“Smell that?” Scott Walters asks me, grinning slightly as he breathes in the subtle but unmistakable scent of weed. We’re hardly through the front door, still shivering from the biting cold of a bright, mid-January morning, but the funk is already there, hanging in the warm air as if to say, “Yeah, this is the place.”
Walters is the co-founder of a specialized clinic in Toronto — a clinic that might just hold the key to the future of Canada’s cannabis industry — so he’s taken me on a mission to inspect Aphria, one of his suppliers. It’s a legal grow-op that looks identical to just about every other plot of land in the small agricultural town of Leamington, Ontario, the greenhouse capital of North America. For four decades, the 40-acre farm has raised mostly tomatoes and cucumbers. It still does, but anyone with a functional nose can tell that’s not all they’re growing.
Walters and I sign ourselves in before entering the office, a nondescript smattering of desks and monitors, unremarkable only until you notice the fingerprint scanners at every door, the ceiling-mounted cameras, the barbed-wire fences visible outside the window and the wide-screen TV showing a grid of closed-circuit feeds. First, Walters meets with Aphria’s executive team, an assortment of experienced growers and business types, and talks shop. Then, we don white lab coats and hairnets for the grand tour.
We sign in a second time to get into the growing quarters, where Walters surveys the stock. Marijuana plants of all strains and sizes stretch down the length of the massive greenhouse. As we stroll between small seedlings and fully flowered shrubs, one of Aphria’s co-founders doles out information about ideal lighting conditions, biological control methods and proper airflow. Listening and inserting the occasional question, Walters crouches to pinch the plants and snap a few photos on his smartphone.
To enter Aphria’s vault, a stark-white labyrinth of immaculately clean humidity-controlled labs, we sign in again—three clipboards deep now—and put on plastic blue booties. We weave through stands of shining metal trays and heavy glass doors before entering in the storage room, where tens of thousands of dollars worth of dry bud is waiting to be shipped out and stuffed into the grinders, vaporizers and rolling papers of Canada’s 60,000 prescribed medical marijuana users. Timidly, Walters pries the top off of one of the containers—the kind a high school cafeteria might use for a massive lasagna—and marvels at the half-kilo of cannabis. His face lights up as he takes a whiff of the unfettered source.
The first time I heard Walters’s voice, about a week before our trip to Aphria, it was a Sunday afternoon. He’d left me a voicemail: “Hi Luc, it’s Scott Walters. It’s about 4:20 p.m.—” A pause, then a laugh. “4:20. Hilarious.”
Walters is 43, and lives with his wife of 20 years and their two children in north Toronto. He wears a pair of black thick-framed glasses and keeps his light, thinning hair neatly cropped. He’s slim and tall with boyishly curious blue eyes and a pair of animated, oversized hands that have a habit of grabbing whatever prop is available—coffee creamers, coasters, water bottles—to illustrate a point. He speaks and dresses modestly and, if you never asked, it would be easy to miss that he’s a Bay Street veteran turned medical marijuana mogul.
Here’s how he got there. Walters was born in Toronto in 1972. He studied computers and economics at the University of Western Ontario in the early 1990s. Over the next two decades, he founded an investment firm that raised $150 million for the uranium sector, started — and then sold — a management company that took on more than $6 billion in assets, and worked as a derivatives trader, hedge fund manager and agri-business consultant for a slew of other companies, including BMO Nesbitt Burns and the Dundee Corporation. But, in time, he became increasingly disillusioned with the industry’s mercenary mindset. “I spent 20 years working with people where everything was about the next buck, the next deal, the next fuck,” he says. “You wouldn’t have liked me. I didn’t like me.”
So, in 2012, much to the surprise of his boss, Walters resigned from Stifel Nicolaus, an American investment bank, and looked for new work. After eliminating his other options—“certainly not oil and gas, bio-tech’s on its ass, forestry is fucked, offshore fishing isn’t working”—he settled on weed.
Walters wasn’t a stranger to the drug. He had first bought hash off the street in downtown Toronto long ago—it turned out to be roofing tar, naturally—and had smoked a bit in high school. In 2010, he started self-medicating with weed to wean himself off the heroin pills he’d been using to treat chronic pain in his back and around his eyes, the side effects of years of heavy drinking and an unhealthy lifestyle. A couple years later, he got a prescription. (On a 10-point pain scale, smoking is said to bring pain down from a five to a one.) He knew the weed world as a patient, but he didn’t quite understand it as a business yet. His first forays flopped: a consulting gig went awry, an idea for a royalties business didn’t pan out, a play in the vaporizer market quickly fizzled.
Then he met a pair of doctors hoping to become medical marijuana pioneers. They knew the medicine—one had studied under a leading cannabis scientist—but lacked the logistics and financing. Walters was their man. He helped them found the Cannabinoid Medical Clinic, a specialized practice where physicians could send patients if they were uncomfortable prescribing the drug. “It’s not a medication that has been thoroughly tested, and there are no treatment guidelines,” Dr. Danial Schecter, one of the clinic’s co-founders, explained to me. “Doctors understand how puffers and inhalers work, but with cannabis, how do you prescribe two puffs three times a day?”
While the doctors worked the science—prescribing medical marijuana and a synthetic cannabinoid called Nabilone, monitoring and studying patient progress, educating physicians on treatment standards—Walters worked the industry. He made visits to scope out Canada’s small selection of legally sanctioned mass producers (where the clinic’s patients would get their bud), became familiar with the quasi-legal unregistered realm and recruited the country’s top pro-pot lawyer. Slowly, he put the pieces in place to support a serious entry into an industry on the verge of exploding.
Walters isn’t the only one in on the secret. Anyone who’s been paying attention knows that bud is about to get big, and there’s a long line of profiteers itching to get in on the action. Health Canada estimates that the country’s medical marijuana industry will be worth $1.3 billion by 2024, though others insist that it’s already bigger — particularly if you include the recreational market — and will only continue to grow. Case in point: the day that Tweed, an established marijuana grower, became the first producer to go public, it was the fourth-most traded stock on the TSX.
But Canadians have been lighting up for generations, so why all the buzz now? The answer starts with Terry Parker, the country’s first legal medical marijuana user. In a string of late-1990s court cases, the Toronto pot advocate convinced the court to recognize his legal right to cannabis as a means of treating his epilepsy. The case forced the government to set up a medical marijuana program that allowed people with certain ailments to obtain a licence to buy marijuana from a government producer, grow their own plants or designate someone else, like a relative or friend, to do it for them. The system was destined to fail, though. The government didn’t have enough inspectors to enforce regulations or monitor the quality of thousands of individual growers, and multiple patients ended up designating the same people to grow their plants, spawning large-scale grow-ops that often funnelled extra herb onto the black market.
To stem the abuse, Health Canada revoked its original system and implemented the revised Marihuana for Medical Purposes Regulations in April 2014. (A court injunction temporarily allowed existing patients to continue operating by the old regulations.) Under the new rules, patients with prescriptions for medical marijuana could purchase cannabis through a number of government-vetted licensed producers (LPs). By and large, the quality and consistency of Canadian cannabis improved, but so did the price of entry. Patients used to growing their own weed now had to cough up thousands of dollars a year for their medicine, and anyone interested in legally producing pot would need several million dollars just to get started.
To get an LP going, you have to have the capital to build a grow-op that meets Health Canada’s stringent security standards—the sort of Big Brother-like surveillance and triple-sign-in bureaucracy we encountered at Aphria. Then you need the proper equipment to process the product and monitor its quality and quantity. You need paid staff to tend to the plants, call-centre workers to deal with patients and a secure, user-friendly website to take online orders. And that’s to say nothing of the money involved in actually growing the damn stuff.
Such prohibitive costs essentially kicked cannabis activists and garage growers to the curb and replaced them with Bay Street big shots and Big Pharma barons — the only people with enough money, and investor appeal, to make a real go of it. Vic Neufeld, the former head of the Canadian pharmaceutical giant Jamieson Laboratories, is the CEO of Aphria; Tweed is run by Bruce Linton, a communications and tech tycoon who’s led numerous companies; and the team of scientists that comprise Bedrocan, another LP, has already struck gold with green in the Netherlands. CEO-types and past presidents run Canada’s 15 or so other up-and-running LPs, too, not to mention the 1,200 other companies anxiously hoping they’ll be next to get licensed.
They want in because, while the start-up costs are exorbitant, the payoff is poised to be even more outrageous. Cannabis in itself may not save any lives—it’s a treatment, not a cure—but its ability to wean people off opiates will. As medical marijuana goes mainstream, it’s likely to supplant more harmful medicines like oxycodone and morphine as a go-to remedy for a laundry list of illnesses and conditions: cancer, HIV/AIDS, Parkinson’s, ALS, anxiety, ADD and diabetes, to name just a few. Cost-conscious insurance companies will be on board because cannabis costs less than opiates and keeps people alive and paying premiums longer. Most patients will prefer pot for the price, too, and because it has fewer side effects—munchies notwithstanding. Estimates propose that roughly 400,000 Canadians will be using medical marijuana by 2024. With that many people smoking around a gram of weed a day, and with a gram of legal weed fetching an average of $7 to $12, you’d have to be high not to realize that the budding multi-billion-dollar industry is about to flower.
And that’s just dried, smokable medical marijuana. Cannabis extracts—which would allow for pot-based patches, pills, powders, oils, candies and other edibles—started making their way into British Columbia’s legal pot program after a provincial court ruling last August. The rest of the country is likely to follow suit, too, so long as a federal court case this spring goes the way everyone in the industry expects it to.
The introduction of extracts would create an entirely new market for cannabis edibles, and a slew of companies to make them. That’s good news for LPs, who would be able to save parts of the plant they previously trashed—Aphria, for one, throws away roughly 60 percent of every marijuana plant—and wholesale massive volumes of weed to companies that can turn them into everything from capsules to candy corn. In the increasingly likely event of legalization, that market would mushroom, as would tax revenues. By then, Big Tobacco and Big Alcohol will likely have found a way to jump on the bandwagon, too (here’s looking at you, Bud Light). “As soon as we get there, then it’s gloves off,” Walters predicts. “Because the money is going to be stupid.”
Here’s the hitch: the Harper government hates pot, and even voting in a longhaired Liberal won’t change the fact that marijuana has historically been seized more often than studied. “No research dollars have been committed to this in the past 50 years because there’s been a war on drugs,” says Sean McNulty, a Toronto portfolio manager who has invested in a number of LPs. “You’ll get money to research the impact of wind turbines on a rare species of bats before you get money to research medical marijuana.”
In the absence of hard data and empirical evidence, Health Canada—already severely underfunded and on a government leash—is understandably hesitant to start passing the joint to anyone with a scraped knee. (And they’re probably not keen on the idea of doctors writing a 75-year-old grandmother with terminal cancer a prescription for Donkey Dick, either.)
That’s where Walters comes in. Unlike other facets of the bud business, his clinic isn’t big money. Provincial health plans cover the cost of visits for its 1,300 patients; the insurance money from appointments and urine tests covers overhead and keeps the lights on. “I make money every time someone pees in a cup,” Walters often jokes, “so I serve a lot of coffee.”
But the humour disguises a clever business plan. When a patient comes to the clinic, he fills out a series of electronic questionnaires about his medical condition and symptoms, among other things. After using medical marijuana, if he’s prescribed it, he responds to more surveys about how certain strains in particular amounts help or hinder his ailment. Anonymized and combined with other patient input, those questionnaires provide an unprecedented statistical snapshot of medical marijuana use. Walters plans to open more clinics in Toronto and in the Maritimes, where PTSD rates are disproportionately higher. With more patients receiving more relief, the data only becomes more accurate and robust.
“It’s incredibly valuable information,” says Tweed executive vice president Mark Zekulin. “If it can finally let us understand not just anecdotally why a particular strain might work for insomnia while another might work for chronic pain, you can start to form the basis for a Phase I clinical trial.” If it could successfully complete a series of clinical trials, cannabis would be eligible for a drug identification number, which would allow pharmacists to sell the medicine over the counter, give it unprecedented legitimacy and boost its user base significantly.
Walters’s data is also the only substantial Canada-specific market research on medical marijuana, and he’s banking on the fact that LPs will be willing to ante up to have access to it. As the industry matures, some of those LPs—and the investors behind them—will win big, others will be bought out and many more will flat-out fail. But there will always be a need for stats, and, so far, Walters has a monopoly on the numbers.
If he’s poised to make millions, though, Walters isn’t letting on. He doesn’t talk much about money, and he’s practically developed a phobia of publicly traded stocks. If you catch him excited or up in arms, it’ll be because an LP is jacking up it prices and his clinic’s patients can’t afford their medicine, not because he lost thousands on the market. He has the born-again air of a man looking for redemption for past sins—a man who’s found a passion grander than a paycheque. “I’ve created hedge funds. I’ve created public companies. I’ve built mines. Big fucking deal,” he says. This is different. “I built a clinic with my own hands. I did that. I helped create something that helps people every day. I’ve never been able to say something like that before.”
It’s 2:30 p.m. and Walters and I are sitting in a cab as it pulls out of the Aphria compound. (We signed out, of course). During the 40-minute drive to Windsor International Airport, Walters debriefs: the place was impressive, the location is perfect, they’ve got a good team, the call centre could use some work.
We’re running late, but Walters stays calm, showing me photos on his phone and sharing stories as we cruise along rural roads lined with more greenhouses. When we finally arrive at the airport, no more than a half-hour before his plane is scheduled to lift off, he promptly bolts out of the taxi and slings his messenger bag—in it, two containers of weed, a grinder, some files and a water bottle—over his shoulder.
He checks in, throws the bag into an X-ray machine and walks through a metal detector. On the other side, a security guard asks him the dreaded question: “Sir, is this your bag?” The guard opens its flap, unceremoniously confiscates Walters’s water bottle, and sends him on his way.