Hellenic Dynamics, the first medical cannabis cultivator to list on the London Stock Exchange, is abandoning the traditional path of expensive, time-consuming EU GMP certification for its facilities. CEO Davinder Rai considers the current framework to be out of touch with the realities of the cannabis market, stating that cannabis is not a pharmaceutical product; it is a natural product.
Hellenic Dynamics, the first pure player in medical cannabis cultivation to launch on the London Stock Exchange (LSE), has signed a new supply agreement with German distributor Demecan. The “Memorandum of Understanding” with Demecan marks the first commercial agreement under the cultivator’s new business strategy.
Hellenic is thus foregoing the long, complex, and costly procedure of obtaining an EU GMP certificate for its Greek facilities, long considered essential for cannabis growers to be able to sell their medical cannabis in Europe.
While some critics claim this amounts to a public admission of “washing out EU GMP,” others have suggested it was a “smart move,” questioning whether EU GMP, a pharmaceutical industry standard, was ever really 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 throughout the European market.
Certification is not only seen as the key to selling products on the market, but it is also often seen as essential for cannabis operators to fetch investment.
On June 6, Hellenic announced its plan to “evolve with market conditions” and adapt its cultivation strategy, deciding “not to invest considerable funds and time in 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 Practices) cannabis in its facilities and sell its product to distributors who have their own EU GMP certified facilities for sale on the medical cannabis market.
According to Davinder Rai, CEO of Hellenic, this strategy would have a “negligible” impact on revenues 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.
EU GMP Out of Touch With Cannabis 2.0
As EU GMP guidelines relate to manufacturing and cannot cover cultivation practices, only the post-harvest area requires EU GMP certification.
The long and costly road to such certification sees a growing number of non-European growers finding ways to partner with EU GMP-certified manufacturers rather than achieving EU GMP status themselves.
Since 2020, EU GMP “conversion” 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, as EU GMP begins after harvest and cannabis must be dried before transport, facilities have taken to rehydrating GACP cannabis so that it can be fully processed under EU GMP conditions.
This practice has remained largely confidential, and organizations such as the UK’s MHRA have signaled their intention to start cracking down on it.
Speaking to Business of Cannabis, Mr. Rai explained, “Our strategy has broadened, it hasn’t changed. Our strategy has always been to grow medical cannabis and then sell it to our distributors. We continue to do that. What has changed,” he continues, “is the evolution of the industry from “cannabis 1.0 to cannabis 2.0″.”
“In the days of cannabis 1.0, yes, EU GMPs were required so you could sell your products directly to distributors, and distributors could sell their products directly to pharmacists. All the costs and burden of certification fell on the grower.”
“During this evolutionary period, Medical Cannabis 2.0, many of the distributors we talk to have invested a lot of money and time in building their own EU GMP facilities within their distribution units.”
“If they’ve spent that time and effort on their own GMP facilities, they’re looking to move up the value chain to buy GACP flowers that they process themselves and can then sell on the market.”
EU GMP an Exercise in Ticking Boxes, or Vital to Patient Safety?
Lawrence Purkiss, Senior Analyst at Prohibition Partners, explains, “There has always been some ambiguity about how EU GMPs should apply to the medical cannabis supply chain, and this debate shows once again that there is still no consensus on this issue within the industry.”
“The quality of cannabis flower is largely defined by the agricultural and cultivation practices applied during cultivation and then by the way it is stored and transported. Post-harvest processing 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 element of a broader system of processes that define quality.”
The EU GMP “conversion” practices we see are only intended to enable products to tick the EU GMP box and are the expected result 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 production. This is one of the reasons for the great variability in quality we see in products on European markets.”
Is Cannabis More Like the Beer Industry
Mr. Rai suggested that cannabis was now analogous to the beer industry, where one company grows the hops, another brews the beer, another distributes it, and another sells it to consumers.
“I think if you’re trying to manage everything, from clones to cultivation to European GMP, distribution, and patients, it’s too much. I want to focus on culture.”
One industry stakeholder told Business of Cannabis that she believed EU GMP rules existed to ensure patient safety, adding that she felt there was no reasonable reason for companies to take shortcuts in order to be more competitive at the expense of patient safety.
In response, Mr. Rai said he didn’t consider what he was doing to be “hijacking EU GMP.”
“I understand that if we don’t produce GACP products that we don’t go through a processing facility, that’s fine. But we produce to the specifications our customers want, with the certifications they want when the products go 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’s not a tablet; it’s not a gel. It’s biomass.”
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