Emerald Health Therapeutics Inc (CVE:EMH) CFO on Extraction Joint Venture with Indena
Emerald Health Therapeutics Inc (CVE:EMH) (OTCMKTS:EMHTF) (FRA:TBD) CFO Rob Hill provides an update on the company’s greenhouse expansion and joint ventures. Emerald Health expects to have its entire 1.1 million square foot greenhouse in Delta, British Columbia ready for cultivation in the first half of 2019. The company raised $10.8 million in December and is using that capital to fund its Quebec facility expansion and its joint venture with Emerald Health Naturals. Emerald Health is looking to international markets and recently entered into a joint venture with Italy’s Indena for extraction technology and capabilities. Hill discusses Emerald Health’s push to develop CBD and THC products and reveals the company has 17 patents in process for such products.
Narrator: Emerald Health Therapeutics Inc. is a Canadian licensed producer of cannabis with indoor cultivation facilities in BC and Quebec.
The company is focused on developing proprietary cannabis products for medical and adult use customers.
Emerald is part of the Emerald Health Group, which represents a group of companies focused on developing pharmaceutical, botanical and nutraceutical products to provide wellness and medical benefits by interacting with the human body’s endocannabinoid system. Emerald Health Therapeutics trades on the TSX Venture under the ticker symbol EMH.
Benjamin A. Smith: Joining us in studio – oh, sorry, outside the studio right now, in BC, is Rob Hill, the CFO of Emerald Health Therapeutics. Rob, welcome to the program.
Rob Hill: Thank you. Hi.
Ed Milewski: I hear you’re getting a lot of snow in Vancouver, is that right?
Rob Hill: Yeah, some parts more than others. I had about an inch on my driveway, but some of my co-workers had upwards of two feet, believe it or not, and not that far outside of Vancouver.
Ed Milewski: Is that a fact? Wow, wow.
Benjamin A. Smith: Now Rob, I want to lead off with a question pertaining to your joint venture with Village Farms International. Of course, Village Farms has had quite the run-up lately; they’ve more than doubled in share price over the last few sessions, and they’re starting to get more interest into that name. Now, your joint venture was signed in the summer of 2017. Can you give us an update about how that’s playing out and where you stand on that joint venture currently?
Rob Hill: Yeah, it’s a great partnership. We sought Village Farms out because of their expertise in growing on a massive scale. They weren’t a cannabis company, we were the cannabis company. We had the expertise there.
And so, over the last 18 months or so, we’ve been building out a facility, a 1.1 million square foot greenhouse that up until November of 2017 were tomatoes. And the process, the licensing process, has been done in stages, and we got our first crop out of that location in Delta, just outside of Vancouver, last summer. And now we’ve expanded, we’ve got 850,000 of the 1.1 million square feet licensed and under cultivation. The remaining sections of it will come onstream soon; we expect to have that entire facility in cultivation during the first half of 2019.
Benjamin A. Smith: Okay. Is that product earmarked to go to retail provincial outlets across the country, or will some of that be diverted into oil production? What’s your plan for that cultivation?
Rob Hill: Yeah, so yeah, and it’ll also, part of it will be used to supply our medical patients as well. But the vast majority of it will go to the recreational market, as primarily in the early stages as dried flower.
But we’ve seen the data coming out of the US and even within our own experience as a licensed producer of cannabis with a decent-sized medical practice, the shift that consumers have towards and extracted product. So we’ll see more and more of that coming out over this next year, we think.
Benjamin A. Smith: Very good.
Ed Milewski: I got a –
Benjamin A. Smith: Yeah, Ed has a question for you, Rob.
Ed Milewski: Yeah, Ed Milewski here, Rob. How many different products do you currently, or categories of products, do you currently have?
Rob Hill: Well, broadly speaking, Ed, we’ve got products first of all for medical patients and for recreation adult use patients, and then within that, we offer extracted product that’s oil, and dried flower. So that’s the extent of it at the moment. And they come in various quantities and things, but really it’s about dried flower and extracted oil.
Ed Milewski: When’s your next quarterly report coming out?
Rob Hill: We’ll have our Q4 report come out at the end of April.
Ed Milewski: Okay, okay, we’ll watch for that.
Benjamin A. Smith: So I was thinking, since I have the CFO of the company in this interview right now, of course I gotta ask you a financial question. How’s the company’s cash position, Rob, and what is Emerald Health Therapeutics plans for expansion, and do you have enough cash to further that expansion?
Rob Hill: So at the end of our last reported figure we had $53,000 that we raised another 10.8 million in December, so we’ve got lots of cash. We continue to spend it quickly, because, as you alluded to, we’ve got some capital projects going. We have a facility in Quebec which is currently producing, but we’re expanding that facility from its existing 25,000 feet of production; it’ll get up to 75,000, actually 85,000 feet now, and that’s because we’ve added a mezzanine layer to put in some processing capacity.
We’ve also got some expansion products going on locally here in the Vancouver area, and we are investing, you’ve seen some news come out recently with investments and partnerships that we’ve created with Emerald Health Naturals, which is a joint venture between ourselves, Emerald Health Therapeutics, and an affiliated company out of San Diego, to distribute natural products. So that’s going to be using cash, and so while we have a fair amount of cash on the balance sheet at the moment, we anticipate having to go to market again at some point in the next few months.
Benjamin A. Smith: Now, I’ve noticed with the recent news cycle, like you said, you got into the health food market in the United States, and there was also, I believe, a CBD extraction project in Italy. So it seems to me that Emerald Health is expanding their reach worldwide. Now, is it, I guess it’s a concerted effort for the company to branch out and now is the right time to expand internationally instead of, you know, historically you’ve been sort of keeping it relatively within borders?
Rob Hill: Yeah, good question. Canada is a great economy, but it’s only, like, roughly 2 percent of the total global GDP, and so naturally, with plants and the capacity and the infrastructure we’re building, we’re going to be looking overseas, and so this particular arrangement you alluded to, Indena, is really an exciting event for us. We announced it last week. Indena is among the world leaders in extraction technology, and we have 500 acres of hemp that we harvested last fall, and we have sitting, and we are going to extract CBD from that hemp. And important in that will be the technology that Indena has now licensed to us, and it allows us to more effectively and efficiently tap into that CBD that’s in 500 acres worth of hemp, which translates to about 135,000 kilograms of dried biomass.
So that whole play into CBD is really a big part of our plans. But we think there’s a big market for that here in Canada, actually, and so we’ll extract, again, with Indena’s technology and then as well, a partnership that we announced recently or last summer, actually, with Factors Group Technology. And Factors Group has massive scale for extraction and softgel manufacturing capability, that we’re going to tap into.
That’ll all be used to help us get great quality products to market that people are looking for.
Benjamin A. Smith: That’s great. So I suppose you see that with the shortages of CBD oil and also dried flower here in Canada, I’m assuming that Emerald Health sees the opportunity to perhaps break in amongst sort of the, you know, the bigger Tier One LPs and create a brand either through white label or creating your own retail brands. Within Canada, there’s definitely that opportunity, there seems to be a large runway with that; the shortages aren’t ending soon.
Rob Hill: Yeah, we see a huge opportunity to get products, and you know, a lot of them are CBD based; so some strong indications of that particular cannabinoid, but there’s a host of others as well that we’re focused on. But there’s strong indication that CBD has wonderful health indications and the ability to enhance people’s health, and we are really focused on that. We have a number of patents in the works that are being developed, all towards developing innovative products that will enhance the health of our clients and people across Canada.
So this massive amount of hemp that we’ve got, that we’ve harvested, we have another harvest planned, it’ll get planted next spring, that’s a big part of that story. And it gets us, we’re talking about a quantity of biomass that we have supply sources that I think put us in there among the very biggest players in the space in Canada right now.
Ed Milewski: Rob, what would be the percentage of CBD versus THC in your products? Is that an easy question to answer?
Rob Hill: Well, yeah. I mean, we have products that are very high in CBD and very low in THC, so that’s a product that won’t give you much of a psycho – no psychoactive effect. And we have products that are very high in THC and low in CBD, and then we have one to one type products. We have a mix, because depending on what you’re trying to achieve from a therapeutic effect, each one of those has a role to play.
Ed Milewski: Do you see from your corporate perspective, do you get the sense that you’re formulating sort of a plan to go one way or the other? Are you going to continue to just go in both areas until it becomes apparent that one is more important than the other?
Rob Hill: Yeah, that’s a good question. We are working on developing, I mentioned we had 17 patents in process at the moment, but we’re continuing to flesh out what the road ahead looks like in terms of products and where we’re going to innovate. I can definitely see CBD being a big part of that future. THC, actually, also has important therapeutic effects, and there’s a big demand in the marketplace for it. But we’re pushing ahead on both fronts for now, and we’ll sort of let the market and let our own internal research help guide exactly how and when we shift into one particular area. And let’s not forget that, aside THC and CBD, there is upwards of 150 or more different active ingredients that are coming out of cannabis and so-called cannabinoids that we’re also investigating as well.
Ed Milewski: Very good.
Benjamin A. Smith: Okay, that’s a great update, Rob. Thanks for joining us on the program, and best of luck going forward. We’ll be following your story close.
Ed Milewski: Thanks, Rob.
Rob Hill: Thanks for having me. Bye for now.
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