Nextleaf Solutions Ltd. is an extraction technology company based in Vancouver, which its extraction lab in nearby Coquitlam. After receiving a standard processor licence from Health Canada in September, it plans to start processing highly-concentrated THC and CBD distillate in late-November to sell as ingredients for the newly legalized products such as edibles, beverages, and lotions.
The company, which trades on the Canadian Securities Exchange, has 16 full-time employees. It has eight issued patents and more than 40 others pending related to the process and equipment used to high-purity THC or CBD distillate, a tasteless and odourless concentrate derived from low-quality dried cannabis biomass, including failed crops.
Nextleaf, which extracts the cannabinoids using cryoethanol, aims to generate revenue through toll processing, white-label production and by licensing its intellectual property. Its processing facility of 6,540 square feet is designed for an annual capacity of 270,000 kilograms of dried cannabis biomass. To start with, however, the company aims to process 500 kg of cannabis biomass daily, for an estimated annual processing of 120,000 kg of biomass for the first six months.
Cannabis Professional spoke with Nextleaf CEO and Co-founder Paul Pedersen about the company’s plans. The conversation, edited for length and clarity, is reproduced below.
Cannabis Professional: What products do you plan to sell?
Paul Pedersen: We’re a processor so we have been focused on developing technology and equipment. We developed our own construction plant as opposed to using off the shelf technology. We’re not focused on building our own brand but being an extraction wholesaler. We can load molecules into vape pens and bulk oil, then it’s sold through our partners. We have a beverage partner in the Okanagan. Our focus is wholesaling molecules to our partners that then add those molecules … in their products that they take to market under their own brands.
CP: What kind of extraction will Nextleaf focus on?
PP: We plan to process THC and CBD distillate. We use cryo-ethanol. We take that crude oil and refine it, it’s basically very cold ethanol. Once we get the crude oil, we distill the crude oil. What we get is a distillate. It’s a 90 per cent broad spectrum cannabinoid. We remove fats, waxes, chlorophylls, and get it to a distillate, a tasteless, odorless cannabinoid. We think that’s very important for edibles and all the 2.0 products. That chlorophyll that you have in any kind of herbal form, that’s what we’re focused on removing through the purification process. We look at THC and CBD as ingredients. We take it all the way to the loaded [vaporizer] cartridge. We sell those cartridges to our clients that then put their brand on it and would sell it to the provinces: white-label manufacturing. We wouldn’t make the final formulations of the lotions or edibles. We send bulk distillate oil to the partner that then manufactures at their facility.
CP: What differentiates you from other extractors?
PP: We really felt like the differentiators are being fastest and cheapest. We’ve spent a lot of time engineering. It’s customized. It is significantly more efficient than conventional off-the-shelf technology. Our vision is to lower the cost-per-milligram of THC and CBD high purity molecules that are then used to manufacture ingredients. When you’re in the commodity business, it comes down to who’s the fastest and the cheapest. Our competitive advantage is that we feel we can produce a high-purity distillate more efficiently than anyone in Canada. We’ve got eight issued patents, one in Canada, five in the United States, two in Australia. We have over 40 pending patents as well.
We’ve punched above our weight when it comes to R&D and innovation. We think that intellectual property will become important in an industry that’s been focused on plants. We think that intellectual property becomes very important, similar to biosciences and biotech. Intellectual property allowed us to differentiate ourselves.
We recently acquired nanoemulsion technology that allows us to take THC and CBD molecules and put them into a nanoemulsified form. When added to beverages and edibles, it increases the onset time. That for us has been a huge focus. How we differentiate is applying technology in ways other companies can’t.
CP: With which beverage company do you have a supply agreement?
PP: BevCanna is a partner, they have a bottling facility in B.C. that can do 70 million bottles a year. With their bottling ability and our technology on taste and onset of THC in beverages, we think that’s going to give us a good opportunity to be a big player in the beverage space through our beverage partner. We’re waiting on their final licensing. They’ve got a research licence.
CP: What is your cost of production?
PP: We can process 500 kilos per day of biomass. We aren’t disclosing the cost of production just yet. Our one system – we’ve got a custom-built cryogenic ethanol plant – that one plant can process the same amount of cannabis as seven carbon dioxide [extraction] machines. We see a lot of companies using off-the-shelf technology. The challenge with that is efficiency. It’s a race to the bottom, just like anything.
CP: Do you plan to sell extracted ingredients to non-cannabis companies?
PP: We’re really focused on cannabinoids. Where we’re excited is adding other plant medicine as we go forward to 2020 as regulations open up with Canada’s health products and being able to formulate other plant products like melotonin or lavender to help with sleep.
CP: Given that Nextleaf plans to sell cannabis vaporizer products, what are your expectations from the impact of vaping illnesses?
PP: We actually think this vaping crisis is going to be a net positive for the legal industry. If you look at the flower market, by our estimates the illicit market supplies 80 to 90 per cent of all the dried flower consumed in Canada. I think it has scared a lot of people into not using products that are unregulated and illicit, and I think it’s going to speed up the rate of adoption. I think it’s going to be faster with 2.0 products than 1.0 products. I think that consumers having a legal option available in conjunction with the risks of consuming unregulated products are going to push consumers to the legal market. It also depends on how many vape products are going to be available. I don’t expect there’s going to be a huge change in people’s consumption habits. I think, in Canada, we’re going to see more of a focus on producers getting these products approved. Now more than ever, the vape crisis is showing regulatory is very important the companies that can navigate Health Canada will be the ones that get products on shelves.
CP: I see you don’t have any female executives. Why is this and do you plan to hire any?
PP: We can certainly do a lot better of a job on female directors. We have one woman on a five-member board, we just added Sherry Boodram to the board of directors. I think it’s a problem across the board industry. It’s something we’re aware of. We are focused on developing leaders internally for our executive team. We’re always out there looking to identify and recruit top people and it’s a mandate for us to look for female leaders in the industry. It’s something we’re aware of and are working on. We’ve made it a mandate to recruit female leaders in the industry. Quite frankly, it’s quite good for business. We really believe that diversity is a good thing. It brings different perspectives.