Eqalis managing director Greg Misson at the Eqalis NZ medicinal cannabis research facility in Katikati. Photo / Andrew Warner.
Eqalis managing director Greg Misson at the Eqalis NZ medicinal cannabis research facility in Katikati. Photo / Andrew Warner.
Medicinal cannabis companies set to merge in a $48.8 million deal are confident they can combat regulatory hurdles to bring more, cheaper products to New Zealand patients.
Publicly listed firm Cannasouth is proposing to buy Bay of Plenty-based competitor Eqalis to share resources for research and development, regulation, sales andprescriptions.
Eqalis chief executive Greg Misson said the deal was about the two companies wanting to beat the black market and put patients first.
“We see there are 255,000 patients who use medical cannabis in New Zealand, and only 6 per cent use legal channels,” Misson told the Herald.
“We’ve been at it for nearly four years and we haven’t made much of a dent in that. We’ve had enough, we’re impatient, we want to get on with it and change that.”
Misson said his company’s merging with Cannasouth would allow it to accelerate development of pharmaceutical technologies, bringing prices down for users.
“The challenge is ours. Don’t give up on the New Zealand industry. We’ve got a full head of steam and we’re going to hit it hard.”
Medicinal cannabis company Eqalis hopes its merger with Cannasouth will improve patient access to products. Photo / Andrew Warner
The acquisition came about when Cannasouth was working with Eqalis to gain Good Manufacturing Practice certification at one of its facilities, and they realised their purposes aligned, Cannasouth chief executive Mark Lucas told the Herald.
He suspected this merger would be the first of many in the industry, given the high costs all players faced.
“This industry is so highly regulated and the costs associated with entry are significant, so you need to be operating at a certain size and level to be able to compete.
“This transaction signals the start of the consolidation of the industry.”
Although, he said it was “very much still a sunrise industry,” and the two firms would need to work together to navigate regulatory hurdles.
Those included removing the “problematic” requirement for products to meet minimum standards in New Zealand before being exported.
“It just results in time delays and additional costs and ultimately, companies like Cannasouth [must] be able to access export markets to sustain our businesses and ultimately reduce costs to local patients.”
Lucas said the merged company would sell products such as oil tinctures and eventually “next generation pharmaceuticals”, which would be more bio-available.
Cannasouth said in an NZX release in October it received its first shipment of three imported and verified medicinal cannabis products and had all necessary licences for cultivation, manufacturing and supply.
“We’ve got products on the market and are about to launch new products,” Lucas told the Herald. “We’re looking at commercialising the flower out of our manufacturing facility at the moment.”
It was also awaiting a Medsafe audit of its cultivation facility to receive Good Manufacturing Practice (GMP) certification.
Cannasouth chief executive Mark Lucas said it had all necessary licences to cultivate, manufacture and supply medicinal cannabis products in New Zealand. Photo / Alan Gibson
Eqalis had an online clinic called RestoreMe that connected patients with prescribing doctors.
Misson said since launching RestoreMe, it had seen competitors reduce the cost of general practitioner initial consultations by two-thirds, to be in line with its price of $45.
The proposed merger would see Cannasouth acquire 100 per cent of the shares in Eqalis, paid for by issuing outstanding equity in Cannasouth to Eqalis’ shareholders, valued at 33 cents per share.
The deal was pending the capital raise of a minimum $9m from Cannasouth shareholders.
If all necessary conditions were met, Lucas would remain Cannasouth chief executive, and Misson would become chief innovation officer.
