22 Feb Considering investing in medicinal cannabis? Here’s what you need to know
Wondering whether to invest your hard-earned money into medicinal cannabis in the UK? Chances are you’ve read some headlines and heard some of the moves made in the market by new companies landing funding. Here are the basics of this exciting and burgeoning market for anyone considering investing in medicinal cannabis.
Investment firms and angel investors are investing in medicinal cannabis
In March 2020, the Alphagreen Group landed half a million pounds in its first equity funding round. The group says that it owns Europe’s biggest consumer marketplace for legal cannabis products, including medicinal cannabis. The deal was made alongside various tech angel investors and investment company Enexis AB, which has form on backing cannabis businesses.
So, with investment firms and angel investors on board, does this mean medicinal cannabis is a good bet for individuals? Recently the London Stock Exchange (LSE) announced a new medicinal cannabis focused exchange traded fund (ETF). In addition, the most recent figures from the Centre for Medicinal Cannabis (CMC) says that more than six million people in the UK have tried CBD products.
CBD is the cannabinoid extracted from marijuana that doesn’t make you high, unlike tetrahydrocannabinol (THC). There has been an explosion of all kinds of CBD products in the wellness market in the UK, available either online or from health food shops and chemists. According to the CMC, around 90% of UK buyers choose to purchase the product online.
Stats show that sales for CBD products already outweigh Vitamin C (£301 million vs £119.22 million). It’s likely that the upswing is at least partially down to the anxieties and stress levels created by the pandemic. However, the market was already growing fast even before COVID-19.
There is absolutely no doubt in my mind that the CBD wellness market will continue to soar over the next few years. Medicinal cannabis in the form of drugs developed using cannabinoids is a more complex area.
What is the legal status of medicinal cannabis in the UK
On 1 November 2018, cannabis for medicinal use was made legal while recreational use remains illegal. However, according to Prohibition Partners, since medicinal cannabis use was legalised, just over 150 prescriptions have actually been issued.
Access to medicinal cannabis is hugely restricted, with only a very few practitioners allowed to prescribe it. In addition, it is only available for a couple of very rare illnesses and side effects from other treatments such as chemotherapy. There has also been a lack of clinical trials and evidence to prove the effectiveness of medicinal cannabis against various illnesses and conditions. This is despite plenty of anecdotal evidence that it helps lots of conditions, including chronic pain.
However, this is changing with more clinical trials underway. The best-known trial is probably Project Twenty21 that has signed up 20,000 people to the UK’s very first medical cannabis registry.
The UK is the biggest exporter of CBD products in the wolrd
The CDC predicts that the medicinal cannabis market in the UK will be worth at least £1.03 billion by 2026, with around 340,000 patients regularly being serviced. When we add in the health, beauty and wellness sector which are consistently adding more CBD products all the time, and it’s clearly a sector on the up for investment purposes.
More companies are becoming listed on public markets, touting cannabis as their core business. Strangely under the radar is the fact that the UK is the biggest producer and exporter of legal cannabis globally.
This is largely down to a drug called Sativex, which is manufactured by GW Pharmaceuticals in Cambridge. Back in 1998, the company managed to obtain a unique licence from the Home Office that allowed the cultivation of cannabis seeds. Today, the company produces Sativex, a cannabinoid-based drug used to treat people with Multiple Sclerosis and is listed on the NASDAQ in the US.
How has the pandemic affected the sector?
COVID-19 has impacted the cannabis industry in the same way as other sectors. CBD stocks have suffered, and while online sales of CBD products have increased, medicinal prescriptions have been even more difficult to obtain.
In addition, clinical trials have been slowed down due to the pandemic and social distancing measures. When there is so much disruption in a market, there are also loads of opportunities for investors. Individual investors should do plenty of research into the companies that goes way beyond recent stock performance. The company in question should be open with their proposition and the way they will execute it. There should be a high-level management team in place, and plenty of reasons to trust their ambitions.
Investing in medicinal cannabis stocks always comes with risks, and it is a volatile sector. When you’ve narrowed down the options available, investing can be carried out through an online broker. There is enormous potential in the use and future of medicinal cannabis, but it’s still a new sector for investors.
It’s not yet possible to tell which medicinal cannabis companies will thrive, and which will fall. And, of course, we have yet to see how the inevitable increase in regulations will impact the sector. However, there is more public debate than ever before surrounding marijuana, CBD products and medicinal cannabis. When the pandemic passes, there will be a major rebound in the market and for investors who want to benefit, the right time to invest could be right now.