A look inside the cannabis business

A handful of companies are trying to create a consistent, locally grown medicinal cannabis product by October. A few are close. reports.

On Tuesday afternoon Brendon Ogilvy stood in the middle of a squeaky clean manufacturing room laden with drums, steel tables, and glowing machinery, and said: ‘‘In a couple months’ time this will all be operational. It looks a bit chaotic now, but it will all come together.’’

The Bay of Plenty settlement of Katikati looks out over the sparsely populated but close-knit community of Matakana Island. Orchardists have long been set up in small-town Kati – as the locals call it – but alongside them for the past few years were entrepreneurs who had begun work on growing something else: Medical cannabis.

A year before the enacting of the Medicinal Cannabis Scheme, Eqalis had already formed, spearheaded by entrepreneurs in Ogilvy and Greg Misson, with the expertise of former NZ Pharmaceutical Society president Elizabeth Plant.

The trio had been burned from the failure of a previous investment with self-styled ‘‘wolf of weed street’’ Ross Smith.

They hired experts to help them; two specialists in traditional Ma¯ ori medicine, a lead scientist, four horticulture experts, assorted medical professionals, and a retired banker, alongside a cast of about a dozen other supporting characters.

In an unremarkable building surrounded by wire fencing, shoehorned between mechanics and barren lots, they’ve spent millions setting up and conducting thousands of experiments and potency tests. They’re hoping that by the end of the year they’ll be selling Medsafe-approved, locally grown medicinal cannabis products.

The launch from the starting blocks began when the scheme was enacted – following years of work including legislation changes – allowing business to apply to the Medicinal Cannabis Agency for licences to possess, grow, supply and research.

About 40 licences have been granted to local companies but the final frontier, the licence to manufacture, has so far evaded everybody. A Ministry of Health spokesperson said Medsafe had four applications (in June there were five) and issue of one was pending – likely to be next week. As well as obtaining the licence, applicants must have verification that their products meet the minimum quality standard.

‘‘Medsafe has had a number of other New Zealand companies indicate that they aim on applying for a Licence to Manufacture Medicines, but have not submitted an application,’’ the spokesperson said. ‘‘The status of applications is largely dependent on the time it takes applicants to design and implement systems that meet the required pharmaceutical Good Manufacturing Practice (GMP).’’

The black-and-white checkered flag beckons on September 30 – the Medicinal Cannabis Agency will require imported products to meet minimum standards from that date. There’s concern that come October there will be no approved products on the market.

New Zealand’s standards are among the world’s highest, some describing the process of gaining the aforementioned GMP as onerous. Products must be tested for microbial contamination, heavy metals, pesticides, absence of aflatoxins, ochratoxin A, foreign matter, loss on drying, ash, and residual solvents. Active ingredients must be THC, THCA, CBD, CBDA, within specified limits. Producers must also demonstrate specified shelf-life and storage conditions, and meet requirements on areas including container material, labelling and testing. Says Ogilvy: ‘‘Setting up a pharmaceutical company should be difficult, it’s not designed to be easy. It does take quite a bit of time, but the whole purpose of it is to maintain safety and consistency.’’

You’d be hard-pressed to find Eqalis. Its Katikati site is nondescript, with little to no signage – aside from a legacy billboard from the dentistry technology workers who used to be there. Staff were staggered when an elderly woman in an expensive car drove up to the door once and asked if they sold direct (they didn’t, and don’t. Even when manufacture and supply status is achieved, operators can’t sell or even advertise directly to the public).

Inside the warm offices is the business of cannabis: A rabbit’s warren of slightly humid and brightly lit rooms, about 33 cannabis plants in each. Of varying size and ages, they’re packed into fabric pots where they grow in coconut husk and Perlight, drinking in a liquid fertigation system. ‘‘They’re completely reliant on us,’’ says fasttalking general manager Tyrone Carlton, who leads visitors through a rigmarole of hairnets, glasses, bodysuits and surgical shoe covers before traipsing through the maze.

The plants are on a tight rotation using a screen of green growing method, training them to sprout carefully, horizontally, through black trellises.

This ensures size uniformity, but also helps light distribution (lighting ensures potency), by the hovering bulbs. The plants are subject to temperature and humidity, light intensity, water and nutrients, and the introduction of CO2. Tweaking any one of those can dramatically alter a plant’s yield and potency, and ultimately they’re looking to get the most bang for their buck – the highest possible gram of potency per gram of biomass.

The orange hill special, a highTHC potency strain, has fragrant terpenes smelling of pungent lemon. Each plant has about 200 terpenes (aromatic compounds found in many plants), but some smells will be more pronounced than others - you even get a whiff of lavender in these rooms - and how you cultivate it can manipulate the terpene ratio, and therefore the effects of the plant, regardless of the THC content.

Some plants have developed small white crystals on the top of the flower, mushroom-like structures that act as storage for cannabinoids and terpenes. The rest of the plant will have much lower levels of CBD. One series of short and fat cultivar was to be harvested the next day. In another small room, hacked plants were drying in black plastic bags stored in dark containers. The room is cold because terpenes will start to evaporate in temperatures over 20 degrees Celsius.

When the plants are dried, they enter the clutches of lead scientist Dr Shane Rutherfurd, who is perhaps the most integral cog in the operation’s wheel. Rutherfurd had a long career in food sciences, but in February 2020 found himself in the lab of this start-up instead, conducting thousands of potency tests and learning about the truculent nature of the cannabis plant.

He researched online and read papers, consulted experts and watched YouTube videos. He experimented with the variability of the grow, and is still working on separation.

‘‘That’s been my life,’’ he says. ‘‘We test everything.’’

You can separate cannabinoids from the flower using an ethanol dissolving process but faced with the issue of storage and disposal, Rutherfurd instead uses a supercritical CO2 oil extractor, which is expensive (half a million) and occasionally temperamental.

Its cylinders take a couple of kilograms of cannabis plant and drip out a sticky, honey textured cannabinoid oil, about 250g, which is further separated into THC and CBD.

Eqalis must demonstrate they know the profile of the cannabinoids and their quantities – some strains will have different peaks of each. And, each gram has to be accounted for – THC can be lost on the silver spoon used to scrape the oil out, for example.

The testing is instrumental. They collect data from the plants multiple times a day to see how the cannabinoids are tracking. Although there’s a lot to be gleaned from international operators, like the US-based manufacturers (Eqalis imports product from Colorado) there’s not a huge amount of information sharing between local businesses, who will also be enduring the trial and error process of getting product to market.

Poker cards are held closely to chests. ‘‘You can understand that from a commercial sense,’’ says Carlton. ‘‘You would have to imagine they’d have this gear,’’ Rutherfurd says, of his testing facilities. Carlton: ‘‘Surely, how else can you know what you’re doing?’’

‘‘I would say we’re not going to have any products on the market by the end of the year, if ever. No licence has been issued – that’s not just a ring the phone or snap your fingers kind of thing . . . it’s getting past the point where Covid is a valid excuse.’’ Abe Gray, right, New Zealand Medical Cannabis Growers Association secretary

Sally King laughs at the suggestion that the cannabis industry has entered a quiet space race. There’s no comparison to the USUSSR standoff, the NZ Medical Cannabis Council executive director says, and while there’s some quiet competition in formulas, technology and intellectual property, she thinks the industry has largely been collaborative. The feeling among her members is dual: Eye-on-the-prize steely concentration, but a bit of relief at what looks like light at the end of the tunnel.

Will New Zealand have locallymade approved product ready to supply by the end of the year? ‘‘Honestly, I cannot say with 100 per cent guarantee, but it’s not all in our hands,’’ she says. The Medicinal Cannabis Agency’s efficiency will be the ultimate hand-brake. King is optimistic, acknowledging the difficulties businesses have had, pointing out that most pharmaceutical products would take a decade’s lead-in before reaching market. The opportunity to become a world leader in the sector is there, she says, and while there are no numbers available on the number of people in paid work in the industry – King thinks it will be small – she imagines it will soon boom.

‘‘I think in 10 years we’ll look back and say, ‘that was a hard start but look what it’s opened up to us’.’’ The tour of Eqalis ends with the very final step in the process: The white-walled manufacturing plant, currently occupied by accountants and other administrators, who’ll soon be shuffled aside to make way for storage and a bustling production chain which would see each batch independently tested to ensure it is what Eqalis says it is.

With the capacity to make 30,000 bottles of oil a month, helped by 4000 plants on Matakana Island managed by lead grower Jason Murray, Ogilvy says they’ll have the capacity to contract out growing if they need to. While that would be an intensive process in itself – commissioning a specific grow to ensure its uniformity – there are business opportunities there for willing partners, he says.

Given New Zealand is a world leader in agriculture and horticulture it’s expected its medicinal cannabis industry will be no different – and there are expectations that it could be a billion-dollar sector. Scan Seek for cannabis job listings and you’ll come across plenty – cultivation managers and technicians, quality assurers, roles in research and development are all in demand.

Speak to Abe Gray, secretary of the newly formed New Zealand Medical Cannabis Growers Association, however, and you’ll find all is not peaceful in the growers’ world. He believes growers who quickly obtained permission to grow plants for big commercial operations have been led down the garden path, and some wasted thousands of kilograms of plants waiting for the industry to start moving.

‘‘I would say we’re not going to have any products on the market by the end of the year, if ever,’’ he says. ‘‘No licence has been issued – that’s not just a ring the phone or snap your fingers kind of thing. A few are a bit of the way down the track, but it was supposed to be done six-plus months ago, and it’s still not happening, it’s getting past the point where Covid is a valid excuse.’’

He believes the grace period to have products up to scratch will have to be extended for patients, if not companies, and is looking forward to a regulatory review of the process.

Eqalis’ manufacturing building is spick and span and occupied by more extraction and purification equipment. There’s a room for labelling and bottling, and one wall contains a Venn-like diagram that we’re not allowed to film. The team are waiting on an H-vac – what will be their biggest expense, they say, left until last – which helps prevent contamination at the site by drawing out impurities. Product that’s waiting on test approval will be ‘‘quarantined’’ in a large cage, then THC products will be stored in a fridge, and CBD at room temperature.

‘‘The whole thing is making sure it’s what we claim it to be, every single time,’’ says Carlton. ‘‘There’s no room for error.’’

With just a few months to go, the final few steps for Eqalis are applying for GMP certification and auditing by Medsafe (they’re hoping this will be scheduled within a month, GMP would pave the way for a manufacture licence), starting the manufacture and testing of pilot batches, and then submitting a product assessment to Medsafe.

Says Ogilvy: ‘‘It’s like waiting for Christmas, and the country has been waiting for this – some people for decades – but the country has been waiting for years.’’