VIDEO: Cannabis Company Sunniva Wants to Supply Big Retailers and Expand in California
Sunniva Inc. (CNSX:SNN) (OTCMKTS:SNNVF), whose name means “Gift of the Sun,” is focused on the cultivation, production and distribution of cannabis in Canada and California. Chairman of the Board & CEO Anthony F. Holler talks to James about staying ahead of competition and the expansion of their facility in California.
James West: Tony, thanks for joining me today.
Anthony Holler: Thank you very much for having me.
James West: Tony, tell me about Sunniva: What does it do, and how did you get to such a big market cap so fast?
Anthony Holler: Well, Sunniva obviously is a cannabis company, and we’re focused on medicinal cannabis particularly. As you know, they’re estimating there will be approximately 3 million medicinal patients in Canada a year. When we started this company, though, we decided to do a bunch of research; went across Canada, went down Washington, Oregon, California, looked at operations, and came back and basically said, this industry doesn’t work like any industry that we’ve been involved in. nobody seems to care about the cost of goods; nobody seems to really care that much about quality, and nobody cares about scale. And if you think of every other industry in this world, that’s what’s important.
Now, in fairness to most people, there’s a lot of money to be made in a short time by these LPs and others. The problem I think that exists is, what will this industry look like in five years? And I think in five years, things like cost of goods, quality and scale will be critically important to be successful.
Our facilities, we have one being built in California right now will, when it’s finished, produce about 100,000 kilograms of cannabis per year. Similarly, the facility we planned in Oliver, same thing, about 100,000.
James West: Oliver, British Columbia?
Anthony Holler: Oliver, British Columbia.
James West: Okay, so you’re a late-stage ACMPR applicant?
Anthony Holler: Exactly. That’s how to look at it. Now, our facilities are not the greenhouses that we know at all. They’re high-technology greenhouses, automated with robotics, because at the end of the day, if you look at this industry, what are the costs? The costs are energy and labour. We’re using the sun for energy; obviously we have some supplemental lighting as well. But to reduce labour costs, go to any industry, what do they do? They automate, they use robotics.
James West: Right.
Anthony Holler: Car industry is a good example. So our view is yeah, we’re not the first ones in this industry here. We’re not going to be the first ones selling cannabis. We’re going to be the last ones. We’re going to be the people standing.
James West: Interesting. I’m curious: how did you achieve a quarter of a billion dollar valuation as only an applicant in the late stages? I’m assuming that this has probably got something to do with your last corporate incarnation.
Anthony Holler: Absolutely. We have been fortunate in my past history to have a number of very successful companies come out of that.
James West: All in medical and biotech.
Anthony Holler: Actually, medical and biotech and there was actually one mining company that was thrown in, because I was asked to come in and fix corporate governance in a mining company that ended up being hugely successful.
James West: Well, you wouldn’t be Canadian if you didn’t have a mining company in your past.
Anthony Holler: Exactly, even though I don’t know anything about mining, just so you know.
James West: Who does, actually!
Anthony Holler: So ID Biomedical was really what, you know, set us on our path to success. That was a biotechnology vaccine company, but what we really did that was smart and lucky was that we acquired the vaccine assets of Shire Pharmaceuticals, and Shire is a massive, multinational company. Part of that acquisition was a unfinished, brand-new flu vaccine manufacturing facility that used the latest technology in the world. So we finished that, got it FDA approved and Health Canada approved, and it can produce high quality flu vaccines at lower cost and at massive scale.
And so as soon as that was approved, Glaxo-Smith-Kline came in and bought us for about $2 billion.
James West: Wow.
Anthony Holler: So we have a lot of background investors who know our routine. You know, when people read the story of our executive team and the Board, they go, these are all hugely successful people in other industries.
James West: Fascinating. Okay, so trying to set that aside as much as we possibly can, but that’s incredible. What does the timeline look like in 2018 for both your California operation and your Oliver, BC operation?
Anthony Holler: California operation will be in production third quarter of this year, and we expect Oliver to be in production in 2019, first quarter 2019.
James West: So is your goal, then, to produce dried flower products and extracts like all the other ACMPR guys, or are you going to apply your expertise in biotechnology development to create custom products?
Anthony Holler: We will be doing both those things. So one of the things we’re doing is, because we have such massive scale, we’re looking to supply the big retailers, you know. There’s companies, every industry changes, and as it gets more sophisticated, some groups want to be marketers, distributors, sellers; other groups go no, I’m going to be in this niche, I’m going to be a grower and refiner, and I’m going to produce the best products at the cheapest price. And that’s kind of where we are.
James West: So how much capital have you raised to date in Sunniva, and how much more do you need to get to full production?
Anthony Holler: Well, that’s the interesting thing, that we’ve raised $51 million as a private company. Now, our facilities we’re financing through debt. So our California facility is paid for by a big LA-based property developer, and we’re leasing that facility back. So they’ve committed to building that facility for $54 million and then we lease that back over 25 years.
James West: That’s interesting. So you don’t actually end up with the asset on your balance sheet, but you also don’t have the CapEx to build it.
Anthony Holler: Exactly. And remember, we’re running a business not a real estate company. And similarly in Canada – in Canada, though, we’re far ahead of California; the big banks are coming into this business, so you’ll expect to see us finance with a Tier One bank.
James West: Interesting. So when do you expect to get your license in Oliver?
Anthony Holler: Well, remember it’s a multi-stage – we expect to get the go-ahead from Health Canada, what they call their core letter, any day actually. And so that allows us to put our financing in place. We already have, remember that we’re already building a large facility in California, so we’ll be using the same contractors out of the Netherlands, all the same technology, the actual facilities are very similar in size.
James West: So do you perceive any risk to you or your investors from the rescinding of the Cole Memo by Jeff Sessions and the Federal prohibition on marijuana in the US, or is that just kind of slowly incrementally evaporating into meaninglessness?
Anthony Holler: I would agree with that comment. I think it’s background noise, to a large extent. I think it’s interesting that right after that Sessions memo came out which rescinded the Cole Memorandum, two states said oh, we’re legalizing cannabis. So it shows you that even at the state level they looked at that and went ‘background noise, we’re going ahead with our plans the way we want to’. I think it was New Hampshire and Vermont. And this was after he rescinded the Cole Memorandum. And you know, the State of California has made it very clear they will not have the federal government interfere with businesses in their state.
James West: Interesting. What does it say about the federal government when it’s not even relevant in terms of federal law? That’s disturbing. Okay, well, that’s a really interesting introduction, Tony. We’re going to leave it there for now. We’ll come back to you in a couple of quarters when you’re up and running and we will resume the conversation then. Thank you for coming in today.
Anthony Holler: Thank you very much.
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