VIDEO: CanniMed Therapeutics Inc CEO Responds to Hostile Takeover Bid From Aurora Cannabis Inc.

Brent Zettl CEO of CanniMed Therapeutics Inc (TSE: CMED, OTCMKTS: CMMDFFRA: 0GB) , talks to James about the hostile takeover threat which is in-progress from Aurora Cannabis Inc (TSE:ACB,OTCMKTS: ACBFF) .  Brent shares his side of the story and argues why his shareholders should stay with the company and not tender their shares to Aurora.  He also discusses CanniMed’s interest in Newstrike Resources Ltd (CVE: HIP, OTCMKTS: NWKRF, FRA: 0N8), and how that could affect this volatile situation.



James West:    Brent, thanks for joining me today.

Brent Zettl:   My pleasure, James.

James West:    Let’s talk a bit about the hostile takeover bid that has been initiated by Aurora – your position is obviously that the bid is opportunistic and they’re using an inflated share price to acquire your company. What do you have to say to your own shareholders as to reasons why they should not tender their bid to the Aurora offer?

Brent Zettl:   Right now what we have is, we’re in the process of acquiring New Strike. That gives us is that we promised to our shareholders at the end of December we are going to look at the rec market and find a way that we’re going to be there with that. New Strike seems to be the logical choice because of three things: they have The Tragically Hip and the up-brand in behind them, which makes an iconic brand that’s going to be breaking into a new market of this $8 billion market, which will likely have double-digit entrances. We will have a – they have a management team that can execute. And they have facilities in Ontario that are actually more than what we have in terms of production.

So we see that we can then combine; we’d have 45,000 kilograms of production, putting us in the top tier with our other peers in the industry, giving us instant access to the rec strategy, and at the same time, still pursuing the international treatments that we have. The international markets -. The $70 billion market there.

Now, in the case of what we have with our New Strike is the best for the shareholders. We’re going to see that it’s actually giving us the best lift in our share price. We’re just getting started to really see this thing rock and roll.

James West:    Okay. So then, in terms of the future growth path of CanniMed with New Strike, you’re proposing that it’s at least as solid or better than what Aurora is capable of accomplishing?

Brent Zettl:   Absolutely. When we look at – even Aurora executives themselves believe that we’re woefully undervalued. That’s why they want to buy us, and instill their, what I call their house of cards and their recent run-up of stock price, and trying to use their inflated Monopoly money as a way of trying to buy out our shareholders and convince them that they should tender their shares to them. But the reality is, they even know that we should be worth two to three times what we are today, which would put us in a $40 to $50 stock range.

So our shareholders, I think, are wise enough to know that we should be getting that value with the shares.

And the other point is that the Aurora stock already seems to be fully valuated. That’s why I believe executives cashed out in November 28th and took $17.8 million off the table, when coincidentally, I doubled my investment three days before that, into our company.

Now, the other thing is that it doesn’t smell right. There’s lots of anomalies, which is what our initiative was yesterday: to invite the securities commission to take a deeper dive, because there are a few irregularities that we see that are not quite copacetic in the way that, the manner in which they did this. Which is also contrary or unfair to our shareholders, the remaining shareholders that were not part of the lock up.

James West:    Sure. Can you elaborate on that a bit?

Brent Zettl:   Well so, right now, you know, they came in just an hour before we were to opine. Because we started working with New Strike at the end of July; we were locked up, we had exclusivity with them to do due diligence, look at their management team, look at their systems, look at all the different things they had to do, make sure it made sense to our shareholders going forward, make sure it would be accretive. Make sure that through our financial advisors, they would test it, from the financial wherewithal to make sure it was really going to add some serious value, and still effectively get us into the rec market with a top brand, and still allow us to do what we need to do in a top brand in the medical side. And it’s matching; the advisors say, let’s do that.

But an hour before we were to make that definitive agreement at the Board level, we get the informal circular, with some terms, with the two lock-ups from some of the major shareholders – which was a complete surprise. And so that, for us, is what I would call a financial guerilla attack.

James West:    Sure. And from a broad market perspective, certainly CanniMed has been in the game before anybody by a long shot, and so, what is it about that sort of experience in the business as a first Canadian government-sanctioned grower of medical marijuana that gives you an advantage over the entire range of experience of other growers?

Brent Zettl:   It gives us a lot of advantages in terms of dealing with the regulatory agencies, especially as we span out across the planet. We helped the Federal government work its way through that; we were partners for the first 14 years, exclusively, with them, and we had 26 contract amendments in our first contract with the Federal government, and then we had two other contracts with them.

Now, as we enter into these other arenas in other countries, we’re finding the very same learning curves that the government agencies need to go through. So we have a depth of management that can help their governments and their bureaucracies move through the system to get the medical things moving forward – medical cannabis in their systems, which are all, by the way, they want to have our oils and our capsules in pharmacy. That’s what they want the model going forward internationally.

In the government side here, though, they do listen to what we have, because we have an impeccable track record. We have not had a single recall in 17 years of production. We have not been out of product, ever, in 17 years. Whereas, you know, Aurora, a two year entrance, they’ve had two recalls and several times they’re out of product. I mean, it just speaks, because we have depth, inventory control systems, we have 281 points of quality control in our system. We’ve done all the things that we had to do in order to make a good quality medicinal product.

Now, those same features, in manufacturing and brand, are necessary for the rec market. You need to have the brand very consistent, because that’s manage the expectation of the consumer, so that every single time they get the same thing that’s produced the same way, the same quality, and it’s also produced in a safe manner so they get safe product. So those same behaviours are going to be needed, and metrics are going to be needed, for the rec market as well, which is why we also say that New Strike is good because they have the same sort of DNA thinking on this. They have the same sort of thing.

James West:    Okay. So is that the key to your strategy in partnering with New Strike, is anticipation of the imminent recreational rules that were going to come out in July of 2018?

Brent Zettl:   Yeah. So when you look at it, we’ve been busy. We’re growing our top line at 5 percent growth month-over-month, so we’ve been, with all these deals internationally, I said lookit, we have to find somebody who can literally focus on the rec market. Our focus has been training physicians and pharmacists and starting on clinical trials and moving down the pharmaceutical path; that’s a $70 billion market by 2025 internationally, and we are leading in those markets. We’re leading, right?

The rec market’s an $8 billion market, not to be ignored. Our shareholders have spoken, they want us to be there, so we plan to be there. We think this is the best way to get there to then capture both markets with top brands in both markets.

James West:    Sure, okay. And so how long until we find out what the outcome of this little dust-up is?

Brent Zettl:   January 23rd is when we are bringing it to the shareholders to vote on the New Strike, and we’re asking them to vote green, vote the proxy positive for New Strike, because it’ll be in all of our best interests.

James West:    Okay. Well, let’s leave it there for now, Brent. We’ll come back to you closer to that date and see how you’re making out. Thank you for coming in today.

Brent Zettl:   My pleasure.


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