For the first time, but unlikely the last, a large pharmaceutical company has teamed up with a cannabis company to promote medical cannabis products.
On December 18th, 2018, Sandoz, a division of Novartis Pharmaceuticals, signed an agreement with Canadian cannabis company Tilray to cooperate on medical cannabis. The agreement executed by the two companies represents an exclusive agreement to market Sandoz’s brand of noncombustible medical marijuana. Sandoz has agreed not to work with any other cannabis companies, and Tilray will not work with any other pharmaceutical companies.
The cooperative agreement is unique and represents a shifting tide in the market for medical marijuana. Until now, the cannabis industry has been dominated by small companies and start-ups, while the traditional pharmaceutical giants have avoided getting involved in this emerging market. The reluctance of these big companies to embrace medical cannabis has hurt the ability to grow because without these big players the market is struggling with legitimacy.
Now that a Novartis subsidiary has made the decision to embrace the growth potential for this market, it will quickly allow the market to gain wider acceptance. This decision highlights the real potential, as a major corporation is now willing to put both their money and reputation behind medical cannabis. This will begin to move the industry beyond the fringe of medicine and will result in more widespread acceptance by doctors.
Doctors are notoriously slow to embrace change in their profession, and the medical cannabis market has certainly been no exception. This should begin to change due to the resources of Novartis behind the effort. They have a very well-established sales force with the power of existing relationships with health care providers. Rather than try to create relationships and work to establish trust with doctors, the doctors can work with the sales professionals they already work with.
With an army of sales representatives, along with the established supply-chain and a name that people know and trust, this cooperative agreement is likely to be extremely beneficial for both companies. Tilray now has a partner that can boost their marketing efforts to new highs, and Sandoz has teamed with an established and successful cannabis company.
This partnership is limited only to noncombustible medical marijuana, in the form of capsules and indigestible oil products made from cannabis. The two companies have been working together to promote the 8 products that Tilray produces since March of 2018. Apparently, both companies have been satisfied with the success of the venture since they have decided to be exclusive partners.
While Tilray continues to develop the medical cannabis market, they are not depending on that market exclusively. They are also putting serious effort to develop the growing recreational cannabis market, as the list of places that permit the recreational consumption of marijuana also grows. This agreement will allow Tilray to put more focus on the recreational market, while they utilize the resources of Sandoz to grow their noncombustible medical marijuana business.
This agreement, once successful, may represent a wave of cooperation between the two industries. More cooperation is likely to follow, as they have natural synergies that can be leveraged. Small cannabis companies know from their experience and research how to effectively grow and process cannabis to make great products, but lacks the marketing budget and manpower to do widespread promotion. They also lack the supply chain to ensure orders can continue to be filled. The large pharmaceutical companies can fill in the gap, and supplement their own lack of experience in medical cannabis by finding a teammate.
What is unclear is how quickly each company’s competitors will look to copy this relationship. Other companies may not be as quick to jump at this, perhaps due to the lack of trust between the two industries. Ingrained in many medical cannabis researchers is a natural distrust of “big pharma” as they have perceived (mostly fairly) that the pharmaceutical industry has been their enemy. While the cannabis companies have raced to develop their products, the pharmaceutical companies were lobbying to restrict this industry to protect their profits.
There may also be some distrust from the large pharmaceutical companies of the medical marijuana companies. They often see cannabis as “snake oil” or a placebo, questioning if the effectiveness of these medicines is real, or if the claims are exaggerated. These companies spend years and lots of research dollars to run studies and test how effective their products truly are, and they are forbidden from releasing any drugs that have not passed stringent FDA testing. They are understandably leery of trusting a drug without a mountain of research behind it. In short, they may be less willing to risk their reputation on less than a sure thing.
Each of these company’s competitors is likely watching this situation very closely, and discussing plans of finding a partner to work with. Some of them might have a desire to act soon, in fear of missing the train. Some may proceed cautiously, wanting someone else to make the big mistake. Regardless of their eventual decision, you can be certain that this agreement is being discussed in board rooms across the country.
Beyond the potential for revenue growth and widespread acceptance of medical cannabis that this teamwork can offer, these cooperative agreements will also create better products. The knowledge and experience of these small start-up companies will be greatly multiplied once they integrate this experience into the framework of a giant pharmaceutical company. While the small companies have succeeded admirably with the research they’ve done, now that research will have the deep pockets they’ve lacked along with the top minds in developing new medicines.
These small companies have used the cannabis plant to develop amazing new drugs with a shoestring budget. It’s truly stunning to imagine what kinds of medicines they can develop with advanced analytical laboratories, money to run wide scale studies, and the best-paid scientists.
It’s clear that we are witnessing an industry transform, from an under serviced industry with a world of unrealized possibilities into an industry exploding in exponential growth and exciting developments around the corner.