CanniMed Therapeutics Inc. (TSE:CMED) (OTCMKTS:CMMDF)(FRA:0GB) CEO Brent Zettl takes a philosophical view of the discovery of pesticide use by ACMPR growers Organigram Holdings and Mettrum.

Transcript:

James West: Brett, thanks for joining us today.

Brent Zettl: My pleasure.

James West: Brett, recently we’ve seen an incidence in the media where there has been some cases of contamination from pesticides in the finished product delivered to patients. Now I happen to know that you employ a rigorous testing regime to prevent exactly that from happening; what is your thought on the impact that this incident has had on the public’s trust in ACMPR supply of cannabis generally?

Brent Zettl: Well generally, I think it’s done a disservice to the optics; not only the optics, but I think the practicality of people who are looking for medical cannabis as a medicine. Obviously, the last thing that a patient should really be concerned about is whether or not the product they’re taking is safe or not. The whole idea of a medicine is that it’s produced as safe as it can be, and that they’re going to be using it in a way that makes it better for their lives or managing their symptoms.

So I think to a large extent, having a pesticide, the issues of the pesticides on a product, I think, has undermined the credibility of the entire program, actually.

James West: And do you think that, at the end of the day, the end result to some degree has been to lend strength to the position of the dispensaries and the gray market, that there’s not that much difference between ACMPR supply and an illegal supply?

Brent Zettl: I would have to say that that’s probably the true story, that we don’t have a – there’s a problem when the dispensaries themselves are, they did a service in the early years, and they’ve always claimed that they provided a benefit to patients. The problem is that in the licensed producer market under the new program, we were supposedly held to a higher standard, and therefore making it beyond the capabilities, or not the capabilities, but beyond some of the safety aspects of it, that property license that made it safer for Canadians.

Now under this particular scenario, it begs the question: are they really that different? And how come we have this thing going on? So it doesn’t really bode well for credibility if we’ve got these things that are happening. It would be easy for a patient to just say, ‘What’s so different?’ than, say, the gray market product.

The truth of the matter is, it does have to be different. And it’s just, I think, a function that, this is just, I would say, the industry evolution where they’re going to have to move to a proper higher standard that does provide patient safety and some credibility, bring the credibility back to the industry.

James West: I just had an interview with Dr. Jonathan Page of Anandia Labs, who provides that kind of analytical service to ACMPR growers and is licensed by the Canadian government, and he was saying that the path to regaining the trust of the consuming public sort of begs that the mandatory nature of testing going forward is present in the supply chain at all times. Would you agree with that?

Brent Zettl: For sure. I would always totally agree, because I mean, testing and testing to conformance is always two standards, has always been our MO, modus operandi, since we began. We produce under GMP standard, which means that we have lots of testing procedures that we have to follow. We test for all kinds of things, we test for metals, we test for microbials, we test for all the different cannabinoids, not just THC and CBD; we measure for a whole host of them. and we measure it not only once, we measure it two or three times throughout the process to make sure that the product, at the end of the day, on the certificate of analysis, is what it says it has to be.

Now, from our standpoint, when we were under the old regime, under the old MMAR, we were not allowed to use any pesticides, zero. So we developed a production system that was not dependent on the need or use of pesticides, and that’s why we said, let’s really put these things to the test and see what’s really going on, is there any surprises. And the answer is no, there isn’t. We don’t use them, and there isn’t any surprises.

But for the industry to think about this now, that should be one of the baselines that should be tested, because people should be able to consider, and there should be thresholds. Like, just because there’s certain types of pesticides that are established, there should be thresholds and minimum standards that are required. Why? Because like anything else, there is a toxic level of anything that comes in that stuff.

And it just so happens, and this is where my big heartburn is: the very good stuff of medical cannabis is in trichomes, and trichomes are these little hairs, little globules on the very outside of the plant. Very outside. High in energy. Unlike most everything else that we consume, other than, say, lettuce, you peel away the layers to get to the good stuff on the inside. So, to some degree, if there’s anything on the outside, like it might be a bit of a residue or something-or-other, you peel it away, like an orange: there might be something on the outside of an orange, you peel it away, you get to the good stuff that’s on the inside.

In medical cannabis, all the good stuff is on the very outside of the plant. Therefore, anything that you put on there, or anything that’s present like mold or like anything else that’s present on the very outside, is going to be consumed by the patient. And that’s the problem. That’s why we use cleanliness as our tool, and prevention, because we know full well that’s what’s going to be consumed by the patient. So therefore, it has to be clean.

James West: Right.

Brent Zettl: I think that’s where the challenge is going to be: we’ve got to have a paradigm shift in the sense where, we’ve got to be mindful of patient safety first, and knowing full well that the stuff that’s on the very outside of the plant is what the patient’s going to consume directly.

James West: Yeah. So I had formerly a great deal of exposure to commercial cannabis growing operation, and there was a persistent threat in the form of the evil spider mite. We found that once you have an infestation of spider mites, you had to essentially shut down and completely disinfect the entire premises from the edge of the road to the back door, and you would very often end up with a recurrence again. I’m convinced, and it hasn’t really been disclosed, but I’m convinced that it must be probably spider mites that these ACMPR growers are battling, and I’m curious: are you telling me that in your environment you’ve never had a problem with spider mites?

Brent Zettl: Well, we, you know, in the early days, we had problem with bugs; thrips were one, spider mites was, we didn’t ever have a problem with spider mites in the chamber with the medical cannabis, but we have had spider mite issues with our other agricultural crops in the other division of the company. And to your point, I totally agree: once you’ve got ‘em, you either have to spray for them, or you have to completely haul everything out and start fresh. So you have to break the cycle if you can.

Same thing with thrips: thrips are the same way. So we’ve had a lot – and aphids are the same thing, right, white flies the same thing. The issue really is, you can use biological agents, like those mites that eat other mites, and you can use thrips eliminator, the biological agents that are allowable. So basically you try and develop an insect ecosystem so you’ve got the predators and the prey being the spider mites, and you try to control it that way.

In the population dynamics, you need a biologist just for that. But at the same time, if you don’t, you have to resort, otherwise they’re sacrificing their crop.

Again, that cycle can get broken if you use cleanliness as your tool. So in our production system, they finish in the flowering chamber 70 days, but when the 70 days are done, and we break down that entire chamber and we spray-wash it, pressure wash it, steam wash it, heat it up and do everything to that chamber that makes it just like it was brand new, so there’s nothing in it after it’s done, every cycle, right? And so that’s why, you break the cycle by making sure – that was exactly what you said would have to get done, so that’s what we do now. We just make sure we use cleanliness as our agent. So we’re using prevention to make sure it’s not there when the crop starts. That’s probably the biggest trick.

James West: Right. Do you think that the outcome of the incident of two ACMPR growers with pesticides, do you think that’s kind of like an isolated situation that’s part of the growing pains of an industry in the throes of birth, and that it is more or less an anomalous blip on the historical timeline that we will now proceed to address, and the fact that we did discover this so early in the cycle of the industry proves, more or less, that the system is working properly?

Brent Zettl: I wish I could say yes. I think the industry is going to learn with time, it’s going to learn the lesson. I think if you were to ask me that question a year from now, I think the answer would be yes, I think we’re going to learn the lesson a year from now. I think that we’re in for a bit more pain, if I can use that word, and a bit more surprises for a bit until we get through this process. I think we’re going to see some more before we get through to the end. Just to be fair, I think it’s because, just because there’s two or three of them that were, shall we say, caught in this process, I don’t think the dragnet’s done. And I think we’re going to find, if they start testing products, they’re going to find some more things that are not quite copacetic, because they only started testing for them now, right?

James West: Right.

Brent Zettl: So I think we’re going to see some more. But I think it will correct itself, and I think the industry will learn that’s not the way to do things. And I think in a year from now, it’ll be cleaned up.

James West: Okay. Dr. Page from Anandia Labs mentioned that he tests for 51 different pesticide molecules, and one of the questions I had for him was in regard to the propensity for individuals to perhaps use pesticide agents that are not recognized as such in the cannabis world at this point, and therefore would elude detection in the laboratory environment. How much of a threat do you think that is going forward beyond this year?

Brent Zettl: Well, it’s a good question because there is a lot of different compounds that are used. I think it’s a matter – the industry really has to be almost somewhat vigilant in and of its own members to make sure that they’re following the rules. I mean, it’s in everyone’s interest within the industry to make sure that we follow those safety standards for the safety of patients, and I think there is a risk, if I can use that word, there is a risk that somebody would start using something outside of the suite of 51 just because they can’t get proper control, and they’re starting to cut corners. But I think there’s going be this, I think there’s going to be an environment where, as we learn there’s people that are starting to have symptoms and they’re starting to pick up and there’s some other things – just like in the Olympics, they start getting better tests for different things as they start getting…it’s a bit of a cat and mouse game.

I think eventually we’ll, no pun intended, weed out those individuals who are starting to cut corners, and eventually they’ll become not suppliers in the future. But I think for right now, that’s a pretty broad spectrum suite, and I think we’ll see that that’s going to help. And I think you’ll start to see more vigilance as time goes on, and maybe that list will get extended. But I think for right now, the answer is, I think there’s a chance there still is a risk, but I think for right now it’s a good start.

James West: Sure. In the United States, now, there is no mandatory testing in any of the states for recreational or medical cannabis that I’m aware of, and I’m just wondering, in your opinion, does that make the Canadian product inherently safer just by virtue of our national regulatory system?

Brent Zettl: Well, you know, if the standards are, if the enforcement is occurring, the answer would be probably yes, because we do have a national standard as opposed to a state by state standard. So every state will sort of have different views of the world, which aren’t necessarily aligned with a sort of a nationalized strategy, which is a standard for everybody. So I think with a nationalized strategy, I think that’s probably a better bet for the patients.

The challenge, of course, is making sure that the enforcement is there, and that the policies and the regulations reflect an evolution that gets to a better and better standard. You’ve got to know that under the old system, which we still name, we had a GMP centre, which is akin to a pharmaceutical manufacturing because it’s a medicine. Even though it’s a plant, we were producing essentially, at the end of the day, a medicine. Now when Health Canada lowered the standards to a GPP, or good production processes, that did sort of allow a lot of producers to get in, because it was a lot lower bar in order to achieve production and get to the end point. But as these things creep in, like pesticide use, we’re going to have to get the bar higher and higher. And I think we’re going to see that overall, now that we’re aware of it, we’re going to have to start testing for that thing on a regular basis.

James West: All right, Brent. That is fascinating as usual. We’ll come back to you again in due course and have another conversation. Thank you so much for your time today.

Brent Zettl: Oh, my pleasure, James.