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Is This The Most Lucrative Direction For Cannabis In Your Portfolio?

August 6, 2020
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The Most Lucrative Direction For Cannabis

Pharmaceutical cannabis is the future of modern cannabis – and in our view, it is the key to making smart investments in the category. According to the GMP compliance consultancy PharmOut in their Industry Growth Predictions for 2020- 2025, the global demand for cannabis, medical and recreational, is increasing consistently at a growth rate of 17% to 23% per annum. And, while true medical-grade cannabis will be influenced by supply/demand and cost pressures as well as by stringent cultivation, processing and export regulations, it is not unreasonable as some analysts predict for the global medicinal cannabis market to eventually reach $650 billion – making it the third largest worldwide market after oil and arms.

Substantiating the market potential

Cannabis contains active ingredients called cannabinoids. The first and second most abundant of these are tetrahydrocannabinol (THC) and the popular cannabidiol (CBD). These are just two, however, of the approximate 144+ cannabinoids that can appear in trace amounts in a marijuana plant. Many of these cannabinoids are soon to be making their way as Active Pharmaceutical Ingredients (APIs) in pharmaceutical medications for the treatment of chronic pain, glaucoma, epilepsy, and the growing body of research in the treatment of HIV/AIDS, Lupus, and MS. This along with promising developments as an anti-proliferative effect on different types of cancer cells. And, cannabinoids as APIs are also being introduced into medications that hold the promise of reducing the dosages of opioids and prompting the discovery of treatments for Alzheimer’s Disease.

In the early 1990s, the endocannabinoid system in the human body was discovered that controls critical biological functions such as pain, memory, sleep and immune functions. Since then, pharmaceutical manufacturers and research facilities have been attempting to work around the policies of government restrictions to be able to conduct meaningful research on the effects of various cannabinoids when they bind to CB1 and CB2 receptors in this internal human endocannabinoid system. Most recently, however, with the popularity of cannabis legalization growing across the world and with the lure of lucrative legal markets that have emerged, governments are fast-tracking the legalization processes relating to pharmaceutical-grade cannabis production and R&D.

Two years ago the U.S. FDA approved GW Pharmaceuticals’ drug Epidiolex for the treatment of a rare and sever form of childhood epilepsy called Dravet Syndrome. That landmark decision marked the first time a medication that contains a cannabinoid derived from marijuana was approved by a US federal agency. That has prompted other major players in the pharmaceutical industry to look for ways to develop cannabinoid-derived medicines, as well as safe and effective consumer products.

  • GW Pharmaceuticals has also developed Sativex, from extracts of THC and CBD for sale in countries that allow it for treatment of spasticity and has intensified development programs in ophthalmics, cystitis, fibromyalgia and opioid reduction.
  • Nexien BioPharma has one granted patent and seven patents pending.
  • In the UK, Brains Bioceutical, a global leader in EU cGMP production of plant-based cannabidiol as an API for pharmaceutical and nutraceutical use recently secured a $30M capital infusion to continue its clinical testing, including a phase III clinical trial for an adult epilepsy drug, and to expand by sevenfold the production of its CBD API in order to meet demand.
  • And, opening the door to more extensive R&D, the World Health Organization Expert Committee on Drug Dependence recommended to the United Nations commission on Narcotic Drugs that cannabis-based preparations proven to be pure Cannabidiol (CBD) should be rescheduled under all international drug control treaties.

Driving the Pharmaceutical Cannabis Market

These are the primary drivers boosting the burgeoning growth of the cannabinoid-based pharmaceutical drug market.

  • The surge in the number of physicians authorizing medical cannabis because of increasing clinical and empirical evidence and the growing number of patients looking for more natural alternatives to traditional drugs.
  • Baby Boomers and Millennials with more liberal attitudes toward cannabis and the experimentation with various forms of alternative remedies.
  • Rising tide opioid abuse requiring an effective replacement medication for the treatment of chronic pain.
  • Continuing legislation changes across the globe spurring cannabis demand in its various forms.
  • The rapid advancement of technologies that has led to:
      • The ability to discover and extract rare cannabinoids from marijuana

    plants

    • Progress in the creation and production of cannabis drug discoveries

Mitigating Risk and Maximizing Upside in this Investment Space

The evidence continues to mount that pharmaceutical cannabis is the future of investing in the industry, however many cannabis companies claim to be “medical cannabis” companies, often making it difficult for investment advisors to tell the real players from the pretenders. Here is the approach we take with our clients for risk mitigation prior to presenting cannabis investment opportunities:

  • First, we ascertain if the company and founders have backgrounds in pharmaceutical or cannabinoid-based science – without this background the chances of success are greatly diminished.
  • Second, we ensure that the company is familiar with and focused on meeting EU cGMP requirements for pharmaceutical grade APIs – and if they are not, we take a pass because we think the lower quality “medical grade” companies are a dime a dozen, and destined for commoditization.
  • Third, we assess the regulatory regime in the company’s home market, and in the target markets – and we analyze the ability of the company to scale in context of near, medium and long-term market expansion as new major international markets come online. In our opinion it is critical for a properly positioned pharmaceutical cannabis company to have the ability to scale rapidly in order to capitalize on the forthcoming opening up of the massive global pharmaceutical engine.

While the market growth potential of this budding future of the medicinal cannabis industry brings with it the upside of fresh startups and growing employment opportunities careful investigation and specialized knowledge is required for investor and consumer protection. At Highway 33 Capital Advisory we are standing by with the expertise and experience to provide guidance.

At Highway 33 Capital Advisory we excel at structuring deals to meet client investment strategies in trending segments like AgTech, as well as our core expertise with highly regulated markets in the fields of pharma, biotech, healthcare, cannabis and CBD/hemp companies as well as technology companies. Thoroughly vetted companies looking to drive growth and enterprise valuations through M&A, non-dilutive debt financing and/or capital investments ranging from $5M to $100M+. Let’s talk about putting the power of this expertise to work for you as a Sell or Buy-side client