Many Cannabis Testing Companies Fail to Achieve Accreditation. Many Others Simply Fail.
SANTA MONICA, CA, Nov. 29, 2016 /PRNewswire/ - As of November 9, recreational marijuana is now legal in California. Signal Bay, Inc., a life sciences company focused on the exploding cannabis testing market which provides quality control testing for potency and contaminants in cannabis flower, extracts and edible products, stands to benefit significantly.
A subset of the overall marijuana market is the cannabis testing market, a space that is expected to grow exponentially as cannabis transitions from a formerly illegal substance to a legal and regulated consumer product. The testing market in the United States is expected to balloon to $850 million in size by 2020. In California alone, the market is expected to reach $300 million in 2017. Cannabis testing is critical to ensuring that cannabis, whether for medical or recreational use, is safe from pesticides, E. coli, molds, solvents and other toxins and impurities.
While many cannabis testing companies are currently vying for market share in this new wide open California market, strict regulations and mandatory cannabis testing accreditation have made it difficult for many inexperienced cannabis testing companies to survive. Only the experienced will thrive in this exploding, yet tight-knit, relationship-based industry. Signal Bay is one such experienced company.
Signal Bay's Oregon branch of EVIO Labs are currently accredited and setting the standard in the industry. Signal Bay currently has five EVIO Labs in operation including one in California. The Company plans to add 18 more accredited EVIO Labs in the Golden State by the end of 2018.
So what does cannabis testing laboratory accreditation entail?
Cannabis Testing Regulation and Accreditation in California
In 2015, California passed a bill (AB 266) requiring medical cannabis to be lab tested for regulatory purposes on or before July 1, 2017. The bill would make all companies involved in the production and sale of cannabis subject to meeting various standards set forth by the International Organization for Standardization, ISO/IEC. These requirements would also apply to third-party laboratories, engaged in marijuana testing. ISO requirements include state statutory environmental, agricultural, consumer protection, and food and product safety requirements, including sanitation standards, etc.
Here's What AB266 mandates, specifically:
- The issuance, renewal, suspension, denial, and revocation of conditional licenses;
- Procedures for appealing fines and the appeal of denial, suspension, or revocation of conditional licenses;
- The application, licensing, and renewal forms and fees;
- A time period in which the bureau shall approve or deny applications for a conditional license;
- Qualifications for licensees;
- Set standards for certification of testing laboratories to perform random sample testing of all medical marijuana.
Signal Bay's Experience with Accreditation Critical to Its Success in California
With a relatively high barrier to entry, and with more states looking to enact stricter testing regulations, many cannabis testing companies have fallen by the wayside. Even in Oregon, where cannabis has been legal for years, stricter testing regulations are impacting the cannabis testing industry in a significant way. In fact, Oregon currently has some of the strictest cannabis testing regulations of all the states in which recreational marijuana is legal, next to Nevada. The accreditation standard in Oregon, ORELAP, is more rigorous than the ISO 17025 standard that will be required in California. As the most experienced and the most dominant player in the Oregon cannabis testing space, Signal Bay understands what it takes to thrive in a robust regulatory environment.
"Many labs fail to ever become accredited," commented CEO of Signal Bay, William Waldrop. "Prior to October 1, when accreditation became mandatory for cannabis testing in Oregon, there were around 30 entities operating in the market that claimed to be full service testing labs. Now there are only 17 accredited labs performing testing services in Oregon and not all of these are actually operating."
"Many labs take up to a year to reach some level of accreditation, but fail to become fully accredited and remain unable to provide the full suite of services required for regulatory compliance. Many get stuck in the research and development stage after accreditation. At Signal Bay, however, our advanced technical experience as well as our experience and understanding of the regulatory system, enables us to get our EVIO Labs accredited and fully operational in a matter of months, rather than years."
Waldrop added that California, as well as other states which just recently legalized marijuana for recreational use (and states which recently approved medical use) are looking to states like Oregon as they build out their own regulatory structure.
Capturing California: The Signal Bay Way
Of all the cannabis testing companies jockeying for California market share, Signal Bay has a remarkable edge. The company's recent experience in the Oregon cannabis testing market as well as its unique business model make it a very strong player in the California market. It has developed a business model likened to Quest Diagnostics (NYSE : DGX ), an industry leader in clinical laboratory services.
"It's the hub and spoke model," simplifies Waldrop. "In each state we will have centralized testing laboratories with other ancillary testing facilities in local markets statewide. The core centralized labs handles the bigger, high dollar testing functions while the smaller localized labs handle collection, sampling, and other testing services. Couriers move back and forth between locations and the hub, maximizing efficiency. This enables us to develop networks of testing laboratories that operate efficiently within each state. Over time the ancillary testing facilities can become more specialized, increasing overall capacity and allowing for reduced downtime of services, even if a critical piece of equipment is out of service at the hub."
This model is critical to reaching economies of scale while not getting bogged down by increasing regulations and the difficulty and time it takes to acquire accreditation.
"Other companies may get bogged down just getting one lab accredited and may temporarily shut down if new regulations require some kind of change or new form of testing," explained Waldrop. "But with our model it is very different. Our experienced team can focus resources efficiently to accommodate any regulatory changes that may come without stalling our business. As long as at least one location is capable of upgrading quickly, all of our locations in that area can continue operation without downtime. Our model enables us to remain incredibly flexible in a volatile and quickly evolving market."
For example, if some new testing requirement was suddenly required, a company with a stand-alone lab would have to potentially reduce throughput or temporarily close to upgrade the lab in order to retain its operational capacity and retain market share whereas Signal Bay would only have to upgrade the "hub" within that geographical area of operation.
"But it's not just about getting through accreditation," said Waldrop, "It's not just paperwork. It's also about having qualified competent scientists that can ensure we are providing the highest level of technical service possible. We find ourselves very fortunate and well positioned in that regard as well."
Many cannabis testing labs struggle to survive simply because they lack proper technical expertise, but this is no issue for Signal Bay. Chief Science Officer and natural products researcher, Dr. Anthony Smith leads the scientists of Signal Bay's EVIO Labs. Dr. Smith is a well respected biochemist and researcher, holding a PhD in Molecular and Cellular Biology from Oregon State University. Dr. Smith held a position on the Oregon governor's Task Force for Researching the Medical and Public Health Effects of Cannabis and serves on the scientific advisory board of the Health Research Institute, a non-profit horticultural and medical research group.
Waldrop went on to explain: "Our technical leadership from each of our laboratory directors and our Chief Science Officer affords us a unique advantage in the California market. We know our way around accreditation and we are some of the best at what we do. Our team is interested not only in producing reliable data for our clients, but our scientists are capable and interested in innovating new techniques, contributing to national and international cannabis research, enhancing public health and safety, and educating producers and consumers."
Signal Bay's Golden State Opportunity
California's $300 million cannabis market is largely up for grabs. There will be many companies in the growing cannabis testing industry that will try to capitalize on this opportunity. With its deep experience, close industry and government relationships, and unique business model, Signal Bay is poised to replicate its success in Oregon and become one of the Golden State's most dominant players.
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