Germany´s largest Finance Portal “Wallstreet-Online” in collaboration with Editors Team of “420stocks.net” published an Interview with our Founder Ivan C. Mestrangelo.
Talking about Motivation, the Industry, our Strategy, the first year in business with MediCrops and about the next milestones in 2020.
Since the Interview is only available in German Language on that news portal, we provide the english translation here:
Interview with Ivan Mestragelo, founder of MediCrops Holding AG Switzerland
Mr Mestrangelo, we met at the ICBC in Zurich in May 2019. At that time, the MediCrops was recently founded. What was your motivation and what did “zero hour” look like?
In the years before, I was trading pharmaceutical raw materials. In the process, I gained a deep insight into segments of pharmaceutical distribution and was often in contact with pharmacists, doctors and even patients. Of course I noticed the hype around ongoing global cannabis legalisation. And in my home country Switzerland the THC-reduced, legal CBD-hemp became quite a “Big Thing”
Some entrepreneurs I know personally, started companies in this market, which are very successful today.
However, I also saw that the Swiss market for CBD hemp, which practically everyone here is allowed to grow and sell as smokeable flowers and as tinctures or food supplement, was quickly saturated. And even though CBD offers some health benefits, it is ultimately the THC that has the true therapeutic value. It is indispensable in pain therapy and in the treatment of other serious diseases such as cancer.
While cannabis containing THC in the USA and Canada has a comparable legal status as CBD hemp in Switzerland, in Europe a prescription is needed for THC-rich flowers and extracts, which are an alternative to strong painkillers due to their cannabinoid content. The cultivation and processing of cannabis for medical use is subject to the same strict GMP guidelines as for other medicinal products. In most European countries cannabis for medical use has been legalised. However, private companies are only allowed to grow it in a few countries and if they do, then conditions such as quantity restrictions are applied that make it difficult to run a large setup. At present, there are only a handful of GMP-certified producers worldwide who own the certified standards to gain access to the supply chain and are therefore even able sell their products in Europe. The market for medical cannabis in Europe is growing rapidly and the quality of cannabis products sold on prescription in pharmacies and also the variety is ridiculously low compared to the recreational market in America.
The prices, however, are 300% higher. The patient gets possibly lost to the black market, because in a good case he gets the better medicine for less money there, so he doesn´t bother for a prescription. If it turns out badly for him, he receives a contaminated herb which does more harm than good.
My intention in founding MediCrops was to improve this situation.
In addition, I am convinced and enthusiastic about the potential of cannabis in medicine and also about the extended use of the hemp plant. Fortunately, I am healthy and do not use cannabis or other prescription drugs myself. However, I see clearly how it helps many people in my environment.
So I started researching for a first suitable Location by scouting for a country in Europe whose government has the most progressive cannabis policy, is a member of the EU or at least an applicant country and has a good relationship with the EU and Switzerland. The expected production costs should also be something to look on. Northern Macedonia emerged as the top candidate. When that was clear, I got on a plane to Skopje and a real entrepreneurial adventure began. First of all, I had to establish relations with the relevant authorities and ministries. What conditions had to be met in order to obtain a state cultivation license? What forecasts can be made for the future of regulation and legal handling of cannabis? I arrived there with nothing but a firm intention. Behind the now existing, ideal setup with a modern, massively expandable production site, the infrastructure and a qualified team, there is a great deal of sacrifice, especially in financial terms. Up to now, I did alll investments on my own.
MediCrops´ executive summary reveals that you will not only grow cannabis flowers on an industrial scale at your first production site, but that an extraction plant and a laboratory will also be purchased. What about further financing?
Offers have already been made that would cover the entire financing requirements for the coming years. However, I am reluctant to carelessly agree to these offers . Such deals with larger companies always entail dependencies, exclusive contracts, drain of know-how, etc. It is not possible to act self-determined and agile. In this early phase of the business, I want to avoid to be tied down to a regime with which opportunities, a young and dynamic market constantly offers, need to be discussed until they have passed.
I also believe that large conglomerates or corporate-controlled puppets are particularly unpopular in the alternative cannabis scene. From the philosophy of “grabbing”, which has shaped our economy so far, I believe in a change to the “sharing”. After all, many people who actually contribute indirectly to the creation of value in the New Economy are isolated from it. Take Instagram, for example: 13 employees generate a company value of one billion dollars within two years. But what constitutes this value? Mainly the registered users, who do not benefit from it. I think that such procedures must be questioned. I also think it’s absurd that the vast majority of small investors are usually only involved in IPOs when banks and brokers have already filled their pockets – and their nest eggs are used up as cannon fodder. Like mostly to late for the party.
Precisely because our business is about a plant that actually “belongs” to all of us, I would like to set an example in terms of financing. That is why we are going down this path with a colourful mixture of private investors who want to support for the medical benefits of the hemp plant out of belief and not just because they smell a profit. A bit like crowdinvestment – only not quite as anonymous. Of course, for me as an entrepreneur it is also about profit, but I prefer to distribute it to many small entities rather than to one big one, for whom it makes little difference anyway.
What strategy do you conduct to get involved in the market?
The strategy is to cultivate a range of the highest quality plant genetics, which are particularly effective for certain diseases, under GMP conditions and to produce ready-to-use preparations in different application forms that are safe and effective for patients. This is because every strain has a specific profile of cannabinoids, some of which have not yet been identified. The entourage effect in combination with terpenes and other secondary plant substances also plays a role in the tolerance and effectiveness of the medicinal plant.
We are significantly expanding the range of available cannabinoid-containing preparations in Europe. In Macedonia, we are able to produce outstanding EU-GMP-certified quality and offer it at competitive prices. There is a great unmet need here. We are breaking down open doors with pharmaceutical distributors. “How much and how soon can you deliver?” It’s a phrase that comes up frequently in these discussions. The long-term goal is the development of drugs with patent protection for the specific treatment of certain conditions. We are also keeping a very wake eye on the development of the recreational/stimulant market, because Luxembourg was the first EU country to announce the tangible step towards full legalisation and has certainly stirred the situation up a little. Personally, I think that culturally we are not so remote from the Americans, Canadians and Dutch. And it works very well in those Countries. The legal market brings the billions to the tax office instead of into pockets of organized crime, and the consumer could rely on receiving a flawless, safe and high quality product. There is really only one appropriate political decision here. And when this market is opened up, we want to be at the forefront with a premium brand, a high recognition value and an appealing image. There is also an interesting coffee shop franchise concept on the idea pile of my partner & marketing expert Benjamin Köhler.
What has happened since the ICBC last May? What were the most important milestones in 2019 for you?
In our year of birth, the selection of a suitable production site in Northern Macedonia and the recruitement of key positions within the MediCrops group had top priority for me.
I confidently call the philosophy we work according to “The best or nothing”. The search for an ideal location for my project turned out to be a real odyssey. In all parts of the country more than one hundred objects were inspected by me and my team. In addition, there were countless discussions and negotiations with local authorities and their officials. It is a country in which one definitely needs good networking and must also be prepared to dive very deeply into the events and society there. This is the only way to obtain reliable information that will enable you to make the right decisions and, in the case of a risky project, to ensure a minimum level of investment security
Can you be precise about Situations where this was helpful?
Of course, how much time do you have? (laughs)
Something of particular significance was when we decided against a location near the capital Skopje. Skopje initially seemed attractive to me because of its proximity to universities and general infrastructure.
There was also a gigantic industrial park near Skopje where a number of large factories from the communist era were for sale. Due to the strict GMP guidelines about contaminants and purity that apply to the production of pharmaceutical grade cannabis, we carried out an extensive analysis of the facilities offered. Soil and water samples, radioactivity etc..
Increased concentrations of a halogenated hydrocarbon were found. An organic solvent which was formerly used as an insecticide under the trade name “Lindan” but which is now prohibited.
This was too delicate and we decided to start in the green oasis of Vevcani. Although this location is a little smaller than I wanted for the beginning and is situated in a rather rural environment, it offers other special features such as direct access to mountain spring water and 300 hectares of land for outdoor cultivation in the surrounding area.
Shortly after we decided against the industrial estate in Skopje, a catastrophic chemical accident occurred right there. It turned out that hundreds of cubic meters of the substance we found in the soil samples were stored there in rusty tanks.
These exploded for unconcluded reasons and contaminated the entire area within a radius of 2 kilometers.
It can be considered a safe fact that no cannabis of pharmaceutical purity can be produced there in the next few years. If we had already established a production facility there, this might have been the end of the company. For me again a great example that as an entrepreneur you cannot proceed carefully and analytically enough and how important it is to have a top management with whom you exchange on every detail.
What are the players in your top management?
Last year, I entrusted our CEO Toby Shillito with the management of the operational business. I am particularly proud of having him for this role, as this man has more than 30 years of experience in the international cannabis business, is well connected in the industry and also has a wealth of knowledge about cultivation methods and plant genetics. A real unicorn and actually priceless. At our subsidiary MediCrops Macedonia Ltd., when filling key positions, we made sure to recruit experienced people with close ties to authorities and ministries. Or even with a direct connection, such as our botanist Goce Georgievski (scientific management & compliance), who also heads the Science and Research Department of the national Ministry of Agriculture.
But to get to the real luminaries with specialised knowledge of cannabis cultivation and genetics, it is necessary to dive into subculture and establish a relationship with those people. This requires a lot of sensitivity. In the meantime we are moving within a network of growers who have been awarded in Cannabis Cups for their work. In principle, a grower is characterised by mastering certain genetics, i.e. controlling and developing them further. This only works if the grower has developed a long-term relationship with the plant. Such people do not work for everyone.
You are new to the industry. How do you find suitable manpower for your company?
In Switzerland, the pharmaceutical industry is traditionally very strong and top universities are located here. I am also connected very well here. This proximity is advantageous because we are competing with established drugs with a highly effective medicinal plant. This is where supporters are needed whose position and research carry weight.
I also found most of the many events that I attended with my team around the world very valuable. The ICBC in Zurich, Cannabis Finance Forum London, European Medical Cannabis Summit in Malta etc. Here you meet people who are also very enthusiastic about the plant and the business and especially some who have expertise in specialist issues such as genetics and extraction. When it comes to cannabis, which was banned for 70 years and has been again legally cultivated commercially for a few years only, personnel with profound knowledge and experience is rare of course. In the meantime, however, we are very well positioned in terms of personnel.
And the outlook for 2020? What goals are you pursuing this year?
The next big step is to fully equip the cultivation plant and extraction system at our first production site in Macedonia. And of course the very complex and costly certifications according to EU-GMP standards, which affects the entire operational processes from plant breeding to processing, storage and logistics. In addition to the architecture, well trained personnel is also decisive in this topic.
In the gold-rush atmosphere created by the liberalisation of the cannabis market in Macedonia, many people wanted to jump into it and underestimated the effort required to introduce GMP standards by far. This is the prerequisite for being able to sell a cannabis product on the medical market in Europe at all.
The pioneers there made many mistakes that we will not repeat. In order to implement the standards, we have a team of specialists who formerly designed and now approve GMP production plants for big pharma. These are projects that are extremely costly and usually difficult for an independent, young company to manage.
In this case, however, our GMP partner is also an importer of medical cannabis. So we will be able to pay for our GMP certification in “Weed”. (laughs)
Otherwise I do not strategically commit myself too much. The market in Europe may change completely in a matter of days, as happened on the American continent. The strength of MediCrops is agility and so we simply try to be as well prepared as possible for different scenarios and opportunities.
At the beginning of this journey I could not have imagined under any circumstances that I would be at this point with MediCrops today. I am very pleased with what we have achieved by joining forces.
It has not been easy, and with every further step it becomes more demanding. Nevertheless, I am looking forward to everything that lies ahead of us.
Mr Mestrangelo, we´d like to thank you for the interview and wish you every success for the future.