FSD Pharma reveals hemp purchase agreement after Auxly deal collapses

Ontario-based FSD Pharma has agreed to buy 1,000 kilograms (2,200 pounds) of hemp on a contractual basis from a farmer in the province for CBD extraction at the company’s Cobourg facility.

The move comes after the breakdown last week of an agreement between FSD and marijuana company Auxly for the purchase of 49.9% of the cannabis produced at Cobourg in return for building a separate 220,000-square-foot cultivation facility on the site.

It isn’t clear whether FSD intends to use any of the planned facility for hemp and CBD purposes.

As of last week, Auxly said it had spent 7.5 million Canadian dollars ($5.6 million) on building the facility.

FSD did not respond to requests for additional information.

Under the new agreement, FSD – together with Ontario extractors and formulators Canntab Therapeutics and World Class Extractions – will purchase hemp flower from Thomas Elcome at CA$100 per kilogram per 1% of CBD extracted. Elcome is president of 10975443 Canada in Ontario, according to a news release.

While there are also plans for a separate agreement in which Elcome will sell crops to those three firms in 2019, the size of the 2018 crop involved in the deal has been questioned – as has the potential quality.

“None of the Canadian hemp crop has been bred for high CBD content, and so the quality is generally low while the cost of extraction is high,” Russ Crawford, president of the Canadian Hemp Trade Alliance, told Marijuana Business Daily.

“There is going to be a real learning experience in 2019. Nobody’s going to knock it out of the park, and there won’t be good profitability.”

Canntab and FSD signed an agreement in September for a 10,000-square-foot facility designed for CBD products such as gel capsules and tablets as well as other types of cannabis-based products, including sleep aids and pain relievers.

FSD, which trades on the Canadian Securities Exchange as HUGE and on over-the-counter exchanges as FSDDF, has facilities on 70 acres of land with 40 acres primed for development and an expansion capability of up to 3.9 million square feet, the company said.