Canada Will Tax Marijuana Just Like Tylenol
Cannabis Investment Expert Joins Supreme Pharmaceuticals
Supreme Pharma (SL-CSE) (SPRWF-OTCBB)
Interview with Brayden R. Sutton, Executive Vice President
VANCOUVER, British Columbia, Oct. 31, 2014 (GLOBE NEWSWIRE) — Tax Court Justice Campbell Miller just ruled that marijuana will be subject to federal Goods & Services Tax (GST) like Tylenol, cough drops and other over-the-counter drugs. The ruling confirms the government’s intent to legalise, regulate and tax medical marijuana in Canada. This is an important ruling, given that recent legislative changes have created a nascent medical marijuana industry in Canada that could be valued at over $1 Billion dollars in just a few years.
The creation of this newly commercialized industry creates a great opportunity for savvy investors to be early entrants and gain substantial returns. However, there are currently dozens of publically traded companies applying for permits to grow marijuana. The challenge is to pick the winning horse. With a space this cluttered it is instructive to see where the experts are placing their bets.
Supreme Pharmaceuticals (SL.V) (SPRWF) has just landed one of those experts, Mr. Brayden R. Sutton, President and CEO of CannabisHealth.com. Mr. Sutton joins Supreme as one of the most prominent cannabis investment experts in Canada, with nearly a decade spent covering the field from operational and public markets perspectives. As Executive Vice President of Supreme, Mr. Sutton will oversee facility design, operations, marketing, financing and business development.
“Being an early mover in the cannabis space, I was sought after and extended offers from almost every cannabis-related company in Western Canada as they all tried to position themselves in the marketplace,” stated Sutton in an exclusive interview with Financial Press, “Some of the offers were very tempting but I was truly looking for a company that checked all the boxes — the one that is providing Health Canada precisely what they’re looking for in the MMPR, one that could provide good value to their patients as well as their shareholders, and one that I felt will be around 10 years from now. I’m not interested in being a small player in the space or making a quick buck in a new sector – I want to take Supreme, the best company in the space in my opinion, to the finish line; and really set it up to be the dominant, low-cost, high-quality producer here in Canada.”
“Supreme received its ready-to-build permit back in January of this year,” stated Sutton, “Our facility has been fully retro-fitted to exceed the requirements of the Health Canada. It’s large, it’s secure, it’s in the right area, and we have local political support — on all levels. From local MP’s, the Mayor, and the town itself. We truly couldn’t be in a better town than Kincardine, Ontario. The 16-acre property, which houses the 7-acre facility, is located on the Bruce Energy Centre and has been independently appraised with an ‘in-use’ value of just under $22 million. We were fortunate enough to secure it for only $4.5m on very favourable terms. And frankly, we’ve yet to find a facility in Canada that is as more ideally suited to the MMPR as this one is, particularly when considering the local support, available skilled labour pool and heightened law enforcement presence due to our proximity to the Bruce Nuclear Power Plant. Our final phase of security is underway as we speak with Marcomm Systems Group and our Security Director, former OPP Drug Investigator Alan Roberton. We expect them to be complete by early November, at which point we will be ready to invite Health Canada to our facility for the inspection.”
Supreme’s Southern Ontario greenhouse is state-of-the-art, high tech facility utilizing advanced agricultural automation methods and applying them to the production of medical marijuana. It’s a 342,000 square foot greenhouse, which is the size of six NFL football fields. In addition, it is perfectly designed for medical marijuana production: it is built out of mould resistant tempered glass and steel, has sealed concrete flooring and is a “low top” design which reduces the facility’s heating and cooling requirements.
“We’ve employed Thaddeus Conrad, who is one of Canada’s leading producers of medical marijuana. Mr. Conrad is a leading breeder of innovative medical marijuana varieties, varieties which have earned him the title of North America’s most awarded marijuana breeder. As a result of this, Mr. Conrad is incredibly well-known under the name ‘Med-Man Brand,'” stated Sutton. “It is an honour to have him exclusively, as he brings with him decades of practical experience as well as a large and loyal patient following for early patient acquisition out of the gate. He is now collaborating with our team of greenhouse technicians, which includes one of Canada’s top agricultural experts who is a researcher at a well-known local University. At Supreme we have three elements: in our greenhouse we acquired the ideal facility, in Mr. Conrad we retained the best medical marijuana cultivator and breeder in the country and in our agricultural team we have some of the leading experts in pharmaceutical agricultural production. By doing this, we feel we will truly have the best value in the marketplace to offer our clients top-quality medicine, consistently, at a very affordable price.”
Sutton stresses that Supreme’s facility is far from a “grow-op” – it’s a high-tech pharmaceutical-grade greenhouse that is ideally suited for medical marijuana production. Health Canada has stated numerous times that it wants a regulated, standardized, automated production system that will turn out a consistent, and most importantly, safe product that meets their very stringent quality assurance measure, and we intend to give them just that. Supreme’s facility provides that; a large volume producer, with a design and operational plan designed for standardization and safety and sufficient economies of scale to implement robust quality control and quality assurance procedures. Supreme also benefits from favourable energy rates, due to the proximity of the local power plant, and most importantly the sun, which will provide up to 60% of the energy needed to produce high-quality medical marijuana.
Supreme is quickly checking off items required to be implemented prior to inspection: the razor-wire topped security fence is in place, the level-9 vault has been installed, the growing areas have been constructed and extensive electronic security and surveillance systems are being implemented right now. Once the final security systems are in place and the production areas are finalized, Supreme will be ready for its inspection by Health Canada. Mr. Sutton states that Supreme anticipates being ready for the inspection by mid November.
“What is unique about our greenhouse is that there is a large concrete structure in the center which houses the vault and high security processing areas. The greenhouse itself provides 4 quadrants of actual growing area, 340k sq. ft. in total, with our controlled rooms being 3,520 sq. ft. each. Even the flow of the building is ideal, in terms of the steps required from the trimming of the plant, to the shipping of it out the door. Employee and product flow has been meticulously designed to increase efficiency and reduce the risk of contamination. There will be an assembly line of sorts, where the production staff will be sealed off from the rest of the operation, allowing them to move the product down the line, while not interfering with anyone who is hands on inside of the actual grow space.”
Supreme Pharma has just raised $2.6M from a recent financing and currently undertaking an additional raise. And is more than capitalized to go right into production and start fulfilling patient orders.
Through economy of scale, Sutton anticipates drastically reducing the market price of cannabis.
“Our goal is to use the extensive medical marijuana expertise our management team has to shake up the marketplace. We will achieve this by using a gradient pricing model, which allows us to target multiple market segments while maintain transparency and credibility with our patients and doctors. We will sell the majority of our products for around $5.00 per gram. From there, premium parts of each crop will be given the ‘royal treatment’ and sold for upwards of $8.00 per gram, to those who can afford it. On the other end of the spectrum, smaller buds and shake will be sold for $2 and $1 respectively. Its all good medicine, but you have to be honest with the doctors and patients about what you are providing. The low cost options are also essential because a large proportion of our patients are very cost-sensitive, and currently expend a great deal of their monthly income on their medicine. The low cost model also improves our ability to pressure insurance providers to provide benefits for medical marijuana.”
Sutton is also very focused on patient acquisition, “The part of the business that many companies are struggling to find an effective way. We are very happy to say that we have roughly 500 patients on stand-by, with many more contacting us daily.” Mr. Sutton reports these patients come from existing relationships held by Supreme’s management team, as well as many individuals living or working near the facility, “and that has all been organic so far, as we’ve not yet had to pay one dime for patients. I have some long-standing relationships with cannabis-friendly physicians, and our hope is to be able to work closely with them, to better educate the public in what is very much going to be an industry driven part of Canada’s Health Care.” This is a benefit for Supreme, as this early patient acquisition is achieved without expending capital to acquire initial patients. In addition, Mr. Sutton reports that Supreme has had strong interest from a number of potential producers to provide marijuana on a wholesale basis. “This is the perfect market opportunity for Supreme, where we can supply others with wholesale marijuana and increase our revenues faster than we can acquire our own patients. Also, when you consider that less of an expense is required to sell wholesale medical marijuana as compared to retailing to individual patients, the profitability of our wholesale division is on par with the retail side.”
“We are in the final stages of completing of the requirements for our Southern Ontario growing facility,” stated Sutton, “I have a decade of experience in this field that tells me when something is going to work. Supreme Pharmaceuticals is that something. In my opinion, it is a question of ‘when’ not ‘if’ it becomes one of the dominant providers in this exciting new sector.”
Supreme Pharmaceuticals is currently trading at $.47 with a market cap of $28 million.
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