has been keeping busy hitting one milestone after another, but is there a break in sight?
Not according to Company CCO Michael Ash. Stockhouse recently had the chance to speak with him about FSD’s HUGE growth in just over three months. The Company has been working to target all legal aspects of the cannabis industry - from cultivation to processing, manufacturing extracts, research and development. The majority of this work is being done under its wholly-owned subsidiary
FV Pharma Inc., a licensed producer under the Access to Cannabis for Medical Purposes Regulations (ACMPR).
Stockhouse readers are likely familiar with FSD’s story. As covered in a
recent full-length feature article, the Company’s ambition is represented in its ticker, C.HUGE, focused on building the largest indoor hydroponic cultivation and processing facility in the world. Situated just an hour east of Toronto, in Cobourg, the Company already has a 620,000 sq. ft. food manufacturing facility to work with, purchased from KRAFT Foods on 70 acres of land. 40 of those acres are primed for development with the potential for more than 3.8 million sq. ft. of cultivation and processing. This facility is also self-sustaining with an on-site electrical substation, water intakes, natural gas lines, and rail lines that feed directly into the facility, which also has 26 loading docks.
All aspects of this facility will be developed in phases through a joint venture agreement with Auxly
Cannabis Group Inc.. (V.XLY). HUGE will receive 50.1% of all cannabis and cannabis-related production from the facility after recovering all costs plus. At full capacity, it is expected that this could yield up to a total 400 million grams of dried cannabis a year.
To further its means to produce low-cost high-quality pharmaceutical cannabis at scale, the Company is using its wealth of space to create a “Cannabis Wonderland”. It could manufacture everything from flowers, oils, pills, vaporizers, beverages, edibles, but will always keep its focus on the pharmaceutical side of the business. With such a massive potential indoor footprint, FSD wants to determine which conditions yield the best results for growing and manufacturing variations including CBD’s, CBN’s, THC’s and CBG’s. Because the medicinal market has such high standards for quality cannabis, FSD chose to focus on this market first, since it would only make a transition into the more casual recreational market that much easier.
image: https://www.stockhouse.com/media/topstories/Misc/FSDQA.jpg
Click to enlarge. FSD grabbed the attention of investors, first when it broke the
daily, then
weekly stock volume trading record, then when it went on to break the
monthly volume trading record. Recently, it broke one billion shares traded and beat the yearly volume record in less than two months. We wanted more information from CCO Ash on this unique angle for penetrating the Canadian recreational cannabis market, and how this business model will fit into an evolving regulatory landscape.
The Company’s mission is to build the largest hydroponic indoor cannabis facility in the world, what guided FSD’s decision to follow this path? Our mission puts us on a unique path in the cannabis industry. Building the largest hydroponic indoor cannabis facility in the world allows the Company to produce the highest quality pharmaceutical-grade product at scale at the lowest cost. With indoor conditions controlled, we ensure standardization and consistency of our products. Under this ideal environment, we are able to produce precise formulations for the treatment of various ailments. FSD wants to support the needs of the hundreds of thousands of Canadians suffering from debilitating and often life-threatening conditions whose lives could be dramatically improved by an all-natural alternative to chemical pharmaceuticals. As for recreational users, they can expect top-quality pharmaceutical-grade products with the potency and variety they demand.
The Company recently signed a HUGE (pun intended) $55 million partnership with Auxly Cannabis Group during this first phase of buildout at the Cobourg facility, can you detail what this relationship entails? Auxly is contributing $55 million to build out the second phase of our Cobourg facility. Of the 620,000 square feet of building space available, Auxly is funding the development of 220,000 square feet in the second phase of our expansion plan (the first phase of 25,000 square feet was complete by HUGE and is already operating). We expect the development to be completed by December 2018 and to begin growing in Q1 2019, pending regulatory approval by Health Canada. FSD retains a 50.1% stream (after all operating expenses are recovered plus a ten percent profit is paid to FSD) of all cannabis and cannabis-derived products produced at the facility, under partnership with Auxly, in perpetuity.
Can you also explain FSD’s collaboration with Canntab and what they will be doing at the Cobourg facility? Canntab is emerging as a leader in the rapidly growing cannabis pill market. Under agreement with FSD, Canntab will occupy up to 10,000 square feet of space at our Cobourg facility to build and install its own manufacturing facility. There they will produce a suite of novel cannabis oral dose delivery platforms, including gel capsules and tablets, and other types of cannabis-based products, including sleep aids and pain relievers. We see great opportunity in offering pharmaceutical quality cannabis based tablets, as many doctors are averse to prescribing smoked cannabis as a solution to patients’ health concerns. The Canntab Premises are intended to be used to supply Canadian and international markets such as Australia and Germany, which legally allow cannabis.
With phase 2 expected to wrap up by January 2019, can you give investors a basic rundown of what to expect with phase 3? Our phase 2 expansion target is 820,000 square feet, so there is still more capacity and development beyond the initial 220,000 square feet. Of the 70 acres of land we occupy, we have 40 acres primed for development in phase 3. The expansion target for phase 3 is over 3.8 million square feet. Investors should expect consistency in our development and business plans, with a focus on hydroponic indoor grow, research and development, high-quality products, and the latest technological advances.
FSD recently signed a partnership with Cannara Biotech Inc. to use its facility near Montreal, how will this differ from, but also add to, your operations in Cobourg? Our agreement with Cannara gives us a combined floor space of over 1.245 million square feet of existing indoor growing capacity. We will occupy over 105,000 square feet of Cannara’s 625,000 square foot facility for the operation of licensed cannabis cultivation and/or the sale of cannabis and cannabis-derived products. The agreement gives FSD a strong footprint in the Quebec marketplace and the potential to supply the two largest cities in Canada with virtually instant delivery access to both. Cannara’s facility is modern and secure and located in the province with the lowest electricity rates in North America, which will help keep our production costs down.
FSD is also moving into Atlantic Canada with its recent investment into a production facility in Newfoundland and Labrador, can you expand on this project and how it fits into the Company’s operations? FSD is expanding its production into the Atlantic provinces with its recent agreement to purchase 51% of Atlantic Island Cannabis Inc., which will be renamed FSD Atlantic Pharma Inc. In the first phase, an indoor high quality 50,000 square foot cannabis production facility will be set up in Freshwater, Carbonear, Newfoundland. Phase two of the project will target a further expansion of the indoor grow facility to up to approximately 300,000 square feet for the production and processing of legal cannabis. This agreement further expands our national indoor grow footprint and allows FSD to deliver the same high-quality pharmaceutical-grade product to Atlantic Canada patients and consumers.
As mentioned in the intro, early record-breaking trading volumes really caught the attention of investors, what were the circumstances that led to this? FSD is focused on indoor growing, which is unique and highly advantageous in the cannabis marketplace. Achieving our mission, continuing to increase our indoor grow capacity and focusing on pharmaceutical-grade production puts us in the position of becoming world leaders in this space. Our investors know that and they are investing in a company that has huge potential.
Speaking generally, could you connect the dots on these announcements and explain how this fits into HUGE’s long-term vision for the Company? FSD is continuing to make very strategic investments in expansion, production capabilities and growth on a national level. We are moving with pace to expand quickly to meet the growing demand for high-quality pharmaceutical-grade cannabis at scale at the lowest cost. We expect to be well-positioned in advance of the October 17, 2018 deadline for the legalization of recreational adult cannabis use.
Greenhouse versus outdoor growing present highly different results, how is FSD using this diverse means of growing to enhance its strain portfolio? With an indoor grow operation, we have better control of the growing climate, which creates a controlled environment for plant growth and consistent product production 365 days a year. In this environment, we are able to effectively manipulate certain variables such as light and temperature and bring out the plant characteristics that we want to display in our strain portfolio. Our scientific approach and variable manipulations allow the plant’s genetics to be expressed differently, which results in strains that have unique scents, put out different terpene profiles and behave in distinctive ways. Quality, consistency and variety in our strain portfolio can best be achieved through proper indoor growing techniques.
Low-cost / high quality pharmaceutical cannabis produced in mass quantities seems like a rarity in the market. Is this how the Company plans to stand apart from its competitors in such a competitive field? Absolutely. As I mentioned, FSD is in a unique position to serve the needs of both the medicinal and the recreational markets with the highest quality product at the lowest price. We anticipate a global shortage in supply of pharmaceutical-grade indoor-grown cannabis and that presents us with an incredible opportunity as we build scale quickly to meet growing demand.
What other kinds of R&D is FSD Pharma doing? FSD’s wholly-owned subsidiary, FV Pharma Inc., has an exclusive license in Canada for the production and distribution of a line of proprietary cannabinoid-based, patent pending and indication-specific products developed by SciCann Therapeutics in Israel. Our strategic alliance gives us premium access to the cannabinoid scientific research platform developed by SciCan, which includes a network of leading researchers, academic institutions and medical centers. This platform will enable us to execute a series of rigorous clinical studies for cannabis-based products in a highly time and cost-efficient environment, to fulfil our goal of becoming the global leader in the new emerging field of clinically proven cannabinoid-based therapies.
What are the next steps for the Company? In this industry, size matters. With that in mind, we will continue to make strategic investments and take advantage of opportunities to build scale and increase our production footprint. We have also recently formed a Special Committee of the Board of Directors that is responsible to assess Mergers and Acquisitions. The Special Committee will investigate and make recommendations to the Board of Directors on the suitability of potential M&A opportunities, although there is currently no assurance that a transaction may be completed.
www.fsdpharma.ca
FULL DISCLOSURE: FSD Pharma Inc. is a paid client of Stockhouse Publishing.