Despite adjustments made by companies prior to legalization, the state of cannabis lab testing in Canada remains unreliable, as different labs fail to produce consistent results for consumers and regulators alike.

Products that are used in human consumption have their fair share of regulations to ensure quality standards are met. In this regard, the cannabis sector is no different. With the Canadian market still so young and consumers still familiarizing themselves with the various products on offer, regulators and end users alike benefit from consistent safety and transparency standards.

Unfortunately, it is hard to keep these safety measures in place when current testing methods can’t produce consistent results. Currently, different laboratories using the same technology get wildly differing results in terms of THC and CBD concentrations despite testing on the same batch of product. The fact that companies can’t get consistent results among themselves only serves to discredit the current state of cannabis testing, which bears drastic safety, quality and cost efficiency consequences that could benefit others in the market.

The truth behind modern cannabis testing

As the cannabis industry continues to explode, there is an increasing demand for testing labs to perform potency, safety and quality tests on ever-increasing quantities of product. This is crucial for medical cannabis patients, for example, who need certain dosages for relief from their symptoms. Even consumers of recreational cannabis need to know THC and CBD levels, because both can influence the strength of the product.

This information is just as important for regulators, who are employed to ensure safe and consistent products. For example, cannabis companies like Bonify have suffered from recalls due to products that were distributed with false information. THC and CBD percentages are frequently used to dictate cannabis price points, which can create inconsistencies at different levels of the supply chain when testing and labeling are not closely regulated. As such, cannabis testing has become a big issue in the industry.

“There are a tremendous number of questions around the reliability of the data that’s being generated by cannabis laboratories,” said Jeremy Applen, head of Cannabis Systems. “If you don’t have robust standards around cultivation, manufacturing, or distribution, you don’t really know what chain of events occurred prior to that product being identified as potentially adulterated.”

Cannabis testing standards

There are a variety of ways that laboratories can measure CBD and THC concentrations. The most commonly used technique is High-Performance Liquid Chromatography (HPLC), which is the current “gold standard” in the industry. HPLC can separate and evaluate a mixture of chemicals in a liquid solution, often extracted from a cannabis flower mixed with a solvent and put against a detector column that tracks how quickly the cannabis compounds move.

HPLC detectors usually measure UV light absorbance, which is correlated with specific molecules. When these molecules reach the detector, their abundance is measured. Since THC and CBD travel at different speeds, they can be detected at different times and can be measured separately in the testing process.

While HPLC tests are theoretically sound on paper, conventional HPLC tests come with their own drawbacks besides the inexplicable variance reported by these labs. Instead, the cannabis industry is seeing a push for more “in-house” analysis systems, where farmers and growers can cut out regulatory middlemen, establishing accurate testing information upstream.

Embracing alternatives

Many cannabis businesses are using portable analyzers at all stages of production. At cultivation facilities, growers are able to perform quality analysis directly onsite and see immediate feedback regarding the crop without having to send a sample over to a lab. It’s not uncommon to wait for five to 15 days before results came back. Instead, gold standard HPLC equivalent solutions can take two to four hours on the long side, with many more convenient alternatives taking as little as 30 minutes.

This opens up a plethora of options for taking a more data-centric approach. Growers can test the same plant at various stages of growth, using consistent technology that isolates certain periods in which particular compounds are more prevalent and potent. At the same time, even the slightest change in dozens of variables can impact the quality of cannabinoid expression. Portable analyzers can let growers specifically test each variable without the concern of cross-lab variability, getting immediate feedback to track and tweak for future experiments to maximize production.

While this is great for growers, producers and manufacturers along the cannabis supply chain can also expect to see benefits from these portable analyzers. For one, portable analyzers can help ensure the consistent quality of raw materials sourced from growers. Normally, producers buy trim and then test it afterwards, but with portable analyzers producers can test the strains and validate the quality of the product onsite before they make the final purchase.

The use of portable analyzers can also help in maximizing cannabinoid extraction. Occasionally after processing, additional cannabinoid content can remain in waste material. While these amounts are often relatively small, the aggregate volume can be recovered once extraction processes are optimized by in-house analysis tools.

Real market examples

A number of private companies have developed testing technologies ranging from liquid chromatography with spectroscopy to infrared technology combined with image analysis. Publicly traded FluroTech (TSX:TEST,OTCQB:FLURF) offers a highly accurate remote analysis platform that employs fluorescence spectroscopy.  The company’s two part testing solution uses an instrument called the CompleTest™ along with consumable test kits, which combine to make a portable, fast, accurate and cost-effective method for cannabis and hemp testing that is currently available for purchase.

The importance of reliable cannabis testing

Without a consistent, reliable source of testing, the cannabis industry may have to deal with a level of uncertainty that affects all participants along the supply chain. From end consumers and manufacturers to cultivators and regulators themselves, participants throughout the cannabis industry could benefit from improved testing protocols. When coupled with future innovations in portable analyzers, consistent and quick cannabis testing could prove to be a game changer for all companies involved.


This article was written according to INN editorial standards to educate investors. 

Cannabis Market Update: Q3 2020 in Review

Click here to read the previous cannabis update.

During the first few months of investment time in 2021, cannabis faced some volatility alongside optimism about federal changes in the most important market for the drug.

The cannabis business found its stride during Q1 thanks to policy change signals and consolidation.

To find out more, the Investing News Network (INN) asked experts about progress in the market during the first major period of the new year, and which developments investors should watch out for.

 

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Cannabis market update: New York and US potential boost operations

New York state’s legalization of recreational cannabis was a huge Q1 announcement that added pressure to the federal government when it comes to cannabis policy, said George Mancheril, co-founder and CEO of Bespoke Financial, a debt financing business with a particular focus on servicing cannabis businesses.

“It’s going to add to the chorus of voices in the federal scene to basically move sooner rather than later,” he explained to INN.

Following the US election in 2020, the momentum for cannabis businesses went on the upswing, as did company valuations, with the idea of expansion at the heart of it all, according to Mancheril.

Before starting Bespoke Financial, Mancheril learned from traditional investment banks, where he worked on lending, fixed income and debt markets with Goldman Sachs (NYSE:GS) and Guggenheim Partners.

Nawan Butt, portfolio manager with Purpose Investments, agrees with Mancheril. The financial expert told INN the ongoing legalization process seen in the US market is leading to expansion.

“It’s becoming more of a national move, then small pockets of proliferation. That’s very exciting about cannabis right now,” said Butt, who co-manages the Purpose Marijuana Opportunities Fund (NEO:MJJ).

This proliferation effect is causing a change in valuations and enthusiasm for US-based operations. Mancheril told INN that by the end of Q1, multi-state operators (MSOs) had raised approximately US$3.3 billion.

The cannabis lender said he sees the industry as having grown from the woes of 2019; it is now seeing a return to form by way of the excitement for an ongoing opening process in the US.

The expert explained that there is likely to be a windfall of capital in the wake of major federal changes for cannabis policy, although the timeline for these changes is becoming increasingly hard to predict.

Leading up to that capital influx, Mancheril said he wants to see operators really drill down on the value of desired assets and whether they make sense.

 

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“What I’d hope is that we continue to see bullish sentiment, but with some measure of responsibility, and let’s not just get over ahead of ourselves,” Mancheril told INN. “The idea is let’s minimize the volatility and continue growing responsibly.”

As far as struggles go, Butt explained that the cannabis industry has cemented itself as a growth-type sector, and as such there are macro environment pressures affecting the way these assets operate.

“We’ve seen this preference for cash flows at growth in the current or in the near future, rather than in the far future, and that’s what we’re seeing as far as valuations go in the broad market,” Butt said.

Cannabis market update: Volatility continues to rule as industry foundations build

Despite the industry’s current potential and the growing pains it has gone through as a whole in both the US and Canada, volatility remains a key factor in the cannabis investment scene.

Butt explained that the current shareholder base, which is dominated by hedge funds and retail investors, still lacks enough institutional support to avoid the day-to-day volatility cannabis has come to be known for.

These two investor groups, Butt said, can be easily spooked and excited by the news of the day when it comes to their investments.

“A lot of these institutions’ strategies are not about short-term profits, but they’re about long-term sustainability of the businesses themselves,” Butt said.

“That’s why you see a lot of volatility in the space, and that’s essentially what we’ve seen over the past, I’d say, three to two months as well,” he added.

That means investors shouldn’t expect an end to volatility anytime soon.

“It’s not about whether we continue to expect volatility, because we do,” Butt said. “We really think that the volatility will be taken out when the shareholder base becomes more institutional, but it’s really about understanding why there is volatility in the first place.”

Cannabis market update: Canadians talk up US business potential, but questions remain

A surge of mergers and acquisitions has taken over the Canadian cannabis sector recently as more producers see potential in America.

One of the biggest announcements in this regard came when Organigram Holdings (NASDAQ:OGI,TSX:OGI) secured a C$221 million investment deal from British American Tobacco (NYSE:BTI,LSE:BATS).

Using the funds, the two will work in tandem to develop new branded products designed to work on the international stage, including in the US. Organigram CEO Greg Engel previously told INN that the US represents a critical opportunity for Canadian companies, but the entry point isn’t as clean as it could be at the moment.

 

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While the long-term potential may be exciting for investors, Butt told INN he’s still unsure how the approach will work for Canadian companies.

The Purpose Investments expert said there will be plenty of space for the biggest Canadian names to pursue US market entries, beyond the initial hemp-derived CBD moves some operators have mde, since the US represents the biggest market in the world.

“But there’s just way too many unknowns right now to say exactly what that participation is going to look like, or when that participation will happen,” he said.

“What we do know is that currently the US MSOs are in a wonderful sort of position to expand on their market leadership that they have. And it will be tough for Canadians to come in and compete with them,” Butt said.

Canadian players still retain the upper hand at times in terms of valuation, which is confusing for both Butt and Dan Ahrens, chief operating officer and portfolio manager at AdvisorShares.

“The performance in quarterly earnings of US companies has been rather spectacular. They’ve knocked it out of the park in most instances,” Ahrens told INN.

Butt praised the recent performance reports from MSOs across the board, pointing to year-over-year growth lines and projections for continued positive performance.

In his view, share prices still don’t reflect company value. “Those are really being discounted at this point,” Butt told INN.

“We’ve seen the Canadian licensed producers be really hot stock performance-wise, outpacing the US (MSOs), and I’ll say it’s rather nonsensical to me,” said Ahrens, who oversees the AdvisorShares Pure Cannabis ETF (ARCA:YOLO) and the recently launched AdvisorShares Pure US Cannabis ETF (ARCA:MSOS).

Cannabis market update: Investor takeaway

The cannabis investment proposition finds itself at an interesting moment in time, as the entire sector eagerly awaits confirmation in the US at the federal level.

While for the Canadians waiting on the sidelines, this development may feel like a major necessity to address current financial struggles, for US-based operators, the heat around the corner could represent an increase to their already thriving operations.

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 Trulieve Cannabis Corp. (“Trulieve” or the “Company”) (CSE: TRUL) (OTC: TCNNF), a leading and top-performing cannabis company in the United States will release its first quarter 2021 financial results on Thursday, May 13, 2021 before markets open. Following the earnings release, management will host a conference call at 8:30 AM Eastern Time to review the financial results.

All interested parties can join the conference call by dialing 1-888-231-8191 or 1-647-427-7450, conference ID: 4880609. Please dial in 15 minutes prior to the call to secure a line. The conference call will be archived for replay until May 20, 2021 . To access the archived conference call, please dial 1-855-859-2056 and enter the encore code 4880609.

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Appointment of Dr. Kelmendi, Assistant Professor of Psychiatry at Yale University and co-founder of the Yale Psychedelic Science Group, brings another experienced medical professional to Lobe’s advisory team.

 Lobe Sciences Ltd. (CSE: LOBE) (OTC Pink: GTSIF) (“Lobe” or the “Company”) is pleased to announce the appointment of Benjamin Kelmendi, MD, Assistant Professor of Psychiatry at Yale University School of Medicine, to its Scientific Advisory Board.

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Ayurcann Holdings Corp. ( CSE: AYUR ) (the “ Company ” or ” Ayurcann “), a Canadian extraction company specializing in the processing of cannabis and hemp for the production of oils and various derivative products, is pleased to unveil further details of its Phase 2 expansion plans.

Ayurcann has commenced trading on the Canadian Securities Exchange (” CSE “) on April 8, 2021 and subsequently announced a private placement of up to $500,000 (” Financing “), as per the Company’s press release dated April 12, 2021. The proceeds of the Financing are intended to be used to further pursue Phase 2 of the expansion of the production capacity of the Company’s Pickering facility.

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