Attorney Peter Homberg, partner at business law firm Dentons, spoke with krautinvest.de ahead of the International Cannabis Business Conference about potential changes to medical cannabis prescribing, pending market consolidation, IP-protected forms of application, clinical trials, cannabis IPOs, uniform EU-wide rules for medical cannabis, and more.

Key Facts:

• Complex reimbursement practices on the GKV side will be maintained.
• A way for exclusivity of own products: Patent forms of application.
• Clinical studies: We always experience surprises – the required effectiveness cannot always be proven. A negative outcome can have an impact on the overall market.
• In one to two years, the next German cannabis companies will be ready for a successful IPO.
• The EU is becoming a supplier market.
• We need uniform standards for medical cannabis in the EU.

krautinvest.de: Hello Mr. Homberg. Since March 2017, medical cannabis has enjoyed a special position in the pharmaceutical industry. Flowers and cannabis extracts, not only finished medicinal products, are allowed to be prescribed. Patient:s must be chronically ill and other treatments have been tried beforehand. There is an authorization requirement. Will this process continue in the coming years?

Peter Homberg: We have to look at two processes: First, the issue of reimbursement. And secondly, the documentation obligation vis-à-vis the BfArM: Which patient is prescribed which application with which success?

I assume that the current complex reimbursement practice on the part of the GKV will be maintained. The GKV funds want to check very carefully who receives cannabis as medicine, in order to avoid at all costs that patients who do not fulfill the prerequisite receive cannabis. The documentation obligation will also be with us for a while, as will the fundamentally positive therapy-open approach.

In this context, we should not forget that in 2017 the legal basis for prescriptions via the detour as “Rezepturarzneimittel” was created very quickly. In the initial phase, this led to an incredible reimbursement level of 20 euros or more per gram because of the “pharmacy surcharge” for prescription drugs. In the meantime, we are already experiencing a price erosion – hardly anyone is still selling for the maximum price of 9.52 euros, which has applied since the new price regulation.

krautinvest.de: In the case of cannabis flower, companies are not incentivized to research because there is no or little chance of patentability. In which cases can researching cannabis companies protect their IP and how?

Peter Homberg: There are different approaches by the industry to gain exclusivity for their products. They certainly can’t do that if they are only growing and distributing flower. One way is to patent forms of application – such as inhalation devices or patches, etc. Of course, there is also the option of bringing finished medicines to market. However, this requires extensive clinical trials, and from my many years in the pharmaceutical industry I know all too well that we always experience surprises in the process, i.e. that the required efficacy cannot always be proven. Admittedly, the situation is somewhat different with cannabis; after all, the companion survey already shows that cannabis has a positive effect. Nevertheless, there is a risk that a clinical trial with a negative outcome for one indication may have an impact on the overall market.

krautinvest.de: What kind of investment costs are we talking about here?

Peter Homberg: For a clinical trial with a cannabis product up to the end of clinical phase 2b, sums of between 80 and 150 million are conceivable, depending on the indication. This is less than for other pharmaceutical products, since, for example, no extensive toxicity testing is required. We already know: Cannabis is safe.

krautinvest.de: Some cannabis companies are already looking at an IPO, partly in order to raise such investments. In Canada, we saw share prices plummet after the initial hype. Are German cannabis companies ready for the IPO?

Peter Homberg: The IPO is one of the variants for raising capital for entrepreneurial activities. If I want to research and grow as an entrepreneur, I need capital. For an IPO, however, I firstly need a good and convincing storyline and secondly I need to have proven sustainability. For this, cannabis companies in Germany are on a very good path, but they are still relatively young. I therefore think that in one to two years, the first companies will be ready for a successful IPO.

We have also seen companies elsewhere that have gone public without proving sustainable profit – in Canada, for example. In my view, companies should first demonstrate some form of profitability in order to manage a successful IPO. In addition, a stable and comprehensible business plan should be a matter of course. Ultimately, the crucial question is how big the companies are and how much capital they can raise.

krautinvest.de: There are now around 100 wholesalers in Germany. Will we see more M&A in the future?

Peter Homberg: We will certainly see consolidation in the German market. In perspective, we will not see 30 to 40 distributors for medical cannabis products in the German market. At what prices the cannabis distributors will sell is difficult to predict. However, in my view, the high prices from the early days will no longer exist. I think that in the meantime you have to cut back and it will also only become clear who is willing to buy.

krautinvest.de: And what will change beyond distribution and research?

Peter Homberg: In the short term, we will certainly see one or the other supplier of cannabis flowers and extracts in Europe. I am thinking, for example, of companies from Portugal, Spain, Greece or even Malta. The EU will therefore turn into a supplier market, which could lead to further pressure on current prices. It also remains to be seen how much “German cannabis” will contribute to this.

krautinvest.de: Keyword EU. EU-wide cannabis programs are partly declared superfluous. Entrepreneurs, on the other hand, complain about a highly fragmented regulatory market at the national level. Germany leads the EU by a wide margin. Do we need our own uniform rules at country and EU level for medical cannabis?

Peter Homberg: Absolutely: Yes! We need uniform standards both within the EU and at the national level. Accordingly, in March 2019, a European Parliament resolution was submitted to the Commission to implement a uniform framework for cannabis at the EU level. Currently, the Commission is working on a directive for the harmonization of the European market for cannabis in European countries. This is also urgently needed. Because all member states of the European Union handle medical cannabis differently, which is very unfavorable for the European single market. This is exactly why the European Cannabis Association was founded. At the ECA, we are particularly committed to industry-friendly harmonization.

About Peter

Peter Homberg is a partner in the Dentons Berlin office. He focuses on life sciences, IP, corporate law and M&A transactions in the life sciences and high-tech sector as well as in R&D and cooperation agreements, cross-border IP licensing and IP strategies. Furthermore, he has extensive experience providing legal advice on compliance issues. Additionally, he is the head of the German Life Sciences Practice and European Cannabis sector group. Peter advises inter alia companies in the pharmaceutical, diagnostics, biotechnology, medical device and medical cannabis industries—from startups to large publicly listed companies. Furthermore, he has broad transactional experience in Southeast Asia. Peter is member of the Licensing Executive Society (LES), the German Association for Intellectual Property and Copyright (GRUR), the German Institution for Arbitration (DIS) as well as the Pharma-Lizenz-Club Deutschland e.V. He regularly holds lectures at seminars and conferences. He is the author of numerous professional articles and other publications regarding corporate or IP law in the field of life sciences and medical cannabis.

At the International Cannabis Business Conference, Peter Homberg will give an update on regulatory changes in Europe and Germany regarding medical cannabis at 9:30 a.m. on Thursday, Aug. 26.

This interview was originally published in German on krautinvest.de and is syndicated with special permission: https://krautinvest.de/konsolidierung-im-cannabismarkt-die-hochpreisigkeit-wird-es-nicht-mehr-geben/

The shifting laws of national sovereignties along with new global treaties and a rather old global one are allowing new winds of cannatrade to enter Germany.

It’s not just Portugal, in other words, that is now on the map to import cannabis into Germany. Spain, Denmark, Malta, Greece, Australia, and South Africa are all birthing producers who are clearly putting Germany in the middle of their bullseye, if not European plans.

What does this mean in general for the average producer?

You have to have your paperwork in order, be prepared to prove cert, and plan, as of now, to spend your conference days at the next International Cannabis Business Conference in Berlin networking your tail off!

Who To Look For?

When planning your Berlin trip to the International Cannabis Business Conference, here are a few things to put on your packing list of to do’s.

Top of the list? A distributor with the right papers on the ground. There are currently 19 of them – with more coming into the market. Their good relationships with pharmacies are essential. And there are thousands of them. All of them are small businesses – owning no more than three or four brick and mortar outlets. All of them are looking for reliable, clean, tested, and certified products.

If that is you, with a plan for insuring a steady supply, you will be popular in every room you show up in.

You Do Not Need The Big Guys…But It Can Sometimes Help

The biggest names in the industry are now in the German market – with one of them already set up to cultivate certified product and two hot on their heels. On top of that larger firms have already established distribution relationships in the German market that allow them to say that they have market penetration in the bag.

However, that is not the whole story – as the indies are finding out. The right relationships with the right strategic partners make all the difference. The market needs certified product – and if that is you – your future is looking very bright in Germany (and beyond) that right now.

The doors may not be fully open, but they are opening more and more with every passing month. For the right entrepreneurial canna firms, there are lucrative opportunities to be had.