Rua hits reset button

Rua Bioscience's Ruatorea growing and research facility. Picture Supplied

Bouncing out of a loss-making year and a share value slump, medicinal cannabis company Rua Bioscience has started the new financial year with two new international deals and a vision to expand Tairawhiti residents’ access to subsidised medical cannabis products. Andrew Ashton asks chief executive Paul Naske how confident he is in the company’s new strategic direction.

At the end of August Tairawhiti-based medical cannabis company Rua Bioscience posted a loss before tax for the year to June 30, 2023 of $5.96m (compared with $7.49m for the financial year ending June 2022) but since then, Rua has entered into a supply agreement with Schroll Medical of Denmark to cultivate, manufacture and supply medicinal cannabis products, and earlier this month announced its official entry into the dynamic Australian medicinal cannabis market.

The latest deal will see Rua team up with Anspec, a leading pharmaceutical distribution company, making Rua Bioscience products available to Australian patients through prescribers.

It means Rua products are now selling in both Australia and Germany, which are two of the world’s biggest medicinal cannabis markets.

Rua chief executive Paul Naske said both deals were a sign that the company’s new strategy was working.

Mr Naske said the fundamental change was that the company had reviewed its strategy and made the difficult decision in March to shut down its Gisborne manufacturing operation (but still retain its Gisborne head office).

“That’s really a result of the New Zealand regulatory environment being very tough and the global medicinal cannabis environment being over-supplied with cannabis — and also very tough.”

Retaining manufacturing capacity in that environment was not a good use of capital and cash, and would have meant going back to the market to raise funds, Mr Naske

said.

The new strategy meant Rua was well positioned globally because its Ruatorea growing and cultivation facility was still going strong.

“What its doing up there is discovering and breeding genetics and new varieties.

“Some of the best genetics in the world are from this area . . . we have access to those, and we are taking those cultivars and growing them overseas.”

Mr Naske likened it to Zespri taking kiwifruit varieties to be grown in Europe.

“We are still creating cannabis products out of our genetics — we are just using other people’s facilities to do it.”

In effect, Rua had kept its breeding and distribution facilities and “outsourced” the cultivation and manufacturing processes.

“And that’s the bit that requires a lot of capital investment, but there are a lot of people around the world doing that and we are partnering with them, using our genetics to grow them at scale to distribute that at market.”

Mr Naske said he was not concerned that the share price was only sitting at 11c.

“The share price gets buffeted around by a lot of stuff outside of our control. So, are we concerned? Well, yes and no really.

“We are honestly just really committed to creating long-term value and sticking to a strategy and a business plan so that we are around for a long time.

“Wherever the share price settles in one two, three or four years from now will be what it will be. We’re not concerned because we don’t foresee we will be raising capital any time soon.

“There’s a lot of talk about the share price and shutting down manufacturing, and people are right to ask, but the reality is Ruatorea is the hub of the genetic strategy and we are working overseas in big export markets because that’s where the return on investment is going to come from.

“Some of these genetics we have here are unique to the region and unique to us.

“So, that’s the special sauce we are taking overseas.”

The distribution networks and relationships already established would stand Rua in good stead in the long term, he said.

The company remained committed to Tairawhiti and its social impact commitments by increasing its compassionate access programme, which allows qualifying Tairawhiti residents access to subsidised medicinal cannabis oil products.

“We want to expand that to 300 patients per month in the region. That’s kind of why we exist. We provide for 30 patients per month presently, and as our sales increase we are going to expand that.

“That’s our internal metric — that’s what really drives us.”

As well, the company was aiming to increase its rangatahi scholarship programme from 11 scholarships per year to 30.

The scholarship programme was designed to celebrate the aspirations of local rangatahi and help drive meaningful long-term social and economic impact in the communities of Tairawhiti.

“That’s our commitment to the region,” Mr Naske said.