Financial Post - MedReLeaf goes for gold

Sheltered in an unmarked industrial building in a Toronto suburb that was once a farmer’s field, MedReLeaf is quietly bringing in the harvest. In a neighbourhood dominated by global technology firms, it’s almost quaint to watch MedReLeaf’s white-coated production staff trim plants by hand on shiny steel tables.

Rick Spence | July 15, 2014 
But there’s nothing quaint about MedReLeaf, a pioneer in the new New Economy. It’s one of a handful of Canadian firms beginning production of medical marijuana. Founded a year ago, and expecting to ship its first products later this month, MedReLeaf expects to be serving 10,000 patients by the end of 2014. Within a few years, Neil Closner, the chief executive, hopes to have 10 similar-sized facilities serving 100,000 Canadians.
He’s not just blowing smoke. Medical marijuana is an instant growth industry created last year by changing federal regulations in response to concerns 400,000 Canadians will be using medical marijuana within the next decade – a tenfold increase from today. This “green rush” has already made paper fortunes for many opportunistic entrepreneurs and speculators. But MedReLeaf is taking a different tack: trying to be the gold standard in an industry still shaking off the stigma of illegality, basement grow-ops and Trailer Park Boys.
“Our slogan is, ‘The Medical Grade Standard,’ ” Closner says. “We built this operation to be a pharmaceutical-manufacturing plant.” To that end, MedReLeaf has created what could be Canada’s poshest grow-op, with high-tech environmental and security controls that exceed government requirements. It also employs registered nurses to interview every customer to understand their conditions and ailments, and how best to serve them.
Most important, MedReLeaf has an exclusive agreement to distribute products developed by Tikun Olam, Israel’s leading medical-marijuana producer. Started on a family farm seven years ago, Tikun Olam has developed new strains to serve varying ailments. One new strain contains high levels of CBD — the pain-relieving medical component of the plant – and very little THC, which creates the fabled “high.” Another new strain has enhanced levels of THC, which has been found to reduce nausea in cancer patients.
Closner joined MedReLeaf at the request of Stephen Arbib, the founder of Toronto-based MENA Investment Network, which develops joint ventures based on Israeli technology and invested more than $5-million in MedReLeaf. Closner says both purpose and profit motivated him. A former investment banker and software entrepreneur, he served as vice-president of business development for Toronto’s Mount Sinai Hospital, where he developed for-profit ventures in contract research and records-management, as well as a fertility clinic. While some colleagues eyed him with trepidation, he calls commercial innovation “a necessary evil” in today’s cash-short health system.
Closner was equally skeptical about joining MedReLeaf. “This was completely new to me,” he says. “I never even smoked a cigarette before. I wondered if this was just a legal excuse to get high.”
Before taking the job, Closner spent a week in Israel with the staff and clients of Tikun. In hospitals, clinics and nursing homes he saw aging seniors and wounded veterans living better, more productive lives with marijuana, whether in cigarette, vapor or capsule form. He met one patient whose pain-killing drugs left him comatose most days. “One [cannabis] capsule a day gave him the clarity to feed himself and go the bathroom by himself,” Closner says.
He was also eager to tackle the healthcare crisis from the patient side. “In Canada we spend $30-billion a year on pharmaceuticals,” he notes. “And many cause side effects that require you to take six other drugs.” He sees marijuana as a therapeutic pain reliever with few side effects whose cost — $10 a day for many patients — will offer major savings to hard-pressed consumers and health plans. “I want to make sure the healthcare system is still around when I need it,” he quips.
Until last year, the law required medical marijuana patients to be licensed by Health Canada, and forced them to buy from small, unlicensed grow-ops. As the number of patients climbed from 150 in 2001 to 35,000 by 2012, Health Canada realized the burden of individual licensing and the dangers of unsupervised production. Today any physician can prescribe marijuana to a patient, who is expected to buy from an approved commercial producer (more than 1,000 companies have applied for licences, although Health Canada has certified only 21 so far).
Closner spent his first year at MedReLeaf building a team of 40, turning a former industrial space into individual climate-controlled growing rooms, sourcing product and nurturing the development of thousands of plants. It hasn’t always been easy. Hiring people who know how to care for marijuana is tricky. “We have an amazing, eclectic team. It includes mature adults who have never had a job with a real company before.”
MedReLeaf’s first batch harvest, now being tested, has been presold to patients across the country, and will be couriered to them soon. As production ramps up, Closner adds, “eventually, we’ll have a new harvest every week.”
While commercial producers aren’t licensed to “sell” marijuana, MedReLeaf thinks it has a marketing edge over its rivals. Tikun Olam gives MedReLeaf access to seven years of patient data that document the effectiveness of its products. “It’s a real selling tool” when talking to doctors, he says. “No one taught them at medical school how to prescribe a plant.”
Strains, dosage, frequency — it’s all guesswork for now. Tikun Olam is running 20 clinical trials in Israel, the results of which MedReLeaf is also eager to share. Closner hopes this growing documentation will help doctors understand how to prescribe cannabis to their patients — and that maybe they’ll say something positive about MedReLeaf when they do.