Rising High: Exclusive talk with venture capital firm Safe Supply

In this edition of “Rising High,” The Fly conducted an exclusive interview with Bill Panagiotakopoulos, chairman and chief executive officer of Safe Supply Streaming, a firm investing in and incubating companies at the forefront of the third wave of drug policy reform. Here are some highlights:

LEGAL DRUG SUPPLY: As jurisdictions around the world move to decriminalize, regulate and legalize drugs, Safe Supply is investing in infrastructure across the safe supply ecosystem to create a tightly woven fabric of synergies that generate short-term revenues, while also maximizing value accretion as investee companies grow. “In the short-term, we want to validate ourselves and the company by owning the relevant licenses that will allow us to legally deal in any drug that we want to, whether that is MDMA, LSD or cocaine,” Panagiotakopoulos said. “That has been accomplished by an investment in CannaLabs, which is a fully functioning lab that currently tests cannabis, psychedelics, nutraceuticals and other compounds.”

He noted the Health Canada-licensed lab is currently working on securing its dealer’s license and serves as one of two of Safe Supply’s foundational investments, with the other being Safe Supply Licensing Co. “That company is expected to receive its inspection for a dealer’s license with a cocaine exemption by year end,” the CEO said. “These two initial investments give us the ability to deal with other companies that are looking to get into the space, but don’t necessarily have the ability, the finances or the time to get one of these licenses. We are now well-positioned to be able to look at the markets in Australia and at other markets to try to figure out how we are going to factor in and best leverage those opportunities.”

MEDIUM-TERM INVESTMENTS: Panagiotakopoulos said Safe Supply does not expect drugs in the third wave of drug reform to be sold at the retail level for many years but sees good opportunity in the ecosystem around the space. “We’re looking at investing in two different companies,” he said. “One is a company called Safety Strips and what they do is they are getting into the U.S. market for fentanyl testing strips.”

The CEO added up until recently fentanyl testing strips were classified as drug paraphernalia in the U.S. and a person could be charged for possession. “Lawmakers and regulators have realized that there is tremendous importance in giving people the power to make sure what they are going to consume is not filled with things that they don’t want to be taking,” he said. “Somebody that wants to go and use ecstasy or cocaine as an example, almost never wants to be exposed to fentanyl as it is a highly addictive, very damaging drug. They will be able to go test their supply and see if it is clean or not.”

A lot of politicians have taken a brave step for that policy change, Panagiotakopoulos said, and Safety Strips is now in discussions with major retailers to get into market. “This is a tremendous land grab now,” he said. “The strips are single use and there is going to be a pretty big demand for it, given that most of the drug supply currently has additives to it that people are not looking for and do not want to be exposed to.”

Safe Supply is also looking at an investment in Harbour Coca, a company that has successfully imported the first commercial coca extract in Canada, the CEO said. “There is one other company that has been using coca extract very successfully and that is Coca-Cola (KO),” he said. “Harbour found it odd nobody else is using this ingredient en mass. So the Harbour team went down to South America and were able to contract the only UN-sanctioned source of coca leaf, get the rights to be able to export coca extract into Canada and be able to do business around the world.”

Panagiotakopoulos noted the coca extract has no alkaloid in it as it has been processed to take the drug out, leaving the flavoring agent and other benefits of the coca leaf. “Harbour is talking to major retailers and bottling companies to develop a wide range of products,” he said. “We feel that that is going to be a huge win for our stakeholders.”

The firm is also looking at a company called Throx, which is evaluating use of the coca plants and its alkaloids, including cocaine, for a treatment for various indications, the CEO said. “They have some really exciting people behind the scientific research on that,” he said. “That’s our mid-term range, which is stuff that does not rely on federal policy to give us a business or not. These are active businesses that are going to do really well.”

LONG-TERM FOCUS: Safe Supply has been in talks with politicians in Switzerland as part of its long-term strategy, Panagiotakopoulos said, as Bern has applied to the federal government to enable the city to allow for cocaine sales for recreational use. “That is a very progressive and forward-looking initiative and the reality is Switzerland is one of the highest per capita users of cocaine in all of Europe,” he said. “It doesn’t take a lot to look at what has happened in North America with all these tent cities to see people are being tricked into taking fentanyl, xylazine and these horrible drugs that people do not want to take and are becoming addicts.”

Taking the illegal network out of the drug supply would help Switzerland to ensure its population stays safe, the CEO said. “More long-term, we’re speaking to a company out in Australia that is looking to open up more pharmacies to be able to deal in the business of psilocybin and MDMA,” he said. “Once our lab gets its dealers license, it will have ability to not only buy and sell MDMA and other drugs to authorized pharmacies and distributors, but also at manufacture them for the Australian market and any market that opens up.”

EXPERTISE: When asked about competition in the legal drug space, Panagiotakopoulos said it is lacking for Safe Supply as the firm is specifically focused on supporting the other “amazing” companies in the drug ecosystem. “Most companies that are coming into this new version of the business are contacting us right off the hop,” he said. “Our management team is very well known in these circles and our legal team is one of the top in North America. Companies look at us as a source of capital and guidance because we have the licenses, the regulatory, the science, the legal and the full suite of requirements that a lot of these companies are looking for.”

INVESTING ACROSS THE VALUE CHAIN: Safe Supply has an investment committee and adheres to very stringent rules when evaluating a company for investment, the CEO said. “We invest in companies that have a proper functioning management team, have a thesis that will actually work, have invested in most cases minimum six months to a year of effort behind their project, have a good reputation and that we can help and get tremendous value out of,” he said. “There are companies out there that have been struggling for maybe the last year, then we are able to step in and help them negotiate contracts, help them with the legal and the regulatory and almost expedite their business,”

Panagiotakopoulos added Safe Supply invests across the value chain as the firm’s goal is to be as diverse as possible with investments. “In cannabis, as an example, you didn’t know if it was the farmer that was going to win, the brand, the processor or the packager,” he said. “At different times they were valued wildly different, so at Safe Supply we look at the whole ecosystem. We go from left to right, from the farmer in South America straight to the tech app. We don’t focus on one specific vein in the vertical sector. We know there are going to be winners in every vertical, so let’s find the top one or two companies, invest in them, support them and when possible, help them work with each other for a better outcome.”

CSE LISTING: In October, Safe Supply began trading on the Canadian Securities Exchange under the ticker SPLY and recently listed on the Frankfurt Exchange under QM4. “We understand that right now the capital markets are struggling,” the CEO said. “We wanted to be first out because we have a lot of investee companies and a lot of potential LOIs that we wanted to start bringing into the company. We felt it was going to give the investor the best chance of the best investment by getting in early. The lifeblood of our company is the investor and making sure that they are able to capitalize on all these amazing opportunities that are coming. We started early, started low and we want to go out and grow with our shareholders and enjoy the upward swing.”

WAR ON DRUGS: When asked about several drugs being listed as Schedule I drugs under the Controlled Substances Act in the U.S., Panagiotakopoulos stated the war on drugs has not worked. “In any city, any 15-year-old can get almost any drug,” he said. “And I’m not talking about the U.S., I’m talking about all North America, and most of Europe, Australia and Asia. Policymakers around the world are looking at this and saying this isn’t working, let’s find a solution.”

Governments have spent $1T fighting a fight they are not winning, the CEO said, and penalizing the most vulnerable people unfairly in a lot of cases. “Then we deal with the side of people using drugs and getting tricked into something way more toxic, way more addictive than the user ever wanted,” he said. “And we’re dealing with the medical costs on the other side, especially up here in Canada with socialized healthcare. The math doesn’t work.”

Regulators need to find a different solution than the war on drugs due to its failings, Panagiotakopoulos said. “If you’re going to use drugs, be safe and if you’re using drugs, let’s find a way to help you on your journey, make sure that we help you get off drugs and more importantly, don’t get deeper down the rabbit hole by using stronger and stronger drugs,” he said. “If you stop wasting the money on trying to fight a war on drugs that is just not working, you’re freeing up a lot of capital to be able to deal with the people that need the help.”

CHALLENGES: When asked about the largest hurdles facing the safe supply industry, the CEO said he believes the biggest challenge is the public understanding of the space. “There are literally billions of dollars being poured into the ecosystem,” he said. “We’re talking about not the hard drugs, but the legal programs that the governments have set out. There is a lot of money here and a lot of opportunity, people just need to understand that. Looking at these opportunities and being in a good position to execute on them, that is where we stand.”

OPPORTUNITIES: As the safe supply sector develops, Panagiotakopoulos said Safe Supply is most excited about the companies it has identified over the past year. “Our biggest advantage here is that we are super early,” he said. “We’re talking to companies at the best time to get in, their valuations are low, they need the most amount of help and we get the most amount of value for our shareholders. That is the biggest opportunity for Safe Supply right now. We are in early and we are talking to the right people at the beginning of their business professional journey. In the future, we look towards being the beachhead and being known in this environment as the first ones in, making the strongest investments in the best companies.”

CANNABIS/PSYCHEDELIC STOCKS: Publicly-traded companies in the space include Aleafia Health (ALEAF), Acreage (ACRHF), Atai Life Sciences (ATAI), Audacious (AUSAF), Aurora Cannabis (ACB), Avant Brands (AVTBF), Ayr Wellness (AYRWF), Awakn Life Sciences (AWKNF), Body and Mind (BMMJ), BZAM (BZAMF), Cannara Biotech (LOVFF), Canopy Growth (CGC), Chicago Atlantic (REFI), Clearmind (CMND), Clever Leaves (CLVR), CordovaCann (LVRLF), Cresco Labs (CRLBF), Cronos Group (CRON), Columbia Care (CCHWF), Compass Pathways (CMPS), CURE Pharmaceutical (CURR), Curaleaf (CURLF), CV Sciences (CVSI), Cybin (CYBN), Delic Holdings (DELCF), Delta 9 (DLTNF), Entourage Health (ETRGF), Enveric Biosciences (ENVB), Fire & Flower (FFLWF), Flora Growth (FLGC), General Cannabis (CANN), Goodness Growth (GDNSF), Greenlane (GNLN), Green Thumb (GTBIF), GrowGeneration (GRWG), Hemp (HEMP), High Tide (HITI), India Globalization Capital (IGC), Indiva (NDVAF), Innovative Industrial Properties (IIPR), InterCure (INCR), IM Cannabis (IMCC), Wellbeing Digital (KONEF), Khiron Life Sciences (KHRNF), Lowell Farms (LOWLF), Lotus Ventures (LTTSF), Lucy Scientific Discovery (LSDI), MediPharm (MEDIF), MedMen (MMNFF), MindMed (MNMD), NewLake Capital (NLCP), Numinus (NUMIF), Organigram (OGI), Planet 13 (PLNHF), Reunion Neuroscience (REUN), Revitalist (RVLWF), RIV Capital (CNPOF), Relmada (RLMD), RYAH Group (RYAHF), Safe Harbor Financial (SHFS), Small Pharma (DMTTF), SNDL (SNDL), Sproutly (SRUTF), Skye Biosciences (SKYE), Stem Holdings (STMH), Sunniva (SNNVF), TerrAscend (TRSSF), Tetra Bio-Pharma (TBPMF), Tilray (TLRY), Trulieve (TCNNF), Tryp Therapeutics (TRYPF), Verano (VRNOF), Village Farms (VFF), Wesana Health (WSNAF), Zynerba (ZYNE) and 4Front Ventures (FFNTF).