Launching products in the medicinal cannabis sector has been far more difficult than initially expected.
Patients are missing out on better care because of the poor performance of New Zealand’s medical cannabis sector, according to the head of a major local cannabis clinic.
CannaPlus, which opened the doors of its Ponsonby clinic during the pandemic, specialises in treating patients with cannabis-based medicines, but thanks to the Government’s stiff regulatory environment it – and other providers – have a limited product range.
The gold standard pharmaceutical regulations put in place by the Medicinal Cannabis Agency have made it difficult to get products to market – testing the patience and budgets of industry players.
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CannaPlus chief executive Mitch Cuevas, who has also spent time working with medicinal cannabis producers, said the business was limited in the formats of cannabis-based medicine it could offer, being either whole cannabis flower (meant to be drank as tea) and oil drops.
No other novel products have been approved and that narrow window has created problems – all approved drops use coconut oil, but one of CannaPlus’s patients has a coconut allergy and an application to import an olive oil-based product was turned down by the ministry.
“There's very few alternatives for patients from that perspective, there's not approved edibles, and there's not anything like a pre-prepared inhalable.”
Products are also expensive and not Government-funded. A greater range of products or greater competition would, in theory, push prices down.
Since the medicinal cannabis scheme started in 2020, only about 25,000 patients have emerged from the 100,000 plus black-market medicinal users.
Many of the companies that have found themselves in sticky financial situations recently have been focused on vertical integration and growing, manufacturing and selling a New Zealand product, rather than importing and branding.
So far Guy Haddleton-backed Helius Therapeutics is the only company to offer such a product with a range of drops, though it now has regulatory approval to process dried flower.
Cuevas said there was undoubtedly a market for locally grown and produced products.
“Patients would much prefer New Zealand product and they'd much prefer product that's not irradiated, so if we can have New Zealand product that meets the standards but is not irradiated, that’s a much better product for the patient.”
Radiation is used to achieve a sufficient microbiological standard for dried cannabis but has an effect on both the taste and terpene profile (aromatic compounds).
Cannabis flower became available in March last year and has since grown to make up 70-80 percent of total sales according to Cuevas, with oil drops, which many firms invested heavily in, making up the much smaller remaining slice.
Of the 20-30 percent still made up of oil drops, full spectrum Cannabidiol offerings, which include a range of cannabinols (but not psychoactive THC) are dominant, with very few patients opting for isolated products.
Though businesses such as CannaPlus stand to do well if the industry evolves to a position where it can convert more customers over from the blackmarket with a wider offering and better prices, ultimately Cuevas said medicinal cannabis doctors weren’t in the space to make money, but rather because they believed it could have great patient outcomes.
The finish line
A handful of cannabis companies have products available, including Canadian giant Tilray, Helius, Cannasouth, Nubu Pharmaceuticals, Rua Bioscience, and Medleaf.
Rua and Cannasouth are both listed on the New Zealand stock exchange and both set out to produce New Zealand medicines.
Cannasouth is still working towards that goal but Tairāwhiti-based Rua has almost completely abandoned it, moving away from manufacturing last month, opting to focus on distributing products in Europe.
Rua chief executive Paul Naske said it had been actively exploring where true value was in the medicinal cannabis industry and how it could best meet the needs of patients and investors.
“To capture value and encourage growth we will focus on our key strengths – leveraging our global-scale supply agreement and established sales and marketing partnerships across Europe to build a sustainable global company, while our world-class cultivation team in Ruatoria works on unique genetics for our established and future product pipelines,” Naske said.
Cannasouth is forging on with its original strategy and looking to merge with Bay of Plenty-based Eqalis.
Cannasouth had just $1.9 million cash in hand on December 31 and an estimated burn rate of something like $600,000 a month, but since then it has sold one of its subsidiaries for $2.2m, buying some more time.
According to an independent report into the proposed merger, the business will have $4m on hand once complete, indicating Eqalis also had less than 12 months of working capital.
The merger is dependent on shareholder approval and Cannasouth raising at least $7m from investors, with $3.3m already committed.
When asked about their respective financial positions, Cannasouth’s chief executive Mark Lucas said the reality was both had gone through the establishment phase and were at the beginning of commercialisation. “It's natural that both companies are in a position where it's now time to start bringing cash in the door by way of sales.”
Eqalis will bring a good manufacturing practice-certified manufacturing facility to the table, and Cannasouth has a large-scale cultivation facility.
Timelines and income forecasts have been blown away right through the sector and Lucas wouldn’t say when the company expected to have its New Zealand-made products in market (it already sells an imported product) or how long the capital raised would last.
