Rua Bioscience co-founder Manu Caddie (left) with chief executive Rob Mitchell. Photo / Supplied
Rob Mitchell, CEO of Rua Bioscience, and co-founder, Manu Caddie, who is also chair of the New Zealand Medical Cannabis Council, are working to reach first revenue this year and shape New Zealand's cannabis rules as they go.
2020 was a defining year for New Zealand's nascent medical cannabis industry. Legislation passed in late 2018 created the legal basis for the sector, but it was just last April that new regulations allowed companies to begin to grow medical cannabis commercially and manufacture products for both the domestic and international markets.
New Zealand now has two publicly traded medical cannabis firms and dozens of private companies. They are working to produce everything from crude cannabis, including flower, grown to pharmaceutical standards, through to fully trialled, approved medicines - a long, strict and clinical process.
This year is likely to see the first New Zealand-grown medical cannabis legally reach New Zealand patients, and it's also expected to mark the first commercial exports of New Zealand products.
The young companies - which have so far produced plans, raised funds, built facilities, qualified for government licences, and sourced seed - must now get down to the critical business of growing and creating products and, ultimately, of turning a profit.
It's important to note that cannabis remains a controlled drug in New Zealand and following the referendum last year - a close vote went against legalising recreational use - there is no immediate prospect of change. CBD (cannabidiol) products, certified to have little to no psychoactive ingredients, are prescription-only medicines, but are not controlled drugs.
Estimates for the future value of the New Zealand medical cannabis market run to hundreds of millions of dollars. But our legal market is currently tiny; what will change that?
Rob: The New Zealand market is in its infancy and faces a number of early challenges. So while Rua definitely sees a role for itself in establishing and supporting the domestic industry, Rua's first strategic focus is on exporting dried flower to Germany - currently the largest single market for GMP (pharmaceutical) grade cannabis in the world.
According to the latest report, more than 120,000 Germans use legal medicinal cannabis. In the first half of 2020 more than €75 million ($127m) worth of cannabis medications were subsidised by health insurance and it's estimated that an additional €37.5m worth of prescriptions were paid for privately.
In contrast, estimates for New Zealand range as high as 50,000 patients and domestic sales of $379m by 2028, according to one forecast. But the truth is, no one knows how fast the market will grow at this stage.
New Zealand's regulatory scheme now allows GPs and others to prescribe medicinal cannabis for any ailments. But there's no mechanism in the scheme to provide a subsidy for cannabis medicines. This will limit widespread, affordable access.
The Minister of Health, Andrew Little, should review ACC and Winz policies on funding medicinal cannabis with a view to making all prescriptions from registered prescribers funded for clients of these organisations.
He should also fund prescriber education focused on sharing the available evidence for prescribing particular medicinal cannabis formulations and forms for specific indications.
(Pharmac does not fund any cannabis-based products and consideration requires a level of clinical study that very few have achieved.)
What other changes do you want the Health Minister to make?
Rob: Another step would be for the minister to take advice on the safety of pharmaceutical grade CBD products with a view to removing all but the highest doses from the prescription-only stipulation, scheduling medium doses as pharmacist-only, low dose as pharmacy-only and very low doses as over-the-counter.
Illicit sales are also a problem that require enforcement. Currently in the domestic market dozens of companies are illegally selling unregulated CBD products, with none of the restrictions around quality control, advertising or traceability that legitimate pharmaceuticals require.
If this continues it will be very difficult for those licensed, compliant companies, which have spent millions of dollars to establish themselves, to improve their market share.
Is it fair to say that turning a profit might ultimately prove the biggest difficulty for New Zealand medical cannabis companies as a group?
Rob: If the minister can address the challenges facing the New Zealand market, our sunrise industry will certainly stand a fighting chance.
The international markets are growing, albeit off a small base, but so too is competition: South America, Europe and Asia are all entering key markets. New Zealand companies will have to differentiate ourselves in the global market, which requires international pharmaceutical expertise, strong relationships, a robust supply chain and significant investment in clinical research. Slick branding and the New Zealand provenance story alone won't cut it.
Rua grew out of a social enterprise, aimed at bringing employment to the indigenous people of the East Coast and rooted in that place. How does the public company remain connected to that original purpose?
Manu: Rua was founded by Hikurangi Bioactives, a local social enterprise that is majority owned by a charity that acts for the benefit of the area. (Hikurangi still controls 27 per cent of Rua shares.)
We have built a social and environmental mission into the DNA of Rua. I'm proud of the decisions we made in selecting early investors, board members and management who share our original vision and are firmly committed to the goals around sustainable employment and economic development for our founding community, Ruatorea, and the wider East Coast.
The company is committed to paying the living wage, and indeed is able to pay growers significantly more than the average income in Ruatorea. And of course, we are still East Coast/Tairāwhiti based; our team of around 30 staff works between sites in Ruatorea and Gisborne.
Hikurangi is still involved in other economic development efforts in the region. How is Rua tied to these?
Manu: The cannabis venture really was third or fourth cab off the rank in terms of what we set out with in 2015.
We [at Hikurangi] were focused on indigenous organisms like kānuka and kina and bioactive extracts from those which we could turn into health products and maybe medicines.
Then we got into hemp and medical cannabis and medical cannabis was an obvious choice because there was expertise in the community and support and we could see the way rules were set to change.
Our focus and goal was really around job creation and economic revitalisation for the coast and it's just that cannabis has moved the farthest and fastest of the ventures that we've been involved in.
But those other things are still coming along and if Rua does well the largest shareholder is still the community entity so there's opportunity for some of the funds to flow back into those other ventures.
I guess we were a bit idealistic earlier on. We had the idea that Rua could be locally owned forever but we quickly realised that we couldn't find enough funds locally. It was going to cost us a lot more than we thought it was. So we've diluted the shareholding but that's allowed us to progress with our goals and to make something happen.
Manu, I've read that, despite the referendum result, you will continue working to persuade the Government to legalise recreational cannabis use. Why?
Manu: I think a number of medicinal cannabis companies were hoping the referendum would succeed in legalising cannabis. Rua Bioscience made it clear we weren't interested in the recreational market but we supported legalisation because the company believes it is the best option for Aotearoa New Zealand.
For me personally, it is an ethical and moral issue. One of the easiest things the Government can do right now is remove the discretion given to police in deciding whether someone found with cannabis should be prosecuted or referred to health services.
Many of those who use cannabis do so for health reasons already and, while medicinal cannabis remains unaffordable and illegal to grow at home, patients will continue to be persecuted, which is an intolerable situation as far as I'm concerned.
'The inclination is not to do too much,' Forsyth Barr analyst Peter Sigley said.