For some people, the idea of a cannabis lab stirs up visuals of an illicit facility hidden away in a secret location. In contrast, modern-day cannabis research facilities focus on extracting key compounds from raw, difficult, unprocessed material. “The majority of the business is an agro-chem business, and it's not super sexy, nor is it exciting. It's heavily chemical engineering and agriculturally based chemistry,” said Jeff Wu, Investor of Chemyx and a cannabis extraction lab investor.
Because of its history of prohibition, cannabis has been largely unexplored scientifically. Scientists charting this new type of chemical extraction are faced with pioneering an entirely new field of chemical engineering. “A lot of what we're doing right now is almost trial and error, where we're researching with a variety of acids and oxidizers for isomerizations and dehydrogenations for making novel compounds. But there really hasn't even been proper R&D done on this,” said Wu.
The field of cannabis research is actively evolving as researchers continue to identify and optimize the best method to extract cannabis. Initially, many cannabis researchers used CO2 extraction because that was a proven method for extracting caffeine from coffee beans. Later, researchers found that technologies methods using ethanol or butane significantly increased cannabis extraction efficiency and decreased extraction time from days to just 30 minutes.
According to Tully Stroud, Extraction Director at Cannacraft, the lack of both technical expertise and infrastructure causes a high barrier to entry into cannabis research. As a result, many laboratories find it more cost-effective to source raw cannabis material for their products. The consistency of unprocessed raw cannabis is like honey and cookie dough, mixed together and cooled in the refrigerator.
Cannabis researchers are constantly trying to identify the best chemical, the most efficient timing, and the optimal temperature for cannabis extraction, in addition to trying to find the right post-processing tools. To meet these needs, Wu and his team repurposed Chemyx high-pressure syringe pumps designed for industrial neuroscience and biomedical applications for processing the tacky denseness of raw cannabis extracts. He called for more basic support tools specifically designed for cannabis processing, extraction, and analysis.
The Wild West Meets Science
Even with successful cannabis compound extraction, researchers are limited in their ability to manipulate those compounds into different versions (isomers), and in their ability to analyze those compounds. Current tests of cannabis extraction products focus only on measuring its potency or detecting the presence of heavy metals.
Like chemical engineers, cannabis researchers use mass spectrometry, infrared spectrometry, and HPLC to adequately analyze extracted compounds. However, because of cannabis’s novelty, mass spectrometry results for cannabis are often inaccurate. There are no established chemical standards for many novel cannabis compounds, so many researchers use a variety of standards for potency and cannabis material type. “We can send in a sample to three different analytical labs and get back three different results that vary by 15%,” said Wu.
When cannabis researchers submit an extracted and crystallized product, many testing facilities report a purity of just 60-70%. This is in sharp contrast to the 90-99% purity expected for a pure crystal of other well-known compounds such as sugar or salt. “It's very slow and gritty science with a total lack of in-line analytical lab support right now,” said Wu.
Unlike typical labs, researchers in cannabis extraction labs cannot sign a service contract with common lab suppliers due to legal limitations. Instead, researchers have to purchase their equipment from an intermediary laboratory company. “That means we don't get the best expertise or the best service for our experiments and results done on time,” said Wu. Getting results for a chromatograph, which usually takes one day for many labs can take up to four days for a cannabis service lab.
The culture of secrecy and stereotype that pervades cannabis has also likely impeded its progress. There are few research labs at academic institutions dedicated to cannabis research and few cannabis specific peer-reviewed journals. As such, there is a need for more objective information sharing platforms to establish a reliable source of successful methodology and discovery in the field. However, the culture of secrecy does not just pertain to cannabis-associated stereotypes. Many cannabis researchers are protective of their hard-won discoveries. “Everybody is keeping a secret. Then it might leak out six months later when somebody tells a friend how they're performing a certain process. The information sharing peer-review scientific journal style is not there,” said Wu.
Cannabis Rush
Despite these significant technical and information challenges, researchers, scientists, and investors continue to flock to the cannabis industry, some seeking opportunities in extraction research. Wu compared the influx to the Gold Rush, as well as the Tech Rush of the late 80s and 90s.
“The possibilities in the manufacturing space are endless, said Stroud. “We’re laying the groundwork for a more efficient and scalable supply chain operation while also driving forward on research and development. This has allowed us to focus on more innovative opportunities that can further the market along.”
The cannabis extraction market extends to both medicinal and recreational purposes. In California alone, the cannabis sales market is 3.1 billion USD with an estimated growth rate of 23%.1 In 2018 the global market for cannabis was $10.6 billion USD.2 In 2019, the global market was 17.7 billion, with an estimated growth rate of 18.1 – 32.9%.2,3 Several estimates project that the market will be 97.35 billion by the end of 2026.2
Many groups in California hold cannabis manufacturing licenses, however, not many are doing extraction work, and less than a third of those are doing it consistently. “Many people that get into these businesses, jump right into brand building without really understanding the industry; or they're just trying to carve out a name for themselves,” said Wu.
According to Wu, success is not in developing a brand, but rather in establishing a basic supply chain. He compared it to drinking a bottle of Coca-Cola. Most consumers know that Coca-Cola contains sugar, but they do not stop to consider how or where that sugar was obtained; similarly, cannabis extraction products can be used in a variety of products for a number of purposes. Wu cautioned that there is a large risk, but if researchers can control their risk margins, there is room for substantial success.
Even with the economic crisis associated with the coronavirus, money still pours into cannabis extraction. This is likely to continue for the next decade as cannabis research gains footing with legalization in more locations. Similar to the Gold Rush and the Tech Rushes, this rush will likely consist of different waves of consolidations and crashes.
“Right now, I feel like we're in the early wave,” said Wu. “We just need to build a chip factory. Let's not worry about computers or apps yet. Let's just build the chip factory and then get that going.” The key to building the basic, “Cannabis chip factory,” is in establishing a sound infrastructure. Currently, there are no dominant cannabis extraction labs, no true operating procedures for extraction, and no reliable distributors.
“How do you build a computer if there's no Intel or AMD or CD making hard drives?” said Wu, referencing some of the influential companies that helped to shape the development of the computer as we know it today. “This is where we're at right now, just building the basic infrastructure of this industry.”
Ultimately, the key to successfully weathering the fluctuating and challenging atmosphere of cannabis research lies in the skillsets and creativity of the people involved. “This is a gigantic start-up industry,” Wu said. “With a start-up, it is the strength of the team that will make or break it.”
References
1. P. McGreevy, “California now has the biggest legal marijuana market in the world. Its black market is even bigger,” Los Angles Times, 2019. https://www.latimes.com/california/story/2019-08-14/californias-biggest-legal-marijuana-market
2. Fortune Business Insights, “Cannabis/Marihuana Market Size, Share and Industry Analysis By Type (Flower/Buds and Concentrates), By Application (Medicinal, Recreational (Edibles and Topicals), and Industrial Hemp), and Regional Forecast 2019-2026,” Fortune Business Insights, 2020. https://www.fortunebusinessinsights.com/industry-reports/cannabis-marijuana-market-100219
3. Grand View Research, “Legal Marijuana Size, Share & Trends Analysis Report By Marijuana Type (Medical, Adult Use), By Product Type, By Medical Application (Cancer, Mental Disorders), and Segment Forecasts 2020-2027,” Grand View Research, 2020. https://www.grandviewresearch.com/industry-analysis/legal-marijuana-market
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