Supreme Pharmaceuticals (TSXV:FIRE) recently announced that it had received a sales license under the Access to Cannabis for Medical Purposes Regulations (ACMPR)–which is no doubt exciting. But, according to its president John Fowler, it’s just the beginning for Supreme Pharmaceuticals. 
Thanks to its wholly-owned subsidiary 7ACRES, Supreme is able to rely on an hyper-focused business model, according to Fowler. 7ACRES grows their product with a sun-based greenhouse model.
“When you are really focused and passionate about doing something well, which for Supreme is taking craft cannabis and developing it on a massive scale – in a nutshell, showing that “big pot” doesn’t have to be ‘bad pot’ – that resonates with the market,” Fowler said in an interview with the Canadian Securities Exchange, in which Supreme traded its common stocks on before moving to the TSXV.


 

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With that in mind, the Investing News Network (INN) recently had the opportunity to catch up with Fowler to discuss a number of things, including:
  • the impact of the sales approval license on the company
  • what’s next for the company, including some of its goals;
  • Fowler’s opinion on talks of a cannabis shortage come legalization in Canada in 2018;
  • why investors should consider Supreme Pharmaceuticals as an investment option.

The transcript of this interview has been edited for clarity and brevity. Read on below to find out what Fowler had to say.
INN: Tell us about the impact the sales approval license has had for Supreme Pharmaceutical.
John Fowler: Getting the sales approval is obviously a large milestone day for Supreme. It’s something that we’ve been working on with the team at 7ACRES [since] the spring of 2013, so it’s really been a four-year journey for us. It’s neither a starting point nor an end point; for us it’s about building a great company and the infrastructure necessary to produce high-quality cannabis at scale. What’s most exciting to us is not the tick-box on a piece of paper saying we have the ability to sell The actual excitement is to get out on the market, get our product into the hands of our [Licenced Producer] (LP) partners, and into the hands of their patients and start to understand where we really sit on the market from a value perspective.
INN: Following this approval–for which Supreme has been working on for years–what’s next for the company and what are some goals you hope to accomplish this year?
JF: Next up for us will be taking the inventory that we produced over the past 14 months, patching that up and selling it, according to contracts that we’ve arranged over the same period. We got some really great LP partners we are working with–companies that have shown a great ability to generate strong branding, strong patient population, and great demand. We’ll be supplying them with additional product and help them serve their patients; that’s the near-term goal. As we expand over the balance of this year and next year, we’ll continue to bring online additional cultivation capacity… as that new capacity comes online there will be more cannabis produced per month and per quarter.
INN: You mentioned some of these LP partners, are you in a position to say who some of them are?
JF: At this time is a little early to announce that. However, all of our LP partners will be required to provide a marker that says ‘sun-grown by 7ACRES,’ so essentially a producers mark. We feel this is very important for the end consumer to really understand where their product came from, how it was produced and what company they can look [for] to make an educated decision around the quality of production. In the future, it will be clear which companies we are working with, it’s just a little early to announce right now.

“Every time you pick up a container of cannabis that’s been produced by us you can expect a certain quality”

INN: You talk about this quality guarantee, do you think this marker will become prevalent in the consumer landscape, for them to look for specific brands and for a standard to be created?
JF: Absolutely. I look at two things, first of all to me a brand is a promise – a brand is not a nice logo, is not a nice t-shirt, a brand is a promise that you make to your consumers. The promise of 7ACRES is that every time you pick up a container of cannabis that’s been produced by us you can expect a certain quality, certain subjective characteristics and certain objective characteristics. Meaning more than just say[ing] lab-tested but also certain positive quality aspects that we believe the consumer is looking for. That’s the promise we make to our LP partners and that’s the promise that they can, in turn, pass along to the end-user.
At the same time we believe very strongly that cannabis is not a commodity, we look at ample information in terms of how cannabis is priced in [places like] Canada and the Pacific Northwest, but in particular for us looking at a market like California, which is a very mature consumer market where there still is a very high price per gram–in many cases north of $15 even up to $20 per gram–there is a really strong focus on quality. If you want to sell cannabis in a good dispensary in California it has to be very high quality or there won’t be shelf-space and we believe the same is going to be true in Canada as our market develops both on the medical and recreational side.

 

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INN: There seems to be a growing concern within industry insiders over a shortage of cannabis next year as recreational use becomes legal in Canada. Have you guys taken any steps for this demand, or is there anything in particular that Supreme is doing?
JF: It shouldn’t be a concern to anyone, whether you are a cannabis company, an investor or just a general Canadian. Looking first at the political side I think we need to accept this reality: in a country that consumes possibly up to $10 billion a year of cannabis, there is no way that the recreational market is going to have that much inventory when the market starts–nor should it. I look at it as a reduction model, where every dollar that’s spent with a company that’s legal, paying taxes, providing security–whether that’s product quality security, employment security, or creating new jobs and all of these things the legal business brings. Every dollar that transitions from the existing illicit market into the legal market, I think, is a political win and a win to the average Canadian.
Looking at companies, we see that as a great opportunity where understanding that the legal side of the market is supplied constraint is really the backbone of our early stage business model at Supreme and why we focus on supply.  We figure that gives us the most leverage in the market and the best way to generate revenues, while also allowing us to be very focused. We have a core company cultivation and we focus all of our resources–whether that’s management time, or capital around using that competency to grow a better business–a more protected business–and eventually a more profitable business.

“There is no way that the recreational market is going to have that much inventory when the market starts”

INN: For any investors looking at Supreme Pharmaceuticals as a potential option, what is your value proposition to them?
JF: At Supreme, we try to be quite simple. Right now Supreme [is the] sole investor in 7ACRES, a cultivation-focused LP that has a real passion for cannabis. This is a company that… is focused on producing high-quality cannabis, doing it in a sustainable way using the sun and on providing that promise to the consumer of a consistent quality product that they can come to expect.
That allows us to focus our resources, time and capital on the cultivation competency–whether that’s greenhouse infrastructure itself, the management team that supports it, or the distribution channels as we are developing them with our LP partners. When you combine all of that together I think that makes a unique position for a cannabis investor, because it’s a much simpler path to revenue and eventually to profitability because our business is focused. Many of our LP partners, they are doing a great job, but they run a business that can get very complicated between cultivation, sales, logistics, distribution, and whatnot. I think for the investor that makes a big challenge in terms of figuring out where the future of the company lies.
Don’t forget to follow us @INN_LifeScience for real-time news updates!
Securities Disclosure: I, Bryan Mc Govern, hold no direct investment interest in any company mentioned in this article.
Editorial Disclosure: The Investing News Network does not guarantee the accuracy or thoroughness of the information reported in contributed article. The opinions expressed in these interviews do not reflect the opinions of the Investing News Network and do not constitute investment advice. All readers are encouraged to perform their own due diligence.

 

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