Special Report: Creso Pharma has become the first ASX-listed company to wholly own a licensed Canadian cannabis producer, after its subsidiary was granted a cultivation licence.

Creso’s (ASX:CPH) Canadian wholly owned subsidiary Mernova Medical has been granted a license to cultivate by Health Canada, making it only the fifth licensed producer in Nova Scotia.

The license gives Mernova Medical the ability to begin planting crops in the new, 24,000 square foot purpose-built, indoor growing facility based in Windsor, Nova Scotia, and the company anticipates the first two crops will be completed in the third quarter of 2019.

Mernova Medical has already signed a three-year supply agreement with TerrAscend Canada, and the cultivation licence permits sales of cannabis immediately on a B2B basis to that company.

Mernova Medical has also been in discussions with the Nova Scotia Liquor Corp (NSLC,) the province’s dedicated distributor of cannabis, to supply the NSLC as soon as a monthly commitment of kilograms of product can be met.

Key strategic advantage: secure storage

The Mernova Medical Windsor facility has a secure storage room which allows the company to wholesale acquire cannabis products from other licensed producers, or even import low cost cannabis products from Creso’s proposed Colombian operations.

The secure storage room can house up to $100 million in concentrated product which could be utilised by Creso as an input into medicinal based delivery technologies for the massive European market and through Creso’s established distribution channels.

“We are excited to achieve this much anticipated milestone. The license makes Creso one of only a handful of companies with a license to produce cannabis in Atlantic Canada. It opens up substantial revenue opportunities given the high demand suppliers face following legalisation in Canada last year,” Creso North American COO John Griese said.

“Our strategy of locking in sales revenue ahead of granting of the license means we can hit the ground running and capitalise on the capabilities of this premium growing facility.”

Purpose-built and efficient

The Mernova Medical Windsor facility is a purpose-built, highly efficient indoor cultivation facility on a 10-acre parcel of land and it is capable of accommodating up to 200,000 square feet of cultivation.

The facility includes many cultivation and automation technologies specifically designed to meet EU Good Manufacturing Practices (GMP) certification standards. It currently accommodates a two-tier grow room with the capacity to yield in excess of 4,000 kilos of cannabis annually.

Dr. Miri Halperin Wernli, Creso CEO and cofounder, said gaining a licence was “a great achievement that Creso now has the ability to cultivate and produce cannabis plants in Canada, a country where demand for cannabis is currently outstripping supply.

“Our rigorous research and production processes will ensure the products grown and produced at the Mernova Medical Windsor facility will be of the highest quality and, as a result, demand premium pricing. In addition to selling excess capacity to third parties, the Mernova Medical Windsor facility allows Creso to vertically integrate its production.

“In-house cultivation allows Creso to lower the cost of production with respect to its current cannabis product range. Creso can ensure raw material supply security as well as maintaining the highest quality level.

“Securing the license is another critical step we have taken over the past year fulfilling our goal to position Creso as a global cannabis brand with operations and the ability to supply human and animal health products across the world.”

Supplying the Europeans

Creso’s aim is to also supply medicinal cannabis direct from this facility to European pharma companies with whom it has existing relationships, specifically in Germany, Italy, Spain and Switzerland.

Discussions with these companies are well underway.

Creso also intends to add an edible cannabis production area to the Windsor facility this year, to meet demand once these products are approved for sale in Canada by the end of 2019.

There are four other companies in the Atlantic Canada region with licenses to cultivate, and Deloitte has estimated that the market size for recreational cannabis in this region could be up to $C290 million.

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