Day 12: Quebec cannabis accelerator sees green in tie-ups with grey-market entrepreneurs

The three-million-square-foot pharmaceutical campus in the heart of Vaudreuil that’s been sitting empty for decades could soon provide a home for grey-market cannabis entrepreneurs looking to go legitimate.

Built in 1968 as the North American headquarters of pharma giant Hoffmann-La Roche, the massive facility in the logistical hub outside Montreal – consisting of a 12-storey mixed-use office tower, a food-grade production facility and an industrial-scale manufacturing centre – has not been fully occupied since the Swiss company moved out in the 1980s.

It has since been a set for dozens of films – purple carpeting remains on the tower’s second floor from when X-Men: Days of Future Past was shot there – but Jonathan Morrison intends on returning the site to its former glory.

During a recent tour of the campus, the president of C3 Farm (C3 stands for Cannabis Compliance and Commercialization) shared never-before-reported details with Cannabis Professional about his plans.

C3 has so far signed deals with 12 cannabis startups to base their operations at the facility, Mr. Morrison said, and has arranged for the McGill University Cannabis Research Centre to move into reserved space in the tower’s main floor in early 2020.

Anja Geitmann, dean of the McGill Faculty of Agricultural and Environmental Sciences, will be leading a team of academic researchers at C3 as soon as January, he said.

“This was built as a tier one pharmaceutical facility for a vertically integrated pharma company,” Mr. Morrison said. “They had everything here from academia to product development, manufacturing, distribution, animal testing, human testing and administration.”

His business model is a twist on the traditional startup accelerator. Instead of taking a minority stake in an existing business, C3 has mostly majority ownership of the companies that Mr. Morrison and his 10-strong team have helped to create from scratch with aspiring cannabis entrepreneurs.

“We are looking to create new companies with people who have expertise in a specific activity,” Mr. Morrison said. “They could be somebody who is running a chocolate factory right now and says ‘I don’t want to sell my factory right now, but I would like to launch a new one and I can’t spend a million dollars’.”

“We have signed up 12 companies and they are essentially all co-packing platforms. We have chocolate. We have candy manufacturing. We have extraction systems. We have resins. We have pre-rolls and we have straight cultivation.”

Another difference from a typical accelerator is C3 does not have specific exit strategies. Individual companies can go public or be acquired if they wish, Mr. Morrison said, “but our objective is really a portfolio of operating companies, we actually want to operate cannabis companies and we are extremely focused on profitability.”

Perhaps the greatest differentiator between C3 and others in Canada’s legal cannabis space is their willingness to work with grey-market players who might have been active in the cannabis community during prohibition. Among the most substantial criticisms of the way in which cannabis legalization has rolled out across Canada has been the extremely limited – and in many cases nonexistent – pathways for existing businesses to transition into the new regime.

“We are a hub for the entire industry, so when we do product formulation we are looking at some of the grey market guys, and some of the guys that have an ability to manufacture from only a medical perspective,” Mr. Morrison said, referring to businesses continuing to operate under the ACMPR (Access to Cannabis for Medical Purposes Regulations) that predates the Cannabis Act.

“Really what we do is, we have an accelerator platform that anybody with an idea or anybody with a product can come and work, but of course we do criminal background checks, we have no interest in taking on any reputational risk here.”

If an entrepreneur looking to work with C3 has a criminal record for something like “cocaine and prostitution and fraud then we have no interest in you,” Mr. Morrison said, but if they had a record for cannabis possession, “we would have no issue.”

C3 has a 39-year lease on the facility, and permits to expand the existing 500,000 square feet of office space to 1.2 million. Because of its tier-one pharmaceutical origins, the site also boasts reinforced concrete flooring, redundant water systems, backup generators and access to 10.5 megawatts of electricity; roughly enough to power 10,000 homes.

All the buildings are connected via underground tunnels. In the basement of the office tower, 100,000 square feet of space originally designed to quarantine drugs under development will be devoted to cultivation.

C3 is expecting to receive cultivation, processing and R&D licenses from Health Canada within a matter of days covering about 15,000 square feet of the campus “which will be a big milestone,” Mr. Morrison said, “but it is only the beginning.”

Recent reporting: