Tag Archives: Demecan

February 11, 2020

European Cannabis is the Emerging Market to Attract North American Investment

By Mark Wheeler

Europe continues to be the new frontier of medical and wellness developments in the cannabis industry, with various sources predicting that Europe will become the world’s largest legal cannabis market over the next 5 years. Key related statistics, include:

A population of over 740 million (over double US and Canada combined)
Total cannabis market estimated to be worth up to €123 billion by 2028 (€58bn medical cannabis (47%), €65bn recreational cannabis (53%))
Over €500 million has been invested in European cannabis businesses (including significant expenditure in research and development, manufacturing and distribution)

To reiterate this belief, this month, hundreds of industry experts and delegates will be attending Cannabis Europa in Madrid, to discuss the expansion of cannabis across Europe and the challenges facing the industry across the member states of the EU and the UK.

Global mainstream leans to European strength

Since late 2018, major global operators have made substantial moves into the cannabis sector. Anheuser-Busch InBev, the world’s largest beer company and maker of Budweiser, entered into a partnership to research beverages infused with two types of cannabis. Constellation, owner of Corona beer, announced a commitment for $4 billion investment in Canadian cannabis company Canopy Growth. BlackRock Inc, through five actively managed BlackRock funds, has invested into Curaleaf Holdings Inc, a dispensary operator, for a not too insignificant investment sum of $11 million (as at March 2019). Such international investments prove that cannabis has moved from the fringes and into the mainstream.

When considering the impact of mainstream cannabis, it should be recognised that major European countries have approved or are planning on implementing, legalisation of medicinal cannabis. The UK, Germany, Italy and the Netherlands already have legal systems in place for medicinal cannabis and France and Spain are currently reviewing key legislative reform to align themselves with international practices. At present the German market is the third largest cannabis market (in terms of size) behind the US and Canada.

In addition to medicinal cannabis, several key European countries have systems in place, or are developing systems, or considering the reform of existing systems, to approve cannabis with THC content at a recreational level. The Netherlands already has a system and Luxembourg’s health minister in August 2019 announced the intention to legalise cannabis for Luxembourg residents. The Luxembourg government is lobbying EU member states to follow suit.

Whilst the EU has a labyrinth of laws in relation to edible CBD (as a novel food) which make the regulatory landscape complex, there has been an explosion of CBD products for vaping and cosmetics. Of course, with each of these products being subject to different local laws (some aligned between EU members states) in relation to vaping and cosmetic related regulations. The Brightfield Group has predicted a 400% increase in the European CBD market (including vaping liquid) from $318m in 2018 to $1.7 billion by 2023. There is also an expansion into applications for CBD with animals with many US manufacturers of CBD-infused pet food.

The European Parliament’s health committee has been calling for properly funded scientific research and there are motions to establish policies to seek to incentivise member states to advance the studies of medical cannabis, with a priority on scientific research and clinical studies – the first step necessary to drafting legislation, designed to better support the industry.

Where does the UK sit within cannabis?

Medicinal cannabis famously saw a legalisation, of sorts, by the then Secretary of State, Sajid Javid, who provided the authorisations for prescriptions for the high profile cases of Billy Caldwell and Alfie Dingley. Subsequently, on 1 November 2018, this was codified into law by an amendment to Schedule 2 of the 2001 Misuse of Drugs Regulations. This allows clinicians to prescribe cannabis as an unlicensed medicine.

There have, of course, been some high profile licensed medicines. The UK company, GW Pharmaceuticals, is the largest exporter of legal medical cannabis in the world, cultivating medical cannabis for production of cannabis-based medicines (e.g. Epidiolex & Sativex). Epidiolex (manufactured by subsidiary Greenwich Biosciences) became the first cannabis-derived medicine approved for use in the US for treatment of seizures caused by Lennox-Gastaut and Dravet syndromes (both severe forms of epilepsy).

When considering the level of research development and investment in the medicinal field, it is no surprise that the UK is the world’s largest producer and exporter of medical cannabis. Research published by the International Narcotics Control Board indicates that the UK produces over 100,000kg a year of medicinal cannabis.

Previous guidance from the National Institute for Health and Care Excellence (NICE) indicated that further research is required to demonstrate the benefit of medicinal cannabis, citing its cost versus evidenced benefit. However, there is now renewed confidence in the UK following NICE’s approval of two cannabis-based medicines produced by GW Pharmaceuticals, Epidiolex (cannabidiol) oral solution and Sativex (nabiximols), for routine reimbursement through the NHS.

Following the re-categorisation of medicinal cannabis in November 2018, a number of clinics have been established where specialised clinicians can start the process of prescribing cannabis based medicinal products (CBMPs). Whilst this route is not fast, and challenges are well documented as to the satisfaction of prescriptions made in the UK, there is momentum behind the development of this as a means for providing genuine and established medical care. A significant step in October 2019, was the CQC registration of one such cannabis clinic, Sapphire Medical Clinics Limited.

In November 2019, a project backed by the Royal College of Psychiatrists was announced with the aim to be the largest trial on the drug’s use in Europe with a target of 20,000 UK patients.

The UK medicinal cannabis sector is establishing a research-based approach to expand usage in the UK and across Europe.

How North America compares to Europe

Canada

Canada, as a first mover within the cannabis sector, has a multitude of large companies which are well-capitalised and have substantial international footprints. The Canadian exchanges have large listed companies looking to Europe with the intention of acquiring or investing into European operations. As of the date of writing, the 10 largest cannabis companies in Canada have an aggregate market cap of over $23.5 billion (and all registered cannabis companies in Canada having an aggregate market cap of over $46.5 billion).

Listed companies have had a tough time over the last 6-12 months with a slowdown in the market as a natural re-balancing occurs – part of which is due to rapid expansion and heavy investment into cultivation by all the major participants in the market. Over the next 6 -12 months we can expect to see management changes (some of which will be voluntary and some of which will be imposed by institutional pressure) to introduce different skill sets at board and senior management level to facilitate the oversight and leadership necessary for large pharmaceutical companies. Many operations have expanded into highly regulated products and complex supply chains whilst still operating with fundamentally the same team that established the operations with entrepreneurial efforts but, perhaps, a lack of experience in these sectors. The recent announcements by Aurora Cannabis and Tilray demonstrate that these restructurings and costs reductions have already commenced. However, with increased experience at board level and an improvement of profitability focused on sustainable business practices, should come new opportunities on a global scale for these North American operations.

The US

The US market, because of the complexity of state and federal laws not being fully aligned, is closer to its infancy than the Canadian market. This is not too dissimilar to the European market. That said, there are a number of well-funded and quite large US enterprises. A limited number of these, such as Tilray, are looking to expand into Europe.

Many of the companies in the US have, and continue to, expand quickly so we can expect to see a number of mergers and acquisitions. We are likely to witness Canadian and US entities merging with one another with the potential for acquisitions for operations within Europe. It is unlikely that the North American companies will risk their capital through organic growth so would be expected to be identifying “turnkey” solutions.

One of the major challenges facing US companies is the complexity of supply and distribution. This is largely a result of the complexities for state and federal laws interacting with one another as well as international importation and exportation with US states.

How you can invest within the UK and Europe

Developments in the fields of research and development are anticipated to add further weight to the lobbying of government and regulatory bodies across Europe.The UK remains, despite the events of Brexit, a major financial hub for Europe. The London market has seen the growth of several investment and operation cannabis companies. This includes private companies such as; EMMAC Life Sciences Limited and the operations formerly trading as European Cannabis Holdings (now demerged into several new entities including NOBL and LYPHE) as well as publicly listed companies; including Sativa Group PLC (the first publically listed cannabis specific company in the UK) and World High Life Plc, both operating on the NEX Exchange.

The Medical Cannabis and Wellness Ucits ETF (CBDX), Europe’s first medical cannabis ETF fund, domiciled in Ireland, and which has been passported for sale in the UK and Italy, has also caused a renewed stir within the market with a further platform for listed investment.

As the regulatory framework evolves further there is an anticipation that more medicinal cannabis and CBD related enterprises should have the opportunity to list on public exchanges, whether in the UK or in European countries.

Conclusion

Despite a period of slow down following the natural rebalancing of the fast-growing North American markets for the cannabis sector, there is renewed confidence in the expansion of the industry. Developments in the fields of research and development are anticipated to add further weight to the lobbying of government and regulatory bodies across Europe.

There is an increased push for a public dialogue and consultation in relation to medicinal and recreational cannabis in the UK, backed by several mainstream media platforms. This is likely to be shaped in some parts by national debates in Luxembourg and other European countries as they consider their own domestic laws.

With European parliaments across the EU (including the UK) hopefully having time freed up to discuss other political matters now that Brexit is progressing, the next 18 months should prove an exciting time within the European cannabis sector.

February 11, 2020

German Medical Cannabis Imports Doubled in 2019. So What?

By Marguerite Arnold

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Germany, for all of the other developments going on right now (globally) is still chugging forward, in integrating medical cannabis. It is slow going – but certainly going.

In terms of overall numbers, there is certainly an interesting story to tell. The import of medical cannabis grade flowers also more than doubled last year over 2018.

Hooray.

But does the “average” German patient have easier access even with more product in the market?

Answer: There are certainly more Germans with more cannabis prescriptions. See the increase in imports and the numbers from the statutory health insurers.

But even though these are clearly positive signs, it has not necessarily gotten much easier so far. That said, it is about to get quite a bit cheaper.

The Mainstreaming of the German and EU Cannabis Market

National pride aside, the German government is in fact the entity which got this whole ball of wax rolling here, and it is they who still determine the pace of regulated change. The cultivation of medical cannabis is now fully underway in the country, with Demecan still in the most interesting position. Aurora has just gotten another certification and is back on the ground in pharmacies.

But many issues remain.

On the ground, pharmacists cannot get enough product on a reliable basis. Patients are still caught in the never-ending merry-go-round of chasing down willing doctors, battling insurance companies for reimbursement and trying to have a good relationship with their local pharmacist. If, of course, they can afford both the drug itself, along with its outlying costs and frustrations to access, and their health insurance company plays ball.

Even then, chances are, the most seriously ill patients are still relying on “other” sources. A reference wholesale price (of €2.30 a gram set by the German government last year) is likely to stabilize the market if not pricing. For everyone – not just those on public healthcare.

The plant is becoming commoditized, even if slower than most people in the industry long to see.

On top of that, while certification is currently gaining steam in the industry, especially in Europe, there are many problems and issues remaining – on everything from processing of the flower to registration of products made from it. And in both the medical and recreational market.

Overall, in other words, markers are all good. But the process is going to be (very) slow if steady for the next several years.

Don’t Expect Continual Explosive Growth

Dronabinol is still at least a third of the public healthcare market. The majority of patients who receive the drug still fit the same overall treatment profile (chronic pain). And doctors are still highly reluctant to consider it as a more standard practice.

But the most important conversation, by far, is still basic legalization and regulation beyond that. That too will change. Not to mention the recreational discussion now absolutely on the table. Four years of a medical market only continue to open doors, not close them. And elsewhere, across the continent, reform is generating new producers from not only southern Europe but just about everywhere else on the globe where cannabis is becoming legit.

For the next year, however, as all of these issues continue to be debated, and at both a national and increasingly local level, don’t expect “explosive” anything.

Those who have established themselves are dug in. It is going to be trench warfare from now on out, barring a major surprise, for the next few years.

What Is Likely To Change The Equation?

CBD battles are absolutely strategic manoeuvres through the intricacies of this regulatory shift (legalization of the plant). This alone, particularly for the next few years, is likely to also move the conversation forward – and not just on the medical front.

It is also patently obvious that governments (starting with Italy) are beginning to again consider the topic of limited home grow and recreational reform.

But the most important conversation, by far, is still basic legalization and regulation beyond that. And until that happens, nothing will be “normal” about a market that is clearly being allowed to grow, in a market which is being carefully tended and managed.

“Explosive” in other words, is far from the agenda of anyone in authority who is making the decisions. And that includes regulated market growth and numbers for the next 48 months at least.

April 5, 2019

German Cultivation Bid Appears To Have Three Finalists

By Marguerite Arnold

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The Frankfurt-based newspaper Handelsblatt Zeitung is reporting that three Canadian firms (actually two Canadians and a German start-up cofounded by another Canadian company) have now been selected as the first cannabis cultivation bid finalists, however insiders on the ground say that this is not necessarily a final decision.

A Berlin-based subsidiary of Wayland in Germany called Demecan, along with Aphria and Aurora have all been named as bid finalists pending a normal review period.

However, there are other complications still looming. This is far from over.

The first issuance of the bid in 2017 went down in court over a technical fault on the part of the issuing agency. The current iteration was posted last summer and saw its application moved several times because of further legal challenges.

As Peter Homburg, partner and head of the European Cannabis Group at Dentons said when contacted by Cannabis Industry Journal, “This is of course not an official announcement. I have a tendency to believe that others involved in the tender process historically may well challenge this decision.”

BfArM, the federal German agency in charge of the cannabis cultivation tender process, did not respond to a request for a comment as of press time.

The Decision Is Far From Over

Here are the basic challenges still ahead:

There is a lawsuit pending against the bid itself from applicants that has yet to be decided. The Klage (formal hearing in court) is due next week. If that does not derail the process, here are the next considerations.

While all three firms named in the bid have international reputations, there are some pending questions.

Wayland is far ahead of the other two firms in terms of production capability in the country. Their facility in eastern Germany has just been certified GMP standard – which means they are qualified to produce the quality of flower required for medical consumption. This news is also far from a surprise.

As Ben Ward, CEO of Wayland Group, commented when contacted by CIJ for a response via email: “At Wayland, we believe in meaningful partnerships, investing in Germany from day one, demonstrating a long-term commitment to the market,” says Ward. “Wayland GmbH is a German company, operated by Germans, existing in Dresden and Munich and is committed to this market. The companies awarded lots received the allocation based on a rigorous application process, not media sensation.”

Of all the Canadian firms, in fact, despite its lack of high-flying stock price, Wayland has made the most concerted effort to show its commitment to producing in Germany by a large investment of capital and expertise. Further, the firm has shown itself to be the most culturally sensitive to German culture, including hiring a female member to the board (a hot topic far from the cannabis industry). However, there are other issues looming. On the same day that Wayland issued a press release announcing its position in the bid, it also issued one announcing the merger talks with ICC had failed.

The second is that Aphria’s main cultivation center in Canada is not EU-GMP certified although they have applied for the same and now also own one of Germany’s largest distributors (with approximately a 6% market share).

Other firms not only kicked off the entire cannabis discussion in Germany, but have established GMP-compliant facilities both in Canada and across Europe, namely Canopy Growth, which was widely believed to have also applied to the second tender. However prevailing rumours about a Canadian “crop failure” in British Columbia (described by the company as a deliberate destruction of plants created by delays in the licensing process) last fall may have also played a role in the German decision.

Aurora is also in interesting waters. Having distinguished itself as Canopy’s closest rival across Europe, winning significant kudos in Denmark, Italy, Poland and Luxembourg last year, the company is also clearly not “just” a medical cannabis company and apparently was refused an opportunity to go public on the Deutsche Börse last fall. The selection of the firm by BfArm for the bid in a situation where the company is on a watch list created by the stock market regulatory agency in Frankfurt is also an intriguing one. Especially given the company’s announcement of its Polish success on the same day as the decision to import was announced, and the fact that so far it is the only Canadian cannabis company to successfully import to Luxembourg.

And The Import Game Is Just Getting Hot…

The unsurprising news that the bid appears to be moving forward is actually not the hottest news in Europe right now. The reality on the ground is already shifting. Several weeks ago, a Frankfurt-based distribution start-up announced that they had successfully imported cannabis into the country from Macedonian-based Nysk Holdings via Poland.

At the International Cannabis Business Conference (ICBC) in Berlin last weekend, Australian producers (for one) were also reporting a German demand for their product that was greater than they could fill. And there were many Israelis present for what is expected to be an official opening of their import ability by the third quarter of this year.

Price Wars Are Looming

The bid itself is going to have a powerful impact on pricing in both the German and European market beyond that. It represents the first time in any country that a government has attempted to pre-negotiate prices for the drug as a narcotic beyond Israel and in this case, it will have at least regional implications.

At the same time, it is also clear that producers like Nysk and beyond them, Israeli and Australian firms (in particular) are actively finding ways to have their product enter the country- and further at prices that are catching the Canadians on the hop. Indeed Aurora is reporting that it actually lowered its “usual” prices to win European contracts which have been reported as being 3.2 euros a gram in Italy and 2.5 euros a gram in Luxembourg.

To put this in perspective, this is a range of about CA$3-5 a gram of flower which is also well below what Canopy (for one) has reported selling its product even to recreational users in Canada and significantly below medical export prices as reported by recent company corporate reports.

Wayland in contrast, is reporting that its production price in Germany will be at least a euro-per-gram cheaper than this. Or in other words, more in line with prices expected to be generated from both the bid itself and the cannabis now entering the country from other sources.

And of course, this is only the first of what is expected to be a series of new tenders. The original amount, itself increased in the two years the issue has been pending, is clearly not enough to even begin to meet demand as proved by the levels of competitively priced imports now entering the country.

Beyond questions about whether this time the tender will actually stand, are those now pending about new ones potentially in the offing – and not just in Germany but across Europe as cannabis continues to see a very green spring.