Leading Cannabis Cultivator in Canada Shares Outlook – Greg Engel of Tilray

Greg Engel

Learn why Greg Engel left a lucrative position in the pharmaceutical industry to become the CEO of a cannabis cultivation company called Tilray. Tilray is part of Privateer Holdings portfolio and it considered among the best capitalized and most well run Canadian cannabis cultivation companies. There are significant differences between how the government regulates cannabis in Canada in the U.S. We go over some of those differences and more in this interview.

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Key Takeaways:
[1:12] – What is Tilray
[1:37] – Greg’s background
[4:00] – Greg discusses innovations he is excited about
[5:04] – How Greg’s friends and family feel about his move to cannabis
[6:06] – How Canada and the United States differ in cannabis regulation
[8:17] – How medical marijuana distributed in Cananda
[10:14] – Greg discusses Tilray’s cultivation facility
[12:26] – Greg talks about clinical trials
[14:57] – Automation in cannabis cultivation
[16:04] – Greg explains how Tilray stands out in the industry
[19:09] – Why can’t we produce synthetic CBD or THC
[20:23] – Greg discusses Tilray’s expansion plans to Uruguay
[22:59] – Dispensaries in Vancouver
[25:08] – Contact information for Tilray

Read Full Transcript

Matthew: Hi, I’m Matthew Kind. Every Monday and Wednesday look for a fresh new episode where I’ll take you behind the scenes and interview the insiders that are shaping the rapidly evolving cannabis industry. Learn more at www.cannainsider.com. That’s www.cannainsider.com. Are you looking for a fulfilling and lucrative career in the cannabis industry? Visit www.cannainsider.com/careers. That’s www.cannainsider.com/careers. Now here’s your program.

Greg Engel is the CEO of Tilray a Health Canada licensed producer and a national leader in the production and distribution of premium medical cannabis. I am pleased to welcome Greg to CannaInsider today. Welcome Greg.

Greg: Thanks Matt. Nice to be on.

Matthew: To give us a sense of geography can you tell us where you are in the world today?

Greg: Yeah so I’m Nanaimo, British Columbia which, Canada’s West Coast. We’re right dead center of Vancouver Island which is off the West Coast of Vancouver.

Matthew: Now can you give listeners a sense of what Tilray is and does?

Greg: Sure we’re a license producer under Canada’s legal, national/federal medical cannabis system. We have been in operation and producing medical cannabis since the regulation changed in April of 2014.

Matthew: Now Greg I believe you came from the pharmaceutical world in background. Can you tell us about that and how you came to join Tilray?

Greg: Sure. My background had been 25 plus years in pharmaceutical and bio tech. The last 15 years I’ve been a head of a number of different companies either pharmaceutical or bio tech here in Canada and/or globally. So you know I have a lot of experience in startups. And what really excited me about Tilray and the opportunity to come to the medical cannabis industry was really three key things. One was that medical cannabis has been a pharmacopeia for thousands of years as you know. And you know the opportunity to really be at the forefront of a federally regulated system and building a company that’s going to operate under that structure, you know, was very exciting for me.

The other was, the second thing was there was a lack of innovation happening in the pharmaceutical work. I mean certainly bio tech companies are innovating, coming up with new solutions for rare diseases, but pharmaceuticals was getting a bit stale, and it was really exciting to come in to and industry in the early stages. It’s almost and lots of parallels too, the early days of tech boom and you know how that works, but one that was going to impact and affect patients’ lives. So a very exciting opportunity.

And the third for me was really a personal connection. I had a sister-in-law who passed away from a brain tumor who turned to medical cannabis and really had significant benefits in her quality of life towards the end of life. And I saw that firsthand and it really, you know, motivated me to be a part of this industry. So lots of things, both business and personal, that have brought me to Tilray.

Matthew: People coming from the pharmaceutical background, I think, it intimidates a lot of people from kind of the grassroots cannabis movements. But I’ve recently had an awakening. You know not everybody that comes from a pharma background is Darth Vader, and there’s a lot we can bring from the pharmaceutical industry into the cannabis industry. Safety, automation, innovation. In terms of innovation you said you were excited about what can be done in the cannabis space. Is there anything in particular you’re really excited about right now where you’re saying hey there’s some innovation happening here, there are some opportunities that I’m looking at closely?

Greg: Yeah there’s a couple things. I mean one you know we’re involved in some clinical research programs, and I think that’s really exciting. Now that we have a federally regulated system and we’re producing, as you said, medical cannabis in a quality environment that undergoes rigorous testing that we can move in to help Canada improve clinical trials with that. So that from an innovation perspective, you know, not that there hasn’t been a lot of work done in the past, but we’re doing it I think at a higher standard. So that’s very innovative, and that’s really exciting.

And I think the other is in the future we’re going to see, you know, continued evolution in the forms of delivery that, you know, companies are working on and patients are looking for. Not just in Canada, we’re restricted currently to selling only dried flower or a dried leaf product, you know, that can be smoked or vaporized. But in the future potentially there’s going to be a lot of opportunities to develop other methods of deliver. So that’s really exciting as well.

Matthew: Now on a personal note, what was your friends’ and family reaction when you said hey I’m getting into the cannabis industry?

Greg: Yeah you know what’s really interesting because you know you don’t always know, you know, it’s not always a topic that comes up amongst people. You don’t know what their personal views are. But you know everybody has been really supportive and understanding, and they’re saying it’s about time that the government made these changes and bringing this to the forefront and it’s legitimate. You know I have actually been overwhelmed with the amount of positive support and feedback I’ve gotten from people. Everyone has really been supportive and said, you know, because everyone has a personal connection. I mean that’s what I’ve found is you know themselves or through relatives or through friends, everyone is aware of someone who has had or has uses or is currently using medical cannabis in their life. So I’ve had great support.

Matthew: Oh that’s great. Now can you give us a little bit of a understanding of how the legalization, how legalization is unfolding in Canada versus the United States and how you view it as different or the same?

Greg: Yeah no it is very different. So go back to 2001 in Canada and there was a system put in place called the MMAR, which allowed individuals to grow for personal use and then up to two other people. So they actually would be given authorization to grow for personal use. And that allowed people who needed medical cannabis or wanted access to it to produce their own. There was one Canadian approved company called PPS that was also supplying medical cannabis, but unfortunately over time, you know, certainly lots of people were growing for themselves or growing in an environment that’s produced, you know, a safe product and it was produced in the proper or sterile areas and you know there weren’t concerns about, but over time there were also some growers that were taking advantage of the regulations and were, you know, producing product which may have been produced in really unsanitary, unsafe conditions and they were reselling that product on the marketplace.

So Health Canada was very concerned that a product was going to the marketplace that was putting people at risk. So they moved towards a regulated system where license applicants would have to be corporations, would have to undergo security background checks, meet a number of criteria and really grow product under a, you know, a safe and sterile conditions under good production practices and meet test criteria, really rigorous testing in terms of release of that product. So today there are 25 companies in Canada that are authorized as licensed producers to sell medical cannabis in Canada under that regulation.

Matthew: Do you anticipate more licenses being awarded or is that kind of fixed at least for the time being?

Greg: No, I do know. A Health Canada presentation recently, they still have over 300 license applications pending right now.

Matthew: Okay. And so you said only flower can be sold, and that’ is only done via the mail correct?

Greg: Yeah so the way the system works is physicians have to write a prescription, not unlike a prescription for a pharmaceutical product. And then that prescription is provided to a licensed producer like ourselves. And then we work with the patient to determine the strains that are appropriate and their ordering. And the only limits that are placed on that prescription is the number of grams per day and per month that a patient can access. And then we ship directly to the patient. So every patient receives product directly at their home.

Matthew: So with your background in pharmaceuticals, do you see an evolution where oils at some point will be available for doctors to prescribe so they can say hey take 10mg of this 2 times a day. I know what it is. It’s a standardized strain. This is what it’s called and I know what the likely outcome is for the human biology. Do you see that coming and when the tipping point will be for doctors who are routinely beginning to prescribe cannabis for different remedies?

Greg: Yeah it’s certainly as you said. I mean there is a desire out there in the medical community, and they are looking for that type of product. I certainly can’t predict when the regulations and when things would change to be able to allow that, but we certainly hear that consistently from the physician community that ideally like to have, you know, an oil or a tincture, some form or an extract that you know has a consistent make up in it and more like a pharmaceutical as you said.

Matthew: Now switching gears to the cultivation facilities Tilray, I think it’s hard for many Americans to understand that the cultivation facilities in Canada are enormous in relation to the cultivations facilities in the United States, and that’s because there’s much fewer of them, as you mentioned, 25 currently. How large is Tilray’s cultivation facility and can you tell us a little bit about what it’s like?

Greg: Sure, great question. We have a 60,000 foot facility, and from the outside it really looks like a production plant. We grow everything indoor, in designated flower, you know, clone mother and then veg in flower rooms through the process. And you know when you walk in you know there’s gowning processes, not unlike you know a pharmaceutical or food environment. People are wearing gowns and suits and hair cover and hair nets. And it really is focused on production and output, and we’re actually continuing to see improvements in our processes here too, you know, get greater yields and to get higher levels of CBD and THC in those strains that we have.

So, as I said, it really feels like a production facility when you come in and it has that sense. And with that we also have a lot of security. It’s a very secure facility because not only is that required by Health Canada, but we also want to protect our product and our employees working on site. And also you know as I said on our product, we wouldn’t want have a loss of product because that would mean we can’t medicine to our patients. So I’ve heard it referred to as the Fort Knox of the region because it definitely is a highly secure environment.

Matthew: Now how many kilos of cannabis do you anticipate being able to produce a year?

Greg: Yeah so we are currently… we were working through restrictions with Health Canada. They were only allowing certain parts of our facility be operational. So even today we’re only at 90 percent. We’re in a position right now to, we’re going to be releasing over the next couple of weeks 130 kilos, because we had a number of rooms that were approved at the end of last year. And then at our current size we’re going to be consistently providing a minimum of 50 kilos per month.

Matthew: Right. And for the American listeners a kilo is, I believe, 2.2 pound.

Greg: Two point two pounds that is correct.

Matthew: Now you mentioned clinical trials, and I’m really interested in that because there’s a lot of naysayers on the fence that say well show me the proof, show me the proof and you know people that have personal experience, they say I already know the proof. This is for you, but what can you tell us about clinical trials? I mean PTSD, is there any clinical trials that you’re doing right now that you’re really excited about or that you feel like could be done and you would like to do in the future? How does that work?

Greg: Yeah so and I think you’re betting on that in terms of that there’s a lot of anecdotal, personal experience here and a lot of small scale studies that have been done. And in order to get to the point where you know, the payers and the reimbursement side of the industry is going to look at covering medical cannabis more routinely. We need to show harder evidence and that’s what our goal right now is, as you mentioned, PTSD. So we currently have a post traumatic stress disorder study which is, you know, is a psychological condition effecting veterans, first responders, sexual assault victims, and that study is partnered with the University of British Columbia and will be starting in the next quarter and ending next year. And the goal of that study is really to assess the effect in that population, you know, a couple of different strains and really to collect, you know, that’s an early study, a Phase II study which we need to further research.

We’re also looking at other studies in both adult and childhood epilepsy. There’s been a lot of work done in those areas, and we feel that you know again doing a study that would support, you know, at a pair perspective and also support what the regulatory even sees. Hard clinical proof is going to make a big difference here, and that’s why we feel… and other companies here are investing in clinical programs and we know in other jurisdictions in the world there are other clinical programs ongoing. And I think we’re seeing a shift from you know a lot of the early stage trials to a more regimented structure of clinical trials which will provide hard clinical proof and allow us to really elevate the status and elevate the conversation which is the important thing.

Matthew: So it sounds like your production facility is very secure and clean and modern, but the next step in evolution is always automation. And I think of robots or different ways to automate a growing facility, especially one that’s as large as yours. Do you see in the next couple of years getting some, borrowing from other industries, maybe even the pharmaceutical to automate routine tasks within your cultivation facility?

Greg: Yeah absolutely. So we’re looking at automation in packaging right now. You know one of the other LPs here in Canada is automating their packaging. We’ve even looked at automation processes within the grow facility. You know our facility, while 60,000 square feet is a great size, we have potential expansion plans that we’ll be working on. We’ve purchased the property next to our facility, and we’re looking to build a facility that will be four to five times the size. And when you start to get to that size, you know, even within the cultivation process you need to look at some automation aspects or some improvement. Yeah, point well taken, I’ve had lots of experience in that in pharma, and it’s one of the things that are going to be critical as we continue to scale up.

Matthew: Now how does Tilray stand out relative to the other licensed cannabis cultivators in Canada. I mean you very well capitalized with Privateer behind you which is… actually you would think everybody is, but it’s not the case necessarily that everybody is well capitalized, but apart from that, how do you feel like Tilray really stands out?

Greg: Yeah I think, and as you said not everybody is well capitalized. You know we are aware certainly of some companies in Canada that are really struggling from a capitalization perspective on both publically and privately held companies. So we’re fortunate to have the backing of Privateer which is great for us. You know what really differentiates us I think is two key things.

One is that you know our patient and customer experience, you know, the experience our patients have with us is top notch. We have an incredible team of customer service personnel, and we offer the only 24/7 actually call center in the country. We have an online portal so patients and physicians can register and order product online, order their medical cannabis that way. And we were the first company to do that as well. So just the whole patient experience is very positive.

Then the other point is the quality of the product we produce. I mean we have 47 different strains, you know, we’re consistently producing products that our commenting on just the quality of what they’re getting from the whole flower perspective. You know, the smell, the taste. We measure terpene levels and we’re reporting those now so patients can get a sense of what the terpenes are, to give them a sense of what the smell and flavor will be of different strains. We’re producing a really high quality product for our patients and giving our patients a great experience at Tilray.

Matthew: Wow that’s a lot of strains, and one thing that pops in my head is (A) that’s great, but (B) is that as a business owner you’re looking at velocity like how fast is this turning over from harvest to actual sale, and is it lingering around more than these other strains. What’s the 80/20 rule? What are the 20 percent of my strains that make up 80 percent of the revenue and how do I reconcile that. Should I be growing more of these strains over here and less of these over here, but that hurts the spectrum of strains I offer. I mean how do you balance those interests as a business owner?

Greg: Yeah, no, it’s a great question and you’ve outlined exactly what we do. So we have a core group of strains that we consistently are providing to the marketplace, and then we have other strains that are limited edition and have a certain point of the year or some seasonality associated with them. We can’t produce, you know, consistently producing all 47, but we have a core that we do produce across a range of indica, sativa, you know, high CBD, hybrids so that there’s a great mix and offering there. But then we have some really nice limited editions we put out at different times. So that’s working really well for us right now and it gives us an ability to meet our patient demand but also give them something unique at certain times.

Matthew: I’m interested to your answer in this question because I have people that email me that are just kind of coming on to the cannabis scene and they say, you know, we have all this sophisticated chemistry and pharmaceuticals. How come we just can’t make synthetic THC or synthetic CBD and I have an answer, but I would love to hear what you think about that.

Greg: Yeah I mean we do know, you know, in Canada we do know there are two synthetic forms that have been produced that are on the marketplace. You know and I think the difference, as you know, is really the chemistry and the makeup of you know how the THC-A form and how the acidic form is metabolized in the body. So we still see that the best choice and the choice is a grown product, you know, an agricultural based product. But the one question I think that highlights to that is that there are potential beneficial effects of some of the other minor cannabinoids as well. Those are not fully understood yet. I mean there’s a lot of research that is going into the effects of those minor cannabinoids and even terpenes potentially. So I think that is part of the makeup of medical cannabis that why there is a difference between a synthetic form in terms of its effect and a natural form that is being produced.

Matthew: That’s a great answer. So there’s a lot we don’t know. There is a lot that is coming into focus, but there’s a lot we don’t know. The mysteries are still being revealed how it all works together.

Greg: Exactly.

Matthew: I’ve read that you are expanding or considering expanding to Uruguay, can you tell us what you’re doing down there?

Greg: Yeah so we applied for a license application in Uruguay when their medical cannabis approval happened in the government, and we are looking at other jurisdictions throughout the globe where medical cannabis is legal. You know that stage, you know, I can’t share really anymore on what’s happening in Uruguay because it’s still very early stage. We’ve applied for a license. We haven’t really gotten any feedback yet on what that looks like, but you know we’re really, as a company, are going to look at opportunities where they arise, where medical cannabis is becoming legal and those opportunities exist we… our goal is to become really the global leading medical cannabis producer in terms of most respected, leading company in the world.

Matthew: Uruguay is an interesting market because they are very pro cannabis. They’ve accepted it culturally and politically, but the government down there continues to kind of say hey let’s make this legal, but then they go we want to control it all. So it’s this back and forth where you’re saying well wait a minute, can we create a commercial operation down here or are you trying to nationalize this. So they’re kind of of two minds on the subject still and hopefully that will clear up soon.

Greg: Yeah hopefully that gets resolved in the near future. And you know and again we’re operating today and that’s one of our advantages. You know Canada is the most restrictive and was the first really true federally regulated program that was structured in this manner. So we’ve been operating under that environment. So we’re used to tough, tight regulations, and that positions us very well for expansion into other markets.

Matthew: So any other markets besides Uruguay that you can talk about?

Greg: Not today. You know as other markets come to being we’re certainly going to look at them. You know as you know there are movements in Australia towards legalization soon. There are other markets in the world that are looking to legalize certainly. But yeah we’re really, you know, we’re going to look at any market that comes up and does it make sense for us and is it a good market for us to go into.

Matthew: Now just one question before we close about the cannabis culture in Vancouver and British Columbia. One thing that’s interesting to me is that dispensaries aren’t allowed legally, yet they exist. And here, you know, we have states that cannabis is legal like here in Colorado, even though it’s illegal federally. How does that work in Vancouver where there’s dispensaries but it’s not legal?

Greg: Yeah so again, you know, certain things I guess I would comment and say, as you said, they’re operating illegally. You know one of the misconceptions, unfortunately, is that they are… there’s a misconception that they source their product from licensed producers like ourselves which they do not. We’re not allowed to sell to them. They are operating illegally, and it really comes down to the law enforcement in terms of taking action against those. I mean a lot of people, because of the way they’re structured and the way the experiences when people go to those dispensaries which has been shown on the media, people feel that they’re actually legal and that they’re walking out with a card that authorizes them to whole product and they’re legally authorized, but they’re not.

As you said, they’re clearly illegal. We have seen a few of them shut down, but certainly, you know, we’ve not seen full action by law enforcement against them as of yet. There are a couple of court cases that are pending. One at the BC Supreme Court and one at the Federal Supreme Court that I think many law enforcement agencies are waiting to see the outcome which would impact their decision to move forward on enforcing in closing those facilities down.

Matthew: I feel like Canada and the U.S. have so many great things about each of their programs, but they lack so much too, but together if we could take the best parts of the Canadian model and the U.S. model because in Canada, banking is legal, mailing flower is legal, but dispensaries and edibles are not. So if there’s some way we could fuse the best of both of these it would really be a home run. So I’m hoping that we’ll watch each other closely and kind of get closer to that.

Greg: Absolutely. I agree. I think there’s things, as you said, the edibles is a good example where you know there is definitely an interest in that area, and we will see as legislation moves forward. You know, if change has happened we would be really happy to work under that regime, but you know lots of things to watch, and as I said, one of the reasons I joined the industry is that this is very early days and lots of innovation and changes ahead.

Matthew: Well Greg in closing where can listeners learn more about Tilray?

Greg: Yeah so our website is www.tilray.ca.

Matthew: Great. Well thanks for being on CannaInsider today Greg, we really appreciate it.

Greg: Yeah great. Thanks for having me Matt, we really appreciate the opportunity.

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