Although still prohibited in Brazil, startups are investing in cannabis cultivation

RIO DE JANEIRO, BRAZIL – The production and sale of cannabidiol is already a reality in the country, but the raw material needs to be imported; even so, entrepreneurs are betting on the permission for legal planting.

The medical marijuana derivative cannabidiol from the pharmaceutical company Prati-Donaduzzi, currently found in Brazilian pharmacies, has Canadian roots. On the other hand, the Nunature brand, which should arrive this month in the country’s pharmacies, comes from Colorado, in the United States.

The foreign origin is the rule that should be repeated by other brands of cannabidiol that are awaiting authorization while the Brazilian legislation remains rigid for the medical cannabis business.

Although companies have been allowed to install factories, process, and sell cannabidiol in pharmacies since last year, there is no medical cannabis planting in Brazil, even for therapeutic purposes.

This, however, has not stopped some entrepreneurs from thinking about businesses that work in planting for medicinal purposes.

The medical cannabis business ecosystem is already a reality in Brazil, mainly from a line of companies, which includes pharmaceutical companies, trying to fit within ANVISA rules to sell cannabidiol in pharmacies.

Since 2014, the use of cannabidiol, one of the substances in cannabis, has been allowed by the National Health Regulatory Agency (ANVISA). Before 2020, however, the only way to get access to the substance was via importation.

Two companies that have already put their projects into play, even if the deals can’t happen yet: Adwa Cannabis and Kaneh Bosm Genes. The two startups were created in university environments interested in operating in a market without the dependence on bringing cannabidiol from abroad, as it occurs today.

At Adwa Cannabis, a startup created by agronomist and geologist Sérgio Rocha at the Federal University of Viçosa, Minas Gerais, the idea is to improve cannabis as an ally in the business model.

This means researching the plant in depth to guarantee, for example, customized seeds. In time, the idea is to have superior quality products – gourmet cannabidiol created in a laboratory.

“If we want to have raw material available here, we have to master it and develop proposals adapted to Brazil’s climate, which meet the needs of different markets that are highly productive, adapted to the pests here,” explains Sérgio Rocha.

Although the Adwa Cannabis business is prevented by legislation, the startup managed to get a special legal authorization to plant the plants in greenhouses inside the Federal University of Viçosa and test the proposals. In the company, there are five partners and 10 people working in operations.

Bill 399 was approved in a Special Committee in the House of Representatives but still needs the approval of the Senate and the Planalto Palace. It foresees permission for the industrial, medicinal, and research planting of cannabis. However, things should not happen fast.

For Sérgio, the legislation should allow the emergence of businesses that plant cannabis in about four years from now. As the company works with all aspects of cultivation, it has also developed agricultural management software specifically for cannabis, which should have a beta version by the end of the year, launched for the South American market.

The idea is that farms in countries where planting is allowed, such as Uruguay and Paraguay, will buy the license for the application. The software development was supported by a call for proposals from the Ministry of Science, Technology, and Innovation. So far, the startup has received the support of R$ 190,000 (US$38,000) from the ministry.

Adwa, however, is already in the process of acceleration within the ecosystem of The Green Hub, an accelerator for startups in the cannabis ecosystem, founded in 2019 by cousins Marcel and Marcelo Grecco. In 2020, the valuation of R$1.66 million.

The company started with capital from the partners but soon grew and received a seed capital in 2019, and in 2020 closed a partnership with the Life Science division of the German pharmaceutical Merck, which encourages startups through the partnership. Today, there are nine driven businesses, which operate mainly in the ancillary market.

HEBREW NAME AND AQUAPONICS TECHNIQUE

Another startup accelerated by The Green Hub, which is not waiting for the law to change before moving forward with its venture, is Kaneh Bosm Genes, the Hebrew term for how cannabis is referred to in the Old Testament of the Bible as a medicinal herb.

The startup’s focus is to be a supplier of cannabis from aquaponic cultivation in the future. Aquaponic cultivation allows plants and fish to be grown in a system of recirculating water and nutrients.

The fish waste provides the nutrients needed for plant growth, while the plants filter the water from the fish tank.

While it cannot do the planting with cannabis, the entrepreneurs at the company’s head do testing with plants such as mint, tomatoes, and basil.

According to Flávia Mota, process and biotechnology engineer and CEO of the company, the difference in the results is noticeable.

“What we see with other plants is that the production time is shorter, by about 30%, with more productivity and less space. In this system, the control of the parameters is also better. Because you use the fish feces to fertilize, you save money. This is because fertilizer represents up to 40% of the cost of a planting,” says Mota. “The intention is to show that the system is energetically sustainable, free of pesticides. Producing quality raw material.”

Mota and partners Breno Bardo, Luciana Custódio, and Yang Neiva were already studying aquaponics and decided to really get into a cannabis business after the Green Hub startups call.

Another decisive factor for the company to bet on this path was examples of Canadian companies that use the aquaponics system to produce cannabis. Habitat Craft Cannabis is one of them. Unlike Brazil, the country has granted permission for recreational and medicinal consumption.

While it cannot validate its hypothesis that aquaponics is a good way to produce cannabis, the entrepreneurs are partnering with an Uruguayan family cannabis farm to verify the impacts of the technique,

Although the company’s focus is on growing cannabis, the company does not dispense with the production of other plants for the production of “enhanced” oils, such as peppermint, patchouli, and lemon balm.

According to the research firm New Frontier Data, the medical cannabis sector in Brazil may reach US$4.7 billion in three years.

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