Everett Knight of Valens Groworks provides an insight into the challenges companies face looking to expand into the medical cannabis extraction market in Europe.
Medical cannabis extraction is a crucial element of cannabis manufacture and processing, but it can be challenging to execute successfully. Traditionally the equipment has not been fully optimised for cannabis specifically, leading to lower than desirable recovery of cannabinoids. Valens GroWorks has emerged as a leader in the extraction space, maximising efficiencies for smaller scale operations who cannot build the infrastructure themselves and utilising methods of extraction which others may shy away from. Here Executive Vice President of Strategy and Investments Everett Knight tells HEQ about his history in the medical cannabis industry and shares his considerable expertise on what makes for great extraction processes.
Can you tell us a little about yourself and how you came to be involved in the Medical Cannabis Extraction Industry?
My journey started in Canada about six and half years ago, when at the time I was investing in small cap Canadian companies. After seeing the benefits of medicinal cannabis first-hand, I knew it had serious potential to treat a variety of things, so I decided to start investing in it.
I noticed there was a significant increase in social acceptance and truly believed the medical benefits of cannabis would be at the base of all markets. It was important to me and my Chief Investment Officer at the time that we gain greater exposure along with one of our doctor clients, so we launched the first institutional cannabis mandate in Canada. As one of the first mutual funds to invest in cannabis, we launched a private equity fund when I left and now have over 1,200 companies in our universe.
Over the past two and half years, I began to shift my focus away from cultivation and towards ancillary businesses, particularly extraction. Not only is extraction the base of all medical products, but the margins are higher in my opinion and more stable. After touring facilities across California, Washington, Colorado and Canada, I eventually came across Valens GroWorks; it was so much further along from an extraction standpoint, not to mention it had a fully licenced testing lab in-house, which in my opinion, is just as equally important and should be a standard among extraction companies.
After seeing the proprietary technology and the knowledge of the team at Valens GroWorks, I ended up becoming the largest institutional shareholder in the company and eventually joined the team. It is really exciting to be at the forefront of this industry within a company like Valens from not only an investment standpoint, but also from a personal standpoint.
Can you tell us a little about customised proprietary technology and how it helps to facilitate different medical cannabis extraction methods?
There are 140+ cannabinoids that can be extracted and need to be isolated, making it very different than other extraction industries. Temperature and pressure will vary depending on what cannabinoid you are isolating for whether it is for CBD, THC, CBN, or CBG. There are a variety of different types of extraction methods and the knowledge base around that is rapidly growing due to the advances in technology.
Not even five years ago, pharmaceutical equipment was being used for extraction. However, the recovery rates of those cannabinoids, or what we call efficiencies, were very low. For example, because the equipment wasn’t customised for cannabis, lower efficiencies were being recovered from input material. Companies, such as Valens GroWorks and machine manufacturers have refined the extraction process and now have the ability to isolate different cannabinoids. For example, Valens has five different types of extraction in house including, CO2 subcritical and supercritical, ethanol, hydrocarbons, solvent-less and terpene. These five different methods allow us the ability to create virtually any end-product.
How important is technology during the medical cannabis extraction process?
Technology is the base of the pyramid. It is important to note that we are only in the second inning of a long-term growth global industry. When it comes to extraction methods, we are still customising the equipment to increase efficiency and finding new methods for extraction for different products.
Even though technology is truly the heart of medical cannabis extraction, the actual process and standard operating procedures are just as important; the pre-processing and post-processing stages allow you to refine your product to the highest quality. It is also imperative to perform routine research and development on the technology and procedures.
Are there any challenges which are driving medical cannabis extraction innovation?
The EU GMP certification is a standard that will really be adhered to Europe. Currently, one of the biggest challenges companies face is receiving the EU GMP certification. Valens GroWorks has been in the application process for over a year and a half and it is no small feat that must be taken very seriously. There are different types of medical cannabis extraction that I believe will never become EU GMP certified, so it is important as a company to invest in the right equipment, which is obviously a challenge of innovation.
Looking to the future how do you anticipate the medical cannabis extraction process will evolve? Are there lessons to be learned in Europe from the larger scale operations across the Atlantic?
Products will map how the medical cannabis extraction process evolves. The most common method today is CO2 extraction, which is simply because it doesn’t require bomb proof facilities and is the most researched method that contains zero by-products. However, I think companies need to explore ethanol and hydrocarbon methods with butane and propane, even though you need bomb proof facilities for the hydrocarbon methods, which can get very complicated.
As the US and Canada have learned, it can be very difficult for companies to build the infrastructure for extraction, which is why third-party extraction companies are so beneficial to the cannabis industry. Today, Europe lacks a variety of products; most are just dried cannabis, tinctures or capsules. And, as we get into topical creams for patients, transdermal or even sublingual there will be a variety of different products and the extraction methods used will change over time. This is something Europe should anticipate and look to North America’s learning curve because extraction can limit your capabilities.
How do you anticipate the European medical cannabis extraction market will evolve?
People underestimate the medicinal cannabis marketplace. Europe is expected to be one of the largest markets in the world, with almost 700 million people, statistics show that the global medical market alone could be a $180 bn (~€158 bn) industry, and that’s just medicinal.
In fifteen years, the European cannabis market will be a completely different landscape. At the moment there is little research and mostly subjective evidence that supports medicinal cannabis. However, as regulations change, we will begin to see more research and more data to support these anecdotal claims and help the growth of the European medicinal cannabis market.
Please note, this article will appear in issue 10 of Health Europa Quarterly, which is available to read now.