What is Cannabis?
As per The Alcohol and Drug Foundation, it classifies Cannabis as a cannabinoid drug. In the cannabis sativa plant, the primary cannabinoids are psychoactive cannabinoid THC and non-psychoactive cannabidiol. The drug is mostly used for recreational and medical purposes (archaically used for spiritual goals as well), and it is believed to have geographically originated in Central Asia and the Indian subcontinent. The drug could be smoked, vaporized or eaten, in various forms, subject to its purpose.
Medicinal Cannabis the current hotspot for investors with a nose for risk is riding high in U.K. post its legalization in October 2018. The tall plant with a stiff upright stem is already legal in Canada and most states in the United States, though it remains illegal at a federal level.
The industry across the world is viewed as apostolic and constrained by blatant regulatory restrictions. However, with the time given more practical medical research shed light on the medicinal properties of cannabis regulations started to get loose to incorporate it into mainstream Cannabis.
This is important because the existing illicit cannabis market is vast, presenting a commercial opportunity as demand transitions to legal channels. This is because worldwide consumers spent billions of dollars on Cannabis. However, only a tiny fraction of the amount accounts to legal, medical sales.
The name Cannabis invariably sparks the name of Pablo Escobar and drifts the mind to the jungles and back alleys of Latin America. It is no wonder then that the first nation to legalize the wonder drug through legislation belongs to that region itself. In December 2013, Uruguay gave the legal stamp to recreational marijuana.
However, readers must also remember that Cannabis stories are all dealing with getting the shipments to North America, where lies the dollars. So, the next to follow suit was one from North America. In 2018 Canada legalized private sales of recreational marijuana with Bill C-45.
Coca-Cola Jumping the Cannabis Bandwagon
Given the sky-high growth aspects in the pot space, even corporate bigwigs like Coca-Cola are jumping the bandwagon. Coca-Cola also has an agreement with the Canadian company Aurora Cannabis for work on its Cannabis infused drinks project. The industry is abuzz with Coca-Cola and Monster Drink fighting their legal battle over the launch of Cannabis infused drinks. The keen interest came from the simple fact that virtually all the cannabis market is untapped. The simple fact illustrates this that in Canada before legalization consumers spent USD 6 billion in 2017 on Cannabis; however, the sad truth is that of this, only 5% came legally.
Per broker estimates in 2018 the pot space was valued at USD 14.5 billion, and it is projected to reach USD 89.1 billion by 2024, with a compounded annual growth rate of 37% during the forecast period. A real-life example would be the case of Canopy Growth, the first listed North America pot producer, which at the bourses has already doubled in value since 2018.
Recent Developments in the Cannabis Space
Another Round for Canadian Retail Cannabis
On Jul 3, 2019, The Government of Ontario, Canada announced another round of cannabis retail store disbursement after the initial lottery process conducted in January 2019. The Alcohol and Gaming Commission of Ontario (AGCO) would issue another fifty-retail store permits across the province, eight of which will be separately allocated to stores to be located on First Nation reserves. The allocation would take place in the second half of August 2019. However, to participate in the disbursements, the applicants must meet particular prerequisites. The first would be a retail space as of October 2019 and adequate financial capacity of USD 250,000 in cash or equivalents and a USD 50,000 letter of credit.
In other developments, lobbying efforts have also picked up speed. In June 2019, a gamut of U.K. politicians and public safety officials visited Canada for Canadian Cannabis Week. The delegation also visited cultivation sites and legal retail stores to have a firsthand feel.
Cannabis an Unstable Bomb or a Ride to Heaven
To anyone even vaguely familiar with the mechanics of Cannabis space, it is known that space is extremely volatile. The full credit goes to the public perception, which is painted with the picture of a decades-old image of Cannabis as only marijuana, a potent drug for self-destruction. This mainly because the public has been fed a whole lot of gangland saga tales through popular culture. One can take a look at the United States, for example. Although the nascent cannabis industry makes millions in Colorado and California, the whole set up remains at the mercy of mood swings of incumbents at the Capitol Hill. This is evident by the fact that the industry there is spending earnest money on lobbyists.
Conversely, if the Capitol Hill took any bold step and cancel its federal prohibition, the gains for early investors would be massive. Valuations would touch heavens overnight.
Key Players in the U.K.
Cannabis mostly an unknown entity in the United Kingdom, hit its high point in the sun when in 2018, medicinal cannabis oil was used to treat severe epilepsy of a pre-teen boy at Heathrow Airport. The U.K.’s domestic cannabis industry is new as medical marijuana only became legal in late 2018. There are several local companies such as-
Founded in 1998 the company focuses on the development of plant-derived cannabinoid therapeutics. It has operations in both the United States and the U.K. The company made great strides in 2018 by bagging the first Food and Drug Administration (FDA) approval for a prescription drug made from the cannabis plant. The drug christened Sativex now sells in more than 25 countries globally. The broader market appeal for this medicine stems from the fact it is used by patients diagnosed with multiple sclerosis.
Next, the company developed Epidiolex, an oral formulation of purified cannabidiol (CBD). Epidiolex is prescribed for the treatment of Lennox-Gastaut syndrome or Dravet Syndrome. Epidiolex was launched in the United States in November 2018, and for the European launch, the company expects a favourable decision in 2019.
Sativa Group PLC
Sativa Group PLC is the first listed medicinal cannabis non-bank financial institution in the United Kingdom. To focus on the United Kingdom, the company created a board to formulate investment strategy in medicinal cannabis and cannabidiol products. Earlier the company operated mainly in the Medicinal Cannabis sector in North America. Prior bets include Canadian plays like Veritas Pharma Inc. and Rapid Dose Therapeutics. Its German subsidiary where the company owns a 60% stake is steadily progressing after getting the regulatory green light towards import and wholesale license. The company plans to capitalize the permit once it gets it to distribute Medicinal Cannabis products in Germany.
Associated British Foods
Associated British Foods is a British conglomerate that marks its presence into the cannabis space through its wholly owned subsidiary, British Sugar. The company has an agreement in place with GW Pharmaceuticals. Per the agreement, British Sugar will be a cultivator of the cannabis crop. GW Pharmaceuticals would utilize it for its drug Epidiolex.
The stocks of Associated British Foods last traded at GBP 2,462 on LSE, up by 0.7 per cent against the previous day closing price. Stock's 52 weeks High and Low is GBP 2,660/GBP 2,011. The company’s stock beta stood at 1.01, reflecting slightly higher volatility of the stock as compared to the benchmark index.
Ananda Developments is also another name that smart investors might have a look at. The company targets the pharma space and is developing Cannabis based products for the same. It is listed on the United Kingdom’s junior Nex market.
Regulatory Updates in the United Kingdom
Given the threat of public backlash, the organizational development by the National Health Service (NHS) in the United Kingdom is progressing at a slow pace. The National Institute for Health and Care Excellence (NICE), the regulatory body of the Department of Health in the United Kingdom is working on preparing definitive clinical guidance for cannabis medicines. It is expected, the regulatory body would publish it in the fourth quarter of 2019. Once released it at one go would simplify and standardize clinical decisions on cannabis medicine prescribing.
Looks like God Also Likes Cannabis
The lure of forbidden fruit has not even spared the gods. The pot space seems to be getting support from investors of an unlikely source. As reported in media, the Church of England’s investment arm which oversees an almost GBP 12.6 billion investment portfolio, is contemplating stop treating the field as taboo and consider investment into medical marijuana.
What also is a big plus for pot is that it can delve into two broader spectrums of consumers in the medicinal Cannabis and consumer products. In the therapeutic space, big pharma is going all out to bring out more cannabis-themed products on the shelves.