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What does the German market look like since April 1st?

Germany: "Most of the players in the market have seen growth of up to 100% or more"

"We see massive growth in the medical market. Across the board, from manufacturers to pharmacies, most players in the market have seen a growth of up to 100% or even more," says Philip Schetter, CEO of Cantourage, about the impact of Germany implementing the first part of Pillar 1 of its cannabis legalization on April 1st. Philip shares that Cantourage itself grew by 160% in April. "There's just a massive demand which is driven by there being more doctors and more patients. There are also now new business models popping up, which further ease the access for patients to get a prescription. It's a whole new world." In a recent webinar, hosted by Zuanic & Associates, three German companies discussed the changes they have noticed since last month.

Sven Von Schilling of Gruenhorn Online Apotheke, Pablo Zuanic of Zuanic & Associates (host), Philip Schetter of Cantourage, and Niklas Kouparanis of Bloomwell Clinics

More demand, more companies
Philip mentions that marketing was part of the massive growth of the medical market. "I've been active in the cannabis industry since 2017. Back then I was surprised that not a lot of people knew that you could get cannabis at a pharmacy without being terminally ill. Then on April 1st, everyone was talking about it. It was all over mainstream media, which made people understand that it's not as challenging anymore to get a prescription. I think that also drove market growth."

Sven Von Schilling, CFO of Gruenhorn Online Apotheke, has also noticed this increasing demand from patients. "The access to medical cannabis has become easier. Also, a significant number of new players have entered the market. Especially teleclinics. Companies that we had never heard of before were suddenly there on April 2nd with a substantial number of prescriptions."

Yet according to Sven, pharmacies face significant challenges and will be the bottleneck. "There is an enormous amount of material on the market and an enormous demand. The bottleneck will be the execution to work on these prescriptions, because that is a burdensome task. Can we significantly increase the output capacity of all the pharmacies dealing with medical cannabis?"

Niklas Kouparanis, CEO of Bloomwell Clinics, adds that the market will not scale by itself. "You need companies that help to scale the market. Patients need to have efficient and fast access to treatments, doctors need an efficient operating system, and pharmacies need the inventory management. Because, from what we're seeing, the patient numbers will go into the millions."

While the market is already significantly growing, what can be expected to happen in the upcoming months/years. "There is one hard figure about market size that we can use," Sven says. "The BfArM required all pharmacies up until Q3 of last year to report the quantities of medical cannabis they bought. In the first 9 months of 2023, this was 14.1 tons. There was no data released for Q4. We believe the total of 2023 was approximately 20 tons. My expectation for 2024 is that this will be increased to maybe 30 and maybe up to 40-45 tons in 2025."

Yet as Sven mentioned before, this poses a challenge for the pharmacies. "It's really difficult for pharmacies to upscale their output. All prescriptions have to be dealt with manually. On average, it takes 20 minutes to deal with one prescription and only trained or licensed pharmacists are allowed to do so. You can only get efficiency into the process if you take a licensed pharmacist to supervise an automated fulfillment line. But it takes time to get there: there are order lead times to get the machinery. So overall, it will take time to really scale up the output in Germany."

Philip expects the German medical market to triple or even quadruple in the next couple of years. "Indeed, the pharmacies will be the biggest bottleneck. But we even see some challenges in our own inventories. Especially for some special products that are in high demand, the production can't be scaled up that quickly. So I foresee some ebb and flow coming up. On the one hand the bottleneck is the pharmacies, then in a couple of weeks time it will be all about the products, and then it will be back to the pharmacies. Therefore, it's important to build a strong and sustainable ecosystem where importers, manufacturers, wholesalers, and pharmacies work closely together to fulfill the demand."

Home grow and clubs
Now that home grow is legal and the cannabis clubs will soon be, will that pose a threat to the medical market? Niklas doesn't believe so. "Home grow is really for the cannabis lovers, not for all patients. As an example, my father comes from Greece. Many people there have grapes in their backyard and make their own wine sometimes. But most of the wine is still bought in the supermarkets. So I don't see home grow as a threat here either."

When it comes to the cannabis clubs, Niklas doesn't see them becoming a successful model. "They're nonprofit, no investors can participate, only 500 members, only 50 grams per month maximum, you cannot consume onsite, you have to pay membership fees, you have to cultivate onsite, making it expensive, etc. Germany is an import market, and the cannabis clubs won't be able to compete with that. The biggest threat to the medical cannabis market is usually the illicit market, because the prices of the illicit market outperform those of the recreational and medical markets. Yet that's not the case in Germany, the illicit market is more expensive. So the illegal market will not be a threat, because of the low prices of the imported medical products. And the cannabis clubs will also not be a threat, because they can't cultivate at the price point that we're importing products either."

Click here to watch the full discussion.