Source: Grant Robertson The Globe and Mail June 3 2014

Vic Neufeld was preparing to ease himself into retirement this year, when he got a call from an old friend with a new idea.

He had just spent the past 21 years running Jamieson Laboratories, turning the Southern Ontario vitamin maker into a global giant. When Jamieson was sold to CCMP Capital Advisors in January, the chief executive officer figured the time was right to step away. But his time off didn’t last long.

Mr. Neufeld, 59, will be unveiled Wednesday as the new CEO of Aphria, a medical marijuana start-up that has aspirations to become one of the largest suppliers in Canada. The call came from his long-time friend Cole Cacciavillani, whose greenhouse operation in Leamington, Ont., grows flowers and hanging plants for large grocery store chains.

For the past two years, Mr. Cacciavillani and business partner John Cervini used some of their massive operations to perfect marijuana growing, under a federal licence that allows them to produce the plants for a select number of medical customers.

Now going public with its story, and with a forthcoming public offering, Aphria hopes to join the 13 other firms that have licences to supply the medical marijuana supply chain in Canada, as prescribed by doctors as a painkiller.

Mr. Neufeld’s appointment is the next stage in Aphria’s evolution, adding a well-known executive who helped expand Jamieson into a leader in natural health supplements, with products such as ginseng, omega-3 and echinacea. Aphria is also expected to announce this week that it has secured $6.2-million in new financing from investors Delavaco Capital and Michael Serruya, along with Front Street Capital, York Plains and Broadband Capital.

The company is also laying the groundwork for an initial public offering on the Toronto Stock Exchange and TSX Venture Exchange in the next few months. The IPO comes on the heels of Tweed Inc., based in Smiths Falls, Ont., which took itself public in April and has positioned itself as one of the first large-scale producers of medical marijuana.

Mr. Neufeld says he wasn’t looking to switch industries, but sees direct parallels between the medical marijuana business and the health supplement sector that flourished after the federal government wrote new regulations a few decades ago to allow such products to come onto the market. That shift allowed Jamieson to go from 7 per cent market share in 1993 to 27 per cent now, with $250-millon in sales.

“When the sale [of Jamieson] was completed, I truly just wanted to kick back,” said Mr. Neufeld, who sees his role as bringing expertise to Aphria at a time when the industry is seeing a flood of new entrants, along with question marks over which companies will succeed. “There’s still a little bit of Wild West [mentality],” he said. “But the goal is to add more credibility.”

Health Canada expects the demand for prescribed marijuana to grow significantly over the next decade, from about 40,000 now to several hundred thousand patients once the regulations are fully in place. However, the game several companies are playing is a speculative one – betting that restrictions on marijuana could eventually be loosened for all consumers, opening up a regulated market similar to alcohol distilleries and breweries.

The Canadian government introduced stricter regulations for medical marijuana this spring, setting the framework for how producers must operate to obtain licences, including high-tech security standards that must be in place. Patients with prescriptions can obtain marijuana only from producers that have been given a licence by Health Canada.

Aphria, which means “agreeable” in Celtic, more resembles the name of a pharmaceutical company than the quirky moniker of its main rival, Tweed. But Mr. Neufeld and Mr. Cacciavillani want to emphasize the science behind the company. Mr. Cacciavillani and Mr. Cervini have spent their careers growing plants and vegetables, manipulating the size, weight and taste. Marijuana is no different, Mr. Cacciavillani said.

The partial licence that has allowed them to grow marijuana for the past two years and supply some to a small number of government approved individuals, while destroying the rest of their production, has allowed them to experiment with 43 species of marijuana, which they intend to narrow down to about half a dozen for production.

“I have a lot of folks asking, do you know how to grow this stuff? Quite frankly, it’s just another plant for us. Geranium, poinsettia, marijuana – it doesn’t really matter,” Mr. Cacciavillani said. “We just wanted to see, how quirky is this thing? Well, they call it weed for a reason. You could grow it out of cement. It’s a pretty strong plant genetically.”

Article source: