Waikato firm Cannasouth has been building a big surfboard. That’s because it’s got a big wave to catch.
The wave is medicinal cannabis and the analogy comes from the company’s chief executive, Mark Lucas.
Cannasouth recently listed on the NZX, the first company to do so in two years, and the first medicinal cannabis company to take the step.
It recently appointed a new product development manager, scientist David Gill, and is well underway with developing cannabinoid products using its labs at Innovation Park and Hamilton East’s secure growing facility.
Timing is everything, and the introduction of the Misuse of Drugs (Medicinal Cannabis) Amendment Act last year has been followed by the release for feedback in July of a discussion document aimed at setting up a regulatory scheme, with Cannasouth set to be among those submitting before the August 7 cutoff.
“It’s like surfing,” Lucas says. “The big wave surfers get on the weather maps and they know when there’s a storm out there. It might be a week before the waves arrive. They fly to to get those waves. But to surf big waves you need a big board.
“We were out there and we realised, well this wave’s pretty big; to compete, or to get on the wave, we need to build a big board and that’s raising capital.”
The listing in June at 50c a share was oversubscribed and saw the company raise $10 million.
Lucas is at pains to stress they are in for the long haul, after being frustrated by some negative media commentary around the listing, which he says implied the cofounders and early investors would look to quickly sell their shares.
The price has since steadied around 37c at time of writing, and Lucas says the share price may have been affected by the commentary, as well as potential confusion around the medicinal cannabis scheme and the adult recreational debate.
He points out the rigorous process of listing involves extensive preparation and documentation.
“We’re building quality systems right throughout the business, all our policy document, everything we’re doing, is about long term success, not just about some short term flurry,” he says.
“We’re focused on building the business and we’re confident that as we hit our milestones that we’ve got lined up, that market will see that and see this business is a long term project.”
He and chief operating officer Nic Foreman can also point to long track records after working in the hemp industry since the ‘90s, first as importers and then as growers for fibre including research partnerships with Waikato University.
The idea for Cannasouth was born when they could see the uptake of medicinal cannabis overseas and calculated it would probably be only a matter of time for New Zealand to catch up.
Cannasouth has been heavily involved in research, developing its own IP, but Lucas and Foreman, with their business backgrounds, recognise the commercial realities as well.
“There’s going to be a lot of competition but the space itself is also looking like it’s going to be rather large.”
The medicinal potential of cannabinoids has been touted as potentially helping with a range of conditions from anxiety, through inflammation to epilepsy and crohn’s disease among others.
Exporting is part of Cannasouth’s plan and it intends to take a broad approach in the market; while its focus has been on developing medicines, there is also potential in neutraceuticals potentially including fortified waters and sports recovery drinks.
“[You have] highly refined medicines at one end and very basic health and wellness products at the other end for generic conditions. We endeavour to be vertically integrated and playing in all of those spaces, so we are exploring all of those opportunities,” Lucas says.
“The market’s going to start small but there is the potential that there’s a very big market at the end of it.”
The “holy grail” would be to come up with their own medicine that can treat a specific condition and be “novel and unique”.
“We have to start producing the basic medicines that you see in this space but we also have to be looking well beyond that into the future and looking at developing these next generation medicines.”
Lucas is broadly happy with the discussion document that has gone out for feedback. “We have been involved with the New Zealand Medical Cannabis Council, which is a group of licensed companies, and as part of that we have regular monthly interactions with the Ministry of Health, who have been doing a great job of consulting with industry.”
He says the biggest concern they are hearing is around the need for specialist approval of prescriptions that include THC. “What is being implied at the moment is GPs aren’t qualified to be able to write a prescription for a medicine that may produce a narcotic effect – well they can do that already for a host of different medicines. I can understand the arguments; some doctors will say that we don’t want to be pressured into writing prescriptions, but doctors already face that pressure with a range of medicines today.”
He says a big challenge will be education of doctors, most of whom see the therapeutic benefit but will want data around what conditions to prescribe it for, the dosage level and drug interactions.
“Doctors will say, show me the clinical data,” he says. “As governments around the world are starting to allow these medicines to exist, now you’re getting clinical data starting to catch up.
“I think the thing to remember is it’s going to start off very slowly. Doctors are not just going to start writing prescriptions on day one of the scheme. It will move slowly but eventually it will be a common medicine.”
The final regulations are due out by the end of the year. That will be followed in Cannasouth’s case by applications for licences, which will potentially be issued within a month or two, and then by growing cultivars, with two or three months to grow the first crop. “Then we go into the manufacture medicine space. You’re not just doing a simple extract, there’s your product, you’re going into a space where it’s GMP [good manufacturing processes]quality, you’ve got to validate, you’ve got to have shelf life.
“It’s going to take time, and we’ve been clear all the way through, this is a marathon and not a sprint.”
That said, they are putting in a burst at the moment.
“We live and breathe it. We love it. Entrepreneurs just love this stuff, this is a dream come true.
“If you can’t make the most of a once in a lifetime opportunity by working hard and surrounding yourself with the smartest people you can find then you’ve made a mistake.”
Plant’s unique qualities
Once widely prescribed before prohibition in the early 20th century, medicinal cannabis is experiencing a revival as the endacannabinoid system becomes a subject of study.
“The premise of medical cannabis is everyone’s got an endocannabinoid system,” says Cannasouth chief operating officer Nic Foreman. “Us and all the animals have endocannibinoids that we use for the functioning of a lot of our physiological subsystems, and it just turns out that the compounds in the [cannabis]plant mimic the ones in the body.”
“It’s like you live in a house,” says chief executive Mark Lucas, who has a deft way with analogies. “You thought you had two storeys and then you realise there’s a third floor to the house, that’s how big a deal the endocannibinoid system is.
“The fact that the plant has cannibinoids is interesting but the fact that we have an endocannibinoid system that controls so many of our regulatory subsystems, now that’s really interesting.”
That sees Cannasouth using expensive equipment to research the individual cannabinoids in the cannabis plant, but also how they might work together in different combinations.
The two main cannibinoids are CBD and THC, the latter producing the high.
Treatment of some conditions may require an element of THC. “These things work in unison, if you isolate a single molecule it’s often not as effective, there seems to be some synergistic effect that goes on.”
He points out that most people taking the medicines don’t want to be high, but just want to feel better, though there may be a place for the wellbeing effect for the likes of palliative care.
“We’re really just at the beginning of the journey of discovery as to what the individual cannabinoids can do and what in unison with other cannibinoids you can start to target,” says Lucas.
“I put it this way: it’s like notes of music – there’s only a limited number of notes but you can put them together in an almost limitless number of ways.”