The challenges of becoming a world power in medicinal cannabis

Local companies must accelerate the pace so that foreign companies don't catch up, given the interest that the business garners.

BY: PORTAFOLIO
 JANUARY 14, 2018 - 7:55 P.M.

The cultivation and transformation of medicinal cannabis in Colombia seems so promising that the companies that have been created to enter this business have had no problem raising capital, but several have already encountered a wall in the financial market: they are being denied opening a simple bank account.

This was confirmed to Portafolio by the director of the National Narcotics Fund, Andrés López, and by other sources linked to this newly created industry.

Curiously, according to López, from Europe we import about 1.5 tonnes of codeine, another narcotic – and as such a controlled substance – with which they manufacture analgesics, anti-diarrheal and cough syrups, and none of the companies that do so have been questioned, or have had banks close their doors on them.

The official recalled that in the United States, in the 29 states where medical marijuana is legal (in another 8 recreational use is already approved) dispensaries must install cashiers, as buyers are not allowed to pay with plastic money so they must make purchases using cash advances on their credit cards. The resentment in this regard became more acute since mid-2017, when Uruguay approved the recreational use of marijuana and fears arose that the profits would circulate into the American banking system. 

To begin to pave this terrain, the newly formed National Association of Colombian Cannabis industries, Asocolcanna, which brings together six companies in the sector, is already asking for meetings with banks who are members of the Banking Association. But the biggest challenge will be to convince banks abroad. "We are somewhat concerned that international banking institutions, especially those headquartered in the United States, have not understood that this is totally legal and that no treaties are being breached," Lopez said.

The other front is the work with Procolombia, so that this opportunity to generate a boom for the country is not truncated by misunderstandings. "We will need important support from the Ministry of Commerce and (national) financial institutions to help clarify the issue to foreign banks," said the newly appointed director of Asocolcanna, Rodrigo Arcila.

This, however, seems to be a minor challenge compared to the prospect of introducing Colombia to the world elite of medicinal cannabis, which promises to become the fifth line of the national economy.

MARKET SIZE

The numbers on its potential differ but even the most conservative estimates are attractive. A report from the portal Visionagain, which serves as a benchmark for several companies in the industry, states that the world market for medicinal cannabis in 2016 moved 12 billion dollars and will grow 18% steadily over the next five years. 

Another report from Brightfield Group places the amount for 2017 at 7.7 billion dollars and predicts that by 2021 it will be 31.4 billion, due to the number of countries that are approving its use as a medication. On the other hand, ReportLinker claims that just the U.S. market will be 19.5 billion dollars by 2024.

Among the leading figures in the field are countries like Canada, Germany, Australia and Israel. And Colombia has the firm intention of arriving with strength. This is demonstrated by the recent quota requested and approved by the INCB (International Narcotics Control Board, which is dependent on the UN) of 40.5 tonnes of marijuana flower, i.e. 44% of the worldwide quota for 2018. With it, the government hopes to cover the needs of companies that are pushing the issue. 

The Director of the Narcotics Fund explained that this figure was calculated assuming that there are about 20 companies licensed to cultivate and 22 to transform cannabis, and that there could be more in the near future. Individually, they would manage between half and one hectare of crops, and also, they would harvest two to three times a year, depending on the implementation of yield-increasing techniques. With this, harvests would meet local needs and 10% of global needs.

In the future, the process will be reversed, according to Lopez. Before April 30, companies must present their business plans for 2019, based on their requested quota and, when all applications are ready, the government will send the country's plan to the INCB headquarters in Vienna (Austria) before June 30. The response to the quota requests should be ready by the last week of December or the first week of January. Only then will we know what the actual size of the business is.

"This is not a business of volume, but of drug quality and efficacy", said Juan Diego Álvarez, Vice-President of Regulatory Affairs for Khiron. 

For the moment, companies are moving forward with the legal procedures, the organization of their business structures, the importation of machinery, crop preparation and locating laboratories and processing plants. Only Pharmacielo and Khiron have began sowing test seeds, which must be certified before the ICA before breaking ground, and others have to take this step soon.

The advantage for these pioneering companies is that they can start their experiments even with strains that did not enter the country legally, as long as they declare them before April 19 of this year. On the other hand, latecomers must certify that the origin of the seeds is a country where the activity is legal. "This has its difficulties because, for example, in Spain and the Netherlands there are seed banks, but when one goes to the government for a permit to remove them, they say that these are ‘collection’ seeds, i.e. they have a semi-legal status that does not allow them to leave the country", Lopez said. 

Thus, according to calculations, only in the first quarter of 2019 would we see the first crops and hopefully before June the processing of essential oils that serve as inputs and perhaps products destined for patients, who are the end users. Alvarez, of Khiron, a company that aspires to be able to produce medications, praised the steps taken by the country, but warned that it's still necessary for the Invima to align itself with the whole plan, with mechanisms to accelerate the register of products derived from cannabis.

In addition to making the legislative and institutional adjustments; overcoming the prejudices that cannabis has and the country's relationship with the illegal narcotics business, is a challenge for Colombia - both companies and government - to rush to take advantage of the forward-thinking regulation before others do so, given the interest it has generated in other jurisdictions.

Source: http://www.portafolio.co/negocios/los-retos-para-ser-potencia-en-cannabis-de-uso-medicinal-513252