Article Date: February 21, 2017
A Napanee company taking a high-tech approach to producing medical cannabis is going public in an effort to finance its rapid expansion.
ABcann Medicinals Inc., which opened in 2014 and began selling cannabis to customers across Canada last year, is expected to complete the process of becoming a publicly traded company by mid-March.
It's now one of the 34 companies licensed to grow medicinal marijuana in Canada.
The company is working through a process called a reverse takeover, where it amalgamates with an existing publicly traded shell company that is not operating. ABcann transfers its operations to that company and assumes its public status.
It's a quicker, less-expensive route to becoming a public company.
"You only go public for two reasons," explained John Molloy, the company's executive chairman and director of the Southeastern Ontario Angel Network, which connects investors to local companies. "One is you want some liquidity for your investors.
"We've been a company for three years and some shareholders probably want some liquidity at some point in time. Being on the public market allows them to trade their shares and make a return. The bigger reason is access to capital."
As a private company, ABcann would struggle to raise the amount of money needed to fund its expansion, and a bank loan is unlikely.
"The No. 1 reason we are going public is to raise the capital we need to expand," company founder Ken Clement said.
Since beginning to sell to patients in June last year, the company has since seen a 30 per cent increase each month.
People are saying there is more growth and more potential in this industry, on a global basis, than the cellphone industry," Clement said.
That growth, and the potential for more, has the company already planning to expand, with plans to build a new, 7,430-square-metre (80,000-square-foot) facility on a 26-hectare (65-acre) property near its existing building. The new building is to be a scaled-up version of the existing facility, which is licensed to produce approximately 625 kilograms of medical marijuana a year.
In addition to the Canadian market, the company has exported to Israel and Australia and has applied to begin exporting to Germany.
The company currently employs about 50 people. Once up and running, the new facility is expected to employ more than 300 more people.
ABcann's production process is characterized by strict control over every aspect of a marijuana plant's growth.
"You can't do that unless you have a very sophisticated system and it is computer controlled," Molloy said.
Using seeds purchased from Holland, the process of growing each plant is tightly controlled and monitored, both to maximize output and quality and to provide a precise log of its history.
Computerized control of the system allows technicians to grow different plants in tightly controlled conditions where everything from soil composition, temperature, humidity, irrigation, light and time are set by technicians.
Before entering the growing rooms, workers shower and change into clothes that are professionally cleaned. They pass through an air shower, designed to blow off dust and fine particles, before entering the most sensitive areas.
Microbial tests are performed twice a week, and positive air pressure means air where the plants are growing flows out, never in, when doors are opened.
Different areas have separate ventilation systems to prevent cross-contamination.
"A big part of all drugs today are synthesized copies of chemical compounds that naturally came from plants," Clement said.
"We have found a way, with a lot of help along the way, to grow a plant in an environment and recreate the chemical compounds that naturally occur in that plant so that the doctor can actually prescribe the plant with the same confidence level that he is prescribing any synthesized drug."
Since medical cannabis is considered a drug, achieving and maintaining consistency between plants is the key to satisfying customer demand, and getting that consistency requires controlling all steps in the process, Clement said.
"If you can't get consistency in your environment, you'll never get a consistent product," he said. "[It would be like] I get a product on a Tuesday and it works for me; I go back and ask for the same product on a Saturday and I am on the couch and can't move; and then I go back four days later and it doesn't affect me at all.
"[With ABcann], I'm buying the same product every time."
Controlling every aspect of the growth process also allows the company to participate in clinical trials to prove medicinal cannabis can be effective.
The company is working with researchers from the University of Guelph on ways to improve the growing process.