanding these elements of purity, potency and quality because physicians can now finally feel comfortable.
GO: Is that why Medipharm wanted to participate in the study that the University Health Network is conducting?
PM: The study will be using blockchain technology to collect data on the therapeutic effects of medical cannabis in adults. Through Medical Cannabis by Shoppers, we’re going to be providing over 20 per cent of the products that are going to these patients in the study. And because we are a GMP-certified platform, it’s been a great additive element to show and to look at the differentiation between a product that’s been made in a certified facility versus some products that have not been made in a certified facility. And whether that reduction in differentiating potencies really does, or does not, have an effect in long-term consumption of these products.
It’s a very exciting trial. There’s very little data, still. And one of the things that we’re doing is launching a clinical research trials portfolio with different investigators across Canada and in Australia. We’re looking at products that we are already selling on the shelves to qualify more data and to further enhance the physician comfortability in writing those scripts.
But also, with the patients’ outcomes – and I say this to express where it is going and not where it is today because we need data to make these claims – hopefully, it gets to a point where the qualified data will suggest an improved, advanced efficacy-based outcome. That’s the goal.
GO: Medical research around cannabis will definitely play a part in moving the industry forward. As we move beyond 2.0, are there other places with room to improve?
PM: In a very young industry and just coming out of the gate now, quality should be very important to the producers. And it should be very important to the patients and to the consumers to ensure that they’re actually getting what they’re buying and at the right prices. One of the things we’re going to be working on now as a member of the Canadian Cannabis Association, I plan to be quite active in how certain elements of this association are changing and updating some of the rules to create more standardization and testing and safety qualifications for the actual manufacturing of such products.