Two years ago, there was a lot of excitement in the London stock market surrounding medical cannabis, as numerous companies were vying for a public listing. However, after the initial hype, investors experienced a lull in the market. But recently, there has been a noticeable revival in the industry.
Companies are adapting to the changes in a still relatively young industry, which some CEOs refer to as “Cannabis 2.0.” Despite being the second largest market for medical cannabis in Europe, the UK’s legalization in 2018 has been progressing slowly and sporadically. However, there has been a steady increase in the number of patients, with around a thousand new patients each month. Prohibition Partners, an industry specialist, predicts that patient numbers will exceed 47,000 this year and possibly reach 70,000 by the end of the next year.
This growth has led to significant jumps in share prices for various cannabis companies listed in London. For example, Oxford Cannabinoid Technologies saw a 70% increase in the first few months of the year, Celadon Pharmaceuticals surged 190%, and Chill Brands skyrocketed almost 300%. These companies cover different sectors of the cannabis market, offering investors access to cultivators, biotechs, CBD producers and distributors, as well as skincare and consumer goods manufacturers.
Currently, London investors have direct access to two cultivators, Celadon and Hellenic Dynamics, with a potential third company, Northern Leaf, recently raising £3 million for a potential listing. Hellenic Dynamics, based in Greece, focuses more on European markets and has just secured a major deal with a German distributor. On the other hand, Celadon gained approval to sell its medical cannabis commercially and has become one of the UK’s leading domestic producers, guaranteeing a more consistent supply.
One obstacle to the growth of the UK’s medical cannabis industry is the cautious regulatory environment. Cannabis is challenging to regulate due to its complexity and the various factors that influence its growth. However, GW Pharmaceuticals, now owned by Jazz Pharmaceuticals, was the first company to develop prescription medicines using cannabis extracts. Its products, Epidiolex and Sativex, received approval in the US in 2018 and England in 2019, respectively. Small-cap biotechs are now following in GW Pharmaceuticals’ footsteps, presenting potential opportunities for investors.
For instance, Oxford Cannabinoid Technologies, which recently renewed its Home Office growing license and gained approval for a phase 1 trial of its pain relief drug candidate in the UK, has experienced significant share price movements. Additionally, Ananda Developments, with a UK cultivation facility, is preparing for two phase 2 clinical trials for chronic pain conditions. These trials could instill more confidence among prescribers and regulators.
Another company taking a more pharmaceutical approach is MGC Pharmaceuticals, whose CannEpil treatment for drug-resistant epilepsy was delivered to UK patients in May. Kanabo, known for its versatility, is developing a cannabis inhaler that was tipped for European approval this year. The company also launched an online medicinal cannabis clinic specializing in pain management.
While CBD, the well-known chemical extract from cannabis, is an active ingredient in some pharmaceutical products, its biggest presence in the UK is in the wellness and lifestyle goods sectors. Sales of CBD, which can be purchased without a prescription as a health supplement or in cosmetic products, are projected to reach €344 million in the UK this year and €383 million by 2027.
Companies like Chill Brands, a skincare business, have regained investor confidence under new leadership and are expanding their product offerings, including third-party CBD products. Cellular Goods, a skincare product manufacturer, recently gained exposure by securing a product placement on multinational beauty retailer Sephora’s website.
The cannabis sector’s developments reflect a common trend observed in new industries as they transform and adapt. Investors should closely monitor these developments to reap the potential rewards. For more small-cap news, visit www.proactiveinvestors.co.uk.
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