A year ago LeafCann did a highly unusual thing — for an aspiring marijuana company at least — and cancelled three licence applications.

It’s unusual because medical cannabis licences are difficult to get, requiring extensive documentation, background checks, and pre-planning.

For the well-organised they can take up to a year from application to receipt.

But CEO Elisabetta Faenza says it was something they had to do.

“LeafCann applied for licenses originally almost two years ago, all three, but it was for a particular site [south-east of Melbourne],” she said.

But they made, and won, an opportunistic bid on a disused R&D pharmaceuticals site on the outskirts of Adelaide in December 2017.

“It was a much much better site and during the bid process the South Australian government made it very clear that they were very open to medicinal cannabis company setting up in [the state], and we just saw all this support.”

The Office of Drug Control (ODC) was adamant they couldn’t switch sites within an application, so they had to scrap the original and resubmit wholly new paperwork in May 2018.

And last week, in the early days of May, Faenza says they got their manufacturing licence.

They’re still waiting on the R&D licence and the cultivation version (here’s an explainer on licences and permits).

Ducks in a row

LeafCann has tentative plans to publicly list someday, with an IPO becoming “an option” from 2020.

The company plans to have a fully built, $20m GMP-certified site (grow “chambers”), R&D facility and manufacturing plant, by the end of 2020.

Two years ago, when they were making those applications, LeafCann also began signing deals.

One with Essential Oils of Tasmania, owned by Atlas Pearls (ASX:ATP), has fallen through.

Faenza says while they “love” the team they couldn’t reach an agreement with the company’s shareholders on issues such as property: LeafCann needed a lease or an option to buy, Atlas wanted to start investing straight away without that certainty on the table.

Deals with Creso Pharma (ASX:CPH) and Canadian cannabis inhaler maker Resolve Digital Health are working out better.

Resolve recently got its inhaler registered as a medical device in Canada, opening the door for similar registration in Australia where LeafCann has the exclusive licence.

A letter of intent with Creso in May 2017 was for product development and production in Australia; LeafCann is waiting on its licences to come through in order to sign a final deal,

They have one confirmed offtake agreement with an unlisted offshoot of a listed company in the nutritional medicine sector and two others with “big overseas companies”.

LeafCann also has six unlisted cultivators in Australia whose licences and licence applications are linked to their manufacturing licence.

Australia is high-tech, mate

Australian cultivators are tending towards the super high-tech for their growing facilities, but Faenza’s vision for what the final LeafCann site will look like could be one of the most extreme.

She describes a system of hyper-controlled growing chambers, each one handling a different stage of growth, a different cultivar, even being looked after by separate employees.

Faenza claims that “seas of green”, such as those in Canada where companies are struggling to lift their quality control standards, simply can’t meet the super high manufacturing standards of GMP because they can’t isolate infections or contamination.

Products made in Canada are also problematic because while they may be “GMP-finished”, the process up until that point is not GMP standard.

“We’re very frustrated that the overseas products that’s coming into Australia. It doesn’t meet the same standards that Australian product will have to meet but it’s preferable to people going out and getting illicit product that absolutely doesn’t meet the standard,” she said.

Myths and legends

What Australian growers like LeafCann are trying to do is bring some quality controlled rigour to a sector that ultimately grew out of Canada’s, and the US’s, illicit drug sectors.

“A lot of what’s out there is mythology, there [are] very [few] validating standards in the sector,” Faenza says.

These include the idea that LED lights can’t produce the right spectrum and enough radiant heat compared to halogen lights. Illicit growers “trained” light makers over years to deliver the right kinds of lights, and LED light makers just haven’t had their products selected for cannabis cultivation in the same way, yet.

“The biggest myth is that greenhouses can produce GMP product,” Faenza says.

In Canada she says it’s a myth that square metres under cultivation — that sea of green — is a mark of profitability.

“The reason they’re not telling you their yields, they’re just telling you the square metres, is if you got the yield information on product [which obtained] a marketing licence, which means it’s passed testing.

“It would be a very small number. It’s not passing.”

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