Hellenic Dynamics, the first “pure player” of medical cannabis cultivation to launch on the London Stock Exchange (LSE), has signed a new supply agreement with German distributor Demecan. The ‘MoU’ with Demecan marks the first commercial agreement under the grower’s new commercial strategy.
Hellenic is thus forgoing the long, complex and costly process of obtaining an EU Good Manufacturing Practices (GMP) certificate for its Greek facilities, long considered essential for cannabis producers to be able to sell their medical cannabis in Europe.
While some critics say this amounts to a public admission of “EU GMP washing”, others have suggested it was a “smart move”, questioning whether EU GMP EU, a pharmaceutical industry standard, have never really been suitable for processing cannabis biomass.
New business strategy
In the EU, GMP certification has long been considered essential for the final processing stages of medical cannabis products intended to be used to treat patients across the European market.
Certification is not only seen as the key to selling products on the market, it is also often seen as essential for cannabis operators in order to attract investment.
On June 6, Hellenic announced its plan to “evolve with market conditions” and adapt its cultivation strategy, deciding “not to invest significant funds and time in building and certifying a facility. EU-GMP in the current phase of its development”.
Instead, Hellenic said it would simply continue to produce GACP (good agricultural and collection practices) cannabis at its facilities, and sell its product to distributors who have their own EU-GMP certified facilities, so that they sell it in the medical cannabis market.
According to Davinder Rai, CEO of Hellenic, this strategy would have a “negligible” impact on revenue, but would save a lot of time and money.
“I personally think this strategy is the most disruptive thing to happen to the industry since it was legalized,” he added.
Cannabis 2.0
As the EU GMP guidelines relate to manufacturing and cannot cover cultivation practices, only the post-harvest area requires EU GMP certification.
The long and expensive path to obtaining this certification sees an increasing number of non-EU growers finding ways to partner with EU GMP certified manufacturers, rather than obtaining GMP status from the EU themselves. EU.
Since 2020, EU GMP “switchover” practices have been taking place across Europe: non-EU GMP flowers grown under GACP conditions are imported into the EU, where they undergo final processing in an EU GMP facility.
Unconfirmed reports also suggest that because EU GMPs begin post-harvest and cannabis must be dried before being transported, facilities have taken to rehydrating GACP cannabis so that it can be fully processed under EU GMP conditions.
The practice has remained largely confidential and organizations such as the UK MHRA have signaled their intention to start cracking down on the practice.
Speaking to Business of Cannabis, Mr Rai explained: “Our strategy has expanded, it has not changed. Our strategy has always been to grow medical cannabis and then sell it to our distributors. We continue to do so. What has changed,” he continues, “is the evolution of the industry, which has moved from ‘cannabis 1.0 to cannabis 2.0’. »
“In the days of Cannabis 1.0, yes, EU GMPs were needed so that you could sell your products directly to distributors, and distributors could sell their products directly to pharmacists. All costs and the burden of certification fell to the grower. »
“During this period of evolution, Medical Cannabis 2.0, many of the distributors we speak with have invested significant time and money in building their own EU-GMP facilities within their distribution units. »
“If they’ve put that time and effort into their own GMP facilities, they’re looking to move up the value chain to buy GACP flowers that they process themselves and then sell on the market. »
A box-ticking exercise or vital to patient safety?
Lawrence Purkiss, Principal Analyst at Prohibition Partners, explains: “There has always been some ambiguity about how EU GMP should apply to the medical cannabis supply chain, and this debate once again shows that there is still has no consensus on this issue within the industry. »
“The quality of cannabis flower is largely defined by the agricultural and cultural practices applied during cultivation, and then by the way it is stored and transported. Post-harvest treatment is, of course, very important and should be at the highest level – and this is where EU GMP applies – but the EU GMP component is only one part of a larger system of processes that define quality. »
The EU GMP “conversion” practices we observe are only intended to allow products to tick the EU GMP box, and they are the expected outcome of companies navigating the current regulatory system. This system, in its current form, places too much emphasis on EU GMP certification as an indicator of the quality and safety of medical cannabis products, and not enough on the other elements involved in the production. This is one of the reasons for the great variability in quality that we observe in products on European markets”.
Mr Rai suggested that cannabis was now analogous to the beer industry, where one company grows hops, another brews beer, another distributes it and another sells it to consumers.
“I think if you try to manage everything from clones to cultivation, European good manufacturing practices, distribution and patients, it’s too much. I want to focus on culture. »
An industry stakeholder told Business of Cannabis that she believed EU GMP rules existed to ensure patient safety, adding that she believed there was no reasonable reason for companies to cut corners in an effort to be more competitive at the expense of patient safety.
In response, Mr Rai said he did not consider what he was doing a “misuse of EU GMP”.
“I understand that if we’re not producing GACP products that we’re not going through a processing facility, that’s fine. But we produce to the specifications our customers want, with the certifications they want when the products are delivered to their facilities.”
He added that “the big question” was why cannabis growers were required to have an EU-GMP license in the first place.
“EU-GMP was the industry standard for pharmaceuticals, so it was applied to cannabis. But it is not a tablet or a gel. It is biomass. »
