West Aucklanders Josiah Spackman and Yuri Pogrebinsky have poured every cent they have into their cannabis startup, Skyman Industries. The company gained Ministry of Health certification on Good Friday, making it the latest entrant in an increasingly crowded field.
The Herald visited Skyman just a few weeks into the cultivation of its first crop. The startup's story so far illustrates some of the challenges and quirks - and opportunities - of what is becoming one of our fastest-growing industries.
There are now 43 medicinal cannabis licence holders, from the big players like Biolumic, Rua Bioscience, Helius Therapeutics, Puro (which recently scored a $13 million government grant as part of a $32m funding package) and NZX-listed Cannasouth (market capitalisation $43m) to more bootstrap operations like Skyman.
Skyman is far from the big league: Spackman and Pogrebinsky scrounged $250,000 to get their operation off the ground.
Last month, the cannabis industry was compared to an earlier New Zealand success story - winegrowing.
"We're proud to support the medicinal cannabis industry as it sets out to follow in the footsteps of our wine industry which, from first planting on commercial scale in the 1970s, has now reached over $2 billion in export value," said Agriculture Minister Damien O'Connor as the Puro grant was announced on April 22 on an organic farm near Blenheim, against a background of some 51,000 cannabis plants.
Skyman is a micro-operation in comparison, but it has already fielded interest for "offtake agreements" (as orders are known in the cannabis business) for up to 500 kilograms of product for each of the four harvests it can manage per year. That amount is beyond its growing capability in these early days, but illustrates the demand.
The product in question is high-grade indica cannabis flowers, which Skyman initially grew from seeds. Pogrebinsky is open about the fact that the seeds were illicitly procured. But after declaring that to the Ministry of Health, the seeds could be certified.
Skyman now has two "mother plants" from which cuttings will be taken to grow future crops. The nursery is indoors and hydroponic - that is, plants growing in water rather than soil. The plants are supplied with oxygen and grown under a battery of LED lights. Before being moved into the nursery, seedlings sit in a nutrient gel and constantly sway back and forward in a breeze created by electric fans, encouraging them to grow stronger stems.
Seedlings which were just a few centimetres high when the Herald visited will grow to bushes the size of small Christmas trees over the next 13 weeks, before their flowers are harvested and then dried.
Skyman will sell some of its crop to local licensed manufacturers, who will use it to create a range of medicinal cannabis products, from oils, to vaporisers, drops, sprays and even tea (the Ministry of Health's website features instructions for making tea from dried cannabis flowers).
The rest will go to licensed exporters. One of the quirks of the system is that while local sales are tightly limited to medicinal use and must be prescribed by a GP, an exporter can send Skyman's product to a country where cannabis use is legal for either medical or recreational use.
The ministry has strict security requirements for licensees, so Skyman's security camera-festooned location in West Auckland is secret, and every internal door is locked with a passcode. Not that the startup would make a juicy target for dope thieves: it grows indica cannabis plants rather than the sativa strain favoured by stoners.
The founders were also required to make a disclosure about the nature of their business to their landlord and, more nervously, to the Henderson police. The cops did a double-take and hustled Pogrebinsky to an interrogation room, but in the end everything went smoothly.
At first glance, the Skyman pair seem straight from central casting. With his black sleeveless T-shirt, beanie and tattoos, Spackman seems an indoor grower straight out of Outrageous Fortune, while Pogrebinsky, with his suit jacket, comes over more as the dealmaker.
In reality, both have the same immediate background working together for the same tech company, where they schemed and dreamed about founding a cannabis startup.
Before that, both had usual childhoods.
Spackman was home-schooled in a conservative Christian ("and very anti-drug") family and got his first full-time job at just 15 in the tech support department for IDG, the publisher of Computerworld and PC World, among other titles.
His career change from IT to a cannabis startup came via a hit-and-run driver who bowled him off his bike on Lincoln Rd - leaving him unable to walk for three months - plus the pain of an irritable bowel, for which he took cannabis oil sourced from the "underground" market.
Pogrebinsky came to New Zealand from Ukraine with his mother, an electrical engineer, when he was 16.
"I keep thanking her for that decision," he says. Watching images of the Russian invasion, "I've seen places where I used to run around in bare feet [now] destroyed and shelled into oblivion. It's a shock to the system."
Skyman quickly drew support from politicians. In the past fortnight, both the Greens' drug law reform spokesperson Chlöe Swarbrick and Labour's Phil Twyford - the local MP - have toured the startup's nursery.
And Spackman and Pogrebinsky say the Ministry of Health has been very helpful with the logistics of getting a medicinal cannabis licence - although the founders did find some of the provisions problematically chicken-and-egg. For example, they had to have offtake (wholesale sales) agreements in place, which is tricky to negotiate before gaining said licence.
And the founders also see two broader issues, which at present combine to make medicinal cannabis products hard for many people to access.
One is scarcity of product, as demand exceeds supply, which keeps prices high. You can pay $60 or more for 30ml of cannabis oil which, like other medicinal marijuana products, is not subsidised by Pharmac - an industry sore point.
"The demand is astronomical, both locally and internationally," Spackman says. "Anything we're able to cultivate is going to be snapped up so very quickly. The demand far exceeds the availability."
This is partly because it's such a new industry, with personal imports banned but exports allowed. The regulatory regime allowing for medical cannabis only came into effect in April 2020, a minimum quality standard backed by Ministry of Health inspections was introduced only in October last year after a transitional quality regime, and the first home-grown product didn't appear in a pharmacy until November.
The other issue is what Pogrebinsky calls more of a "cultural" one, with some GPs loath to prescribe medicinal cannabis for a condition such as chronic pain or anxiety.
"Patients have to fight to get it from their GP," he says. "Partly it's lack of supply and lack of education, but it's mostly the stigma that remains for no reason."
Pogrebinsky's take is backed by a recent investigative piece by journalist Russell Brown, which featured several examples of doctors actively obstructing patients' efforts to obtain medicinal cannabis. It also included supportive voices in the medical community, including Otago University research fellow Dr Geoff Noller.
Spackman adds that on the patient side, many people don't know that most medicinal products are centred on the calming CBD (cannabidiol), and contain zero or only trace elements of THC - the main psychoactive compound in cannabis, the one that gives recreational users a high.
"The THC is effectively burned off before it gets manufactured," Spackman says.
"People on the other side of the debate bundle it together with 'gateway' drugs, but it's only as bad as paracetamol," Pogrebinsky adds.
"In fact, it's better because there's no toll on your liver from long-term use," Spackman says.
The pair welcome Ministry of Health inspections. It's good for the Skyman brand. They want it certified that they've grown premium product.
But overall, they see the current regulatory regime as too restrictive, which forces most people to turn to the underground scene, where THC levels and quality control are a free-for-all.
Swarbrick agrees.
"The Medicinal Cannabis Scheme is still far too rigid to deliver affordable and accessible medicinal cannabis to patients," the Green MP tells the Herald.
"That's what happens when you try to wedge a literal weed with therapeutic properties into a highly 'pharmaceuticalised' model of regulation."
Swarbrick points to the Drug Foundation's State of the Nation 2022 report which estimated that despite legalisation in 2020, about 94 per cent of Kiwis continue to get access to their medicinal cannabis through the black market.
"Cost remains the biggest issue with regard to access, but we also know there's a general GP hesitancy to engage with a substance that's cast in such a long shadow of stigma from the war on drugs," Swarbrick says.
"Education can go a long way here, but honestly, while Pharmac continues to refuse to acknowledge medicinal cannabis as on par with opiates and their cocktail of side-effects for things like pain management, we are tinkering with a system that hasn't got the fundamentals right.
"The Greens have worked with the Government on a few tweaks to the Medicinal Cannabis Scheme, such as the pragmatic step to allow licensed growers to use seeds from the unlicensed market (once they've been through the paperwork)."
But she was also left frustrated by Health Minister Andrew Little's response to her March parliamentary question on whether he had sought advice on the affordability or accessibility of medicinal cannabis products.
Little's one-word reply: "No".
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