19 September 2021
By Max Holloway
LYPHE Group CEO Dean Friday Talks about leading the way in Medical Cannabis, in an interview with Benzinga
Interviews, Lyphe Group
In a recent broadcast, Dean Friday, CEO of LYPHE Group, chatted with Benzinga about the technology behind providing medical cannabis, the current business model and future plans for LYPHE Group.
Read the full details of the interview below now:
To get us started, can you tell us who LYPHE Group are and a little about your background as an introduction?
My name is Dean Friday, and I’m originally from Perth in Western Australia. My background is in accounting and finance, having trained at KPMG in the very early stages of my career. I came to the UK pretty soon after that and stepped into investment banking for a couple of years, soon moving onto tech entrepreneurship. I didn’t really enjoy working for big corporations, so I set up an early stage economy business which was profitable and gave me a good way to exit that world.
Coming from a mining town like Perth, I spent a number of years as CFO for a couple of different mining companies. This was a fantastic experience, taking businesses through from exploration to development and then into production. I then moved back into technology and tech businesses, working in a number of roles such as co-founder, CEO or CFO in a SaaS business, ecommerce business and also business services operations.
This was all before I started as the co-founder of LYPHE Group. LYPHE Group is now the largest medical cannabis business in the UK by patient numbers and revenues and we’ve established a very solid position in the UK market, currently servicing 60% of the UK’s medical cannabis patients.
In the UK, what is that market size? What does that look like?
It’s an early stage market, I think there’s around 8000 patients in the UK market at this point in time, so it’s very early stages but it’s following the exact same trajectory as most of the markets we’ve seen. We’ve quietly studied this as we moved through our first year, and now we’re in our second year we’re starting to see that doctor education is going to take a tight grip on our business. Now that the stigma is starting to dissolve across the country and people are becoming generally more aware of medical cannabis and the benefits of medical cannabis as a therapy, I think we’re going to become more widely known and we’ll start to see exponential rates of patient growth.
This is a very heavily regulated market in the UK, which establishes barriers at entry, but our business is one of the first movers in the market in the UK. We operate at the intersection of what we call health tech and medical cannabis and are a vertically integrated business. In our world, that means we incorporate manufacturing, importing and wholesale clinical care and dispensing services. We don’t go upstream to cultivation, because there’s actually no cultivators permitted in the UK at this point in time and because that’s not really where we see ourselves being best placed to build long term value downstream. On that note, it’s worth mentioning that we want to focus on those downstream activities and own the direct patient relationship rather than a customer relationship. We believe that is how we will build our brand and get long term value in the market.
As an extension of that, we’re looking to build the most recognised cannabis pharmacy dispensary brand, the most recognised cannabis product brand and the most recognised clinics brand. Whilst that’s not as important in the North American markets, it’s actually quite an important part of most of the European markets as it’s the patient access point. There’s not really any marketing permitted for medical cannabis products across Europe, so it’s very important to be able to have that direct link to the patients and doctor/patient access.
During COVID, we all saw the digital world explode, particularly telehealth – can you tell us a little more about this part of the tech platform for you guys? What does it look like or what does it mean? What does it represent to you in terms of opportunity in the business?
The tech focus in our business has really come from a number of the senior executive team. I came from a tech background and the other co-founders similarly came from technology, digital marketing and these types of aspects. COVID had a really interesting impact on our business.
Before COVID, we were operating from seven different clinic locations across the UK and that obviously then stopped. However, we were able to get special dispensation to operate as a telehealth clinic, which hadn’t been permitted before. Due to us being a very tech-enabled team, we were able to switch the business model very quickly and capitalise on working remotely – and now 100% of clinical consultations are done via telehealth. In addition to that, the digital pharmacy is operated online through what we call distance selling in the UK. That is a big feature of the business, and every patient that receives product through us is transacted via their digital pharmacy with the product then being directly delivered to them. This is really important for our business in a number of different ways. Firstly, we see that establishing a tech-focused business is of critical importance in terms of facilitating our ability to be able to scale not only in the UK, but also into other markets in Europe.
Secondly, we feel as though we’ve really nailed the business model in the UK and we’re doing all we can to cover all aspects of the market. That’s largely because we had to actually build it out ourselves based on the cannabis infrastructure because there were no doctors in the UK who were educated and understood medical cannabis. Due to this, we now run an academy to train and educate doctors on how to prescribe medical cannabis.
Thirdly, there were no clinics that specialised or established the focal point or patient access point for patients that needed medical cannabis. There were no dispensaries or anywhere that would be able to source the product, it hadn’t been imported in the country before and there was no cultivation permitted. We established the import of the first product into the country and then made the first bulk order into the country. So yes, it’s been a very curious and trailblazing time to be in an industry like this – but it’s certainly been working for us in the UK market.
Would you say that you’re trying to be the Amazon of cannabis? It seems like LYPHE Group is expanding faster than the market, so how would expansion work for you?
Good question – yes, very much so. We see ourselves in that way in a lot of respects and we have a go-to market strategy. We’ve got a targeted number of European states. What distinguishes Europe from the US, in a lot of respects, is that the European market is complex and there’s this overarching regulatory framework that’s established in the EU. On top of that, each single country in Europe is different in terms of the whole value chain ranging from importation, how product can be imported and, from a clinical point of view, what conditions can be prescribed for and whether the product can be prescribed by a GP or if it has to come from medical specialist.
This medicine is seen as a last resort, meaning that several other products need to have been tried or therapy needs to have been tried before medical cannabis can be prescribed. Then there’s lots of different rules around pharmacy, as well. So, you’ve got to have a very close and in-depth understanding of the regulatory framework in every single market to be able to have a chance of establishing a good-to-go market strategy and be able to execute that well. In answer to your question, yes, we’re hoping to soon deploy into other European states in the near future.
That’s phenomenal. I ask this question a lot, but when it comes to the overall plan, what are LYPHE Group’s thoughts? Are you potentially in the position for partnerships? Or are you building the brand to be, say, the next Pepsi/Coca-Cola?
We’re a team of operators, in some respects, and we’re focused on making sure that we absolutely nail the operational side in each of these new markets that we’re looking into. Having said that, I’m sure we’ll be seen by a lot of different groups and this could be key to opening up Europe for, let’s say, a North American suitor or an ordinary American group looking to jump over the pond. Europe is a hugely attractive and exciting market and I do think that, globally at this point, it has a population of close to double that of Northern America.
I was looking up the top 10 North American Cannabis companies and they total up to 120 billion of market capitalisation compared to what, I think, may be 500 to 700 million in total in Europe. That’s just because we haven’t got to that inflection point, we still have so much growth to come. So that does get us talking about the huge opportunity that is over in Europe.
Are you getting interest from North American groups?
Right now, our focus is on delivering against our internal operating objectives and maintaining our position in the UK and then also entering into the new European markets. Once we’ve done that, we’ll look opportunistically at the interest from groups internationally.
With 8000 medical cannabis patients in the UK currently and you guys owning 60% of the market share, what is that like for you when you’ve been doing all the grunt work building that market share from the ground up?
As I touched on before, there was no medical cannabis infrastructure for us to work with or a supplier to use – we had to build that all out ourselves. So we’ve had to draw on the skill sets that we had in our organisation from different fronts. We’re not a very narrowly focused business, but we’re focused on what we’re doing.
We do need skill sets from up and down the value chain to be able to make it all happen, and we work with great partners as well. However, for us, it’s a heavily regulated market and it’s a relatively complex patient pathway and access pathway. It requires us to be able to build our systems and our business so it can not only deliver and execute very well from a customer service point of view, but also to an operational point of accuracy which can then be built on where growth has then been happening so fast.
We’re growing significantly month on month so, yes, for a business like this, there’s always going to be growing pains – as there always will be with any high-growth business.
As you just brought up partners, are you going to keep bringing in new partners? It seems like you have a high standard for who you work with.
It’s really important to us that we have our own brand of medical cannabis products, which is the biggest selling product in the UK market due to the size of the market we have. We source and supply about 90-95% of the product available in the UK through our dispensary.
We’re always searching for the suppliers that can provide high quality products with a secure supply chain, and that’s always been an issue with the European markets because there’s pretty tough regulations over here in terms of the EU GMP regulations. Partners that can provide products at a good price that meet these standards are valuable, because medical cannabis can be quite expensive in Europe.
We feel that bringing the price down to the consumer is really important in terms of continuing to accelerate the growth and accessibility of medical cannabis to patients, not only here in the UK but also into the other markets that we’re working closely with. It’s a big focus of ours, and we’re hoping to deliver a competitive advantage moving into these markets.
It sounds like you’ve built a competitive moat around yourselves. Is there a potential for you to move this business model back home to Australia at some point, or take it across the pond in the other direction?
The Australian markets are interesting. We will go back at there at some point in time, but I’m pretty firmly wedged into the European market for the foreseeable future.
Do you want to leave our investors with any last thoughts?
I think we’ve covered off the major points and features of where we are and what we’re doing, both in the UK and other European markets. I think what sets us apart is having access to superior regulatory market intelligence and industry intelligence into each of these markets. It’s being able to build a business model and scale very quickly and easily.
We know a lot of Canadians have tried to blitz their way into Europe with a market strategy and that hasn’t gone very well. Without the right strategy, you end up spending a lot of money without getting the proper understanding of what the local markets need. I think that’s been the secret sauce for us.
You can listen to the full Benzinga broadcast on YouTube here.