Kazmira co-CEO talks Perrigo investment, challenges, opportunities and more
In this edition of "Rising High," The Fly conducted an exclusive interview with Pulak Sharma, co-chief executive officer of Kazmira, an industrial scale producer of broad-spectrum CBD oil, CBD isolate and water-soluble CBD. Here are some of the highlights:
HEMP-DERIVED CBD: Kazmira is a supplier of hemp-based CBD products free of THC from American-grown ground industrial hemp. The company produces highly concentrated oils using a proprietary technology platform that enables the supply of products that are free of THC, pesticides, solvent residues and heavy metals. “We are really focused on ingredients derived from hemp, whether it be from CBD or any other molecules that will come out of the hemp plant,” Sharma said. “We have unique technology and capabilities to make those ingredients a very high purity without the THC component and we are really targeting the CBD molecules.” The company also offers a White Label program for customers to select a bundle of CBD products and focus on front-end business as well as a Private Label program offering custom formulations through a collaborative product development process. “We realized a lot of our customers were interested in fully finished goods,” Sharma said. “We really thought it made sense to develop not only the right processes to make those finished goods for our customers but also enable them to envision a concept of what a finished good could look like.” The co-CEO said Kazmira had a very robust pipeline of product development and that naturally turned into a business as customers liked the quick turnaround time. “They really liked that we focus on innovation and providing something very novel for the industry,” he said. “It’s been a pretty interesting approach to problem-solving and the CBD space because a lot of customers just want something they can run with.” Sharma added that compliance and safety is also an important aspect of the company’s operations. “You need to have a very intimate relationship with your cannabinoids,” he said. “You should sweat a little bit. You have to make the product and go through the process and that obviously involves a lot of validation on purity, certificates of analysis, heavy metals, pesticides and that often is very overlooked.” The co-CEO added Kazmira spends a lot of efforts ensuring it has established the right systems for cGMP manufacturing. “We’re constantly working with third-party labs, making sure everything is traceable and we can actually find the contaminants,” he said. Ultimately though, the company’s main focus is on serving customers well. “We truly believe in the power of cannabinoids and I think to some degree the power of cannabinoids has been laughably underestimated,” he said. “We are really focusing on making sure our customers find a lot of value in what we provide and on working with them to innovate and working with them for them to be successful.”
PERRIGO INVESTMENT: Kazmira announced in June it closed a $50M strategic investment from Perrigo Company (PRGO) and entered into a long-term supply agreement with the company. Perrigo acquired an approximate 20% equity stake in Kazmira. “It’s a big validation for the industry that really focusing on science and innovation and keeping our nose to the grindstone has had its pay off,” Sharma said. “We have always been very close to the work at hand.” The investment is being used to scale up Kazmira’s facilities and laboratories, engage with regulatory authorities, develop the company’s product portfolio, extend reach into retail mass markets and enhance management and technical teams. “For a pharmaceutical company to invest in a company like ours in this phase definitely says there’s a lot of potential here,” the co-CEO said. “The power of cannabinoids is going to shine and a lot of focus is going to be on understanding how these molecules can completely change human health and nutrition as we know it today.” When asked about how larger companies entering the space may impact the industry, Sharma said a lot of the effect will depend on the Food and Drug Administration. “As bigger companies and pharmaceutical companies want to get into the space, it’s going to open up the channel for dialogue with regulatory bodies on how CBD should be regulated as a dietary supplement or a drug or a mix of both,” he said. “That’s what is really important. It is going to unlock that conversation so better, richer conversations can happen, which then allow the right research to happen and the right folks to enter the space, innovate and create new products.”
DELIVERY SYSTEMS: As technology in the space develops and delivery systems for CBD become more differentiated, Sharma said he believes consumer demand will shift towards higher milligram strength products. “People are looking to incorporate CBD and other cannabinoids into their daily lives and for that to really be enabled we’re going to need delivery systems to enable the higher bioavailability of the cannabinoids and CBD,” he said. “Specifically, it’s very lipophilic and it’s very hydrophobic, so how do we get it into the body? It’s going to be a very interesting field of study.” The co-CEO added he believes a lot of research will be conducted on how to make CBD and cannabinoids much more bioavailable in the body. “The second thing is going to be a big focus on looking for claims,” he said. “CBD at the moment has kind of become an elixir. There is some value to the indefinite optimism but at the same time we need some definite optimism. Being able to make claims is going to be a powerful field for work that will grow the entire category and enable CBD to become more mainstream.”
CHALLENGES: When asked about the biggest challenges facing the industry, the co-CEO cited the lack of incentive for players to act in a good way as well as the traceability of the supply chain. “The challenges I see are, number one, the importance of allowing good players to be good,” he said. “The way to enable that is really some sort of regulatory process.” Sharma added enabling the right actors is very, very key as not doing so results in a tragedy of the commons. “People just focus on short term gain and sacrifice long term benefit,” he said. “If there’s no incentive for the right players to act in a good way and there’s only incentive for the wrong players to continue getting away with mislabeling, not having the right amount of cannabinoids or having too much THC, everybody is going to suffer in the long-term.” Sharma also noted that he sees supply chain traceability as a hurdle and said the cannabis space needs to ensure manufacturing facilities are following cGMP processing and making product in a way in which it complies with all the laws. “There’s definitely a Wild West aspect to the whole industry and what concerns I have with that is the people try the product and they may not try it again because they didn’t feel the effect that product promised because it turns out it had only half the milligrams of CBD that it said,” he said. “That is the real challenge, that the consumer loses out the most and in turn the entire industry will suffer because the consumers are not dumb. They’ll buy it once, they’ll try it, if it doesn’t work how they thought it would, they won’t buy it again and you’ve potentially lost that customer.” Sharma added the acquisition cost to get the customer back can be very costly.
OPPORTUNITIES: As the cannabis space develops, Sharma said Kazmira is focused on creating the right platform for CBD to become an ingredient and allowing customers to develop novel products. “That’s one thing we spent a lot of our time on,” he said. “I don’t want to be the one to have to do all the work all the way down to the finished project, some of the work needs to be transferred over to the brand so they can create potentially new product categories with CBD and that’s we’re we believe there is a lot of opportunity.” Sharma said the opportunity lies in companies taking the ingredient and creating something that could be a habit. “That’s a big aspect of it, how do you create habit out of consuming cannabinoids every day?” he said. “People are not used to that, it’s very novel.” The co-CEO added brands will have to do a good job of identifying the customers that will really benefit from cannabinoids and CBD. “How do we create a habit in which those customers can become strong users of CBD and they’re able to say that it truly helps them?” he said. “I think being really focused on delivering value through customer service and the creation of a habit, I think that’s going to be significant in the industry moving forward.”
CANNABIS STOCKS: Other publicly-traded companies in the space include Akerna (KERN), Aleafia (ALEAF), Aphria (APHA), Aurora Cannabis (ACB), Auxly Cannabis (CBWTF), Biome Grow (BIOIF), CannTrust (CTST), Canopy Growth (CGC), Canopy Rivers (CNPOF), CordovaCann (LVRLF), Cresco Labs (CRLBF), Cronos Group (CRON), CV Sciences (CVSI), Delta 9 (VRNDF), FluroTech (FLURF), General Cannabis (CANN), Greenlane (GNLN), Green Thumb Industries (GTBIF), GrowGeneration (GRWG), Harborside (HSDEF), HEXO (HEXO), Hemp Inc. (HEMP), India Globalization Capital (IGC), Indiva (NDVAF), Indus Holdings (INDXF), Innovative Industrial Properties (IIPR), Khiron Life Sciences (KHRNF), Liberty Health Sciences (LHSIF), MediPharm (MEDIF), MedMen (MMNFF), MJardin (MJARF), Neptune Wellness (NEPT), Omnicanna (ENDO), Organigram (OGI), Planet 13 (PLNHF), Sproutly (SRUTF), Sunniva (SNNVF), Supreme Cannabis (SPRWF), Valens (VLNCF), Tetra Bio-Pharma (TBPMF), Tilray (TLRY), Trulieve (TCNNF), Vireo Health (VREOF), Wayland Group (MRRCF), WeedMD (WDDMF), Wildflower Brands (WLDFF), YSS Corp. (YSSCF), Zynerba (ZYNE) and 4Front Ventures (FFNTF).