Emerald Health Therapeutics (CVE:EMH) (OTCMKTS:EMHTF) (FRA:TBD) CEO Chris Wagner discusses their recent deal to be part of the British Columbia retail market. Wagner explains that Emerald Health, the province’s largest cannabis producer, was recently licensed to sell out of its one million square foot facility in Delta, British Columbia. The pair talk about Emerald Health’s deal to acquire Northern Vine Canada, a licensed dealer, which allows Emerald Health to develop new, innovative products as part of its development push. Emerald’s “objective is to have multi-billion-dollar products that are patented, that we will sell all over the world” in medical markets such as Australia and Germany.
James West: Hey, welcome back to Midas Letter Live. My guest in this segment is Chris Wagner; he’s the CEO of Emerald Health Therapeutics, trading on the Venture under the symbol EMH. Chris, thanks for joining me today.
Chris Wagner: Thanks, James. Good to be here.
James West: Chris, Emerald Health is certainly in the ring as far as the big battle for market share goes with all of the ACMPR producers. Most interestingly to me was the idea that, you know, this press release came out with all the BC companies that were going to be part of the BC retail: Emerald Health wasn’t included, and then, so the stock sold off, and then you announced that oh, actually, now we’re included! And the stock did not regain all of its lost ground, however, yet.
Chris Wagner: Yeah, you know, it’s interesting. We really, at Emerald, we have this focus on, we believe that people use cannabis for a purpose. So we think it’s either for improving sleep or reducing anxiety or relaxing, and to be effective in providing products for that type of person, you need to have a very scientific focus to create brand-new products. So we focus a lot on that, and making sure that we get deals with BC and other provinces and have very low-cost supply.
So the deal with BC, you know, there were 31 licensed producers who were announced that signed a deal with them, and we did not until about a week later. And the reason we didn’t was, the first deal is not always the best deal. It’s like the number one thing everybody learns in business school is, you don’t always take the first deal, because it’s not always the best deal. And so we didn’t take the first deal, but we took the best deal. And so, you know, a week later, we had that announcement.
I think in terms of the Emerald shareholder, it is really beneficial to them, and to the BC government, that we did not take the first deal. We’re one of the biggest producers in the country, and we’re certainly the biggest in BC, so we’re going to be a long term supplier for the BC government.
James West: Okay. So you’re bigger in terms of cannabis production than Canopy’s BC operations?
Chris Wagner: Yeah, quite a bit bigger. So we have a million square feet in Delta on a 5 million square foot footprint.
James West: Oh, that’s through the deal with Village Farms?
Chris Wagner: Exactly right. And so we actually just on Monday received – I actually came on Friday, but we announced it on Monday – the license to sell out of that facility. So that is a massive production facility. And you know, the people from BC, the government, the BCLDB and other provincial buyers, have toured our facilities, and every time they do that, they come back and they say, ‘This is amazing. This is one of the most high-tech, high-quality operations in the country, and we want to do business with you.’ So that was also part of the deal with BC is, we brought them out and they had a nice tour.
James West: Right, interesting. So then, you’ve also signed a definitive agreement to acquire Northern Vine Canada, which you already own 65 percent of. What is Northern Vine’s value proposition?
Chris Wagner: Yeah, so Emerald Health Therapeutics is a licensed producer, an LP, so we grow and cultivate and sell; Northern Vine, we now own 100 percent of, and it’s a licensed dealer; that’s a horrible name for a company that are licensed, but what it allows them, and now us, to do, is import. So we’re allowed to import oils for medical purposes, and we’re also allowed to experiment and combine things with cannabinoids that other licensed producers are not allowed to do. So it gives us a very broad range to develop brand new, innovative products that other groups might not be able to do, and that’s a big part of where Emerald’s going, is intellectual property, brand new products. And so owning 100 percent of Northern Vine really gives us a leg up there.
James West: Sure. So your announcement yesterday of the 50/50 joint venture with Pure Sun Farms, that’s not Village Farms?
Chris Wagner: Yeah, so Village Farms and Emerald together have formed a company called Pure Sun Farms.
James West: Oh, okay.
Chris Wagner: So we each own half of it.
James West: Right, not another million square feet. [laughter]
Chris Wagner: No, no same one.
James West: Okay, that’s good.
Chris Wagner: And the value proposition there is, you know, Village Farms has 750 years of growing experience; we have an equivalent on the biotechnology, life sciences side, so what a great combination. So we work on that together, and it’s been amazingly fast, actually, the conversion of that facility. There were tomatoes growing in that facility seven months ago. So we went from zero to fully licensed, fully able to sell product, in seven months. It’s fast, and it’s big and green in there right now. So it’s a wonderful thing to see.
James West: That’s great. Then so is it safe to say that Emerald Health is more focused on the medicinal side of cannabis than it is the recreational side?
Chris Wagner: We actually look at those two markets very similarly. We think that whether you’re a medical patient or a recreational patient, you take cannabis for a purpose, whatever that purpose is. If it’s to relax recreationally, or it’s medicinal, you need to get some sleep, you want a consistent outcome every single time; and so that’s our approach. Our approach is consistency and quality, so you get this predictable outcome, and we’re going to back that up with patented products and also running clinical studies to demonstrate that if you really do want to improve your sleep, that we have products that we can demonstrate those outcomes in a quantitative way. And I think…
James West: Clinically.
Chris Wagner: Clinically, yeah. And even from a – you can really only do that if you’re life science-focused company. If you’ve never done that before, it’s really hard to do, even to think about doing these kind of clinical studies that demonstrate, hey, I wanted to relax, and there’s actually scales, there’s validated scales that measure relaxation. I wanted to relax, I took Emerald’s product, this was the outcome. And published in journals, and that’s a really good way to actually market and create a brand awareness around these products. It’s not just a flashy product with nice signage, it is that and it has evidence supporting its use.
James West: Yeah. The interesting thing about life sciences is, you know, people say, well, this is a bubble and it’s going to go away because as soon as it’s everywhere, there’ll be a few big ones. But then when you look at if, you know, people like to control it broadly to the de-prohibition of alcohol, which had, apart from some very basic utilitarian uses, alcohol was purely recreational.
Chris Wagner: That’s right.
James West: Whereas cannabis, the recreational component is really just the smallest little part of it, because if you look at the licensing by the FDA of Epileptrol [sic] from GW Pharma, that’s really indicative that there could be a complete avalanche of new sort of patented molecules coming out of the CBD complex. And so I guess Emerald Health – this is my long-winded wind up for you – Emerald Health is looking to capture that opportunity based on the fact that you’re basically a life sciences company more so than a cannabis company.
Chris Wagner: We believe the Canadian recreational market is a good market, we’re going to participate in that, but it is only just the beginning. Our objective is to have multi-billion-dollar products that are patented, that we will sell all over the world, and it won’t be in recreational markets. It’s going to be in medical markets in, you know, Australia, Germany and so on, all over the world. So that is the objective, and you summarized it nicely.
James West: Well, that’s great. Then so in terms of catalysts for shareholders or investors considering Emerald Health right now, what is the runway for the rest of 2018 look like, and what’s the first part of 2019 look like?
Chris Wagner: Well, you’re going to start to see a whole lot of sales coming from us, selling into this market. You’re going to start to see some announcements around some of the patenting of brand new products we’ve been doing. You’re going to see our brand being rolled out to Canadians; Canadians will know who Emerald Health Therapeutics is, I can guarantee you that.
You’re going to see the launch of Emerald Health Naturals, which is a company that we’ve started that will sell non-cannabis products in grocery stores and pharmacies all across the country. So you’re going to see a lot, and it’s all happening very, very soon.
James West: Mm-hmm. Okay, well, that’s great. Tell you what: that’s great catch-up then, Chris. Let’s leave it there for now. We’ll come back to you again in a quarter’s time and see how the plan is unfolding. Thank you so much for joining me today.
Chris Wagner: Thanks, James. Good to be here, thank you.
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