62 Atlantic Business Magazine | January/February 2015

SPECIAL REPORT

New Brunswick

In the momentEntrepreneurship in New Brunswick is alive and well and bustling to innovate. Those who do well, do very well, indeed, by ignoring the naysayers and, to quote a phrase, going “higher and higher”

Story by Alec BrucePhotos provided by OrganiGram

63atlanticbusinessmagazine.com | Atlantic Business Magazine

“I sat down with my architects and engineers here two months ago and we designed and finalized the drawings for the largest marijuana facility in the world,” CEO Denis Arsenault (pictured left) explained in October, before laughing. “For Moncton, That’s a little weird.”

Not weirder, perhaps, than the company’s actual provenance.

According to the Halifax Chronicle-Herald last January, the idea for OrganiGram began with a serious bike accident. Moncton-based businessman Jim Laffoley was minding his saddle when he spilled headlong into the ground and broke both his arms.

As he recovered in hospital, the hapless cyclist felt that medical marijuana, known to help with anxiety, nausea, pain management and neurological disorders, could one day be regarded as

a viable alternative to traditional opiate painkillers. With federal government plans in place to transition medical marijuana production from a small home-business model to a commercial industry, he saw an opportunity. As soon as he was again ambulatory, he travelled to Colorado to study commercial growing techniques. In no time, he hired a master grower and invested in grow-op equipment to facilitate mass production in a Moncton industrial park.

Arsenault made the scene in February. He was taken enough with Laffoley’s business model that he actually came out of early retirement. “With my background being business and construction, it was the perfect mix. So I (started) in March to run (the operation),” he says.

Since then, having received its Health Canada license under the new program

New Brunswick is not, by any definition, the Colorado of Canada. But that could change, and soon, if the founders and operatives of Moncton-

based OrganiGram, one of only 13 commercially-licensed pot growers under the federal government’s 2013 Marijuana for Medical Purposes Program, have anything to say about it.

Randy Flemming, OrganiGram master grower, works with an assistant grower to transplant clones.

64 Atlantic Business Magazine | January/February 2015

to sell marijuana to patients with a prescription (as of late March), OrganiGram has gone public.

By late August, its Toronto stock exchange shares tripled in value, outpacing its competitors in central Canada and capping the company’s worth at over $100 million. And Arsenault couldn’t be happier for the company he now operates, the last of the 13 licensed by the feds.

“Did I expect us, as the baby... to have the highest market cap? No. Am I pleased that we did? Yes. Does it create a level of expectation? Yes.

Do I have a problem with that? No. We have a great team, we have some competitive advantages. That leader status suits us well. And from there we can build on it.”

In reality, that’s an attitude that seems pervasive in the business community around Moncton these days — indeed, even further afield in the province.

Consider, for example, the social mentoring firm Clarity, the brainchild of Riverview, N.B.-raised entrepreneur Dan Martell. Founded in early 2012, the company is based on

a very simple but powerful concept: help. Clarity offers customers in the process of starting their own business the chance to speak with industry experts to help them with whatever problem they may be facing, whether it involves market research, raising capital, or anything that may require more than a simple Google search to figure out. Clarity belies its digital roots, and offers the immediacy of an intimate phone call, bypassing the coldness of digital interaction. As one customer testimonial says, “The ROI on a single call can be huge when you connect to the right person and Clarity provides that opportunity.”

Then, there’s the highly ambitious start-up run by Dalhousie University computer science grad Simon Gauvin, Agora Mobile’s signature software Vizwik is an education tool designed to give individual teachers a means to teach coding without necessarily having to be experts themselves. The software allows students to build and share their own apps using a more visually based coding system, and is designed for students between grades six and 12.

The company hopes to help bridge the gap between the lack of coding education in North American schools (only about 10 per cent teach coding) and the rapid growth of the tech industry. After a public launch in September, nearly 200 teachers have already signed up for Vizwik in New Brunswick.

As for innovation and creativity, don’t count out the recent star of the Acadian business world, Distillerie Fils du Roy, based in Petit-Paquetville, whose homegrown absinthe and gin have garnered international awards (and major distribution deals) over the past few years.

Though it’s an old trope among innovators and entrepreneurs, repeated in business schools and board rooms across the country, companies do perform best when there is as little regulation and red tape as possible. Of course, sometimes navigating strict and ever-changing government regulation can be a savvy business skill in its own right.

OriganiGram’s Arsenault certainly gets the point. He learned that while commercial medical marijuana was

65atlanticbusinessmagazine.com | Atlantic Business Magazine

a capital intensive industry, banks wouldn’t touch it, skittish over what is still a controlled substance. The decision to go public at that point became something of a no-brainer. “I just felt that going public gave me the biggest access to a financial pool, and the reality is that due to the investor interest, it was a good way to raise money,” he says.

In record time, the company received the highest market cap of all five publicly-traded medical marijuana companies on the Toronto stock exchange. Arsenault points to several factors to explain the high investor confidence in OrganiGram. One is Moncton itself. In addition to giving the bilingual OrganiGram access to the entire Quebec market, being based in New Brunswick also helps OrganiGram maintain lower capital and operational costs than its Ontario and British Columbia competitors.

“Construction costs are considerably less than they would be for example in Toronto or Vancouver,” he says. “So there’s no question there’s some savings there on the

capital side of things. And you can imagine there are some savings on the operational side, you know, wages. The other thing that would surprise you and surprised me was our industrial rates for electricity are 7.1 cents per kilowatt, and Ontario’s are 10.5. And electricity is our biggest cost. So having said that, it’s very beneficial, the fact that electricity costs are so low.”

Those low operational and capital costs, what Arsenault calls “great synergies,” help OrganiGram offer a competitive price for their product, pegged in August at $6-9 a gram. This is all the more remarkable as the company is the only licensed marijuana grower in Canada to be certified organic by ECOCERT, a respected international body which

certifies organic farming methods worldwide.

As OrganiGram’s master grower Randy Fleming stated in a press release this past October, OrganiGram harvests its product “without the use of pesticides, synthetic nutrients, and without irradiation or cold pasteurization.” In an industry which wants marijuana to be viewed by patients and doctors as a serious pharmaceutical, organic certification is no mere bauble, but a guarantee of purity.

Finally, Arsenault believes merely having a Health Canada license in such a prohibitive, highly regulated industry is something of a golden ticket, though it involves a lot of dancing through expensive hoops. “We’re in a highly regulated industry,

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“ ...our industrial rates for electricity are 7.1 cents per kilowatt, and Ontario’s are 10.5. And electricity is our biggest cost. (It’s) very beneficial, the fact that electricity costs are so low.”

66 Atlantic Business Magazine | January/February 2015

make no bones about it,” he says. “You need to put some resources in place internally to be able to meet (Health Canada’s) regulations.”

Not that he minds. “At the end of the day, (the Health Canada regulations are) offset by the reality that there’s barriers to entry. You’re not going to get competitors that pop up on every street corner. So I think if you have a good internal system to deal with the regulation, it can only be seen as a benefit.”

Right now, Arsenault is more concerned with the short term. “Currently all the licensed producers are sold out. So the strategy for growth moving forward is supply will catch demand.” Moreover Health Canada’s own projections for growth from last October (part of its rationale in helping transform medical marijuana industry into a for-profit commercial industry) are rosy. The

federal government released data in October 2013 that suggested the number of medical pot users will grow from 37,000 to 450,000 by 2024. It also projected annual medical marijuana revenues will grow to $1.3 billion in 10 years’ time.

Even so, Arsenault believes there are other potential developments which could further speed up growth in the coming years. “There’s a couple of shoes that will drop. Number one is insurance companies are starting to look at medical marijuana as a viable alternative to some pharmaceutical drugs for certain ailments. The next shoe that will drop … is the fact the country will go recreational and legal down the road.”

For now, OrganiGram is focusing on becoming global pioneers in commercially produced, organic medical marijuana, something

Arsenault credits Health Canada regulations for starting. The firm will likely expand its workforce this year, further cementing its reputation for homegrown success — one in which location, flexibility and incredible timing played a major part.

“Only the Netherlands has had nationwide legalization and not at the scope we’re at,” says Arsenault. “Because the way they’ve set it up is it’s a bunch of little facilities. Our government has set it up so that there are 13 large facilities, so we’ll be able to take the technology and work it throughout the world.”

He mentions one South African conglomerate that will be traveling to Canada to learn from Canadian companies, including OrganiGram, about commercially grown pot. “People in Moncton, New Brunswick are teaching people in South Africa how to go grow medical marijuana.”

Indeed, how weird is that? •

(With research and files from Richard Whittall)

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“ People in Moncton, New Brunswick are teaching people in South Africa how to go grow medical marijuana.”