Flipping the cannabis model on its head

As medicinal cannabis start-ups nationwide burn through cash in hopes of being the biggest and the best, Nubu Pharmaceuticals is taking a different approach, writes Catherine Beard.

Auckland-based Nubu Pharmaceuticals distributes medicinal cannabis products from international markets and intends to export New Zealand-made products when the time is right.

However, one thing sets Nubu aside from the other cannabis companies operating in New Zealand. It doesn’t have large facilities for growing cannabis like many of its 10-odd competitors vying for cannabis supremacy.

Right now, all of those companies are eyeing the medicinal market, but many are likely to pivot if the referendum results in legalisation. All are focused on IP and the unique strains and uses that can be found in New Zealand-grown cannabis.

The point of difference

Many cannabis companies want to own all parts of the value chain, or ‘seed-to-sale’. That involves planting cannabis, growing it, extracting the nutrients, packaging it and selling it to the consumer. Nubu, however, noticed the industry hasn’t matured enough to take control of the entire value chain.

“We saw early on that there wasn’t going to be all these big companies that could grow it, manufacture it and sell it,” co-founder Mark Dye explains.

“We looked at our skills and realised we are a sales, distribution and innovation company. Instead of focusing on the growing of the cannabis, our focus is on bringing the product into New Zealand and selling it through our distribution networks and creating innovative products to sell to outside markets.”

The commercial viability of cannabis – both medicinal and recreational – has been called into question recently, as share prices of the “big three” Canadian companies – Canopy, Aurora and Tilray – took a hit.

Dye puts falling stock prices in the cannabis market down to maturing. He says many of the companies are shifting from being a part of the entire value chain to specialising.

“The biggest cannabis companies in the world, the likes of Canopy and Aurora, are setting themselves up to be more like Nubu.

“Everyone is avoiding growing cannabis like it’s going out of fashion because that is all going to be done in the likes of South America, Asia and Africa.”

The business is gearing to combine New Zealand botanicals or technologies and push them into global markets, Dye says.

“The part of the business I’m most excited about is our innovation arm – premium New Zealand products that will be exported to the rest of the world.”

Right now, Nubu is working with the biggest pharmaceutical distributor in the country, ProPharma, which distributes to the likes Unichem, Life Pharmacy and Chemist Warehouse.  

The impact of Covid-19

Like most businesses, Covid-19 hit Nubu hard. “We were planning to do a capital raise in April, so it changed things for us. We really had to tighten the screws,” Dye says.

The business’s three full-time employees had been working out of shared office space. He says the industry changes and moves at such a frantic pace that Covid was just “another bump in the road”.

“If you can stop, think and not stress out about the problem in front of you, then I think you will be fine. There’s always a way through.”

Despite its focus on medicinal cannabis as a licenced pharmaceutical company, this years’ referendum will impact the business.

Dye says in international markets that switch from medicinal to legalisation, the medicinal companies “haemorrhage money”. 

“Given how the business is currently structured, it wouldn’t be the best thing for us, however the company has a strategy for the opening of a recreational market that creates new opportunities for the business, most of which we can leverage on existing infrastructure and know-how.”

Catherine Beard is executive director of ExportNZ and ManufacturingNZ, divisions of New Zealand’s largest advocacy body. Email [email protected]