Wednesday, December 6, 2023

High-tech company backs cannabis crop opportunity

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Baked-in efficiencies take the worry out of processing plant.
Tyrone Carlton, left, and Jake Chew of Eqalis with the latest trial cannabis crop being grown indoors.
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A Bay of Plenty tech company has quietly revolutionised cannabis processing, providing a pathway from an artisanal small-scale sector to a broad-acre operation offering patients lower cost, legal, medicine – and farmers a viable new cropping option.

Eqalis was formed four years ago by a group of investors including Greg Misson, the founding managing director of Open Country Cheese, who tipped up Fonterra’s New Zealand farm milk monopsony (a market situation in which there is only one buyer).

Today, Misson said, the aim is still to be something of a disruptor. 

This time that is thanks to a process he and his team in Katikati have been developing that enables significantly larger-scale extraction of the key cannabinoid compounds THC and CBD. They are destined for both medicinal drug use and as ingredients in an ever-widening range of commodity products from shampoo to pet food.

Currently in NZ the purchase of medicinal cannabis products is legal with a doctor’s prescription, but uptake via prescriptions remains relatively low because of the high cost of products and doctors’ need for a wider evidence base before prescribing. 

Medicinally, CBD helps with inflammation and seizures in medications such as Epidiolex, the first prescription drug to contain CBD. 

THC has been approved for nausea treatment caused by chemotherapy, and is linked to helping with glaucoma and muscle spasticity.

But the tolerance of patients to the psychoactive THC is highly individualised, with approximately 20% of the population genetically predisposed to have a greater risk of developing psychosis issue later in life.

The company is patenting a prescribing tool based on a DNA test designed to identify a patient’s risk profile, prior to any treatment being recommended. 

Overseas uptake of cannabis-based medicines is considerably more advanced than in NZ, with CBD used in products other than medicines. Estimates are the cannabinoid sector will soar from US$4 billion (about $6bn) a year to US$56bn a year by 2028.

“What we are seeing is CBD shifting from just medicinal use to being a supplement and commodity,” Misson said.

He said the current processes for extracting CBD and THC from cannabis plants are intensive and require  pressurised use of carbon dioxide, or use of flammable solvents.  Machines valued at $500,000 are capable of processing less than 50kg of biomass a day. 

Current systems require cannabis to be dried prior to processing “so, your ability to scale up is really limited. Because of this typically you require 5% of your cropping area be committed to processing plant- that is a big, expensive footprint.” Misson said.

Eqalis has developed a patented process that bypasses the need to dry the crop prior to processing, and has removed the processing bottleneck with technology Misson claims will provide hundreds of times more processing capacity nationally.

Drawing on his dairy experience, he likens what comes next to what happened in the dairy sector.

“Cheese production used to be very artisanal, and it was not until dairy factories successfully scaled up the technology that dairy farms were in turn able to scale up their operations. With this came some significant economies of scale, greater volumes to market and more multiple end uses for cheese.”

Eqalis is looking to supply the broadening and growing CBD supplement market with the bulk of its processed products, with medicinal-grade CBD and THC forming the minority of the final market.

“Just as we saw the ingredients market open up after small-scale cheese production, we see the same thing happening here,” Misson said.

The company is putting strong emphasis on good plant genetics, importing seed from around the world and growing multiple varieties out to identify responses to growth parameters including moisture, humidity and temperature. 

With 40 cultivars growing, capable of producing 100 cannabinoid compounds and 200 terpenes (naturally occurring plant compounds), they can identify multiple plant options for different growing circumstances.

The identified varieties are planted under iwi management on Matakana Island, “hardened” to growing outdoors before being transported to Timaru to grow out in a larger scale, commercial farm-type environment. Misson said estimates are that commercially viable crops could generate $40,000 a hectare in CBD value alone.

“We are confident it is a crop farmers would be interested in growing. The cultivation tech is not far removed from other crops worth significantly less, and it does not require the infrastructure you have for crops like kiwifruit.”

The plant also offers some upsides to farmers wanting to reduce their nitrogen footprint, given its appetite for nitrogen uptake in its vegetative stages of growth.

Timing of processing is key with cannabis as it is for hop crops, where drying has to be initiated as soon as possible after the harvest. 

With Eqalis’ process removing the drying stage, Misson can see the potential for centralised processing plants capable of handling about 400ha each in key growing regions.

The company is in advanced discussions to merge with another cannabis company, Cannasouth, combining with that company’s cannabis flower-based product range. The merged entity would be the largest cannabis company in NZ.

Meantime Eqalis is awaiting approval for its range of products and ingredients. It has also developed a topical cannabinoid-based product for treating pain, and Misson believes farmers will have the opportunity to leverage off their success by cropping cannabis in the next five years.

Watch our latest On Farm Story ‘New NZ agritech tracks who’s on-farm, doing what’ below

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