Yahoo Finance 5Q Scott Boyes, cannabis capitalist
There’s no question in Scott Boyes’ mind – marijuana is the next dot-com.
“We consider it probably the biggest nutraceutical of the 21st century,” says the president and CEO of Canadian Bioceutical Corporation, a company which has spent the last 20 years producing herbal and natural-based medicines and is now looking to launch a new medical marijuana venture, BioCannabis Products, and massive grow-op in Owen Sound.
“From a business perspective, there’s huge potential on the medical side and then there’s the hidden carrot of controlled recreational use down the road,” adds Boyes. “We've seen it (legalized) in four states in the U.S. and Justin Trudeau talks about it in Canada – if that ever hit it would just explode.”
His position is hardly surprising given the ubiquity of chatter surrounding marijuana reform but Boyes makes for an unlikely cannabis capitalist considering he divided the first three decades of his career between building railway businesses from the ground up, consulting for the finance sector and working a stint as vice president of the Bank of Nova Scotia.
But now, with Boyes at the helm, the company is hoping to capitalize on the country’s new marijuana regulation – effective last April – that requires patients to get a prescription from doctors but purchase medicinal cannabis via commercial producers.
The decision forces licensed commercial producers to meet the sort of standards and scrutiny big pharma would face bringing a drug to market.
It’s a clear evolution from the marijuana market’s teenaged years where small independent growers and dispensary middlemen made it difficult to track and complicated for patients to purchase cannabis to dampen the nausea from chemotherapy or cope with glaucoma.
“(Health Canada) raised the bar so high, you literally need millions of dollars to get into the sector,” he adds.
We sat down with Boyes to talk about the Owen Sound plant, his personal reformation surrounding reefer madness and why he picks Canada over the U.S.’s fractured marijuana market.
This is a pretty substantial grow-op you’re looking to build in Owen Sound – 155,000 square feet with room to expand making it one of the largest in North America.
We looked for a building that was scalable. We're leasing over 150,000 square feet now of a 240,000 square foot building. We've got an option on the balance of the space. It also has a 100,000 square foot existing foundation not utilized now that we could expand quickly – the city has said they would expedite that if that came to be. It’s an old glass factory.
You've got the full support from Owen Sound then?
It’s incredible. In fact I was there last night at a city council meeting and I was expecting some local opposition, usually you get some, but there was not one speaker that came to the podium against the project. We were there armed and ready to deal with objections.
Really, no objections?
Not one. We've had great support from the city council – the current mayor, former mayor, letters of support from the police chief and fire chief.
That’s encouraging. On the other hand, the Feds recently blocked CEN Biotech’s application to build a massive production plant. I know it’s heartbreaking but what happens if you don’t get the permit?
We're reasonably confident we'll get it. I think its a question of how long does it take. The regulations are written that if you do x, y and z the minister must issue the license. It’s just a question of making sure you become compliant.
People, and government in particular, seem to be getting a bit more comfortable with the idea of medical marijuana.
My wife just went through a bout of breast cancer and she was dealing with nausea problems and pain problems from the chemo. I have a daughter who's in third year medical school and she came home for a visit, saw the agony my wife was going through and the first thing she said was: “Mom, we need to get you some cannabis because it's the best thing for treating nausea.”
You grew up in the 50s and 60s – did you ever imagine marijuana becoming a billion dollar, regulated industry in Canada?
No. Not at all. Like everyone else, we tried it when we were young, didn't do much for me and I never thought about marijuana again. I preached to my kids against using it until my daughter came home and said "Dad, grow up." So yeah… but now I don't see it as toking up at a rock concert. I see it as medicine.
I was noticing your career took a full left turn in 2013 when you went from the finance and railroad world to life sciences, was it what was going on at home that spurred the change?
I was a commercial financier for many years. I’ve been in the lending, borrowing, capital-raising community and managing businesses for quite awhile. I got a call from a contact to meet with a lawyer who had a client who was trying to get into this business. His concept was to acquire a big facility, sub-divide it to get individual licensed on behalf of investors and treat it kind of like a condominium. I knew very little about the sector. I worked on it for a bit but the business plan was flawed and the facility was not suitable so I ended up walking away from it.
But you’d already immersed yourself in it so you kept going?
About the same time, Sanjay Gupta came out with his CNN special Weed and it showed how certain strains of cannabis were really helping people and I thought, wait a minute, there really is a lot going on here, this is an industry beneficial to society if properly channeled and properly controlled.
Some States really seem to have bought into the idea and run with it. Why not set up your plant south of the border to capitalize on both the recreational and medicinal side?
Number one, it’s still illegal federally in the US. So where it's legal, it’s legal state to state. There are only four states where it’s legal recreationally and in Colorado you’re dealing with a whole slew of small licensed producers. Production standards are much different. Right now in the U.S. it’s kind of like it’s the Wild Wild West. And until it stabilizes, I’m not sure that would be the best place to invest. Plus you’re also dealing with fractured markets. Of the 23 states that have licensed it for medical use, the regulations are extremely varied. And it’s very hard to raise capital in the U.S. because you can’t be a public company and be a grower because it's illegal federally.
Whereas Canada’s recently regulatory upgrades create a clear blueprint to work with, making it more attractive.
Go back to Prohibition. When Prohibition in the US ended, who were the biggest producers that supplied the U.S. market? It was Seagram’s and Hiram Walker. Large Canadian producers that had a big head start on formalized massive scale production. I think the parallel will exist here too. In Canada we’ve got a federally regulated industry that’s creating a very high standard product focused on the medical market, which is now legal in 23 states. We're getting an opportunity to create a head start.
Any idea how big the market is here?
Right now Health Canada has estimated it would be worth $1.5 billion but that’s based on the medical market. My expectation is that if it's ever recreationally legal it’ll be heavily controlled in terms of quality and distribution, maybe even like alcohol – who knows? – but it’s going to be here eventually.
