Industry players predict the NZ medicinal cannabis export industry could quickly generate foreign exchange earnings to rival the wine industry if the promised regulatory reform is enacted.

But talk on the street is that conservative factions in the coalition government may be slowing the reforms.

Hundreds of millions of shareholder dollars have been invested into the industry since a legislative change in late 2018, with 43 entities licenced to provide medicinal cannabis products, according to MedSafe data. Since then, there has been a substantive shake-up of the industry with a series of mergers and a few failures.

The previous government approved changes to the regulatory framework last year, to better enable the fledgling industry to compete in global markets as well as reduce domestic costs – a move company spokespeople said at the time would liberate the industry.

But they are still waiting for regulatory emancipation, despite the support of ACT and National, including its Health Minister, Dr Shane Reti.

Domestic market

A Ministry of Health paper to Cabinet, obtained by Informed Investor magazine and dated September 2023, states frankly the domestic market is too small to support the capital-intensive industry and the regulatory changes are needed for the sector to deliver a return to shareholders.

Speak to the CEOs of the NZ Medicinal Cannabis Council and the country’s largest domestic producer, Helius Therapeutics, and they are diplomatic about what is causing the hold-up, but emphatic changes must be urgently instituted.

The council’s Sally King points to the election, the protracted process for forming a government and the many priorities it has to manage as potential reasons for the delay.

Other industry players and market commentators (who chose to speak off the record) point the finger at NZ First, saying its conservative position is road-blocking the reform necessary to unlock the huge potential in export earnings.

Helius’ Carmen Doran points to the requirement to print product labels in English in New Zealand and in German in Germany as an example of the type of unintended consequences from the present regulatory regime.

Helius can’t export its pure NZ product to European countries because the contradictory requirements of the regimes in each territory forbid it. She says the international potential of the industry is huge and NZ possesses one large competitive advantage – it’s stringent, internationally respected regulatory regime around medicines.

Clean and green

The clean and green NZ brand helps, but Doran says Kiwi medicinal products are trusted internationally, particularly in the important European market.

King concurs, pointing to the United States, where individual states regulate the industry with uneven results and international distrust. “Internationally, we have the best-dressed regulatory framework for medicines,” she says.

“New Zealand has one of the highest regulatory standards for manufacturing medicinal products anywhere in the world – other countries trust New Zealand medicine and that is a significant advantage,” says Doran.

The stringent standards also act as a significant barrier to overseas entry into the NZ market and Doran says the domestic market is overshooting projections for its size, which is generally cited as $1.5 billion (for the overall cannabis market).

She says domestic research shows there are 400,000 Kiwis using cannabis medicinally, usually for pain management and/or mental health, and it is a safe and efficacious alternative treatment to traditional pharmaceutical medicine.

Investor patience

Helius is privately-owned (there are three NZX-listed companies, CannaSouth Group, Rua Bioscience and BSI), and the only company in the domestic market producing NZ-grown and NZ-made medicinal cannabis products from its 8,800sqm facility.

King and Doran say the patience of investors in the sector is praiseworthy, given the significant amount of capital in the fledgling industry. “Medicinal cannabis is hugely capital intensive and has a longer runway [to profitability than many investors expected],” notes King.

Government tardiness on regulatory reform is the key piece in the market puzzle, both women say. King and Doran want the government to get their skates on and speed up the process.

“There are so many hoops still to get through – the parliamentary counsel, the minister, the legislative committee, back to Cabinet … there doesn’t seem to have been enough urgency around this,” says King.

“The international market,” adds Doran, “is expected to be around US$65 billion by 2025. The numbers are huge and New Zealand only needs to get a slice of that export pie and we could be the next wine industry.”

Both women were asked about NZ First but declined to comment.