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Is Medicinal Cannabis The Hot New Investment?

Is Medicinal Cannabis The Hot New Investment?

Doctors in New Zealand can now prescribe cannabis for medicinal purposes – and if a proposed bill is passed, a whole new industry could spring up. Claire Connell speaks to two Kiwi companies racing to manufacture this drug.

28 October 2021

In the small town of Ruatoria, population around 800, there’s an optimistic buzz in the air.

Panapa Ehau of Hikurangi Enterprises. Photo: Rebecca Grunwell, The Gisborne Herald

Hikurangi Enterprises has just taken its business plan to develop medicinal cannabis products in the East Cape town to the locals – and raised NZ$1.4 million.

A further NZ$600,000 was raised nationwide through crowdfunding site PledgeMe, an overwhelming demand that crashed the site. Hikurangi will now be seeking more money from other sources.

The chance to be involved in something happening in their backyard – potentially creating 120 jobs – was enticing for the locals.

For some Māori investors on the East Cape, many without internet access, this project might be the first time they’ve invested in anything.

So what’s the appeal of medicinal cannabis?

Worldwide appeal

Industry experts say demand for medicinal cannabis is booming overseas, as scientists learn more about its therapeutic benefits.

Cannabidiol (CBD), a chemical compound found in the cannabis plant, doesn’t get users high, but it does offer pain relief for people suffering from some conditions. It’s been available on prescription here since 2016.

Data from Grand View Research shows that by 2025, the global medicinal cannabis market is expected to reach US$55.8 billion (NZ$80.4 billion).

Paul Manning, a co-founder of Helius Therapeutics, a Kiwi start-up planning to create medicinal cannabis products in Auckland, calls medicinal cannabis “one of the hottest investments on the planet”.

Paul Manning, a co-founder of Helius Therapeutics.

Helius raised NZ$15 million from New Zealand investors for its capital raise through Deloitte in just three months.

“We could have raised the capital we needed many times over by going to America. But we wanted New Zealand investors … We want to build a global brand from New Zealand.”

Panapa Ehau of Hikurangi Enterprises says demand is outstripping medicinal cannabis supply worldwide. Earlier this year, the company signed a Letter of Intent with Seattle-based Rhizo Sciences. Under this NZ$160 million deal, Rhizo will purchase products from Hikurangi.

But there’s a catch. Helius is still waiting on a government licence to cultivate, research, and manufacture medicinal cannabis. Hikurangi has been granted theirs.

Both companies are also waiting on a new bill to be passed through Parliament – the Misuse of Drugs (Medicinal Cannabis) Amendment Bill, which will relax restrictions around medicinal cannabis. The new rules will allow cultivation here, and remove cannabidiol (CBD) products from the list of substances classified as controlled drugs. It will also introduce an exception and a statutory defence for terminally ill people to possess and use cannabis.

No one yet knows whether potential restrictions around the bill might stop the business being viable.

High risk?

Ehau says any investment that’s in an industry that doesn’t exist, with legislation that isn’t set in concrete yet, is risky.

“But we are very confident the pathway will open up. It’s not a matter of if this space opens up – but when.”

And with the crowdfunding model Hikurangi used, there’s added pressure, because the investors are not only members of the community, they’re neighbours, family, whānau.

Having the whole community involved in the process is the company’s goal, Ehau says.

From his Auckland base, Manning says this is a start-up industry, in a highly regulated environment for pharmaceutical products which require specific expertise. All this makes it “quite a complex investment”.

“But it’s no guts, no glory. There’s a high-risk profile, absolutely. But New Zealand could well be a billion-dollar market.”

Helping sick Kiwis

Chronically ill Kiwis who find their symptoms are relieved by taking cannabis could benefit from a domestic market of legal products – but they’ll still require a prescription.

The high cost and the criminality of cannabis use are current barriers, says Shane Le Brun, of Medicinal Cannabis Awareness New Zealand.

Around 166,000 Kiwis say they use cannabis for medicinal purposes, Ministry of Health survey figures show. Le Brun puts the figure at more like 40,000 to 50,000 people genuinely using cannabis to ease pain or other symptoms of illnesses.

Brands that doctors can currently prescribe cost in the thousands – out of reach for most chronically ill people on the sickness benefit or ACC payments. Le Brun says only around 40 people nationwide are paying for these legal products.

Medical cannabis products made by Hikurangi and Helius are aiming to be significantly cheaper than those currently on the market.

The future looks bright

Ehau says improving the lives of sick Kiwis and creating jobs for local people in Ruatoria outweigh the financial potential.

People and land are at the centre of Hikurangi’s business model, he says.

It was encouraging to also see a number of Gisborne business leaders investing alongside locals, Ehau says.

“There’s huge amounts of enthusiasm and positivity. There hasn’t been a buzz like this in Ruatoria for quite a long time.”

Manning says Helius is fundamentally a biotech company, designed to improve the quality of life for New Zealanders through access to affordable, quality medicinal cannabis.

He estimates 500 jobs could be created in the cannabis industry – including around 100 at Helius.

Crowded house

So is there enough room for both players?

Says Manning: “We’re running our own race, and I’m sure Hikurangi are too.

“I really applaud what they’re doing. It’s just a different approach – it’s very community-centred.”

Manning says there’s enough room in the market for both companies.

“One doesn’t have to succeed over the other, and new entrants will pop up. I think we’re sitting on the precipice of a whole new industry, which is going to use the best of all that’s great about New Zealand – innovation, biology, horticulture, scientific pursuits, ‘brand New Zealand’. It’s a very exciting time.”

What is cannabidiol (CBD)?

CBD is a type of cannabinoid, a substance found in cannabis that has potential therapeutic value. CBD has little or no psychoactive properties. Since 2016, doctors have been able to prescribe CBD products.

What about hemp?

Hemp is a strain of the cannabis plant that has low concentration of THC, the psychoactive component of cannabis. Hemp can be, and is, grown in New Zealand but it needs a licence. It’s only allowed to be grown for industrial purposes, for example, cloth and material. Government consultation is under way for hemp seeds, which have no psychoactive qualities, to be cleared for food consumption. Source: Ministry of Health

First published 20 August, 2018

Story by Claire Connell

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