Is EU-GMP Certification Really Necessary For Cannabis Cultivators?
HELLENIC Dynamics, the first pureplay medical cannabis cultivator to launch on the London Stock Exchange (LSE), has signed a new supply deal with German distributor Demecan.
The ‘memorandum of understanding’ (MoU) with Demecan marks the first commercial agreement as part of the grower’s newly amended commercial strategy.
This will see Hellenic forgo the lengthy, complex and expensive process of obtaining an EU Good Manufacturing Process (GMP) certification for its Greek facility, long considered all but essential for cannabis producers to trade profitably in Europe.
While some critics claim this amounts to a public admission of ‘EU-GMP washing’, others have suggested this is a ‘smart move’, questioning whether EU-GMP, a standard in the pharmaceutical industry, was ever really suitable for dealing with cannabis biomass.
New commercial strategy
In the EU, GMP certification has long been considered essential for the final processing steps of medical cannabis products intended to be used to treat patients anywhere in the European market.
Certification is not only seen as key to sell products in the market, but also is often considered as all but essential for budding cannabis operators to secure investment.
Earlier this month Northern Leaf, which operates a 100,000 sq. ft greenhouse and processing facility in Jersey, announced that it had achieved the ‘key regulatory milestone’ of EU-GMP accreditation, considered ‘the strongest possible endorsement’ of the company as it prepares for an imminent IPO.
In a public rejection of this framework, Hellenic announced earlier this month that it would forgo what Northern Leaf’s CEO himself described as ‘an extremely rigorous, costly and multi-year process’.
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On June 6, Hellenic informed investors of a plan to ‘move with market conditions’ and adapt its cultivation strategy, deciding ‘not to invest considerable funds and time into the construction and certification of an EU-GMP facility in the current phase of its development’.
Instead, Hellenic said it would simply continue to produce GACP (good agricultural and collection practice) cannabis at its facility, and sell its product to distributors that have their own EU-GMP certified facilities, for them to sell on to the medical cannabis market.
This strategy, according to Hellenic’s CEO Davinder Rai, would mean the impact to revenues was ‘negligible’, but considerable time and capex would be saved.
“I personally believe this strategy is the most disruptive thing to happen to the industry since its legalisation,” he added.
According to Prohibition Partners’ European Cannabis Report: 8th Edition, ‘the current consensus is that cultivation does not need to be covered by EU-GMP certification’.
As EU-GMP guidelines are for manufacturing and cannot cover cultivation practices, it is only the post-harvest area that requires EU-GMP certification.
The long and costly path to attaining such certification is seeing an increasing number of non-EU cultivators find ways to partner with EU-GMP manufacturers, rather than obtaining EU-GMP status themselves.
Since 2020, EU-GMP ‘conversion’ practices have been taking place across Europe, whereby 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 as EU-GMP starts post-harvest, and cannabis must be dried before being transported, facilities have taken to rehydrating GACP cannabis so it can be fully processed under EU-GMP conditions.
The practice has largely been kept under wraps, and organisations such as the UK’s MHRA have signalled their intention to begin cracking down on the practice.
Speaking to Business of Cannabis, Mr Rai explained: “Our strategy has expanded; it hasn’t changed. Our strategy was always to grow medical cannabis, then sell medical cannabis to our distributors. We’re still doing that.”
The thing that changed, he continued, is an evolution of the industry from ‘cannabis 1.0, to cannabis 2.0’.
“Back in cannabis 1.0, yes, EU-GMP was required so you could sell your products directly to distributors, and distributors could sell their products directly to pharmacists. All of the cost and certification burden fell on the cultivator.
“During this evolutionary period, medical cannabis 2.0, a lot of the distributors that we are talking to have put a lot of money and time into building their own EU-GMP facilities at their distribution units.
“If they’ve spent that time and effort into their own GMP facilities, they are looking to move further up the value chain to buy GACP flowers which they then process themselves which they can sell into the market.”