How Katabolt Helped A Pharmaceutical Identify A Market For Medicinal Cannabis

Summary

MedGreen Pharmaceutical is a pioneering phytopharmaceutical company with the goal of becoming the leading New Zealand medicinal cannabis provider across the globe.

They reached out to Katabolt to identify the best export market to target so the MedGreen team, including CEO, Brock Lauritsen, could focus on building infrastructure and capability.

There were three stages to the work Katabolt did with MedGreen:

1. Pathfinder process — discovery workshop, initial research and go to market plan;

2. Market validation — Market Opportunity Assessment to find and qualify partners in Germany and Italy;

3. Due diligence — sign MOU’s and a service agreement.

Pathfinder Process

Seven years ago, Rob Lewis and Hilary Quemby, the founders of MedGreen, started petitioning the government and Ministry of Health to put a regulatory scheme in place for medicinal cannabis. In 2018, work began on a state-of-the-art facility in the Bay of Plenty to produce medicinal cannabis including a product manufacturing and distribution warehouse, laboratory, greenhouse, nursery and drying facilities.

Rob and Hilary first met Katabolt at an Export Essentials workshop (delivered in conjunction with New Zealand Trade & Enterprise) to help early-stage exporters learn the fundamentals of becoming successful export businesses. The decision to work with experts in the exporting space was an easy one, according to Brock Lauritsen, the CEO of MedGreen.

“We didn't even try to do it ourselves,” says Lauritsen. “We were in the startup phase and securing our first customer in one of the big global markets was key to our business. It was a speed to market decision for us and putting our trust in someone who knew what they were doing allowed us to focus on building the infrastructure and other capabilities we needed to deliver the product.”

“New Zealand wasn’t the target market for MedGreen,” says Michael Poynter, Head of Research with Katabolt. “They needed to sell their product into one of the new markets opening up overseas for medicinal cannabis. They came to us to help them select the right market, secure partners, and help them with everything else involved in opening up a new export market.”

MedGreen went through the Pathfinder process (part of Katabolt’s PREPARE service) to understand whether they were ready for export, ensure they had clarity on their purpose for exporting, and to learn more about the industry sector and potential markets.

“The Pathfinder process helped us define and develop our strategy and get us focused,” says Brock Lauritsen. “There are so many opportunities in this space they can become distracting.”

Market Validation

At Katabolt we’re obsessed with evidence. Our team of experienced data analysts and planners use cutting-edge tools — many of them proprietary to Katabolt — to gather evidence and validate (or debunk) your assumptions so we can adjust them accordingly. It all comes down to risk mitigation. Our evidence-based process gives your export plan the best chance of success.

After the Pathfinder Process helped MedGreen define their export strategy, the next step was a Market Opportunity Assessment to identify the ideal market.

The Market Opportunity Assessment compares markets across eight factors that define an attractive market opportunity. The factors are agreed with the client and the matrix enables objective decision making instead of relying on intuition or subjective beliefs.

Katabolt and MedGreen analysed price, volume, regulations, and ease of doing business, amongst other things. This stage involves reviewing market reports, industry databases, white papers on regulations, and other desk research. The Katabolt team listed 20 to 30 potential markets before narrowing the list to two, Germany and Argentina, in order to focus their resources on understanding those two markets in detail.

Once Katabolt started to look more closely at Argentina, they uncovered regulatory restrictions that significantly impacted on the opportunity. The Market Validation process confirmed Germany as the best market for MedGreen.

“We were pretty confident that Germany was going to be our target market before we started working with Katabolt but the work we did with them gave us the assurance we needed,” says Lauritsen. “The rigor they bring to the decision making process is very reassuring.”

“Katabolt does the heavy lifting when it comes to research,” explains Poynter, “but we update the client regularly, get input from them where we need it, and have milestone meetings to discuss major decisions.”

Katabolt tested and revised Med Green's value proposition, identified potential import partners and developed an understanding of what MedGreen needed to do to break into the German market. They interviewed key people in the industry in Germany and some of the questions Katabolt answered for MedGreen included:

● Is there a worthwhile opportunity?

● How do you get your product to market?

● How do you become compliant?

● What is the projected return on investment (ROI)?

Due Diligence: Closing the Deal

The Due Diligence step is part of Katabolt’s SUSTAIN service that is committed to helping our clients build a platform for sustainable exporting. We help you define and secure a sustainable route to market. That could mean securing a deal with a single distributor or multiple resellers; it all depends on your business model.

After Germany was identified as the best market fit for MedGreen, the final stage of the process was partner selection, including due diligence and negotiating deals.

We’ve been doing this for more than 10 years, and have access to a global partner network, channels, connections and customers we can call on for support. More importantly, we know how to close the deal.

Katabolt organised two market trips to Europe for MedGreen. The first involved attending conferences and meetings with potential import partners, legal advisors, and government agencies. The second trip was focused on due diligence and progressing negotiations with shortlisted partners.

One of the biggest challenges with this project was the complex regulatory requirements,” says Poynter. “Germany is a tightly regulated market so we had to understand the regulatory landscape. We had to make sure the import partner was kosher.”

“Because the industry is so new, virtually every company involved is a startup,” says Lauritsen. “We had to make sure our partner was well funded. We needed to know the calibre of people on the board, the company structure, their strategy and capability.”

“The only gripe we had was the process felt almost too diligent at times. This was all about speed to market for us and even though Katabolt moved fast and hard some things took longer than expected. But it really helped confirm and validate the direction we wanted to take.”

“I think the word focus sums it up. There were a number of things we could have done but Katabolt helped us prioritise so we can generate revenue to support other opportunities.”

At the end of the due diligence process, MedGreen signed a 3-year deal with a German partner worth $8.5m per year, assuming price and volume stays the same. They plan to export the first shipment in early 2021. They’re also at an advanced stage of negotiations with two other partners.

“The partners we connected with are likely to be the same partners we work with when we develop our next products,” says Lauritsen. “We’ve learned so much from working with Katabolt and we've built our own internal capability so we can do a lot of this work ourselves in the future. But when we secure funding and need help on other strategic projects we will definitely work with Katabolt again. The team is great and we’ve built a strong professional and personal relationship with them.

Are you ready?

Working with Katabolt is an exciting, exhilarating process with endless possibilities.

We can’t make it happen for you. But we will make it happen with you. Now, let’s get started.

GET IN TOUCH