Narrator: Neptune Wellness Solutions is a
health and wellness products company founded in 1998, and is headquartered in Laval, Canada. The company is engaged in the extraction,
purification, and formulation of science-based products. Neptune Wellness offers speciality ingredients
such as Maximil, a patented ingredient that enhances the absorption of lipid-based nutraceuticals
and various other marine and seed oils. In January, Neptune Wellness received its
Health Canada license to process cannabis, which allows the company to manufacture and
purify cannabis extracts and cannabis oil, and to sell its services to other license-holders. Production activities are expected to start
soon at Neptune’s 50,000-square-foot certified facility in Sherbrooke, Quebec. Neptune Wellness Solutions is listed on the
Toronto Stock Exchange and the NASDAQ, and trades under the ticker symbol NEPT. James West: I’m joined now by Jim Hamilton,
CEO of Neptune Wellness. Jim, welcome back. Jim Hamilton: Jim, it’s great to be back. The Jims are together again. James West: Yes! Jim Hamilton: Last time I was here, I think
it was Valentine’s Day. And you weren’t here; I was heartbroken. James West: [laughter] Well, I’m sorry,
Jim. You probably didn’t give me enough notice
on that; I would never have left you alone on Valentine’s Day. Jim Hamilton: A lot of change, again, to the
studio, since I was here last; including, you got a new haircut. James West: I tend to get those every once
in a while. But this is not about me; let’s talk about
you. Neptune’s, the stock price has really turned
in a great performance, especially since the beginning of the year, and obviously that’s
at least in part driven by some of the moves you’ve made in the last few months. Most recently, you announced that Martin Landry
has become Chief of Corporate Development; Martin Landry, formerly of GMP. Jim Hamilton: That’s correct. James West: That’s a great strategy: hire
the bankers! But probably more pertinent to the actual
business is, you’ve acquired a hemp processor, SugarLeaf Labs. Now, just for clarity’s sake, this is not
the SugarLeaf cannabis company that is operating in California and Oregon and Washington. Jim Hamilton: No, very, very, very, very true. James, just from where we started here, what’s
gone on since the new year, a lot, I think since the last time we were on your show – first
of all, we were happy to get our license in Canada, and we’ve started processing, and
the plant is up and running. We’ve had the addition of a couple of really
great people to our team, one of whom you just mentioned, Martin Landry – who those
in this industry know very, very well, is really the lead and one of the first great
industry analysts, and we’re happy to have him on board to help us with strategy. James West: I guess I won’t be calling him
for an interview anytime soon, at least not from the GMP context. Jim Hamilton: Also the addition of a wonderful
gentleman, Dr. Graham Wood, who is really probably one of the foremost clinicians in
the cannabis space here in Canada, who’s been doing a lot of the clinical work – not
only in application forms, but on the clinical side, has joined us to lead our as Chief Scientific
Officer, which is a great addition. And lastly, as you just mentioned, the addition
of SugarLeaf Labs. They are based just outside of Charlotte,
North Carolina, and they’re in the hemp processing business. So James, you know, when we’ve been looking,
we believe, a lot in the opportunity that exists in America – we love Canada, but
we love the opportunity that exists in America. And with the Farm Bill coming through, both
the NASDAQ and the TSX, our insurance companies and bankers, have been supportive. So we’re very happy we announced that transaction
just last week. James West: So hemp – the acquisition of
a hemp processor is obviously to service the value chain in terms of having your own processor
in the vertical sort of lineup? Jim Hamilton: Well, yeah, and look, James,
we’re not on the vertical; we’re more interested in the horizontal. So we’re not a cultivator, as I have maybe
mentioned to you before, that we don’t have competency in cultivation, but we have a legacy
of decades in extraction. You know, the purification and formulation
of delivery forms and clinical research; this is what our Omega-3 business and nutrition
products business was built on, and similarly with SugarLeaf Labs in the United States,
they’re not cultivators. But we love them for so many reasons. One, they are based in North Carolina, the
heart of the tobacco belt. We think the tobacco belt will be a very interesting
region to be located in. They have great contacts with the agri community
there, which is very powerful. So we think the climate and the agri infrastructure
of the tobacco belt will be very conducive to this business. They also have large-scale extraction that
they have built and have brought online as we speak; 1,500 metric tonnes worth. And where I think they saw value in us was
a couple of ways: one is, I think people in this industry in the United States don’t
have a full appreciation for the quality control standards that CPG companies are looking for. In fact, when we first arrived and were talking
to them, they thought we were a little bit crazy, and then they said other customers
came through and realized you weren’t crazy, this is what CPG industry needs. I think they very much appreciated our connectivity
to the big brands and CPG companies in the United States in health and wellness and food,
and that was very powerful. And I think they also appreciated the fact
that we were listed both on the NASDAQ and the TSX. So a great synergy in competencies, and a
great opportunity to b ring them together. And I’m a big believer in this industry
in the United States. Again, I think I’ve mentioned, James, when
we’ve been together before, it’s larger than the Vitamin E segment; it’s on track
to be larger than the Omega-3 sector, and I think it’s a major consumer product category. We’re also happy to have a footprint in
the United States; should marijuana ever become federally legal, we’ll be able to quickly
adapt to that. James West: Right. So is the opportunity now for Neptune more
or less completely focused on the CBD industry that has obviously transformed since it received
a different listing from, it’s no longer part of the Prohibited Substances Act, now
it’s a regulated substance. So I mean, we’ve just seen an explosion
in the different types and modes of CBD available; is that where Neptune is going to dominant? Jim Hamilton: James, we see our Canadian operation
and our facility just outside of Montreal for, I’ll call it, regulated markets, you
know, such as Canada and markets that are akin to that, like Europe. So, where it’s highly controlled, regulated. That will be CBD and THC marijuana. We see America for America. We don’t see moving things across the Canadian
border to the United States; we see this American footprint for America, and we see a lot of
opportunity there. I think the CBD market also is a very, very
interesting market, because ultimately it will be for chronic consumption; it’s not
going to be for when we’re together, or to relax, but it will be for things like pain,
inflammation, anxiety, that you’ll probably consume on a daily basis. James West: Yeah, that’s interesting. I have started consuming CBD on a daily basis,
as much as for an experiment as to just see what the effects are. But because I’ve noticed since I have been
doing it that recovery time from workouts are, in fact, as represented, faster, my ability
to concentrate for long periods of time on single tasks has miraculously manifested itself
once again – Jim Hamilton: Which is saying something, right? [laughter]
James West: Right. So just those things alone – and gastrointestinal
reliability, I’m going to call it – have made me sort of consider this as a legitimate
dietary supplement personally. So I’m a very much aligned with the way
you think that, you know, CBD is the near-term, but you’re saying you’ve also got great
opportunities in THC in regulated markets. So is that targeting more the pharmaceutical
prescription? Jim Hamilton: James, my belief ultimately,
and actually one of the reasons we initially got into cannabis, because we see this really
as a natural products and health products business primarily, and it doesn’t mean
CBD is separate and distinct from THC. I think ultimately we’ll see combinations
of formulations as science presents itself in terms of what is ideal. I think in the CBD market in the CPG world,
we’ll see a lot of combination products that will be labeled as hemp initially in
the United States, but it will be hemp with melatonin; hemp with Omega-3s; and they’ll
use the structure function claims that go with Omega-3s, you know, for healthy, you
know, bones and joints or inflammation, what have you, and that will be how the products
ultimately will be positioned. And so we’re very excited by that. I think in the controlled markets, we’ll
see something similar, but maybe THC being more of an element, there. James West: Sure. So is your acquisition of SugarLeaf Labs,
then, designed to control costs in the supply chain as it pertains to creating concentrated
isolates as ingredients for your products? Jim Hamilton: James, we’re first and foremost
a B2B company. Actually, SugarLeaf does have a small branded
business called Forest Remedies that we’ll have to think through how we play that, but
first and foremost, we’re a B2B company. And I think when we look at this industry,
whether it be Canada cannabis or CBD America, it will ultimately be dominated by CPG brands. And CPG brands are rarely backwardly integrated
into the ingredient; they depend on great ingredient companies like DSM, BASF, Lonza,
and others to support their business, and I think that’s probably – there’s no
reason to think this industry won’t be different in future. James West: Interesting. So the cost of products that you produce,
you’re – when you say you’re B2B, does that mean you’re selling your products on
a white label basis to other businesses? Jim Hamilton: Yeah, James, I think first and
foremost, we process into pure active compound, if you will, and like we do in our nutrition
business today, we can take that further and put it into a delivery form and the bottle
and the label. Some CPG companies like the turnkey solution;
others that have that infrastructure will take the ingredient. It really depends on which is best for the
customer. But I think that is sort of the normal CPG
model today, and I think it’s not either/or, but it’ll be a combination thereof. James West: I see. So if I’m a CPG-focused business in the
medical and wellness space, and I have existing distribution for products, and now I want
to add the CBD component, does that mean I can come to Neptune and that’s the business,
is that you create the products for us and can package and can white label if necessary,
or whatever element of that you need to? Okay, you know, it’s taken me a little while,
but I finally understand your business! Jim Hamilton: The CBD is working. [laughter]
James West: The CBD is having an effect! Awesome. Okay, so in that context, what does the landscape
look like for you competitively? Jim Hamilton: I think again, there’s two
things. I think in the Canadian cannabis context,
James, competitively licensed in January; you have a facility that is built and constructed,
initial licensing is online and working and pending amendments. What’s important in our Canadian facility
is, we have expandability that is up to 6,000 tonnes. This is what we were extracting Omega-3 krill
oil on, and we can grow into that. And we’re taking a hard look at that today
as we speak. And one could say, why would anyone ever need
that kind of capacity? But I think if you look at the demand profile
in Canada and in regulated markets, it’s underserved today. I think there’s a lot of interesting runway
being laid out because of the pending legislation for other edibles and whatnot; and remember,
we’re 80 percent weed in Canada today, and we have every reason to believe we’ll start
to pattern after California and Colorado in future, where the majority will be built on
some kind of extract. And I think that negates consideration for
hemp demand. Seven percent of Americans are taking CBD
hemp now on a regular basis. James West: Really? Jim Hamilton: It’s a major segment. James West: And what’s sort of the – where
was it at, say, a year ago? Jim Hamilton: Much smaller. Look, as I mentioned earlier, it’s bigger
than Vitamin E, and it’s on track to be as much as Omega-3. So in Canada, I think the demand profile is
underserved today, and it will be underserved for a period of time. I think in the United States, so that’s
good news, and we’re happy to be part of that. I think in the United States, where the frustration
with major brands today is, they can’t get the conversation they need relative to the
quality, stability and traceability of the product. And one could argue that’s probably normal,
because if you are a marijuana person, that was never a requirement in your business before. But if you’re going to be on the wall on
the shelves at CVS or Walmart or in Whole Foods, you’re going to have to come with
a product that is pure and consistent, so it’s 25 milligrams, every bottle, every
pill, every capsule, every company, and it’s going to have to be shelf-stable, and it’s
going to have to taste good, and all those good things. James West: All the things that you’ve been
doing for decades. Jim Hamilton: And I think, James, I think
that is the conversation that the major brands are looking for today. That doesn’t mean other companies won’t
get there, and as they continue to recognize that, but we think that’s a great advantage
in the near-term, is our connectivity to CPG and our appreciation for how that works. James West: Right. Interesting. Well, that sounds like you’re really executing
a well-thought-out strategy, Jim, and it’s reflected in your share price, which is the
best endorsement there is. So let’s leave the conversation there for
now, and I’ll look forward to following up with you probably sooner rather than later. Thanks for joining me today. Jim Hamilton: James, thanks for having us. James West: You bet.