The Bets behind medicinal Cannabis

Businesses interested in developing the medicinal cannabis industry are readying their millions for investments. Industry Regulations will permit the country become an important player. This is the panorama.

The regulations issued by the Government, which define the rules of the game for the production and processing of cannabis for medical and scientific purposes, opened the way for the creation of an industry that has broad potential and on which several companies are starting to bet on.

A month ago, a series of resolutions were issued that define the normative framework in which those interested in being part of this business shall navigate. According to entrepreneurs this regulation is comprehensive, as it seeks not only to regulate the development and establishment of the industry, but also obliges the private actor to invest in research in order to ensure both product quality and consumer safety.

Such are the opportunities generated by this nascent industry that five companies decided to join together in order to create the industry´s first Association, which already has legal status and is known as the National Association of Colombia Cannabis Industries (Asocolcanna), founded by Econnabis. Ecomedics (to be commercially known as CleverLeaves), Cannavida, Medcann and Khiron Life Science Corporation.

These companies are vertically integrated; that is, they will have their own crops, they will develop, manufacture and market cannabis derived products, with the idea of selling them not only in Colombia but in other currently regulated markets.

Felipe Harker, spokesman for Asocolcanna, states that it is up to the private sector to establish the rules that ensure the sustainability of the industry. "This is a global reality and Colombia is leveraging its competitive advantages, such as low production costs and the geographical positioning of the crops, because it is in the Equator," he says.

The business men compare the cannabis market in the country to Canada´s, which stated off with 7.914 patients in 2014 and expects 750.000 in 2020.

The objective of Asocolcanna is to formally link all companies that want to participate in this business and in order to do so has the necessary vehicles to provide advice and support in relation to the regulatory framework. The Association has a membership modality for small growers. Gustavo Escobar, the CEO of CleverLeaves (Ecomedics), believes that regulation not only opens up possibilities for large industrial investments, but small and medium growers or small-scale enterprises can also be part of any of the production chain links.

After the regulations were approved, companies have focused on applying for the licenses, which first must be authorized by the Ministry of Health that permits the processing of medical marijuana and then the Ministry of Agriculture in order to receive the cultivation license. The association already has three licensees: Ecomedics, CannaVida and Econnabis, have the Ministry of Health´s approval for production and manufacture, but must now obtain the cultivation license, as well as register with the lnvima.

Regulations will allow the companies that bet on the cannabis industry to commercialize their products, both in the local and foreign markets.

INVESTMENTS

The bets on the business are not small. Andrés Galofre, commercial manager of Khiron, a company founded in Canada, with a subsidiary in Colombia (Khiron Colombia SAS), says that $ 10 billion will be invested in the next 10 months, resources that will be used to set up product research, development and manufacturing infrastructure, which are expected to go to market on 2019.

This organization, with Canadian and Colombian capital, is present throughout the value chain and its goal is to be publicly traded in the Toronto Stock Exchange in order to have a greater access to resources, before the end of the year.

Meanwhile, Medcann, will develop its own genetics, it will have a 10 hectare crop and a facility for the manufacture and refining of derivatives.

The project will be located in the department of Meta with a total investment of between US $15 million and US $20 million, says Felipe Harker, founder and partner in the firm. This money will be used to buy equipment, and for extraction, processing and analytical laboratories. The company plans to spend 3% of its sales on social investment and another 3% on R&D. CleverLeaves will have its own crops in the Sabana, but will work with small growers at the same time. This company was the first one made up of Colombian capital to obtain the license to produce and manufacture medicinal cannabis derivatives.

The objective of Asocolcanna is to promote good practices in the performance of agro industrial activities related with the exploitation the cannabis plant.

The initial plans point towards investments between US $3 million and US $5 million, an amount that will vary according to the project´s progress. These are own resources, but the company is being funded by investors, both from Colombia and abroad, mainly from Canada.

Econnabis is completely vertically integrated. "We follow a model from seed to patient. This way, we can ensure quality throughout the entire production process: cultivation, processing, and elaboration, "says its CEO, Mauricio Krausz.

They estimate that in the first 3 to 5 years they will invest $ 15.000 million, which will come from investment groups with industry experience, and especially in research.

CannaVida, of Canadian origin, has invested US $1 million in its operations in Colombia. Its CEO, Ron Marzel, says that most of the money has directly benefited the local economy, since it has been used to acquire and develop properties in Barichara and to pay personnel. For the next year he plans to invest close to US $10 million, in order to develop his business in a market that this manager considers a challenge.

These companies face the challenge of having operations and production processes in which the consumer is key in order to offer standardized medicines with phytotherapeutic quality.

Source: Revista Dinero