In this edition of "Rising High," The Fly conducted an exclusive interview with Leith Pedersen, co-founder and president and general counsel of Sunniva (SNNVF), a vertically integrated medical cannabis company with operations in Canada and in California. Here are some of the highlights:
HOUSE OF BRANDS: Sunniva is a fully-integrated cannabis producer in California and owns one of the largest chains of medical cannabis clinics and education centers in Canada, Pedersen said, adding the company has a fully operational extraction facility with in-house compliant distribution. “We are in the latter stages of completing a large scale, high tech glasshouse which will produce 50M grams of premium flower on an annual basis once completed later this year,” the company president said. He noted the company also launched three cannabis brands Sun Fire, KYNDNESS and Herbella, in mid-March that form the initial series of a planned “house of brands” the company will develop. “Our product offerings include premium flower, ultra-pure distillate for vape cartridges and a full suite of extracted concentrates such as shatter, sugar and live resins,” Pedersen said.
COMPETITION: The company president said he does expect competition to increase in the future as regulations and access to capital become less onerous. “There continues to be a large amount of cannabis that is failing California state testing requirements, causing disruptions along the value chain,” he said. “The current environment is beneficial to us as we are focused on what we can control, building pesticide-free cultivation at a large scale so that we are not reliant on other producers for our products.” Pedersen said Sunniva has also secured the means to package and distribute products. “We believe that one of the future differentiators in the market will be the ability to produce high quality brands that can be delivered consistently to dispensaries, which will help to secure shelf space at retail outlets and to develop brand loyalty with end users,” he said.
LEGALIZATION: When asked which country could be the next to legalize cannabis on a federal level, the company president said that it is hard to predict. “There are so many governments around the world that are looking at the Canadian model and working through the details, examining how the rollout last October was accomplished, to determine how legalization may look for them,” Pedersen said. “We are confident that the spread of legalization around the globe for both medical and adult use will continue, regardless of which country goes next.” He said the company has a similar view when it comes to the U.S. as there are only a handful of states that don’t have some form of legal cannabis. “We are of the opinion that ultimately, all individual states will legalize cannabis, and that eventually it will be made legal federally,” he said.
CALIFORNIA FOCUS: Pedersen said at this point Sunniva remains focused on building operations and brands in California and is not looking to expand to any other countries. “Looking ahead to the future, we see great opportunity to expand within the California market – which on its own is larger than the entire Canadian market,” he said. “Should the U.S. make cannabis federally legal, and we can more easily move operations across state lines, we would definitely look at expansion within the U.S.”
CHALLENGES: When asked about the challenges the industry is facing, the company's president said he believes the biggest hurdles will come from the shift from the black market toward a regulated industry. “This encompasses not only quality control of the plants and the manufactured products, but also the safe handling and distribution of finished goods,” Pedersen said. “Compliance regulations and enforcement are still in infancy and even established operators need to be flexible in an evolving business environment.” He added that issues in the discrepancy between state versus federal legality also create challenges. “It impacts the financial operations of individual companies, since access to capital is limited due to restrictions from the banking industry and the capital markets,” he said. “This has caused a higher cost of capital for many small startups in the U.S.”
INVESTOR INTEREST: Pederson said as investor interest increases in the space, the next couple of years are going to be about execution. “Many of the early entrant companies moved very quickly, raising money, buying assets, beginning construction of large facilities in order to capitalize on the wave of excitement,” the company president said. “At some point, as with any new or emerging industry, the wave of euphoria that grabs investors gives way to the fundamental basis of all business…finding out who can run a profitable and longer-term sustainable business. That is only done through execution of the business plan, prudent use of cash and building a strong foundation for future growth.” He added he believes the industry landscape will look very different as the sector matures over the next five years.
OTHER CANNABIS STOCKS: Publicly-traded companies in the space include Aurora Cannabis (ACB), Aphria (APHA), CV Sciences (CVSI), CannTrust Holdings (CNTTF), Cronos Group (CRON), General Cannabis (CANN), Canopy Growth (CGC), Tilray (TLRY), Innovative Industrial Properties (IIPR), India Globalization Capital (IGC), ICC International Cannabis (KNHBF), Biome Grow (ORTFD), MediPharm Labs (MLCPF), Indiva (NDVAF), OrganiGram (OGRMF), KushCo (KSHB), MedMen Enterprises (MMNFF), Elixinol Global (ELLXF), Planet 13 Holdings (PLNHF), Wayland Group (MRRCF), Khiron Life Sciences (KHRNF), Liberty Health Sciences (LHSIF) and Origin House (ORHOF).
Sunniva
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Aurora Cannabis
-0.085 (-0.93%)
APHA
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CV Sciences
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CNTTF
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Cronos Group
-0.81 (-4.00%)
Canopy Growth
-0.18 (-0.40%)
Tilray
-0.19 (-0.28%)
IGC Pharma
+0.35 (+17.77%)
ICC International Cannabis
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ORTFD
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Changed to MEDIF
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INDIVA
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Organigram
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KushCo Holdings
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MedMen
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Elixinol Global
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Planet 13 Holdings
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Wayland Group
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Khiron Life Sciences
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Liberty Health Sciences
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Origin House
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