Massive CBD extraction facility opens in Colorado

The facility was purchased by the company after two infusions of capital this year.  It is a building purchased from pharmaceutical company Novartis and was repurposed from the manufacture of the antidepressant drug Xanax. The building had stood idle for several years before the sale.

Economies of scale

The newly repurposed factory will allow Mile High Labs to get a jumpstart on the supply end of the CBD industry.  The company can easily accommodate economies of scale in its new facility, which at the moment it is only using a fraction of.

The hemp-derived CBD manufacturing space is moving at light speed. New facilities come online almost monthly.  So claims of who’s the biggest are hard to vet.

But what is clear from the tours of the facility the company offered yesterday is that this place is BIG.  The warehouse alone could house a football field. It’s easily the largest facility devoted to the manufacture of a dietary ingredient that this reporter has personally toured.

And Novartis left behind a mountain of pharmaceutical manufacturing equipment as part of the sale, as much as $160 million worth. In addition to mixing and drying machines, the facility came replete with six bottling lines as well as tableting machines and the capability of expanding into capsule filling as well.

Meteoric growth

At the opening ceremony which was attended by Colorado Gov. Jared Polis, founder and CEO Steve Mueller said the company’s growth has been meteoric.  He founded the company more than three years ago as a one man shop. Mile High Labs had about 35 employees in January and now employs more than 200 people.

“I’m excited by the ambition and the scale of this place,”​ Mueller said. “I think it changes how people think about the CBD industry. “​

Mueller said that the 2014 Farm Bill pared with state legislation really jumpstarted the industry in Colorado.  But that didn’t mean his path of business development was without its pitfalls.  At first, his lab was qualified as a “MRB,” or marijuana related business, meaning his company was ineligible for banking services.

“It was so frustrating to have a desk full of checks and no bank account and no way to pay my employees,”​ Mueller said.

Room for new ideas

Mueller said one of the things that excited him about the hemp/CBD realm was there was so much white space to play in.  Big problems that needed to be solved and few solutions on the table.  

It contrasted starkly with his academic training, where he received a bachelor’s degree in physics.

“In physics, there was so much study to make tiny changes in a problem,” ​Mueller told the audience of more that 100 people. 

“In this business, every week we are making huge developments. As an engineer, when you look at this industry you see that so little work had been done.  There was so much opportunity to develop the technical side of things,”​ he said.

Supply chain rationalization

Among the technical developments of the company are the use of mobile crude processing units, said chief operating officer Philip von Mecklenburg, PhD.  The units can be transported on flatbed trucks and can be fairly quickly erected on site.  That allows the processing of hemp biomass from the field to a crude oil state before the material even enters the extraction facility in Broomfield.

At the moment the field processors are working fields in Colorado, both because there is a significant amount of hemp grown in the state and also because not taking the material across state lines eliminates a certain amount of residual legal risk. But Von Mecklenburg said having the processors mobile means the company can go to where it makes the most sense to acquire its biomass in the future as the regulatory picture becomes clearer.

Von Mecklenburg has a background in logistics, and at his last professional stop had created what he called an “Expedia for the freight industry.”​

“You have 10 packages that say want to go to Shanghai,”​ Von Mecklenburg said. “So my platform gave you multiple options for that shipment, just like buying a plane ticket.”​

Scale needed to satisfy big CPG customers

Von Mecklenburg said similar issues will need to be solved in the CBD space.  At the moment a number of the companies in the industry are still at cottage scale.  That was true of the dietary supplement industry as a whole for a number of years, but the picture is changing at an order of magnitude faster within the hemp realm, where sales still seem to be heading for the stratosphere.

The new facility will put Mile High Labs on the map when the regulatory picture becomes clearer and the big CPG companies start to launch products.  Word heard through the grapevine is that many such products are under development.  Those companies will be buying at scale, so being able to reliably meet big orders will be paramount, Von Mecklenburg said. 

“The business has been a little bit amateurish,” ​Von Mecklenburg said. ​

“We will have the mass scale and the quality that can be used by FDM companies,” ​he said.

Concentrating on CBD isolate

Mile High Labs is concentrating on the products of CBD isolate, which will have the most formulation adaptability, Von Mecklenburg said.  The company also says it has a water soluble powder for beverages.

In addition, the company will start offering white label services for CBD products, whether as tinctures, tablets or eventually capsules. 

Another way in which company officials say the firm is differentiating itself is in the realm of quality.  As a result of taking over the Novartis facility the company now has an almost embarrassment of riches when it comes to lab space.  There will be enough room for application labs, too, where brand partners can develop test batches of proposed new products.

Compliance and Regulator Direct Wendi Young said she believes Mile High Labs with the new plant and the processes that were put into place there can lay a claim to the highest quality standards in the industry.

“I was hired at the beginning of the year to create quality standards that are the highest in the cannabis industry,”​ Young said.

Young previously was quality director for a smaller pharmaceutical firm in Colorado. She said Mile High Labs’ Broomfield facility is ISO 9001 certified and the plan is to acquire additional certifications.