Financing Alternatives in Complex Markets

 Cannabis-Financing-Alternatives-in-Complex-Markets

 

Cannabis Financing Alternatives in Complex Markets

Finding the right resource for business financing comes with its own set of challenges, but those in the cannabis space, in particular, have an extra set of hurdles (or two) to climb over. Much like the mining and construction industries, cannabis falls into the high-risk category leaving entrepreneurs seeking traditional loans at a dead end. While the successful push in licensing continues, a lack of access to institutional banking has prolonged the process for many and stunted the full potential of growth for the cannabis market. It's a reality most evident in the United States where companies that received the legal go-ahead as early as 2014 are still not open for business. The good news? Alternative cannabis financing options are popping up in unconventional places. It's merely a matter of knowing where to look, and the steps you can take to qualify.


Obstacles in Cannabis Business Financing 

Currently, in the U.S., 11 states (and D.C.) have legalized recreational marijuana, and 33 more states have legalized its use medicinally. Despite this growing trend, the substance is still federally illegal, creating a huge barrier for companies when it comes to financing and banking. As cannabis companies patiently wait for the SAFE Banking Act to pass in the U.S., they continue to struggle to set up institutional bank accounts, let alone access funds to start, operate, or expand their company. 

Risky business is the name of the game, at least from those who hold the cash. Financiers see two types of risk in cannabis business financing: legal ambiguities - especially in the U.S. - and systemic risk in the form of assets that cannot easily transfer in the face of dissolution. In 2018, when the Bank of Montreal invested in several large cannabis companies, the tide toward institutional financing was expected to turn toward the cannabis industry. But it didn't. Instead, the majority of Canadian business owners are still struggling to secure cannabis financing, all in an environment where legalization of cannabis is on a country level. 


Alternative Cannabis Financing Solutions

Although one door has closed, several others have opened. Traditional lenders unaccustomed to providing credit lines for assets means there is an appetite for alternative cannabis financing options. Private investors, local credit unions, self-funding, crowd-funding, celebrities, and holding companies are just a few of the choices some start-ups have pursued. 

There's also a more direct level of financial support offered by companies selling cannabis equipment and services. Where other private lenders struggle to negotiate the risks associated with cannabis business financing, equipment manufacturers, in particular, understand the inherent value and potential -- leading to internal financing solutions and in some cases access to extended financial networks.

 

Approach Cannabis Financing with a Plan

Regardless of how you choose to pursue financing for your cannabis business — private lenders, manufacturers, angel investors — the key to securing the money you need is approaching any investor with a well-researched business plan and the data to back it up. 

  1. No Time for Half-baked Ideas | In an age of legitimization, cannabis companies can no longer rely on half-baked ideas. Just like any loan application, seeking cannabis financing requires an understanding of what the money will be used for down to the very last cent. Otherwise, it is challenging for a lender to determine how much financing you actually need. It can be daunting running those numbers and establishing a clear growth plan, but doing so gives a lender the assurance you've done your research, know what you want, and how you're going to use it. From equipment needs, and raw material to personnel, a solid plan includes identifying the costs associated and carefully outlining how every item of your budget will be spent.

    Quick tip: You wouldn’t go back to the bank multiple times changing the loan amount for a home, and you shouldn't do it now. Take time to get those numbers right the first time around. 

  2. It is a Team Effort | Investors want to be privy to certain information about your company, including details about your team and their roles. It's always valuable if you can create a way to introduce potential investors to those involved in your company's purchasing decisions and expansion plans. There's nothing worse than reaching the finish line only to be told that silent partner 'Joe', who your lender is unaware of, now has a few changes to the application.

    Quick Tip: Explain who will handle different aspects of the capital and how their role influences the rest of the team, the investment funds, and your future growth. 

  3. Deliver a Pitch They Can’t Refuse | Beyond explaining how you plan to use any financing, how do you plan to expand your business, increase revenue, and make money for yourself, your company, and your investors? Cannabis business financing — or any business financing, for that matter — is about more than just acquiring new equipment or expanding building space. Once those goals are accomplished, where will the business go from there, and what do the key milestones look like? Lay everything out on the table, and be transparent in your intentions with a comprehensive pitch deck. Remember, just because you may not be walking into a bank, you are asking for a hefty sum of money that deserves the same professional approach.

    Quick Tip: Build an impressive business plan that leaves nothing to guess, and in turn, an offer investors can't refuse. 

 

Financing through Vitalis

Manufacturing companies like Vitalis even offer internal financing solutions and access to a network of financing partnerships. Where other private lenders struggle to negotiate the risks associated with cannabis business financing, equipment manufacturers like ours understand the inherent value and potential within the cannabis industry.   

Ready to get the funding to grow your business? Contact the team at Vitalis today and learn more about our unique equipment financing solutions.

 

 


Sources

www.forbes.com/sites/kriskrane/2018/06/13/marijuana-banking-constraints-disproportionately-harm-small-businesses/#49181dc054ed

www.esquire.com/lifestyle/a21719186/all-states-that-legalized-weed-in-us/

www.cnbc.com/2019/10/01/underbanked-cannabis-industry-struggles-to-finance-double-digit-growth.html

www.potnetwork.com/news/bmo-invests-big-cannabis-shows-growth-american-banking-sector

www.westerninvestor.com/news/finance/financial-institutions-reluctant-to-bankroll-cannabis-entrepreneurs-1.23962148

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Psychedelic Trip: Let there be Data

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As the world turns an eye to therapeutic alternatives and the reform surrounding them, there's a topic that keeps capturing headlines - psychedelics. While still grouped as an illicit drug by today's standards, psychedelics are slowly, and discretely making their way to research facilities near and far. The mindset is this: If Cannabis can do it, so can psilocybin. But if the diligent systems and bureaucratic intricacies that once surrounded cannabis legalisation (and in some cases depending on geography still do) should serve as an indication: a fledgeling future for medicinal psychedelics will weigh heavily on precise data, process, and compliance.

 

Overcoming a Century-Old Stigma 

Changing the public perception of something embedded with stigmas is no easy feat. Since the Opium Act of 1908, governments around the world have worked to protect citizens from what they categorised as illegal substances. Such was the case with Cannabis when it joined the restricted list in 1923. 

Through legislative processes grounded in research and data, we've seen global strides taken in the face of changing public and government opinion. Efforts by countries, especially Canada, that have led the way in setting a progressive precedent for other nations to follow, and a blueprint for future industries to reference when faced with similar hurdles along the way. Nationwide Cannabis legalisation in 2018 in Canada, opened the doors to better study and understand the benefits of the plant, the seemingly endless types of cannabinoids and how to extract them, isolate them, and utilise them for different applications. In the lead-up to and amid Legalisation 2.0 extraction played a leading role not only in delivering a quality product for Licensed Producers but set a precedent in areas of controlled research. And while it may not have been high on the initial list of reasons, after years of in-depth study on Cannabis has indirectly given the approval of and confidence for emerging industries like medicinal psychedelics to follow. 

 

It's Not about the Trip; It's about the Journey

The success story that Cannabis is basking in today didn't come without obstacles. Remember the restricted list of 1923? Cannabis sat on it for decades, as the government largely overlooked decriminalisation and regulation - and how to merge the two. Positive as the shift was when they approved the production and distribution of medical Cannabis in 2013, it brought to light the grey areas behind the term 'legal'.  

The research of micro-dosing of psilocybin, the primary psychoactive ingredient in mushrooms, and slated to be the next major breakthrough in healthcare, is facing similar obstacles surrounding the contradictory legalities that its predecessor once endured. At present, psilocybin is still considered a drug, illegal on many lists and making research efforts to study the potential benefits, and the restrictions controlling the 'how' an uphill battle. 

Initial efforts have once again raised awareness to the same vital points flagged when Cannabis came into question on the road to legitimacy - compliance, safety, and good manufacturing practices. It has also brought to the forefront those entities and bodies who will once again play a supporting role in enhancing programs behind the research and development of the world's next therapeutic alternative. 

Institutions that have been granted a head start in exploring the ins and outs of the plant are highlighting areas that need more in-depth consideration. Safe manufacturing practices and the right systems required to gather data on the complexities of specific molecules and compounds are cited as the more complicated areas, among others. The University of Toronto recently launched the Psychedelic Studies Research Program (PSRP), dependent on Health Canada's approval of both the clinical trials and manufacturing process. PSRP has cited that without quality standards in place and the regulation that outlines the standards, it is impossible to manage the output of substances that are needed for controlled research. To reach that vital point of discovery will mean putting trust in science and a system with measures in place to support the regulation of those findings.

Have a product you want to be extracted for research purposes? To learn more about our research and development programmes, reach out today.

Keeping it Real: Edibles, Concentrates, and Topicals

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Has it been a year already? Marking the anniversary since the legalization of cannabis in Canada brings with it an even more exciting milestone for the market - the addition of edibles, concentrates, and topicals. It's a promising step for the industry at large in encouraging healthy competition. More importantly, it shines a light on the behind-the-scenes work to ensure safe practices and responsible processing for every product bound for the market.   

Legalization 2.0

Reaching this point in the journey of legalization certainly didn't happen overnight. It's a significant shift in both policy and mindset that hasn't happened since the end of alcohol prohibition. In fact, this recent news has been in the works for years, just not out in the open. A task force comprised of consultants, federal bodies, and industry experts have been leading studies and gathering facts to develop the framework for what's been coined 'Legalization 2.0'. 

What took so long exactly? Most of those closed-door conversations centered around establishing what safe consumption limits looked like, which standard packaging rules to apply, and how to enforce specific marketing standards. As straight forward as those measures may seem to anxious consumers, it's a learning curve that will take some time for even for the most prepared in the industry to get right, and a valid reason behind the uncertainty on how soon products will hit stores. In line with Health Canada’s mandatory 60-day notice period for companies to submit documented proof of compliance, it's assumed the mass availability of such products won’t happen before January of 2020. 

For more information on Canadian Regulations, visit the Government of Canada website

A Battle with the Black Market

While a progressive move, Canada's strict regulations on cannabis are set to ensure the health and safety of the public, with ambitions to displace the industry’s black market. Global research consultancy firm Deloitte estimates that the second wave of cannabis legalization is expected to open a $2.7 billion market in Canada, with cannabis-extract-based products accounting for about $1.6 billion. Figures like these pose a question of how the 'bad guys' fit into that future equation. Recent scandals of THC-vaping products suggested to be tied to illegal vendors have created an air of caution with consumers and opened the gates of opportunity for those able to answer the demand with safe, consistent, and affordable product lines. As the legal industry matures and responds to the factors that have kept the illegal side booming -- which include cost, location, and supply -- it’s bound to cut deep with the black market.

From gummies and creams, cookies, and shatter, keeping these edibles, concentrates, and topicals pure doesn't start in the storefront, rather begins in the stage of turning flower into extracted oils. When it comes to extracting with the cleanest process and producing a pure broad-spectrum output, CO₂ remains the reigning champ. Unlike butane and ethanol methods that are toxic and flammable, CO₂ extraction uses temperature and pressure to produce a clean, quality pull of essential compounds. No harsh residual chemicals or contamination of harmful toxins within the final product - be it concentrates, topicals and edibles - means you can count on it being 100% pure cannabis, and 100% safe.

Learn more about the pure process of CO₂ extraction in our Guided Tour

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Top 3 Skills to Look for in an Operator

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The success of the most sophisticated systems in the world, from planes and trains, to computers, and medicine are all dependent on one thing - their operators. A testament that no matter how complex a design or automated a process might be, there still needs to be an expert in control. Extraction is no different. In fact, the reliability of your investment depends on the men and women balancing variables, comparing numbers, and using their intuition to reach an optimal output. How do you find the top talent to run the most critical part of your business? We’ve got you covered with the top three essential skills to look for in an extraction Operator. 

1. MECHANICAL APTITUDE

An Operator wears many hats when it comes to CO2 extraction, from handling biomass, and monitoring the flow of solvent to adjusting the pressure and conducting preventative maintenance tests. Talk about a long list of duties, which is simpler for those who come from industries that require the same knowledge, such as mining, oil and gas, heavy equipment operations, and other processing machinery. What exactly does experience on a rig have to do with operating an extraction machine? More than you think. Having a mechanical aptitude of any kind means being aware of the function of the component that makes up a complex system. 

Take the phase management aspect of CO2 extraction systems. It offers versatility and control of specific extraction parameters in the process, but with that comes a level of manual application - turning levers and setting pressure and temperature boundaries. It’s like hopping into a Ferrari. You better make sure you know what all the buttons do if you want to utilize the car’s full power potential and get the most out of the experience.

Coming from a similar industry and understanding the motions isn’t the only valuable takeaway. Previous experience also brings a familiarity with the technical terms of the job. To find someone who has not only mastered the craft but is fluent in the language around the process, equipment, and roles from day one, means saving valuable training time and resources.

2. CRITICAL THINKING 

As much as it is a science, let’s not forget that extraction is also an art. Sure the systems are meticulously designed and built to do the work, but some aspects require creativity. Operators are in a constant state of trying to strike the right balance with several variables - temperature, time, pressure, and more - all in an aim to find that extraction sweet spot. The pace of the industry is moving quickly, and with technical systems to match, having the ability to think critically has never been more precious to a company’s bottom line. 

Machines won’t always run the way intended, and troubleshooting won’t always be straightforward. Even having a system down for an hour is enough to cause a hard hit on profits. While Vitalis support will always be an option - we want to be our client’s last resort on account that an Operator was able to think on their toes and correct it themselves to ensure little to no downtime. A natural comparison is when a pilot receives an alert that there’s something wrong with the aircraft and has a very short window of time to fix it until things go downhill. Scrolling through a user manual would likely slow things down. So, what kind of pilot would you want in charge? If we had to take a guess, it would be someone with that natural ability to assess a situation, identify discrepancies, and create workable solutions to be communicated to an entire team. 

3. FOCUS

Optimizing throughput and efficiency when working long hours isn’t easy for everyone. Add to that having to follow a particular set of detailed instructions and record data means being alert and proactive as an Operator is a must.

It’s not just a skill we encourage our customers to seek when building their team. Being able to focus is a crucial aspect we look for in every one of our Vitalis Operators charged with performing our standard Factory Acceptance Tests before delivering the systems. Over an extended time, our team tests the equipment under minimum and maximum operating conditions for accuracy, safety, and consistency. We take it seriously, being one of the final people responsible for ensuring the systems are flawless.

SUPPORTING YOUR OPERATORS TO SUCCEED

Finding the right Operator with these three essential skills is one piece of the puzzle to extraction success. No matter who fills that role, it’s crucial they are fully equipped with the tools and the support they need to perform. Lending a hand to our customers and bridging that gap with training, manuals, and 24-hour assistance long after the systems are delivered to run their machines will always be a top priority. 

Want to learn more about setting your business up for success? Speak to one of our experts today. 

In Case You Missed It: GMP Basics

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Europe is the next big-ticket for medicinal cannabis, but it’ll take more than just having the right resources and team in place to make an entrance. The key to accessing this emerging market is having Good Manufacturing Practice (GMP) accreditation. A requirement that all medicinal products come from a GMP accredited manufacturer is one of many strict regulatory measures the European Union has put into place. Their aim is to assure both regulators and consumers that the products are safe, consistent, fit for purpose, and of the highest quality.

As part of our Vitalis educational series, our team of experts recently led a webinar on the process of obtaining a GMP certification for the equipment. In case you missed it, we’ve recapped the most important points to consider.

What is qualification versus validation?
Validation is an act, process, or instance to support or collaborate something on a sound authoritative basis. Qualification is an act or process to assure something complies with some condition, standard, or specific requirements.

Does the Factory Acceptance Test (FAT)  include actual extraction performance as performed on the customer like feedstock?
No. The FAT includes running the machine at a minimum and maximum operating parameters with no product. It allows for any issues with the machine to be identified in the absence of the product.

Are all of your gauges also field calibratable for future Performance Qualification?
Yes, all of the sensors and gauges can be calibrated by a qualified professional in the field.

Does re-using and recycling CO2 present any GMP challenges?
Re-using any solvent in a GMP environment does pose a challenge. You must prove that the recycled solvent will not affect the product quality of future batches.

Is there any statement in any of the GMP schemes that define Calibration requirements during the maintenance/life cycle of the equipment?
GMP regulations do not state how often instruments should be recalibrated as every instrument will be different. Manufacturers may provide a recalibration schedule, but it is ultimately up to the customer.

How does the development of Standard Operating Procedures (SOPs) fit into the GMP documentation sphere?
Any task that is done in a GMP environment that affects product quality should have a SOP to support that task. Having a SOP ensures that the task has been evaluated and is done the same way every time.

Does the scope of GMP change based on the stage of the process? For example, does a solvent tank require the same surface finish as an extractor?
They do not necessarily need to have the same surface finish. GMP is a risk-based system. If the risk of microbial or chemical contamination of the surface is high, then a smoother surface would be warranted to allow for easy cleaning. The solvent tank will probably only contain solvent and no product. Depending on the solvent, the surface finish may be rougher as the risk of microbial contamination is low.

Who is responsible for verifying and providing the GMP certification, and is it different per jurisdiction?
Every GMP jurisdiction will have a regulatory authority with inspectors to carry out audits.

Are EU-GMP regulations the most stringent?
It is hard to argue who has the most stringent GMP regulations, but the most highly regarded regulations can be found in the US (FDA), the EU, and Japan. Traditionally the FDA has been the largest pharmaceutical manufacturers while the EU and Japan are the largest markets, both bringing with them their own set of mature regulations.

What insight do you have into the qualification process for multiple pieces of equipment from different manufacturers?
Each piece of equipment in a GMP environment needs to be qualified separately, regardless if they are from the same manufacturer or not. When using multiple manufacturers, the qualification effort may be more as each manufacturer may offer differing levels of support and documentation. If you can procure equipment from the same manufacturer, then you only have to deal with one company, which may streamline your overall GMP validation efforts.

Is EU-GMP easier or more cost-effective for CO2 extraction technologies versus ethanol extraction?
Both can be used for GMP purposes. However, it all depends on the products you are manufacturing, as well as the pre- and post-processing methods required. There are additional infrastructure requirements when using ethanol and getting ethanol of the required grade may be difficult depending on geography.

Are cannabis extractors currently required to be GMP certified in Canada?
Cannabis extractors do not need to be GMP certified in Canada; they must adhere to Good Production Practices (GPP).

Is it possible to operate a GMP certified piece of equipment in a non-GMP certified facility? i.e. can you get a qualification on the machinery, but not the whole facility?
GMP certification applies to the entire production process, so you can’t have GMP certified equipment in a Non-GMP facility. You can have equipment that is GMP compliant and that receives the qualification in a non-GMP facility.

Is it possible to have a fully compliant lab and make dangerous products?
Many common pharmaceutical drugs and foods such as coffee, if consumed in excess, can be toxic and, therefore, dangerous. Most pharmaceutical drugs, if not taken as per the manufacturer's recommendations, can have harmful effects on an individual. Every pharmaceutical drug has to go through an approval process, and part of that is determining the safe dosage. If the advice is not followed, then there could be harm to the consumer, but if the advice is followed, there should be no issues, and the drug can be considered safe.

What if your terpenes are made in a Current Good Manufacturing Practice (cGMP) facility, but you add too much to a cartridge and vape at too high of a temperature?
Take, for example, if terpenes are made in a cGMP facility, but too much was added to the cartridge and vape at too high of a temperature. This has been occurring in the USA due to very lax regulation at the state level on vape cartridges and no regulation at the federal level. Equally, it means the FDA, the agency tasked with protecting consumer safety, cannot. The only way to avoid such a thing is for cannabis to be brought within the scope of the FDA where they can regulate the vape cartridge contents and set limits.

cGMP is one part of consumer safety, but does that mean it is necessarily assurance of its safety?
GMP is meant to protect consumer safety during the manufacturing process of the product. GMP has nothing to do with whether the product itself is safe. Product safety is covered when a pharmaceutical drug is submitted to the FDA for approval and is what clinical trials establish. GMP will guarantee that the product has been manufactured consistently and to the highest possible standards.

Interested in learning more about GMP? Speak to one of our experts today

GMP Documentation for the Cannabis Industry

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The legal medical cannabis industry is in full bloom across the globe. In North American markets, the dominant cannabis firms have firmly rooted their positions and are now setting their sights to Europe for new growth opportunities.

While medical cannabis is legal in a number of European countries already, it’s estimated that the EU's medical cannabis market could expand to over 123 billion euros within a decade.1

Gaining access to the EU’s medical cannabis market is no easy task – almost all medical cannabis that gets exported to Europe must come from a Good Manufacturing Practice accredited facility. Good Manufacturing Practice (GMP) is a best-in-class set of regulations that covers all facets of pharmaceutical drug production from raw materials, equipment, facilities, down to training and personal hygiene of staff.

GMP standards ensure pharmaceutical products are fit for purpose, high quality, consistently made, and safe for consumption. GMP regulations dictate that equipment must be made in a way that is streamlined, safe, and reliable.

GMP regulations are enforceable by law and once GMP accreditation is obtained, it must be maintained. Failure to do so can result in the loss of market access, fines, or class action lawsuits.

Gaining GMP accreditation has a double effect of providing access to new cannabis markets and improving your brand reputation. When consumers see a GMP-labelled cannabis package, they know the product is safe, clean, and will work as advertised. GMP certification also fosters trust with supply chain partners, which saves time and money when the time comes to make deals.

As an international GMP-compliant equipment supplier to the pharmaceutical and recreational cannabis industries, Vitalis specialists have a deep understanding of not only Canada's Good Production Practices (GPP) but GMP regulations around the world and will ensure that the qualification of the Vitalis equipment goes smoothly.

Since GMP rules are flexible and not a specific set of instructions, it’s the responsibility of every cannabis exporter to bring their production facilities into compliance with GMP rules. Due to the massive scope and highly technical nature of GMP, it’s vital to get the help of an experienced consultant early in the compliance process.

Bringing in a GMP Consultant:

A GMP consultant looks at your facility, equipment, processes, documentation, and even your supply chain to determine what is required to bring your facility into compliance, and how to focus your company resources on the highest impact areas.

Through the Validation process, you’ll create in-depth documentation proving that you’re in compliance with GMP rules every step of the way, so that your facility passes inspection the first time. While qualifying equipment is ultimately the customer’s responsibility, a GMP consultant will help you through the process.

What Documentation is needed for GMP Qualification of equipment?

A typical equipment qualification process will begin with the User Requirements Specification (URS), which outlines a customer’s regulatory, materials, construction, and safety needs. At Vitalis, we aim to reduce the validation burden on the customer by providing standardized URS documents that reflect our standard machine offerings as a starting point. Customers then review this document and work with Vitalis to tailor the requirements of the equipment to suit their processes.

Following the URS is the Design Qualification (DQ), which translates the requirements in the URS into the equipment design. For efficient auditing purposes, it’s critical to have traceability between the URS and the DQ. The results of the Design Qualification allow a customer to assess the suitability of the equipment for their facility.

Upon completion of the build and before shipping to the customer, a Factory Acceptance Test (FAT) is performed. During Factory Acceptance Testing, the equipment is tested under the minimum and maximum operating conditions to ensure that it performs as expected. Measuring devices such as gauges and sensors are tested for accuracy, and safety features such as e-stops are checked to ensure they are operating as designed. The FAT is reviewed by the Vitalis Quality Team and supplied to the customer as part of the turnover package.

Before a piece of equipment can be used in production, it undergoes an Installation Qualification and Operational Qualification (IQ / OQ).

Installation Qualification is a process that includes checks to ensure equipment has been correctly installed. As well, it verifies that utility connections have been made properly, that the equipment has been placed in an acceptable location, and that it adheres to the manufacturer's design and install requirements.

Operational Qualification is the process of running the equipment at its maximum and minimum operating parameters to ensure the equipment performs safely and consistently at all operating ranges and provides verification that the system is ready for product runs.

Vitalis not only provides an IQ/OQ protocol as standard with every GMP machine, but our expert Service Technicians will also visit our customers to execute the IQ/OQ protocol.

The last qualification step is the Performance Qualification (PQ). The PQ is the documented verification that systems and equipment perform effectively under prescribed production conditions. That is, it qualifies the customer’s approved process methods and product specifications. While the customer is ultimately responsible for this qualification step, Vitalis can offer support when needed.

The Turnover Package (TOP) is the final set of documents in the qualification effort that provides the documented evidence that the equipment was designed, constructed, and tested in accordance with the customer's requirements. The Turnover Package includes material traceability records, certificates of compliance, engineering drawings, critical user information needed to maintain the system like maintenance intervals and procedures, and spare parts lists. It is also critically important that the documentation provided in the Turnover Package adheres to Good Documentation Practice, which outlines how documentation should be prepared, filled out and corrected.

Vitalis assembles a comprehensive Turnover Package for every GMP system built. As experts on the design and construction of the machines, it makes sense to ensure that all documentation is accurate and ready for delivery. Taking this step helps to reassure customers that their Vitalis equipment can be qualified for compliance within their GMP environment. It's just another way that Vitalis continues to lead the industry in GMP and customer support.

Talk to Vitalis about setting up a GMP-compliant extraction system.

1. Will Europe be the world’s largest cannabis market? https://www.healtheuropa.eu/medical-cannabis-market/90033/

Take a Guided Tour of CO2 Extraction: Part 1

From the machinery and components through to solvent recovery, learn how CO2 extraction is made possible!

Part 1 - get familiar with the systems and equipment involved, from pump technology to phase management.

Carbon dioxide (CO2) makes an excellent extraction solvent for botanical oils. CO2 is a unique solvent as it retains its solvency power as either a (subcritical) liquid or as a supercritical fluid depending on the respective temperature and pressure. By changing the pressure and temperature of CO2, its solubility and selectivity for a specific compound of interest can be changed to optimize an extraction.

This three-part series will provide a guided tour through the process of extraction using CO2 as the extraction solvent. Various aspects of the extraction system will be covered ranging from the machinery and components, the different parameters that can be used, to the interwoven principles of extraction (see Figure 1 for an overview). The first part will provide a mechanical focus on the early stages of the process, particularly on storage of the solvent and the distribution of the solvent via a dual acting positive displacement pump. Part two will examine what occurs during the extraction process in the extraction chamber, solvent power and the associated solubility. Finally, part three will cover the separation of the solutes from the solvent stream and solvent recovery.

The Vitalis Difference - Figure 1 Pages - Block Diagram-01

1. STORAGE

The extraction process begins with the CO2 accumulator. This is the reservoir that supplies the system with solvent during operation. CO2 can be stored here as either a low-pressure gas, a high-pressure gas or a liquid.

The Vitalis Difference - Phase Management - Final_corrected

2. DISTRIBUTION

The pump is the next stage of the process. The job of the pump is to deliver CO2 to the system at a selected pressure. The two most common pumps that are used in the extraction industry today are dual acting positive displacement pumps and diaphragm pumps.

DUAL ACTING POSITIVE ACTING DISPLACEMENT PUMPS

Dual acting positive displacement pumps have the ability to deliver an uninterrupted flow of solvent into the extraction system. In turn, the pump’s hydraulic cylinder applies force to two oppositely directed pistons. Liquid enters the available space ahead of one piston, as force is applied to the other to deliver a volume of the solvent. At the completion of this stroke, force is then applied to the opposite piston, now primed with a volume of solvent ready for delivery to the next section of the machine. Hence, dual acting positive displacement pumps eliminate the interruption in solvent output (by eliminating the down stroke). Figure 2 shows the recharge and output operation of the dual acting positive displacement pump. Due to their efficiency and continuous solvent delivery, and the fact that their design is very robust, they are the favored option for use in extraction equipment.

Figure 2

DIAPHRAGM PUMPS

Briefly, solvent only enters diaphragm pumps on their down stroke and is then delivered on their output stroke (Figure 3). Despite numerous variations on their designs, solvent delivery results from these pulses; thus, the system will experience an interruption in the flow of solvent at each down stroke as the pump is primed with a new volume of solvent for delivery. Furthermore, diaphragm pumps generally have smaller displacements (being that the pump strokes provide a lesser fluctuation in internal volume) and operate at higher frequencies (more cycles for the life of the operation) which results in increased wear and system pulsation. This style of pump is also known to be less robust, making it less reliable, which leads to potential increased downtime for maintenance and component failure.

Figure 3

Regardless of what pump is chosen, as the CO2 reaches the pump, it must either be as high-pressure gas or in a liquid state. As previously mentioned, only liquid and supercritical phases of CO2 have adequate solvent power to be used in extraction. It is important to note that if a high-pressure gas is delivered to the chamber, enough additional pressure must be built up within to produce a liquid or supercritical fluid. If the solvent is pumped as a liquid, no change of phase is required. However, an operator may wish to adjust the fluid temperature which would include potential selection of the supercritical phase, before the solvent reaches the extraction chamber.

PHASE AND EFFICIENCY

Importantly, the phase of the solvent as it is acted upon by a system’s solvent-delivery pump can affect the extraction machinery’s mechanical efficiency. Liquids are effectively non-compressible, meaning the force applied by the pump is used to efficiently deliver solvent to the system. Conversely, more work is required when applied to a volume of gas and this will be given off as thermal energy as the gas is compressed. This means, that when acting on a volume of gas, an amount of the output stroke’s energy is then converted to heat.

Delivering the solvent as a liquid incorporates further efficiency as the density (being the number of particles per unit volume) of gases, even under high pressure, is much lower than that of liquids. This means that two identical pumps, one primed with a volume of gaseous CO2, the other with an identical volume of liquid CO2, do not contain the same amount of solvent. The pump filled with the liquid CO2 contains more solvent molecules than the pump filled with gaseous CO2. This results in fewer pump strokes that are required to deliver a given amount of solvent when it is pumped as a liquid.

3. PHASE MANAGEMENT

Phase management is an optional stage during the extraction process. Temperature adjustments including those where a phase change is induced, can be made using a phase management system. To adjust the solvent temperature, the flow is directed through one or more coiled or folded solvent flow paths within heat-exchange bath(s) or vessel(s). These flow paths are designed to maximize the surface area and can be used to either increase or decrease solvent temperatures through the flow path piping.

From here CO2, either as a subcritical liquid or supercritical fluid, goes into the extraction chamber where the extraction process takes place, before following on to the separation stages. These stages will be covered in the ensuing two parts of this guided tour of a CO2 extraction system.

The Vitalis Difference - Phase Management_v2

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GMP Overview Part 3: How To Get Ready For GMP

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Deciding to become GMP certified is a crucial first step, but before embarking on the journey it is imperative that a cannabis supplier or manufacturer is both prepared and understands what is required for GMP certification. Failure to plan properly and allocate the necessary resources can have a significant detrimental impact upon a business. Getting the GMP certification process right will save time, money, and resources, and can be highly advantageous for a company involved in the cannabis industry. Not only does it allow greater market access, but it also helps to reinforce the quality and reliability of the product being sold. Here are some important steps and considerations that companies should take into account as they get ready for GMP certification.

Getting a GMP specialist

When first considering whether to gain GMP certification, it is important to have an experienced specialist to assist you. This GMP specialist can be an internal or external resource and is essential to navigate the intricacies of GMP legislation and compliance. This person should have the skills to be able to conduct a gap analysis and report their findings. This process will identify the gaps between current processes and GMP requirements and provide recommendations to get the business ready for certification. It is far more efficient and effective to identify gaps early as implementing GMP retrospectively can incur significant costs. Knowing the cost and effort required to obtain GMP certification upfront allows for effective planning and minimizes the overall cost.

Risk Assessment

GMP covers all aspects of production from the raw materials, facilities and equipment, to the training and personal hygiene of staff. GMP requires that a business carry out a risk assessment of all their processes, identify areas that contain potential risks, and adopt strategies to minimize their occurrence. High risk areas identified from the gap analysis will require a larger qualification and validation effort than areas deemed to be lower risk. Typically identified high risk processes include manufacturing equipment, facilities, and personnel that work directly or closely with product. The areas of risk will differ between different manufacturers and suppliers, so it is important to understand all processes and the risks each pose.

Becoming GMP Certified

Gaining GMP certification requires a cannabis supplier or manufacturer to complete a GMP audit process. The auditors will be representatives from the regulatory authority for which the business wishes to gain certification, and the auditor’s agency will differ between jurisdictions. For example, the Food and Drug Administration (FDA) GMP inspection will be conducted by an auditor from the FDA. In the EU, while the European Medicines Agency (EMA) will coordinate inspections, the inspection itself will be carried out by a national authority in one of the EU member states. Here in Canada, to gain EU GMP certification an auditor from an EU member state will complete the audit.
Following the inspection, an audit report is produced stating whether or not certification has been achieved and provides corrective actions to be taken where it has not.

Every effort is made to ensure auditors are consistent in their interpretation of regulations. Even so, the individual auditors’ readings and inferences are subjective – what one auditor might find acceptable another may not. It is important to note that such discrepancies are uncommon and where they occur, processes have been established for resolving any potential audit disputes.

Maintaining GMP Certification

Maintaining GMP certification is important in ensuring continued market access and product accreditation. This can be achieved through measures such as properly maintaining equipment and facilities, following standard operating procedures, and ensuring GMP documentation is in order and available to inspectors. GMP auditors can conduct both scheduled and surprise inspections to ensure manufacturers or suppliers remain compliant. Failure to comply with GMP regulations can result in severe penalties such as shutdown of manufacturing facilities, seizure or recall of product, and even criminal investigations and lawsuits, all depending on the level of non-compliance. While it is possible to re-gain GMP certification or to fix any non-compliance issues, depending on the financial implications of the penalties imposed, for smaller businesses it could lead to failure of the business.

As more businesses within the cannabis industry look to implement GMP, manufactures or suppliers that follow suit will not only increase their business opportunities, but will also develop a reputation of excellence in the quality of products they produce. The need for GMP certification will soon increase as it appears GMP will become the standard for medical cannabis products and potentially for recreational products as well. Understanding what is involved in the GMP process is essential for a company looking to become involved in this space.

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Vitalis Writer Publishes Third Article in 3 Part Series

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Vitalis writer Krista Kulczycki has just concluded her three-part series on the topic of yields.

The article, published Aug 22 on Cannabis Science & Technology, wraps up the set with a discussion on processing parameters, and how operating conditions, including extraction runtime and processing parameters, have a major influence on the yield obtained from an extraction. Access Part 3: Return Versus Effort and Associated Processing Parameters here.

Throughout the series, key concepts in extraction are examined. From pre-processing through to profitability, Krista goes into detail on the variables that can impact yields, providing a clear explanation on an industry topic that is often misunderstood.

To view the entire series, check out Part 1 and Part 2 on Cannabis Science & Technology, and look for more from Krista in the near future.

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