Medicinal cannabis is now legal in many European countries

The UK officially changed the law on medicinal cannabis to allow the prescription of cannabis in specialist cases 1st November 2018. The change in law took place amidst of a wave of policy change throughout Europe that permitted medicinal cannabis to be prescribed for certain conditions including Epilepsy, MS, Crohn’s disease and for pain management.

Despite the legal framework permitting the prescription of cannabis in the UK, few have actually been made and unfortunately patients are still being forced to seek treatment through grey-market supply chains.

Having said this, the number of prescriptions made in the UK is rising and is set to increase further as clinicians increase their understanding of medicinal cannabis and gain confidence in making prescriptions. This is largely a result of the great work campaigners are doing in facilitating an education process and maintaining pressure on authorities.

Many countries currently prescribe through limited compassionate access programs and the mass-market launch of medicinal cannabis treatments driven by clinical trials and formal approval is still a number of years off.

This creates an opportunity for nimble research and development programs to develop, test and produce cannabis derived pharmaceutical products for the wider market that add to those cannabis medicines currently available such as Sativex.

In the meantime, the low-THC Cannabinoid (CBD) market is filling the gap for those who wish to self-medicate and driving a boom in demand for cannabis-related products.

Brightfield Group, a cannabis industry research house, estimates the European CBD market is going to be worth $416m in 2019 versus $5.7 billion in the United States. Highlighting the significant growth prospects for the sector, Brightfield forecasts the European CBD market will grow by 400% by 2023.

It is important to note that some European countries are yet to legalise medicinal cannabis or CBD which will present new markets when their policy falls in line with recent changes in Europe.

European cannabis companies are attracting investment from the UK

Despite ongoing Brexit negotiations, London is still attracting interest from companies seeking to raise capital through public markets. There hasn’t yet been a cannabis IPO on London’s main markets and to date early stage investors have satisfied the funding requirements of a range of innovative cannabis companies through private channels.

Documents seen by the Cannabis Investor Forum suggest investors are prepared to invest in companies at eye watering valuations in private markets in the expectation of exponential growth in the short term and IPOs over the next 18 months.

Private markets have largely driven the deal flow in the UK as investors await a number of potential IPOs of cannabis-related companies on London’s Main Market.

London does have a number of cannabis-focused companies listed on its exchanges, but these tend to be centred around the junior exchanges or companies that have transitioned their operations towards cannabis by building on existing assets.

North American companies are targeting Europe

Legalisation of recreational cannabis in Canada drove a material increase in revenue enjoyed by the country’s cannabis producers, but with the impact now largely priced, North American companies are now targeting further growth in Europe.

Canadian cannabis companies have been piling into Europe through way of acquisitions and direct investment into establishing new operations.

Aurora Cannabis, for example, secured o foothold in the European hemp market through the acquisition of Agropro whilst pursing the construction of production facilities in Denmark and Portugal.

Canopy Growth, the world’s largest cannabis producer, have allocated $115 million to investment in Europe, setting sights on operations in Greece, Spain and Italy.

The acquisitive nature of North American companies presents an exciting environment for entrepreneurial European cannabis companies that are able to cement their presence in the market in the short-term.

Demand for cannabis is rising

A significant contributor to the upcoming boom in the European cannabis market is the basic economic demand function of an increased number of patients choosing medicinal cannabis and CBD wellness products over historical alternatives.

Highlighting potential growth in demand, a report by Barclays predicts the legal cannabis market will be worth $272 billion by 2028.

A large proportion of this growth in Europe will be in medicinal and pharmaceutical as increased clinician education facilitates a greater number of prescriptions.

In the medium-term cannabis consumption growth will be largely within the CBD market as touched on previously.

With the total size of the Europe’s health care market estimated to rise to in excess of $2 trillion in 2020, growth in the medical applications of cannabis provides a significant opportunity as stigmas are broken down and adoption increases.

The European cannabis industry will create jobs and provide economic growth

Economic growth is spluttering in Europe as the impact of accommodative central bank policy diminishes and the consequences of a US/China trade hit the European manufacturing sector.

The prospect of a European recession driving increased unemployment is exacerbated by the adoption of artificial intelligence and automation in the workplace.

Whilst cannabis companies employ reasonably high-level technological infrastructure in their research and development facilities, the production and harvesting of cannabis is still relatively labour intensive.

Additionally, the economy is likely experience job creation associated with the cannabis supply chain and distribution networks that will provide relief for jobs lost elsewhere in the economy.

Data from Statistics Canada reveals that around 60% of cannabis industry workers are employed in the harvesting and cultivation stage of production.

This will be welcome news to countries such as North Macedonia, Greece and Bulgaria who are licensing cannabis production facilities to revive struggling agriculture sectors.

There is also the argument that the potential wider legalisation of consumer cannabis would create a cannabis-based leisure market providing additional employment opportunities.

Incidentally, the leisure market is an industry that is predicated to expand as workers enjoy more free time as a result of automation and artificial intelligence.

Luxembourg have fired the starting gun for European recreation legalisation

While the EU operates a multispeed approach to cannabis regulation, Luxembourg has adopted the stance of Canada and numerous US states in laying out plans to permit the production and purchase of cannabis for recreational purposes.

The Luxembourg state has outlined a two-year timeline to legalisation that would see access for over-18s to recreational cannabis through government regulated outlets.

Comments from the Luxembourg government have so far suggested that they are keen to avoid a Dutch-style market where the country becomes a cannabis tourist hub.

This, however, may be very difficult to control. Luxembourg is small country that borders France, Germany and Belgium and the porous nature of these borders will inevitably lead to legally sold cannabis from Luxembourg spilling into these countries.

While France, Germany and Belgium could enact stricter border controls, it is more than likely to boost cannabis legalisation up the agenda at a government level, especially if Luxembourg demonstrates an effective system that secures tax revenue.

The Cannabis Investor Forum will be showcasing and debating the UK cannabis investment industry on the 24th October in the City of London. The one day event will feature keynote speakers, discussion panels and an exhibition. Please register for further information here.