VIDEO: MedReleaf CEO Neil Closner on the Recent $100 Million Financing Deal

MedReleaf Corp. (TSE:LEAF) (OTCMKTS:MEDFF) (FRA:MEW) CEO Neil Closner talks to James about future plans in light of the recent $100 million financing, including expansion and distribution. He also sheds light on how the company remains consistent in the high quality of their products against competition.


James West:     Neil, thanks for joining me today.

Neil Closner:     Pleasure. Thanks for having me.

James West:     Neil, I’d like to start the conversation with the $100 million financing that was recently announced by MedReleaf. What is it that you’re planning to do with all of that money?

Neil Closner:     Well, as we’ve said, we’re raising money to just be opportunistic and strategic. We’re always keeping our eyes open for opportunities, and we will very likely be using some of it to build out additional capacity.

James West:     Okay. So is it safe to presume that, from that statement, that you are sort of acquisition-minded?

Neil Closner:     I think we’re always looking at opportunities, and as things come up, we evaluate them on a case-by-case basis.

James West:     Okay. So this isn’t necessarily for organic expansion at this point.

Neil Closner:     Part of it is.

James West:     Part of it is? Okay, great. Now, MedReleaf has always stood out in my mind as one of the top companies in the ACMPR game, if for nothing else –

Neil Closner:     That’s nice to hear!

James West:     Well, it’s your own accomplishment. You have reported achieving a production rate of 300 grams per year per square foot. Is that something you attribute directly to the fact that you’re growing in an enclosed space as opposed to a greenhouse, for example?

Neil Closner:     Well, certainly yields per square foot in a greenhouse are somewhat less than indoor. That’s a standard known issue. The average indoor, however, yield per square foot is somewhere around 150 grams per square foot, on average. And that’s from third party-verified data. So we’re about 2X what is normally expected of an indoor growing operation, which has in large part enabled us to have the financial performance that we’ve had.

James West:     Interesting. Yeah. So you’re one of the leaders in terms of financial performance, and obviously that speaks to sort of your vision and your preparation and positioning within the ACMPR markets. So I’m encouraged to ask you: where do you see the market evolving as the new recreational rules come into effect on July 1, 2018, if they do so on time?

Neil Closner:     Yes, it’s a big ‘if’. I mean, I think it’s fairly well understood there will be a recreational market in Canada, if it’s July or august or whenever it might be, it’s coming. There’s certainly an evolution in the market that’s going to take place. There’s a lot of new license-holders that have been introduced or permitted in the last number of months, so things will be interesting. There will be some competition. But I think many of those new entrants have quite a road to go, still, before they can reach a production level that will really enable them to fill shelves on a retail level at a mass scale.

So there’s a handful of us that have that scale today, and I think you’ll see us, by and large, filling those shelves in the earliest days, for sure.

James West:     Sure. So is your production rate now sufficient that you could supply a significant portion of the anticipated demand of the recreational users, assuming they all abandon the black market upon legalization?

Neil Closner:     Well, so that’s a big assumption, right, that everyone will abandon the black market and on Day One immediately come to the new legal recreational world. That’s probably too far of a stretch, or a really optimistic, rosy perspective on things. I mean, you just have to look at Ontario as an example: there’s only going to be 40 stores, for example, when they say that the ultimate demand and need will be hundreds of stores.

James West:     Sure.

Neil Closner:     So the demand will probably not be there Day One, in terms of all of the people moving over. But we do have capacity, we do have product, we’ve been building up inventory in anticipation of filling retail channels. So we expect to be a major player in the adult use market, for sure.

James West:     Sure, okay. So some companies have made moves like an alliance with a celebrity – you know, everybody’s got these different approaches to the recreational branding relative to the medical branding, and certainly MedReleaf implies more of a medical focus. So are you looking at sort of carving off a recreational brand?

Neil Closner:     Yes. So we’ve been doing a lot of work behind the scenes on developing a recreational brand portfolio of our own, and then product portfolios under each of those brands to go after specific segments of the recreational market that we believe we can perform well in. The metric that we benchmark ourselves on is really relative market share, not overall market share, so if we enter a specific segment of the market, we want to be a dominant player there, and we’ve really designed our brand portfolio around doing that successfully.

So as the adult use market becomes a little more clear in terms of, who are actually going to be the retailers, what’s the pricing going to look like, the taxation regime going to look like, you know, we’ll unveil these brands publicly, and people will start to become familiar with them.

James West:     Sure, okay. One of the things that is synonymous with MedReleaf, and not to be sounding like I’m blowing smoke, but it’s just to some degree I am, is the quality and reliability of the consistency of the quality of MedReleaf’s product. So quality is an interesting issue, I find, when you’re in discussion with the cannabis industry, because for one sort of coterie of the industry, quality is all about potency. And for other segments in the recreational side, it’s more about a combination of potency with flavour and throat-feel and more of a sort of a connoisseur type of approach. And then on the medical side, quality refers to the reliability of, you know, things like dosage and consistency of product, along with whatever else might be in the final product.

Neil Closner:     That’s right.

James West:     So how does the layperson, who’s not within the industry, gauge quality?

Neil Closner:     It’s a very good question, especially in light of the proposed regulations and the restrictions that may be placed on the producers in terms of branding and advertising. So if you can imagine walking into a brand new cannabis retail store and you’re faced with hundreds of products, to your point, how do you determine which one you want to buy?

James West:     Exactly.

Neil Closner:     So the way we approach quality at MedReleaf is really coming at it from two separate angles. So on the medical side, we view it as more of an objective analysis, right? So we send our products out to the lab to be tested before we obviously sell them, and we get objective measurements of quality, we feel, from that, which are consistency of the potency, the actual potency levels, in our case from a production standpoint, the yields that we obtain on a per-harvest basis and, of course, the bio-burden on the product. So, is it contaminated or not, what are the levels of the external matter on the plant that should or should not be there. That’s an objective measurement of quality that we focus on very carefully.

On the other side, which tilts more to the adult use side of the market, is this more subjective, which as you alluded to – so, the taste, the smell when you open the container, what kind of feeling do you get…those are the more subjective, more wine sort of similar characteristics. And on that front as well, we’ve also focused, and because we grow indoors, we feel we can control all the inputs that go into growing a healthy plant, which ultimately leads to a very strong product in the output.

So on that benchmark, for example, I guess one of the leading evaluators of the more subjective elements of the product is Lyft Cannabis here in Canada, so they’re like the Michelin guide of cannabis, if you will. They give out awards every year. We’ve consistently had products that have ranked in the tops of those awards; in fact, this year, a couple of weeks ago, we were just the most awarded licensed producer of all. We won 10 awards; most of our major products won first place finishes, and we were also awarded the Number One Licensed Producer of the Year.

So from a subjective standpoint we seem to be doing quite well with the general public, and on the medical side, our products and the consistency of those products seems to resonate really strongly with the medical community.

James West:     Okay, Neil, that’s great. Let’s leave it there for now. We’ll come back to you in a quarter’s time or so and see how you’re making out. Thanks for joining me today.

Neil Closner:     Thank you.

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