PODCAST: Emerald Health Therapeutics CEO Bin Huang on Growing into a Large-Scale Cannabis Producer in Time for Legalization Next Year
Emerald Health Therapeutics Inc. (TSX.V:EMH) (OTCQX:EMHTF) (FRA:TBD) is a licensed producer of medical cannabis and distributes through an e-commerce platform. CEO Bin Huang talks about the company’s transition into a large-scale licensed producer, as well as adapting to advertizing regulations once recreational marijuana is legalized in Canada in 2018.
James West: Bin, thank you for joining me today.
Bin Huang: Thank you, James, for the invitation. Pleasure to be speaking here.
James West: Bin, let’s start with an overview: what exactly is the value proposition to the investors in Emerald Health?
Bin Huang: Yeah. Emerald Health is a licensed producer in Canada. We actually have for medical cannabis, we actually have a full set of licenses. We cultivate cannabis, we manufacture cannabis oils, and we sell dried cannabis and cannabis oils for medical purposes using our e-commerce platform. So the value proposition is that we have a medical focus. Our team has very extensive experience in medical research, and also in operations – execution of business strategy.
As a licensed producer, we have a very excellent track record, but right now this year, we are on the cusp of transformation into a very large-scale licensed producer, just in time, ready for the legal market next year in Canada. And I think relative to other major licensed producers that have a million square foot capacity, we are nowhere near the valuation, so I think that’s a very compelling situation for us to be in, facing the transformational growth this year.
James West: Sure. So you have 500,000 square feet under cultivation now?
Bin Huang: The current facility we have now is a pilot facility in Victoria, British Columbia, and we do our cultivation there, but it’s a pilot facility. The growth, the expansion, is what we are focusing on, and we actually have two major projects. One is the joint venture with Village Farms, and that has an existing 1.1 million square foot of state-of-the-art greenhouse already in place and operational; we just need to do the retrofitting and get the Health Canada license for it to be used for cannabis.
James West: And how long do you anticipate that will take you?
Bin Huang: Well, we want to be ready for legalization. So mid-next year, we want to be growing and we want to start harvesting. So that’s the very aggressive timeline we are targeting.
James West: Right.
Bin Huang: And the other major piece of growth plan, expansion plan, is our Metro Vancouver property. We leased 32 acres of land, and that is big enough to build another 1 million square foot of growth space, but we are taking a modular approach. So the first two phases will just be 50,000 square foot each, and that will be 100,000 total in cultivation space, and that’s for high-quality indoor growing and also for extraction, for processing, for the infrastructure there.
James West: Wow. Okay, so you’re diversified across greenhouses and indoor, you’re diversified across British Columbia, I guess. How many patients – do you have patients that you sell to now, and if so, how many, and where are they based?
Bin Huang: So we do sell to patients. We started selling dried, I think two years ago, and cannabis oil July last year. And we sell to patients nationwide. We haven’t disclosed the patient number, but it is a pilot facility, so we don’t have a large patient base at this stage. But stably growing and a good reputation with the patients.
We sell Canada-wide, and I would say most of our patients come from Ontario, Alberta and British Columbia. British Columbia is not a large patient base for the medical cannabis nationwide for most licensed producers, but we actually have a major presence in British Columbia because we’re located here, and the local doctors are familiar with us. So we do sell nationwide, yes.
James West: Great. Okay, so that’s interesting. So how will you deal with the Health Canada limitations on advertising to customers when the recreational regime arrives?
Bin Huang: So the advertising policy is still under development, and I think there was a suggestion that cannabis for recreational use should be plain packaging. As an industry, I think we’d really like to be able to share the information with consumers, and I think consumers need to know that, too.
Right now, the Health Canada limitation on advertising is for medical, so for the recreational use it’s still under development. We are one of the licensed producers that work as a group that is working with the government and also working with Advertising Standards Canada, that’s an independent agency, to work out a mechanism so that we don’t promote the use of cannabis, particularly we don’t promote the attraction to children. But at the same time, there needs to be competition between brands, and there needs to be education about what a product content is.
So plain packaging would not work well for anybody, but some kind of limitation, some kind of self-regulation would be helpful, and we’re totally supportive about that, and we want to work together with the government to come up with an approach that’s good for the society but also supports the competition within the industry.
James West: And tell me about how you have built the company, who are your investors, who are the main shareholders, what sort of relationships do you have in the capital markets community that is going to support you financially to the realization of all of these plans?
Bin Huang: Happy to talk about that! The company, the industry as you know, is relatively new, so MMPR came into place in Canada April 2014. So our company, three, four years old, is as old as the industry. So it went through the typical start-up period; you know, we had to build the compliance infrastructure, and we’re all start-ups dealing with a highly regulated industry.
But fortunately, we were able to build a very strong team, and the management team has the relevant and very rich experience in the relevant areas of business. Like our head grower, he has been growing professionally and legally for 15 years, and our head of R&D is a PhD from Guelph, and Dr. Frey Garabagi, he has patents on making therapeutic antibodies in plants. So that’s how relevant and how deep his experience is.
My own experience having been CEO of life sciences companies for 15 years, and I’ve been with this company as CEO for three years. So I’m familiar with the medical market and also with capital markets, raising capital as well. But also very importantly, our executive chairman is Dr. Avtar Dhillon. Dr. Dhillon is a medical doctor by training, practiced in Vancouver for eight years, and has extensive experience in capital-raising for life sciences companies. Very noteworthy is, he was CEO for a company called Genetronics, and he turned that company from a $10 million market cap bankruptcy company into a over $500 million USD market cap company, a company called Inovio, that’s on the NASDAQ.
James West: Right. Sure.
Bin Huang: He has a track record of building shareholder value, and obviously financing companies from both inside and getting capital as well.
He’s the principal of Emerald Health Sciences, which is a major shareholder of Emerald Health Therapeutics — they own 49 percent of the company – but we also have about 15 percent of our shares owned by institutions because we did a bought deal financing last April and last February. So we’re quite well capitalized; we raised a total of 40 million CDN thanks to the team and thanks to Dr. Dhillon’s leadership in getting the capital at the right time, at the right price as well.
So building the company has been very challenging, but also a very exciting experience for all of us. I think, with the support of our increasing shareholders and with the track record of the experience of the management team, we’re very well positioned to be ready for legalization – to be a major licensed producer with the million square foot capacity by mid-next year.
And I just want to mention that relative to other licensed producers that have the million square foot or higher capacity plan, we’re nowhere near the valuation. So I think that presents a compelling case for us as well.
James West: All right, Bin. That’s a great introductory interview. We’re going to leave it there for now, and I will come back to you in several quarters, or a couple of quarters anyways, and we’ll see how Emerald Health is progressing. Thank you very much for your time today.
Bin Huang: Well thank you for the invitation. I look forward to reporting back the progress in the future. Thank you.
James West: You bet. Bye for now, Bin.
Bin Huang: Bye-bye.
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