Love it or loathe it, marijuana as medicine is not a trend likely to disappear soon. Its use – and sale – is not going unnoticed by the legitimate business world.
Michigan-based nutritional supplement company, Creative Edge Nutrition, is on course to becoming the first U.S. company to be allowed to distribute medicinal marijuana in Canada, says CEO Bill Chaaban. In November the company was notified by Canada’s federal health department, Health Canada, that it has been approved to grow, distribute, import and export medicinal marijuana and plant seeds through its Canadian subsidiary CEN Biotech.
Creative Edge, which sells health supplements and trades for fractions of a penny on OTC Markets, reported less than $2 million in the first half of 2013 but Chaaban – an attorney licensed to practice in both the U.S. and Canada – says this latest play could catapult the company’s earnings into the stratosphere. “By the end of year five we’ll be doing $100 million in sales, with a margin of 80 percent.”
Currently, for medicinal users in Canada, marijuana costs between $5 and $6 CAD per gram (that’s between $4.70 and $5.60 in U.S. dollars). CEN Biotech’s cost to produce runs between 80 cents and $1 CAD per gram. Chaaban predicts the operation will be up and running and ready to begin shipping within seven months.
CEN Biotech’s new 58,000 square foot facility – still under construction in Lakeshore, Ontario, across the Detroit River from Michigan – has cost the company about $16 million CAD. Chaaban claims capital was raised from a pool of, ahem, ‘seed’ investors that includes companies that deal in alcohol and tobacco, entertainment industry players and professional sports figures. He would not provide specific names. Chaaban estimates that he owns roughly 4% of the company.
The level of oversight mandated by Health Canada has demanded CEN Biotech design their new facility like a high security penitentiary, says Chaaban, including night vision cameras, laser sensors, 24-hour security staff and tagging technology that will allow the organization to monitor the movement of every single plant. “There will be RF-ID (radio frequency ID) tags on every single seed.”
Also, no purchase of product by registered patients can be conducted in cash and CEN Biotech’s leadership team – made up of four lawyers, two doctors of pharmacy, two former law enforcement officers, an agricultural engineer and an executive of a drug company – has been vetted by the Royal Canadian Mounted Police.
Cannabis is used to treat the effects of glaucoma, Crohn’s disease, multiple sclerosis, nerve pain and chemotherapy, among other ailments. Health Canada had previously allowed individuals to apply for licenses to produce marijuana for medicinal use but increases in fire hazards, home invasions and crime have led the organization to push for a more regulated co-op system that requires fire and police approval, tracking and taxation, says Chaaban. Also, with so many producers, the organization had a hard time overseeing quality. “Too many people were applying to grow their own.”
Health Canada predicts that there will be half a million medicinal users in Canada within ten years but Chaaban feels that with the ease of access and assurance of consistency, that figure could be reached in two.
Not that Canada is CEN Biotech’s only market—the company’s 24 strains of plants will be exported to sources in Uruguay, Israel, The Netherlands, Mexico, Columbia, Iran and North Korea. Seeds from prime sources can be imported for use in the production facility.
Cannabis Day 2012, Vancouver. (image: Cannabis Culture on Flickr)
As far as the United States market is concerned, Chaaban is betting that as more states adopt laws embracing medicinal marijuana, state governments will look for taxable product sources they feel have trustworthy tracking procedures and he wants CEN Biotech to be among them. “Once the feds come on board we’ll definitely enter the U.S. market.”
Other publicly traded firms work in the medicinal marijuana space, including Cannabis Science, Inc.; Endocan Corporation; GW Pharmaceuticals and Medical Marijuana, Inc. Should medical marijuana continue to be embraced by states and federal governments, more players are likely to enter the market as growers, distributors and investors.
Follow me on Twitter @KarstenStrauss