Helius Therapeutics’ Paul Manning on the challenges and opportunities of New Zealand’s cannabis industry (listen)
Manning is one third of the trio behind Helius Therapeutics, a company he co-founded last year with Gavin Pook (the former general manager of Red Bull New Zealand) and JP Schmidt (who has worked extensively in the private equity and property investment space).
In February, Manning announced he would leave his cushy, high-paying position as managing director of advertising agency 99 to go all in on Helius and take it to the next stage of development, following the Medicinal Cannabis Amendment Bill passing its first reading in January.
Helius is focused on the cultivation, research and manufacturing of medical-grade cannabis products within New Zealand, and is one of several companies awaiting a license from Medsafe to begin its operations.
Listen to our interview with Manning below about his company and this exciting emerging sector in New Zealand, or alternatively, read on for a Q&A.
What was it about the cannabis industry that lured you away from the advertising industry into a start-up in an industry that doesn’t exist yet?
Firstly, I believe this is one of the greatest entrepreneurial opportunities of our time. We’re on the precipice of creating an entirely new industry, we will be converting a black market to a legitimate economy, and we have the chance to make a real, positive difference in the lives of hundreds of thousands of kiwis. And of course, there’s a significant commercial upside, particularly for a company who does this right, and does it first. I believe that will be Helius.
For me, coming from a career in advertising, I can also see another major opportunity – to build a brand that defines the category. What we learnt from the repeal of alcohol prohibition in the 1930s, is that when prohibition ends, brands dominate. Today, of course, we have no brands in this category. Just a black market devoid of standards and a whole lot of stigma from decades spent in the shadows. What New Zealand’s legal, medicinal cannabis industry needs is branding. It needs trust and legitimacy. It needs education for patients and prescribers. It needs products that are produced to the highest possible standards, which people can identify and choose with confidence. So, we aren’t just building a world-class medicinal cannabis production company. We’re building a brand that can lead the New Zealand market. A brand that could, one day, compete on the world stage.
The other thing that attracted me to Helius was the team we’ve brought together. We have JP Schmidt, another very successful local entrepreneur with a background in private equity and property. We have Gavin Pook, who was part of the original team who launched Red Bull in New Zealand from a garage, and he went on to lead the company up until recently when he and I joined Helius. And we have our not-so-secret weapon, US medicinal cannabis pioneer Matthew Rhoden – presently based in California, he had a central role in the development of Charlotte’s Webb (the breakthrough cannabis extract that helps control epileptic seizures), he’s working with the Department of Defence creating cannabis-based burn creams for the US military, he has helped design legislation in several American states, and brings a wealth of specialist knowledge to Helius that simply does not exist anywhere else in New Zealand. So, we are very lucky to have such an amazing group of people, all working towards a common goal.
It’s incredibly exciting. I have no doubt it’ll be a unique challenge for us all.
A representation of what Helius’ products could like
Some would see it as a pretty big gamble – do you consider it a risky move?
Without a doubt, there is risk. Start-up businesses are one thing, and they all face risk. But what we’re doing here is operating ahead of legislative change. And that presents a number of unique challenges. Right now we’re in unchartered territory. We are sinking significant resources into an industry doesn’t yet exist. We’ve all left behind the security of professional careers at the top of our respective industries. For each of us, it’s a leap of faith.
Allow me to briefly touch on the legislative progress. You’ll be aware that the amendment bill to the Misuse of Drugs (Medicinal Cannabis) Act was read by the Minister of Health, Dr David Clark, in February this year. It passed unanimously though the house. So, we have a vehicle to design the regulatory framework and legalisation for legal access to medicinal cannabis in this country. Now the bill is with the Health Select Committee and this has the potential to create an enormous opportunity for New Zealand.
Our nation is following in the footsteps of dozens of other countries like Canada, the US, Germany and Australia. The main risk we face relates to how the legislation itself is designed. We want this legislation to create a sound, commercially-viable environment for our local producer industry to thrive. We’ll know more about this when the Health Select Committee release their report in July.
So for now, we are navigating a political process and there are a lot of variables. Will all patients have access to cannabis-based products as long as their doctor recommends it, or will only a handful of conditions quality? How will cannabis products be dispensed? Will you access them through pharmacies like other medicines, or could we build a digital dispensary and provide product direct to patients with a prescription? What cannabis species will we be allowed to import? Will we be allowed to use the whole plant and its 483 known compounds, or just the ‘big two’ cannabinoids, CBD and THC? These factors will all have an impact on our business.
But this is what makes our work so very interesting. How often in your career do you have the chance to be at the bleeding edge in a business that will help shape an entirely new industry? There are plenty of risks to navigate, but the potential rewards outweigh these ten-fold.
Based on the way marijuana companies have thrived in cities where legalisation has changed, is it fair to assume that New Zealand would follow a similar path when it’s legalised?
Yes, I think it’s likely that New Zealand will follow the path of other developed countries like Canada, the US and Australia. Whilst there are differences in each country’s approach, the fundamental concept is to make cannabis accessible to people for medicinal purposes and develop a local producer industry. I anticipate this will eventually lead to an opportunity to export New Zealand’s medicinal-grade cannabis products to the world, bolstering our economy.
For now, Helius is focused on the domestic market. Helping New Zealanders. According to the Ministry of Health, there are 235,000 kiwis who regularly consume cannabis for medicinal purposes. That’s roughly 1 in 20 New Zealanders. Nobody knows the exact value of the medicinal cannabis market in New Zealand, but we estimate it could be worth around NZ$1 billion.
You’re confident that a change to medical marijuana laws is on the cards in the next few years. What about the transition from medical marijuana into recreational marijuana – do you see that happening anytime soon here? And is Helius purely focused on the medical side?
That’s right. New Zealand’s will get a recreational cannabis referendum in 2020. I think there’s sufficient support in New Zealand for this to pass into law at some stage, but it won’t be anytime soon. Recreational cannabis is definitely not part of our strategy. Helius focuses exclusively on developing GMP-certified cannabis-based products for medicinal applications.
Most New Zealanders support cannabis reform. The recreational referendum really emphasises just how far attitudes towards the plant have shifted over the last decade. In the meantime, we anticipate kiwis will be able to access cannabis legally for medicinal purposes by mid-2019, or by 2020 at the latest, before the next election.
Should legislative conditions allow it, there are numerous opportunities for innovation in years to come. Take ‘CBD water’, for example. Enhancing water with minerals, ions and electrolytes is not new. But now that CBD has been de-scheduled and given validity in the medical world, it’s only a matter of time before H2O and CBD join forces to give us CBD water – in fact it’s already happening overseas. Another example is CBD infused pet supplements. In the US, sales of CBD pet products have approximately doubled in size year-on-year since 2014. These are not concepts that Helius will be working on in the short term, but you can see the opportunities for medicinal cannabis products are boundless.
How has Helius’ business model been structured around the tricky unknown factors (e.g. not knowing when the legislation will actually be passed)?
This is a great question. Right now we are operating in advance of regulatory change. As mentioned earlier, there are a lot of unknowns. Some see this is a bold move, and for good reason – the industry doesn’t exist yet. But our strategy is simple: We will be first. We will have the highest quality and most effective products. These products will be affordable. And they will be available for the public on day-one of the law change.
The Helius model is designed to adapt to all of the known variables. We have to make some assumptions based on what we know today, while being prepared to adjust our approach in order to meet the parameters of future legislation. Agility is an essential virtue when operating under these conditions. Legislation will influence the type of cannabis products we can produce. It will determine who we can sell them to and where these products are dispensed. It will also set standards for the industry, and we are banking on those standards be set high.
The Health Select Committee are due to release their report in July and that will provide greater clarity on legislation. In the meantime, there’s a lot to do.
Helius is completing a $15 million capital round, managed by our consulting partners, Deloitte. This will allow us to execute against our strategy and create a truely world-class brand here in for New Zealand.
We are building a state-of-the-art cannabis cultivation, research and manufacturing facility. This is a secure, concrete structure over 5000 sqm in size. The Helius fit-out will be a bespoke design, built by local companies, to exacting international standards. New Zealanders deserve products they can trust, and that’s why we’ve also opted for our facility to be GMP-certificated.
Helius’ $15 million production facility located by Auckland Airport
Our team are working through the final stages of licensing. We are developing our product range, brand and packaging. We’re working with US specialists and local advisors to create bespoke security protocols. In fact, we’re about to sign an agreement with one the country’s largest security companies to protect the Helius facility. And we’re scoping an exciting clinical trial with local research partners.
We have enough capital to do all this work while we await legislative change, assuming we can start selling by mid-2020. Every aspect of the business is being designed and refined in an agile, phased approach. It’s a very dynamic environment, but we love it!
What have been some of the negative effects of New Zealand having no legal marijuana industry/no subsidisation on overseas medical marijuana imports?
There are so many stories of kiwis struggling without access to medicinal cannabis products. Every month dozens of new stories arise and since we announced the launch of Helius, we’ve been inundated with literally hundreds of emails from people who are desperate for products we haven’t even begun to produce. People battling cancer, epilepsy, MS, chronic pain, arthritis, sleep disorders, Parkinson’s disease, and more.
A very small number of people have legal access right now, but the costs are crippling. The reality is that 99% of people are forced to break the law and procure products on the black market – this means that sufferers literally have to find a drug dealer to purchase product. Illegal cannabis is of unknown origin, unknown potency, unknown cannabinoids ratios, and grown mostly by gangs. They may be laden with pesticides, they’re almost always highly psychoactive, and predominantly available in a raw form only. That means patients have to smoke it or bake it into edibles. Thankfully, we will soon offer vastly better medical alternatives.
In early 2017, Peter Dunne announced that CBD was to be removed from the list of controlled drugs. In my view, that move was really the beginning of cannabis reform in New Zealand, and was one of the key factors the drove us to build Helius. It was a change that enabled doctors in New Zealand to issue prescriptions for medical-grade CBD products directly to patients and eliminated many of the licensing and other regulatory requirements that pharmacies, prescribers, and wholesalers previously faced.
However, there was a major disconnect in the legislation. Firstly, only a handful of imported cannabis products are available in New Zealand and they are extremely expensive. The most prominent being a product called Sativex. It is used almost exclusively by people living with multiple sclerosis (MS), but in rare cases it can be prescribed for other conditions. Sativex costs over $1000 a month for patients who use it regularly. There are no funding pathways for any of these cannabis medicines – so the costs are prohibitive for most people. One email I received was from a young guy who had a rare gastrointestinal disorder. He was spending $700 a month on imported CBD – it dramatically improved his condition, but the financial burden has been utterly overwhelming. It doesn’t need to be like that.
The bill that is currently with the Health Select Committee is intended to address this disconnect. Whilst there are a number of important changes required, the cornerstone will be the creation of a local producer industry. This is where Helius comes in. By cultivating, researching, manufacturing and selling locally-produced cannabis products, we can dramatically reduce the cost of access for patients.
At the same time we will be eroding the black market, converting illegal activities and profit into a legitimate, taxable industry. We will be producing medical-grade products to GMP-certified standards that cost no more than black market. Think about that for a minute! These products will be pharmaceutical-grade and affordable. Our GMP-certification is the global gold standard for medicinal products and I imagine this will be a major point of differentiation for Helius. It provides regulators, healthcare providers and patients with certainty that Helius products are high quality, safe and consistent.
Secondly, whilst there is a willingness amongst many doctors to support cannabis-based medicine, very few are prescribing the products. There are several reasons for this, including a lack of familiarity and almost no formal training available in the field. More education for healthcare professionals will be required to improve knowledge of cannabis-based products so this prescription bottleneck can be overcome in the future, when the next round of legislation comes into effect.
When I picture our customer, I don’t see someone smoking cannabis. Although some will prefer raw products, the global trend in medicinal cannabis has largely moved toward refined derivatives. This will begin to protect companies like ours from the slowly increasing commoditisation of raw flower.
What’s really exciting is that Helius will be producing a range of these products to suit specific applications. This is a very good thing, because different ailments require different strains, dosages and combinations. With our unique IP, Helius will create GMP-certified, pure cannabis oil that can then be manufactured into a wide variety of therapeutic products. We’ll leverage our knowledge to grow and develop the right strains from day-one, and this will be a key element in leveraging our first mover advantage.
With no established businesses as of yet in an entirely new industry, the New Zealand cannabis industry is ripe for the picking for entrepreneurs. Where would you say the biggest commercial opportunities are?
Helius plans to initially focus on four key market segments where our cannabis-based products offer proven efficacy; chronic pain (including arthritis), sleep disorders, cancer and neurological disorders.
The further cannabis is refined, the greater the efficacy, so for each of these market segments we plan to produce multiple dosage ratios (THC:CBD) that can be consumed through five different media, depending on the target ailment. Helius is developing branded cannabis-based products within each key delivery medium.
Okay, so what products will Helius offer? We will, naturally, offer loose leaf, which is raw medical cannabis available in a range a of strains, either as dried flowers or as a ground product. We will make oil drops, available in a dropper bottle that dispenses the oil. We will have vape pens and cartridges, allowing for consumption by vaporising a specific dose of oil. We will have oral capsules, which are soft gel caps containing oil. And we will have topical creams that can be applied to your skin.
For example, one of our branded products is an arthritis cream that is applied directly to the target joint, reducing inflammation and mitigating chronic pain. Most people suffering arthritis won’t want to smoke cannabis, but a legal, natural cannabis-based topical cream that may be purchased over the counter their local pharmacy – that will be great news for many of the 600,000 people in New Zealand suffering this debilitating condition.
All of Helius’ refined products will be made from cannabis oil extract. By maintaining product consistency across segments, we can increase or decrease the volume of certain ratios produced in an agile manner, with minimal impact to our supply chain. Over time, we plan to develop further products which will enable the company to expand market share through research and innovation and increase our yield through new product development.
We’re talking about a domestic market that will be worth hundreds of millions of dollars. And later, potentially an export opportunity in a global market worth tens of billions of dollars. The commercial opportunities are extraordinary.
What about on the ag-tech side?
There is a lot of specialised tech in cultivating cannabis and manufacturing products to medical standards. There are not only a raft of agronomic and security technologies used on the cultivation end, but also tools such as our seed-to-sale tracking system and an API we will use that helps dispense cannabis in a way that’s convenient, transparent, and compliant with regulations.
For example, we have tracking and reporting tools that will be customised to New Zealand’s regulations, as soon as they are released. We also have software to help us operate every aspect of the business, with comprehensive reporting, data-driven patient management tools, and integrated hardware.
One of the most interesting technologies that Helius will use is BioTrack. It’s the world’s leading seed-to-sale cannabis tech. Most states in the US require a comprehensive seed-to-sale cannabis tracking system to monitor cultivation efforts and inventory. We don’t yet know if this will be mandatory in New Zealand, but we think it should be. Our seed-to-sale-tracking system will allow us to trace any of our cannabis products through the entire supply chain, right back to its mother plant. It will also help to mitigate diversion of product, because we can trace who had access to it at Helius, who shipped it and to whom it was prescribed. This kind of comprehensive data tracking is an example of the emphasis Helius is placing on quality control and compliance.
We also have agronomic technology that will allow us to closely monitor thousands of plants in our cultivation grid, log strains to trace genealogy and clone potency, optimise yields and nutrient cycles, and to maintain the highest standards of compliance. On the processing and manufacturing side of the business, this technology also helps manage product variations and inventory down to the precise milligram.
We’ve also scoped the development of a digital dispensary. This is a secure e-commerce platform that will allow patients with the appropriate prescription or doctor’s reference, to select Helius products online and have them sent by a specialised courier directly to their door, in tamper-proof packaging. We can use this platform to securely manage patient data, keep track of our products and dispense repeats without friction.
A lot of the tech we’re using will come from the US and Canada where it has been developed over many years, but we will not be overlooking the expertise and technology available from New Zealand’s own brilliant horticultural sector.
What about the branding opportunities in this space? I’ve seen quite a few awesome brands overseas like MedMen.
MedMed is a smart concept. They have focused on vertical integration and a best-in-class experience. They’ve done an outstanding job and that business is enormous now. People have called their dispensaries “Apple stores for cannabis”. But of course MedMen are operating in the more advanced US market where cannabis is available recreationally. That opens up a lot more opportunities for this kind of creativity.
As you know, I’ve spent my career in marketing and communications. I’ve led some of New Zealand’s biggest agencies and worked with many of the countries leading brands. My greatest passion is design, and I believe that branding and design thinking will be something that sets Helius apart in the market. Our brand is designed to represent the highest professional standards. It will help to mitigate stigma associated with the drug and set the tone for this emerging sector.
As the medicinal cannabis industry moves out of the shadows, it will establish itself amongst the most highly-regulated business environments in the world, on par with financial services and healthcare in terms of depth and complexity within the regulatory framework. The Helius brand is designed to reflect the company’s extremely high standards as a state-of-the-art therapeutics producer. I want it to exist comfortably alongside the identities of major pharmaceutical, nutraceutical and wellness brands, evoking a sense of quality, trust, modernity, innovation and professionalism.
If you’re wondering about the inspiration behind our brand name, it comes from Greek mythology. Helius is the titan god of the sun, a guardian of oaths, and the god of sight. So our name reflects our three core values; we harness the power of nature (the sun), we deliver results for our people, our customers and our investors (the oaths), and we relentlessly pursue innovation (the sight). We call the crescent ‘H’ in our brand mark the ‘solis’ device. It’s an abstract of the sun.
What could opening up this industry do for New Zealand’s economy?
Opening up New Zealand’s legal cannabis industry will benefit our economy in so many ways.
Let’s start with the value of a new, legal domestic market. Owing to its present status, the true value of New Zealand’s medicinal cannabis market is unknown. However, estimates from various commentators have suggested spending may range from $300m to more than $1 billion per annum. What we know for sure is that New Zealand has some of the highest cannabis use rates in the world. According to the UN, 13.4% of adults here use cannabis for recreational or medicinal purposes. After caffeine, alcohol and tobacco, cannabis is the most widely used recreational drug in Aotearoa. This ranks as the ninth highest cannabis consumption level in the world. New Zealanders already spend a lot of money on cannabis, even when isolated to medicinal use.
We are converting medicinal cannabis from the black market to a legitimate industry. Today, these revenues are collected mostly by gangs. Soon this spending will flow through regulated local producers and a raft of adjacent business from healthcare logistics providers to pharmacies.
These business will pay tax. If New Zealand’s domestic medicinal cannabis market is worth – let’s be conservative – $500 million, then it will generate company tax revenue for the country of $140 million, plus GST on products sold and income taxes from people we employ. That’s millions which could be spent on furthering medical outcomes for New Zealanders.
These businesses will have to employ people. Lots of people. On the producer side, Helius will hire dozens of kiwis, providing a new avenue for those wanting to enter the fields of horticulture, science and technology. We have some extraordinary talent in our local agriculture sector and we intend to apply this talent to our business, and train for specialism.
At the same time, we will stem the illegal sale of cannabis that is presently fueling gang activities and lining the pockets of criminals across the country. That’s got to be a good thing. And presumably, this will also have a positive effect on enforcement costs.
Other countries have had a bit of a head start on us now – how can we catch-up to what other players are doing, and what do you consider unique about what New Zealand can offer in this space?
There’s a clear international trend towards legalisation and New Zealand is set to join many forward thinking countries such as Canada, Australia, the United States (28 states), Uruguay, the Netherlands, Colombia, Israel and Czech Republic, to name a few. These places have all amended their laws to allow consumption of cannabis for medical purposes, at the very least. So yes, we’ve got some catching up to do!
Through this forthcoming regulatory change, we have an opportunity to improve quality of life for many New Zealanders and to become a world leader in medicinal cannabis cultivation, research and production. However, we believe for a local producer industry to be viable, there are several critical priorities we must address. In turn, these factors are also essential for the intent of the government’s bill to be realised. Because without a strong local producer industry, medicinal cannabis products will remain expensive and largely inaccessible.
So, the first stage is to ensure that our politicians get the legislation right.
Firstly, I think it’s important that we set high quality standards for the industry. We want this new sector to set off on the most legitimate footing possible and we want doctors and patients to have confidence in our products. We think the solution will be to ensure all cannabis-based products produced or consumed for medicinal purposes in New Zealand are GMP-certified.
We need to offer products that are effective. It’s important that New Zealand follows the other leading countries and allows us to use the whole plant. This means not placing restrictions on THC or any of the other compounds in cannabis that have therapeutic properties. Both THC and CBD are required to work together in many products, in order to be effective. And there are dozens of other compounds in cannabis that offer important medicinal benefits – they work together, creating something called ’the entourage effect’. Therefore, to ensure product efficacy for a wide range of ailments and patients, there should be no restrictions on the use of natural compounds in medicinal cannabis products. It’s essential we conform with international best practice in this area.
We need to ensure this new industry is well-regulated and that producers who fail to comply face harsh penalties. I don’t think New Zealand can afford to have substandard operators – again, it’s a matter of legitimacy and confidence in the quality practices of the sector. Really, there should be a government level, industry-wide seed-to-sale tracking system that ensures complete supply chain accountability.
The government should not decide who qualifies for access to medicinal cannabis purposes. That’s a job for our doctors. We must not restrict access to specific ailments. Cannabis can benefit many patients in a wide variety of ways. Health practitioners should decide who accesses cannabis products.
And finally, it’s critical we support the acceptance and prescription of cannabis-based products for patients in New Zealand. The government should commission training for healthcare practitioners, ideally through the Ministry of Health. This is something that MCANZ have been advocating for and it will be a key priority to ensure that, once all the legislative work is done, doctors feel confident recommending cannabis-based products.
As for the second part of your question – what do I consider unique about what New Zealand can offer in this space – I would suggest that New Zealand produced medicinal cannabis products will attract a premium if exported to other markets. Our clean, green image has served us well in so many other sectors and the power of ‘brand New Zealand’ is not to be underestimated.
With your background in advertising, I’m sure there’s going to be a lot of time and thought going into how to market such a product to an NZ audience. How are you planning on overcoming the ‘stoner stigma’ with Helius?
Great question. How do we move from contraband to desired brand? How do we move the medicinal cannabis industry out of the shadows and begin normalise its use? And how do we shake off the stoner stereotypes? We’ve all heard them. When I resigned from my job as Managing Director of 99, my boss at our parent company insisted in ending every sentence in our conversations with “duuuuude”. He was just kidding, of course.
Cannabis is poised to make huge gains in New Zealand’s lifestyle, health and wellness sectors. And in a space where our customers index toward women aged 50+, addressing social stigma is one of the challenges we will face.
The good news is, even before I need to weave any social marketing magic, attitudes are already changing. You only have to pick up a newspaper to read the latest in a long line of stories about patients demanding access to cannabis products. There was a UMR poll that was recently reported in the NZ Herald showing three quarters of New Zealanders believed patients should have access to medicinal cannabis when prescribed by a doctor. And the government’s amendment bill has so far enjoyed bi-partisan support. So we’re not in such a bad place.
We expect reform will open the door for patients to use cannabis legally for relief from illnesses like chronic pain, multiple sclerosis, migraines and arthritis. But despite the benefits associated with medical cannabis, its usage will continue to carry the stigma of drug abuse, at least for the first several years post-prohibition.
Then there’s the ‘stoner stigma’. That’s the idea that if you use cannabis, you must be lazy, unmotivated, and not very bright. Stoners probably lunch on Burger Rings, live in a flat with six other stoners, and watch Netflix all day because, obviously, they’re unemployed. Even at a time when the industry in other countries is proving that medical cannabis saves lives, provides relief from debilitating ailments and that legalisation doesn’t mean the collapse of civilisation, there will always be some people intent on preserving the stoner stigma. So how do we change this?
Education is key for the accessibility of medical cannabis – education of patients and healthcare practitioners. Medicinal cannabis should be available as a viable option to patients in situations where they would gain a therapeutic benefit. Nobody has ever died from cannabis use alone. It’s neuro-protective and is a relatively low-risk drug with a harmfulness rating which is roughly half that of alcohol.
After looking into the industry, here and abroad, we quickly realised that cannabis is no longer a countercultural product. Cannabis is a mainstream product, consumed by mainstream people.
The Helius brand will be diametrically opposed to old fashioned clichés of the industry. We are already working with healthcare organisations and charities to lay the foundations of positive social change. Over time, Helius will use data insights to educate regulators, policymakers, healthcare professionals and consumers.
As a side note – you mentioned MedMen earlier. Some cannabis brands like this are trying to eliminate the word ‘stoner’ altogether to help quash the stereotype. I was doing some research and found that just this year MedMen launched an advertising campaign called Forget Stoner. It’s important to remember they operate in both the medicinal and recreational cannabis market – but their line was ‘Today’s cannabis enthusiasts are everywhere and everyone. It’s time to drop the label. Forget Stoner’. The ads features portraits of regular people of all walks of life who are identified mostly by their profession, with the word stoner crossed out. It’s a novel attempt to shift the paradigm.