Cannasouth aims to raise $3m


Hamilton listed medicinal cannabis firm Cannasouth is forging ahead with a share offer to raise $3 million after a new regulatory regime kicked in at the start of April.

The offer, which closes on April 30, is to existing shareholders and aims to accelerate development of the company’s key initiatives.

Chief executive Mark Lucas said the early uptake signs were promising. “Without going into details, I’d say we’re very encouraged with the response so far.”

Cannasouth wants to raise funds towards a range of projects, including registration and launch of imported medicinal cannabis products. The company says it is currently well capitalised with more than $7.3 million of cash on hand and no debt. Its wholly owned subsidiary Cannasouth Plant Research New Zealand is about to lodge new medicine licence applications for its first products.

The Covid-19 lockdown has seen construction halt on its greenhouse cultivation facility but any possible delays from the lockdown will not be “material”, Lucas said, as the company moves as quickly as it can to bring products to market.

“There’s a reason that [the medicinal cannabis sector]is developing – people are looking for these types of medicines and products, and ultimately that won’t have changed post Covid-19.”

The regulatory change means GPs can now prescribe medicines containing THC without sign-off from a specialist, and also introduces stringent standards that Lucas believes will be good for the industry.

He said registering medicines to meet good manufacturing process (GMP) requirements is complex and difficult. “Ultimately, it’s going to be a benefit for the patients. It’s going to be a benefit for the industry because it means the market’s not going to be flooded with substandard products.”

GP education around medicinal cannabis remains a challenge for the industry, and Lucas expects prescribing of the new medicines to begin slowly and then reach critical mass as prescribers gain confidence around levels of risk.

He said that has happened in Australia, where numbers ramped up “really, really fast” and where there is a more complex prescribing process which varies from state to state. New Zealand will have the benefit of a single system.

“I think the ministry [in New Zealand]wanted to learn from other jurisdictions and I think they have. And so we’re confident that the system here, once fully bedded in, is going to be a good one.”

While the first products to market will be imported, Cannasouth aims for vertical integration with a medium-term goal of producing raw ingredients in New Zealand and taking them from seed to sale.

That is assisted by its acquisition of a 60 percent share in Hastings-based Midwest Pharmaceuticals, which already operates in a GMP medicines environment and has continued operating the essential services part of its business during the lockdown.

Lucas said Cannasouth has been building the foundations of a successful business, including recruiting the right people. “I’m really pleased with the structure that we’ve got. The Cannasouth Cultivation operation is going to be world class. It’s not going to be oversized, but it has the ability to scale up quite quickly,” he said.

“Our quality is going to be about as high as you can get and yet our production price point is going to be much better than some of the more traditional approaches for producing that material.”

Cannasouth is keeping an eye on the recreational cannabis referendum, which Lucas says could have pluses and minuses whichever way the vote goes.


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