Medical Cannabis Network speaks with Dr Marc Christian Theurer and Dr Hartmut Vennen of FTI Consulting in Germany about how they advise their clients to succeed in the ever-evolving cannabis industry.
FTI Consulting provide their clients across Germany with expert advice in strategic communications, corporate finance and restructuring, construction solutions and competition economics including the cannabis industry.
For more than 15 years, their strategic communications practice has advised clients – ranging from German Mittelstand to global corporations – in all aspects of their communications activities. They advise on financial, regulatory and reputational issues, and provide capital markets communications; corporate, brand, change, crisis and internal communications; and public affairs advice.
Dr Theurer, Senior Director at FTI consulting, and Dr Vennen, Senior Managing Director, were in attendance at The Cannabis Society’s European Medical Conference in Berlin in September 2019, where Medical Cannabis Network were covering the events of the day.
How would FTI consulting support clients in protecting their freedom to operate in the cannabis industry?
Vennen explained: “The agenda of our clients is just simply to be successful in their markets; often they are stepping into a market that they do not understand entirely, and they need to navigate it successfully. Therefore, our advice for newcomers to the medical cannabis markets would always be to take very careful first steps, listen to their stakeholders, and understand what is really important to make your business a success. The whole medical cannabis business in Germany is about building trust and confidence in what you are bringing to the table.”
Might it present dangers down the line if there is an over expectation of what products can do without having the data or evidence to back it up? There were discussions about a research hub coming together in order to conduct research. How would you like to see that happen?
Vennen continued: “I think to be successful in the medical cannabis industry in Germany, data will make all the difference. All of the industry players would be well advised to think about producing meaningful data, real world data, clinical data – whatever is available. They need to make the point and demonstrate benefit to both patients and the health system itself.
“This will be a crucial entry into the system, because medical cannabis companies are coming to Germany from all over the world, but some companies’ only concern is making money as quickly as possible.
“Those companies eager to build and maintain their freedom to operate, should take a longer term view and work on bringing real value to the system. In order to do so they need to help patients based on evidence and data. If a company wants to build a good reputation in this market, remain on safe ground and build a rapport with stakeholders, then these benefits must be backed by data. That is the most important thing.”
Theurer added: “At the moment, medical cannabis is still a niche market, but it is growing exponentially. However, increasing significance will sooner or later result in an increase of public and regulatory scrutiny. Stakeholders will be questioning why a particular company’s products are different and whether they really work and provide an added value to patients.”
You mentioned that a lot of the industry players in the sector are SMEs and startups and that they therefore don’t necessarily have the influence to push things forward. As such, is there a need for them to work together? They seemed happy to hear this, were you surprised by that?
Vennen said: “Absolutely, that was quite unexpected. It seems that the time is probably right to join forces and start doing something together. Companies can come together to create a powerful group, aligned along the same interests and intentions.
“This way, the probability of getting things through is much higher than when walking alone. That reaction was unexpected but a very good outcome of the conference. It seems that the time is now to start thinking about coalition building, alliance and associations to drive the movement forward.”
Based on your interactions by FTI consulting with companies and what you’ve seen in the industry, as the industry has evolved in recent years what are the most common regulatory compliance issues that companies face? How would you advise them to overcome those issues?
Vennen postulated: “I think from a more general viewpoint we see very often that companies set out very confident and focused on their own activities, ambitions and products; companies that come to a new market with the ambition to successfully navigate that unfamiliar landscape should put themselves firmly into the shoes of their audience in that market.
“That is a common mistake because if companies do not see the full picture then they might not see the available opportunities when too wrapped up in their own ambitions. Our advice would be to keep an open mind, stay in dialogue with the relevant regulatory bodies to see what their needs are, and they can be met. This will ultimately ensure success.
Theurer added: “Unfortunately, in the early stages the legislation was pushed through rather quickly and it wasn’t done in the most coherent and diligent manner. This resulted in a lot of grey areas, in terms of the preconditions for prescribing. This poses a problem for many professionals and it is very difficult for companies to comply with the undefined nature of these grey areas. At some point there will be some kind of a clarification so it will undoubtedly get easier. In the upcoming debate about this clarification, the industry is advised to play an active role to ensure reasonable solutions in line with its long-term interests.”
Would this be difficult to achieve?
Theurer responded: “Eventually, the need for action is becoming so strong that establishing regulatory clarity is inevitable. Companies will also have to prepare for EU harmonisation which will come sooner or later. That will be a huge milestone and will completely change the face of the industry.”
We spoke to Peter yesterday about the harmonisation that everyone is anticipating. He suggested there might be a few negative implications, do you have the same feelings of how this might work out?
Theurer said: “Ultimately the European Parliament has already set the tone. They have recognised this as a pharmaceutical. If this definition prevailed, medical cannabis products – like any other medical device or product – would need correct authorisation which involves every product being required to prove its efficacy, but also that it does not do any harm. This will involve a huge amount of investment which is something that a handful of companies may be able to do but most are simply too small.
“Conversely harmonisation is not only a threat but also an opportunity. It will be up to the Commission to table a proposal. The Commission is a very practical institution eager to find reasonable solutions. The Commission will examine the functioning in the EU member states and will probably present a balanced proposal for the subsequent legislative process.”
Vennen concluded: “In the light of the upcoming debates on harmonisation it is very important to build trust and confidence in the products being produced, and in their medical applications.
“Most companies underestimate this, and they are convinced that they are bringing the best products to the table within Germany or Europe as a whole, and they overlook the need for consensus building, getting in touch and maintaining a dialogue, understanding each other in terms of requirements and ambitions. This sometimes hinders them from being as successful as possible in the market and it does need to be addressed.”
There are many risks startups face in the cannabis industry, especially with larger companies already in the industry (such as Tilray, Bedrocan etc.). What advice would you give to companies in order to achieve scalable, sustainable growth in the medical cannabis industry?
Vennen said: “From a communication standpoint there are a few risks that everyone should be aware of. One of the most important in my opinion is to be extremely clear about defining yourself as a medical, pharmaceutical company or startup in order to avoid becoming embroiled in the movement advocating for legalisation of recreational cannabis.
“If you become involved in that debate, then you lose credibility rather than gaining it and credibility is vital for product success in this market. At any point you are involved in communications consider how you are positioning yourself, how you are differentiating yourself from the ‘legalise it’ movement. This is essential when trying to gain ground and build a reputation as a credible organisation.”
Would you say that this means that a company necessarily needs to either choose a recreational or medicinal market? Do you think they can be active in both markets, but still stay away from the legalisation campaign?
Vennen said: “In my opinion, as a flower producer there is a crossover into both areas but that doesn’t particularly matter. Patients, pharmacists, doctors etc. must be crystal clear that if you belong to one group you cannot go into the other one because it is a requirement in this space that you differentiate yourself from the other side.
Theurer added: “I think the larger players are doing this anyway. When you observe how Aurora are positioning themselves in the marketplace, it’s the right approach. They clearly stress that they are a pharmaceutical company. Coming back to the SMEs, it’s always the same in the cannabis industry as in all the other industries, you always have to be quicker, better, faster.”
What can we expect in the next 12 months from the cannabis industry? What more do you think can realistically be achieved in the industry?
Vennen remarked: “There is currently no evidence that the growth rate of the German market will slow down or move significantly in any other direction, so it remains a very attractive market. That will continue in my opinion over the next 12-24 months and it will be essential that companies are able to come together and join forces in order to bring about change together and ensure they are recognised in the marketplace as entities with very good reputations who can be trusted. That would be the essential takeaway for me, you can really change the game by remaining in good contact with all the relevant players you are dependent on for your own success.”
Concluding on the same page Theurer added: “There are fundamental changes in the market almost on a bi-weekly basis concerning import, export, cultivation etc. For sure, demand will continue to drive strong growth in the foreseeable future. Anything else can’t be predicted. There will still be a great deal of pressure on the supply side. And this will remain a strong challenge given the regulatory status quo.”
Dr Marc Christian Theurer
Dr Hartmut Vennen
Senior Managing Director