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Deepak Anand on Supply and Distribution of CBD and Medical Cannabis in Europe

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Midas Letter is provided as a source of information only, and is in no way to be construed as investment advice. James West, the author and publisher of the Midas Letter, is not authorized to provide investor advice, and provides this information only to readers who are interested in knowing what he is investing in and how he reaches such decisions.

Investing in emerging public companies involves a high degree of risk and investors in such companies could lose all their money. Always consult a duly accredited investment professional in your jurisdiction prior to making any investment decision.

Midas Letter occasionally accepts fees for advertising and sponsorship from public companies featured on this site. James West and/or Midas Letter may also receive compensation from companies affiliated with companies featured on this site. James West and/or Midas Letter also invests in companies on this site and so readers should view all information on this site as biased.

James sits down with Deepak Anand, a well-known figure in the legal cannabis scene, and the CEO and Co-Founder of Materia Ventures. Materia Ventures deal with the supply and distribution of CBD and medical cannabis based products, predominantly in Europe. The company will be launching their products very soon in the Danish and UK markets. The CEO outlines Materia’s completed Series A round of financing, the company’s valuation and their go-public strategy. Mr. Anand also sits on the Board of the Centre for Medical Cannabis (CMC) and provides his informed insights of current cannabis regulations around the world including the United States, China, and various nations inside Europe.

Transcript

James West: I’m joined now by Deepak Anand. He is the founder and CEO of Materia Ventures. Deepak, welcome back.

Deepak Anand: Thanks for having me.

James West: Deepak, I’m going to jump to a conclusion: correct me if I’m wrong, but I’m assuming that Materia Ventures is the culmination of your past five years active in the regulatory space in cannabis globally?

Deepak Anand: It very much is, James, yes.

James West: Okay, so what does Materia do specifically?

Deepak Anand: We deal with the supply and distribution of CBD and medical cannabis based products, predominantly in Europe.

James West: Okay, as a vertically integrated from commodity to CPG provider? Or do you occupy some middle range in a horizontal value chain?

Deepak Anand: No, absolutely, we do everything from sort of post-cultivation all the way up until sales to either patients or consumers.

James West: Okay. Where do you distribute these products now?

Deepak Anand: So we’re involved in the Danish market in a big way, as well as sort of in the UK market. We’re going to be launching our products very soon into these two markets predominantly.

James West: Are these medically-focused products, or wellness products that don’t need a prescription?

Deepak Anand: Both of them. So I mean, for me, coming from Canada, where we regulate CBD very differently than they do in Europe, that opened up a massive opportunity for us to be able to get into this space. So we’re targeting both markets: medical as well as CBD.

Unfortunately in Europe what’s happening today is there seem to be more companies than patients, as far as the medical cannabis space is concerned. So we’re looking to expand that market out. Germany, by far, is the leading market in Europe for where medical cannabis is prevalent in any way; the UK is building out. It’s slow; there’s a number of sort of regulatory challenges to overcome before that political challenge is to overcome in this country, but the CBD opportunities are tremendous. It’s regulated as a normal food here, which allows you to sell products in grocery stores and supermarket chains and pharmacies over the counter, which is a tremendous opportunity, and you know, the one thing that we haven’t seen, like the US, is some very established brands on the CBD side to be able to take advantage of that market. It’s where the US was on the CBD side seven years ago, where there was a whole bunch of players in the market, but it was very unregulated. You know, you couldn’t really rely on a lot of brands, there were really no brands. And so for us, that created a massive opportunity.

James West: In the UK, I’ve seen that there’s no shortage of CBD products on the shelves of health food stores, of novelty stores – it’s everywhere. Is this market quickly becoming saturated with supply way in excess of demand?

Deepak Anand: So based on where things currently stand, yes. However, this coming Thursday, you’re going to see some changes that come up as a result of a report that we’re releasing. I’m on the Board of something called the Centre for Medical Cannabis, it’s CMC, and on Thursday, we release our report on CBD that looks at all of the products that are on the market, particularly in the UK, talking about sort of the unregulated-ness, the sort of, you know, the unsafeness in those products. And I think that is going to force the regulator here and across Europe to structively [sic] look at how CBD is being regulated. It’s a bit of a Wild West situation.

It’s not going to be the level of the US FDA’s currently post the Farm Bill, but certainly it’s going to change things up in terms of the way products are distributed. I think you’re going to see a scaling back of this Wild West attitude here where anything goes, you may be consuming CBD that’s got THC in it, you may be consuming snake oil and you have no idea what you’re putting in; just because a label says 100 milligrams of CBD, that doesn’t necessarily mean what you’re getting. 

So they may be oversupply of unregulated product today, but there’s an absolute demand for safe, tested, regulated supply of products, and that’s where we come in.

James West: Okay. So in China, who produces half the world’s hemp currently, I can buy from a wholesaler literally tonnes of 99.99 percent organically produced CBD isolate, which at a price which I’m not going to talk about now because it’s fluctuating daily, but at a price that makes me very suspicious of the ability of any European or North American-based producer of CBD to do so at a rate that can compete with the Chinese supply.

Now obviously, the import and export barriers are going to prevent that from happening for the time being, but how soon until free trade mentality causes us to have to welcome importation and exportation of cannabinoids in concentrated form?

Deepak Anand: Very soon. In fact, in the UK there was a company that I worked very closely with that is importing CBD isolate from China, and distributing it here under GMP. And they have full EU GMP licensing, so it’s happening sooner than you would expect, and you’re absolutely right: I mean, the price point makes a lot of sense. I think the challenge here is, there’s not many companies that have the licensing and the ability to be able do this in a regulated fashion, and I think companies that are being set up now to cater to that are the ones that are going to be successful in the long term.

But I mean, the Chinese hemp is here, and it’s going to expand across the globe. You know, the regulatory considerations aside, this is starting to happen already.

James West: Right. So Materia, where does it source its cannabinoids?

Deepak Anand: So we’ve got a whole bunch of sort of suppliers around the world. We’ve looked at, you know, cannabis as a commodity, James; I’ve had the opportunity to be fortunately involved with a number of different countries, whether it be Lesotho, whether it be Macedonia, whether it be Thailand, whether it be, you know, Cyprus, Malta, and the list is endless. So I’ve seen a number of sort of cultivation facilities, a number of governments looking at this, and so we source our biomass from a variety of these countries. We’re looking at Canada, certainly, for the supply now; it’s sort of the best product from a quality perspective available today, but we’re looking at importing CBD from China. We’re looking at bringing THC in from Colombia, and there’s no reason why that shouldn’t happen.

James West: Right. So do you think that the de-prohibition Federally of THC is the catalyst that the world is waiting for, before THC finds its way into the medical supply chain as much as CBD does?

Deepak Anand: I think we’re still some time away from that happening. I think there’s a very cautious approach in dealing with this, for a reason that I’m not so certain why. I mean, we’ve seen in Canada now, you know, since October 17th, at least, where we’ve had a legal program, the sky’s not fallen as far as THC is concerned, and I’m pretty sure we’ll see the same thing with edibles coming online soon. I don’t think THC is going to be as readily available around the world as CBD is today, but we’re certainly moving in that direction. I think we’re definitely a few years away from THC being widely available, but we’re making inroads in that direction.

James West: So from where you sit as a guy who spent a lot of time traveling to all these countries, and probably has a pretty good finger on the pulse of where regulation is at in each one, how soon is it until we’re at a more or less globalized state of the entire market?

Deepak Anand: Very soon. You know, I think in the next five to seven years, we’ll definitely see global movements; I think what Luxembourg and Malta, particularly, are doing at a European level is very interesting. I think you will see Luxembourg legalize recreational cannabis in the next couple of years, and people don’t appreciate that as much as they should, perhaps, because Luxembourg is a tiny little country; but what most people, particularly in North America, don’t realize is, Europe is really one market. As soon as one country opens up its borders, I mean, Luxembourg is neighbouring to a variety of other countries where you drive in and out of Luxembourg like you’re getting in and out from another city, and that changes the conversation at a European level.

So as soon as one or two countries start to legalize cannabis for recreational adult use purposes, that changes the gamut as far as Europe is concerned, and that gets the world really looking at this. I think Asia is already moving in that direction; we’ve seen Thailand now come out, India will be not too far behind, and once these markets are up and running, you know, China’s already said they’re not happy with the US dominating the hemp play, as you kind of alluded to earlier. So we’re seeing this happen; it’s a matter of five to seven years before we see full, you know, sort of global movement towards this. 

The countries I’m hesitant about, though, are certainly the Middle East. I don’t know what’s going to happen there. It’s been this taboo substance for a very long time; I don’t know if we’ll see a seismic shift there anytime soon.

James West: Right. So Materia is, you recently closed a Series A round; congratulations. What was the valuation on that, and what’s your go-public strategy?

Deepak Anand: Thank you. Yeah, we closed, just closing $6 million currently on a $33 million valuation, pre-money. The go-public strategy, you know, we’re going to try and stay private for as long as possible. You know, we’ve had, we’ve sort of been fortunate to be able to, you know, get a lot of interest. We’ve over subscribed on all of our rounds, so it’s been very interesting from that perspective. Going to try and stay private for as long as we possibly can. 

James West: Okay, great. Let’s leave it there for now. Deepak, as usual, an interesting conversation; thank you very much for joining me.

Deepak Anand: Thanks for having me.

Midas Letter is provided as a source of information only, and is in no way to be construed as investment advice. James West, the author and publisher of the Midas Letter, is not authorized to provide investor advice, and provides this information only to readers who are interested in knowing what he is investing in and how he reaches such decisions.

Investing in emerging public companies involves a high degree of risk and investors in such companies could lose all their money. Always consult a duly accredited investment professional in your jurisdiction prior to making any investment decision.

Midas Letter occasionally accepts fees for advertising and sponsorship from public companies featured on this site. James West and/or Midas Letter may also receive compensation from companies affiliated with companies featured on this site. James West and/or Midas Letter also invests in companies on this site and so readers should view all information on this site as biased.

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