This month we speak to Aras Azadian, CEO of Avicanna, the only Colombian-focused LP listed on the senior board of the Toronto Stock Exchange.
Avicanna (TSE:AVCN) is a biopharmaceutical company with a global expansion plan which sources its cannabinoids from its own grows near Santa Marta, on the Caribbean coast. Amongst the Avicanna’s partnerships are a deal with local pharmaceutical firm Altea and a joint venture with Sigma Analytical Services for product analysis. It has just become the first company to complete commercial CBD exports to South Africa and the UK.
CCI: How did you land upon Santa Marta as the base for Avicanna’s cannabis cultivation?
AA: In Toronto it became clear that there was a huge gap in the market as the leading LPs were increasingly focused on growing and selling flower for the recreational market. I wanted to build a strictly medical company with a strong emphasis on research, clinical development and dose control. But to do that Avicanna needed to vertically integrated, to control the entire value chain and source our own cannabinoids.
Canada didn’t make sense given environmental restrictions and high costs. We looked at Uruguay, Argentina and Jamaica but concluded that Colombia had the most comprehensive regulations. In Colombia you can tell that the framework was based on an economic policy to build an industry that creates jobs, revenues and brings in foreign investment. Santa Marta has an optimal microclimate for growing cannabis. In addition to the 12 hours of sunlight, our position in the foothills of the Sierra Nevada means we get a dry, crisp breeze over the crops that keeps humidity levels low. We’re also near Santa Marta which has good transport links and the area is safe compared to other parts of Colombia.
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CCI: What products does Avicanna currently produce and how does it intend to bring them to market?
AA: We have some of the most advanced lines of cannabinoids products in the world. Our first line are pharmaceutical products produced with cannabinoids isolated and extracted at our Santa Marta site through our joint venture with Altea Pharma. We currently have one product in phase two of clinical trials and several others in the first stage. We hope to bring them to market two years from now. The second line are phytotherapeutical products – gels, sprays, capsules – made from different ratios of cannabinoids and different doses. Then we have Pure Earth, which launched in Colombia in October. It’s the only CBD skincare line in the country based on human trials. Finally, for the last year, we have been exporting the raw materials – CBD – to companies around the world.
CCI: What are the most challenging aspects of the Colombian regulatory environment at present?
AA: There’s a handful of companies that are ready to go to market, to export, to generate revenues and jobs. We have finished products we want to sell, but the government isn’t ready and I think they should be more flexible. In Canada, which has 400,000 medicinal cannabis patients consuming over CAD$100 million in product a month, I can get an import permit for an Avicanna spray or capsule.
However, INVIMA demands that exported products must be registered in Colombia and that would take five years of clinical development. However, there are many countries around the world, including Canada and the EU that have their own specific regimes that allow patient access to cannabis medicines but INVIMA has yet to recognize that in its own regulations.
If you are thinking about investing in Colombian cannabis, get expert advice from the CCI team.
CCI: Are projected production costs of 5c per gram realistic in Colombia?
AA: I think the figures make sense and we have demonstrated that through various harvests. Our greenhouses use zero electricity, we don’t use fans, air conditioners or CO2 pumps. Obviously labor and land are cheaper than Canada. We predict costs at US$50-US$100 per kilogram of flower depending on the modality required. We have outdoor grow and then low-tech and high-tech greenhouses. Once we scale up and build our new GMP extraction facilities we can optimize and costs will drop significantly.
CCI: How did you source genetics for the project?
AA: We spent years searching across the planet, looking at over 1,000 genetic strains of which we have registered 25 with ICA. Some companies only tested a few and hoped it would work out, but you have to look at a bigger gene pool. Our growers are some of the best in Colombia, they know the region through years of experience and that increases the chance of success. The genetics have been cultivated with several harvests. We have the key genotypes that work in the region and we grow through cloning.
CCI: What role do you think Colombia will play in the global industry?
AA: There’s no doubt that Colombia will dominate on a low-cost API production point of view. Once we figure the regulatory pathways to get the products out of Colombia, it’s going to be very difficult for other jurisdictions to compete. The challenge is to get to that standard of quality and to straighten out regulations. Colombian LPs also need to spend more on clinical trials and research. Today Avicanna has ongoing clinical trials in Colombia. Some Canadian LPs with US$20bn market caps spend less than US$1m on research. We are a tiny company and spend more resources on research and that preclinical work has helped our position as one of the global leaders.
CCI: How did Avicanna’s listing on the main board of the TSX come about and what’s your case for the stock?
AA: We’re the only operating firm in Colombia on the main board because we are considered a pharmaceutical issuer rather than a cannabis company. The sophistication of our clinical and research work allows us to qualify for the senior exchange and allows us to qualify for a different level of institutional capital; those funds that are open to pharmaceutical stocks but forbidden from investing in cannabis companies.
The case for our stock is simple: We’re not a cannabis company, we are the most scientifically advanced company in the space, with global marketing plans, but vertically integrated with our own grows.
The stock has been mistreated because we went public at the worst time for cannabis-related capital markets. But when you see the problems causing the crash of Canadian cannabis stocks – high costs, massive burn rates, poor research – those are the areas we are directly addressing. The current price won’t affect morale, the market will realize value sooner or later.